N-CSR 1 d154518dncsr.htm IVY FUNDS Ivy Funds
Table of Contents

 

 

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 811-6569

IVY FUNDS

(Exact name of registrant as specified in charter)

6300 Lamar Avenue, Overland Park, Kansas 66202

(Address of principal executive offices) (Zip code)

Wendy J. Hills

6300 Lamar Avenue

Overland Park, Kansas 66202

(Name and address of agent for service)

 

 

Registrant’s telephone number, including area code: 913-236-2000

Date of fiscal year end: March 31

Date of reporting period: March 31, 2016

 

 

 

Table of Contents

ITEM 1.     REPORTS TO STOCKHOLDERS.

 

1

Table of Contents

Annual Report

March 31, 2016

 

    Ticker   
    Class A        Class B        Class C        Class E        Class I        Class R        Class R6        Class Y   
Ivy Funds                

Ivy Asset Strategy Fund

     WASAX        WASBX        WASCX        IASEX        IVAEX        IASRX        IASTX        WASYX   

Ivy Balanced Fund

     IBNAX        IBNBX        IBNCX        IVYEX        IYBIX        IYBFX        IBARX        IBNYX   

Ivy Energy Fund

     IEYAX        IEYBX        IEYCX        IVEEX        IVEIX        IYEFX        IENRX        IEYYX   

Ivy Global Natural Resources Fund

     IGNAX        IGNBX        IGNCX        IGNEX        IGNIX        IGNRX        INRSX        IGNYX   

Ivy LaSalle Global Real Estate Fund

     IREAX        IREBX        IRECX          IRESX        IRERX          IREYX   

Ivy LaSalle Global Risk-Managed Real Estate Fund

     IVRAX        IVRBX        IVRCX          IVIRX        IVRRX          IVRYX   

Ivy Real Estate Securities Fund

     IRSAX        IRSBX        IRSCX        IREEX        IREIX        IRSRX        IRSEX        IRSYX   

Ivy Science and Technology Fund

     WSTAX        WSTBX        WSTCX        ISTEX        ISTIX        WSTRX        ISTNX        WSTYX   

 

     LOGO  

Table of Contents

CONTENTS

Ivy Funds

 

 

 

President’s Letter

      3   

Illustration of Fund Expenses

      4   

Management Discussion, Portfolio Highlights and Schedule of Investments:

     7   

Ivy Asset Strategy Fund

      7   

Ivy Balanced Fund

      18   

Ivy Energy Fund

      29   

Ivy Global Natural Resources Fund

      35   

Ivy LaSalle Global Real Estate Fund

      41   

Ivy LaSalle Global Risk-Managed Real Estate Fund

      47   

Ivy Real Estate Securities Fund

      53   

Ivy Science and Technology Fund

      58   

Statements of Assets and Liabilities

      65   

Statements of Operations

      67   

Statements of Changes in Net Assets

      69   

Statement of Cash Flows

     72   

Financial Highlights

      74   

Notes to Financial Statements

      90   

Report of Independent Registered Public Accounting Firm

      106   

Income Tax Information

      107   

Board of Trustees and Officers

      108   

Annual Privacy Notice

      111   

Proxy Voting Information

      112   

Quarterly Portfolio Schedule Information

      112   

Householding Notice

      112   

IRA Disclosure

      112   

 

This report is submitted for the general information of the shareholders of Ivy Funds. It is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by a current Ivy Funds prospectus, or summary prospectus, and current performance information, including current Lipper ranking information.

 

2   ANNUAL REPORT   2016  

Table of Contents

PRESIDENT’S LETTER

Ivy Funds

MARCH 31, 2016 (UNAUDITED)

 

 

 

LOGO

Henry J. Herrmann, CFA

 

 

 

Dear Shareholder,

Despite moderate economic growth in the U.S., financial markets have been volatile, especially in the latter half of the fiscal year. What’s causing the fluctuations?

The simple answer is financial markets dislike uncertainty. In recent months we’ve been faced with significant uncertainty around numerous issues, including:

 

  •  

Central bank actions;

  •  

politics in the U.S., specifically surrounding the presidential election;

  •  

credit concerns in the energy sector;

  •  

very slow growth in Europe and Japan;

  •  

credit quality issues in important emerging economies, including China;

  •  

the U.K.’s June vote on exiting the European Union;

  •  

fluctuations in currencies.

Amid the uncertain backdrop, the U.S. economic expansion has remained relatively good. Our investment team believes the U.S. is the bright spot, supported primarily by the U.S. consumer, who is benefitting from lower energy prices and lower inflation in general. The improved labor market allows for better demand for cars, homes, furnishings and various consumer goods.

When interest rates in the U.S. will rise, and by how much, remains an area of focus for the financial markets. Markets reacted negatively when the Federal Reserve raised rates slightly in December and seemed to imply more increases were likely. Since then, the Fed seems to have moderated its tightening plans. It’s clear the Fed has become attuned to very sluggish global growth. Future rate increases in the U.S. will be very slow to develop, with job growth and inflation being most important determinants of central bank policy. Overseas, the European Central Bank and Bank of Japan are actively engaged in aggressive easing. As yet, these steps are not leading to strengthening economic activity.

China, in the face of economic softening, has turned toward more aggressive stimulus. We believe moderate economic acceleration is likely in China in 2016, which should be beneficial to broader global growth.

 

While challenges remain, we do see potential catalysts for growth in several areas and industries and our team continues to seek investment opportunities around the globe.

Economic Snapshot

 

 

 

     03/31/2016      03/31/2015  

S&P 500 Index

      2,059.74         2,067.89   

MSCI EAFE Index

      1,652.04         1,849.34   

10-Year Treasury Yield

      1.78%         1.94%   

U.S. unemployment rate

      5.0%         5.5%   

30-year fixed mortgage rate

      3.71%         3.69%   

Oil price per barrel

    $ 38.34       $ 47.60   

Sources: Bloomberg, U.S. Department of Labor, MBA, CME

All government statistics shown are subject to periodic revision. The S&P 500 Index is an unmanaged index that tracks the stocks of 500 primarily large-cap U.S. companies. MSCI EAFE Index is an unmanaged index comprised of securities that represent the securities markets in Europe, Australasia and the Far East. It is not possible to invest directly in any of these indexes. Mortgage rates are from BankRate and reflect the overnight national average rate on a conventional 30-year fixed loan. Oil prices reflect the market price of West Texas intermediate grade crude.

Respectfully,

 

LOGO

Henry J. Herrmann, CFA

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.

 

 

  2016   ANNUAL REPORT   3

Table of Contents

ILLUSTRATION OF FUND EXPENSES

Ivy Funds

     (UNAUDITED)

 

 

 

Expense Example

 

 

As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, exchange fees and account fees; and (2) ongoing costs, including management fees, distribution and service fees, and other Fund expenses. The following table is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period ended March 31, 2016.

Actual Expenses

 

 

The first section in the following table provides information about actual account values and actual expenses for each share class. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $7,500 account value divided by $1,000 = 7.5), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. There may be additional fees charged to holders of certain accounts that are not included in the expenses shown in the table. Fees apply to Individual Retirement Accounts (IRAs), IRA Rollovers, Roth IRAs, Conversion Roth IRAs, Simplified Employee Pension (SEP), Savings Incentive Match Plan for Employees (SIMPLE) IRAs, Tax-Sheltered Accounts (TSAs), Keogh Plans, Owner Only 401(k) (Exclusive K) Plans and Final Pay Plans. As of the close of the six months covered by the table, a customer is charged an annual fee of $18 within each plan type. This fee is waived for IRA Rollovers and Conversion Roth IRAs if the customer owns another type of IRA. Coverdell Education Savings Account plans are charged an annual fee of $10 per customer. With limited exceptions, for Class A and Class C shares, if your Fund account

balance is below $650 on the Friday prior to the last full week of September of each year, the account will be assessed an account fee of $20. You should consider the additional fees that were charged to your Fund account over the six-month period when you estimate the total ongoing expenses paid over the period and the impact of these fees on your ending account value as such additional expenses are not reflected in the information provided in the following table. Additional fees have the effect of reducing investment returns.

Hypothetical Example for Comparison Purposes

 

 

The second section in the following table provides information about hypothetical account values and hypothetical expenses for each share class based on the Fund’s actual expense ratio and an assumed rate of return of five percent per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this five percent hypothetical example with the five percent hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), exchange fees or account fees. Therefore, the second section in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Expenses paid may be impacted by expense reduction arrangements. If those arrangements had not been in place, expenses paid would have been higher. See Note 7 to the Financial Statements for further information.

 

 

     Actual(1)      Hypothetical(2)         
Fund    Beginning
Account
Value
9-30-15		      Ending
Account
Value
3-31-16		      Expenses
Paid During
Period*		      Beginning
Account
Value
9-30-15		      Ending
Account
Value
3-31-16		      Expenses
Paid During
Period*		      Annualized
Expense Ratio
Based on the
Six-Month
Period		  

Ivy Asset Strategy Fund

  

                                    

Class A

    $ 1,000       $ 975.10       $ 4.94       $ 1,000       $ 1,020.00       $ 5.05         1.00%   

Class B**

    $ 1,000       $ 971.10       $ 8.77       $ 1,000       $ 1,016.11       $ 8.97         1.78%   

Class C

    $ 1,000       $ 971.30       $ 8.48       $ 1,000       $ 1,016.45       $ 8.67         1.71%   

Class E

    $ 1,000       $ 975.00       $ 4.94       $ 1,000       $ 1,020.00       $ 5.05         1.00%   

Class I

    $ 1,000       $ 976.20       $ 3.66       $ 1,000       $ 1,021.33       $ 3.74         0.73%   

Class R

    $ 1,000       $ 973.30       $ 6.61       $ 1,000       $ 1,018.32       $ 6.76         1.34%   

Class R6

    $ 1,000       $ 976.90       $ 2.97       $ 1,000       $ 1,022.05       $ 3.03         0.59%   

Class Y

    $ 1,000       $ 975.20       $ 4.84       $ 1,000       $ 1,020.06       $ 4.95         0.99%   

See footnotes on page 6.

 

4   ANNUAL REPORT   2016  

Table of Contents

ILLUSTRATION OF FUND EXPENSES

Ivy Funds

     (UNAUDITED)

 

 

 

     Actual(1)      Hypothetical(2)         
Fund    Beginning
Account
Value
9-30-15		      Ending
Account
Value
3-31-16		      Expenses
Paid During
Period*		      Beginning
Account
Value
9-30-15		      Ending
Account
Value
3-31-16		      Expenses
Paid During
Period*		      Annualized
Expense Ratio
Based on the
Six-Month
Period		  

Ivy Balanced Fund

  

                                    

Class A

    $ 1,000       $ 1,024.90       $ 5.57       $ 1,000       $ 1,019.47       $ 5.55         1.11%   

Class B**

    $ 1,000       $ 1,020.90       $ 9.30       $ 1,000       $ 1,015.84       $ 9.27         1.83%   

Class C

    $ 1,000       $ 1,021.00       $ 9.09       $ 1,000       $ 1,016.04       $ 9.07         1.79%   

Class E***

    $ 1,000       $ 1,025.30       $ 4.86       $ 1,000       $ 1,020.22       $ 4.85         0.96%   

Class I

    $ 1,000       $ 1,026.10       $ 4.25       $ 1,000       $ 1,020.80       $ 4.24         0.84%   

Class R

    $ 1,000       $ 1,022.80       $ 7.28       $ 1,000       $ 1,017.81       $ 7.26         1.44%   

Class R6

    $ 1,000       $ 1,026.60       $ 3.55       $ 1,000       $ 1,021.53       $ 3.54         0.69%   

Class Y

    $ 1,000       $ 1,024.90       $ 5.57       $ 1,000       $ 1,019.54       $ 5.55         1.09%   

Ivy Energy Fund

  

                                    

Class A

    $ 1,000       $ 968.50       $ 7.48       $ 1,000       $ 1,017.43       $ 7.67         1.51%   

Class B**

    $ 1,000       $ 964.00       $ 11.69       $ 1,000       $ 1,013.05       $ 11.98         2.39%   

Class C

    $ 1,000       $ 965.50       $ 10.71       $ 1,000       $ 1,014.13       $ 10.98         2.17%   

Class E***

    $ 1,000       $ 970.00       $ 5.91       $ 1,000       $ 1,018.97       $ 6.06         1.21%   

Class I

    $ 1,000       $ 970.30       $ 5.42       $ 1,000       $ 1,019.47       $ 5.55         1.11%   

Class R

    $ 1,000       $ 967.40       $ 8.36       $ 1,000       $ 1,016.50       $ 8.57         1.70%   

Class R6

    $ 1,000       $ 971.20       $ 4.73       $ 1,000       $ 1,020.24       $ 4.85         0.95%   

Class Y

    $ 1,000       $ 968.90       $ 6.69       $ 1,000       $ 1,018.17       $ 6.86         1.37%   

Ivy Global Natural Resources Fund

  

                                    

Class A

    $ 1,000       $ 967.60       $ 8.56       $ 1,000       $ 1,016.26       $ 8.77         1.75%   

Class B**

    $ 1,000       $ 962.40       $ 13.54       $ 1,000       $ 1,011.15       $ 13.88         2.77%   

Class C

    $ 1,000       $ 964.40       $ 11.59       $ 1,000       $ 1,013.24       $ 11.88         2.35%   

Class E

    $ 1,000       $ 969.70       $ 6.11       $ 1,000       $ 1,018.77       $ 6.26         1.25%   

Class I

    $ 1,000       $ 969.50       $ 5.81       $ 1,000       $ 1,019.14       $ 5.96         1.17%   

Class R

    $ 1,000       $ 967.20       $ 8.66       $ 1,000       $ 1,016.19       $ 8.87         1.76%   

Class R6

    $ 1,000       $ 971.00       $ 4.93       $ 1,000       $ 1,019.96       $ 5.05         1.01%   

Class Y

    $ 1,000       $ 968.20       $ 6.99       $ 1,000       $ 1,017.92       $ 7.16         1.42%   

Ivy LaSalle Global Real Estate Fund

  

                                    

Class A

    $ 1,000       $ 1,065.60       $ 7.85       $ 1,000       $ 1,017.44       $ 7.67         1.51%   

Class B**

    $ 1,000       $ 1,059.40       $ 13.18       $ 1,000       $ 1,012.25       $ 12.88         2.55%   

Class C

    $ 1,000       $ 1,058.50       $ 14.10       $ 1,000       $ 1,011.28       $ 13.78         2.74%   

Class I

    $ 1,000       $ 1,063.90       $ 8.15       $ 1,000       $ 1,017.14       $ 7.97         1.57%   

Class R

    $ 1,000       $ 1,062.00       $ 11.24       $ 1,000       $ 1,014.13       $ 10.98         2.17%   

Class Y

    $ 1,000       $ 1,065.20       $ 7.74       $ 1,000       $ 1,017.45       $ 7.57         1.51%   

Ivy LaSalle Global Risk-Managed Real Estate Fund

  

                                    

Class A

    $ 1,000       $ 1,118.50       $ 8.05       $ 1,000       $ 1,017.44       $ 7.67         1.51%   

Class B**

    $ 1,000       $ 1,113.20       $ 11.94       $ 1,000       $ 1,013.67       $ 11.38         2.27%   

Class C

    $ 1,000       $ 1,113.00       $ 12.36       $ 1,000       $ 1,013.31       $ 11.78         2.34%   

Class I

    $ 1,000       $ 1,118.50       $ 7.20       $ 1,000       $ 1,018.16       $ 6.86         1.37%   

Class R

    $ 1,000       $ 1,115.60       $ 10.37       $ 1,000       $ 1,015.16       $ 9.87         1.97%   

Class Y

    $ 1,000       $ 1,118.10       $ 7.94       $ 1,000       $ 1,017.46       $ 7.57         1.51%   

See footnotes on page 6.

 

  2016   ANNUAL REPORT   5

Table of Contents

ILLUSTRATION OF FUND EXPENSES

Ivy Funds

     (UNAUDITED)

 

 

 

     Actual(1)      Hypothetical(2)         
Fund    Beginning
Account
Value
9-30-15		      Ending
Account
Value
3-31-16		      Expenses
Paid During
Period*		      Beginning
Account
Value
9-30-15		      Ending
Account
Value
3-31-16		      Expenses
Paid During
Period*		      Annualized
Expense Ratio
Based on the
Six-Month
Period		  

Ivy Real Estate Securities Fund

  

                                    

Class A

    $ 1,000       $ 1,119.10       $ 7.73       $ 1,000       $ 1,017.71       $ 7.36         1.46%   

Class B**

    $ 1,000       $ 1,114.00       $ 12.47       $ 1,000       $ 1,013.25       $ 11.88         2.35%   

Class C

    $ 1,000       $ 1,114.50       $ 11.52       $ 1,000       $ 1,014.15       $ 10.98         2.17%   

Class E

    $ 1,000       $ 1,119.00       $ 7.63       $ 1,000       $ 1,017.76       $ 7.26         1.45%   

Class I

    $ 1,000       $ 1,121.50       $ 5.41       $ 1,000       $ 1,019.90       $ 5.15         1.02%   

Class R

    $ 1,000       $ 1,117.70       $ 8.68       $ 1,000       $ 1,016.79       $ 8.27         1.64%   

Class R6

    $ 1,000       $ 1,122.20       $ 4.56       $ 1,000       $ 1,020.66       $ 4.34         0.87%   

Class Y

    $ 1,000       $ 1,119.90       $ 6.68       $ 1,000       $ 1,018.71       $ 6.36         1.26%   

Ivy Science and Technology Fund

  

                                    

Class A

    $ 1,000       $ 983.00       $ 6.44       $ 1,000       $ 1,018.52       $ 6.56         1.30%   

Class B**

    $ 1,000       $ 979.60       $ 10.00       $ 1,000       $ 1,014.86       $ 10.18         2.03%   

Class C

    $ 1,000       $ 979.90       $ 9.80       $ 1,000       $ 1,015.12       $ 9.97         1.98%   

Class E

    $ 1,000       $ 982.70       $ 6.94       $ 1,000       $ 1,018.00       $ 7.06         1.40%   

Class I

    $ 1,000       $ 984.80       $ 4.86       $ 1,000       $ 1,020.12       $ 4.95         0.98%   

Class R

    $ 1,000       $ 981.90       $ 7.83       $ 1,000       $ 1,017.13       $ 7.97         1.57%   

Class R6

    $ 1,000       $ 985.60       $ 4.07       $ 1,000       $ 1,020.87       $ 4.14         0.83%   

Class Y

    $ 1,000       $ 983.60       $ 6.05       $ 1,000       $ 1,018.88       $ 6.16         1.23%   

 

* Fund expenses for each share class are equal to the Fund’s annualized expense ratio for each share class (provided in the table), multiplied by the average account value over the period, multiplied by 183 days in the six-month period ended March 31, 2016, and divided by 366.

 

** These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

*** Class share is closed to investment.

 

(1) This section uses the Fund’s actual total return and actual Fund expenses. It is a guide to the actual expenses paid by the Fund in the period. The “Ending Account Value” shown is computed using the Fund’s actual return and the “Expenses Paid During Period” column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. A shareholder may use the information here, together with the dollar amount invested, to estimate the expenses that were paid over the period. For every thousand dollars a shareholder has invested, the expenses are listed in the last column of this section.

 

(2) This section uses a hypothetical five percent annual return and actual Fund expenses. It helps to compare the Fund’s ongoing costs with other mutual funds. A shareholder can compare the Fund’s ongoing costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

The above illustrations are based on ongoing costs only and do not include any transactional costs, such as sales loads or exchange fees.

 

6   ANNUAL REPORT   2016  

Table of Contents

MANAGEMENT DISCUSSION

Ivy Asset Strategy Fund

(UNAUDITED)

 

 

 

LOGO

Michael L. Avery

LOGO

Chace Brundige

LOGO

Cynthia P. Prince-Fox

Below, Michael L. Avery, Cynthia P. Prince-Fox and Chace Brundige, CFA, portfolio managers of Ivy Asset Strategy Fund, discuss positioning, performance and results for the fiscal year ended March 31, 2016. Mr. Avery has managed the Fund for 19 years and has 37 years of industry experience. Mr. Avery will retire from the firm effective June 30, 2016. Ms. Prince-Fox and Mr. Brundige became portfolio managers on the Fund on August 4, 2014. Ms. Prince-Fox has 33 years of industry experience and Mr. Brundige has 22 years of industry experience.

 

For the 12 Months Ended March 31, 2016

         

Ivy Asset Strategy Fund (Class A shares at net asset value)

      –14.39%   

Ivy Asset Strategy Fund (Class A shares including sales charges)

      –19.31%   

Benchmark(s) and/or Lipper Category

         

S&P 500 Index

      1.78%   

(generally reflects the performance of large- and medium-sized U.S. stocks)

         

Barclays U.S. Aggregate Bond Index

      1.96%   

(generally reflects the performance of most U.S.-traded investment grade bonds)

         

Barclays U.S. Treasury Bills: 1-3 Month Index

      0.09%   

(generally reflects the performance of investment-grade Treasury bills, representing cash)

         

Lipper Alternative Global Macro Funds Universe Average

      -6.22%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Multiple indexes are shown because the Fund invests in multiple asset classes.

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

An environment of uncertainty, volatility

 

 

Fear seemed to be the operative word in 2015 and early in 2016 in global equity, fixed income, and currency markets, though the beginning and end points masked the volatility throughout the fiscal year. The U.S. Treasury 10-year yield began the year at 1.94%, peaking around 2.50% in June 2015 and hitting a trough around 1.63% in February 2016 before ending the fiscal year at 1.78%. Similarly, the S&P 500 Index began and ended the fiscal year at 2059, but had four +10% swings in between.

 

The U.S. dollar had been in a strengthening trend since the summer of 2014, but began to weaken during the final quarter of the fiscal year. The dollar strengthened broadly against developed market currencies such as the yen, Canadian dollar and the euro, but the currencies of emerging areas such as Russia, Brazil, Thailand, Argentina and Colombia suffered as well. The yen has rallied to start 2016, despite the Bank of Japan moving to a negative interest rate policy in January with the intent of weakening the yen. Similarly, though not as dramatic as the yen, the euro has moved off its lows of November 2015 and onto a slightly stronger trajectory in 2016, even as the European Central Bank continued to cut rates and expand its quantitative easing (QE) facility.

Commodities prices weakened through most of the year, but showed signs of stabilization in the second half of the fiscal year. West Texas Intermediate crude oil prices (the U.S. benchmark) have perhaps found a floor during the first part of 2016, closing below $27 in February, but above $40 at the end of March on reduced supply expectations and a weaker U.S. dollar. Though inflation expectations continue to look well-contained, the consumer price index has trended higher because of energy, and the core measure excluding food and energy is running above the target of 2% because of increases in core goods and housing-related indicators.

Fed funds futures had an interest rate hike priced in from the U.S. Federal Reserve (Fed) during the second half of calendar 2015, though the odds were lower after Greece’s “No” vote in its July referendum on austerity and debt relief, and following the market correction after China’s yuan devaluation. We had doubts the Fed would be able to begin the normalization process of moving off of the “zero-bound” after seven years, given the macroeconomic risks globally. However, in spite of increasingly volatile markets, the Fed raised its base rate by 0.25% at its December meeting. Several years into the economic cycle, we believe the Fed prefers to build capacity to cut rates in the future, when warranted.

It is impossible to fully know the amount of leverage amassed in the global financial system, though we know there has been massive buildup in debt on emerging market country balance sheets — corporates and sovereigns alike. We think this is not a great recipe and the magnitude of the global impact is one of the most important questions facing investors today. The multiple growth scares during the fiscal year typically gain potency in a highly levered, low-growth world.

As of the end of the fiscal year, the Fed had not acted to raise rates again and softened its rhetoric on what would prompt further hikes. This, combined with a renewed pro-cyclical shift from China, changed the markets’ tone in February.

Global growth decelerated to roughly 3% in 2015 and we expect a further slowdown in 2016, with developed market gross domestic product (GDP) growth below 2% and emerging market economies coming in at 3.5-4.0%. The U.S. is likely to continue to lead developed economies, though estimates for the U.S. were revised lower after the final release of fourth-quarter 2015 GDP. Growth in Europe and Japan remains positive, but fails to show signs of real acceleration despite the central bank accommodation in place. The ongoing trends of slower growth and rising debt will continue to magnify the effects of slight changes in the markets’ assumptions for global growth.

 

  2016   ANNUAL REPORT   7

Table of Contents

MANAGEMENT DISCUSSION

Ivy Asset Strategy Fund

 

(UNAUDITED)

 

 

 

Cautious approach to the year

 

 

The Fund reported a negative return for the fiscal year while its all-equities S&P 500 Index benchmark showed a positive return, although the benchmark’s return was significantly less than it reported in the previous three years. The Fund’s return also was below the negative return of its Lipper peer group average.

As the fiscal year began, we maintained a somewhat cautious outlook on the markets. This was broadly based on the belief that we remained in a challenging environment of global overcapacity and low demand as well as uncertainty on how markets would react to the potential for higher rates. We continued the process of increasing exposure to the U.S. since we believed it was the best relatively positioned region globally.

Areas of focus during the year included: better-positioned U.S. consumers with cleaner balance sheets, lower energy prices and an improving labor market; an improving housing market helped by increased confidence among Millennials; growing numbers of emerging market consumers and where their money would be spent; and technology that provided companies with improving efficiencies and productivity.

Early in the fiscal year, the Fund benefitted from areas within technology, healthcare and even energy as the equity market began to consolidate into an increasingly smaller number of names. As we moved through the summer of 2015, global growth fears began to crystalize and had a negative impact on the Fund, which had both direct and indirect exposure to emerging markets (albeit lower than one year prior). We began to position the Fund more defensively in response to some of these market gyrations and fears about the timing of the Fed’s rate increase by increasing our weighting in cash and U.S. Treasuries.

Relative to the index, the names in the Fund that detracted from performance for the year were primarily in the consumer discretionary, information technology, and industrials sectors. As we repositioned the Fund to be more defensive, we also reduced some of our exposure to names in these sectors in which we had less confidence in their ability to withstand what we considered a shaky environment while tilting our energy weighting toward low-cost producers and service companies and away from the more defensive downstream segment, i.e. refiners. We maintained exposure to companies that we believe have stronger prospects for growth. We also increased our exposure to companies closely tied to the domestic economy, which had been oversold.

Several of the Fund’s private investments were detractors from relative performance versus the benchmark index. In addition, debt and equity positions in one investment were sold in fourth-quarter 2015 and another position was sold in first-quarter 2016. The total value of the remaining private securities represented 10.5% of net assets in the Fund at March 31, 2016.

Our cash allocation averaged about 16% during the year, which reduced performance when equity markets rose.

Gold has been a long-term holding in the Fund and one that we view as a currency with a stable “printing press,” especially relative to those fiat currencies we seek to hedge. We reduced our exposure by roughly half early in the fiscal year as we grew concerned about the effects of rising bond yields and the end of QE in the U.S. During the final quarter of the fiscal year, we increased our position again. To us, the large fluctuations within the market were evidence of global growth concerns and potential for an eventual increase in money printing.

Derivatives use early in the fiscal year was relatively low and used to opportunistically increase exposure to equities. During the second half of 2015, we opportunistically employed index hedging strategies. That protection was helpful during the large market selloff periods as additional protection in the event of a broader market selloff. During first-quarter 2016, we wound down most of our derivatives exposure. We believe defensive positioning through derivatives is currently expensive on a historical basis. Instead, our current defensive posture is expressed through our holdings in gold, U.S. Treasuries and cash, which we look to opportunistically reinvest in the market as pullbacks occur.

Central bank policy risk

 

 

Looking ahead, we think the unintended consequences associated with global central bank policies are a primary risk for the markets and we expect to see increased volatility as central bankers attempt to reconcile a number of uncertainties. Those headwinds include a relatively stronger U.S. economy, but concern regarding the timing of additional rate hikes; the fading effects of easier monetary policy combined with slow growth and mounting global leverage, geopolitical events, and China’s growth prospects although that country’s economic data have strengthened recently in response to fiscal policy changes to stimulate investment areas within infrastructure.

These headwinds mean growth will be challenged for industries and companies. As such, we remain focused on where in the world we think growth will occur. Many of our holdings from last year remain core holdings in 2016. Our highest conviction names fall into the secular growth category with strong balance sheets that offer optionality of share repurchases, dividends, or acquisitions, along with certain cyclical energy companies.

Emerging market consumers have had a prominent role within the portfolio since the financial crisis — particularly in China — and we continue to believe in their long-term growth as the rise in discretionary income is likely to continue to eclipse that of their developed market counterparts. However, we believe the growth rate for consumption will be slower and, from here, more dependent on structural reforms. In addition, multinationals are seeing increased competition from local companies as quality improves.

Absent a perceived policy mistake (monetary or fiscal) or global shock, the equity markets could experience another year of volatility and bond yields with little movement in one direction or another, particularly at the long end and in spite of the Fed’s desire to normalize rates. As a result, equities continue to have the largest weighting within the Fund, albeit at lower levels than a year ago. As a portfolio distinguished by its flexibility to make larger, high-conviction allocations when warranted, we can’t help but be wary of the stubbornly persistent headwinds facing the global economy and capital markets.

 

8   ANNUAL REPORT   2016  

Table of Contents

 

 

We recognize our relatively more defensive allocation in the face of rising equity markets may frustrate some shareholders. The increased number of market and economic risks suggest caution as a prudent guide, but a willingness to act at such time when those risks and rewards become more balanced. The Fund changes as the market environment in which we invest changes; it is the hallmark of our flexibility. What remains steadfast is the process we utilize to manage investor money.

Performance shown at NAV does not include the effect of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

The Fund may allocate from 0 to 100% of its assets between stocks, bonds and short-term instruments of issuers around the globe and in investments with exposure to various foreign countries. The Fund may also invest in precious metals.

International investing involves additional risks, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. The value of the Fund’s investments, as measured in U.S. dollars, may be unfavorably affected by changes in foreign currency exchange rates and exchange control regulations.

Fixed-income securities are subject to interest-rate risk and, as such, the net asset value of the Fund may fall as interest rates rise. Investing in high-income securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds.

The Fund may focus its investments in certain regions or industries, thereby increasing its potential vulnerability to market volatility.

The Fund may seek to hedge market risk on various securities, manage and/or increase exposure to certain securities, companies, sectors, markets, foreign currencies and/or precious metals and seek to hedge certain event risks on positions held by the Fund via the use of derivative instruments. Such investments involve additional risks, as the fluctuations in the values of the derivatives may not correlate perfectly with the overall securities markets or with the underlying asset from which the derivative’s value is derived.

Investing in commodities is generally considered speculative because of the significant potential for investment loss due to cyclical economic conditions, sudden political events, and adverse international monetary policies. Markets for commodities are likely to be volatile and the Fund may pay more to store and accurately value its commodity holdings than it does with the Fund’s other holdings.

These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the portfolio managers and are current only through the end of the period of the report as stated on the cover. The managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The indexes noted are unmanaged, include reinvested dividends and do not include fees. One cannot invest directly in an index, nor is an index representative of the Ivy Asset Strategy Fund’s performance.

 

  2016   ANNUAL REPORT   9

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Asset Strategy Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      47.4%   

Consumer Discretionary

      10.6%   

Information Technology

      8.9%   

Health Care

      8.0%   

Consumer Staples

      7.2%   

Financials

      5.3%   

Energy

      4.5%   

Industrials

      2.3%   

Materials

      0.6%   

Bullion (Gold)

      6.3%   

Bonds

      21.7%   

United States Government and Government Agency Obligations

      14.6%   

Corporate Debt Securities

      7.1%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      24.6%   

Lipper Rankings

 

 

 

Category: Lipper Alternative Global
Macro Funds		    Rank      Percentile

1 Year

    309/327      95

3 Year

    133/247      54

5 Year

    86/167      52

10 Year

    3/50      6

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

Country Weightings

 

 

 

North America

      53.1%   

United States

      53.1%   

Europe

      12.4%   

United Kingdom

      8.3%   

Other Europe

      4.1%   

Bullion (Gold)

      6.3%   

Pacific Basin

      3.4%   

Other

      0.2%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      24.6%   
 

 

Top 10 Equity Holdings

 

 

 

Company    Country      Sector      Industry

Coca-Cola Co. (The)

   

United States

     

Consumer Staples

     

Soft Drinks

Microsoft Corp.

   

United States

     

Information Technology

     

Systems Software

Kraft Foods Group, Inc.

   

United States

     

Consumer Staples

     

Packaged Foods & Meats

Chipotle Mexican Grill, Inc., Class A

   

United States

     

Consumer Discretionary

     

Restaurants

Philip Morris International, Inc.

   

United States

     

Consumer Staples

     

Tobacco

Media Group Holdings LLC, Series I

   

United States

     

Consumer Discretionary

     

Leisure Products

Allergan plc

   

United States

     

Health Care

     

Pharmaceuticals

Home Depot, Inc. (The)

   

United States

     

Consumer Discretionary

     

Home Improvement Retail

Citigroup, Inc.

   

United States

     

Financials

     

Other Diversified Financial Services

Cognizant Technology Solutions Corp., Class A

   

United States

     

Information Technology

     

IT Consulting & Other Services

See your advisor or www.ivyfunds.com for more information on the Fund’s most recent published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

10   ANNUAL REPORT   2016  

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Asset Strategy Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)     Class B(4)     Class C     Class E     Class I     Class R     Class R6      Class Y  

1-year period ended 3-31-16

      -19.31%        -18.25%        -15.01%        -19.32%        -14.17%        -14.69%        -14.09%         -14.36%   

5-year period ended 3-31-16

      0.47%        0.74%        0.93%        0.44%        1.90%        1.29%        —            1.67%   

10-year period ended 3-31-16

      5.00%        4.94%        4.84%        —           —           —           —            5.62%   

Since Inception of Class through 3-31-16(5)

      —           —           —           4.23%        5.27%        1.85%        -9.63%         —      

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) 4-2-07 for Class E shares, 4-2-07 for Class I shares, 7-31-08 for Class R shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

  2016   ANNUAL REPORT   11

Table of Contents

CONSOLIDATED SCHEDULE OF INVESTMENTS

Ivy Asset Strategy Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Consumer Discretionary

  

 

Apparel Retail – 0.3%

  

Limited Brands, Inc.

     355      $ 31,193   
   

 

 

  
 

Auto Parts & Equipment – 1.7%

  

Continental AG (A)

     372        84,705   

Delphi Automotive plc

     1,163        87,211   
   

 

 

  
      171,916   
   

 

 

  
 

Cable & Satellite – 1.1%

  

Comcast Corp., Class A

     1,941        118,568   
   

 

 

  
 

Home Improvement Retail – 1.4%

  

Home Depot, Inc. (The) (B)

     1,084        144,691   
   

 

 

  
 

Internet Retail – 0.8%

  

Amazon.com, Inc. (C)

     145        86,242   
   

 

 

  
 

Leisure Products – 3.1%

  

Media Group Holdings LLC, Series H (C)(D)(E)(F)

     640        60,093   

Media Group Holdings LLC, Series I (C)(D)(E)(F)

     381        151,166   

Media Group Holdings LLC, Series T (C)(D)(E)(F)

     80        110,007   
   

 

 

  
      321,266   
   

 

 

  
 

Movies & Entertainment – 0.3%

  

Delta Topco Ltd. (C)(D)

     718,555        30,671   
   

 

 

  
 

Restaurants – 1.9%

  

Chipotle Mexican Grill, Inc., Class A (C)

     340        159,895   

McDonalds Corp.

     252        31,693   
   

 

 

  
      191,588   
   

 

 

  
 

Total Consumer
Discretionary – 10.6%

   

     1,096,135   

Consumer Staples

  

 

Brewers – 0.6%

  

InBev N.V. (A)

     506        62,929   
   

 

 

  
 

Hypermarkets & Super Centers – 0.6%

  

Costco Wholesale Corp.

     384        60,524   
   

 

 

  
 

Packaged Foods & Meats – 1.6%

  

Kraft Foods Group, Inc.

     2,112        165,934   
   

 

 

  
 

Soft Drinks – 2.7%

  

Coca-Cola Co. (The)

     3,988        184,985   

PepsiCo, Inc. (B)

     859        88,030   
   

 

 

  
      273,015   
   

 

 

  
COMMON STOCKS
(Continued)		   Shares     Value  

Tobacco – 1.7%

  

ITC Ltd. (A)

     4,674      $ 23,167   

Philip Morris International, Inc.

     1,601        157,104   
   

 

 

  
      180,271   
   

 

 

  
 

Total Consumer Staples – 7.2%

  

     742,673   

Energy

  

 

Oil & Gas Equipment & Services – 2.2%

  

Halliburton Co.

     3,606        128,790   

Schlumberger Ltd.

     1,363        100,514   
   

 

 

  
      229,304   
   

 

 

  
 

Oil & Gas Exploration & Production – 2.3%

  

Cabot Oil & Gas Corp.

     446        10,134   

EOG Resources, Inc.

     1,301        94,459   

Noble Energy, Inc.

     2,990        93,929   

Pioneer Natural Resources Co.

     219        30,802   
   

 

 

  
      229,324   
   

 

 

  
 

Total Energy – 4.5%

  

     458,628   

Financials

  

 

Diversified Banks – 1.5%

  

Axis Bank Ltd. (A)

     8,299        55,659   

Banca Intesa S.p.A. (A)

     27,226        75,407   

Kabushiki Kaisha Mitsubishi Tokyo Financial Group (A)

     3,404        15,771   

State Bank of India (A)

     3,132        9,188   
   

 

 

  
      156,025   
   

 

 

  
 

Life & Health Insurance – 1.1%

  

AIA Group Ltd. (A)

     20,435        115,777   
   

 

 

  
 

Other Diversified Financial
Services – 2.7%

  

Citigroup, Inc. (B)

     3,419        142,726   

JPMorgan Chase & Co.

     2,213        131,072   
   

 

 

  
      273,798   
   

 

 

  
 

Total Financials – 5.3%

  

     545,600   

Health Care

  

 

Biotechnology – 2.5%

  

Alexion Pharmaceuticals, Inc. (C)

     406        56,482   

Amgen, Inc.

     819        122,853   

Biogen, Inc. (C)

     291        75,703   
   

 

 

  
      255,038   
   

 

 

  
 

Health Care Equipment – 0.5%

  

Medtronic plc

     736        55,185   
   

 

 

  
 

Managed Health Care – 0.8%

  

Anthem, Inc.

     592        82,311   
   

 

 

  
 

Pharmaceuticals – 4.2%

  

Allergan plc (C)

     564        151,129   

Bristol-Myers Squibb Co.

     1,183        75,564   

Pfizer, Inc.

     3,927        116,396   
COMMON STOCKS
(Continued)		   Shares     Value  

Pharmaceuticals (Continued)

  

Shire Pharmaceuticals Group plc ADR

     381      $ 65,528   

Teva Pharmaceutical Industries Ltd. ADR

     341        18,231   
   

 

 

  
      426,848   
   

 

 

  
 

Total Health Care – 8.0%

  

     819,382   

Industrials

  

 

Aerospace & Defense – 1.0%

  

Lockheed Martin Corp. (B)

     466        103,108   
   

 

 

  
 

Construction & Engineering – 0.5%

  

Larsen & Toubro Ltd. (A)

     2,726        50,087   
   

 

 

  
 

Industrial Machinery – 0.8%

  

Ingersoll-Rand plc

     1,364        84,563   
   

 

 

  
 

Total Industrials – 2.3%

  

     237,758   

Information Technology

  

 

Application Software – 2.6%

  

Adobe Systems, Inc. (B)(C)

     1,449        135,922   

Intuit, Inc. (G)

     1,238        128,734   
   

 

 

  
      264,656   
   

 

 

  
 

Data Processing & Outsourced
Services – 1.1%

  

Visa, Inc., Class A (B)

     1,446        110,582   
   

 

 

  
 

Internet Software & Services – 2.1%

  

Alibaba Group Holding Ltd. ADR (C)

     1,070        84,598   

Alphabet, Inc., Class A (C)

     174        132,592   
   

 

 

  
      217,190   
   

 

 

  
 

IT Consulting & Other Services – 1.3%

  

Cognizant Technology Solutions Corp., Class A (C)(G)

     2,178        136,584   
   

 

 

  
 

Semiconductors – 0.0%

  

Micron Technology, Inc. (C)

     608        6,370   
   

 

 

  
 

Systems Software – 1.8%

  

Microsoft Corp.

     3,345        184,759   
   

 

 

  
 

Total Information Technology – 8.9%

   

     920,141   

Materials

  

 

Paper Products – 0.6%

  

International Paper Co.

     1,483        60,842   
   

 

 

  
 

Total Materials – 0.6%

  

     60,842   
 

TOTAL COMMON
STOCKS – 47.4%

   

   $ 4,881,159   

(Cost: $5,290,764)

      
 

 

12   ANNUAL REPORT   2016  

Table of Contents

CONSOLIDATED SCHEDULE OF INVESTMENTS

Ivy Asset Strategy Fund (in thousands)

MARCH 31, 2016

 

 

 

CORPORATE DEBT
SECURITIES		   Principal     Value  

Consumer Discretionary

  

 

Movies & Entertainment – 7.1%

  

Delta Topco Ltd.,
10.000%,
    11-24-60 (D)(G)

   $ 729,133      $ 729,133   
   

 

 

  
 

Total Consumer
Discretionary – 7.1%

   

     729,133   
 

TOTAL CORPORATE DEBT SECURITIES – 7.1%

   

   $ 729,133   

(Cost: $735,342)

      
 
UNITED STATES
GOVERNMENT
AGENCY OBLIGATIONS		              

Mortgage-Backed Obligations – 0.0%

  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO:

      

5.000%, 5-15-18 (H)

     161        6   

5.500%, 3-15-23 (H)

     189        14   

5.500%,
10-15-25 (H)

     462        60   

5.500%, 1-15-33 (H)

     207        37   

5.500%, 5-15-33 (H)

     365        63   

6.000%,
11-15-35 (H)

     372        73   

Federal National Mortgage Association Agency REMIC/CMO:

      

5.500%, 6-25-23 (H)

     341        42   

5.500%, 8-25-33 (H)

     696        110   

5.500%,
12-25-33 (H)

     158        4   

5.500%, 4-25-34 (H)

     704        122   

5.500%, 8-25-35 (H)

     822        147   

5.500%,
11-25-36 (H)

     1,289        255   

Government National Mortgage Association Agency REMIC/CMO:

      

7.000%, 5-20-33 (H)

     1,673        417   

5.500%, 7-20-35 (H)

     477        107   
   

 

 

  
      1,457   
   

 

 

  
 

TOTAL UNITED STATES GOVERNMENT AGENCY OBLIGATIONS – 0.0%

    

   $ 1,457   

(Cost: $1,442)

      
 
UNITED STATES
GOVERNMENT
OBLIGATIONS		              

Treasury Inflation Protected
Obligations – 0.7%

   

U.S. Treasury Notes,

      

0.625%, 1-15-26

     73,427        76,789   
   

 

 

  
 

Treasury Obligations – 13.9%

  

U.S. Treasury Bonds:

      

2.250%, 11-15-25

     240,003        249,875   

2.875%, 8-15-45

     231,941        244,045   

3.000%, 11-15-45

     127,410        137,598   
UNITED STATES
GOVERNMENT
OBLIGATIONS
(Continued)		   Principal     Value  

Treasury Obligations (Continued)

  

U.S. Treasury Notes:

      

1.625%, 7-31-20

   $ 176,567      $ 180,112   

1.750%,
12-31-20

     109,676        112,410   

1.375%, 1-31-21

     135,519        136,540   

2.000%, 8-15-25

     359,335        366,368   
   

 

 

  
      1,426,948   
   

 

 

  
 

TOTAL UNITED STATES GOVERNMENT OBLIGATIONS – 14.6%

    

   $ 1,503,737   

(Cost: $1,472,658)

      
 
BULLION – 6.3%   Troy
Ounces		         

Gold

     529        651,337   
   

 

 

  

(Cost: $634,439)

      
 
SHORT-TERM
SECURITIES		   Principal         

Commercial Paper (I) – 20.5%

  

Abbott Laboratories,

      

0.360%, 5-10-16

   $ 19,200        19,192   

Air Products and Chemicals, Inc.:

      

0.460%, 4-4-16

     27,250        27,249   

0.470%, 4-5-16

     10,000        10,000   

0.380%, 4-18-16

     39,750        39,742   

Army & Air Force Exchange Service,

      

0.350%, 4-1-16

     4,000        4,000   

Baxter International, Inc.:

      

0.710%, 4-1-16

     12,000        12,000   

0.700%, 4-7-16

     10,000        9,999   

Becton Dickinson & Co.:

      

0.760%, 4-4-16

     6,000        6,000   

0.761%, 4-5-16

     19,000        18,999   

0.490%, 4-20-16

     14,000        13,996   

0.500%, 5-3-16

     20,000        19,991   

Bemis Co., Inc.:

      

0.470%, 4-13-16

     11,732        11,730   

0.470%, 4-14-16

     15,000        14,997   

BMW U.S. Capital LLC (GTD by BMW AG):

      

0.460%, 4-4-16

     80,000        79,997   

0.370%, 4-13-16

     35,000        34,995   

0.390%, 4-21-16

     30,000        29,993   

0.400%, 4-28-16

     10,000        9,997   

BorgWarner, Inc.:

      

0.610%, 4-5-16

     10,000        9,999   

0.490%, 4-21-16

     45,000        44,987   

CA GO Notes, Ser B-6 (Taxable), (GTD by Bank of America N.A.),

      

0.450%, 4-12-16

     10,000        9,999   

Campbell Soup Co.:

      

0.791%, 4-1-16

     4,988        4,988   

0.791%, 4-5-16

     20,000        19,999   

SHORT-TERM

SECURITIES

(Continued)

   Principal     Value  

Commercial Paper (I) (Continued)

  

0.811%, 4-8-16

   $ 20,000      $ 19,998   

0.400%, 4-12-16

     10,000        9,999   

0.450%, 4-21-16

     5,000        4,999   

0.460%, 4-25-16

     19,000        18,994   

0.480%, 5-4-16

     15,000        14,993   

Caterpillar Financial Services Corp. (GTD by Caterpillar, Inc.),

      

0.410%, 5-4-16

     25,000        24,990   

Chevron Corp.,

      

0.330%, 4-12-16

     14,329        14,327   

Clorox Co. (The):

      

0.460%, 4-11-16

     20,000        19,997   

0.470%, 4-13-16

     1,800        1,800   

0.490%, 4-20-16

     12,700        12,697   

0.500%, 4-27-16

     5,300        5,298   

0.510%, 5-18-16

     7,000        6,995   

Coca-Cola Co. (The),

      

0.350%, 4-22-16

     10,500        10,498   

Corporacion Andina de Fomento:

      

0.340%, 4-15-16

     12,000        11,998   

0.370%, 5-2-16

     30,000        29,990   

DTE Energy Co. (GTD by Detroit Edison Co.):

      

0.580%, 4-1-16

     5,000        5,000   

0.660%, 4-5-16

     13,250        13,249   

Ecolab, Inc.:

      

0.720%, 4-4-16

     18,000        17,999   

0.470%, 4-13-16

     4,000        3,999   

0.470%, 4-14-16

     10,000        9,998   

Emerson Electric Co.,

      

0.300%, 4-12-16

     15,000        14,999   

Essilor International S.A.:

      

0.500%, 4-1-16

     35,000        35,000   

0.430%, 4-4-16

     8,000        8,000   

0.380%, 4-18-16

     40,000        39,992   

0.390%, 4-20-16

     10,000        9,998   

0.400%, 5-2-16

     10,000        9,996   

0.430%, 5-26-16

     2,100        2,099   

Harley-Davidson Financial Services (GTD by Harley-Davidson Credit Corp.):

      

0.540%, 4-5-16

     2,000        2,000   

0.460%, 4-11-16

     10,000        9,999   

0.490%, 4-22-16

     15,000        14,996   

0.490%, 4-25-16

     15,000        14,995   

0.500%, 4-28-16

     10,000        9,996   

HP, Inc.:

      

0.831%, 4-4-16

     28,000        27,999   

0.320%, 4-11-16

     50,000        49,995   

John Deere Canada ULC (GTD by Deere & Co.):

      

0.320%, 4-12-16

     5,000        5,000   

0.390%, 4-26-16

     20,000        19,994   

John Deere Financial Ltd. (GTD by John Deere Capital Corp.),

      

0.410%, 4-28-16

     17,000        16,995   

John Deere Financial, Inc. (GTD by John Deere Capital Corp.),

      

0.410%, 5-5-16

     14,000        13,994   
 

 

  2016   ANNUAL REPORT   13

Table of Contents

CONSOLIDATED SCHEDULE OF INVESTMENTS

Ivy Asset Strategy Fund (in thousands)

MARCH 31, 2016

 

 

 

SHORT-TERM

SECURITIES

(Continued)

   Principal     Value  

Commercial Paper (I) (Continued)

  

Kroger Co. (The):

      

0.550%, 4-1-16

   $ 10,000      $ 10,000   

0.700%, 4-4-16

     17,000        16,999   

0.600%, 4-5-16

     20,000        19,999   

Malayan Banking Berhad (GTD by Wells Fargo Bank N.A.):

      

0.400%, 4-14-16

     20,000        19,997   

0.700%, 5-9-16

     7,000        6,997   

0.690%, 5-19-16

     4,200        4,197   

0.540%, 6-16-16

     4,500        4,495   

McCormick & Co., Inc.,

      

0.470%, 4-27-16

     10,000        9,997   

Medtronic Global Holdings SCA:

      

0.630%, 4-4-16

     18,000        17,999   

0.570%, 4-5-16

     55,120        55,117   

0.450%, 4-18-16

     16,000        15,996   

Mondelez International, Inc.:

      

0.570%, 4-1-16

     10,200        10,200   

0.520%, 5-24-16

     5,387        5,383   

NBCUniversal Enterprise, Inc.:

      

0.770%, 4-5-16

     5,215        5,215   

0.650%, 4-7-16

     27,500        27,498   

0.460%, 4-11-16

     6,000        5,999   

Northern Illinois Gas Co.:

      

0.500%, 4-4-16

     7,000        7,000   

0.570%, 4-5-16

     41,800        41,797   

0.470%, 4-13-16

     18,000        17,997   

Novartis Finance Corp. (GTD by Novartis AG):

      

0.410%, 4-7-16

     20,000        19,999   

0.350%, 4-18-16

     60,075        60,065   

0.380%, 5-9-16

     24,600        24,590   

PACCAR Financial Corp. (GTD by PACCAR, Inc.),

      

0.390%, 4-4-16

     30,000        29,999   

Pfizer, Inc.:

      

0.490%, 5-11-16

     11,000        10,995   

0.390%, 5-23-16

     7,000        6,996   

QUALCOMM, Inc.,

      

0.340%, 4-13-16

     10,000        9,999   

River Fuel Co. #2, Inc. (GTD by Bank of Nova Scotia),

      

0.550%, 4-29-16

     20,383        20,376   

River Fuel Funding Co. #3, Inc. (GTD by Bank of Nova Scotia):

      

0.430%, 4-15-16

     16,810        16,807   

0.440%, 4-29-16

     10,000        9,996   

0.520%, 6-1-16

     20,317        20,299   

Roche Holdings, Inc.:

      

0.420%, 4-6-16

     105,000        104,994   

0.350%, 4-19-16

     27,000        26,995   

Rockwell Automation, Inc.:

      

0.610%, 4-1-16

     2,083        2,083   

0.360%, 4-11-16

     12,000        11,998   

0.450%, 4-18-16

     22,525        22,520   

SHORT-TERM

SECURITIES

(Continued)

   Principal     Value  

Commercial Paper (I) (Continued)

  

Scotiabanc, Inc. (GTD by Bank of Nova Scotia (The)):

      

0.430%, 4-1-16

   $ 50,000      $ 50,000   

0.360%, 4-11-16

     10,000        9,999   

Sherwin-Williams Co. (The),

      

0.360%, 4-12-16

     15,000        14,998   

St. Jude Medical, Inc.,

      

0.480%, 4-19-16

     30,000        29,992   

The Regents of the Univ of CA, Commercial Paper Notes, Ser B (Taxable):

      

0.420%, 4-4-16

     33,901        33,899   

0.460%, 4-11-16

     19,000        18,997   

United Technologies Corp.:

      

0.730%, 4-4-16

     25,000        24,999   

0.470%, 4-13-16

     14,000        13,998   

Virginia Electric and Power Co.:

      

0.630%, 4-5-16

     2,700        2,700   

0.450%, 4-19-16

     15,000        14,996   

0.460%, 4-20-16

     14,000        13,996   

0.460%, 4-25-16

     25,000        24,992   

W.W. Grainger, Inc.:

      

0.340%, 4-4-16

     8,500        8,500   

0.340%, 4-14-16

     7,569        7,568   

0.360%, 4-20-16

     15,000        14,997   

0.360%, 4-21-16

     10,000        9,998   

0.370%, 4-27-16

     7,500        7,498   

Wisconsin Electric Power Co.:

      

0.400%, 4-1-16

     6,938        6,938   

0.490%, 4-5-16

     20,000        19,999   

Wisconsin Gas LLC:

      

0.400%, 4-7-16

     12,000        11,999   

0.430%, 4-12-16

     11,291        11,289   

0.440%, 4-14-16

     35,000        34,994   
   

 

 

  
      2,105,653   
   

 

 

  
 

Master Note – 0.0%

  

Toyota Motor Credit Corp.,

      

0.443%, 4-6-16 (J)

     3,062        3,062   
   

 

 

  

Municipal Obligations – 3.4%

  

CA GO Bonds, Ser 2004B6 (GTD by U.S. Bank N.A.),

      

0.400%, 4-7-16 (J)

     21,600        21,600   

CA Hlth Fac Fin Auth, Var Rate Hosp Rev Bonds (Adventist Hlth Sys/West), Ser 1998B (GTD by U.S. Bank N.A.),

      

0.360%, 4-1-16 (J)

     17,400        17,400   

CA Muni Fin Auth, Recovery Zone Fac Bonds (Chevron USA, Inc. Proj), Ser 2010C (GTD by Chevron Corp.),

      

0.340%, 4-1-16 (J)

     12,386        12,386   

SHORT-TERM

SECURITIES

(Continued)

   Principal     Value  

Municipal Obligations (Continued)

  

CA Statewide Cmnty Dev Auth, Multifam Hsng Rev Bonds (Wyndover Apts), Ser 2004 LL (GTD by FNMA),

      

0.410%, 4-7-16 (J)

   $ 1,443      $ 1,443   

City of Whittier, Hlth Fac Rev Bonds (Presbyterian Intercmnty Hosp), Ser 2009 (GTD by U.S. Bank N.A.),

      

0.400%, 4-7-16 (J)

     27,375        27,375   

Columbus Rgnl Arpt Auth, Cap Funding Rev Bonds (OASBO Expanded Asset Pooled Fin Prog), Sr Ser 2005 (GTD by U.S. Bank N.A.),

      

0.410%, 4-7-16 (J)

     6,900        6,900   

Dev Auth of Monroe Cnty, Pollutn Ctl Rev Bonds (GA Power Co. Plant Scherer Proj), First Ser 2008 (GTD by Georgia Power Co.),

      

0.480%, 4-1-16 (J)

     24,475        24,475   

Fremont (Alameda Cnty, CA), Fremont Public Fin Auth (GTD by U.S. Bank N.A.),

      

0.400%, 4-7-16 (J)

     19,510        19,510   

Greenville Hosp Sys Board of Trustees, Hosp Rfdg Rev Bonds, Ser 2008B (GTD by U.S. Bank N.A.),

      

0.400%, 4-7-16 (J)

     6,000        6,000   

Harris Cnty Hosp Dist, Sr Lien Rfdg Rev Bonds, Ser 2010 (GTD by JPMorgan Chase & Co.),

      

0.430%, 4-7-16 (J)

     14,000        14,000   

Hosp Fac Auth of Clackamas Cnty, OR, Rev Bonds (Legacy Hlth Sys), Ser 2008B (GTD by U.S. Bank N.A.),

      

0.400%, 4-7-16 (J)

     1,905        1,905   

IL Fin Auth, Var Rate Demand Rev Bonds (The Carle Fndtn), Ser 2009 (GTD by JPMorgan Chase Bank N.A.),

      

0.420%, 4-7-16 (J)

     855        855   

IL Fin Auth, Var Rate Demand Rev Bonds (The Univ of Chicago Med Ctr), Ser D (GTD by JPMorgan Chase & Co.),

      

0.350%, 4-1-16 (J)

     9,000        9,000   

Irvine Unif Sch Dist, Cmnty Fac Dist No. 09-1, Adj Rate Spl Tax Bonds, Ser 2012A (GTD by U.S. Bank N.A.),

      

0.360%, 4-1-16 (J)

     28,600        28,600   
 

 

14   ANNUAL REPORT   2016  

Table of Contents

CONSOLIDATED SCHEDULE OF INVESTMENTS

Ivy Asset Strategy Fund (in thousands)

MARCH 31, 2016

 

 

 

SHORT-TERM

SECURITIES

(Continued)

   Principal     Value  

Municipal Obligations (Continued)

  

Irvine Unif Sch Dist, Cmnty Fac Dist No. 09-1, Adj Rate Spl Tax Bonds, Ser 2014C-C (GTD by U.S. Bank N.A.),

      

0.360%, 4-1-16 (J)

   $ 10,000      $ 10,000   

LA Pub Fac Auth, Var Rate Rev Rfdg Bonds (CHRISTUS Hlth), Ser 2009B-1 (GTD by Bank of New York (The)),

      

0.520%, 4-7-16 (J)

     6,605        6,605   

MI Strategic Fund, Var Rate Demand Ltd. Oblig Rev Bonds (Air Prods and Chemicals, Inc. Proj), Ser 2007 (GTD by Air Prods and Chemicals, Inc.),

      

0.390%, 4-1-16 (J)

     25,077        25,077   

MS Business Fin Corp., Gulf Opp Zone Indl Dev Rev Bonds (Chevron USA, Inc. Proj), Ser 2007B (GTD by Chevron Corp.),

      

0.380%, 4-1-16 (J)

     25,400        25,400   

Muni Elec Auth GA, Gen Resolution Proj Bond Anticipation Notes, Ser A (Taxable), (GTD by Wells Fargo Bank N.A.):

      

0.420%, 4-7-16

     26,000        25,998   

0.410%, 4-14-16

     7,000        6,999   

NYC GO Bonds, Fiscal 2006 Ser E (GTD by Bank of America N.A.),

      

0.390%, 4-7-16 (J)

     5,300        5,300   

NYC GO Bonds, Fiscal 2008 Ser L-4,

      

0.360%, 4-1-16 (J)

     13,000        13,000   

SHORT-TERM

SECURITIES

(Continued)

   Principal     Value  

Municipal Obligations (Continued)

  

San Francisco City and Cnty, Pub Util Comnty Water Rev, Series A1T (Taxable), (GTD by Royal Bank of Canada),

      

0.430%, 5-3-16

   $ 5,000      $ 5,000   

Santa Clara Cnty Fin Auth, Var Rate Rev Bonds, El Camino Hosp, Ser 2009A (GTD by Wells Fargo Bank N.A.),

      

0.380%, 4-7-16 (J)

     14,751        14,751   

Sheridan Redev Agy CO Tax, Var Rfdg S Santa Fe Dr Corridor Redev PJ, Ser A-1 (GTD by JPMorgan Chase & Co.),

      

0.460%, 4-7-16 (J)

     1,900        1,900   

Tuscaloosa Cnty Indl Dev Auth, Gulf Opp Zone Bonds (Hunt Refining Proj), Ser 2011G (GTD by Bank of Nova Scotia),

      

0.410%, 4-7-16 (J)

     6,000        6,000   

Uinta Cnty, WY, Pollutn Ctl Rfdg Rev Bonds (Chevron USA, Inc. Proj), Ser 1992 (GTD by Chevron Corp.),

      

0.370%, 4-1-16 (J)

     10,267        10,267   

Univ of KS Hosp Auth, Var Rate Demand Hlth Fac Rev Bonds (KU Hlth Sys), Ser 2004 (GTD by U.S. Bank N.A.),

      

0.400%, 4-1-16 (J)

     5,140        5,140   
   

 

 

  
      352,886   
   

 

 

  

SHORT-TERM

SECURITIES
(Continued)

   Principal     Value  

United States Government Agency
Obligations – 1.0%

   

Overseas Private Investment Corp. (GTD by U.S. Government):

      

0.360%,
4-6-16 (J)

   $ 47,112      $ 47,112   

0.400%,
4-6-16 (J)

     33,448        33,448   

0.360%,
4-7-16 (J)

     16,250        16,250   

0.400%,
4-7-16 (J)

     1,900        1,900   
   

 

 

  
      98,710   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 24.9%

   

   $ 2,560,311   

(Cost: $2,560,243)

  

    
 

TOTAL INVESTMENT SECURITIES – 100.3%

   

   $ 10,327,134   

(Cost: $10,694,888)

  

    
 

LIABILITIES, NET OF
CASH AND OTHER ASSETS – (0.3)%

    

     (29,975 ) 
 

NET ASSETS – 100.0%

  

   $ 10,297,159   
 

 

Notes to Consolidated Schedule of Investments

 

* Not shown due to rounding.

 

(A) Listed on an exchange outside the United States.

 

(B) All or a portion of securities with an aggregate value of $528 are held in collateralized accounts for OTC derivatives collateral as governed by International Swaps and Derivatives Association, Inc. Master Agreements.

 

(C) No dividends were paid during the preceding 12 months.

 

(D) Restricted securities. At March 31, 2016, the Fund owned the following restricted securities:

 

Security      Acquisition Date(s)     Shares        Cost        Market Value  

Delta Topco Ltd.

        1-23-12 to 6-15-12        718,555         $ 339,126         $ 30,671   

Media Group Holdings LLC, Series H

        8-29-13 to 10-31-13       640           448,211           60,093   

Media Group Holdings LLC, Series I

        4-23-13 to 11-8-13        381           209,901           151,166   

Media Group Holdings LLC, Series T

        7-2-13 to 1-23-15        80           172,543           110,007   
             Principal                    

Delta Topco Ltd., 10.000%, 11-24-60

        4-1-12 to 1-1-16      $ 729,133           735,342           729,133   
           

 

 

  
            $ 1,905,123         $ 1,081,070   
           

 

 

  

The total value of these securities represented 10.5% of net assets at March 31, 2016.

 

(E) Investment is owned by an entity that is treated as a corporation for U.S. tax purposes and is owned by the Fund and consolidated as described in Note 6 of the Notes to Financial Statements.

 

 

  2016   ANNUAL REPORT   15

Table of Contents

CONSOLIDATED SCHEDULE OF INVESTMENTS

Ivy Asset Strategy Fund (in thousands)

MARCH 31, 2016

 

 

 

(F) Deemed to be an affiliate due to the Fund owning at least 5% of the voting securities.

 

(G) Payment-in-kind bonds.

 

(H) Interest-only security. Amount shown as principal represents notional amount for computation of interest.

 

(I) Rate shown is the yield to maturity at March 31, 2016.

 

(J) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following forward foreign currency contracts were outstanding at March 31, 2016:

 

      Currency to be
Delivered		            Currency to be
Received		      Settlement
Date		      Counterparty    Unrealized
Appreciation		      Unrealized
Depreciation		       

Euro

      97,277       U.S. Dollar      110,033         4-26-16       Deutsche Bank AG    $ —       $ 732     

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

        

Consumer Discretionary

   $ 744,198       $ —       $ 351,937   

Consumer Staples

     742,673         —         —   

Energy

     458,628         —         —   

Financials

     545,600         —         —   

Health Care

     819,382         —         —   

Industrials

     237,758         —         —   

Information Technology

     920,141         —         —   

Materials

     60,842         —         —   

Total Common Stocks

   $ 4,529,222       $ —       $ 351,937   

Corporate Debt Securities

     —         —         729,133   

United States Government Agency Obligations

     —         1,457         —   

United States Government Obligations

     —         1,503,737         —   

Bullion

     651,337         —         —   

Short-Term Securities

     —         2,560,311         —   

Total

   $ 5,180,559       $ 4,065,505       $ 1,081,070   

Liabilities

        

Forward Foreign Currency Contracts

   $ —       $ 732       $ —   

The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

 

     Common Stocks     Corporate Debt
Securities		  

Beginning Balance 4-1-15

   $ 1,469,902      $ 662,848   

Net realized gain (loss)

     (25,441 )      —   

Net change in unrealized appreciation (depreciation)

     (733,237 )      — * 

Purchases

     —        66,285   

Sales

     (359,287 )      —   

Amortization/Accretion of premium/discount

     —        —   

Transfers into Level 3 during the period

     —        —   

Transfers out of Level 3 during the period

     —        —   

Ending Balance 3-31-16

   $ 351,937      $ 729,133   

Net change in unrealized appreciation (depreciation) for all Level 3 investments still held as of 3-31-16

   $ (775,367 )    $ — * 

During the year ended March 31, 2016, there were no transfers between Levels 1 and 2.

 

16   ANNUAL REPORT   2016  

Table of Contents

CONSOLIDATED SCHEDULE OF INVESTMENTS

Ivy Asset Strategy Fund (in thousands)

MARCH 31, 2016

 

 

 

Information about Level 3 fair value measurements:

 

    

Fair Value at

3-31-16

      Valuation Technique(s)      Unobservable Input(s)      Input Value(s)  

Assets

           

Common Stocks

   $ 351,937         Discounted cash flows model         Long-term growth rate         2.50 % 
          Weighted average cost of capital         9.22 to 40 % 
                        Illiquidity discount         10 % 

Corporate Debt Securities

     729,133         Discounted cash flows model         Long-term growth rate         2.50 % 
          Weighted average cost of capital         9.22 % 
                        Illiquidity discount         10 % 

Significant increases in long-term growth rate inputs could result in a higher fair value measurement. However, significant increases in weighted average cost of capital or illiquidity discount inputs could result in a lower fair value measurement.

During the year ended March 31, 2016, securities totaling $324,734 changed valuation techniques from discounted book value to discounted cash flows model. The change in valuation techniques is primarily due to the discounted book value method no longer reflecting current market conditions.

The following acronyms are used throughout this schedule:

ADR = American Depositary Receipts

CMO = Collateralized Mortgage Obligation

FNMA = Federal National Mortgage Association

GTD = Guaranteed

REMIC = Real Estate Mortgage Investment Conduit

 

Country Diversification

  

(as a % of net assets)

  

United States

      53.1%   

United Kingdom

      8.3%   

Ireland

      2.0%   

India

      1.3%   

Hong Kong

      1.1%   

Other Countries

      3.3%   

Other+

      30.9%   
 

 

  +Includes gold bullion, cash and other assets (net of liabilities), and cash equivalents

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   17

Table of Contents

MANAGEMENT DISCUSSION

Ivy Balanced Fund

(UNAUDITED)

 

 

 

LOGO

Matthew A. Hekman

Below, Matthew A. Hekman, portfolio manager of the Ivy Balanced Fund, discusses positioning, performance and results for the fiscal year ended March 31, 2016. He has managed the Fund since 2014 and has 17 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy Balanced Fund (Class A shares at net asset value)

      –4.92%   

Ivy Balanced Fund (Class A shares including sales charges)

      –10.38%   

Benchmark(s) and/or Lipper Category

         

S&P 500 Index

      1.78%   

(generally reflects the performance of large- and medium-sized U.S. stocks)

         

Barclays U.S. Government/Credit Index

      1.75%   

(generally reflects the performance of securities in the bond market)

         

Lipper Mixed-Asset Target Allocation Growth Funds Universe Average

      –3.09   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses, whereas the index returns do not include any such fees. Multiple indexes are presented because the Fund invests in multiple assets classes. The performance discussion below is at net asset value.

 

Key drivers

 

 

The fiscal year ended March 31, 2016 exhibited an increasing amount of volatility, as investors grappled with a sluggish global growth environment; the beginning of an interest rate cycle embarked upon by the U.S. Federal Reserve (Fed), which created substantial fluctuations in global currency markets; ongoing geopolitical unrest in Eurasia and the Middle East; and persistent deflationary forces from the basic materials sector that were headlined by oil and base metals. As a result, longer-term interest rates, while volatile, declined over the course of the period and traditionally defensive sectors of the equity market outperformed.

Contributors and detractors

 

 

The Fund underperformed peers in the Lipper Mixed-Asset Target Allocation Growth Funds Universe, posting a loss of 4.92% over the 12 months ended March 31, 2016. Poor stock selection in the equity portion of the Fund and a long-standing short duration position in the fixed-income portion of the Fund contributed to the Fund’s underperformance. The Fund’s equity benchmark, the S&P 500 Index, was up 1.78% for the period. The Fund’s fixed-income benchmark, the Barclays U.S. Government/Credit Index, was up 1.75% for the period.

The equity portion of the Fund declined approximately 3% over the past 12 months, trailing the benchmark return due predominately to stock selection. In particular, equity positions in technology, materials, energy and industrials drove poor relative performance. In addition, the Fund was underweight in the utilities and telecommunications sectors, which were the best performing sectors in the S&P 500 Index. The Fund’s relative underweight in the energy, financials and health care sectors were positive contributors to relative performance. Strong stock selection in the consumer staples sector also had a positive impact on Fund performance. Given very modest global growth, markets are fragile and susceptible to significant moves (up and down), as witnessed in the fall of 2015 and again in January and February of 2016. As a result, the Fund has employed the use of options to protect against downside risk in the equity market, which had a negative 90 basis points impact on performance in the fiscal year ended March 31, 2016.

The fixed-income portion of the Fund declined approximately 1% over the past 12 months. This performance lagged the Barclays U.S. Government/Credit Index’s return due to the Fund’s relatively shorter duration and poor performance in fixed-income positions in the energy sector. For quite some time, the Fund has been short duration relative to its benchmark, given the low level of interest rates. The Fund has a substantially overweight position to credit instruments given the good health of corporate balance sheets and abundant liquidity available within the financial system, which helped to mitigate the Fund’s underperformance resulting from its duration, but was unable to make up the entire shortfall.

Top contributors to Fund performance came from the technology, consumer staples and consumer discretionary sectors. Specifically, Amazon.com (no longer a fund holding), Broadcom Corp., Constellation Brands, Inc., McDonald’s Corp., Home Depot Inc., Carnival Corp. and Time Warner Cable (no longer a Fund holding) were notable contributors. In addition, General Electric and Newfield Exploration posted strong performance during the period. In most cases, we believe that the outlook for these companies continues to be promising. At Broadcom, synergies from the Avago Technologies Limited merger, coupled with strong demand for Broadcom’s products in wireless and cloud computing applications, continue to drive visible growth. At Constellation Brands, exceptional demand for its core beer portfolio and compelling gross margin expansion opportunities continue to be a tailwind for growth. At McDonald’s, reinvigoration of the brand through all-day breakfast and refranchising appear to be driving near term strength as senior management works to optimize the company’s footprint and operational structure. At Home Depot, ongoing improvement in the home repair and remodel market in the U.S., coupled with an emphasis on cost management, has produced strong results that we believe should prove sustainable. At Carnival, industry supply growth discipline has produced an environment conducive for return on invested capital improvement that we believe appears sustainable.

 

18   ANNUAL REPORT   2016  

Table of Contents

 

 

 

Detractors to Fund performance were Freeport-McMoRan, Energy Transfer Partners, Plains GP Holdings, Kohl’s, Shire Pharmaceuticals, Union Pacific and Williams Sonoma. Freeport-McMoRan, Energy Transfer Partners and Plains GP Holdings shares fell as global commodity prices declined due to oversupply and weak demand. Kohl’s struggled as traffic in the store has been difficult to maintain due to ongoing online share shift in retail and a lack of brand differentiation. Shire Pharmaceuticals was negatively impacted by growing concerns over drug pricing in the U.S. and investor concerns over capital deployment decisions made during the period. Union Pacific declined as rail volumes fell with a decline in energy production and manufacturing activity. Williams Sonoma underperformed due to poor execution in its logistics business and a growing threat from online peers in the home furnishing space. Freeport-McMoRan, Energy Transfer Partners, Plains GP Holdings and Kohl’s are no longer Fund holdings.

Outlook

 

 

With multiple economic and political crosswinds buffeting global asset markets, it seems to us that volatility is likely to remain at an elevated level. The Fund’s strategy was adjusted over the past fiscal year in reaction to the growing risks to economic growth and potential economic disruption resulting from the dramatic decline in oil and base metal prices. The targeted equity allocation was reduced from 70% to 55% over that time period with the remainder allocated to fixed income and cash.

Over the long-term, asset markets generally tend to follow corporate earnings and cash flows; unfortunately, the trends and outlook with respect to corporate earnings and cash flows have been disappointing. In fact, the S&P 500 Index revenues have been declining on a year-over-year basis for the past four quarters and earnings have declined for the third and fourth quarters of 2015. (First quarter 2016 is expected to continue this downward trend, with consensus expectations persistently declining through the quarter.) This backdrop helps explain the inability of risk markets to advance past their cycle-to-date peaks reached in the summer of 2015. Additionally, this anemic growth environment, coupled with recessionary economic conditions in several emerging market countries, has motivated central bankers around the globe to pursue unprecedented levels of monetary stimulus including various forms of quantitate easing and negative interest rates. To date, these measures have failed to ignite economic growth.

While we continue to monitor macroeconomic forces and trends, we maintain an emphasis on finding high quality, growing companies whose securities are trading at a reasonable valuation with visible catalysts to drive relative outperformance over the next 12 months. This approach has served investors well over time, and our confidence in it has not waned.

Performance shown at NAV does not include the effects of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

Fixed-income securities are subject to interest rate risk and, as such, the Fund’s net asset value may fall as interest rates rise. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the portfolio manager and are current only through the end of the period of the report as stated on the cover. The portfolio manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The indexes noted are unmanaged, include reinvested dividends and do not include fees. One cannot invest directly in an index, nor is an index representative of the Ivy Balanced Fund’s performance.

 

  2016   ANNUAL REPORT   19

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Balanced Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      52.8%   

Health Care

      11.7%   

Information Technology

      10.0%   

Consumer Discretionary

      7.9%   

Financials

      7.9%   

Consumer Staples

      5.2%   

Industrials

      3.6%   

Energy

      3.2%   

Materials

      2.3%   

Telecommunication Services

      1.0%   

Purchased Options

      0.4%   

Bonds

      28.4%   

Corporate Debt Securities

      27.0%   

United States Government and Government Agency Obligations

      0.7%   

Loans

      0.7%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      18.4%   

Lipper Rankings

 

 

 

Category: Lipper Mixed-Asset Target
Allocation Growth Funds		    Rank      Percentile

1 Year

    395/485      82

3 Year

    171/455      38

5 Year

    124/405      31

10 Year

      19/305      7

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

 

 

Top 10 Equity Holdings

 

 

 

Company    Sector      Industry

Carnival Corp.

   

Consumer Discretionary

     

Hotels, Resorts & Cruise Lines

Broadcom Corp., Class A

   

Information Technology

     

Semiconductors

JPMorgan Chase & Co.

   

Financials

     

Other Diversified Financial Services

PNC Financial Services Group, Inc. (The)

   

Financials

     

Regional Banks

Teva Pharmaceutical Industries Ltd. ADR

   

Health Care

     

Pharmaceuticals

Comcast Corp., Class A

   

Consumer Discretionary

     

Cable & Satellite

Shire Pharmaceuticals Group plc ADR

   

Health Care

     

Pharmaceuticals

Union Pacific Corp.

   

Industrials

     

Railroads

PPG Industries, Inc.

   

Materials

     

Diversified Chemicals

Cognizant Technology Solutions Corp., Class A

   

Information Technology

     

IT Consulting & Other Services

See your advisor or www.ivyfunds.com for more information on the Fund’s most recently published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

20   ANNUAL REPORT   2016  

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Balanced Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class B(4)      Class C      Class E(5)      Class I      Class R      Class R6      Class Y  

1-year period ended 3-31-16

      -10.38%         -9.20%         -5.62%         -10.28%         -4.70%         -5.29%         -4.57%         -4.95%   

5-year period ended 3-31-16

      5.74%         6.04%         6.26%         5.98%         7.29%         —            —            7.01%   

10-year period ended 3-31-16

      6.08%         5.99%         5.99%         —            —            —            —            6.78%   

Since Inception of Class through 3-31-16(6)

      —            —            —            6.15%         6.94%         7.65%         1.83%         —      

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) Class E shares are not currently available for investment.

 

(6) 4-2-07 for Class E shares, 4-2-07 for Class I shares, 12-19-12 for Class R shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

  2016   ANNUAL REPORT   21

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Balanced Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Consumer Discretionary

  

 

Cable & Satellite – 1.5%

  

Comcast Corp., Class A

     675      $ 41,250   
   

 

 

  
 

Casinos & Gaming – 0.8%

  

Las Vegas Sands, Inc.

     451        23,313   
   

 

 

  
 

Home Improvement Retail – 1.0%

  

Home Depot, Inc. (The)

     212        28,307   
   

 

 

  
 

Homefurnishing Retail – 1.1%

  

Williams-Sonoma, Inc.

     549        30,025   
   

 

 

  
 

Hotels, Resorts & Cruise Lines – 2.1%

  

Carnival Corp.

     1,125        59,356   
   

 

 

  
 

Movies & Entertainment – 0.9%

  

Twenty-First Century Fox, Inc.

     907        25,583   
   

 

 

  
 

Restaurants – 0.5%

  

McDonalds Corp.

     106        13,371   
   

 

 

  
 

Total Consumer
Discretionary – 7.9%

   

     221,205   

Consumer Staples

  

 

Brewers – 1.0%

  

Anheuser-Busch InBev S.A. ADR

     214        26,621   
   

 

 

  
 

Distillers & Vintners – 0.9%

  

Constellation Brands, Inc.

     175        26,403   
   

 

 

  
 

Packaged Foods & Meats – 3.3%

  

J.M. Smucker Co. (The)

     217        28,175   

Kraft Foods Group, Inc.

     350        27,493   

Mead Johnson Nutrition Co.

     431        36,584   
   

 

 

  
      92,252   
   

 

 

  
 

Total Consumer Staples – 5.2%

  

     145,276   

Energy

  

 

Oil & Gas Equipment & Services – 1.0%

  

Schlumberger Ltd.

     381        28,099   
   

 

 

  
 

Oil & Gas Exploration & Production – 1.8%

  

Newfield Exploration Co. (A)

     736        24,460   

Noble Energy, Inc.

     854        26,826   
   

 

 

  
      51,286   
   

 

 

  
 

Total Energy – 2.8%

  

     79,385   

Financials

  

 

Asset Management & Custody
Banks – 0.6%

  

Northern Trust Corp.

     255        16,628   
   

 

 

  
 

Investment Banking & Brokerage – 0.9%

  

Morgan Stanley

     1,022        25,560   
   

 

 

  
COMMON STOCKS
(Continued)		   Shares     Value  

Other Diversified Financial
Services – 2.0%

  

JPMorgan Chase & Co. (B)

     928      $ 54,941   
   

 

 

  
 

Regional Banks – 1.7%

  

PNC Financial Services Group, Inc. (The)

     572        48,370   
   

 

 

  
 

Specialized Finance – 1.1%

  

Intercontinental Exchange, Inc.

     129        30,380   
   

 

 

  
 

Specialized REITs – 1.2%

  

Crown Castle International Corp.

     391        33,778   
   

 

 

  
 

Total Financials – 7.5%

  

     209,657   

Health Care

  

 

Biotechnology – 0.5%

  

Biogen, Inc. (A)

     51        13,394   
   

 

 

  
 

Health Care Equipment – 1.1%

  

Medtronic plc

     393        29,490   
   

 

 

  
 

Health Care Services – 0.7%

  

Laboratory Corp. of America Holdings (A)

     179        20,978   
   

 

 

  
 

Managed Health Care – 1.7%

  

Anthem, Inc.

     243        33,795   

UnitedHealth Group, Inc.

     107        13,799   
   

 

 

  
      47,594   
   

 

 

  
 

Pharmaceuticals – 5.6%

  

Allergan plc (A)

     130        34,911   

Johnson & Johnson

     354        38,249   

Shire Pharmaceuticals Group plc ADR

     240        41,177   

Teva Pharmaceutical Industries Ltd. ADR

     772        41,293   
   

 

 

  
      155,630   
   

 

 

  
 

Total Health Care – 9.6%

  

     267,086   

Industrials

  

 

Aerospace & Defense – 0.4%

  

Boeing Co. (The)

     84        10,682   
   

 

 

  
 

Industrial Conglomerates – 1.0%

  

General Electric Co.

     882        28,034   
   

 

 

  
 

Railroads – 1.4%

  

Union Pacific Corp.

     490        38,956   
   

 

 

  
 

Total Industrials – 2.8%

  

     77,672   

Information Technology

  

 

Application Software – 1.1%

  

Autodesk, Inc. (A)

     525        30,616   
   

 

 

  
COMMON STOCKS
(Continued)		   Shares     Value  

Communications Equipment – 0.9%

  

Harris Corp.

     329      $ 25,635   
   

 

 

  
 

Data Processing & Outsourced
Services – 0.8%

  

FleetCor Technologies, Inc. (A)

     162        24,053   
   

 

 

  
 

IT Consulting & Other Services – 1.4%

  

Cognizant Technology Solutions Corp., Class A (A)

     611        38,291   
   

 

 

  
 

Semiconductor Equipment – 1.0%

  

Applied Materials, Inc.

     1,271        26,924   
   

 

 

  
 

Semiconductors – 3.8%

  

Broadcom Corp., Class A

     383        59,236   

Microchip Technology, Inc.

     556        26,821   

Texas Instruments, Inc.

     366        21,016   
   

 

 

  
      107,073   
   

 

 

  
 

Systems Software – 0.5%

  

Symantec Corp.

     755        13,878   
   

 

 

  
 

Technology Hardware, Storage & Peripherals – 0.5%

   

Apple, Inc.

     133        14,499   
   

 

 

  
 

Total Information
Technology – 10.0%

   

     280,969   

Materials

  

 

Diversified Chemicals – 1.4%

  

PPG Industries, Inc.

     345        38,414   
   

 

 

  
 

Paper Products – 0.4%

  

International Paper Co.

     266        10,910   
   

 

 

  
 

Total Materials – 1.8%

  

     49,324   
 

TOTAL COMMON
STOCKS – 47.6%

   

   $ 1,330,574   

(Cost: $1,149,765)

      
 
PREFERRED STOCKS         

Energy

  

 

Oil & Gas Exploration &
Production – 0.4%

  

Hess Corp., Convertible, 8.000% (A)

     190        12,803   
   

 

 

  
 

Total Energy – 0.4%

  

     12,803   

Financials

  

 

Diversified Banks – 0.1%

  

First Republic Bank, Series G, 5.500% (A)

     120        3,001   
   

 

 

  
 

Other Diversified Financial
Services – 0.3%

  

Citigroup, Inc., 6.300% (A)

     366        9,523   
   

 

 

  
 

Total Financials – 0.4%

  

     12,524   
 

 

22   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Balanced Fund (in thousands)

MARCH 31, 2016

 

 

 

PREFERRED STOCKS
(Continued)		   Shares     Value  

Health Care

  

 

Pharmaceuticals – 2.1%

  

Allergan plc, Convertible Series A, 5.500%

     31      $ 28,493   

Teva Pharmaceutical Industries Ltd., Convertible, 7.000% (A)

     34        29,624   
   

 

 

  
      58,117   
   

 

 

  
 

Total Health Care – 2.1%

  

     58,117   

Industrials

  

 

Environmental & Facilities
Services – 0.8%

  

Stericycle, Inc., 5.250%

     232        21,564   
   

 

 

  
 

Total Industrials – 0.8%

  

     21,564   

Materials

  

 

Commodity Chemicals – 0.5%

  

A. Schulman, Inc., Convertible, 6.000%

     19        13,963   
   

 

 

  
 

Total Materials – 0.5%

  

     13,963   

Telecommunication Services

  

 

Integrated Telecommunication
Services – 1.0%

   

Frontier Communications Corp., Convertible Series A, 11.125%

     261        27,230   
   

 

 

  
 

Total Telecommunication Services – 1.0%

   

     27,230   
 

TOTAL PREFERRED
STOCKS – 5.2%

   

   $ 146,201   

(Cost: $151,842)

      
 
PURCHASED
OPTIONS		   Number of
Contracts
(Unrounded)		         

S&P 500 Index:

      

Put $1,875.00, Expires
4-1-16

     2,066        10   

Put $1,925.00, Expires
4-22-16

     1,481        337   

Put $1,940.00, Expires
5-20-16

     1,484        1,863   

Put $2,000.00, Expires
5-20-16

     1,352        3,022   

Put $2,000.00,
Expires
6-3-16

     2,082        5,996   
   

 

 

  
 

TOTAL PURCHASED
OPTIONS – 0.4%

   

   $ 11,228   

(Cost: $26,407)

      
CORPORATE DEBT
SECURITIES		   Principal     Value  

Consumer Discretionary

  

 

Auto Parts & Equipment – 0.0%

  

Delphi Corp.,

      

5.000%, 2-15-23

   $ 849      $ 893   
   

 

 

  
 

Automobile Manufacturers – 0.5%

  

General Motors Co.,

      

6.600%, 4-1-36

     5,809        6,393   

Volkswagen Group of America, Inc.,

      

2.125%, 5-23-19 (C)

     6,250        6,182   
   

 

 

  
      12,575   
   

 

 

  
 

Broadcasting – 0.0%

  

Discovery Communications LLC,

      

3.300%, 5-15-22

     900        888   
   

 

 

  
 

Cable & Satellite – 0.4%

  

Comcast Corp. (GTD by Comcast Cable Communications and NBCUniversal),

      

3.150%, 3-1-26

     4,712        4,906   

Pearson Funding Five plc,

      

3.250%, 5-8-23 (C)

     900        859   

Viacom, Inc.:

      

2.500%, 9-1-18

     1,100        1,108   

2.200%, 4-1-19

     2,000        2,006   

2.750%, 12-15-19

     3,000        3,056   
   

 

 

  
      11,935   
   

 

 

  
 

General Merchandise Stores – 0.1%

  

Dollar General Corp.:

      

4.125%, 7-15-17

     450        464   

1.875%, 4-15-18

     1,000        1,006   
   

 

 

  
      1,470   
   

 

 

  
 

Homebuilding – 0.1%

  

Toll Brothers Finance Corp.,

      

4.375%, 4-15-23

     1,500        1,466   
   

 

 

  
 

Hotels, Resorts & Cruise Lines – 0.0%

  

Hyatt Hotels Corp.,

      

3.375%, 7-15-23

     500        490   
   

 

 

  
 

Household Appliances – 0.2%

  

Stanley Black & Decker, Inc.,

      

2.451%, 11-17-18

     6,000        6,094   
   

 

 

  
 

Housewares & Specialties – 0.2%

  

Newell Rubbermaid, Inc.,

      

4.200%, 4-1-26

     5,400        5,648   
   

 

 

  
 

Internet Retail – 0.1%

  

Amazon.com, Inc.,

      

2.600%, 12-5-19

     2,900        3,018   
   

 

 

  
 

Specialty Stores – 0.3%

  

GNC Holdings, Inc., Convertible,

      

1.500%, 8-15-20 (C)

     6,000        4,905   

L Brands, Inc.,

      

6.875%, 11-1-35

     3,250        3,527   
   

 

 

  
      8,432   
   

 

 

  
 

Total Consumer
Discretionary – 1.9%

  

     52,909   

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Consumer Staples

  

 

Brewers – 0.3%

  

Anheuser-Busch InBev S.A./N.V.,

      

2.650%, 2-1-21

   $ 6,000      $ 6,168   

SABMiller Holdings, Inc.,

      

2.200%, 8-1-18 (C)

     2,700        2,761   
   

 

 

  
      8,929   
   

 

 

  
 

Distillers & Vintners – 0.0%

  

Beam, Inc.,

      

1.750%, 6-15-18

     1,000        1,001   
   

 

 

  
 

Drug Retail – 0.2%

  

CVS Health Corp.,

      

2.800%, 7-20-20

     4,000        4,153   

Walgreens Boots Alliance, Inc.,

      

2.700%, 11-18-19

     1,650        1,684   
   

 

 

  
      5,837   
   

 

 

  
 

Food Distributors – 0.3%

  

Campbell Soup Co.,

      

2.500%, 8-2-22

     2,400        2,354   

ConAgra Foods, Inc.,

      

1.900%, 1-25-18

     3,190        3,204   

Wm. Wrigley Jr. Co.,

      

2.400%,
10-21-18 (C)

     1,500        1,515   
   

 

 

  
      7,073   
   

 

 

  
 

Household Products – 0.0%

  

Church & Dwight Co., Inc.,

      

2.875%, 10-1-22

     500        506   
   

 

 

  
 

Packaged Foods & Meats – 0.1%

  

Mead Johnson Nutrition Co.,

      

3.000%, 11-15-20

     2,100        2,159   
   

 

 

  
 

Personal Products – 0.0%

  

Estee Lauder Co., Inc. (The),

      

2.350%, 8-15-22

     1,200        1,218   
   

 

 

  
 

Tobacco – 0.2%

  

BAT International Finance plc,

      

2.750%,
6-15-20 (C)

     4,000        4,115   
   

 

 

  
 

Total Consumer Staples – 1.1%

  

     30,838   

Energy

  

 

Oil & Gas Equipment & Services – 0.9%

  

Brand Energy & Infrastructure Services,

      

8.500%,
12-1-21 (C)

     19,500        18,330   

Newpark Resources, Inc., Convertible,

      

4.000%, 10-1-17

     2,100        1,818   

Schlumberger Holding Corp.,

      

2.350%,
12-21-18 (C)

     6,000        6,040   
   

 

 

  
      26,188   
   

 

 

  
 

 

  2016   ANNUAL REPORT   23

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Balanced Fund (in thousands)

MARCH 31, 2016

 

 

 

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Oil & Gas Exploration & Production – 1.0%

  

BP Capital Markets plc (GTD by BP plc):

      

2.241%, 9-26-18

   $ 4,250      $ 4,305   

2.315%, 2-13-20

     3,000        3,026   

Devon Energy Corp.,

      

2.250%, 12-15-18

     3,000        2,800   

Occidental Petoleum Corp.,

      

2.600%, 4-15-22

     3,000        3,026   

ONEOK Partners L.P.,

      

3.200%, 9-15-18

     2,750        2,662   

Whiting Petroleum Corp., Convertible,

      

1.250%,
4-1-20 (C)

     20,000        11,637   
   

 

 

  
      27,456   
   

 

 

  
 

Oil & Gas Storage & Transportation – 0.9%

  

Buckeye Partners L.P.,

      

2.650%, 11-15-18

     6,300        6,256   

Hornbeck Offshore Services, Inc., Convertible,

      

1.500%, 9-1-19

     10,951        6,495   

Kinder Morgan Energy Partners L.P.,

      

2.650%, 2-1-19

     3,250        3,211   

Plains All American Pipeline L.P. and PAA Finance Corp.:

      

2.600%, 12-15-19

     1,750        1,658   

4.650%, 10-15-25

     3,500        3,238   

Williams Partners L.P.,

      

3.600%, 3-15-22

     5,500        4,516   
   

 

 

  
      25,374   
   

 

 

  
 

Total Energy – 2.8%

  

     79,018   

Financials

  

 

Asset Management & Custody
Banks – 0.6%

  

Ares Capital Corp.:

      

4.875%, 11-30-18

     6,500        6,679   

3.875%, 1-15-20

     10,000        10,250   
   

 

 

  
      16,929   
   

 

 

  
 

Consumer Finance – 0.9%

  

American Express Co.,

      

4.900%, 12-29-49

     5,800        5,205   

Capital One Bank USA N.A.:

      

2.150%, 11-21-18

     3,150        3,148   

2.250%, 2-13-19

     4,000        3,991   

Capital One N.A.,

      

2.400%, 9-5-19

     3,250        3,242   

Hyundai Capital America,

      

2.875%,
8-9-18 (C)

     1,550        1,578   

SLM Corp.,

      

4.875%, 6-17-19

     3,000        2,895   

Total System Services, Inc.,

      

2.375%, 6-1-18

     5,538        5,531   
   

 

 

  
      25,590   
   

 

 

  
 

Diversified Banks – 6.2%

  

ABN AMRO Bank N.V.,

      

2.500%,
10-30-18 (C)

     6,200        6,285   

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Diversified Banks (Continued)

  

Bank of America Corp.:

      

2.000%, 1-11-18

   $ 2,500      $ 2,511   

8.000%, 12-29-49

     8,800        8,613   

Bank of New York Mellon Corp. (The),

      

2.100%, 1-15-19

     6,000        6,080   

Bank of Nova Scotia (The):

      

1.450%, 4-25-18

     2,500        2,498   

2.050%, 10-30-18

     5,000        5,049   

BNP Paribas S.A.,

      

2.450%, 3-17-19

     4,500        4,579   

Commonwealth Bank of Australia,

      

2.250%, 3-13-19

     4,750        4,813   

DBS Group Holdings Ltd.,

      

2.246%, 7-16-19 (C)

     8,750        8,833   

HSBC Holdings plc,

      

3.400%, 3-8-21

     7,500        7,655   

ING Bank N.V.:

      

2.500%, 10-1-19 (C)

     5,400        5,484   

2.450%, 3-16-20 (C)

     7,200        7,254   

2.750%, 3-22-21 (C)

     12,000        12,185   

KeyBank N.A.,

      

2.500%, 12-15-19

     4,000        4,052   

Lloyds Bank plc,

      

2.350%, 9-5-19

     2,650        2,677   

Lloyds Bank plc (GTD by Lloyds Banking Group plc),

      

2.300%, 11-27-18

     2,000        2,017   

Mizuho Bank Ltd.,

      

2.650%, 9-25-19 (C)

     5,200        5,283   

National Australia Bank Ltd.,

      

2.400%, 12-9-19 (C)

     12,000        12,179   

Rabobank Capital Funding Trust III (GTD by Rabobank Nederland),

      

5.254%,
12-31-49 (C)

     9,162        9,105   

Royal Bank of Canada,

      

2.350%, 10-30-20

     6,000        6,078   

Royal Bank of Scotland Group plc (The),

      

7.640%, 3-29-49

     5,800        5,640   

Skandinaviska Enskilda Banken AB,

      

2.375%, 3-25-19 (C)

     4,000        4,038   

Societe Generale S.A.:

      

4.250%, 4-14-25 (C)

     2,750        2,648   

5.922%, 4-29-49 (C)

     11,000        10,890   

Standard Chartered plc,

      

2.250%, 4-17-20 (C)

     10,700        10,455   

Sumitomo Mitsui Banking Corp.,

      

2.450%, 1-16-20

     4,000        4,049   

UBS Preferred Funding Trust V,

      

6.243%, 5-29-49

     6,536        6,536   

Westpac Banking Corp.,

      

2.250%, 7-30-18

     5,000        5,080   
   

 

 

  
      172,566   
   

 

 

  

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Investment Banking & Brokerage – 1.0%

  

BGC Partners, Inc.,

      

5.375%, 12-9-19

   $ 6,500      $ 6,830   

Charles Schwab Corp. (The),

      

2.200%, 7-25-18

     1,000        1,014   

Credit Suisse Group Funding (Guernsey) Ltd.,

      

2.750%, 3-26-20

     4,000        3,949   

Goldman Sachs Group, Inc. (The):

      

2.900%, 7-19-18

     1,350        1,382   

2.625%, 1-31-19

     4,000        4,080   

2.600%, 4-23-20

     3,400        3,429   

Morgan Stanley:

      

2.125%, 4-25-18

     2,500        2,520   

2.650%, 1-27-20

     5,900        5,989   
   

 

 

  
      29,193   
   

 

 

  
 

Life & Health Insurance – 0.3%

  

AIA Group Ltd.,

      

2.250%, 3-11-19 (C)

     2,600        2,611   

New York Life Global Funding,

      

1.550%, 11-2-18 (C)

     4,200        4,210   
   

 

 

  
      6,821   
   

 

 

  
 

Multi-line Insurance – 0.1%

  

Loews Corp.,

      

3.750%, 4-1-26

     3,000        3,067   
   

 

 

  
 

Multi-Line Insurance – 0.3%

  

American International Group, Inc.,

      

2.300%, 7-16-19

     2,750        2,774   

Aon plc (GTD by Aon Corp.),

      

2.800%, 3-15-21

     6,000        6,067   
   

 

 

  
      8,841   
   

 

 

  
 

Other Diversified Financial
Services – 1.8%

  

Citigroup, Inc.:

      

3.875%, 2-19-19

     2,600        2,594   

5.800%, 11-29-49

     8,600        8,226   

5.950%, 12-29-49

     2,000        1,914   

5.950%, 12-31-49

     7,250        6,978   

Daimler Finance North America LLC,

      

2.375%, 8-1-18 (C)

     2,600        2,642   

Fidelity National Financial, Inc.,

      

6.600%, 5-15-17

     900        941   

Fidelity National Information Services, Inc.:

      

2.000%, 4-15-18

     1,250        1,243   

2.850%, 10-15-18

     1,300        1,321   

Fifth Street Finance Corp.,

      

4.875%, 3-1-19

     6,700        6,566   

JPMorgan Chase & Co.,

      

7.900%, 4-29-49

     3,000        3,000   

Moody’s Corp.,

      

2.750%, 7-15-19

     1,300        1,334   

MUFG Americas Holdings Corp.,

      

2.250%, 2-10-20

     2,700        2,687   
 

 

24   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Balanced Fund (in thousands)

MARCH 31, 2016

 

 

 

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Other Diversified Financial Services (Continued)

   

PennantPark Investment Corp.,

      

4.500%, 10-1-19

   $ 8,100      $ 8,022   

Total Capital,

      

2.125%, 8-10-18

     1,500        1,525   
   

 

 

  
      48,993   
   

 

 

  
 

Property & Casualty Insurance – 0.1%

  

Berkshire Hathaway Finance Corp.,

      

2.200%, 3-15-21

     3,000        3,062   
   

 

 

  
 

Regional Banks – 0.5%

  

PNC Bank N.A.,

      

2.200%, 1-28-19

     4,000        4,061   

SunTrust Banks, Inc.:

      

2.350%, 11-1-18

     3,700        3,727   

5.625%, 12-29-49

     4,800        4,752   
   

 

 

  
      12,540   
   

 

 

  
 

Specialized Finance – 0.2%

  

Intercontinental Exchange, Inc.:

      

2.500%, 10-15-18

     1,700        1,731   

2.750%, 12-1-20

     4,500        4,595   
   

 

 

  
      6,326   
   

 

 

  
 

Specialized REITs – 0.0%

  

Crown Castle International Corp.,

      

5.250%, 1-15-23

     1,046        1,125   
   

 

 

  
 

Total Financials – 12.0%

  

     335,053   

Health Care

  

 

Biotechnology – 0.5%

  

Amgen, Inc.:

      

2.200%, 5-22-19

     6,000        6,139   

2.125%, 5-1-20

     6,000        6,076   
   

 

 

  
      12,215   
   

 

 

  
 

Health Care Equipment – 0.1%

  

Mallinckrodt International Finance S.A.,

      

3.500%, 4-15-18

     500        480   

Zimmer Holdings, Inc.,

      

2.700%, 4-1-20

     3,000        3,043   
   

 

 

  
      3,523   
   

 

 

  
 

Health Care Facilities – 0.5%

  

Surgery Center Holdings, Inc.,

      

8.875%,
4-15-21 (C)

     15,000        15,000   
   

 

 

  
 

Health Care Services – 0.2%

  

Laboratory Corp. of America Holdings,

      

2.500%, 11-1-18

     1,450        1,463   

Quest Diagnostics, Inc.,

      

2.500%, 3-30-20

     2,750        2,761   
   

 

 

  
      4,224   
   

 

 

  

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Health Care Supplies – 0.3%

  

C.R. Bard, Inc.,

      

1.375%, 1-15-18

   $ 4,385      $ 4,392   

Cardinal Health, Inc.,

      

2.400%, 11-15-19

     3,900        3,960   
   

 

 

  
      8,352   
   

 

 

  
 

Managed Health Care – 0.4%

  

Aetna, Inc.,

      

2.200%, 3-15-19

     2,600        2,648   

UnitedHealth Group, Inc.,

      

2.700%, 7-15-20

     1,700        1,767   

WellPoint, Inc.,

      

1.875%, 1-15-18

     7,200        7,224   
   

 

 

  
      11,639   
   

 

 

  
 

Pharmaceuticals – 0.7%

  

Forest Laboratories, Inc.,

      

5.000%, 12-15-21 (C)

     9,500        10,611   

Mylan, Inc.,

      

2.550%, 3-28-19

     700        701   

Perrigo Co. Ltd.,

      

2.300%, 11-8-18

     8,850        8,843   
   

 

 

  
      20,155   
   

 

 

  
 

Total Health Care – 2.7%

  

     75,108   

Industrials

  

 

Aerospace & Defense – 1.8%

  

BAE Systems Holdings, Inc.,

      

2.850%, 12-15-20 (C)

     4,150        4,218   

Huntington Ingalls Industries, Inc.,

      

5.000%, 11-15-25 (C)

     19,085        19,992   

Northrop Grumman Corp.,

      

1.750%, 6-1-18

     2,060        2,066   

TransDigm Group, Inc.,

      

7.500%, 7-15-21

     12,000        12,570   

TransDigm, Inc.,

      

6.000%, 7-15-22

     10,900        10,859   
   

 

 

  
      49,705   
   

 

 

  
 

Airlines – 0.2%

  

Southwest Airlines Co.,

      

2.650%, 11-5-20

     4,300        4,386   
   

 

 

  
 

Railroads – 0.0%

  

Kansas City Southern de Mexico S.A. de C.V.,

      

2.350%, 5-15-20 (C)

     873        858   
   

 

 

  
 

Trucking – 0.1%

  

Ryder System, Inc.:

      

2.450%, 11-15-18

     2,150        2,170   

2.350%, 2-26-19

     1,000        999   
   

 

 

  
      3,169   
   

 

 

  
 

Total Industrials – 2.1%

  

     58,118   

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Information Technology

  

 

Data Processing & Outsourced
Services – 0.1%

   

Fiserv, Inc.,

      

2.700%, 6-1-20

   $ 2,900      $ 2,951   
   

 

 

  
 

Semiconductors – 1.0%

  

Micron Technology, Inc.,

      

5.500%, 2-1-25

     8,081        6,550   

Micron Technology, Inc., Convertible,

      

3.000%, 11-15-43

     33,500        22,822   
   

 

 

  
      29,372   
   

 

 

  
 

Systems Software – 0.3%

  

CA, Inc.,

      

2.875%, 8-15-18

     2,850        2,897   

Oracle Corp.,

      

2.250%, 10-8-19

     5,300        5,470   
   

 

 

  
      8,367   
   

 

 

  
 

Total Information
Technology – 1.4%

   

     40,690   

Materials

  

 

Construction Materials – 0.5%

  

Hillman Group, Inc. (The),

      

6.375%, 7-15-22 (C)

     16,330        13,636   
   

 

 

  
 

Diversified Chemicals – 0.1%

  

Solvay Finance (America) LLC (GTD by Solvay S.A.),

      

3.400%, 12-3-20 (C)

     3,250        3,305   
   

 

 

  
 

Diversified Metals & Mining – 0.4%

  

Anglo American plc,

      

4.125%, 4-15-21 (C)

     2,200        1,826   

Glencore Funding LLC:

      

3.125%, 4-29-19 (C)

     3,000        2,723   

2.875%, 4-16-20 (C)

     5,500        4,895   

Teck Resources,

      

3.000%, 3-1-19

     2,500        2,000   
   

 

 

  
      11,444   
   

 

 

  
 

Fertilizers & Agricultural
Chemicals – 0.1%

  

Monsanto Co.,

      

2.125%, 7-15-19

     2,100        2,132   
   

 

 

  
 

Industrial Gases – 0.1%

  

Airgas, Inc.,

      

1.650%, 2-15-18

     1,250        1,249   

Praxair, Inc.,

      

3.000%, 9-1-21

     1,000        1,051   
   

 

 

  
      2,300   
   

 

 

  
 

Metal & Glass Containers – 0.0%

  

BlueScope Steel (Finance) Ltd. and BlueScope Steel Finance (USA) LLC,

      

7.125%, 5-1-18 (C)

     1,281        1,287   
   

 

 

  
 

 

  2016   ANNUAL REPORT   25

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Balanced Fund (in thousands)

MARCH 31, 2016

 

 

 

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Specialty Chemicals – 0.1%

  

Albemarle Corp. (GTD by Albemarle Holdings Corp. and Albemarle Holdings II Corp.),

      

3.000%, 12-1-19

   $ 1,650      $ 1,661   

RPM International, Inc.,

      

3.450%, 11-15-22

     1,000        976   
   

 

 

  
      2,637   
   

 

 

  
 

Total Materials – 1.3%

  

     36,741   

Telecommunication Services

  

 

Integrated Telecommunication
Services – 0.6%

   

AT&T, Inc.,

      

2.300%, 3-11-19

     13,000        13,275   

Verizon Communications, Inc.,

      

2.625%, 2-21-20

     2,468        2,540   
   

 

 

  
      15,815   
   

 

 

  
 

Wireless Telecommunication
Service – 0.0%

  

American Tower Corp.,

      

4.700%, 3-15-22

     1,400        1,517   

Virgin Media Finance plc,

      

4.875%, 2-15-22

     284        252   
   

 

 

  
      1,769   
   

 

 

  
 

Total Telecommunication Services – 0.6%

   

     17,584   

Utilities

  

 

Electric Utilities – 0.5%

  

Electricite de France S.A.,

      

2.150%,
1-22-19 (C)

     4,000        4,047   

Entergy Texas, Inc.,

      

2.550%, 6-1-21

     3,900        3,921   

Georgia Power Co.,

      

2.400%, 4-1-21

     3,000        3,037   

PPL Energy Supply LLC,

      

4.600%, 12-15-21

     2,800        2,240   
   

 

 

  
      13,245   
   

 

 

  
 

Gas Utilities – 0.2%

  

Sempra Energy,

      

2.400%, 3-15-20

     4,150        4,166   
   

 

 

  
 

Multi–Utilities – 0.1%

  

Dominion Resources, Inc.,

      

2.500%, 12-1-19

     4,000        4,047   
   

 

 

  
 

Renewable Electricity – 0.3%

  

Canadian Solar, Inc., Convertible,

      

4.250%, 2-15-19

     10,000        8,381   
   

 

 

  
 

Total Utilities – 1.1%

  

     29,839   
 

TOTAL CORPORATE DEBT SECURITIES – 27.0%

   

   $ 755,898   

(Cost: $774,079)

      
LOANS (D)   Principal     Value  

Financials

  

 

Other Diversified Financial
Services – 0.5%

  

WP Mustang Holdings LLC,

      

8.500%, 5-29-22

   $ 16,201      $ 15,931   
   

 

 

  
 

Total Financials – 0.5%

  

     15,931   

Industrials

  

 

Industrial Machinery – 0.2%

  

Dynacast International LLC,

      

9.500%, 1-30-23

     5,426        4,992   
   

 

 

  
 

Total Industrials – 0.2%

  

     4,992   
 

TOTAL LOANS – 0.7%

  

   $ 20,923   

(Cost: $21,512)

      
 

UNITED STATES GOVERNMENT AGENCY OBLIGATIONS

   

        

Mortgage-Backed Obligations – 0.0%

  

Federal National Mortgage Association Fixed Rate Pass-Through Certificates:

      

6.000%, 9-1-17

     17        17   

5.000%, 1-1-18

     12        12   

6.500%, 10-1-28

     43        49   

6.500%, 2-1-29

     6        7   

7.000%, 11-1-31

     53        63   

6.500%, 2-1-32

     41        49   

7.000%, 2-1-32

     59        70   

7.000%, 3-1-32

     26        32   

7.000%, 7-1-32

     30        34   

6.500%, 9-1-32

     32        38   

5.500%, 5-1-33

     30        34   

5.500%, 6-1-33

     26        29   
   

 

 

  
      434   
   

 

 

  
 

TOTAL UNITED STATES GOVERNMENT AGENCY OBLIGATIONS – 0.0%

    

   $ 434   

(Cost: $381)

      
 

UNITED STATES GOVERNMENT OBLIGATIONS

   

        

Treasury Obligations – 0.7%

  

U.S. Treasury Notes:

      

0.625%, 5-31-17

     8,500        8,495   

1.375%, 11-30-18

     10,000        10,147   
   

 

 

  
      18,642   
   

 

 

  
 

TOTAL UNITED STATES GOVERNMENT OBLIGATIONS – 0.7%

    

   $ 18,642   

(Cost: $18,455)

      
 

SHORT-TERM SECURITIES

  

        

Commercial Paper (E) – 17.5%

  

Apple, Inc.,

      

0.370%, 5-3-16

     8,400        8,397   

SHORT-TERM
SECURITIES

(Continued)

   Principal     Value  

Commercial Paper (E) (Continued)

  

Army & Air Force Exchange Service,

      

0.350%, 4-1-16

   $ 4,716      $ 4,716   

Baxter International, Inc.:

      

0.710%, 4-1-16

     10,000        10,000   

0.700%, 4-7-16

     10,000        9,999   

0.460%, 4-11-16

     8,000        7,999   

Becton Dickinson & Co.:

      

0.490%, 4-20-16

     15,000        14,996   

0.500%, 5-3-16

     8,000        7,996   

Bemis Co., Inc.:

      

0.650%, 4-4-16

     5,000        5,000   

0.470%, 4-13-16

     8,000        7,999   

BMW U.S. Capital LLC (GTD by BMW AG):

      

0.400%, 4-1-16

     10,000        10,000   

0.460%, 4-4-16

     6,000        6,000   

0.370%, 4-14-16

     15,000        14,998   

BorgWarner, Inc.,

      

0.490%, 4-21-16

     15,000        14,996   

Campbell Soup Co.:

      

0.811%, 4-8-16

     10,000        9,999   

0.450%, 4-21-16

     7,000        6,998   

0.460%, 4-26-16

     5,000        4,998   

Clorox Co. (The),

      

0.480%, 4-19-16

     13,050        13,047   

Corporacion Andina de Fomento,

      

0.370%, 5-4-16

     10,000        9,996   

Danaher Corp.,

      

0.390%, 4-1-16

     10,000        10,000   

DTE Energy Co. (GTD by Detroit Edison Co.):

      

0.580%, 4-1-16

     5,000        5,000   

0.690%, 4-4-16

     20,000        19,999   

Ecolab, Inc.:

      

0.720%, 4-4-16

     5,000        5,000   

0.700%, 4-7-16

     6,000        5,999   

0.470%, 4-14-16

     10,000        9,998   

Essilor International S.A.:

      

0.430%, 4-4-16

     4,000        4,000   

0.380%, 4-18-16

     10,000        9,998   

General Mills, Inc.:

      

0.470%, 4-1-16

     10,000        10,000   

0.650%, 4-4-16

     5,000        5,000   

John Deere Canada ULC (GTD by Deere & Co.),

      

0.320%, 4-12-16

     5,000        4,999   

Kroger Co. (The),

      

0.700%, 4-4-16

     9,000        8,999   

Malayan Banking Berhad (GTD by Wells Fargo Bank N.A.),

      

0.400%, 4-14-16

     20,000        19,997   

McCormick & Co., Inc.:

      

0.450%, 4-18-16

     15,000        14,997   

0.470%, 4-27-16

     15,000        14,995   

0.470%, 4-28-16

     10,000        9,996   

Medtronic Global Holdings SCA,

      

0.570%, 4-5-16

     7,000        6,999   

Mondelez International, Inc.,

      

0.640%, 4-5-16

     10,000        9,999   

Northern Illinois Gas Co.,

      

0.470%, 4-13-16

     2,200        2,200   
 

 

26   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Balanced Fund (in thousands)

MARCH 31, 2016

 

 

 

SHORT-TERM
SECURITIES

(Continued)

   Principal     Value  

Commercial Paper (E) (Continued)

  

Novartis Finance Corp. (GTD by Novartis AG):

      

0.410%, 4-4-16

   $ 8,000      $ 8,000   

0.360%, 4-25-16

     11,000        10,997   

Novartis Securities Investment Ltd. (GTD by Novartis AG),

      

0.330%, 4-18-16

     10,000        9,998   

Rockwell Automation, Inc.:

      

0.570%, 4-6-16

     15,000        14,999   

0.550%, 4-7-16

     5,979        5,978   

0.360%, 4-11-16

     10,000        9,999   

Sherwin-Williams Co. (The),

      

0.360%, 4-12-16

     10,000        9,999   

Virginia Electric and Power Co.:

      

0.670%, 4-6-16

     4,000        4,000   

0.460%, 4-25-16

     10,000        9,997   

W.W. Grainger, Inc.,

      

0.340%, 4-4-16

     5,000        5,000   

SHORT-TERM
SECURITIES

(Continued)

   Principal     Value  

Commercial Paper (E) (Continued)

  

Wisconsin Electric Power Co.,

      

0.650%, 4-6-16

   $ 32,435      $ 32,433   

Wisconsin Gas LLC:

      

0.400%, 4-8-16

     11,000        10,999   

0.440%, 4-14-16

     10,000        9,998   
   

 

 

  
      488,706   
   

 

 

  
 

Master Note – 0.0%

  

Toyota Motor Credit Corp.,

      

0.443%, 4-6-16 (F)

     686        686   
   

 

 

  
 

Municipal Obligations – 1.0%

  

MS Business Fin Corp., Gulf Opp Zone Indl Dev Rev Bonds (Chevron USA, Inc. Proj), Ser 2007D (GTD by Chevron Corp.),

      

0.370%, 4-1-16 (F)

     18,000        18,000   

SHORT-TERM
SECURITIES

(Continued)

   Principal     Value  

Municipal Obligations (Continued)

  

Muni Elec Auth GA, Gen Resolution Proj Bond Anticipation Notes, Ser A (Taxable), (GTD by Wells Fargo Bank N.A.),

      

0.410%, 4-14-16

   $ 10,000      $ 9,999   
   

 

 

  
      27,999   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 18.5%

   

   $ 517,391   

(Cost: $517,382)

      
 

TOTAL INVESTMENT SECURITIES – 100.1%

   

   $ 2,801,291   

(Cost: $2,659,823)

      
 

LIABILITIES, NET OF CASH AND OTHER
ASSETS – (0.1)%

   

     (3,082 ) 
 

NET ASSETS – 100.0%

  

   $ 2,798,209   
 

 

Notes to Schedule of Investments

 

(A) No dividends were paid during the preceding 12 months.

 

(B) All or a portion of securities with an aggregate value of $54,941 are held in collateralized accounts to cover potential obligations with respect to outstanding written options.

 

(C) Securities were 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 March 31, 2016 the total value of these securities amounted to $244,422 or 8.7% of net assets.

 

(D) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016.

 

(E) Rate shown is the yield to maturity at March 31, 2016.

 

(F) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following written options were outstanding at March 31, 2016 (contracts and exercise prices unrounded):

 

Underlying Security    Counterparty,
if OTC		    Type    Number of
Contracts		      Expiration
Month		      Exercise
Price		      Premium
Received		      Value  

S&P 500 Index

    N/A    Put      1,116         April 2016         $1,700.00       $ 655       $ (3 ) 
   N/A    Put      1,481         April 2016         1,725.00         588         (59 ) 
   N/A    Put      1,484         May 2016         1,700.00         960         (249 ) 
   N/A    Put      1,352         May 2016         1,850.00         1,483         (757 ) 
   N/A    Put      2,082         June 2016         1,750.00         879         (843 ) 
                 

 

 

  
                  $ 4,565       $ (1,911 ) 
                 

 

 

  

 

  2016   ANNUAL REPORT   27

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Balanced Fund (in thousands)

MARCH 31, 2016

 

 

 

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 1,330,574       $ —       $ —   

Preferred Stocks

     132,238         13,963         —   

Purchased Options

     11,228         —         —   

Corporate Debt Securities

     —         755,898         —   

Loans

     —         15,931         4,992   

United States Government Agency Obligations

     —         434         —   

United States Government Obligations

     —         18,642         —   

Short-Term Securities

     —         517,391         —   

Total

   $ 1,474,040       $ 1,322,259       $ 4,992   

Liabilities

        

Written Options

   $ 1,065       $ 846       $ —   

During the year ended March 31, 2016, there were no transfers between any levels.

The following acronyms are used throughout this schedule:

ADR = American Depositary Receipts

GTD = Guaranteed

OTC = Over the Counter

REIT = Real Estate Investment Trust

 

See Accompanying Notes to Financial Statements.

 

28   ANNUAL REPORT   2016  

Table of Contents

MANAGEMENT DISCUSSION

Ivy Energy Fund

(UNAUDITED)

 

 

 

LOGO

David P. Ginther

Below, David P. Ginther, CPA, portfolio manager of Ivy Energy Fund, discusses positioning, performance and results for the fiscal year ended March 31, 2016. Mr. Ginther has managed the Fund since its inception in 2006 and has 21 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy Energy Fund (Class A shares at net asset value)

      –23.38%   

Ivy Energy Fund (Class A shares including sales charges)

      –27.80%   

Benchmark(s) and/or Lipper Category

         

S&P 1500 Energy Sector Index

      –16.81%   

(generally reflects the performance of stocks that represent the energy market)

         

Lipper Natural Resources Funds Universe Average

      –23.16%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is based on net asset value.

 

Oil prices fall late in year

 

 

U.S. equities closed the fiscal year in mildly positive territory, although the energy sector finished lower, as measured by its benchmark index. The slow, steady growth of the U.S. economy, ongoing strength of the U.S. dollar and the slowing economic growth rate in China helped hold global oil prices in a range of about $35 to $60 per barrel, with volatile trading at times during the year.

The U.S. Federal Reserve (Fed) early in the fiscal year removed “patient” in reference to interest rate increases. The Fed also indicated that it believed lower energy prices would be transitory and inflation would meet its 2% target by 2017. However, the Fed lowered its forecast for gross domestic product at that time and again in June 2015. Equity and bond markets rallied on the news and took it to mean higher short-term rates were unlikely until the second half of 2015. The Fed did act to increase short-term rates in December and stated its intent to do more increases in 2016 if economic data allowed. However, the Fed did not raise rates again by the end of the fiscal year.

China is one of the two largest importers of crude oil, exceeding 7 million barrels per day. Concerns about the pace of economic growth in China and overall in emerging markets, along with continued but slowing supply growth, increases in global inventories and the likely addition of more Iranian crude oil coming to market were factors in persistently lower prices. China devalued its currency in August 2015, setting off another round of concerns about both global growth rates and China’s economy. China’s currency later was granted Special Drawing Rights status by the International Monetary Fund. China changed from a U.S. dollar base for its currency to a “basket” of currencies, which many investors think will help its competiveness against the dollar.

Fund feels effects of price drop

 

 

The Fund had a negative return for the fiscal year and underperformed its benchmark index and peer group average, both of which also had negative returns. The ongoing low levels of oil prices throughout the fiscal year continued to pressure the prices of energy stocks, which represent the largest sector in the Fund.

The Fund’s performance relative to the benchmark index primarily was because of stock selections in the energy sector. The Fund during the fiscal year had a heavier allocation to the “upstream” energy companies when compared to the benchmark, which holds what the portfolio manager considers to be an outsized allocation to large integrated oil companies. The Fund underweighted the integrated oil companies this year. Historically, integrated companies often underperform when the energy sector performs well as a whole, but they tend to do relatively better when the sector is in decline, as it was throughout 2015 and into 2016.

The five greatest relative contributors to the Fund’s performance in the year were Parsley Energy Inc., ConocoPhillips, RSP Permian Inc., CME Group Inc. and Williams Companies Inc. The five greatest relative detractors were Exxon Mobil Corp., Chevron Corp., Energy Transfer Equity LP, MPLX LP and C&J Energy Services Inc. As of March 31, 2016, ConocoPhillips, Williams Companies Inc., Energy Transfer Equity LP and C&J Energy Services Inc. no longer were holdings in the Fund.

A focus on supply and demand

 

 

We think steady economic growth and low inflation will continue in the U.S. in the coming year, maintaining the country’s position as a bright spot among developed countries. In our view, global economic growth also is likely to remain slow overall.

U.S. shale oil producers have significantly cut marginal costs. While we believe all U.S. shale offers opportunities, much of our focus is on the Permian Basin as the place production growth is most likely to continue. Companies there still are improving efficiency and productivity, and are reducing costs faster than in other, more mature shale areas.

 

  2016   ANNUAL REPORT   29

Table of Contents

MANAGEMENT DISCUSSION

Ivy Energy Fund

(UNAUDITED)

 

 

 

We estimate the world is oversupplied by about 1.5% on total consumption of 95 million barrels per day (bpd). However, we think the year-over-year increase in global supply will start to diminish, as output has slowed from producing countries outside the Organization of Petroleum Exporting Countries, led by U.S. shale producers. In December 2015, oil output in the continental U.S. fell on a year-over-year basis — a first since the onset of the shale renaissance.

We think current supply/demand factors and “headline” risks — the response from investors to news stories and world events — will hold down oil prices in the short term. We estimate oil demand will grow by about 1.0 million bpd on average each year for the next three to five years. Depending on the demand environment, we think the supply/demand imbalance will be corrected in the third-quarter of 2016.

Performance shown at NAV does not include the effect of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. The value of the Fund’s shares will change and you could lose money on your investment.

Investing in companies involved in one specified sector may be more risky and volatile than an investment with greater sector diversification. Investing in the energy sector can be riskier than other types of investment activities because of a range of factors, including price fluctuation caused by real and perceived inflationary trends and political developments, and the cost assumed by energy companies in complying with environmental safety regulations. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the portfolio manager and are current only through the end of the period of the report as stated on the cover. The manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of Ivy Energy Fund.

 

30   ANNUAL REPORT   2016  

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Energy Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      96.5%   

Energy

      91.0%   

Financials

      4.2%   

Industrials

      1.3%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      3.5%   

Lipper Rankings

 

 

 

Category: Lipper Natural Resources Funds    Rank      Percentile

1 Year

    50/93      54

3 Year

    26/72      36

5 Year

    30/66      45

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

Country Weightings

 

 

 

North America

      91.4%   

United States

      87.3%   

Canada

      4.1%   

Europe

      5.1%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      3.5%   
 

 

Top 10 Equity Holdings

 

 

 

Company    Country      Sector      Industry

CME Group, Inc.

   

United States

     

Financials

     

Specialized Finance

Schlumberger Ltd.

   

United States

     

Energy

     

Oil & Gas Equipment & Services

Cimarex Energy Co.

   

United States

     

Energy

     

Oil & Gas Exploration & Production

Pioneer Natural Resources Co.

   

United States

     

Energy

     

Oil & Gas Exploration & Production

Halliburton Co.

   

United States

     

Energy

     

Oil & Gas Equipment & Services

Continental Resources, Inc.

   

United States

     

Energy

     

Oil & Gas Exploration & Production

Parsley Energy, Inc., Class A

   

United States

     

Energy

     

Oil & Gas Exploration & Production

Newfield Exploration Co.

   

United States

     

Energy

     

Oil & Gas Exploration & Production

Baker Hughes, Inc.

   

United States

     

Energy

     

Oil & Gas Equipment & Services

Concho Resources, Inc.

   

United States

     

Energy

     

Oil & Gas Exploration & Production

See your advisor or www.ivyfunds.com for more information on the Fund’s most recent published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

  2016   ANNUAL REPORT   31

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Energy Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class B(4)      Class C      Class E(5)      Class I      Class R      Class R6      Class Y  

1-year period ended 3-31-16

      -27.80%         -27.12%         -23.87%         -27.55%         -23.06%         -23.53%         -22.96%         -23.26%   

5-year period ended 3-31-16

      -7.68%         -7.56%         -7.17%         -7.41%         -6.21%         —            —            -6.45%   

10-year period ended 3-31-16

      —            —            —            —            —            —            —            —      

Since Inception of Class
through 3-31-16(6)

      0.15%         0.07%         0.08%         -0.09%         0.68%         -4.09%         -25.10%         0.89%   

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) Class E shares are not currently available for investment.

 

(6) 4-3-06 for Class A shares, 4-3-06 for Class B shares, 4-3-06 for Class C shares, 4-2-07 for Class E shares, 4-2-07 for Class I shares, 12-19-12 for Class R shares, 7-31-14 for Class R6 shares and 4-3-06 for Class Y shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

32   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Energy Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Energy

  

 

Integrated Oil & Gas – 7.0%

  

Chevron Corp.

     49      $ 4,660   

Exxon Mobil Corp.

     164        13,696   

Royal Dutch Shell plc, Class A (A)

     197        4,789   

Suncor Energy, Inc.

     237        6,577   
   

 

 

  
      29,722   
   

 

 

  
 

Oil & Gas Drilling – 1.9%

  

Helmerich & Payne, Inc.

     44        2,581   

Patterson-UTI Energy, Inc.

     300        5,284   
   

 

 

  
      7,865   
   

 

 

  
 

Oil & Gas Equipment & Services – 23.8%

  

Baker Hughes, Inc.

     349        15,281   

Cameron International Corp. (B)

     124        8,321   

Core Laboratories N.V.

     86        9,701   

FMC Technologies, Inc.(B)

     120        3,276   

Forum Energy Technologies, Inc. (B)

     549        7,242   

Halliburton Co.

     439        15,685   

Schlumberger Ltd.

     243        17,896   

Superior Energy Services, Inc.

     661        8,848   

U.S. Silica Holdings, Inc.

     341        7,739   

Weatherford International Ltd. (B)

     936        7,282   
   

 

 

  
      101,271   
   

 

 

  
 

Oil & Gas Exploration &
Production – 44.7%

  

Anadarko Petroleum Corp.

     285        13,271   

Cimarex Energy Co.

     167        16,244   

Concho Resources, Inc. (B)

     151        15,252   

Continental Resources, Inc. (B)

     515        15,648   

Diamondback Energy, Inc. (B)

     156        12,017   

EOG Resources, Inc.

     200        14,480   

Gulfport Energy Corp. (B)

     221        6,269   
COMMON STOCKS
(Continued)		   Shares     Value  

Oil & Gas Exploration & Production (Continued)

   

Laredo Petroleum Holdings, Inc. (B)

     613      $ 4,860   

Marathon Oil Corp.

     381        4,247   

Memorial Resource Development Corp. (B)

     383        3,898   

Newfield Exploration Co. (B)

     464        15,421   

Noble Energy, Inc.

     299        9,404   

Oasis Petroleum LLC (B)

     1,084        7,893   

Parsley Energy, Inc., Class A (B)

     691        15,614   

Pioneer Natural Resources Co.

     113        15,868   

RSP Permian, Inc. (B)

     458        13,302   

Whiting Petroleum Corp. (B)

     821        6,554   
   

 

 

  
      190,242   
   

 

 

  
 

Oil & Gas Refining & Marketing – 5.8%

  

Marathon Petroleum Corp.

     58        2,160   

Marathon Petroleum Corp. L.P.

     186        5,524   

Phillips 66

     96        8,295   

Tesoro Corp.

     49        4,236   

Valero Energy Corp.

     66        4,214   
   

 

 

  
      24,429   
   

 

 

  
 

Oil & Gas Storage &
Transportation – 7.8%

  

Columbia Pipeline Partners L.P.

     271        3,954   

Enbridge, Inc.

     128        4,963   

Enterprise Products Partners L.P.

     191        4,700   

Phillips 66 Partners L.P.

     128        8,037   

Shell Midstream Partners L.P.

     73        2,682   

Tallgrass Energy GP L.P., Class A

     374        6,909   

Valero Energy Partners L.P.

     42        1,984   
   

 

 

  
      33,229   
   

 

 

  
 

Total Energy – 91.0%

  

     386,758   
COMMON STOCKS
(Continued)		   Shares     Value  

Financials

  

 

Specialized Finance – 4.2%

  

CME Group, Inc.

     187      $ 17,947   
   

 

 

  
 

Total Financials – 4.2%

  

     17,947   

Industrials

  

 

Railroads – 1.3%

  

Canadian Pacific Railway Ltd.

     41        5,440   
   

 

 

  
 

Total Industrials – 1.3%

  

     5,440   
 

TOTAL COMMON
STOCKS – 96.5%

   

   $ 410,145   

(Cost: $444,633)

      
 
SHORT-TERM
SECURITIES		   Principal         

Commercial Paper (C) – 2.1%

  

NBCUniversal Enterprise, Inc.,
0.650%, 4-7-16

   $ 5,000        4,999   

Northern Illinois Gas Co.,
0.610%, 4-1-16

     4,000        4,000   
   

 

 

  
      8,999   
   

 

 

  
 

Master Note – 1.3%

  

Toyota Motor Credit Corp.,
0.443%,
4-6-16 (D)

     5,565        5,565   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 3.4%

   

   $ 14,564   

(Cost: $14,565)

      
 

TOTAL INVESTMENT SECURITIES – 99.9%

   

   $ 424,709   

(Cost: $459,198)

      
 

CASH AND OTHER ASSETS,
NET OF LIABILITIES – 0.1%

   

     494   
 

NET ASSETS – 100.0%

  

   $ 425,203   
 

 

Notes to Schedule of Investments

 

(A) Listed on an exchange outside the United States.

 

(B) No dividends were paid during the preceding 12 months.

 

(C) Rate shown is the yield to maturity at March 31, 2016.

 

(D) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

 

  2016   ANNUAL REPORT   33

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Energy Fund (in thousands)

MARCH 31, 2016

 

 

 

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 410,145       $ —       $ —   

Short-Term Securities

     —         14,564         —   

Total

   $ 410,145       $ 14,564       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

 

Country Diversification

  

(as a % of net assets)

  

United States

      87.3 % 

Canada

      4.1 % 

Netherlands

      2.3 % 

Switzerland

      1.7 % 

United Kingdom

      1.1 % 

Other+

      3.5 % 
 

 

+Includes cash and other assets (net of liabilities), and cash equivalents

 

See Accompanying Notes to Financial Statements.

 

34   ANNUAL REPORT   2016  

Table of Contents

MANAGEMENT DISCUSSION

Ivy Global Natural Resources Fund

(UNAUDITED)

 

 

 

 

LOGO

David P. Ginther

Below, David P. Ginther, CPA, portfolio manager of Ivy Global Natural Resources Fund, discusses positioning, performance and results for the fiscal year ended March 31, 2016. Mr. Ginther has managed the Fund since 2013. He has 21 years of industry experience.

Fiscal Year performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy Global Natural Resources Fund (Class A shares at net asset value)

      –22.32%   

Ivy Global Natural Resources Fund (Class A shares including sales charges)

      –26.77%   

Benchmark(s)/Lipper Category

         

MSCI AC World IMI 55% Energy + 45% Materials Index

      –13.90%   

(generally reflects the performance of the energy and materials stocks in developed and emerging markets.)

         

Lipper Global Natural Resources Funds Universe Average

      –19.22%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

 

Oil prices still pressured

 

 

U.S. equities closed the fiscal year ended March 31, 2016 in mildly positive territory, although the energy sector finished lower, as measured by the Fund’s benchmark index. The slow, steady growth of the U.S. economy, ongoing strength of the U.S. dollar and the slowing economic growth rate in China helped hold global oil prices in a range of about $35 to $60 per barrel, with volatile trading at times during the year.

The U.S. Federal Reserve (Fed) early in the fiscal year removed “patient” in reference to interest rate increases. The Fed also indicated that it believed lower energy prices would be transitory and inflation would meet its 2% target by 2017. However, the Fed lowered its forecast for gross domestic product at that time and again in June 2015. Equity and bond markets rallied on the news and took it to mean higher short-term rates were unlikely until the second half of 2015. The Fed did increase short-term rates in December and stated its intent to do more increases in 2016 if economic data allowed. However, the Fed did not raise rates again during the remainder of the fiscal year.

China is one of the two largest importers of crude oil, exceeding 7 million barrels per day. Concerns about the pace of economic growth in China and overall in emerging markets, along with continued but slowing supply growth, increases in global inventories and the likely addition of more Iranian crude oil coming to market were factors in persistently lower prices. China devalued its currency in August 2015, setting off another round of concerns about both global growth rates and China’s economy. China’s currency later was granted Special Drawing Rights status by the International Monetary Fund. China changed from a U.S. dollar base for its currency to a “basket” of currencies, which many investors think will help its competiveness against the dollar.

Difficult year in natural resources

 

 

The Fund finished another difficult year for natural resources with a negative return and underperformed its benchmark index and peer group average on a relative basis.

The underperformance relative to the benchmark index primarily was because of the Fund’s overweight allocation to the energy sector throughout the year compared to the benchmark. For example, while the benchmark index’s average weighting in energy for the fiscal year was 54.85%, the Fund’s was 63.53%, based on equity assets. The energy sector had broad declines during the fiscal year, based on concerns about global supply and demand; growth in the global production of oil, including from the U.S.; concerns about slowing economic growth in emerging market countries; and geopolitical tensions affecting oil-producing regions worldwide. As a result of the price plunge, the Fund’s overweight allocation to the energy sector hurt performance relative to the blended benchmark index.

The Fund typically hedges foreign currency exposure using forward foreign currency contracts. These derivatives positions were slightly positive contributors to performance as the U.S. dollar strengthened.

The oil industry remains a major focus for the Fund, especially through companies involved in equipment & services, exploration & production and transportation industries. The increase in shale oil production from key basins in North America also remains an important focus for energy holdings, particularly production from the Permian Basin, a region that we believe holds a better potential for production cost reductions than other shale regions.

A focus on oil supply/demand

 

 

We think steady economic growth and low inflation will continue in the U.S. in the coming year, maintaining the country’s position as a bright spot among developed countries. In our view, global economic growth also is likely to remain slow overall.

 

  2016   ANNUAL REPORT   35

Table of Contents

MANAGEMENT DISCUSSION

Ivy Global Natural Resources Fund

 

(UNAUDITED)

 

 

 

We think commodities remain in a low-demand environment because of the slow pace of the global economy. Commodities prices persisted at weaker levels during the fiscal year and we think that situation will continue until global economic growth gains momentum. We think major commodities companies will continue to focus on managing costs and capital expenditures as a result. The prospects for growth have improved in several emerging countries, but not to a level that we think is sufficient to greatly increase demand.

U.S. shale oil producers have significantly cut marginal costs. While we believe all U.S. shale offers opportunities, much of our focus is on the Permian Basin as the place in which production growth is most likely to continue. Companies there still are improving efficiency and productivity, and are reducing costs faster than in other, more mature shale areas.

We estimate the world is oversupplied by 1.5-2.0% on total consumption of 95 million barrels per day (bpd). However, we still think the year-over-year increase in global supply will start to diminish. Output has slowed from producing countries outside the Organization of Petroleum Exporting Countries, led by U.S. shale producers. In December 2015, oil output in the continental U.S. fell on a year-over-year basis — a first since the onset of the shale renaissance.

As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

Performance shown at NAV does not include the effect of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Investing in companies involved in one specified sector may be more risky and volatile than an investment with greater diversification. Investing in natural resources can be riskier than other types of investment activities because of a range of factors, including price fluctuation caused by real and perceived inflationary trends and political developments; and the cost assumed by natural resource companies in complying with environmental and safety regulations. International investing involves additional risks, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Commodity trading, including trading in precious metals, is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the portfolio manager and are current only through the end of the period of the report as stated on the cover. The portfolio manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of Ivy Global Natural Resources Fund’s performance.

 

36   ANNUAL REPORT   2016  

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Global Natural Resources Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      97.8%   

Energy

      63.4%   

Materials

      25.7%   

Industrials

      4.9%   

Financials

      3.8%   

Utilities

      0.0%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      2.2%   

Lipper Rankings

 

 

 

Category: Lipper Global Natural
Resources Funds		    Rank      Percentile

1 Year

    91/138      66

3 Year

    81/131      62

5 Year

    74/114      65

10 Year

    40/53      75

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

Country Weightings

 

 

North America

      87.1%   

United States

      81.6%   

Canada

      5.5%   

Europe

      10.7%   

United Kingdom

      6.8%   

Other Europe

      3.9%   

Pacific Basin

      0.0%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      2.2%   
 

 

Top 10 Equity Holdings

 

 

 

Company    Country      Sector   Industry

Schlumberger Ltd.

   

United States

      Energy   Oil & Gas Equipment & Services

Dow Chemical Co. (The)

   

United States

      Materials   Diversified Chemicals

Halliburton Co.

   

United States

      Energy   Oil & Gas Equipment & Services

LyondellBasell Industries N.V., Class A

   

United States

      Materials   Specialty Chemicals

CME Group, Inc.

   

United States

      Financials   Specialized Finance

EOG Resources, Inc.

   

United States

      Energy   Oil & Gas Exploration & Production

Concho Resources, Inc.

   

United States

      Energy   Oil & Gas Exploration & Production

Suncor Energy, Inc.

   

Canada

      Energy   Integrated Oil & Gas

Rio Tinto plc

   

United Kingdom

      Materials   Diversified Metals & Mining

Baker Hughes, Inc.

   

United States

      Energy   Oil & Gas Equipment & Services

See your advisor or www.ivyfunds.com for more information on the Fund’s most recent published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

  2016   ANNUAL REPORT   37

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Global Natural Resources Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

(2) Blended index is represented by 55% MSCI AC World IMI Energy Index and 45% MSCI AC World IMI Materials Index.

 

Average Annual Total Return(3)    Class A(4)      Class B(5)      Class C      Class E      Class I      Class R      Class R6      Class Y  

1-year period ended 3-31-16

      -26.77%         -26.18%         -22.82%         -26.51%         -21.99%         -22.40%         -21.80%         -22.19%   

5-year period ended 3-31-16

      -13.34%         -13.24%         -12.86%         -13.10%         -11.90%         -12.41%         —            -12.10%   

10-year period ended 3-31-16

      -3.87%         -3.92%         -3.94%         —            —            -3.44%         —            -3.09%   

Since Inception of Class through 3-31-16(6)

      —            —            —            -5.82%         -4.85%         —            -24.51%         —      

 

(3) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(4) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(5) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(6) 4-2-07 for Class E shares, 4-2-07 for Class I shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

38   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Global Natural Resources Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Canada

  

 

Energy – 3.4%

  

Suncor Energy, Inc.

     858      $ 23,884   
   

 

 

  
 

Industrials – 2.1%

  

Canadian Pacific Railway Ltd.

     115        15,312   
   

 

 

  
 

Total Canada – 5.5%

  

   $ 39,196   

China

  

 

Materials – 0.0%

  

China Metal Recycling (Holdings) Ltd. (A)

     30,000        —   
   

 

 

  
 

Total China – 0.0%

  

   $ —   

France

  

 

Materials – 0.9%

  

L Air Liquide S.A.

     56        6,313   
   

 

 

  
 

Total France – 0.9%

  

   $ 6,313   

Netherlands

  

 

Energy – 1.2%

  

Core Laboratories N.V.

     77        8,656   
   

 

 

  
 

Total Netherlands – 1.2%

  

   $ 8,656   

Switzerland

  

 

Energy – 1.8%

  

Weatherford International Ltd. (A)

     1,615        12,561   
   

 

 

  
 

Total Switzerland – 1.8%

  

   $ 12,561   

United Kingdom

  

 

Materials – 6.8%

  

BHP Billiton plc

     1,529        17,195   

Randgold Resources Ltd. ADR

     97        8,763   

Rio Tinto plc

     799        22,436   
   

 

 

  
      48,394   
   

 

 

  
 

Total United Kingdom – 6.8%

  

   $ 48,394   

United States

  

 

Energy – 57.0%

  

Anadarko Petroleum Corp.

     314        14,623   

Baker Hughes, Inc.

     507        22,239   

Cameron International Corp. (A)

     227        15,224   

Cimarex Energy Co.

     207        20,116   

Concho Resources, Inc. (A)

     247        24,967   

Continental Resources, Inc. (A)

     605        18,379   

Diamondback Energy, Inc. (A)

     74        5,746   

Enterprise Products Partners L.P.

     140        3,444   

EOG Resources, Inc.

     359        26,071   
COMMON STOCKS
(Continued)		   Shares     Value  

Energy (Continued)

  

Exxon Mobil Corp.

     167      $ 13,926   

FMC Technologies, Inc. (A)

     128        3,510   

Gulfport Energy Corp. (A)

     265        7,499   

Halliburton Co.

     1,164        41,582   

Helmerich & Payne, Inc.

     80        4,712   

Marathon Oil Corp.

     338        3,770   

Marathon Petroleum Corp.

     103        3,844   

Marathon Petroleum Corp. L.P.

     166        4,915   

Newfield Exploration Co. (A)

     417        13,850   

Noble Energy, Inc.

     486        15,254   

Oasis Petroleum LLC (A)

     1,211        8,813   

Patterson-UTI Energy, Inc.

     398        7,011   

Phillips 66

     128        11,079   

Pioneer Natural Resources Co.

     153        21,540   

Schlumberger Ltd.

     677        49,907   

Shell Midstream Partners L.P.

     165        6,027   

Superior Energy Services, Inc.

     575        7,693   

Tallgrass Energy GP L.P., Class A

     607        11,223   

Tesoro Corp.

     44        3,767   

Valero Energy Corp.

     58        3,749   

Valero Energy Partners L.P.

     75        3,533   

Whiting Petroleum Corp. (A)

     856        6,828   
   

 

 

  
      404,841   
   

 

 

  
 

Financials – 3.8%

  

CME Group, Inc.

     282        27,100   
   

 

 

  
 

Industrials – 2.8%

  

Caterpillar, Inc.

     253        19,386   
   

 

 

  
 

Materials – 15.3%

  

Dow Chemical Co. (The)

     837        42,593   

LyondellBasell Industries N.V., Class A

     352        30,111   

PPG Industries, Inc.

     142        15,876   

Praxair, Inc.

     44        5,007   

Southern Copper Corp.

     549        15,220   
   

 

 

  
      108,807   
   

 

 

  
 

Total United States – 78.9%

  

   $ 560,134   
 

TOTAL COMMON
STOCKS – 95.1%

   

   $ 675,254   

(Cost: $713,488)

      
    
INVESTMENT FUNDS		   Shares     Value  

United States – 2.7%

  

SPDR Gold Trust (A)

     161      $ 18,975   
   

 

 

  
 

TOTAL INVESTMENT
FUNDS – 2.7%

   

   $ 18,975   

(Cost: $19,111)

      
 

PREFERRED STOCKS

  

        

United States

  

 

Utilities – 0.0%

  

Konarka Technologies, Inc., 8.000%, Convertible (A)(B)

     3,500        —   
   

 

 

  
 

Total United States – 0.0%

  

   $ —   
 

TOTAL PREFERRED
STOCKS – 0.0%

   

   $ —   

(Cost: $10,850)

      
 
SHORT-TERM
SECURITIES		   Principal         

Commercial Paper (C) – 1.6%

  

Bemis Co., Inc.
0.650%, 4-4-16

   $ 5,000        4,999   

Danaher Corp.
0.450%, 4-6-16

     4,000        4,000   

Mondelez International, Inc.
0.570%, 4-1-16

     2,784        2,784   
   

 

 

  
      11,783   
   

 

 

  

Master Note – 0.6%

  

Toyota Motor Credit Corp. 0.443%, 4-6-16 (D)

     3,938        3,938   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 2.2%

   

   $ 15,721   

(Cost: $15,722)

      
 

TOTAL INVESTMENT SECURITIES – 100.0%

   

   $ 709,950   

(Cost: $759,171)

      
 

CASH AND OTHER ASSETS,
NET OF LIABILITIES – 0.0%

   

     153   
 

NET ASSETS – 100.0%

  

   $ 710,103   
 

 

  2016   ANNUAL REPORT   39

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Global Natural Resources Fund (in thousands)

MARCH 31, 2016

 

 

 

Notes to Schedule of Investments

 

(A) No dividends were paid during the preceding 12 months.

 

(B) Restricted security. At March 31, 2016, the Fund owned the following restricted security:

 

Security      Acquisition Date(s)      Shares        Cost        Market Value  

Konarka Technologies, Inc., 8.000%, Convertible

      8-31-07        3,500         $ 10,850         $ —   
              

 

 

  

The total value of this security represented 0.0% of net assets at March 31, 2016.

 

(C) Rate shown is the yield to maturity at March 31, 2016.

 

(D) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following forward foreign currency contracts were outstanding at March 31, 2016:

 

      Currency to be
Delivered		            Currency to be
Received		      Settlement
Date		      Counterparty    Unrealized
Appreciation		      Unrealized
Depreciation		       

British Pound

      28,819       U.S. Dollar      41,715         4-26-16       UBS AG    $ 320       $ —     

Canadian Dollar

      31,366       U.S. Dollar      24,121         4-26-16       UBS AG      —         31     

Euro

      5,473       U.S. Dollar      6,198         4-26-16       UBS AG      —         34     
                 

 

 

                  $ 320       $ 65     
                 

 

 

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 675,254       $ —       $ —   

Investment Funds

     18,975         —         —   

Preferred Stocks

     —         —         —   

Short-Term Securities

     —         15,721         —   

Total

   $ 694,229       $ 15,721       $ —   

Forward Foreign Currency Contracts

   $ —       $ 320       $ —   

Liabilities

        

Forward Foreign Currency Contracts

   $ —       $ 65       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

The following acronym is used throughout this schedule:

ADR = American Depositary Receipts

 

Market Sector Diversification

  

(as a % of net assets)

  

Energy

      63.4 % 

Materials

      25.7 % 

Industrials

      4.9 % 

Financials

      3.8 % 

Utilities

      0.0 % 

Other+

      2.2 % 
 

 

+ Includes cash and other assets (net of liabilities), and cash equivalents

 

See Accompanying Notes to Financial Statements.

 

40   ANNUAL REPORT   2016  

Table of Contents

MANAGEMENT DISCUSSION

Ivy LaSalle Global Real Estate Fund

(UNAUDITED)

 

 

 

LOGO

Keith R. Pauley

 

LOGO

Stanley J. Kraska, Jr

 

LOGO

George J. Noon

 

LOGO

Matthew Sgrizzi

The Ivy Global Real Estate Fund was renamed Ivy LaSalle Global Real Estate Fund on Feb. 1, 2016. The Fund is subadvised by LaSalle Investment Management Securities, LLC. Below, portfolio managers Keith R. Pauley, CFA; Stanley J. Kraska, Jr.; George J. Noon, CFA; and Matthew Sgrizzi, CFA, discuss positioning, performance and results for the fiscal year ended March 31, 2016. Mr. Pauley and Mr. Kraska have managed the Fund since inception and each has 30 years of industry experience. Mr. Noon has managed the Fund since inception and has 28 years of industry experience. Mr. Sgrizzi became a portfolio manager on the Fund on May 15, 2015. He replaced Ernst-Jan de Leeuw. He has 14 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy LaSalle Global Real Estate Fund (Class A shares at net asset value)

      –2.00%   

Ivy LaSalle Global Real Estate Fund (Class A shares including sales charges)

      –7.64%   

Benchmark(s) and/or Lipper Category

         

FTSE EPRA/NAREIT Developed Index

      1.27%   

(generally reflects the performance of real estate stocks in developed countries)

         

Lipper Global Real Estate Funds Universe Average

      –0.48%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

Dominated by macro concerns

 

 

The past year was dominated by concerns about decelerating global economic growth — with a particular focus on the slowing Chinese economy — along with the impact of potential increases in interest rates and falling oil prices. These concerns culminated in the second half of 2015 and into the start of 2016 as market volatility increased, global economic growth and inflation expectations significantly compressed and credit spreads widened. In an attempt to combat the weakening global economic growth outlook and lower inflation expectations, several central banks around the world implemented additional stimulus measures, while others maintained a dovish tone. Markets were able to rally in the final month of the fiscal year with improving macro-economic data and supportive central bank policies.

Public real estate securities (as measured by the FTSE EPRA/NAREIT Developed Index) posted modestly positive gains, outperforming the broader equity markets (as measured by the MSCI World Index) which traded lower during the fiscal year period. The performance of both indices was hindered by this period of higher market volatility and decreasing growth expectations. After a rather active capital market environment in the prior fiscal year, equity issuance by the public real estate companies was much more subdued this year while debt issuance remained high.

Results reflect a few key weightings

 

 

The Fund finished the fiscal year with a negative return, as did its peer group average. The Fund’s benchmark index had a small positive return for the year.

 

The Fund’s underperformance relative to its benchmark index for the fiscal year was driven by negative stock selection. These results can be attributed to an overweight position relative to the benchmark to the development companies in Hong Kong and Japan. Despite office and residential market fundamentals holding their own or even improving, the developers underperformed. A slowing global economic growth outlook and a heightened level of risk aversion weighed on market sentiment. These development companies were disproportionately impacted in this type of environment with their higher relative correlation with the broader equity market.

Country allocations contributed to performance results, but not enough to outweigh the negative stock selection impact. Allocation results were helped by an overweight that transition to an underweight position to the U.K., an underweight position to Singapore and an overweight position to Australia.

The Fund’s portfolio includes companies we believe offer attractive stock prices relative to our estimates of their intrinsic and net asset values, and is well diversified by country, currency, and property type. The Fund’s risk profile remains broadly similar to the global property company investment universe. However, the Fund’s investments are tilted towards companies with what we believe are better quality assets, management teams capable of adding shareholder value and somewhat less leverage.

Growth concerns remain

 

 

The global economic outlook has brightened recently with improvements in macro-economic data, the easing of credit markets and accommodative central banks. Nevertheless, growth concerns remain. Recent forecasts put global economic growth at 2.3% in 2016, with an increase in growth expectations for the U.S. We continue to expect slow-to-moderate economic growth over the next several years. Inflation has remained well below target in most economies, but inflation expectations have begun to tick upwards since mid-February. Interest rates have remained low through the first quarter of 2016.

 

  2016   ANNUAL REPORT   41

Table of Contents

MANAGEMENT DISCUSSION

Ivy LaSalle Global Real Estate Fund

 

(UNAUDITED)

 

 

 

Real estate fundamentals remain generally positive. Occupancies and rents remain firm or are improving in most markets. We believe most public companies remain well positioned for the current environment from both an operational and capital market access perspective. These companies generally own higher quality assets and are modestly levered, providing them with significant financial flexibility. We think the current positive fundamental outlook is likely to mean global property stocks can produce earnings growth in the mid to high single digits on average in 2016. We believe global real estate companies are trading at their net asset values on average and below the premiums at which they have historically traded.

Performance shown at NAV does not include the effect of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

Investment risks associated with investing in real estate securities, in addition to other risks, include rental income fluctuation, depreciation, property tax value changes and differences in real estate market values.

Because the Fund invests more than 25% of its total assets in the real estate industry, it may be more susceptible to a single economic, regulatory, or technical occurrence than a fund that does not concentrate its investments in this industry.

International investing involves additional risks, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets.

The Fund is non-diversified, meaning that it may invest a significant portion of its total assets in a limited number of issuers, and a decline in value of those investments would cause the Fund’s overall value to decline greater than that of a more diversified portfolio. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the Fund’s portfolio managers and are current only through the end of the period of the report as stated on the cover. The managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged, includes reinvested dividends and does not include fees. One cannot invest directly in an index, nor is an index representative of the Ivy LaSalle Global Real Estate Fund’s performance.

 

42   ANNUAL REPORT   2016  

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy LaSalle Global Real Estate Fund(a)

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      99.4%   

Financials

      97.6%   

Telecommunication Services

      1.8%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      0.6%   

Lipper Rankings

 

 

 

Category: Lipper Global Real Estate Funds    Rank      Percentile

1 Year

    126/165      76

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

 

Country Weightings

 

 

 

North America

      56.5%   

United States

      53.5%   

Other North America

      3.0%   

Pacific Basin

      29.4%   

Japan

      12.7%   

Hong Kong

      8.6%   

Australia

      7.0%   

Other Pacific Basin

      1.1%   

Europe

      13.5%   

United Kingdom

      4.5%   

Other Europe

      9.0%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      0.6%   
 

 

Top 10 Equity Holdings

 

 

 

Company    Country      Sector      Industry

Simon Property Group, Inc.

   

United States

     

Financials

     

Retail REITs

Equity Residential

   

United States

     

Financials

     

Residential REITs

Mitsui Fudosan Co. Ltd.

   

Japan

     

Financials

     

Real Estate Development

Mitsubishi Estate Co. Ltd.

   

Japan

     

Financials

     

Real Estate Development

Sun Hung Kai Properties Ltd.

   

Hong Kong

     

Financials

     

Real Estate Development

Health Care, Inc.

   

United States

     

Financials

     

Health Care REITs

AvalonBay Communities, Inc.

   

United States

     

Financials

     

Residential REITs

Boston Properties, Inc.

   

United States

     

Financials

     

Office REITs

Camden Property Trust

   

United States

     

Financials

     

Residential REITs

Unibail-Rodamco

   

France

     

Financials

     

Retail REITs

See your advisor or www.ivyfunds.com for more information on the Fund’s most recent published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

(a)Effective February 1, 2016, the name of Ivy Global Real Estate Fund changed to Ivy LaSalle Global Real Estate Fund.

 

  2016   ANNUAL REPORT   43

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy LaSalle Global Real Estate Fund

(UNAUDITED)

 

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class B(4)      Class C      Class I      Class R      Class Y  

1-year period ended 3-31-16

      -7.64%         -6.84%         -3.21%         -2.11%         -2.68%         -2.08%   

5-year period ended 3-31-16

      —            —            —            —            —            —      

10-year period ended 3-31-16

      —            —            —            —            —            —      

Since Inception of Class through 3-31-16(5)

      2.43%         2.37%         3.26%         4.33%         3.72%         4.67%   

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) 4-1-13 for Class A shares, 4-1-13 for Class B shares, 4-1-13 for Class C shares, 4-1-13 for Class I shares, 4-1-13 for Class R shares and 4-1-13 for Class Y shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

44   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy LaSalle Global Real Estate Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Australia

  

 

Financials – 7.0%

  

DEXUS Property Group

     55      $ 337   

Mirvac Group

     280        415   

Scentre Group

     245        833   

Westfield Corp.

     107        818   
   

 

 

  
      2,403   
   

 

 

  
 

Total Australia – 7.0%

  

   $ 2,403   

Austria

  

 

Financials – 0.2%

  

Buwog AG

     2        53   
   

 

 

  
 

Total Austria – 0.2%

           $ 53   

Canada

  

 

Financials – 2.8%

  

Allied Properties

     2        57   

Canadian Apartments Properties

     7        239   

Dream Office Real Estate Investment Trust

     3        48   

H&R Real Estate Investment Trust

     14        230   

RioCan

     12        252   

SmartREIT

     5        140   
   

 

 

  
      966   
   

 

 

  
 

Total Canada – 2.8%

           $ 966   

Finland

  

 

Financials – 0.1%

  

Sponda plc

     5        20   
   

 

 

  
 

Total Finland – 0.1%

           $ 20   

France

  

 

Financials – 3.4%

  

Gecina

     2        255   

Mercialys S.A.

     2        52   

Unibail-Rodamco

     3        853   
   

 

 

  
      1,160   
   

 

 

  
 

Total France – 3.4%

           $ 1,160   

Germany

  

 

Financials – 2.7%

  

Ado Properties S.A.(A)

     4        153   

alstria office AG

     10        140   

Deutsche EuroShop AG

     5        213   

Deutsche Wohnen AG

     11        337   

LEG Immobilien AG

     1        75   
   

 

 

  
      918   
   

 

 

  
 

Total Germany – 2.7%

           $ 918   

Hong Kong

  

 

Financials – 8.6%

  

Hongkong Land Holdings Ltd.

     76        455   

Link (The)

     100        590   

COMMON STOCKS

(Continued)

   Shares     Value  

Financials (Continued)

  

Sun Hung Kai Properties Ltd.

     111      $ 1,357   

Swire Properties Ltd.

     196        530   
   

 

 

  
      2,932   
   

 

 

  
 

Total Hong Kong – 8.6%

           $ 2,932   

Japan

  

 

Financials – 12.7%

  

Daiwa Office Investment Corp.

     — *      199   

Global One Corp.

     — *      92   

Ichigo Hotel Investment Corp.

     — *      93   

Kenedix Office Investment Corp.

     — *      218   

Mitsubishi Estate Co. Ltd.

     75        1,393   

Mitsui Fudosan Co. Ltd.

     60        1,497   

ORIX JREIT, Inc.

     — *      244   

Sumitomo Realty & Development Co. Ltd.

     12        351   

Tokyu, Inc.

     — *      251   
   

 

 

  
      4,338   
   

 

 

  
 

Total Japan – 12.7%

           $ 4,338   

Jersey

  

 

Financials – 0.2%

  

Atrium European Real Estate Ltd.

     18        71   
   

 

 

  
 

Total Jersey – 0.2%

           $ 71   

Mexico

  

 

Financials – 0.2%

  

Prologis Property Mexico S.A. de C.V.

     33        53   
   

 

 

  
 

Total Mexico – 0.2%

           $ 53   

Netherlands

  

 

Financials – 0.2%

  

Wereldhave N.V.

     1        61   
   

 

 

  
 

Total Netherlands – 0.2%

           $ 61   

Norway

  

 

Financials – 0.5%

  

Entra ASA

     20        185   
   

 

 

  
 

Total Norway – 0.5%

           $ 185   

Singapore

  

 

Financials – 1.1%

  

CapitaCommercial Trust

     49        54   

CapitaLand Ltd.

     53        121   

CapitaMall Trust

     59        92   

Global Logistic Properties Ltd.

     39        55   

Mapletree Commercial Trust

     37        38   
   

 

 

  
      360   
   

 

 

  
 

Total Singapore – 1.1%

           $ 360   

COMMON STOCKS

(Continued)

   Shares     Value  

Spain

  

 

Financials – 0.1%

  

Axiare Patrimonio SOCIMI S.A.

     3      $ 48   
   

 

 

  
 

Total Spain – 0.1%

           $ 48   

Sweden

  

 

Financials – 1.1%

  

Hufvudstaden AB

     14        224   

Wihlborgs Fastigheter AB

     7        153   
   

 

 

  
      377   
   

 

 

  
 

Total Sweden – 1.1%

           $ 377   

Switzerland

  

 

Financials – 0.5%

  

PSP Swiss Property Ltd., Registered Shares

     2        179   
   

 

 

  
 

Total Switzerland – 0.5%

           $ 179   

United Kingdom

  

 

Financials – 4.5%

  

Big Yellow Group plc

     9        96   

British Land Co. plc (The)

     7        75   

Derwent London plc

     6        252   

Hammerson plc

     27        226   

Hansteen Holdings plc

     54        83   

Land Securities Group plc

     39        623   

LondonMetric Property plc

     39        89   

Shaftesbury plc

     8        110   
   

 

 

  
      1,554   
   

 

 

  
 

Total United Kingdom – 4.5%

           $ 1,554   

United States

  

 

Financials – 51.7%

  

American Assets Trust, Inc.

     2        64   

American Campus Communities, Inc.

     6        270   

AvalonBay Communities, Inc.

     6        1,091   

Boston Properties, Inc.

     8        994   

Brixmor Property Group, Inc.

     11        284   

Camden Property Trust

     11        897   

Care Capital Properties, Inc.

     6        157   

CBL & Associates Properties, Inc.

     14        162   

Columbia Property Trust, Inc.

     6        137   

Corporate Office Properties Trust

     10        265   

Cousins Properties, Inc.

     15        152   

CubeSmart

     14        453   

DDR Corp.

     18        324   

Duke Realty Corp.

     11        244   

DuPont Fabros Technology, Inc.

     5        203   

EastGroup Properties, Inc.

     2        101   

Equity Residential

     21        1,588   

General Growth Properties, Inc.

     13        385   
 

 

  2016   ANNUAL REPORT   45

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy LaSalle Global Real Estate Fund (in  thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS

(Continued)

   Shares     Value  

Financials (Continued)

  

Health Care, Inc.

     17      $ 1,194   

Host Hotels & Resorts, Inc.

     22        360   

Hudson Pacific Properties, Inc.

     8        238   

LaSalle Hotel Properties

     15        372   

Medical Properties Trust, Inc.

     2        24   

New York, Inc.

     4        45   

Paramount Group, Inc.

     16        262   

ProLogis

     18        784   

Public Storage, Inc.

     3        711   

Ramco-Gershenson Properties Trust

     9        155   

Retail Properties of America, Inc.

     12        187   

RLJ Lodging Trust

     12        268   

Senior Housing Properties Trust

     11        197   

Simon Property Group, Inc.

     12        2,550   

SL Green Realty Corp.

     3        266   

COMMON STOCKS

(Continued)

   Shares     Value  

Financials (Continued)

  

Sovran Self Storage, Inc.

     2      $ 290   

Spirit Realty Capital, Inc.

     23        261   

Sunstone Hotel Investors, Inc.

     20        283   

Taubman Centers, Inc.

     6        442   

Ventas, Inc.

     6        351   

Vornado Realty Trust

     7        678   
   

 

 

  
      17,689   
   

 

 

  
 

Telecommunication Services – 1.8%

  

American Tower Corp., Class A

     6        608   
   

 

 

  
 

Total United States – 53.5%

  

   $ 18,297   
 

TOTAL COMMON
STOCKS – 99.4%

  

   $ 33,975   

(Cost: $31,301)

      
SHORT-TERM
SECURITIES		   Principal     Value  

Master Note – 0.0%

  

Toyota Motor Credit Corp.
0.443%,
4-6-16(B)

   $ 7      $ 7   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 0.0%

   

   $ 7   

(Cost: $7)

      
 

TOTAL INVESTMENT SECURITIES – 99.4%

   

   $ 33,982   

(Cost: $31,308)

      
 

CASH AND OTHER ASSETS,
NET OF LIABILITIES – 0.6%

   

     202   
 

NET ASSETS – 100.0%

  

   $ 34,184   
 

 

Notes to Schedule of Investments

 

* Not shown due to rounding.

 

(A) No dividends were paid during the preceding 12 months.

 

(B) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

      Level 1      Level 2      Level 3  

Assets

         

Investments in Securities

         

Common Stocks

    $ 33,975       $   —       $   —   

Short-Term Securities

      —         7         —   

Total

    $ 33,975       $ 7       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

The following acronym is used throughout this schedule:

REIT = Real Estate Investment Trusts

 

Market Sector Diversification

  

(as a % of net assets)

  

Financials

      97.6 % 

Telecommunication Services

      1.8 % 

Other+

      0.6 % 

 

+ Includes cash and other assets (net of liabilities), and cash equivalents

 

See Accompanying Notes to Financial Statements.

 

46   ANNUAL REPORT   2016  

Table of Contents

MANAGEMENT DISCUSSION

Ivy LaSalle Global Risk-Managed Real Estate Fund

(UNAUDITED)

 

 

 

 

LOGO

Keith R. Pauley

 

LOGO

Stanley J. Kraska, Jr.

 

LOGO

George J. Noon

 

LOGO

Matthew Sgrizzi

The Ivy Global Risk-Managed Real Estate Fund was renamed Ivy LaSalle Global Risk-Managed Real Estate Fund on Feb. 1, 2016. The Fund is subadvised by LaSalle Investment Management Securities, LLC. Below, portfolio managers Keith R. Pauley, CFA; Stanley J. Kraska, Jr.; George J. Noon, CFA; and Matthew Sgrizzi, CFA, discuss positioning, performance and results for the fiscal year ended March 31, 2016. Mr. Pauley and Mr. Kraska have managed the Fund since inception and each has 30 years of industry experience. Mr. Noon has managed the Fund since inception and has 28 years of industry experience. Mr. Sgrizzi became a portfolio manager on the Fund on May 15, 2015. He replaced Ernst-Jan de Leeuw. He has 14 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy LaSalle Global Risk-Managed Real Estate Fund (Class A shares at net asset value)

      5.27%   

Ivy LaSalle Global Risk-Managed Real Estate Fund (Class A shares including sales charges)

      –0.74%   

Benchmark(s) and/or Lipper Category

         

FTSE EPRA/NAREIT Developed Index

      1.27%   

(generally reflects the performance of real estate stocks in developed countries)

         

Lipper Global Real Estate Funds Universe Average

      –0.48%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

Dominated by macro concerns

 

 

The past year was dominated by concerns about decelerating global economic growth — with a particular focus on the slowing Chinese economy — along with the impact of potential increases in interest rates and falling oil prices. These concerns culminated in the second half of 2015 and into the start of 2016 as market volatility increased, global economic growth and inflation expectations significantly compressed and credit spreads widened. In an attempt to combat the weakening global economic growth outlook and lower inflation expectations, several central banks around the world implemented additional stimulus measures, while others maintained a dovish tone. Markets were able to rally in the final month of the fiscal year with improving macro-economic data and supportive central bank policies.

Public real estate securities (as measured by the FTSE EPRA/NAREIT Developed Index) posted modestly positive gains, outperforming the broader equity markets (as measured by the MSCI World Index) which traded lower during the fiscal year period. The performance of both indices was hindered by this period of higher market volatility and decreasing growth expectations. After a rather active capital market environment in the prior fiscal year, equity issuance by the public real estate companies was much more subdued this year while debt issuance remained high.

Performance

 

 

The Fund finished the fiscal year with a positive return, above the positive return of its benchmark index and the negative return of its peer group average.

 

Stock selection was contributed to performance in all major geographic regions, with particular strength in Japan and the U.S. A large portion of the outperformance relative to the benchmark index can be attributed to the risk-managed strategy of the Fund, which helped avoid Asian development companies and U. S. hotel companies, both of which significantly underperformed during the period. Asian development companies faced a slowing global economic growth outlook coupled with a heightened level of risk aversion, both of which weighed on market sentiment. These development companies were disproportionately impacted in this type of environment with their higher relative correlation with the broader equity market. U.S. hotel companies also underperformed as the sector’s fundamentals weakened in 2015 and remained weak at the start of 2016. Hotels also faced headwinds from a strong U.S. dollar, limited international tourism, a growing supply pipeline, and disruptive threats from online sites to select and book accommodations as well as guest experience review sites.

In addition, positive stock selection results in Japan were helped by the strong performance of the country’s property investment companies, which have benefitted from the Bank of Japan’s negative interest rate policy and a renewed demand for yield. The Fund’s outperformance in the U.S. also can be partly attributed to a tilt towards blue-chip securities and an overweight allocation to the outperforming apartment, regional mall and self-storage sectors.

Country allocations also contributed to performance in the period, with positive results from an overweight position that transition to an underweight to the U.K., an underweight position to Singapore and an overweight position to Australia.

The Fund’s portfolio includes companies we believe offer favorable stock prices relative to estimates of their intrinsic and net asset values, and is well diversified by country, currency, and property type. The Fund’s portfolio is tilted towards companies with what we believe are better quality assets, management teams capable of adding shareholder value and significantly lower leverage. Although they have less risk on average, we believe the companies in the Fund are likely to produce solid earnings growth.

 

  2016   ANNUAL REPORT   47

Table of Contents

MANAGEMENT DISCUSSION

Ivy LaSalle Global Risk-Managed Real Estate Fund

(UNAUDITED)

 

 

 

Growth concerns remain

 

 

The global economic outlook has brightened recently with improvements in macro-economic data, the easing of credit markets and accommodative central banks. Nevertheless, growth concerns remain. Recent forecasts put global economic growth at 2.3% in 2016, with an increase in growth expectations for the U.S. We continue to expect slow-to-moderate economic growth over the next several years. Inflation has remained well below target in most economies, but inflation expectations have begun to tick upwards since mid-February. Interest rates have remained low through the first quarter of 2016.

Real estate fundamentals remain generally positive. Occupancies and rents remain firm or are improving in most markets. We believe most public companies remain well positioned for the current environment from both an operational and capital market access perspective. These companies generally own higher quality assets and are modestly levered, providing them with significant financial flexibility. We think the current positive fundamental outlook is likely to mean global property stocks can produce earnings growth in the mid to high single digits on average in 2016. We believe global real estate companies are trading at their net asset values on average and below the premiums at which they have historically traded.

Performance shown at NAV does not include the effect of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

Investment risks associated with investing in real estate securities, in addition to other risks, include rental income fluctuation, depreciation, property tax value changes and differences in real estate market values.

Because the Fund invests more than 25% of its total assets in the real estate industry, it may be more susceptible to a single economic, regulatory, or technical occurrence than a fund that does not concentrate its investments in this industry.

International investing involves additional risks, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets.

The Fund is non-diversified, meaning that it may invest a significant portion of its total assets in a limited number of issuers, and a decline in value of those investments would cause the Fund’s overall value to decline greater than that of a more diversified portfolio. These and other risks are more fully described in the Fund’s prospectus.

There is no guarantee that the Ivy LaSalle Global Risk-Managed Real Estate Fund will not decline in value in comparison with funds that do not use a risk-managed approach.

The opinions expressed in this report are those of the Fund’s portfolio managers and are current only through the end of the period of the report as stated on the cover. The managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged, includes reinvested dividends and does not include fees. One cannot invest directly in an index, nor is an index representative of the Ivy LaSalle Global Risk-Managed Real Estate Fund’s performance.

 

48   ANNUAL REPORT   2016  

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy LaSalle Global Risk-Managed Real Estate Fund(a)

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      97.8%   

Financials

      97.8%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      2.2%   

Lipper Rankings

 

 

 

Category: Lipper Global Real Estate Funds    Rank      Percentile

1 Year

    2/165      2

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

Country Weightings

 

 

 

North America

      55.7%   

United States

      53.3%   

Other North America

      2.4%   

Pacific Basin

      28.6%   

Japan

      11.5%   

Hong Kong

      8.4%   

Australia

      7.4%   

Other Pacific Basin

      1.3%   

Europe

      13.5%   

United Kingdom

      4.4%   

France

      3.8%   

Other Europe

      5.3%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      2.2%   
 

 

Top 10 Equity Holdings

 

 

 

Company    Country      Sector      Industry

Simon Property Group, Inc.

   

United States

     

Financials

     

Retail REITs

Equity Residential

   

United States

     

Financials

     

Residential REITs

Health Care, Inc.

   

United States

     

Financials

     

Health Care REITs

Boston Properties, Inc.

   

United States

     

Financials

     

Office REITs

Public Storage, Inc.

   

United States

     

Financials

     

Specialized REITs

Swire Properties Ltd.

   

Hong Kong

     

Financials

     

Real Estate Operating Companies

Hongkong Land Holdings Ltd.

   

Hong Kong

     

Financials

     

Real Estate Development

AvalonBay Communities, Inc.

   

United States

     

Financials

     

Residential REITs

Scentre Group

   

Australia

     

Financials

     

Retail REITs

Camden Property Trust

   

United States

     

Financials

     

Residential REITs

See your advisor or www.ivyfunds.com for more information on the Fund’s most recent published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

(a) Effective February 1, 2016, the name of Ivy Global Risk-Managed Real Estate Fund changed to Ivy LaSalle Global Risk-Managed Real Estate Fund.

 

  2016   ANNUAL REPORT   49

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy LaSalle Global Risk-Managed Real Estate Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class B(4)      Class C      Class I      Class R      Class Y  

1-year period ended 3-31-16

      -0.74%         0.36%         4.34%         5.37%         4.78%         5.25%   

5-year period ended 3-31-16

      —            —            —            —            —            —      

10-year period ended 3-31-16

      —            —            —            —            —            —      

Since Inception of Class through 3-31-16(5)

      4.68%         4.91%         5.81%         6.78%         6.16%         6.80%   

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) 4-1-13 for Class A shares, 4-1-13 for Class B shares, 4-1-13 for Class C shares, 4-1-13 for Class I shares, 4-1-13 for Class R shares and 4-1-13 for Class Y shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

50   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy LaSalle Global Risk-Managed Real Estate Fund
(in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Australia

  

 

Financials – 7.4%

  

DEXUS Property Group

     237      $ 1,442   

Scentre Group

     696        2,369   

Vicinity Centres

     188        461   

Westfield Corp.

     284        2,177   
   

 

 

  
      6,449   
   

 

 

  
 

Total Australia – 7.4%

  

   $ 6,449   

Canada

  

 

Financials – 2.4%

  

Allied Properties

     11        287   

Boardwalk

     2        78   

Canadian Apartments Properties

     17        591   

RioCan

     34        702   

SmartREIT

     17        448   
   

 

 

  
      2,106   
   

 

 

  
 

Total Canada – 2.4%

  

   $ 2,106   

France

  

 

Financials – 3.8%

  

Gecina

     7        1,027   

Mercialys S.A.

     5        122   

Unibail-Rodamco

     8        2,126   
   

 

 

  
      3,275   
   

 

 

  
 

Total France – 3.8%

  

   $ 3,275   

Germany

  

 

Financials – 3.0%

  

Ado Properties S.A. (A)

     12        409   

alstria office AG

     33        477   

Deutsche EuroShop AG

     14        654   

Deutsche Wohnen AG

     28        865   

LEG Immobilien AG

     2        182   
   

 

 

  
      2,587   
   

 

 

  
 

Total Germany – 3.0%

  

   $ 2,587   

Hong Kong

  

 

Financials – 8.4%

  

Hongkong Land Holdings Ltd.

     471        2,818   

Link (The)

     265        1,569   

Swire Properties Ltd.

     1,080        2,916   
   

 

 

  
      7,303   
   

 

 

  
 

Total Hong Kong – 8.4%

  

   $ 7,303   

Japan

  

 

Financials – 11.5%

  

Activia Properties, Inc.

     — *      384   

Comforia Residential, Inc.

     — *      183   

Daiwa Office Investment Corp.

     — *      1,287   

Hulic, Inc.

     — *      657   

Kenedix Office Investment Corp.

     — *      1,929   
COMMON STOCKS
(Continued)		   Shares     Value  

Financials (Continued)

  

Nippon Building Fund, Inc.

     — *    $ 2,128   

Nippon Prologis, Inc.

     — *      497   

ORIX JREIT, Inc.

     1        2,129   

Tokyu, Inc.

     1        734   
   

 

 

  
      9,928   
   

 

 

  
 

Total Japan – 11.5%

  

   $ 9,928   

Jersey

  

 

Financials – 0.3%

  

Atrium European Real Estate Ltd.

     60        241   
   

 

 

  
 

Total Jersey – 0.3%

  

   $ 241   

Netherlands

  

 

Financials – 0.2%

  

Wereldhave N.V.

     3        190   
   

 

 

  
 

Total Netherlands – 0.2%

  

   $ 190   

Singapore

  

 

Financials – 1.3%

  

Ascendas Real Estate Investment Trust

     85        151   

CapitaCommercial Trust

     334        364   

CapitaMall Trust

     227        352   

Mapletree Commercial Trust

     208        218   
   

 

 

  
      1,085   
   

 

 

  
 

Total Singapore – 1.3%

  

   $ 1,085   

Spain

  

 

Financials – 0.3%

  

Axiare Patrimonio SOCIMI S.A.

     18        273   
   

 

 

  
 

Total Spain – 0.3%

  

   $ 273   

Sweden

  

 

Financials – 1.0%

  

Hufvudstaden AB

     55        877   
   

 

 

  
 

Total Sweden – 1.0%

  

   $ 877   

Switzerland

  

 

Financials – 0.5%

  

PSP Swiss Property Ltd., Registered Shares

     5        438   
   

 

 

  
 

Total Switzerland – 0.5%

  

   $ 438   

United Kingdom

  

 

Financials – 4.4%

  

Big Yellow Group plc

     20        218   

Derwent London plc

     15        660   

Hammerson plc

     68        569   

Hansteen Holdings plc

     116        177   

Land Securities Group plc

     103        1,622   
COMMON STOCKS
(Continued)		   Shares     Value  

Financials (Continued)

  

LondonMetric Property plc

     89      $ 202   

Shaftesbury plc

     30        393   
   

 

 

  
      3,841   
   

 

 

  
 

Total United Kingdom – 4.4%

  

   $ 3,841   

United States

  

 

Financials – 53.3%

  

American Assets Trust, Inc.

     13        518   

American Campus Communities, Inc.

     28        1,310   

AvalonBay Communities, Inc.

     15        2,808   

Boston Properties, Inc.

     24        3,108   

Brixmor Property Group, Inc.

     29        736   

Camden Property Trust

     27        2,254   

Corporate Office Properties Trust

     28        738   

Cousins Properties, Inc.

     34        355   

CubeSmart

     34        1,136   

Duke Realty Corp.

     27        613   

EastGroup Properties, Inc.

     12        718   

Equity Residential

     60        4,508   

Federal Realty Investment Trust

     4        702   

General Growth Properties, Inc.

     32        951   

Health Care, Inc.

     51        3,547   

Hudson Pacific Properties, Inc.

     24        704   

National Retail Properties, Inc.

     16        758   

New York, Inc.

     9        91   

Paramount Group, Inc.

     68        1,085   

ProLogis

     47        2,056   

Public Storage, Inc.

     11        2,941   

Ramco-Gershenson Properties Trust

     25        451   

Regency Centers Corp.

     13        977   

Retail Properties of America, Inc.

     34        531   

Senior Housing Properties Trust

     28        493   

Simon Property Group, Inc.

     33        6,927   

Sovran Self Storage, Inc.

     6        735   

Taubman Centers, Inc.

     25        1,765   

Ventas, Inc.

     15        937   

Vornado Realty Trust

     18        1,706   
   

 

 

  
      46,159   
   

 

 

  
 

Total United States – 53.3%

  

   $ 46,159   
 

TOTAL COMMON
STOCKS – 97.8%

   

   $ 84,752   

(Cost: $75,986)

      
 

 

  2016   ANNUAL REPORT   51

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy LaSalle Global Risk-Managed Real Estate Fund (in thousands)

MARCH 31, 2016

 

 

 

SHORT-TERM
SECURITIES		   Principal     Value  

Master Note – 1.2%

  

Toyota Motor Credit Corp.

      

0.443%, 4-6-16 (B)

   $ 1,000      $ 1,000   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 1.2%

   

   $ 1,000   

(Cost: $1,000)

      
 

TOTAL INVESTMENT SECURITIES – 99.0%

   

   $ 85,752   

(Cost: $76,986)

      
 

CASH AND OTHER ASSETS, NET OF LIABILITIES – 1.0%

   

     909   
 

NET ASSETS – 100.0%

  

   $ 86,661   
 

 

Notes to Schedule of Investments

 

* Not shown due to rounding.

 

(A) No dividends were paid during the preceding 12 months.

 

(B) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  
       

Assets

        

Investments in Securities

        

Common Stocks

   $ 84,752       $ —       $ —   

Short-Term Securities

     —         1,000         —   

Total

   $ 84,752       $ 1,000       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

The following acronym is used throughout this schedule:

REIT = Real Estate Investment Trusts

 

Market Sector Diversification

  

(as a % of net assets)

  

Financials

      97.8 % 

Other+

      2.2 % 
 

 

+ Includes cash and other assets (net of liabilities), and cash equivalents

 

See Accompanying Notes to Financial Statements.

 

52   ANNUAL REPORT   2016  

Table of Contents

MANAGEMENT DISCUSSION

Ivy Real Estate Securities Fund

(UNAUDITED)

 

 

 

 

LOGO

Matthew K. Richmond

 

LOGO

Lowell R. Bolken

Ivy Real Estate Securities Fund (the “Fund”) is subadvised by Advantus Capital Management, Inc. Below, Matthew K. Richmond and Lowell R. Bolken, CFA, portfolio managers of the Fund, discuss positioning, performance and results for the fiscal year ended March 31, 2016. Mr. Richmond has managed the Fund since 2014 and has 21 years of industry experience. Mr. Bolken has managed the Fund since 2006 and has 25 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy Real Estate Securities Fund (Class A shares at net asset value)

      3.41%   

Ivy Real Estate Securities Fund (Class A shares including sales charges)

      –2.53%   

Benchmark(s) and/or Lipper Category

         

Wilshire U.S. Real Estate Securities Index

      5.38%   

(generally reflects the performance of securities representing the commercial real estate market)

         

Lipper Real Estate Funds Universe Average

      2.52%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below reflects net asset value (NAV).

 

Volatility amid uncertain backdrop

 

 

While real estate stocks delivered positive returns during the fiscal year and performed in-line with the broader U.S. stock market, the path to those returns was anything but smooth. The sector spent all but the last few weeks of the year in negative territory before rallying sharply in March to finish with a gain. Like the broader equity markets, real estate investment trust (REIT) share prices were tossed between “risk on” and “risk off” investor sentiment. Fears of rising interest rates and their impact on all asset valuations; slow, weak growth in global gross domestic product (GDP); a precipitous drop in oil prices; dramatic geopolitical events including rising terrorism; unfounded fear of a mini-credit crisis; and widespread uncertainty around the policy actions of the U.S. Federal Reserve (Fed) were headwinds for the equity markets and REITs.

U.S. commercial real estate conditions improved steadily throughout the year. Occupancies and rental rates across all major property types improved and reached record levels in apartments and self-storage facilities. There continued to be limited new construction activity and, in instances in which construction appeared to be heating up, demand was robust enough to absorb the new supply. The fundamental backdrop for the sector remained stable, potentially allowing for a longer-than-average recovery cycle. How the property sector performs going forward will be largely determined by macroeconomic and capital market fundamentals.

Performance constrained by office companies

 

 

The Fund delivered a positive return for the fiscal year that was above its peer group average but below its benchmark index.

Favorable stock selection within owners of self-storage, health care facilities and regional malls contributed to the Fund’s relative performance. However, the contribution to return from these sectors was overshadowed by negative performance in the office sector. The Fund was overweight relative to its benchmark index in coastal-focused, urban office owners and these stocks lagged the benchmark index. Growing fears of a tech-driven slowdown in San Francisco leasing activity and expectations for weaker New York City leasing caused owners in those markets to have negative total returns. To date, there has been little evidence that either of these conditions has materialized, but the perception that these trends could unfold was a headwind for share prices.

The majority of the Fund’s other holdings were contributors. An overweight to self-storage owners was the largest positive contributor. Self-storage fundamentals were strong, and we believe 2016 may again offer earnings growth in that sector. We avoided low-quality regional mall owners in the Fund, which provided a significant contribution to performance. Operating conditions for non-dominant mall properties remained challenging, and private valuations for those properties are extremely stressed. A decision to underweight owners of health care facilities, whose returns were muted by fears of rising interest rates and a broadly changing health care reimbursement landscape, also contributed to returns. Finally, an overweighting in industrial warehouse owners benefitted returns. Industrial landlords are experiencing a significant increase in demand, driven by economic improvement and growth in e-commerce sales.

We have positioned the Fund to potentially benefit from improvement in GDP growth and employment, a stable interest rate environment and healthy overall U.S. capital markets. We focused the majority of holdings in mid- and large-capitalization companies with a bias toward major urban, coastal and Sunbelt markets.

A common theme among individual holdings within the Fund was companies that we believe own well-located, high-quality properties; feature stable balance sheets; are exhibiting improving property fundamentals; and have above-average cash-flow growth prospects. From a property-type perspective, the Fund was overweight in owners of apartments, warehouses, urban-centric office buildings and self-storage facilities.

 

  2016   ANNUAL REPORT   53

Table of Contents

MANAGEMENT DISCUSSION

Ivy Real Estate Securities Fund

(UNAUDITED)

 

 

 

Outlook for 2016

 

 

We believe that real estate stocks should continue to offer an attractive dividend yield with a stable earnings growth profile relative to broader equities. However, volatility appears to be here to stay, as the markets grapple with weak global growth and unprecedented monetary policy actions meant to stimulate aggregate demand. This sort of backdrop can lead to short-term dislocations in REIT share prices relative to their underlying property value.

Absent the U.S. slipping into an outright recession, or even a stall-speed environment, we believe commercial real estate properties can deliver another year of solid cash flow growth. Occupancies and rental rates across the major property types are at or nearing equilibrium levels, and we think the current environment can sustain itself with the proper macro backdrop. We believe that few, if any, of the typical forces that have caused previous corrections are present today.

At the property level, real estate conditions in the U.S. remain favorable, although the cycle appears to be in the later stages. The primary determination of whether the cycle prolongs itself lies with the pace of economic growth and the health of credit markets. We believe a recent slowdown in commercial mortgage-backed securities lending, if sustained, will exert negative pressure on property prices. In addition, a failure of the economy to accelerate may impede future space demand. Demand still exceeds new supply across the major property types, speculative construction activity is minimal, and both property pricing and lending standards remain rational.

In an environment of positive GDP growth and 1.5-2% employment growth, we think real estate operating conditions are likely to remain favorable. In that environment, 2016 may provide another year of cash flow growth for REITs. We believe cash flow growth may be 6-8% across the sector, with similar levels of dividend growth. Still, we are mindful of peaking internal growth levels and believe the sector is reliant on continued economic improvement to sustain current operating conditions.

Performance shown at NAV does not include the effect of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

Investment risks associated with real estate securities, in addition to other risks, include rental income fluctuation, depreciation, property tax value changes and differences in real estate market values. Real estate securities are subject to interest-rate risk and, as such, the Fund’s net asset value may fall as interest rates rise.

Because the Fund invests more than 25% of its total assets in the real estate industry, it may be more susceptible to a single economic, regulatory, or technical occurrence than a fund that does not concentrate its investments in this industry. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the Fund’s portfolio managers and are current only through the end of the period of the report as stated on the cover. The managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The indexes noted are unmanaged, include reinvested dividends and do not include fees. One cannot invest directly in an index, nor is an index representative of Ivy Real Estate Securities Fund’s performance.

 

54   ANNUAL REPORT   2016  

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Real Estate Securities Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      99.0%   

Financials

      94.5%   

Information Technology

      3.9%   

Industrials

      0.6%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      1.0%   

Lipper Rankings

 

 

 

Category: Lipper Real Estate Funds    Rank      Percentile

1 Year

    129/263      49

3 Year

    83/222      38

5 Year

    117/188      62

10 Year

    91/129      70

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

 

 

Top 10 Equity Holdings

 

 

 

Company    Sector      Industry

Simon Property Group, Inc.

   

Financials

     

Retail REITs

Public Storage, Inc.

   

Financials

     

Specialized REITs

AvalonBay Communities, Inc.

   

Financials

     

Residential REITs

Essex Property Trust, Inc.

   

Financials

     

Residential REITs

Health Care, Inc.

   

Financials

     

Health Care REITs

ProLogis

   

Financials

     

Industrial REITs

Boston Properties, Inc.

   

Financials

     

Office REITs

Equinix, Inc.

   

Information Technology

     

Internet Software & Services

Equity Residential

   

Financials

     

Residential REITs

Ventas, Inc.

   

Financials

     

Specialized REITs

See your advisor or www.ivyfunds.com for more information on the Fund’s most recently published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

  2016   ANNUAL REPORT   55

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Real Estate Securities Fund

(UNAUDITED)

 

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class B(4)      Class C      Class E      Class I      Class R      Class R6      Class Y  

1-year period ended 3-31-16

      -2.53%         -1.41%         2.67%         -2.58%         3.86%         3.21%         4.02%         3.62%   

5-year period ended 3-31-16

      9.32%         9.34%         9.80%         9.22%         11.17%         10.48%         —            10.90%   

10-year period ended 3-31-16

      4.74%         4.38%         4.54%         —            —            5.37%         —            5.73%   

Since Inception of Class through 3-31-16(5)

      —            —            —            3.16%         4.58%         —            12.90%         —      

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) 4-2-07 for Class E shares, 4-2-07 for Class I shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

56   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Real Estate Securities Fund (in thousands)

MARCH 31, 2016

 

 

 

 

COMMON STOCKS   Shares     Value  

Financials

  

 

Diversified REITs – 0.5%

  

STORE Capital Corp.

     143      $ 3,693   
   

 

 

  
 

Health Care REITs – 5.2%

  

Care Capital Properties, Inc.

     94        2,512   

HCP, Inc.

     78        2,554   

Health Care, Inc.

     438        30,371   

Physicians Realty Trust

     75        1,401   
   

 

 

  
      36,838   
   

 

 

  
 

Hotel & Resort REITs – 1.2%

  

Chesapeake Lodging Trust

     127        3,353   

Pebblebrook Hotel Trust

     190        5,526   
   

 

 

  
      8,879   
   

 

 

  
 

Industrial REITs – 6.8%

  

DCT Industrial Trust, Inc.

     192        7,583   

First Industrial Realty Trust, Inc.

     445        10,124   

ProLogis

     685        30,278   
   

 

 

  
      47,985   
   

 

 

  
 

Office REITs – 16.6%

  

Alexandria Real Estate Equities, Inc.

     146        13,297   

Boston Properties, Inc.

     227        28,834   

Douglas Emmett, Inc.

     307        9,244   

Duke Realty Corp.

     623        14,049   

Highwoods Properties, Inc.

     212        10,112   

Kilroy Realty Corp.

     160        9,928   

SL Green Realty Corp.

     172        16,667   

Vornado Realty Trust

     158        14,874   
   

 

 

  
      117,005   
   

 

 

  
 

Residential REITs – 22.3%

  

American Campus Communities, Inc.

     270        12,724   

Apartment Investment and Management Co., Class A

     129        5,393   

AvalonBay Communities, Inc.

     181        34,510   

Camden Property Trust

     160        13,488   

COMMON STOCKS

(Continued)

   Shares     Value  

Residential REITs (Continued)

  

Education Realty Trust, Inc.

     66      $ 2,758   

Equity Lifestyle Properties, Inc.

     115        8,383   

Equity Residential

     347        26,011   

Essex Property Trust, Inc.

     131        30,606   

Sun Communities, Inc.

     98        6,982   

UDR, Inc.

     427        16,446   
   

 

 

  
      157,301   
   

 

 

  
 

Retail REITs – 23.1%

  

Brixmor Property Group, Inc.

     232        5,944   

Federal Realty Investment Trust

     60        9,433   

General Growth Properties, Inc.

     663        19,724   

Kimco Realty Corp.

     556        16,015   

Macerich Co. (The)

     172        13,645   

National Retail Properties, Inc.

     22        1,030   

Regency Centers Corp.

     155        11,594   

Simon Property Group, Inc.

     354        73,600   

Weingarten Realty Investors

     309        11,605   
   

 

 

  
      162,590   
   

 

 

  
 

Specialized REITs – 18.8%

  

CubeSmart

     352        11,723   

Digital Realty Trust, Inc.

     195        17,273   

Extra Space Storage, Inc.

     184        17,187   

Host Hotels & Resorts, Inc.

     942        15,734   

LaSalle Hotel Properties

     63        1,587   

Public Storage, Inc.

     141        38,974   

RLJ Lodging Trust

     255        5,839   

Sunstone Hotel Investors, Inc.

     285        3,985   

Ventas, Inc.

     318        19,998   
   

 

 

  
      132,300   
   

 

 

  
 

Total Financials – 94.5%

  

   $ 666,591   

COMMON STOCKS

(Continued)

   Shares     Value  

Industrials

  

 

Office Services & Supplies – 0.6%

  

CyrusOne, Inc.

     95      $ 4,323   
   

 

 

  
 

Total Industrials – 0.6%

  

     4,323   

Information Technology

  

 

Internet Software & Services – 3.9%

  

Equinix, Inc.

     83        27,353   
   

 

 

  
 

Total Information
Technology – 3.9%

   

     27,353   
 

TOTAL COMMON
STOCKS – 99.0%

   

   $ 698,267   

(Cost: $465,352)

      
 
SHORT-TERM SECURITIES     Principal           
 

Master Note – 0.5%

  

Toyota Motor Credit Corp., 0.443%, 4-6-16 (A)

   $ 3,193        3,193   
   

 

 

  
 

TOTAL SHORT-TERM
SECURITIES – 0.5%

   

   $ 3,193   

(Cost: $3,193)

      
 

TOTAL INVESTMENT SECURITIES – 99.5%

   

   $ 701,460   

(Cost: $468,545)

      
 

CASH AND OTHER ASSETS, NET OF LIABILITIES – 0.5%

   

     3,598   
 

NET ASSETS – 100.0%

  

   $ 705,058   

 

 

 

Notes to Schedule of Investments

 

(A) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 698,267       $ —       $ —   

Short-Term Securities

     —         3,193         —   

Total

   $ 698,267       $ 3,193       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

The following acronym is used throughout this schedule:

REIT = Real Estate Investment Trusts

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   57

Table of Contents

MANAGEMENT DISCUSSION

Ivy Science and Technology Fund

(UNAUDITED)

 

 

 

 

LOGO

Zachary H. Shafran

Below, Zachary H. Shafran, portfolio manager of Ivy Science and Technology Fund, discusses positioning, performance and results for the fiscal year ended March 31, 2016. He has managed the Fund since February 2001 and has 27 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy Science and Technology Fund (Class A shares at net asset value)

      –15.10%   

Ivy Science and Technology Fund (Class A shares including sales load)

      –19.98%   

Benchmark(s) and/or Lipper Category

         

S&P North American Technology Sector Index

      8.79%   

(generally reflects the performance of U.S. science and technology stocks)

         

Lipper Science & Technology Funds Universe Average

      –1.09%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

 

Uncertainty continues with slow global growth

 

 

Equity and fixed-income markets were volatile in the fiscal year ended March 31, 2016. The global recovery experienced setbacks throughout the year, though we believe the gradual recovery should continue. Global growth for 2016 is expected to be weaker and more uneven than earlier forecasts, with the U.S. emerging as the main driver for growth. After many false starts, in the fourth quarter of 2015, the U.S. Federal Reserve (Fed) raised rates for the first time since June 2006. Additional rate increases may take place at some point this upcoming year. Inflation generally surprised on the downside with the drop in commodity prices and lackluster wage growth. On the international front, economic growth remained sluggish despite a continued policy of central bank easing. During the fourth quarter, the Eurozone was disappointed with European Central Bank (ECB) President Mario Draghi’s tempered announcement during the most recent ECB meeting, as expectations were high for a more aggressive response to the current slow-growth conditions. Potential turmoil remains in the European Union (EU), as Britain set June 23 as the date for a referendum on the country’s membership in the EU. In early 2015, the chances of a “Brexit” — Britain departing from the EU — seemed remote. Today, largely due to Europe’s migration crisis and regulation concerns, the chances of a Brexit have increased.

The decline in energy prices that started mid-year 2014 gathered steam during the fiscal year as robust North American production, in addition to the recovery of oil supplies in OPEC nations (Libya and Iraq), has overwhelmed tepid global demand for the commodity. The continued downgrading of demand growth through the year, along with OPEC’s unwillingness to support price levels by curtailing output, led to the rapid decline in price levels. While the sharp fall in oil prices adversely impacted the energy sector and oil-producing countries, we believe this will aid consumer-based economies/countries if the price stays at a relatively low level for an extended period.

On the year, information technology stocks performed well, with the Fund’s benchmark index advancing nearly 9%. The market was notably narrow, with the largest five companies in the benchmark accounting for the vast majority of the benchmark’s return. We believe balance sheet strength (large cash balances and relatively low debt levels), increases in dividend payments and strong management were key in providing stability and growth to this sector. On the health care front, we believe there are many investment opportunities in those companies that are able to provide innovative solutions or services to the end user.

A volatile year

 

 

The Fund significantly underperformed its benchmark and its peer-group average during the period. Poor stock selection in industrials, consumer discretionary and information technology were the main detractors to relative performance, while overall sector allocation, in particular health care, also contributed to the relative decline. In terms of specific holdings, a position in Micron Technology Inc. was the greatest detractor to performance for the year, followed by the Fund’s holding of Vertex Pharmaceuticals Inc. Micron Technology reported disappointing earnings and guidance during the fiscal year. Weakness in the PC industry, along with cost and margin concerns, negatively impacted performance during the period. Additionally, in 2015 virtually all of the technology sector’s outperformance came from a few names, including Facebook, Amazon, Netflix, and Google, accounting for a very narrow market for outperformance. While the Fund had sizable positions in Facebook and Google, its relative underweight in these positions compared to the index and its lack of exposure to Amazon and Netflix had a negative impact on Fund performance.

Unfortunately, the Fund’s long-standing “applied science and technology” investment approach also diminished performance. The Fund’s allocation to health care, a sector not included in the Fund’s benchmark index, was a notable detractor to performance; however, we believe this is one of the sectors with the greatest opportunity for innovation and growth going forward.

Fund positioning

 

 

While we recognize the challenges of the world economic backdrop, we are excited about the innovation and growth that is taking place within certain companies. We believe many of the stocks in the information technology space remain relatively inexpensive and are well-positioned going

 

58   ANNUAL REPORT   2016  

Table of Contents

 

 

forward. As confidence is restored, we believe there should be an increase in capital expenditure in various markets around the world as companies become more comfortable with the high cost transitions related to changes in internal infrastructure. The Fund had about 70% of its equity exposure in the information technology sector as of March 31, 2016.

The Fund’s exposure to health care names over the year remained relatively stable, and as of the fiscal year-end, about 19% of the Fund’s equity holdings were in the health care sector. Also, in developing markets, as the standard of living increases, we believe the demand for quality health care should increase as well. In our view, medical technology, biotechnology, medical records and pharmaceuticals are among the greatest innovators and early adopters of new science and technology, so we are paying particularly close attention to companies in those areas as well. We also are looking more closely at companies that may benefit from a continued low interest rate environment.

The “applied science and technology” holdings span several industries and sectors and make up the remainder of the Fund’s equity composition, totaling approximately 10%. The Fund’s cash position as of March 31, 2016 was about 1%. The current cash allocation is slightly lower than the Fund’s historic average allocation. We almost always have some cash on hand in an effort to take advantage of opportunities that may present themselves or to use as a defensive measure to protect the Fund in adverse market conditions.

Seeking opportunities in a muted growth environment

 

 

We believe global economic growth is fragile and is being buoyed by an extremely aggressive global monetary policy. For instance, early in 2015 the ECB unveiled details of a trillion-euro bond purchase program. It seems that only the Fed has moved in a direction of tighter policy. All in all, we think eventual improvement in economic growth will lead to tighter monetary and, to a lesser extent, fiscal policy across the globe.

For the upcoming fiscal year, lingering fiscal concerns and other geopolitical risks have resulted in a rather muted growth outlook. That said, in mixed economic environments, we believe there are many potential investment opportunities — especially in biotechnology, data, mobility and health care — around the world. As we look at the securities of such companies, we are focused on what we believe are good growth prospects and sound capital structures. We believe there will be a modest improvement in capital spending trends, and we are looking for a continuation of an active mergers-and-acquisition environment. As always, we will carefully monitor the macroeconomic environment, but our focus remains primarily on security-specific fundamental research. Going forward, we believe this attention to bottom-up research, coupled with the innovation and transformation under way across the globe, will continue to provide investment opportunities for the Fund.

Performance shown at NAV does not include the effect of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

Because the Fund invests more than 25% of its total assets in the science and technology industry and has significant concentrations within certain issuers, the Fund’s performance may be more susceptible to a single economic, regulatory or technological occurrence than a fund that does not concentrate its investments in this industry. Securities of companies within specific industries or sectors of the economy may periodically perform differently than the overall market. In addition, the Fund’s performance may be more volatile than an investment in a portfolio of broad market securities and may underperform the market as a whole, due to the relatively limited number of issuers of science and technology related securities. Investment risks associated with investing in science and technology securities, in addition to other risks, include: operating in rapidly changing fields, abrupt or erratic market movements, limited product lines, markets or financial resources, management that is dependent on a limited number of people, short product cycles, aggressive pricing of products and services, new market entrants and obsolescence of existing technology. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the Fund’s portfolio manager and are current only through the end of the period of the report as stated on the cover. The portfolio manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged, includes reinvested dividends and does not include fees. One cannot invest directly in an index, nor is an index representative of the Ivy Science and Technology Fund’s performance.

 

  2016   ANNUAL REPORT   59

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Science and Technology Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      98.6%   

Information Technology

      68.9%   

Health Care

      18.7%   

Industrials

      3.1%   

Consumer Discretionary

      2.6%   

Financials

      1.8%   

Telecommunication Services

      1.7%   

Utilities

      1.1%   

Materials

      0.5%   

Consumer Staples

      0.2%   

Warrants

      0.0%   

Purchased Options

      0.0%   

Bonds

      0.5%   

Corporate Debt Securities

      0.5%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      0.9%   

Lipper Rankings

 

 

 

Category: Lipper Science & Technology
Funds		    Rank      Percentile

1 Year

    153/160      96

3 Year

    133/149      89

5 Year

    71/142      50

10 Year

    19/115      17

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

Country Weightings

 

 

 

North America

      80.1%   

United States

      80.1%   

Europe

      8.6%   

Pacific Basin

      5.4%   

India

      3.9%   

Other Pacific Basin

      1.5%   

Other

      4.0%   

Israel

      4.0%   

Bahamas/Caribbean

      1.0%   

Cash and Other Assets (Net of Liabilities), Cash Equivalents+ and Purchased Options

      0.9%   

 

 

 

Top 10 Equity Holdings

 

 

 

Company    Country      Sector      Industry

Microsoft Corp.

   

United States

     

Information Technology

     

Systems Software

Euronet Worldwide, Inc.

   

United States

     

Information Technology

     

Data Processing & Outsourced Services

Alliance Data Systems Corp.

   

United States

     

Information Technology

     

Data Processing & Outsourced Services

Microsemi Corp.

   

United States

     

Information Technology

     

Semiconductors

WNS (Holdings) Ltd. ADR

   

India

     

Information Technology

     

Data Processing & Outsourced Services

Aspen Technology, Inc.

   

United States

     

Information Technology

     

Application Software

Cerner Corp.

   

United States

     

Health Care

     

Health Care Technology

Micron Technology, Inc.

   

United States

     

Information Technology

     

Semiconductors

ACI Worldwide, Inc.

   

United States

     

Information Technology

     

Application Software

Facebook, Inc., Class A

   

United States

     

Information Technology

     

Internet Software & Services

See your advisor or www.ivyfunds.com for more information on the Fund’s most recent published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

60   ANNUAL REPORT   2016  

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Science and Technology Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class B(4)      Class C      Class E      Class I      Class R      Class R6      Class Y  

1-year period ended 3-31-16

      -19.98%         -18.99%         -15.68%         -20.09%         -14.84%         -15.35%         -14.71%         -15.04%   

5-year period ended 3-31-16

      7.72%         8.02%         8.24%         7.63%         9.35%         8.69%         —            9.07%   

10-year period ended 3-31-16

      8.53%         8.37%         8.36%         —            —            8.93%         —            9.28%   

Since Inception of Class through 3-31-16(5)

      —            —            —            8.57%         10.03%         —            -4.68%         —      

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) 4-2-07 for Class E shares, 4-2-07 for Class I shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

  2016   ANNUAL REPORT   61

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Science and Technology Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Consumer Discretionary

  

 

Consumer Electronics – 2.6%

  

Garmin Ltd.

     1,439      $ 57,490   

Harman International Industries, Inc.

     821        73,121   
   

 

 

  
      130,611   
   

 

 

  
 

Total Consumer
Discretionary – 2.6%

   

     130,611   

Consumer Staples

  

 

Agricultural Products – 0.2%

  

Arcadia Biosciences, Inc. (A)(B)

     3,161        8,788   
   

 

 

  
 

Total Consumer Staples – 0.2%

  

     8,788   

Financials

  

 

Specialized REITs – 1.8%

  

QTS Realty Trust, Inc., Class A

     1,926        91,240   
   

 

 

  
 

Total Financials – 1.8%

  

     91,240   

Health Care

  

 

Biotechnology – 7.2%

  

Evogene Ltd. (A)(B)

     1,852        12,056   

FibroGen, Inc. (A)

     1,187        25,278   

Isis Pharmaceuticals, Inc. (A)

     3,356        135,898   

Seres Therapeutics, Inc. (A)

     344        9,148   

Spark Therapeutics, Inc. (A)

     119        3,509   

Vertex Pharmaceuticals, Inc. (A)

     2,211        175,736   
   

 

 

  
      361,625   
   

 

 

  
 

Health Care Equipment – 0.3%

  

Avinger, Inc. (A)(B)

     1,363        13,062   
   

 

 

  
 

Health Care Facilities – 2.5%

  

Tenet Healthcare Corp. (A)

     4,275        123,687   
   

 

 

  
 

Health Care Technology – 3.7%

  

Cerner Corp. (A)

     3,506        185,667   
   

 

 

  
 

Life Sciences Tools & Services – 1.9%

  

PRA Health Sciences, Inc. (A)

     2,266        96,900   
   

 

 

  
 

Pharmaceuticals – 3.1%

  

Teva Pharmaceutical Industries Ltd. ADR

     2,848        152,413   
   

 

 

  
 

Total Health Care – 18.7%

  

     933,354   

Industrials

  

 

Building Products – 0.7%

  

Advanced Drainage Systems, Inc.

     1,682        35,828   
   

 

 

  
COMMON STOCKS
(Continued)		   Shares     Value  

Construction & Engineering – 0.2%

  

Abengoa S.A., Class B ADR

     6,083      $ 8,698   
   

 

 

  
 

Industrial Machinery – 2.2%

  

Pentair, Inc.

     2,063        111,948   
   

 

 

  
 

Total Industrials – 3.1%

  

     156,474   

Information Technology

  

 

Application Software – 10.5%

  

ACI Worldwide,
Inc. (A)(B)

     8,611        179,030   

Aspen Technology, Inc. (A)(B)

     5,192        187,569   

Globant S.A. (A)

     1,620        49,984   

Mobileye N.V. (A)

     1,016        37,869   

Silver Spring Networks,
Inc. (A)(B)

     4,810        70,944   
   

 

 

  
      525,396   
   

 

 

  
 

Data Processing & Outsourced
Services – 14.9%

   

Alliance Data Systems Corp. (A)

     1,045        229,988   

Euronet Worldwide, Inc. (A)(B)(C)

     3,271        242,396   

EVERTEC, Inc.

     1,737        24,281   

First Data Corp., Class A (A)

     1,618        20,937   

QIWI plc ADR

     2,125        30,790   

WNS (Holdings) Ltd. ADR (A)(B)

     6,346        194,456   
   

 

 

  
      742,848   
   

 

 

  
 

Electronic Components – 2.1%

  

Universal Display Corp. (A)

     1,966        106,334   
   

 

 

  
 

Internet Software & Services – 11.2%

  

21Vianet Group, Inc. ADR (A)

     851        16,994   

Alibaba Group Holding
Ltd. ADR (A)

     738        58,356   

Alphabet, Inc., Class A (A)

     140        106,730   

Alphabet, Inc., Class C (A)

     181        134,942   

Facebook, Inc., Class A (A)

     1,551        176,923   

Pandora Media, Inc. (A)

     2,659        23,801   

Twitter, Inc. (A)

     2,430        40,217   
   

 

 

  
      557,963   
   

 

 

  
 

IT Consulting & Other Services – 4.1%

  

Acxiom Corp. (A)(B)

     6,256        134,136   

CSRA, Inc.

     1,395        37,531   

Virtusa Corp. (A)

     934        34,969   
   

 

 

  
      206,636   
   

 

 

  
COMMON STOCKS
(Continued)		   Shares     Value  

Semiconductor Equipment – 1.4%

  

Nanometrics,
Inc. (A)(B)

     1,438      $ 22,785   

Photronics,
Inc. (A)(B)

     4,528        47,141   
   

 

 

  
      69,926   
   

 

 

  
 

Semiconductors – 18.8%

  

Cypress Semiconductor Corp.

     8,969        77,669   

Dialog Semiconductor plc (A)(D)

     1,409        55,759   

Marvell Technology Group Ltd.

     4,890        50,418   

Micron Technology, Inc. (A)

     17,665        184,955   

Microsemi Corp. (A)

     5,484        210,090   

NXP Semiconductors N.V. (A)

     2,079        168,520   

Rambus, Inc. (A)(B)

     6,607        90,841   

Semtech Corp. (A)(B)

     3,890        85,543   

Silicon Laboratories, Inc. (A)

     275        12,375   
   

 

 

  
      936,170   
   

 

 

  
 

Systems Software – 5.1%

  

Microsoft Corp.

     4,571        252,456   
   

 

 

  
 

Technology Hardware, Storage &
Peripherals – 0.8%

   

Hewlett Packard Enterprise Co.

     2,266        40,167   
   

 

 

  
 

Total Information
Technology – 68.9%

   

     3,437,896   

Materials

  

 

Commodity Chemicals – 0.4%

  

BioAmber, Inc. (A)(B)

     4,883        20,507   
   

 

 

  
 

Fertilizers & Agricultural
Chemicals – 0.1%

  

Marrone Bio Innovations, Inc. (A)(B)

     2,608        2,347   
   

 

 

  
 

Total Materials – 0.5%

  

     22,854   

Telecommunication Services

  

 

Alternative Carriers – 1.7%

  

Zayo Group Holdings, Inc. (A)

     3,548        86,004   
   

 

 

  
 

Total Telecommunication Services – 1.7%

   

     86,004   

Utilities

  

 

Renewable Electricity – 1.1%

  

Abengoa Yield plc

     2,991        53,175   
   

 

 

  
 

Total Utilities – 1.1%

             53,175   
 

TOTAL COMMON
STOCKS – 98.6%

   

   $ 4,920,396   

(Cost: $3,989,186)

      
 

 

62   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Science and Technology Fund (in thousands)

MARCH 31, 2016

 

 

 

WARRANTS   Shares     Value  

Commodity Chemicals – 0.0%

  

BioAmber, Inc., expires 5-9-17 (B)(E)

     1,276      $ 2,240   
   

 

 

  
 

Fertilizers & Agricultural Chemicals – 0.0%

  

Marrone Bio Innovations, Inc., expires
8-20-23 (B)(E)(F)

     2,390        — * 
   

 

 

  
 

TOTAL WARRANTS – 0.0%

  

   $ 2,240   

(Cost: $447)

      
 
PURCHASED OPTIONS    
 

 

 Number of
Contracts

(Unrounded)

   
  

  

        

Xerox Corp.,

      

Call $11.00, Expires 4-15-16, OTC (Ctrpty: Societe Generale Bank)

     29,318        938   
   

 

 

  
 

TOTAL PURCHASED
OPTIONS – 0.0%

   

   $ 938   

(Cost: $1,431)

      
CORPORATE DEBT
SECURITIES		   Principal     Value  

Materials

  

 

Fertilizers & Agricultural Chemicals – 0.5%

  

Marrone Bio Innovations, Inc.,

      

8.000%, 8-20-20 (B)(F)

   $ 23,900      $ 23,876   
   

 

 

  
 

Total Materials – 0.5%

  

     23,876   
 

TOTAL CORPORATE DEBT SECURITIES – 0.5%

   

   $ 23,876   

(Cost: $23,900)

      
 

Commercial Paper (G) – 1.2%

  

Bemis Co., Inc.,

      

0.470%, 4-13-16

     3,768        3,767   

BorgWarner, Inc.,

      

0.490%, 4-21-16

     5,000        4,998   

Campbell Soup Co.,

      

0.440%, 4-19-16

     9,000        8,998   

Ecolab, Inc.,

      

0.470%, 4-13-16

     11,000        10,998   

Rockwell Automation, Inc.,

      

0.610%, 4-1-16

     3,930        3,930   

St. Jude Medical, Inc.,

      

0.480%, 4-19-16

     16,000        15,996   
CORPORATE DEBT
SECURITIES		   Principal     Value  

Commercial Paper (G) (Continued)

  

Wisconsin Gas LLC,

      

0.380%,
4-4-16

   $ 8,000      $ 8,000   
   

 

 

  
      56,687   
   

 

 

  

United States Government Agency
Obligations – 0.0%

   

Overseas Private Investment Corp. (GTD by U.S. Government),

      

0.360%,
4-6-16 (H)

     1,661        1,661   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 1.2%

   

   $ 58,348   

(Cost: $58,345)

      
 

TOTAL INVESTMENT SECURITIES – 100.3%

   

   $ 5,005,798   

(Cost: $4,073,309)

      
 

LIABILITIES, NET OF
CASH AND OTHER
ASSETS – (0.3)%

    

     (16,686 ) 
 

NET ASSETS – 100.0%

  

   $ 4,989,112   
 

 

Notes to Schedule of Investments

 

* Not shown due to rounding.

 

(A) No dividends were paid during the preceding 12 months.

 

(B) Deemed to be an affiliate due to the Fund owning at least 5% of the voting securities.

 

(C) All or a portion of securities with an aggregate value of $4,076 are held in collateralized accounts to cover potential obligations with respect to outstanding written options.

 

(D) Listed on an exchange outside the United States.

 

(E) Warrants entitle the Fund to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any.

 

(F) Restricted securities. At March 31, 2016, the Fund owned the following restricted securities:

 

Security    Acquisition Date(s)      Principal      Cost      Market Value  

Marrone Bio Innovations, Inc., 8.000%, 8-20-20

      8-20-15       $ 23,900       $ 23,900       $ 23,876   
            Shares                

Marrone Bio Innovations, Inc., expires 8-20-23

      8–20–15         2,390       $ —       $ — * 
        

 

 

  
         $ 23,900       $ 23,876   
        

 

 

  

The total value of these securities represented 0.5% of net assets at March 31, 2016.

 

(G) Rate shown is the yield to maturity at March 31, 2016.

 

(H) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following written options were outstanding at March 31, 2016 (contracts and exercise prices unrounded):

 

Underlying Security   

Counterparty,

if OTC

    Type    Number of
Contracts		      Expiration
Month		     

Exercise

Price

      Premium
Received		      Value  

Xerox Corp.

    Societe Generale Bank    Put      21,748         April 2016         $9.25       $ 1,069       $ (22 ) 
   Societe Generale Bank    Put      7,570         April 2016         9.75         393         (15 ) 
                 

 

 

  
                  $ 1,462       $ (37 ) 
                 

 

 

  

 

  2016   ANNUAL REPORT   63

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Science and Technology Fund (in thousands)

MARCH 31, 2016

 

 

 

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 4,920,396       $ —       $ —   

Warrants

     —         2,240         —   

Purchased Options

     —         938         —   

Corporate Debt Securities

     —         23,876         —   

Short-Term Securities

     —         58,348         —   

Total

   $ 4,920,396       $ 85,402       $ —   

Liabilities

        

Written Options

   $ —       $ 37       $ —   

During the year ended March 31, 2016, securities totaling $2,029 were transferred from Level 1 to Level 2 due to the lack of observable market data due to decreased market activity or information for these securities. Transfers out of Level 1 represent the values as of the beginning of the reporting period.

The following acronyms are used throughout this schedule:

ADR = American Depositary Receipts

GTD = Guaranteed

OTC = Over the Counter

REIT = Real Estate Investment Trust

 

Country Diversification

  

(as a % of net assets)

  

United States

      80.1%   

Israel

      4.0%   

India

      3.9%   

Netherlands

      3.4%   

United Kingdom

      2.2%   

China

      1.5%   

Spain

      1.3%   

Germany

      1.1%   

Bermuda

      1.0%   

Other Countries

      0.6%   

Other+

      0.9%   
 

 

+Includes options, cash and other assets (net of liabilities), and cash equivalents

 

 

See Accompanying Notes to Financial Statements.

 

64   ANNUAL REPORT   2016  

Table of Contents

STATEMENTS OF ASSETS AND LIABILITIES

Ivy Funds

AS OF MARCH 31, 2016

 

 

 

(In thousands, except per share amounts)   Ivy Asset
Strategy
Fund(1)		     Ivy
Balanced
Fund		     Ivy
Energy
Fund		     Ivy Global
Natural
Resources
Fund		     Ivy LaSalle
Global
Real
Estate
Fund(2)		     Ivy LaSalle
Global
Risk-
Managed
Real
Estate
Fund(3)		     Ivy Real
Estate
Securities
Fund		  

ASSETS

  

Investments in unaffiliated securities at value+

   $ 9,354,531      $ 2,801,291      $ 424,709      $ 709,950      $ 33,982      $ 85,752      $ 701,460   

Investments in affiliated securities at value+

     321,266        —        —        —        —        —        —   

Bullion at value+

     651,337        —        —        —        —        —        —   

Investments at Value

     10,327,134        2,801,291        424,709        709,950        33,982        85,752        701,460   

Cash

     28,028        363        1        1        1        1        1   

Cash denominated in foreign currencies at value+

     12        —        —        —        18        42        —   

Investment securities sold receivable

     4,660        3,726        —        1        81        26        6,194   

Dividends and interest receivable

     42,214        9,042        144        2,073        120        287        2,157   

Capital shares sold receivable

     19,535        6,314        2,673        407        26        721        522   

Receivable from affiliates

     44        —        —        24        86        56        5   

Unrealized appreciation on forward foreign currency contracts

     —        —        —        320        —        —        —   

Prepaid and other assets

     154        111        61        45        39        42        52   

Total Assets

     10,421,781        2,820,847        427,588        712,821        34,353        86,927        710,391   

LIABILITIES

              

Investment securities purchased payable

     6,225        12,519        —        2        82        190        3,485   

Capital shares redeemed payable

     112,768        7,518        2,210        1,627        68        47        1,525   

Independent Trustees and Chief Compliance Officer fees payable

     1,215        53        7        572        — *      1        76   

Distribution and service fees payable

     137        37        4        7        — *      1        5   

Shareholder servicing payable

     3,306        521        134        402        13        16        205   

Investment management fee payable

     164        50        10        19        1        2        16   

Accounting services fee payable

     23        23        12        17        2        4        15   

Unrealized depreciation on forward foreign currency contracts

     732        —        —        65        —        —        —   

Written options at value+

     —        1,911        —        —        —        —        —   

Other liabilities

     52        6        8        7        3        5        6   

Total Liabilities

     124,622        22,638        2,385        2,718        169        266        5,333   

Total Net Assets

   $ 10,297,159      $ 2,798,209      $ 425,203      $ 710,103      $ 34,184      $ 86,661      $ 705,058   

NET ASSETS

              

Capital paid in (shares authorized – unlimited)

   $ 10,870,152      $ 2,681,803      $ 541,425      $ 2,955,192      $ 32,550      $ 78,714      $ 471,003   

Undistributed (distributions in excess of) net investment income

     229,907        (743 )      (780 )      2,121        109        339        2,558   

Accumulated net realized loss

     (433,136 )      (26,973 )      (80,953 )      (2,198,257 )      (1,149 )      (1,158 )      (1,418 ) 

Net unrealized appreciation (depreciation)

     (369,764 )      144,122        (34,489 )      (48,953 )      2,674        8,766        232,915   

Total Net Assets

   $ 10,297,159      $ 2,798,209      $ 425,203      $ 710,103      $ 34,184      $ 86,661      $ 705,058   

CAPITAL SHARES OUTSTANDING:

              

Class A

     151,373        57,033        17,881        33,092        2,740        5,677        17,774   

Class B

     14,549        3,516        345        902        27        71        166   

Class C

     190,835        39,030        7,832        10,430        91        357        658   

Class E

     2,534        8        10        350        N/A        N/A        125   

Class I

     113,107        16,209        7,688        7,874        247        920        466   

Class R

     5,158        574        1,747        1,960        47        201        56   

Class R6

     565        226        405        874        N/A        N/A        107   

Class Y

     24,515        5,402        3,845        2,588        79        384        5,312   

NET ASSET VALUE PER SHARE:

              

Class A

     $20.83        $22.99        $10.75        $12.53        $10.58        $11.39        $28.60   

Class B

     $19.73        $22.78        $9.90        $10.75        $10.56        $11.38        $27.80   

Class C

     $19.87        $22.85        $10.08        $10.55        $10.55        $11.38        $28.15   

Class E

     $20.89        $23.09        $10.99        $12.81        N/A        N/A        $28.60   

Class I

     $21.06        $22.98        $11.11        $13.02        $10.57        $11.39        $28.75   

Class R

     $20.63        $22.96        $10.69        $12.37        $10.57        $11.39        $28.59   

Class R6

     $21.10        $23.01        $11.14        $13.06        N/A        N/A        $28.78   

Class Y

     $20.88        $22.99        $10.89        $12.80        $10.64        $11.40        $28.62   

+COST

              

Investments in unaffiliated securities at cost

   $ 9,229,794      $ 2,659,823      $ 459,198      $ 759,171      $ 31,308      $ 76,986      $ 468,545   

Investments in affiliated securities at cost

     830,655        —        —        —        —        —        —   

Bullion at cost

     634,439        —        —        —        —        —        —   

Cash denominated in foreign currencies at cost

     13        —        —        —        18        41        —   

Written options premiums received at cost

     —        4,565        —        —        —        —        —   

 

* Not shown due to rounding.
(1) Consolidated Statement of Assets and Liabilities (See Note 6 in Notes to Financial Statements).
(2) Effective February 1, 2016, the Fund’s name changed from Ivy Global Real Estate Fund to Ivy LaSalle Global Real Estate Fund.
(3) Effective February 1, 2016, the Fund’s name changed from Ivy Global Risk-Managed Real Estate Fund to Ivy LaSalle Global Risk-Managed Real Estate Fund.

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   65

Table of Contents

STATEMENTS OF ASSETS AND LIABILITIES

Ivy Funds

AS OF MARCH 31, 2016

 

 

 

(In thousands, except per share amounts)    Ivy Science
and
Technology
Fund		  

ASSETS

  

Investments in unaffiliated securities at value+

    $ 3,668,081   

Investments in affiliated securities at value+

      1,337,717   

Investments at Value

      5,005,798   

Cash

      2   

Investment securities sold receivable

      14,966   

Dividends and interest receivable

      4,018   

Capital shares sold receivable

      9,035   

Receivable from affiliates

      17   

Prepaid and other assets

      81   

Total Assets

      5,033,917   

LIABILITIES

   

Investment securities purchased payable

      25,313   

Capital shares redeemed payable

      17,773   

Independent Trustees and Chief Compliance Officer fees payable

      154   

Distribution and service fees payable

      41   

Shareholder servicing payable

      1,347   

Investment management fee payable

      109   

Accounting services fee payable

      23   

Written options at value+

      37   

Other liabilities

      8   

Total Liabilities

      44,805   

Total Net Assets

    $ 4,989,112   

NET ASSETS

   

Capital paid in (shares authorized – unlimited)

    $ 4,194,114   

Distributions in excess of net investment income

      (8,658 ) 

Accumulated net realized loss

      (130,258 ) 

Net unrealized appreciation

      933,914   

Total Net Assets

    $ 4,989,112   

CAPITAL SHARES OUTSTANDING:

   

Class A

      38,646   

Class B

      1,331   

Class C

      20,459   

Class E

      449   

Class I

      27,006   

Class R

      2,415   

Class R6

      1,280   

Class Y

      15,480   

NET ASSET VALUE PER SHARE:

   

Class A

      $46.35   

Class B

      $39.32   

Class C

      $40.70   

Class E

      $46.08   

Class I

      $50.49   

Class R

      $45.45   

Class R6

      $50.62   

Class Y

      $48.70   

+COST

   

Investments in unaffiliated securities at cost

    $ 3,092,719   

Investments in affiliated securities at cost

      980,590   

Written options premiums received at cost

      1,462   

 

See Accompanying Notes to Financial Statements.

 

66   ANNUAL REPORT   2016  

Table of Contents

STATEMENTS OF OPERATIONS

Ivy Funds

FOR THE YEAR ENDED MARCH 31, 2016

 

 

 

(In thousands)   Ivy  Asset
Strategy
Fund(1)		     Ivy
Balanced
Fund		     Ivy
Energy
Fund		     Ivy Global
Natural
Resources
Fund		  

INVESTMENT INCOME

  

Dividends from unaffiliated securities

   $ 206,874      $ 34,898      $ 5,491      $ 16,920   

Foreign dividend withholding tax

     (6,685 )      (352 )      (94 )      (513 ) 

Interest and amortization from unaffiliated securities

     36,522        25,868        76        119   

Interest and amortization from affiliated securities

     14,068        —        —        —   

Foreign interest withholding tax

     — *      —        —        —   

Payment in-kind bond security income

     61,786        —        —        —   

Total Investment Income

     312,565        60,414        5,473        16,526   

EXPENSES

        

Investment management fee

     108,579        17,201        3,676        8,405   

Distribution and service fees:

        

Class A

     12,379        3,123        506        1,296   

Class B

     4,513        732        41        146   

Class C

     61,973        7,852        828        1,446   

Class E

     161        — *      — *      13   

Class R

     689        58        81        138   

Class Y

     2,237        405        106        111   

Shareholder servicing:

        

Class A

     7,530        2,062        599        2,158   

Class B

     739        104        17        95   

Class C

     7,089        802        175        433   

Class E

     192        — *      — *      49   

Class I

     10,106        522        134        239   

Class R

     352        29        41        71   

Class R6

     7        — *      — *      1   

Class Y

     1,406        251        71        73   

Registration fees

     472        220        155        127   

Custodian fees

     867        33        14        22   

Independent Trustees and Chief Compliance Officer fees

     560        82        13        1   

Accounting services fee

     275        275        142        234   

Professional fees

     454        30        17        33   

Other

     1,378        128        62        120   

Total Expenses

     221,958        33,909        6,678        15,211   

Less:

        

Expenses in excess of limit

     (166 )      —        —        (49 ) 

Total Net Expenses

     221,792        33,909        6,678        15,162   

Net Investment Income (Loss)

     90,773        26,505        (1,205 )      1,364   

REALIZED AND UNREALIZED GAIN (LOSS)

        

Net realized gain (loss) on:

        

Investments in unaffiliated securities

     (450,482 )      34,919        (56,491 )      (122,248 ) 

Investments in affiliated securities

     (46,128 )      —        —        —   

Futures contracts

     (48,660 )      —        —        —   

Written options

     103,916        547        —        —   

Forward foreign currency contracts

     (52,506 )      —        —        712   

Foreign currency exchange transactions

     (1,916 )      —        2        (53 ) 

Net change in unrealized appreciation (depreciation) on:

        

Investments in unaffiliated securities

     (2,194,362 )      (199,437 )      (59,079 )      (110,520 ) 

Investments in affiliated securities

     (344,750 )      —        —        —   

Futures contracts

     (4,323 )      —        —        —   

Written options

     (14,500 )      2,654        —        —   

Forward foreign currency contracts

     7,454        —        —        (1,028 ) 

Foreign currency exchange transactions

     604        —        —        47   

Net Realized and Unrealized Loss

     (3,045,653 )      (161,317 )      (115,568 )      (233,090 ) 

Net Decrease in Net Assets Resulting from Operations

   $ (2,954,880 )    $ (134,812 )    $ (116,773 )    $ (231,726 ) 

 

    *Not shown due to rounding.
(1) Consolidated Statement of Operations (See Note 6 in Notes to Financial Statements).

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   67

Table of Contents

STATEMENTS OF OPERATIONS

Ivy Funds

FOR THE YEAR ENDED MARCH 31, 2016

 

 

 

(In thousands)   Ivy LaSalle
Global Real
Estate Fund(1)		     Ivy LaSalle
Global Risk-
Managed
Real Estate
Fund(2)		     Ivy Real
Estate
Securities
Fund		     Ivy Science
and
Technology
Fund		  

INVESTMENT INCOME

  

Dividends from unaffiliated securities

   $ 1,142      $ 2,498      $ 18,523      $ 34,473   

Foreign dividend withholding tax

     (48 )      (113 )      —        (1,258 ) 

Interest and amortization from unaffiliated securities

     — *      2        19        1,374   

Interest and amortization from affiliated securities

     —        —        —        697   

Total Investment Income

     1,094        2,387        18,542        35,286   

EXPENSES

        

Investment management fee

     328        628        6,216        47,393   

Distribution and service fees:

        

Class A

     73        115        1,238        5,164   

Class B

     3        8        50        617   

Class C

     9        35        178        9,622   

Class E

     N/A        N/A        8        55   

Class R

     3        11        8        579   

Class Y

     2        9        381        2,315   

Shareholder servicing:

        

Class A

     121        125        1,728        4,352   

Class B

     — *      1        25        122   

Class C

     3        4        54        1,397   

Class E

     N/A        N/A        21        102   

Class I

     4        15        20        2,814   

Class R

     1        5        4        296   

Class R6

     N/A        N/A        — *      3   

Class Y

     2        6        229        1,435   

Registration fees

     78        82        129        267   

Offering cost

     —        —        —        —   

Custodian fees

     21        21        17        219   

Independent Trustees and Chief Compliance Officer fees

     1        2        18        182   

Accounting services fee

     29        48        185        275   

Professional fees

     20        21        25        102   

Other

     21        21        65        303   

Total Expenses

     719        1,157        10,599        77,614   

Less:

        

Expenses in excess of limit

     (179 )      (123 )      (703 )      (27 ) 

Total Net Expenses

     540        1,034        9,896        77,587   

Net Investment Income (Loss)

     554        1,353        8,646        (42,301 ) 

REALIZED AND UNREALIZED GAIN (LOSS)

        

Net realized gain (loss) on:

        

Investments in unaffiliated securities

     (609 )      100        18,864        (108,493 ) 

Investments in affiliated securities

     —        —        —        134,260   

Written options

     —        —        —        2,757   

Foreign currency exchange transactions

     — *      (7 )      —        (3 ) 

Net change in unrealized appreciation (depreciation) on:

        

Investments in unaffiliated securities

     (803 )      2,849        (9,534 )      (966,000 ) 

Investments in affiliated securities

     —        —        —        (33,244 ) 

Written options

     —        —        —        1,425   

Foreign currency exchange transactions

     3        5        —        —   

Net Realized and Unrealized Gain (Loss)

     (1,409 )      2,947        9,330        (969,298 ) 

Net Increase (Decrease) in Net Assets Resulting from Operations

   $ (855 )    $ 4,300      $ 17,976      $ (1,011,599 ) 

 

* Not shown due to rounding.
(1) Effective February 1, 2016, the Fund’s name changed from Ivy Global Real Estate Fund to Ivy LaSalle Global Real Estate Fund.
(2) Effective February 1, 2016, the Fund’s name changed from Ivy Global Risk-Managed Real Estate Fund to Ivy LaSalle Global Risk-Managed Real Estate Fund.

 

See Accompanying Notes to Financial Statements.

 

68   ANNUAL REPORT   2016  

Table of Contents

STATEMENTS OF CHANGES IN NET ASSETS

Ivy Funds

 

 

 

    Ivy Asset Strategy Fund(1)        Ivy Balanced Fund        Ivy Energy Fund  
(In thousands)   Year ended
3-31-16		      Year ended
3-31-15		        Year ended
3-31-16		      Year ended
3-31-15		        Year ended
3-31-16		      Year ended
3-31-15		  

INCREASE (DECREASE) IN NET ASSETS

                     

Operations:

                     

Net investment income (loss)

   $ 90,773       $ 229,009         $ 26,505       $ 12,597         $ (1,205 )     $ (1,094 ) 

Net realized gain (loss) on investments

     (495,776 )       4,684,980           35,466         101,236           (56,489 )       (15,854 ) 

Net change in unrealized appreciation (depreciation)

     (2,549,877 )       (5,788,861 )         (196,783 )       68,818           (59,079 )       (36,512 ) 

Net Increase (Decrease) in Net Assets Resulting from Operations

     (2,954,880 )       (874,872 )         (134,812 )       182,651           (116,773 )       (53,460 ) 

Distributions to Shareholders From:

                     

Net investment income:

                     

Class A

     (10,489 )       (28,374 )         (13,081 )       (6,752 )         —         —   

Class B

     —         (589 )         (294 )       —           —         —   

Class C

     —         (8,229 )         (3,453 )       (58 )         —         —   

Class E

     (139 )       (258 )         (2 )       (2 )         —         —   

Class I

     (24,092 )       (70,078 )         (4,163 )       (2,578 )         —         —   

Class R

     —         (324 )         (98 )       (22 )         —         —   

Class R6

     (501 )       (57 )         (49 )       (13 )         —         —   

Class Y

     (1,819 )       (5,002 )         (1,596 )       (1,032 )         —         —   

Net realized gains:

                     

Class A

     (244,925 )       (1,122,023 )         (60,494 )       (30,568 )         —         —   

Class B

     (24,891 )       (105,009 )         (3,461 )       (1,995 )         —         —   

Class C

     (332,675 )       (1,414,827 )         (38,343 )       (18,309 )         —         —   

Class E

     (3,492 )       (11,538 )         (9 )       (5 )         —         —   

Class I

     (299,183 )       (1,755,141 )         (16,265 )       (8,576 )         —         —   

Class R

     (7,609 )       (26,544 )         (625 )       (235 )         —         —   

Class R6

     (4,657 )       (1,679 )         (181 )       (52 )         —         —   

Class Y

     (42,467 )       (197,824 )         (6,651 )       (4,543 )         —         —   

Total Distributions to Shareholders

     (996,939 )       (4,747,496 )         (148,765 )       (74,740 )         —         —   

Capital Share Transactions

     (10,951,731 )       (4,772,735 )         551,690         598,637           105,554         293,560   

Net Increase (Decrease) in Net Assets

     (14,903,550 )       (10,395,103 )         268,113         706,548           (11,219 )       240,100   

Net Assets, Beginning of Period

     25,200,709         35,595,812           2,530,096         1,823,548           436,422         196,322   

Net Assets, End of Period

   $ 10,297,159       $ 25,200,709         $ 2,798,209       $ 2,530,096         $ 425,203       $ 436,422   

Undistributed (distributions in excess of) net investment income

   $ 229,907       $ 177,878         $ (743 )     $ 3,347         $ (780 )     $ 27   

 

(1) Consolidated Statements of Changes in Net Assets (See Note 6 in Notes to Financial Statements).

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   69

Table of Contents

STATEMENTS OF CHANGES IN NET ASSETS

Ivy Funds

 

 

 

    Ivy Global Natural
Resources Fund		        Ivy LaSalle Global Real
Estate Fund(1)		        Ivy LaSalle Global Risk-
Managed Real Estate Fund(2)		  
(In thousands)   Year ended
3-31-16		      Year ended
3-31-15		        Year ended
3-31-16		      Year ended
3-31-15		        Year ended
3-31-16		      Year ended
3-31-15		  

INCREASE (DECREASE) IN NET ASSETS

                     

Operations:

                     

Net investment income (loss)

   $ 1,364       $ (960 )       $ 554       $ 352         $ 1,353       $ 613   

Net realized gain (loss) on investments

     (121,589 )       31,059           (609 )       786           93         609   

Net change in unrealized appreciation (depreciation)

     (111,501 )       (257,191 )         (800 )       3,294           2,854         5,890   

Net Increase (Decrease) in Net Assets Resulting from Operations

     (231,726 )       (227,092 )         (855 )       4,432           4,300         7,112   

Distributions to Shareholders From:

                     

Net investment income:

                     

Class A

     —         —           (371 )       (479 )         (565 )       (839 ) 

Class B

     —         —           — *       (2 )         (1 )       (20 ) 

Class C

     —         —           —         (5 )         (8 )       (42 ) 

Class E

     —         —           N/A         N/A           N/A         N/A   

Class I

     —         —           (30 )       (42 )         (135 )       (238 ) 

Class R

     —         —           (2 )       (5 )         (13 )       (41 ) 

Class R6

     —         —           N/A         N/A           N/A         N/A   

Class Y

     —         —           (11 )       (14 )         (46 )       (85 ) 

Net realized gains:

                     

Class A

     —         —           (569 )       (192 )         (469 )       —   

Class B

     —         —           (5 )       (2 )         (6 )       —   

Class C

     —         —           (16 )       (5 )         (35 )       —   

Class E

     —         —           N/A         N/A           N/A         N/A   

Class I

     —         —           (49 )       (19 )         (100 )       —   

Class R

     —         —           (9 )       (3 )         (21 )       —   

Class R6

     —         —           N/A         N/A           N/A         N/A   

Class Y

     —         —           (17 )       (6 )         (41 )       —   

Total Distributions to Shareholders

     —         —           (1,079 )       (774 )         (1,440 )       (1,265 ) 

Capital Share Transactions

     (188,815 )       (342,833 )         1,955         4,767           20,251         21,559   

Net Increase (Decrease) in Net Assets

     (420,541 )       (569,925 )         21         8,425           23,111         27,406   

Net Assets, Beginning of Period

     1,130,644         1,700,569           34,163         25,738           63,550         36,144   

Net Assets, End of Period

   $ 710,103       $ 1,130,644         $ 34,184       $ 34,163         $ 86,661       $ 63,550   

Undistributed (distributions in excess of) net investment income

   $ 2,121       $ 976         $ 109       $ (49 )       $ 339       $ (339 ) 

 

* Not shown due to rounding.
(1) Effective February 1, 2016, the Fund’s name changed from Ivy Global Real Estate Fund to Ivy LaSalle Global Real Estate Fund.
(2) Effective February 1, 2016, the Fund’s name changed from Ivy Global Risk-Managed Real Estate Fund to Ivy LaSalle Global Risk-Managed Real Estate Fund.

 

See Accompanying Notes to Financial Statements.

 

70   ANNUAL REPORT   2016  

Table of Contents

STATEMENTS OF CHANGES IN NET ASSETS

Ivy Funds

 

 

 

    Ivy Real Estate Securities
Fund		     Ivy Science and Technology
Fund		  
(In thousands)   Year ended
3-31-16		     Year ended
3-31-15		     Year ended
3-31-16		     Year ended
3-31-15		  

INCREASE (DECREASE) IN NET ASSETS

        

Operations:

        

Net investment income (loss)

   $ 8,646      $ 5,489      $ (42,301 )    $ (40,341 ) 

Net realized gain on investments

     18,864        41,982        28,521        60,656   

Net change in unrealized appreciation (depreciation)

     (9,534 )      99,506        (997,819 )      451,918   

Net Increase (Decrease) in Net Assets Resulting from Operations

     17,976        146,977        (1,011,599 )      472,233   

Distributions to Shareholders From:

        

Net investment income:

        

Class A

     (5,170 )      (2,866 )      —        —   

Class B

     (6 )      —        —        —   

Class C

     (50 )      (5 )      —        —   

Class E

     (32 )      (11 )      —        —   

Class I

     (178 )      (114 )      —        —   

Class R

     (14 )      (7 )      —        —   

Class R6

     (49 )      (28 )      —        —   

Class Y

     (1,871 )      (1,473 )      —        —   

Net realized gains:

        

Class A

     (23,374 )      (14,818 )      (50,726 )      (43,478 ) 

Class B

     (232 )      (184 )      (1,735 )      (1,723 ) 

Class C

     (836 )      (540 )      (26,741 )      (21,751 ) 

Class E

     (155 )      (85 )      (548 )      (409 ) 

Class I

     (582 )      (288 )      (40,456 )      (34,397 ) 

Class R

     (78 )      (53 )      (2,949 )      (2,299 ) 

Class R6

     (144 )      (102 )      (993 )      (225 ) 

Class Y

     (7,056 )      (5,234 )      (20,848 )      (20,535 ) 

Total Distributions to Shareholders

     (39,827 )      (25,808 )      (144,996 )      (124,817 ) 

Capital Share Transactions

     (46,465 )      93,503        (169,491 )      546,771   

Net Increase (Decrease) in Net Assets

     (68,316 )      214,672        (1,326,086 )      894,187   

Net Assets, Beginning of Period

     773,374        558,702        6,315,198        5,421,011   

Net Assets, End of Period

   $ 705,058      $ 773,374      $ 4,989,112      $ 6,315,198   

Undistributed (distributions in excess of) net investment income

   $ 2,558      $ 1,282      $ (8,658 )    $ (12,054 ) 

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   71

Table of Contents

CONSOLIDATED STATEMENT OF CASH FLOWS

Ivy Asset Strategy Fund

FOR THE YEAR ENDED MARCH 31, 2016

 

 

 

(In thousands)        

Cash flows provided by operating activities:

  

Net decrease in net assets resulting from operations

    $ (2,954,880 ) 

Adjustments to reconcile net decrease in net assets from operations to net cash provided by operating activities:

   

Purchases of long-term investment securities

      (10,492,006 ) 

Proceeds from sales of long-term investment securities

      21,654,579   

Proceeds from sales of bullion, net

      1,056,075   

Purchases of options

      (60,295 ) 

Payments received from payment in kind securities

      (81,179 ) 

Purchases of short-term portfolio investment securities, net

      (197,055 ) 

Decrease in dividends and interest receivable

      12,648   

Decrease in receivables from affiliates

      81   

Decrease in variation margin receivable

      10,247   

Decrease in prepaid and other assets

      219   

Decrease in Trustees and Chief Compliance Officer fees payable

      (155 ) 

Decrease in distribution and service fees payable

      (147 ) 

Decrease in shareholder servicing fees payable

      (2,453 ) 

Decrease in investment management fee payable

      (224 ) 

Decrease in variation margin payable

      (4,970 ) 

Decrease in written options

      (17,747 ) 

Net unrealized loss on foreign currency transactions

      7,780   

Decrease in other liabilities

      (183 ) 

Net change in unrealized depreciation on investments in unaffiliated securities

      2,194,362   

Net change in unrealized depreciation on investments in affiliated securities

      344,750   

Net change in unrealized depreciation on futures contracts

      4,323   

Net change in unrealized depreciation on written options

      14,500   

Net change in unrealized appreciation on forward foreign currency contracts

      (7,454 ) 

Net change in unrealized appreciation on foreign currency exchange transactions

      (556 ) 

Net realized loss on investments, written options, swap agreements and foreign currency transactions

      495,776   

Net cash provided by operating activities

      11,976,036   

Cash flows used for financing activities:

   

Proceeds from sale of shares

      2,083,868   

Payment on shares redeemed

      (13,833,606 ) 

Cash Dividends Paid

      (203,605 ) 

Net cash used for financing activities

      (11,953,343 ) 

Net increase in cash and foreign currency

      22,693   

Cash and foreign currency, at beginning of year

      5,347   

Cash and foreign currency, at end of year

    $ 28,040   

Supplemental disclosure of cash flow information:

   

Reinvestment of dividends

    $ 793,336   

 

See Accompanying Notes to Financial Statements.

 

72   ANNUAL REPORT   2016  

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  2016   ANNUAL REPORT   73

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY ASSET STRATEGY FUND

 

     Net Asset
Value,
Beginning of
Period		     Net
Investment
Income
(Loss)(1) 		    Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		    

Distributions
From Net
Investment
Income

     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

              

Year ended 3-31-2016

   $ 25.89      $ 0.15      $ (3.78 )    $ (3.63 )    $ (0.06 )    $ (1.37 )    $ (1.43 ) 

Year ended 3-31-2015

     31.61        0.26        (1.01 )      (0.75 )      (0.12 )      (4.85 )      (4.97 ) 

Year ended 3-31-2014

     27.04        0.27        4.45        4.72        (0.15 )      —        (0.15 ) 

Year ended 3-31-2013

     25.44        0.39        1.88        2.27        (0.67 )      —        (0.67 ) 

Year ended 3-31-2012

     25.42        0.20        0.10        0.30        (0.28 )      —        (0.28 ) 

Class B Shares(5)

              

Year ended 3-31-2016

     24.73        (0.04 )      (3.59 )      (3.63 )      —        (1.37 )      (1.37 ) 

Year ended 3-31-2015

     30.54        0.03        (0.96 )      (0.93 )      (0.03 )      (4.85 )      (4.88 ) 

Year ended 3-31-2014

     26.20        0.05        4.29        4.34        — *      —        — * 

Year ended 3-31-2013

     24.55        0.19        1.82        2.01        (0.36 )      —        (0.36 ) 

Year ended 3-31-2012

     24.53        0.00        0.12        0.12        (0.10 )      —        (0.10 ) 

Class C Shares

              

Year ended 3-31-2016

     24.88        (0.02 )      (3.62 )      (3.64 )      —        (1.37 )      (1.37 ) 

Year ended 3-31-2015

     30.69        0.04        (0.97 )      (0.93 )      (0.03 )      (4.85 )      (4.88 ) 

Year ended 3-31-2014

     26.33        0.05        4.32        4.37        (0.01 )      —        (0.01 ) 

Year ended 3-31-2013

     24.67        0.20        1.83        2.03        (0.37 )      —        (0.37 ) 

Year ended 3-31-2012

     24.66        0.01        0.11        0.12        (0.11 )      —        (0.11 ) 

Class E Shares

              

Year ended 3-31-2016

     25.96        0.13        (3.78 )      (3.65 )      (0.05 )      (1.37 )      (1.42 ) 

Year ended 3-31-2015

     31.67        0.23        (0.98 )      (0.75 )      (0.11 )      (4.85 )      (4.96 ) 

Year ended 3-31-2014

     27.10        0.26        4.45        4.71        (0.14 )      —        (0.14 ) 

Year ended 3-31-2013

     25.49        0.38        1.89        2.27        (0.66 )      —        (0.66 ) 

Year ended 3-31-2012

     25.48        0.19        0.10        0.29        (0.28 )      —        (0.28 ) 

Class I Shares

              

Year ended 3-31-2016

     26.15        0.23        (3.84 )      (3.61 )      (0.11 )      (1.37 )      (1.48 ) 

Year ended 3-31-2015

     31.88        0.33        (1.02 )      (0.69 )      (0.19 )      (4.85 )      (5.04 ) 

Year ended 3-31-2014

     27.25        0.34        4.48        4.82        (0.19 )      —        (0.19 ) 

Year ended 3-31-2013

     25.67        0.45        1.90        2.35        (0.77 )      —        (0.77 ) 

Year ended 3-31-2012

     25.64        0.25        0.11        0.36        (0.33 )      —        (0.33 ) 

Class R Shares

              

Year ended 3-31-2016

     25.68        0.05        (3.73 )      (3.68 )      —        (1.37 )      (1.37 ) 

Year ended 3-31-2015

     31.45        0.14        (1.00 )      (0.86 )      (0.06 )      (4.85 )      (4.91 ) 

Year ended 3-31-2014

     26.94        0.16        4.43        4.59        (0.08 )      —        (0.08 ) 

Year ended 3-31-2013

     25.29        0.29        1.88        2.17        (0.52 )      —        (0.52 ) 

Year ended 3-31-2012

     25.28        0.11        0.11        0.22        (0.21 )      —        (0.21 ) 

Class R6 Shares

              

Year ended 3-31-2016

     26.21        0.22        (3.81 )      (3.59 )      (0.15 )      (1.37 )      (1.52 ) 

Year ended 3-31-2015(6)

     31.79        0.22        (0.78 )      (0.56 )      (0.17 )      (4.85 )      (5.02 ) 

Class Y Shares

              

Year ended 3-31-2016

     25.94        0.15        (3.78 )      (3.63 )      (0.06 )      (1.37 )      (1.43 ) 

Year ended 3-31-2015

     31.67        0.25        (1.01 )      (0.76 )      (0.12 )      (4.85 )      (4.97 ) 

Year ended 3-31-2014

     27.09        0.27        4.46        4.73        (0.15 )      —        (0.15 ) 

Year ended 3-31-2013

     25.49        0.39        1.88        2.27        (0.67 )      —        (0.67 ) 

Year ended 3-31-2012

     25.46        0.20        0.11        0.31        (0.28 )      —        (0.28 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) Annualized.

 

(5) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(6) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

74   ANNUAL REPORT   2016  

Table of Contents

 

 

 

      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		      Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		    

Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets
Including
Expense
Waiver

     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

                   

Year ended 3-31-2016

    $ 20.83         -14.39 %    $ 3,153         0.99 %      0.61 %      — %      — %      68 % 

Year ended 3-31-2015

      25.89         -2.28       6,332         0.96       0.86       —       —       75  

Year ended 3-31-2014

      31.61         17.47       9,659         0.96       0.92       —       —       65  

Year ended 3-31-2013

      27.04         9.09       7,853         0.98       1.55       —       —       39  

Year ended 3-31-2012

      25.44         1.31       8,019         0.97       0.81       —       —       47  

Class B Shares(5)

                   

Year ended 3-31-2016

      19.73         -15.06       287         1.76       -0.16       —       —       68  

Year ended 3-31-2015

      24.73         -3.01       571         1.71       0.11       —       —       75  

Year ended 3-31-2014

      30.54         16.58       783         1.71       0.16       —       —       65  

Year ended 3-31-2013

      26.20         8.27       715         1.73       0.79       —       —       39  

Year ended 3-31-2012

      24.55         0.54       695         1.76       0.02       —       —       47  

Class C Shares

                   

Year ended 3-31-2016

      19.87         -15.01       3,792         1.71       -0.10       —       —       68  

Year ended 3-31-2015

      24.88         -2.99       7,807         1.68       0.13       —       —       75  

Year ended 3-31-2014

      30.69         16.59       9,880         1.68       0.19       —       —       65  

Year ended 3-31-2013

      26.33         8.34       8,321         1.70       0.83       —       —       39  

Year ended 3-31-2012

      24.67         0.56       8,416         1.71       0.06       —       —       47  

Class E Shares

                   

Year ended 3-31-2016

      20.89         -14.41       53         1.00       0.53       1.14       0.39       68  

Year ended 3-31-2015

      25.96         -2.29       72         1.00       0.79       1.10       0.69       75  

Year ended 3-31-2014

      31.67         17.40       74         1.00       0.87       1.12       0.75       65  

Year ended 3-31-2013

      27.10         9.07       58         1.00       1.50       1.20       1.30       39  

Year ended 3-31-2012

      25.49         1.26       50         1.00       0.77       1.23       0.55       47  

Class I Shares

                   

Year ended 3-31-2016

      21.06         -14.17       2,382         0.74       0.95       —       —       68  

Year ended 3-31-2015

      26.15         -2.06       9,112         0.74       1.08       —       —       75  

Year ended 3-31-2014

      31.88         17.72       13,522         0.73       1.14       —       —       65  

Year ended 3-31-2013

      27.25         9.33       9,681         0.74       1.76       —       —       39  

Year ended 3-31-2012

      25.67         1.57       8,180         0.75       1.03       —       —       47  

Class R Shares

                   

Year ended 3-31-2016

      20.63         -14.69       106         1.34       0.20       —       —       68  

Year ended 3-31-2015

      25.68         -2.67       161         1.33       0.47       —       —       75  

Year ended 3-31-2014

      31.45         17.03       162         1.33       0.54       —       —       65  

Year ended 3-31-2013

      26.94         8.71       124         1.34       1.15       —       —       39  

Year ended 3-31-2012

      25.29         0.96       102         1.33       0.45       —       —       47  

Class R6 Shares

                   

Year ended 3-31-2016

      21.10         -14.09       12         0.60       0.89       —       —       68  

Year ended 3-31-2015(6)

      26.21         -1.67       12         0.59 (4)      1.18 (4)      —       —       75 (7)

Class Y Shares

                   

Year ended 3-31-2016

      20.88         -14.36       512         0.99       0.63       1.00       0.62       68  

Year ended 3-31-2015

      25.94         -2.31       1,134         0.96       0.85       0.98       0.83       75  

Year ended 3-31-2014

      31.67         17.47       1,516         0.96       0.92       0.98       0.90       65  

Year ended 3-31-2013

      27.09         9.08       1,168         0.98       1.55       0.99       1.54       39  

Year ended 3-31-2012

      25.49         1.35       1,167         0.97       0.80       1.00       0.77       47  

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   75

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY BALANCED FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income
(Loss)(1) 		    Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		     Distributions
From Net
Investment
Income		         
    
    
    
Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

                

Year ended 3-31-2016

    $ 25.65       $ 0.29      $ (1.51 )    $ (1.22 )    $ (0.26 )    $ (1.18 )    $ (1.44 ) 

Year ended 3-31-2015

      24.38         0.20        1.97        2.17        (0.16 )      (0.74 )      (0.90 ) 

Year ended 3-31-2014

      21.60         0.15        3.25        3.40        (0.10 )      (0.52 )      (0.62 ) 

Year ended 3-31-2013

      20.03         0.19        1.70        1.89        (0.17 )      (0.15 )      (0.32 ) 

Year ended 3-31-2012

      19.08         0.17        1.05        1.22        (0.18 )      (0.09 )      (0.27 ) 

Class B Shares(4)

                

Year ended 3-31-2016

      25.45         0.11        (1.50 )      (1.39 )      (0.10 )      (1.18 )      (1.28 ) 

Year ended 3-31-2015

      24.19         0.01        1.97        1.98        —        (0.72 )      (0.72 ) 

Year ended 3-31-2014

      21.45         (0.03 )      3.23        3.20        —        (0.46 )      (0.46 ) 

Year ended 3-31-2013

      19.93         0.03        1.69        1.72        (0.05 )      (0.15 )      (0.20 ) 

Year ended 3-31-2012

      18.99         0.02        1.05        1.07        (0.04 )      (0.09 )      (0.13 ) 

Class C Shares

                

Year ended 3-31-2016

      25.53         0.13        (1.52 )      (1.39 )      (0.11 )      (1.18 )      (1.29 ) 

Year ended 3-31-2015

      24.26         0.02        1.97        1.99        — *      (0.72 )      (0.72 ) 

Year ended 3-31-2014

      21.50         (0.01 )      3.24        3.23        —        (0.47 )      (0.47 ) 

Year ended 3-31-2013

      19.98         0.05        1.68        1.73        (0.06 )      (0.15 )      (0.21 ) 

Year ended 3-31-2012

      19.03         0.04        1.06        1.10        (0.06 )      (0.09 )      (0.15 ) 

Class E Shares(5)

                

Year ended 3-31-2016

      25.76         0.33        (1.53 )      (1.20 )      (0.29 )      (1.18 )      (1.47 ) 

Year ended 3-31-2015

      24.48         0.23        1.99        2.22        (0.20 )      (0.74 )      (0.94 ) 

Year ended 3-31-2014

      21.68         0.18        3.27        3.45        (0.13 )      (0.52 )      (0.65 ) 

Year ended 3-31-2013

      20.02         0.22        1.78        2.00        (0.19 )      (0.15 )      (0.34 ) 

Year ended 3-31-2012

      19.06         0.21        1.04        1.25        (0.20 )      (0.09 )      (0.29 ) 

Class I Shares

                

Year ended 3-31-2016

      25.63         0.36        (1.52 )      (1.16 )      (0.31 )      (1.18 )      (1.49 ) 

Year ended 3-31-2015

      24.36         0.26        1.98        2.24        (0.23 )      (0.74 )      (0.97 ) 

Year ended 3-31-2014

      21.58         0.21        3.26        3.47        (0.16 )      (0.53 )      (0.69 ) 

Year ended 3-31-2013

      20.01         0.24        1.69        1.93        (0.21 )      (0.15 )      (0.36 ) 

Year ended 3-31-2012

      19.04         0.22        1.06        1.28        (0.22 )      (0.09 )      (0.31 ) 

Class R Shares

                

Year ended 3-31-2016

      25.65         0.22        (1.53 )      (1.31 )      (0.20 )      (1.18 )      (1.38 ) 

Year ended 3-31-2015

      24.37         0.11        1.98        2.09        (0.07 )      (0.74 )      (0.81 ) 

Year ended 3-31-2014

      21.59         0.07        3.26        3.33        (0.03 )      (0.52 )      (0.55 ) 

Year ended 3-31-2013(6)

      20.16         0.00        1.43        1.43        —        —        —   

Class R6 Shares

                

Year ended 3-31-2016

      25.66         0.39        (1.52 )      (1.13 )      (0.34 )      (1.18 )      (1.52 ) 

Year ended 3-31-2015(7)

      24.66         0.22        1.72        1.94        (0.20 )      (0.74 )      (0.94 ) 

Class Y Shares

                

Year ended 3-31-2016

      25.66         0.29        (1.52 )      (1.23 )      (0.26 )      (1.18 )      (1.44 ) 

Year ended 3-31-2015

      24.38         0.20        1.99        2.19        (0.17 )      (0.74 )      (0.91 ) 

Year ended 3-31-2014

      21.60         0.15        3.26        3.41        (0.10 )      (0.53 )      (0.63 ) 

Year ended 3-31-2013

      20.03         0.19        1.70        1.89        (0.17 )      (0.15 )      (0.32 ) 

Year ended 3-31-2012

      19.08         0.18        1.05        1.23        (0.19 )      (0.09 )      (0.28 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Annualized.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) Class share is closed to investment.

 

(6) For the period from December 19, 2012 (commencement of operations of the class) through March 31, 2013.

 

(7) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(8) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2013.

 

(9) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

76   ANNUAL REPORT   2016  

Table of Contents

 

 

 

        Net Asset
Value,
End of Period		        Total
Return(2)		      Net Assets,
End of Period
(in millions)		        Ratio of
Expenses to
Average  Net
Assets
Including
Expense
Waiver		          
Ratio of Net
Investment
Income
(Loss) to
Average  Net
Assets
Including
Expense
Waiver		      Portfolio
Turnover
Rate		  

Class A Shares

                        

Year ended 3-31-2016

      $ 22.99           -4.92 %     $ 1,311           1.10 %       1.21 %       56 % 

Year ended 3-31-2015

        25.65           9.06        1,207           1.11        0.78        33  

Year ended 3-31-2014

        24.38           15.90        863           1.15        0.62        34  

Year ended 3-31-2013

        21.60           9.56        399           1.17        0.93        35  

Year ended 3-31-2012

        20.03           6.52        205           1.23        0.90        37  

Class B Shares(4)

                        

Year ended 3-31-2016

        22.78           -5.62        80           1.83        0.48        56  

Year ended 3-31-2015

        25.45           8.28        74           1.84        0.04        33  

Year ended 3-31-2014

        24.19           15.01        70           1.89        -0.11        34  

Year ended 3-31-2013

        21.45           8.73        44           1.95        0.16        35  

Year ended 3-31-2012

        19.93           5.72        23           2.02        0.10        37  

Class C Shares

                        

Year ended 3-31-2016

        22.85           -5.62        892           1.79        0.53        56  

Year ended 3-31-2015

        25.53           8.34        736           1.80        0.09        33  

Year ended 3-31-2014

        24.26           15.11        524           1.84        -0.06        34  

Year ended 3-31-2013

        21.50           8.75        246           1.88        0.23        35  

Year ended 3-31-2012

        19.98           5.84        128           1.92        0.21        37  

Class E Shares(5)

                        

Year ended 3-31-2016

        23.09           -4.82        — *         0.95        1.36        56  

Year ended 3-31-2015

        25.76           9.22        — *         0.96        0.92        33  

Year ended 3-31-2014

        24.48           16.10        — *         1.00        0.78        34  

Year ended 3-31-2013

        21.68           10.15        — *         1.03        1.09        35  

Year ended 3-31-2012

        20.02           6.71        — *         1.05        1.11        37  

Class I Shares

                        

Year ended 3-31-2016

        22.98           -4.70        373           0.84        1.47        56  

Year ended 3-31-2015

        25.63           9.34        315           0.86        1.03        33  

Year ended 3-31-2014

        24.36           16.21        211           0.88        0.89        34  

Year ended 3-31-2013

        21.58           9.82        66           0.92        1.19        35  

Year ended 3-31-2012

        20.01           6.88        39           0.94        1.17        37  

Class R Shares

                        

Year ended 3-31-2016

        22.96           -5.29        13           1.44        0.89        56  

Year ended 3-31-2015

        25.65           8.71        9           1.46        0.43        33  

Year ended 3-31-2014

        24.37           15.51        4           1.47        0.29        34  

Year ended 3-31-2013(6)

        21.59           7.09        — *         1.48 (3)       0.02 (3)       35 (8)

Class R6 Shares

                        

Year ended 3-31-2016

        23.01           -4.57        5           0.69        1.60        56  

Year ended 3-31-2015(7)

        25.66           8.01        4           0.70 (3)       1.29 (3)       33 (9)

Class Y Shares

                        

Year ended 3-31-2016

        22.99           -4.95        124           1.09        1.16        56  

Year ended 3-31-2015

        25.66           9.10        185           1.11        0.79        33  

Year ended 3-31-2014

        24.38           15.91        152           1.13        0.64        34  

Year ended 3-31-2013

        21.60           9.57        89           1.16        0.96        35  

Year ended 3-31-2012

        20.03           6.57        70           1.19        0.96        37  

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   77

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY ENERGY FUND

 

    

Net Asset

Value,
Beginning of
Period

     Net
Investment
Income
(Loss)(1) 		   

Net Realized
and Unrealized
Gain (Loss) on

Investments

    

Total from

Investment

Operations

    

    
    
    
Distributions

From Net

Investment

Income

    

Distributions

From Net

Realized

Gains

    

Total

Distributions

  

Class A Shares

              

Year ended 3-31-2016

   $ 14.03      $ (0.03 )    $ (3.25 )    $ (3.28 )    $ —      $ —      $ —   

Year ended 3-31-2015

     16.38        (0.05 )      (2.30 )      (2.35 )      —        —        —   

Year ended 3-31-2014

     13.74        (0.09 )      2.73        2.64        —        —        —   

Year ended 3-31-2013

     12.68        (0.07 )      1.13        1.06        —        —        —   

Year ended 3-31-2012

     15.11        (0.09 )      (2.34 )      (2.43 )      —        —        —   

Class B Shares(5)

              

Year ended 3-31-2016

     13.04        (0.13 )      (3.01 )      (3.14 )      —        —        —   

Year ended 3-31-2015

     15.35        (0.17 )      (2.14 )      (2.31 )      —        —        —   

Year ended 3-31-2014

     12.98        (0.19 )      2.56        2.37        —        —        —   

Year ended 3-31-2013

     12.08        (0.17 )      1.07        0.90        —        —        —   

Year ended 3-31-2012

     14.52        (0.18 )      (2.26 )      (2.44 )      —        —        —   

Class C Shares

              

Year ended 3-31-2016

     13.24        (0.10 )      (3.06 )      (3.16 )      —        —        —   

Year ended 3-31-2015

     15.55        (0.13 )      (2.18 )      (2.31 )      —        —        —   

Year ended 3-31-2014

     13.12        (0.16 )      2.59        2.43        —        —        —   

Year ended 3-31-2013

     12.19        (0.14 )      1.07        0.93        —        —        —   

Year ended 3-31-2012

     14.62        (0.16 )      (2.27 )      (2.43 )      —        —        —   

Class E Shares(6)

              

Year ended 3-31-2016

     14.30        0.01        (3.32 )      (3.31 )      —        —        —   

Year ended 3-31-2015

     16.65        (0.01 )      (2.34 )      (2.35 )      —        —        —   

Year ended 3-31-2014

     13.92        (0.04 )      2.77        2.73        —        —        —   

Year ended 3-31-2013

     12.81        (0.03 )      1.14        1.11        —        —        —   

Year ended 3-31-2012

     15.22        (0.05 )      (2.36 )      (2.41 )      —        —        —   

Class I Shares

              

Year ended 3-31-2016

     14.44        0.02        (3.35 )      (3.33 )      —        —        —   

Year ended 3-31-2015

     16.80        0.02        (2.38 )      (2.36 )      —        —        —   

Year ended 3-31-2014

     14.03        (0.02 )      2.79        2.77        —        —        —   

Year ended 3-31-2013

     12.90        (0.02 )      1.15        1.13        —        —        —   

Year ended 3-31-2012

     15.31        (0.03 )      (2.38 )      (2.41 )      —        —        —   

Class R Shares

              

Year ended 3-31-2016

     13.98        (0.05 )      (3.24 )      (3.29 )      —        —        —   

Year ended 3-31-2015

     16.35        (0.08 )      (2.29 )      (2.37 )      —        —        —   

Year ended 3-31-2014

     13.74        (0.11 )      2.72        2.61        —        —        —   

Year ended 3-31-2013(7)

     12.26        (0.03 )      1.51        1.48        —        —        —   

Class R6 Shares

              

Year ended 3-31-2016

     14.46        0.04        (3.36 )      (3.32 )      —        —        —   

Year ended 3-31-2015(8)

     18.03        0.03        (3.60 )      (3.57 )      —        —        —   

Class Y Shares

              

Year ended 3-31-2016

     14.19        (0.01 )      (3.29 )      (3.30 )      —        —        —   

Year ended 3-31-2015

     16.55        (0.04 )      (2.32 )      (2.36 )      —        —        —   

Year ended 3-31-2014

     13.86        (0.06 )      2.75        2.69        —        —        —   

Year ended 3-31-2013

     12.77        (0.05 )      1.14        1.09        —        —        —   

Year ended 3-31-2012

     15.20        (0.07 )      (2.36 )      (2.43 )      —        —        —   

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) Annualized.

 

(5) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(6) Class share is closed to investment.

 

(7) For the period from December 19, 2012 (commencement of operations of the class) through March 31, 2013.

 

(8) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(9) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2013.

 

(10) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

78   ANNUAL REPORT   2016  

Table of Contents

 

 

 

     

Net Asset

Value,

End of Period

     

Total

Return(2)

    

Net Assets,

End of Period

(in millions)

    

Ratio of

Expenses to

Average Net

Assets

Including

Expense

Waiver

    

Ratio of Net

Investment

Income

(Loss) to

Average Net

Assets

Including

Expense

Waiver

    

Ratio of

Expenses to

Average Net

Assets

Excluding

Expense

Waiver(3)

    

Ratio of Net

Investment

Loss to

Average Net

Assets

Excluding

Expense

Waiver(3)

    

Portfolio

Turnover

Rate

  

Class A Shares

                  

Year ended 3-31-2016

    $ 10.75         -23.38 %    $ 192        1.49 %      -0.23 %      — %      — %      31 % 

Year ended 3-31-2015

      14.03         -14.35       213        1.48       -0.33       —       —       22  

Year ended 3-31-2014

      16.38         19.13       124        1.60       -0.59       —       —       34  

Year ended 3-31-2013

      13.74         8.44       82        1.60       -0.54       1.68       -0.62       30  

Year ended 3-31-2012

      12.68         -16.08       85        1.60       -0.66       —       —       20  

Class B Shares(5)

                  

Year ended 3-31-2016

      9.90         -24.08       3        2.36       -1.11       —       —       31  

Year ended 3-31-2015

      13.04         -15.05       5        2.29       -1.17       —       —       22  

Year ended 3-31-2014

      15.35         18.26       5        2.38       -1.37       —       —       34  

Year ended 3-31-2013

      12.98         7.36       4        2.49       -1.43       —       —       30  

Year ended 3-31-2012

      12.08         -16.74       4        2.41       -1.47       —       —       20  

Class C Shares

                  

Year ended 3-31-2016

      10.08         -23.87       79        2.16       -0.89       —       —       31  

Year ended 3-31-2015

      13.24         -14.85       82        2.09       -0.92       —       —       22  

Year ended 3-31-2014

      15.55         18.43       30        2.16       -1.15       —       —       34  

Year ended 3-31-2013

      13.12         7.71       19        2.26       -1.20       —       —       30  

Year ended 3-31-2012

      12.19         -16.62       20        2.23       -1.30       —       —       20  

Class E Shares(6)

                  

Year ended 3-31-2016

      10.99         -23.15       — *      1.20       0.05       —       —       31  

Year ended 3-31-2015

      14.30         -14.11       — *      1.20       -0.08       —       —       22  

Year ended 3-31-2014

      16.65         19.53       — *      1.25       -0.25       —       —       34  

Year ended 3-31-2013

      13.92         8.74       — *      1.31       -0.26       —       —       30  

Year ended 3-31-2012

      12.81         -15.83       — *      1.30       -0.36       —       —       20  

Class I Shares

                  

Year ended 3-31-2016

      11.11         -23.06       85        1.10       0.16       —       —       31  

Year ended 3-31-2015

      14.44         -14.05       82        1.09       0.10       —       —       22  

Year ended 3-31-2014

      16.80         19.74       14        1.14       -0.12       —       —       34  

Year ended 3-31-2013

      14.03         8.76       6        1.21       -0.14       —       —       30  

Year ended 3-31-2012

      12.90         -15.74       5        1.19       -0.26       —       —       20  

Class R Shares

                  

Year ended 3-31-2016

      10.69         -23.53       19        1.70       -0.43       —       —       31  

Year ended 3-31-2015

      13.98         -14.50       15        1.69       -0.53       —       —       22  

Year ended 3-31-2014

      16.35         19.00       5        1.72       -0.70       —       —       34  

Year ended 3-31-2013(7)

      13.74         12.07       — *      1.73 (4)      -0.91 (4)      —       —       30 (9)

Class R6 Shares

                  

Year ended 3-31-2016

      11.14         -22.96       5        0.95       0.35       —       —       31  

Year ended 3-31-2015(8)

      14.46         -19.80       2        0.93 (4)      0.34 (4)      —        —       22 (10)

Class Y Shares

                  

Year ended 3-31-2016

      10.89         -23.26       42        1.36       -0.08       —       —       31  

Year ended 3-31-2015

      14.19         -14.26       37        1.34       -0.22       —       —       22  

Year ended 3-31-2014

      16.55         19.41       18        1.39       -0.38       —       —       34  

Year ended 3-31-2013

      13.86         8.54       8        1.45       -0.39       —       —       30  

Year ended 3-31-2012

      12.77         -15.99       7        1.45       -0.52       —       —       20  

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   79

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY GLOBAL NATURAL RESOURCES FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income
(Loss)(1) 		    Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		         
    
    
Distributions
From  Net
Investment
Income		     Distributions
From Net
Realized
Gains		      Total
Distributions		  

Class A Shares

                 

Year ended 3-31-2016

    $ 16.13       $ 0.03      $ (3.63 )    $ (3.60 )    $ —      $ —       $ —   

Year ended 3-31-2015

      19.07         0.00 *      (2.94 )      (2.94 )      —        —         —   

Year ended 3-31-2014

      17.84         (0.02 )      1.25        1.23        —        —         —   

Year ended 3-31-2013

      17.76         (0.03 )      0.14        0.11        (0.03 )      —         (0.03 ) 

Year ended 3-31-2012

      24.20         (0.01 )      (6.43 )      (6.44 )      —        —         —   

Class B Shares(5)

                 

Year ended 3-31-2016

      13.98         (0.11 )      (3.12 )      (3.23 )      —        —         —   

Year ended 3-31-2015

      16.67         (0.15 )      (2.54 )      (2.69 )      —        —         —   

Year ended 3-31-2014

      15.73         (0.15 )      1.09        0.94        —        —         —   

Year ended 3-31-2013

      15.76         (0.14 )      0.11        (0.03 )      —        —         —   

Year ended 3-31-2012

      21.65         (0.15 )      (5.74 )      (5.89 )      —        —         —   

Class C Shares

                 

Year ended 3-31-2016

      13.67         (0.06 )      (3.06 )      (3.12 )      —        —         —   

Year ended 3-31-2015

      16.26         (0.10 )      (2.49 )      (2.59 )      —        —         —   

Year ended 3-31-2014

      15.31         (0.11 )      1.06        0.95        —        —         —   

Year ended 3-31-2013

      15.31         (0.11 )      0.11        0.00        —        —         —   

Year ended 3-31-2012

      21.00         (0.12 )      (5.57 )      (5.69 )      —        —         —   

Class E Shares

                 

Year ended 3-31-2016

      16.43         0.09        (3.71 )      (3.62 )      —        —         —   

Year ended 3-31-2015

      19.36         0.06        (2.99 )      (2.93 )      —        —         —   

Year ended 3-31-2014

      18.06         0.04        1.26        1.30        —        —         —   

Year ended 3-31-2013

      17.96         0.01        0.15        0.16        (0.06 )      —         (0.06 ) 

Year ended 3-31-2012

      24.45         0.01        (6.50 )      (6.49 )      —        —         —   

Class I Shares

                 

Year ended 3-31-2016

      16.69         0.10        (3.77 )      (3.67 )      —        —         —   

Year ended 3-31-2015

      19.63         0.09        (3.03 )      (2.94 )      —        —         —   

Year ended 3-31-2014

      18.28         0.07        1.28        1.35        —        —         —   

Year ended 3-31-2013

      18.19         0.06        0.14        0.20        (0.11 )      —         (0.11 ) 

Year ended 3-31-2012

      24.69         0.06        (6.56 )      (6.50 )      —        —         —   

Class R Shares

                 

Year ended 3-31-2016

      15.94         0.01        (3.58 )      (3.57 )      —        —         —   

Year ended 3-31-2015

      18.87         (0.02 )      (2.91 )      (2.93 )      —        —         —   

Year ended 3-31-2014

      17.67         (0.04 )      1.24        1.20        —        —         —   

Year ended 3-31-2013

      17.58         (0.05 )      0.14        0.09        —        —         —   

Year ended 3-31-2012

      24.00         (0.05 )      (6.37 )      (6.42 )      —        —         —   

Class R6 Shares

                 

Year ended 3-31-2016

      16.70         0.13        (3.77 )      (3.64 )      —        —         —   

Year ended 3-31-2015(6)

      20.86         0.11        (4.27 )      (4.16 )      —        —         —   

Class Y Shares

                 

Year ended 3-31-2016

      16.45         0.06        (3.71 )      (3.65 )      —        —         —   

Year ended 3-31-2015

      19.39         0.04        (2.98 )      (2.94 )      —        —         —   

Year ended 3-31-2014

      18.10         0.02        1.27        1.29        —        —         —   

Year ended 3-31-2013

      18.02         0.02        0.13        0.15        (0.07 )      —         (0.07 ) 

Year ended 3-31-2012

      24.50         0.03        (6.51 )      (6.48 )      —        —         —   

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) Annualized.

 

(5) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(6) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

80   ANNUAL REPORT   2016  

Table of Contents

 

 

 

      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		      Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		     Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets
Including
Expense
Waiver		     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 12.53         -22.32 %    $ 415         1.66 %      0.18 %      — %      — %      17 % 

Year ended 3-31-2015

      16.13         -15.42       645         1.57       -0.03       —       —       22  

Year ended 3-31-2014

      19.07         6.90       1,008         1.56       -0.09       —       —       100  

Year ended 3-31-2013

      17.84         0.64       1,375         1.52       -0.18       —       —       83  

Year ended 3-31-2012

      17.76         -26.61       1,770         1.41       -0.07       —       —       84  

Class B Shares(5)

                   

Year ended 3-31-2016

      10.75         -23.10       10         2.65       -0.85       —       —       17  

Year ended 3-31-2015

      13.98         -16.14       21         2.47       -0.95       —       —       22  

Year ended 3-31-2014

      16.67         5.98       40         2.41       -0.95       —       —       100  

Year ended 3-31-2013

      15.73         -0.19       69         2.33       -0.97       —       —       83  

Year ended 3-31-2012

      15.76         -27.21       112         2.20       -0.86       —       —       84  

Class C Shares

                   

Year ended 3-31-2016

      10.55         -22.82       110         2.30       -0.47       —       —       17  

Year ended 3-31-2015

      13.67         -15.93       187         2.20       -0.65       —       —       22  

Year ended 3-31-2014

      16.26         6.21       291         2.18       -0.72       —       —       100  

Year ended 3-31-2013

      15.31         0.00 *      410         2.13       -0.78       —       —       83  

Year ended 3-31-2012

      15.31         -27.10       603         2.07       -0.73       —       —       84  

Class E Shares

                   

Year ended 3-31-2016

      12.81         -22.03       4         1.26       0.59       2.21       -0.36       17  

Year ended 3-31-2015

      16.43         -15.13       6         1.27       0.32       2.03       -0.44       22  

Year ended 3-31-2014

      19.36         7.20       7         1.27       0.20       2.12       -0.64       100  

Year ended 3-31-2013

      18.06         0.91       7         1.27       0.05       2.21       -0.89       83  

Year ended 3-31-2012

      17.96         -26.54       7         1.27       0.06       2.03       -0.69       84  

Class I Shares

                   

Year ended 3-31-2016

      13.02         -21.99       103         1.16       0.67       —       —       17  

Year ended 3-31-2015

      16.69         -14.98       174         1.11       0.47       —       —       22  

Year ended 3-31-2014

      19.63         7.39       224         1.08       0.37       —       —       100  

Year ended 3-31-2013

      18.28         1.14       484         1.05       0.32       —       —       83  

Year ended 3-31-2012

      18.19         -26.33       1,137         1.02       0.32       —       —       84  

Class R Shares

                   

Year ended 3-31-2016

      12.37         -22.40       24         1.75       0.10       —       —       17  

Year ended 3-31-2015

      15.94         -15.53       33         1.69       -0.12       —       —       22  

Year ended 3-31-2014

      18.87         6.79       43         1.67       -0.20       —       —       100  

Year ended 3-31-2013

      17.67         0.51       50         1.63       -0.30       —       —       83  

Year ended 3-31-2012

      17.58         -26.75       66         1.60       -0.26       —       —       84  

Class R6 Shares

                   

Year ended 3-31-2016

      13.06         -21.80       11         1.00       0.92       —       —       17  

Year ended 3-31-2015(6)

      16.70         -19.94       5         0.95 (4)      0.97 (4)      —        —        22 (7)

Class Y Shares

                   

Year ended 3-31-2016

      12.80         -22.19       33         1.40       0.42       —       —       17  

Year ended 3-31-2015

      16.45         -15.16       60         1.35       0.20       —       —       22  

Year ended 3-31-2014

      19.39         7.07       88         1.33       0.10       —       —       100  

Year ended 3-31-2013

      18.10         0.93       186         1.27       0.11       1.29       0.09       83  

Year ended 3-31-2012

      18.02         -26.45       491         1.20       0.14       1.27       0.07       84  

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   81

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY LASALLE GLOBAL REAL ESTATE FUND

 

          
    
    
Net Asset
Value,
Beginning of
Period		      Net
Investment
Income
(Loss)(1) 		    Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		     Distributions
From Net
Investment
Income		     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

                

Year ended 3-31-2016

    $ 11.15       $ 0.17      $ (0.41 )    $ (0.24 )    $ (0.13 )    $ (0.20 )    $ (0.33 ) 

Year ended 3-31-2015

      9.83         0.13        1.46        1.59        (0.19 )      (0.08 )      (0.27 ) 

Year ended 3-31-2014

      10.00         0.11        (0.12 )      (0.01 )      (0.16 )      —        (0.16 ) 

Class B Shares(4)

                

Year ended 3-31-2016

      11.10         0.06        (0.40 )      (0.34 )      (0.01 )      (0.19 )      (0.20 ) 

Year ended 3-31-2015

      9.79         0.01        1.46        1.47        (0.08 )      (0.08 )      (0.16 ) 

Year ended 3-31-2014

      10.00         0.00 *      (0.12 )      (0.12 )      (0.09 )      —        (0.09 ) 

Class C Shares

                

Year ended 3-31-2016

      11.10         0.04        (0.41 )      (0.37 )      —        (0.18 )      (0.18 ) 

Year ended 3-31-2015

      9.80         (0.01 )      1.47        1.46        (0.08 )      (0.08 )      (0.16 ) 

Year ended 3-31-2014

      10.00         0.00 *      (0.11 )      (0.11 )      (0.09 )      —        (0.09 ) 

Class I Shares

                

Year ended 3-31-2016

      11.14         0.17        (0.42 )      (0.25 )      (0.12 )      (0.20 )      (0.32 ) 

Year ended 3-31-2015

      9.82         0.12        1.46        1.58        (0.18 )      (0.08 )      (0.26 ) 

Year ended 3-31-2014

      10.00         0.09        (0.11 )      (0.02 )      (0.16 )      —        (0.16 ) 

Class R Shares

                

Year ended 3-31-2016

      11.12         0.10        (0.41 )      (0.31 )      (0.04 )      (0.20 )      (0.24 ) 

Year ended 3-31-2015

      9.81         0.05        1.46        1.51        (0.12 )      (0.08 )      (0.20 ) 

Year ended 3-31-2014

      10.00         0.04        (0.11 )      (0.07 )      (0.12 )      —        (0.12 ) 

Class Y Shares

                

Year ended 3-31-2016

      11.22         0.17        (0.42 )      (0.25 )      (0.13 )      (0.20 )      (0.33 ) 

Year ended 3-31-2015

      9.89         0.12        1.48        1.60        (0.19 )      (0.08 )      (0.27 ) 

Year ended 3-31-2014

      10.00         0.11        (0.05 )      0.06        (0.17 )      —        (0.17 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) Ratio of expenses to average net assets excluding offering cost was 2.40%.

 

(6) Ratio of expenses to average net assets excluding offering cost was 2.39%.

 

(7) Ratio of expenses to average net assets excluding offering cost was 1.43%.

 

(8) Ratio of expenses to average net assets excluding offering cost was 1.99%.

 

82   ANNUAL REPORT   2016  

Table of Contents

 

 

 

      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		     Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		     Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets
Including
Expense
Waiver		     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

                  

Year ended 3-31-2016

    $ 10.58         -2.00 %    $ 29        1.51 %      1.67 %      2.12 %      1.06 %      59 % 

Year ended 3-31-2015

      11.15         16.31       28        1.51       1.22       2.14       0.59       63  

Year ended 3-31-2014

      9.83         0.02       22        1.51       1.12       2.62       0.01       36  

Class B Shares(4)

                  

Year ended 3-31-2016

      10.56         -3.03       — *      2.56       0.62       —       —       59  

Year ended 3-31-2015

      11.10         15.05       — *      2.66       0.06       —       —       63  

Year ended 3-31-2014

      9.79         -1.16       — *      2.68 (5)      -0.02       3.14       -0.48       36  

Class C Shares

                  

Year ended 3-31-2016

      10.55         -3.21       1        2.74       0.41       —       —       59  

Year ended 3-31-2015

      11.10         14.92       1        2.68       -0.09       —       —       63  

Year ended 3-31-2014

      9.80         -1.03       1        2.67 (6)     —       3.12       -0.45       36  

Class I Shares

                  

Year ended 3-31-2016

      10.57         -2.11       3        1.59       1.59       —       —       59  

Year ended 3-31-2015

      11.14         16.14       3        1.62       1.08       —       —       63  

Year ended 3-31-2014

      9.82         -0.13       2        1.71 (7)      0.94       2.16       0.49       36  

Class R Shares

                  

Year ended 3-31-2016

      10.57         -2.68       — *      2.20       0.99       —       —       59  

Year ended 3-31-2015

      11.12         15.40       1        2.25       0.50       —       —       63  

Year ended 3-31-2014

      9.81         -0.67       — *      2.27 (8)      0.38       2.73       -0.08       36  

Class Y Shares

                  

Year ended 3-31-2016

      10.64         -2.08       1        1.51       1.63       1.86       1.28       59  

Year ended 3-31-2015

      11.22         16.32       1        1.51       1.15       1.90       0.76       63  

Year ended 3-31-2014

      9.89         0.68       1        1.51       1.13       2.37       0.27       36  

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   83

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY LASALLE GLOBAL-RISK MANAGED REAL ESTATE FUND

 

          
    
Net Asset
Value,
Beginning  of
Period		      Net
Investment
Income(1) 		     Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		     Distributions
From Net
Investment
Income		     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

                 

Year ended 3-31-2016

    $ 11.06       $ 0.22       $ 0.35      $ 0.57      $ (0.13 )    $ (0.11 )    $ (0.24 ) 

Year ended 3-31-2015

      9.72         0.14         1.48        1.62        (0.28 )      —        (0.28 ) 

Year ended 3-31-2014

      10.00         0.13         (0.24 )      (0.11 )      (0.17 )      —        (0.17 ) 

Class B Shares(4)

                 

Year ended 3-31-2016

      11.04         0.15         0.33        0.48        (0.03 )      (0.11 )      (0.14 ) 

Year ended 3-31-2015

      9.70         0.06         1.46        1.52        (0.18 )      —        (0.18 ) 

Year ended 3-31-2014

      10.00         0.03         (0.23 )      (0.20 )      (0.10 )      —        (0.10 ) 

Class C Shares

                 

Year ended 3-31-2016

      11.04         0.13         0.33        0.46        (0.02 )      (0.10 )      (0.12 ) 

Year ended 3-31-2015

      9.70         0.05         1.47        1.52        (0.18 )      —        (0.18 ) 

Year ended 3-31-2014

      10.00         0.03         (0.23 )      (0.20 )      (0.10 )      —        (0.10 ) 

Class I Shares

                 

Year ended 3-31-2016

      11.07         0.24         0.34        0.58        (0.15 )      (0.11 )      (0.26 ) 

Year ended 3-31-2015

      9.72         0.15         1.47        1.62        (0.27 )      —        (0.27 ) 

Year ended 3-31-2014

      10.00         0.12         (0.24 )      (0.12 )      (0.16 )      —        (0.16 ) 

Class R Shares

                 

Year ended 3-31-2016

      11.05         0.18         0.34        0.52        (0.07 )      (0.11 )      (0.18 ) 

Year ended 3-31-2015

      9.70         0.09         1.47        1.56        (0.21 )      —        (0.21 ) 

Year ended 3-31-2014

      10.00         0.06         (0.24 )      (0.18 )      (0.12 )      —        (0.12 ) 

Class Y Shares

                 

Year ended 3-31-2016

      11.07         0.23         0.33        0.56        (0.12 )      (0.11 )      (0.23 ) 

Year ended 3-31-2015

      9.72         0.13         1.50        1.63        (0.28 )      —        (0.28 ) 

Year ended 3-31-2014

      10.00         0.13         (0.24 )      (0.11 )      (0.17 )      —        (0.17 ) 

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) Ratio of expenses to average net assets excluding offering cost was 2.15%.

 

(6) Ratio of expenses to average net assets excluding offering cost was 1.27%.

 

(7) Ratio of expenses to average net assets excluding offering cost was 1.88%.

 

84   ANNUAL REPORT   2016  

Table of Contents

 

 

 

      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		      Ratio of
Expenses to
Average  Net
Assets
Including
Expense
Waiver		     Ratio of Net
Investment
Income to
Average  Net
Assets
Including
Expense
Waiver		     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income to
Average  Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 11.39         5.27 %    $ 65         1.51 %      2.08 %      1.76 %      1.83 %      59 % 

Year ended 3-31-2015

      11.06         16.77       43         1.50       1.31       1.83       0.98       53  

Year ended 3-31-2014

      9.72         -1.00       20         1.51       1.39       2.08       0.82       38  

Class B Shares(4)

                   

Year ended 3-31-2016

      11.38         4.36       1         2.33       1.42       —       —       59  

Year ended 3-31-2015

      11.04         15.74       1         2.34       0.57       —       —       53  

Year ended 3-31-2014

      9.70         -1.92       1         2.53 (5)     0.32       2.58       0.27       38  

Class C Shares

                   

Year ended 3-31-2016

      11.38         4.34       4         2.35       1.24       —       —       59  

Year ended 3-31-2015

      11.04         15.72       3         2.38       0.43       —       —       53  

Year ended 3-31-2014

      9.70         -1.91       2         2.53 (5)      0.33       2.58       0.28       38  

Class I Shares

                   

Year ended 3-31-2016

      11.39         5.37       11         1.39       2.25       —       —       59  

Year ended 3-31-2015

      11.07         16.79       10         1.47       1.46       —       —       53  

Year ended 3-31-2014

      9.72         -1.09       8         1.65 (6)     1.20       1.70       1.15       38  

Class R Shares

                   

Year ended 3-31-2016

      11.39         4.78       2         1.99       1.66       —       —       59  

Year ended 3-31-2015

      11.05         16.15       2         2.07       0.88       —       —       53  

Year ended 3-31-2014

      9.70         -1.72       2         2.26 (7)     0.60       2.31       0.55       38  

Class Y Shares

                   

Year ended 3-31-2016

      11.40         5.25       4         1.51       2.19       1.67       2.03       59  

Year ended 3-31-2015

      11.07         16.87       5         1.51       1.26       1.71       1.06       53  

Year ended 3-31-2014

      9.72         -0.98       3         1.50       1.35       1.95       0.90       38  

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   85

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY REAL ESTATE SECURITIES FUND

 

          
    
    
Net Asset
Value,
Beginning of
Period		      Net
Investment
Income
(Loss)(1) 		    Net Realized
and Unrealized
Gain on
Investments		      Total from
Investment
Operations		      Distributions
From Net
Investment
Income		     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

  

Year ended 3-31-2016

    $ 29.38       $ 0.33      $ 0.52       $ 0.85       $ (0.29 )    $ (1.34 )    $ (1.63 ) 

Year ended 3-31-2015

      24.35         0.21        5.86         6.07         (0.17 )      (0.87 )      (1.04 ) 

Year ended 3-31-2014

      23.73         0.16        0.69         0.85         (0.23 )      —        (0.23 ) 

Year ended 3-31-2013

      21.27         0.16        2.45         2.61         (0.15 )      —        (0.15 ) 

Year ended 3-31-2012

      19.42         0.09        1.82         1.91         (0.06 )      —        (0.06 ) 

Class B Shares(5)

  

Year ended 3-31-2016

      28.58         0.11        0.48         0.59         (0.03 )      (1.34 )      (1.37 ) 

Year ended 3-31-2015

      23.77         (0.03 )      5.67         5.64         —        (0.83 )      (0.83 ) 

Year ended 3-31-2014

      23.17         (0.06 )      0.66         0.60         —        —        —   

Year ended 3-31-2013

      20.85         (0.06 )      2.38         2.32         —        —        —   

Year ended 3-31-2012

      19.20         (0.12 )      1.77         1.65         —        —        —   

Class C Shares

  

Year ended 3-31-2016

      28.92         0.13        0.52         0.65         (0.08 )      (1.34 )      (1.42 ) 

Year ended 3-31-2015

      24.02         0.00 *      5.78         5.78         (0.01 )      (0.87 )      (0.88 ) 

Year ended 3-31-2014

      23.42         0.00 *      0.67         0.67         (0.07 )      —        (0.07 ) 

Year ended 3-31-2013

      21.00         0.01        2.42         2.43         (0.01 )      —        (0.01 ) 

Year ended 3-31-2012

      19.27         (0.05 )      1.78         1.73         —        —        —   

Class E Shares

  

Year ended 3-31-2016

      29.37         0.30        0.54         0.84         (0.27 )      (1.34 )      (1.61 ) 

Year ended 3-31-2015

      24.35         0.13        5.87         6.00         (0.11 )      (0.87 )      (0.98 ) 

Year ended 3-31-2014

      23.72         0.13        0.70         0.83         (0.20 )      —        (0.20 ) 

Year ended 3-31-2013

      21.27         0.14        2.46         2.60         (0.15 )      —        (0.15 ) 

Year ended 3-31-2012

      19.43         0.10        1.81         1.91         (0.07 )      —        (0.07 ) 

Class I Shares

  

Year ended 3-31-2016

      29.53         0.44        0.54         0.98         (0.42 )      (1.34 )      (1.76 ) 

Year ended 3-31-2015

      24.50         0.32        5.90         6.22         (0.32 )      (0.87 )      (1.19 ) 

Year ended 3-31-2014

      23.85         0.28        0.69         0.97         (0.32 )      —        (0.32 ) 

Year ended 3-31-2013

      21.37         0.24        2.51         2.75         (0.27 )      —        (0.27 ) 

Year ended 3-31-2012

      19.52         0.22        1.80         2.02         (0.17 )      —        (0.17 ) 

Class R Shares

  

Year ended 3-31-2016

      29.37         0.31        0.49         0.80         (0.24 )      (1.34 )      (1.58 ) 

Year ended 3-31-2015

      24.35         0.20        5.81         6.01         (0.12 )      (0.87 )      (0.99 ) 

Year ended 3-31-2014

      23.73         0.15        0.68         0.83         (0.21 )      —        (0.21 ) 

Year ended 3-31-2013

      21.27         0.15        2.44         2.59         (0.13 )      —        (0.13 ) 

Year ended 3-31-2012

      19.43         0.09        1.81         1.90         (0.06 )      —        (0.06 ) 

Class R6 Shares

  

Year ended 3-31-2016

      29.56         0.50        0.52         1.02         (0.46 )      (1.34 )      (1.80 ) 

Year ended 3-31-2015(6)

      26.13         0.20        4.34         4.54         (0.24 )      (0.87 )      (1.11 ) 

Class Y Shares

  

Year ended 3-31-2016

      29.40         0.40        0.51         0.91         (0.35 )      (1.34 )      (1.69 ) 

Year ended 3-31-2015

      24.39         0.28        5.84         6.12         (0.24 )      (0.87 )      (1.11 ) 

Year ended 3-31-2014

      23.75         0.24        0.68         0.92         (0.28 )      —        (0.28 ) 

Year ended 3-31-2013

      21.28         0.23        2.45         2.68         (0.21 )      —        (0.21 ) 

Year ended 3-31-2012

      19.44         0.16        1.81         1.97         (0.13 )      —        (0.13 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) Annualized.

 

(5) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(6) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

86   ANNUAL REPORT   2016  

Table of Contents

 

 

 

      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		      Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		     Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets
Including
Expense
Waiver		     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

                   

Year ended 3-31-2016

    $ 28.60         3.41 %    $ 507         1.47 %      1.22 %      1.57 %      1.12 %      66 % 

Year ended 3-31-2015

      29.38         25.19       543         1.46       0.78       1.56       0.68       48  

Year ended 3-31-2014

      24.35         3.65       384         1.56       0.67       1.66       0.57       73  

Year ended 3-31-2013

      23.73         12.32       341         1.64       0.71       1.68       0.67       43  

Year ended 3-31-2012

      21.27         9.88       276         1.73       0.45       —       —       55  

Class B Shares(5)

                   

Year ended 3-31-2016

      27.80         2.48       5         2.37       0.41       2.47       0.31       66  

Year ended 3-31-2015

      28.58         23.95       6         2.41       -0.10       2.51       -0.20       48  

Year ended 3-31-2014

      23.77         2.59       6         2.61       -0.28       2.71       -0.38       73  

Year ended 3-31-2013

      23.17         11.08       7         2.75       -0.29       2.79       -0.33       43  

Year ended 3-31-2012

      20.85         8.65       7         2.89       -0.62       —       —       55  

Class C Shares

                   

Year ended 3-31-2016

      28.15         2.67       19         2.18       0.48       2.28       0.38       66  

Year ended 3-31-2015

      28.92         24.27       21         2.18       0.01       2.28       -0.09       48  

Year ended 3-31-2014

      24.02         2.90       14         2.27       0.02       2.37       -0.08       73  

Year ended 3-31-2013

      23.42         11.50       15         2.35       0.03       2.39       -0.01       43  

Year ended 3-31-2012

      21.00         9.03       12         2.49       -0.28       —       —       55  

Class E Shares

                   

Year ended 3-31-2016

      28.60         3.36       4         1.52       1.11       1.87       0.76       66  

Year ended 3-31-2015

      29.37         24.88       4         1.67       0.49       1.93       0.23       48  

Year ended 3-31-2014

      24.35         3.58       2         1.67       0.54       2.15       0.06       73  

Year ended 3-31-2013

      23.72         12.27       2         1.67       0.61       2.27       0.01       43  

Year ended 3-31-2012

      21.27         9.90       1         1.67       0.50       2.36       -0.19       55  

Class I Shares

                   

Year ended 3-31-2016

      28.75         3.86       13         1.03       1.58       1.13       1.48       66  

Year ended 3-31-2015

      29.53         25.74       13         1.02       1.18       1.12       1.08       48  

Year ended 3-31-2014

      24.50         4.20       9         1.02       1.18       1.12       1.08       73  

Year ended 3-31-2013

      23.85         12.95       7         1.09       1.06       1.12       1.03       43  

Year ended 3-31-2012

      21.37         10.46       3         1.15       1.15       —       —       55  

Class R Shares

                   

Year ended 3-31-2016

      28.59         3.21       2         1.65       1.13       1.75       1.03       66  

Year ended 3-31-2015

      29.37         24.92       2         1.64       0.72       1.74       0.62       48  

Year ended 3-31-2014

      24.35         3.58       1         1.66       0.62       1.76       0.52       73  

Year ended 3-31-2013

      23.73         12.23       2         1.71       0.69       1.75       0.65       43  

Year ended 3-31-2012

      21.27         9.84       1         1.73       0.49       —       —       55  

Class R6 Shares

                   

Year ended 3-31-2016

      28.78         4.02       3         0.87       1.83       0.97       1.73       66  

Year ended 3-31-2015(6)

      29.56         17.66       4         0.86 (4)      1.10 (4)      0.96 (4)      1.00 (4)      48 (7)

Class Y Shares

                   

Year ended 3-31-2016

      28.62         3.62       152         1.26       1.46       1.36       1.36       66  

Year ended 3-31-2015

      29.40         25.41       180         1.26       1.05       1.36       0.95       48  

Year ended 3-31-2014

      24.39         3.97       143         1.27       1.03       1.37       0.93       73  

Year ended 3-31-2013

      23.75         12.63       168         1.34       1.06       1.37       1.03       43  

Year ended 3-31-2012

      21.28         10.24       149         1.39       0.82       —       —       55  

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   87

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY SCIENCE AND TECHNOLOGY FUND

 

          
    
Net Asset
Value,
Beginning of
Period		      Net
Investment
Loss(1) 		    Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		     Distributions
From Net
Investment
Income		      Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

                 

Year ended 3-31-2016

    $ 55.95       $ (0.35 )    $ (7.99 )    $ (8.34 )    $ —       $ (1.26 )    $ (1.26 ) 

Year ended 3-31-2015

      52.71         (0.36 )      4.77        4.41        —         (1.17 )      (1.17 ) 

Year ended 3-31-2014

      39.79         (0.30 )      14.54        14.24        —         (1.32 )      (1.32 ) 

Year ended 3-31-2013

      33.54         (0.27 )      6.71        6.44        —         (0.19 )      (0.19 ) 

Year ended 3-31-2012

      35.09         (0.32 )      0.93        0.61        —         (2.16 )      (2.16 ) 

Class B Shares(5)

                 

Year ended 3-31-2016

      48.01         (0.63 )      (6.80 )      (7.43 )      —         (1.26 )      (1.26 ) 

Year ended 3-31-2015

      45.73         (0.65 )      4.10        3.45        —         (1.17 )      (1.17 ) 

Year ended 3-31-2014

      34.92         (0.59 )      12.72        12.13        —         (1.32 )      (1.32 ) 

Year ended 3-31-2013

      29.69         (0.48 )      5.90        5.42        —         (0.19 )      (0.19 ) 

Year ended 3-31-2012

      31.58         (0.53 )      0.77        0.24        —         (2.13 )      (2.13 ) 

Class C Shares

                 

Year ended 3-31-2016

      49.63         (0.63 )      (7.04 )      (7.67 )      —         (1.26 )      (1.26 ) 

Year ended 3-31-2015

      47.21         (0.65 )      4.24        3.59        —         (1.17 )      (1.17 ) 

Year ended 3-31-2014

      35.99         (0.58 )      13.12        12.54        —         (1.32 )      (1.32 ) 

Year ended 3-31-2013

      30.57         (0.47 )      6.08        5.61        —         (0.19 )      (0.19 ) 

Year ended 3-31-2012

      32.41         (0.51 )      0.80        0.29        —         (2.13 )      (2.13 ) 

Class E Shares

                 

Year ended 3-31-2016

      55.70         (0.42 )      (7.94 )      (8.36 )      —         (1.26 )      (1.26 ) 

Year ended 3-31-2015

      52.57         (0.45 )      4.75        4.30        —         (1.17 )      (1.17 ) 

Year ended 3-31-2014

      39.74         (0.38 )      14.53        14.15        —         (1.32 )      (1.32 ) 

Year ended 3-31-2013

      33.48         (0.29 )      6.74        6.45        —         (0.19 )      (0.19 ) 

Year ended 3-31-2012

      35.04         (0.33 )      0.92        0.59        —         (2.15 )      (2.15 ) 

Class I Shares

                 

Year ended 3-31-2016

      60.64         (0.22 )      (8.67 )      (8.89 )      —         (1.26 )      (1.26 ) 

Year ended 3-31-2015

      56.87         (0.23 )      5.17        4.94        —         (1.17 )      (1.17 ) 

Year ended 3-31-2014

      42.72         (0.19 )      15.66        15.47        —         (1.32 )      (1.32 ) 

Year ended 3-31-2013

      35.88         (0.17 )      7.20        7.03        —         (0.19 )      (0.19 ) 

Year ended 3-31-2012

      37.36         (0.23 )      1.01        0.78        —         (2.26 )      (2.26 ) 

Class R Shares

                 

Year ended 3-31-2016

      55.05         (0.49 )      (7.85 )      (8.34 )      —         (1.26 )      (1.26 ) 

Year ended 3-31-2015

      52.04         (0.52 )      4.70        4.18        —         (1.17 )      (1.17 ) 

Year ended 3-31-2014

      39.42         (0.46 )      14.40        13.94        —         (1.32 )      (1.32 ) 

Year ended 3-31-2013

      33.32         (0.36 )      6.65        6.29        —         (0.19 )      (0.19 ) 

Year ended 3-31-2012

      34.93         (0.40 )      0.92        0.52        —         (2.13 )      (2.13 ) 

Class R6 Shares

                 

Year ended 3-31-2016

      60.70         (0.12 )      (8.70 )      (8.82 )      —         (1.26 )      (1.26 ) 

Year ended 3-31-2015(6)

      57.21         (0.12 )      4.78        4.66        —         (1.17 )      (1.17 ) 

Class Y Shares

                 

Year ended 3-31-2016

      58.68         (0.34 )      (8.38 )      (8.72 )      —         (1.26 )      (1.26 ) 

Year ended 3-31-2015

      55.20         (0.35 )      5.00        4.65        —         (1.17 )      (1.17 ) 

Year ended 3-31-2014

      41.60         (0.31 )      15.23        14.92        —         (1.32 )      (1.32 ) 

Year ended 3-31-2013

      35.03         (0.26 )      7.02        6.76        —         (0.19 )      (0.19 ) 

Year ended 3-31-2012

      36.54         (0.31 )      0.98        0.67        —         (2.18 )      (2.18 ) 

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) Annualized.

 

(5) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(6) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

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      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		      Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		     Ratio of Net
Investment
Loss to
Average Net
Assets
Including
Expense
Waiver		     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Loss to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

                   

Year ended 3-31-2016

    $ 46.35         -15.10 %    $ 1,790         1.28 %      -0.69 %      — %      — %      24 % 

Year ended 3-31-2015

      55.95         8.48       2,198         1.26       -0.67       —       —       32  

Year ended 3-31-2014

      52.71         35.99       1,998         1.26       -0.63       —       —       35  

Year ended 3-31-2013

      39.79         19.28       759         1.37       -0.79       —       —       43  

Year ended 3-31-2012

      33.54         3.01       549         1.39       -1.02       —       —       51  

Class B Shares(5)

                   

Year ended 3-31-2016

      39.32         -15.71       52         2.02       -1.42       —       —       24  

Year ended 3-31-2015

      48.01         7.67       69         2.01       -1.42       —       —       32  

Year ended 3-31-2014

      45.73         34.91       71         2.04       -1.42       —       —       35  

Year ended 3-31-2013

      34.92         18.37       40         2.17       -1.59       —       —       43  

Year ended 3-31-2012

      29.69         2.15       32         2.24       -1.86       —       —       51  

Class C Shares

                   

Year ended 3-31-2016

      40.70         -15.68       833         1.97       -1.37       —       —       24  

Year ended 3-31-2015

      49.63         7.73       999         1.95       -1.37       —       —       32  

Year ended 3-31-2014

      47.21         35.02       776         1.97       -1.34       —       —       35  

Year ended 3-31-2013

      35.99         18.47       278         2.07       -1.50       —       —       43  

Year ended 3-31-2012

      30.57         2.25       219         2.13       -1.76       —       —       51  

Class E Shares

                   

Year ended 3-31-2016

      46.08         -15.21       21         1.41       -0.82       1.54       -0.95       24  

Year ended 3-31-2015

      55.70         8.29       22         1.43       -0.84       1.55       -0.96       32  

Year ended 3-31-2014

      52.57         35.80       17         1.43       -0.80       1.63       -1.00       35  

Year ended 3-31-2013

      39.74         19.31       9         1.43       -0.85       1.91       -1.33       43  

Year ended 3-31-2012

      33.48         3.00       6         1.43       -1.06       2.01       -1.64       51  

Class I Shares

                   

Year ended 3-31-2016

      50.49         -14.84       1,364         0.97       -0.39       —       —       24  

Year ended 3-31-2015

      60.64         8.79       1,871         0.97       -0.39       —       —       32  

Year ended 3-31-2014

      56.87         36.37       1,411         0.99       -0.36       —       —       35  

Year ended 3-31-2013

      42.72         19.70       322         1.04       -0.46       —       —       43  

Year ended 3-31-2012

      35.88         3.37       186         1.06       -0.69       —       —       51  

Class R Shares

                   

Year ended 3-31-2016

      45.45         -15.35       110         1.57       -0.98       —       —       24  

Year ended 3-31-2015

      55.05         8.15       114         1.57       -0.98       —       —       32  

Year ended 3-31-2014

      52.04         35.56       105         1.59       -0.96       —       —       35  

Year ended 3-31-2013

      39.42         18.96       56         1.64       -1.07       —       —       43  

Year ended 3-31-2012

      33.32         2.76       42         1.64       -1.27       —       —       51  

Class R6 Shares

                   

Year ended 3-31-2016

      50.62         -14.71       65         0.83       -0.22       —       —       24  

Year ended 3-31-2015(6)

      60.70         8.25       12         0.82 (4)      -0.32 (4)      —        —       32 (7)

Class Y Shares

                   

Year ended 3-31-2016

      48.70         -15.04       754         1.22       -0.63       —       —       24  

Year ended 3-31-2015

      58.68         8.53       1,030         1.22       -0.63       —       —       32  

Year ended 3-31-2014

      55.20         36.02       1,043         1.24       -0.61       —       —       35  

Year ended 3-31-2013

      41.60         19.40       552         1.29       -0.71       —       —       43  

Year ended 3-31-2012

      35.03         3.10       399         1.30       -0.93       —       —       51  

 

See Accompanying Notes to Financial Statements.

 

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Table of Contents

NOTES TO FINANCIAL STATEMENTS

Ivy Funds

MARCH 31, 2016

 

 

 

1.   ORGANIZATION

Ivy Funds, a Delaware statutory trust (the “Trust”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. Ivy Asset Strategy Fund, Ivy Balanced Fund, Ivy Energy Fund, Ivy Global Natural Resources Fund, Ivy LaSalle Global Real Estate Fund (formerly known as Ivy Global Real Estate Fund), Ivy LaSalle Global Risk-Managed Real Estate Fund (formerly known as Ivy Global Risk-Managed Real Estate Fund), Ivy Real Estate Securities Fund and Ivy Science and Technology Fund (each, a “Fund”) are eight series of the Trust and are the only series of the Trust included in these financial statements. The investment objective(s), policies and risk factors of each Fund are described more fully in the Funds’ Prospectus and Statement of Additional Information (“SAI”). Each Fund’s investment manager is Ivy Investment Management Company (“IICO” or the “Manager”).

Each Fund offers Class A, Class B, Class C, Class I, Class Y, and Class R shares. The Funds’ Class B shares are not available for purchase by new and existing investors. Class B shares will continue to be available for dividend reinvestment and exchanges from Class B shares of another fund within Ivy Funds. Certain Funds may also offer Class E shares. Class E shares are closed for all investments in the Ivy Balanced Fund and Ivy Energy Fund. Certain Funds may also offer Class R6 shares. Class A and Class E shares are sold at their offering price, which is normally net asset value (“NAV”) plus a front-end sales charge. For Class A shares, a 1% contingent deferred sales charge (“CDSC”) is only imposed on shares purchased at NAV for $1 million or more that are subsequently redeemed within 12 months of purchase. Class B and Class C shares are sold without a front-end sales charge, but may be subject to a CDSC. Class I, Class R, Class R6 and Class Y shares are sold without either a front-end sales charge or a CDSC. All classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Net investment income, net assets and NAV per share may differ due to each class having its own expenses, such as transfer agent and shareholder servicing fees, directly attributable to that class. Class A, B, C, E, R and Y have a distribution and service plan. Class I shares and Class R6 shares are not included in the plan. Class B shares will automatically convert to Class A shares 96 months after the date of purchase.

 

2.   SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by each Fund.

Security Transactions and Related Investment Income. Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses are calculated on the identified cost basis. Interest income is recorded on the accrual basis and includes paydown gain (loss) and accretion of discounts and amortization of premiums. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is informed of the ex-dividend date. All or a portion of the distributions received from a real estate investment trust or publicly traded partnership may be designated as a reduction of cost of the related investment and/or realized gain.

Foreign Currency Translation. Each Fund’s accounting records are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars daily, using foreign exchange rates obtained from an independent pricing service authorized by the Board of Trustees of the Trust (the “Board”). 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. Each Fund combines fluctuations from currency exchange rates and fluctuations in value when computing net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments. Foreign exchange rates are typically valued as of the close of the New York Stock Exchange (“NYSE”), normally 4:00 P.M. Eastern time, on each day the NYSE is open for trading.

Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.

Income Taxes. It is the policy of each Fund 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, each Fund intends to pay distributions as required to avoid imposition of excise tax. Accordingly, no provision has been made for Federal income taxes. The Funds file income tax returns in U.S. federal and applicable state jurisdictions. The Funds’ tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax returns. Management of the Trust periodically reviews all tax positions to assess that it is more likely than not that the position would be sustained upon examination by the relevant tax authority based on the technical merits of each position. As of the date of these financial statements, management believes that no liability for unrecognized tax positions is required.

Dividends and Distributions to Shareholders. 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 (“U.S. GAAP”). If the total dividends and distributions made in any tax year exceeds net investment income and accumulated realized capital gains, a portion of the total distribution may be treated as a tax return of capital.

Segregation and Collateralization. In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”), the Dodd Frank Wall Street Reform and Consumer Protection Act, or the interpretive rules and regulations of the U.S. Commodities Futures Trading Commission require that a Fund either deliver collateral or segregate assets in connection with certain investments (e.g., dollar rolls, financial futures contracts, foreign currency exchange contracts, options written, securities with extended settlement periods and swaps), the Fund will

 

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segregate collateral or designate on its books and records cash or other liquid securities having a value at least equal to the amount that is required to be physically segregated for the benefit of the counterparty. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, each party has requirements to deliver/deposit cash or securities as collateral for certain investments. Certain countries require that cash reserves be held while investing in companies incorporated in that country. These cash reserves and cash collateral that has been pledged to cover obligations of the Funds under derivative contracts, if any, will be reported separately on the Statement of Assets and Liabilities as “Restricted cash.” Securities collateral pledged for the same purpose, if any, is noted on the Schedule of Investments.

Concentration of Market and Credit Risk. In the normal course of business, the Funds invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Funds may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Funds; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Funds may be exposed to counterparty credit risk, or the risk that an entity with which the Funds have unsettled or open transactions may fail to or be unable to perform on its commitments. The Funds manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Funds’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded on the Funds’ Statement of Assets and Liabilities, less any collateral held by the Funds.

Certain Funds may hold high-yield and/or non-investment-grade bonds, which may be subject to a greater degree of credit risk. Credit risk relates to the ability of the issuer to meet interest or principal payments or both as they become due. The Funds may acquire securities in default and are not obligated to dispose of securities whose issuers subsequently default.

Certain Funds may enter into financial instrument transactions (such as swaps, futures, options and other derivatives) that may have off-balance sheet market risk. Off-balance sheet market risk exists when the maximum potential loss on a particular financial instrument is greater than the value of such financial instrument, as reflected on the Statement of Assets and Liabilities.

If a Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in financial derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad.

Inflation-Indexed Bonds. Certain Funds may invest in inflation-indexed bonds. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted to the rate of inflation. The interest rate on these bonds is generally fixed at issuance at a rate lower than typical bonds. Over the life of an inflation-indexed bond, however, interest will be paid based on a principal value, which is adjusted for inflation. Any increase or decrease in the principal amount of an inflation-indexed bond will be included as interest income on the Statement of Operations, even though investors do not receive their principal until maturity.

Interest Only Obligations. These securities entitle the owner to receive only the interest portion from a bond, Treasury note or pool of mortgages. These securities are generally created by a third party separating a bond or pool of mortgages into distinct interest-only and principal-only securities. As the principal (par) amount of a bond or pool of mortgages is paid down, the amount of interest income earned by the owner will decline as well.

Loans. Certain Funds may invest in loans, the interest rates of which float or adjust periodically based upon a specified adjustment schedule, benchmark indicator, or prevailing interest rates, the debtor of which may be a domestic or foreign corporation, partnership or other entity (“Borrower”). Loans generally pay interest at rates which are periodically redetermined by reference to a base lending rate plus a premium. These base lending rates generally include prime rates of one or more major U.S. banks, London Interbank Offered Rate (“LIBOR”) rates or certificates of deposit rates. Loans often require prepayments from excess cash flow or permit the Borrower to repay at its election. The degree to which Borrowers repay cannot be predicted with accuracy. As a result, the actual maturity may be substantially less than the stated maturities. Loans are exempt from registration under the Securities Act of 1933, as amended, may contain certain restrictions on resale, and cannot be sold publicly. A Fund’s investments in loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties.

When a Fund purchases assignments, it acquires all the rights and obligations under the loan agreement of the assigning lender. Assignments may, however, be arranged through private negotiations between potential assignees and potential assignors, and the rights and obligations acquired by the purchaser of an assignment may differ from, and be more limited than those held by the assigning lender. When a Fund purchases a participation of a loan interest, the Fund typically enters into a contractual agreement with the lender or other third party selling the participation. A participation interest in loans includes the right to receive payments of principal, interest and any fees to which it is entitled from the lender and only upon receipt by the lender of payments from the Borrower, but not from the Borrower directly. When investing in a participation interest, if a Borrower is unable to meet its obligations under a loan agreement, a Fund generally has no right to enforce compliance with the terms of the loan agreement. As a result, the Fund assumes the credit risk of the Borrower, the selling participant, and any other persons that are interpositioned between the Fund and the Borrower. If the lead lender in a typical lending syndicate becomes insolvent, enters Federal Deposit Insurance Corporation (“FDIC”) receivership or, if not FDIC insured, enters into bankruptcy, the Fund may incur certain costs and delays in receiving payment or may suffer a loss of principal and/or interest.

 

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Payment In-Kind Securities. Certain Funds may invest in payment in-kind securities (“PIKs”). PIKs give the issuer the option at each interest payment date of making interest payments in either cash or additional debt securities. Those additional debt securities usually have the same terms, including maturity dates and interest rates, and associated risks as the original bonds. The daily market quotations of the original bonds may include the accrued interest (referred to as a dirty price) and require a pro-rata adjustment from the unrealized appreciation or depreciation on investments to interest receivable on the Statement of Assets and Liabilities.

Securities on a When-Issued or Delayed Delivery Basis. Certain Funds may purchase securities on a “when-issued” basis, and may purchase or sell securities on a “delayed delivery” basis. “When-issued” or “delayed delivery” refers to securities whose terms and indenture are available and for which a market exists, but which are not available for immediate delivery. Delivery and payment for securities that have been purchased by a Fund on a when-issued basis normally take place within six months and possibly as long as two years or more after the trade date. During this period, such securities do not earn interest, are subject to market fluctuation and may increase or decrease in value prior to their delivery. The purchase of securities on a when-issued basis may increase the volatility of a Fund’s NAV to the extent the Fund executes such transactions while remaining substantially fully invested. When a Fund engages in when-issued or delayed delivery transactions, it relies on the buyer or seller, as the case may be, to complete the transaction. Their failure to do so may cause the Fund to lose the opportunity to obtain or dispose of the security at a price and yield IICO, or the Fund’s investment subadviser, as applicable, consider advantageous. The Fund maintains internally designated assets with a value equal to or greater than the amount of its purchase commitments. The Fund may also sell securities that it purchased on a when-issued or delayed delivery basis prior to settlement of the original purchase.

Custodian Fees. “Custodian fees” on the Statement of Operations may include interest expense incurred by a Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. A Fund pays interest to its custodian on such cash overdrafts, to the extent they are not offset by positive cash balances maintained by that Fund. The “Earnings credit” line item, if shown, represents earnings on cash balances maintained by that Fund during the period. Such interest expense and other custodian fees may be paid with these earnings.

Independent Trustees and Chief Compliance Officer Fees. Fees paid to the Independent Trustees can be paid in cash or deferred to a later date, at the election of the Trustee according to the Deferred Fee Agreement entered into between the Trust and the Trustee(s). Each Fund records its portion of the deferred fees as a liability on the Statement of Assets and Liabilities. All fees paid in cash plus any appreciation (depreciation) in the underlying deferred plan are shown on the Statement of Operations. Additionally, fees paid to the Chief Compliance Officer of the Funds are shown on the Statement of Operations.

Indemnifications. The Trust’s organizational documents provide current and former Trustees and Officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Trust. In the normal course of business, the Trust may also enter into contracts that provide general indemnification. The Trust’s maximum exposure under these arrangements is unknown and is dependent on future claims that may be made against the Trust. The risk of material loss from such claims is considered remote.

Basis of Preparation. Each Fund is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 (“ASC 946”). The accompanying financial statements were prepared in accordance with U.S. GAAP, including but not limited to ASC 946. U.S. GAAP requires the use of estimates made by management. Management believes that estimates and valuations are appropriate; however, actual results may differ from those estimates, and the valuations reflected in the accompanying financial statements may differ from the value ultimately realized upon sale or maturity.

Subsequent Events. Management has performed a review for subsequent events through the date this report was issued.

 

3.   INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Each Fund’s investments are reported at fair value. Fair value is defined as the price that each Fund would receive upon selling an asset or would pay upon satisfying a liability in an orderly transaction between market participants at the measurement date. Each Fund calculates the NAV of its shares as of the close of the NYSE, normally 4:00 P.M. Eastern time, on each day the NYSE is open for trading.

For purposes of calculating the NAV, the portfolio securities and other assets are valued on each business day using pricing and valuation methods as adopted by the Board. Where market quotes are readily available, fair value is generally determined on the basis of last reported sales prices, or if no sales are reported, based on quotes obtained from a quotation reporting system, established market makers, or pricing services.

Prices for fixed-income securities are typically based on quotes that are obtained from an independent pricing service authorized by the Board. To determine values of fixed-income securities, the independent pricing service utilizes such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Securities that cannot be valued by the independent pricing service may be valued using quotes obtained from dealers that make markets in the securities.

Short-term securities with maturities of 60 days or less are valued based on quotes that are obtained from an independent pricing service authorized by the Board as described in the preceding paragraph above.

Because many foreign markets close before the NYSE, events may occur between the close of the foreign market and the close of the NYSE that could have a material impact on the valuation of foreign securities. Waddell & Reed Services Company (“WRSCO”), pursuant to procedures adopted by the Board, evaluates the impact of these events and may adjust the valuation of foreign securities to reflect the fair value as of the close of the NYSE. In addition, all securities for which values are not readily available or are deemed unreliable are appraised at fair value as determined in good faith under the supervision of the Board.

 

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Where market quotes are not readily available, portfolio securities or assets are valued at fair value, as determined in good faith by the Board or Valuation Committee pursuant to procedures approved by the Board.

Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information or broker quotes), including where events occur after the close of the relevant market, but prior to the NYSE close, that materially affect the values of a Fund’s securities or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the securities trade do not open for trading for the entire day and no other market prices are available.

The Board has delegated to WRSCO the responsibility for monitoring significant events that may materially affect the values of a Fund’s securities or assets and for determining whether the value of the applicable securities or assets should be re-evaluated in light of such significant events. The Board has established a Valuation Committee to administer and oversee the valuation process, including the use of third party pricing vendors.

The Board has adopted methods for valuing securities and other assets in circumstances where market quotes are not readily available. For instances in which daily market quotes are not readily available, investments may be valued, pursuant to procedures established by the Board, with reference to other securities or indices. In the event that the security or asset cannot be valued pursuant to one of the valuation methods established by the Board, the value of the security or asset will be determined in good faith by the Valuation Committee in accordance with the procedures adopted by the Board.

When a Fund uses these fair valuation methods applied by WRSCO that use significant unobservable inputs to determine its NAV, securities will be priced by a method that the Board or persons acting at their direction believe accurately reflects fair value and are categorized as Level 3 of the fair value hierarchy. These methods may require subjective determinations about the value of a security. The prices used by a Fund may differ from the value that will ultimately be realized at the time the securities are sold.

WRSCO is responsible for monitoring the implementation of the pricing and valuation policies through a series of activities to provide reasonable comfort of the accuracy of prices including: 1) periodic vendor due diligence meetings to review methodologies, new developments, and process at vendors, 2) daily and monthly multi-source pricing comparisons reviewed and submitted to the Valuation Committee, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by management and the Valuation Committee.

Accounting standards establish a framework for measuring fair value and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the factors that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

An individual investment’s fair value measurement is assigned a level based upon the observability of the inputs which are significant to the overall valuation.

The three-tier hierarchy of inputs is summarized as follows:

Level 1 – Observable input such as quoted prices, available in active markets, for identical assets or liabilities.

Level 2 – Significant other observable inputs, which may include, but are not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market corroborated inputs.

Level 3 – Significant unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available, which may include assumptions made by the Board or persons acting at their direction that are used in determining the fair value of investments.

A description of the valuation techniques applied to the Funds’ major classes of assets and liabilities measured at fair value on a recurring basis follows:

Asset-Backed Securities and Mortgage-Backed Securities. The fair value of asset-backed securities and mortgage-backed securities are estimated using recently executed transactions and based on models that consider the estimated cash flows of each debt tranche of the issuer, establish a benchmark yield, and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche including, but not limited to, the prepayment speed assumptions and attributes of the collateral. To the extent the inputs are observable and timely, the values would be categorized in Level 2 of the fair value hierarchy, and otherwise they would be categorized as Level 3.

Bullion. The fair value of bullion is at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded and are categorized in Level 1 of the fair value hierarchy.

Corporate Bonds. The fair value of corporate bonds, as obtained from an independent pricing service, is estimated using various techniques, which consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, fundamental data relating to the issuer, and credit default swap spreads adjusted for any basis difference between cash and derivative instruments. While most corporate bonds are categorized in Level 2 of the fair value hierarchy, in instances where lower relative weight is placed on transaction prices, quotations, or similar observable inputs, they are categorized in Level 3 of the fair value hierarchy.

 

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Derivative Instruments. Forward foreign currency contracts are valued based upon the closing prices of the forward currency rates determined at the close of the NYSE provided by an independent pricing service. Swaps derive their value from underlying asset prices, indices, reference rates and other inputs or a combination of these factors. Swaps are valued by an independent pricing service unless the price is unavailable, in which case they are valued at the price provided by a dealer in that security. Futures contracts traded on an exchange are generally valued at the settlement price. Listed options are ordinarily valued at the mean of the last bid and ask price provided by an independent pricing service unless the price is unavailable, in which case they are valued at a quotation obtained from a broker-dealer. Over-the-counter (“OTC”) options are ordinarily valued at the mean of the last bid and ask price provided by an independent pricing service for a comparable listed option unless such a price is unavailable, in which case they are valued at a quotation obtained from a broker-dealer. If no comparable listed option exists from which to obtain a price from an independent pricing service and a quotation cannot be obtained from a broker-dealer, the OTC option will be valued using a model reasonably designed to provide a current market price.

Listed derivatives that are actively traded are valued based on quoted prices from the exchange and are categorized in Level 1 of the fair value hierarchy. OTC derivative contracts include forward foreign currency contracts, swap agreements, and option contracts related to interest rates, foreign currencies, credit standing of reference entities, equity prices, or commodity prices. Depending on the product and the terms of the transaction, the fair value of the OTC derivative products are modeled taking into account the counterparties’ creditworthiness and using a series of techniques, including simulation models. Many pricing models do not entail material subjectivity because the methodologies employed do not necessitate significant judgments and the pricing inputs are observed from actively quoted markets, as is the case with interest rate swap and option contracts. OTC derivative products valued using pricing models with significant observable inputs are categorized within Level 2 of the fair value hierarchy.

Equity Securities. Equity securities traded on U.S. or foreign securities exchanges or included in a national market system are valued at the official closing price at the close of each business day unless otherwise stated below. OTC equity securities and listed securities for which no price is readily available are valued at the average of the last bid and asked prices.

Mutual funds, including investment funds, typically are valued at the NAV reported as of the valuation date.

Securities that are stated at the last reported sales price or closing price on the day of valuation taken from the primary exchange where the security is principally traded and to the extent these securities are actively traded and valuation adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy.

Foreign securities, for which the primary trading market closes at the same time or after the NYSE, are valued based on quotations from the primary market in which they are traded and categorized in Level 1. Because many foreign securities markets and exchanges close prior to the close of the NYSE, closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after that close. Certain foreign securities may be fair valued using a pricing service that considers the correlation of the trading patterns of the foreign security to the intra-day trading in the U.S. markets for investments such as American Depositary Receipts, financial futures, exchange-traded funds, and the movement of certain indices of securities based on a statistical analysis of their historical relationship; such valuations generally are categorized in Level 2.

Preferred stock, repurchase agreements, and other equities traded on inactive markets or valued by reference to similar instruments are also generally categorized in Level 2.

Loans. Loans are valued using a price or composite price from one or more brokers or dealers as obtained from an independent pricing service. The fair value of loans is estimated using recently executed transactions, market price quotations, credit/market events, and cross-asset pricing. Inputs are generally observable market inputs obtained from independent sources. Loans are generally categorized in Level 2 of the fair value hierarchy, unless key inputs are unobservable in which case they would be categorized as Level 3.

Municipal Bonds. Municipal bonds are fair valued based on pricing models used by and obtained from an independent pricing service that take into account, among other factors, information received from market makers and broker-dealers, current trades, bid-wants lists, offerings, market movements, the callability of the bond, state of issuance, benchmark yield curves, and bond insurance. To the extent that these inputs are observable and timely, the fair values of municipal bonds would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.

Restricted Securities. Restricted securities that are deemed to be both Rule 144A securities and illiquid, as well as restricted securities held in non-public entities, are included in Level 3 of the fair value hierarchy to the extent that significant inputs to valuation are unobservable, because they trade infrequently, and, therefore, the inputs are unobservable. Restricted securities that are valued at a discount to similar publicly traded securities may be categorized as Level 2 of the fair value hierarchy to the extent that the discount is considered to be insignificant to the fair value measurement in its entirety; otherwise they may be categorized as Level 3.

U.S. Government and Agency Securities. U.S. government and agency securities are normally valued using a model that incorporates market observable data such as reported sales of similar securities, broker quotes, yields, bids, offers, quoted market prices, and reference data. Accordingly, U.S. government and agency securities are normally categorized in Level 1 or 2 of the fair value hierarchy depending on the liquidity and transparency of the market.

Transfers from Level 2 to Level 3 occurred primarily due to the lack of observable market data due to decreased market activity or information for these securities. Transfers from Level 3 to Level 2 occurred primarily due to the increased availability of observable market data due to increased market activity or information. Transfers between levels represent the values as of the beginning of the reporting period.

 

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For fair valuations using unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances for reported fair values that presents changes attributable to total realized and unrealized gains or losses, purchases and sales, and transfers in or out of the Level 3 category during the period. In accordance with the requirements of U.S. GAAP, a fair value hierarchy and Level 3 reconciliation, if any, have been included in the Notes to the Schedule of Investments for each respective Fund.

Net realized gain (loss) and net unrealized appreciation (depreciation), shown on the reconciliation of Level 3 investments if applicable, are included on the Statement of Operations in net realized gain (loss) on investments in unaffiliated and/or affiliated securities and in net change in unrealized appreciation (depreciation) on investments in unaffiliated and/or affiliated securities, respectively. Additionally, the net change in unrealized appreciation (depreciation) for all Level 3 investments still held as of March 31, 2016, if applicable, is included on the Statement of Operations in net change in unrealized appreciation (depreciation) on investments in unaffiliated and/or affiliated securities.

 

4.   DERIVATIVE INSTRUMENTS ($ amounts in thousands unless indicated otherwise)

The following disclosures contain information on why and how the Funds use derivative instruments, the associated risks of investing in derivative instruments, and how derivative instruments affect the Funds’ financial positions and results of operations when presented by primary underlying risk exposure.

Forward Foreign Currency Contracts. Certain Funds may enter into forward foreign currency contracts (“forward contracts”) for the purchase or sale of a foreign currency at a negotiated rate at a future date. Forward contracts are reported on a schedule following the Schedule of Investments. Forward contracts will be valued daily based upon the closing prices of the forward currency rates provided by an independent pricing service determined at the close of the NYSE as provided by a bank, dealer or independent pricing service. The resulting unrealized appreciation and depreciation is reported on the Statement of Assets and Liabilities as a receivable or payable and on the Statement of Operations within the change in unrealized appreciation (depreciation). At contract close, the difference between the original cost of the contract and the value at the close date is recorded as a realized gain (loss) on the Statement of Operations.

Risks to a Fund related to the use of such contracts include both market and credit risk. Market risk is the risk that the value of the forward contract will depreciate due to unfavorable changes in the exchange rates. Credit risk arises from the possibility that the counterparty will default. If the counterparty defaults, a Fund’s maximum loss will consist of the aggregate unrealized gain on appreciated contracts that is not collateralized.

Ivy Asset Strategy Fund and Ivy Global Natural Resources Fund enter into forward foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to, or hedge exposure away from foreign currencies (foreign currency exchange rate risk).

Futures Contracts. Certain Funds may engage in buying and selling futures contracts. Upon entering into a futures contract, the Fund is required to deposit, in a segregated account, an amount 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 Fund each day, dependent on the daily fluctuations in the value of the underlying debt security or index.

Futures contracts are reported on a schedule following the Schedule of Investments. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are identified on the Schedule of Investments. Cash held by the broker to cover initial margin requirements on open futures contracts and the receivable and/or payable for the daily mark to market for the variation margin are noted on the Statement of Assets and Liabilities. The net change in unrealized appreciation (depreciation) is reported on the Statement of Operations. Realized gains (losses) are reported on the Statement of Operations at the closing or expiration of futures contracts.

Risks of entering into futures contracts include the possibility of loss of securities or cash held as collateral, that there may be an illiquid market where the Fund is unable to close the contract or enter into an offsetting position and, if used for hedging purposes, the risk that the price of the contract will correlate imperfectly with the prices of the Fund’s securities.

Ivy Asset Strategy Fund invests in long and/or short positions in futures contracts to gain exposure to, or economically hedge against, changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Option Contracts. Options purchased by a Fund are accounted for in the same manner as portfolio securities. The cost of instruments acquired through the exercise of call options is increased by the premium paid to purchase the call. The proceeds from instruments sold through the exercise of put options are decreased by the premium paid to purchase the put.

When a 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 value of the option written. When an option expires on its stipulated expiration date or a 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 written call option is exercised, the premium is added to the proceeds from the sale of the underlying instrument in determining whether a Fund has realized a gain or loss. For each Fund, when a written put is exercised, the cost basis of the instruments purchased by a Fund is reduced by the amount of the premium received.

Investments in options, whether purchased or written, involve certain risks. Writing put options and purchasing call options may increase a Fund’s exposure to the underlying instrument. With written options, there may be times when a Fund will be required to purchase or sell instruments to meet its obligation under the option contract where the required action is not beneficial to the Fund, due to unfavorable movement of the market price of the underlying instrument. Additionally, to the extent a Fund enters into OTC option transactions with counterparties, the Fund will be exposed to the risk that counterparties to these OTC transactions will be unable to meet their obligations under the terms of the transaction.

 

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Ivy Asset Strategy Fund, Ivy Balanced Fund and Ivy Science and Technology Fund may purchase and write call and put options to increase or decrease hedging exposure to underlying instruments (which may include credit risk, equity risk, foreign currency exchange rate risk, event risk and/or interest rate risk), increase exposure to various equity markets or certain sectors, gain exposure to or facilitate trading in certain securities and/or, in the case of options written, to generate returns from options premiums.

Collateral and rights of offset. A Fund may mitigate credit risk with respect to OTC derivative counterparties through credit support annexes (“CSA”) included with an International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreement which is the standard contract governing most derivative transactions between the Fund and each of its counterparties. The CSA allows the Fund and its counterparty to offset certain derivative financial instruments’ payables and/or receivables against each other and/or with collateral, which is generally held by the Fund’s custodian. The amount of collateral moved to/from applicable counterparties is based upon minimum transfer amounts specified in the CSA. To the extent amounts due to the Fund from its counterparties are not fully collateralized contractually or otherwise, the Fund bears the risk of loss from counterparty non-performance. See Note 2 “Segregation and Collateralization” for additional information with respect to collateral practices.

Offsetting of Assets and Liabilities. The following tables present financial instruments that are either (1) offset or (2) subject to an enforceable master netting arrangement or similar agreement as of March 31, 2016:

Assets

 

                          Gross Amounts Not Offset on the
Statement of Assets and Liabilities		  
Fund    Gross
Amounts of
Recognized
Assets		      Gross Amounts
Offset on the
Statement of
Assets and
Liabilities		      Net Amounts
of Assets
Presented on
the Statement
of Assets and
Liabilities		      Financial
Instruments and
Derivatives
Available for
Offset		     Non-Cash
Collateral
Received		     Cash
Collateral
Received		     Net
Amount
Receivable		  

Ivy Global Natural Resources Fund

                  

Unrealized appreciation on forward foreign currency
contracts(1)

    $ 321       $ —       $ 321       $ (67 )    $ (254 )    $ —      $ —   

Ivy Science and Technology Fund

                  

Investments in unaffiliated securities at value*

    $ 938       $ —       $ 938       $ (37 )    $ —      $ (280 )    $ 621   

 

* Purchased options are reported as investments in unaffiliated securities on the Statement of Assets and Liabilities.

 

(1) Amounts include forward contracts that have an offset to an open and close contract, but have not settled. These amounts are included on the Statement of Assets and Liabilities line item for Investment securities sold receivable.

Liabilities

 

                          Gross Amounts Not Offset on the
Statement of Assets and Liabilities		  
Fund    Gross
Amounts of
Recognized
Liabilities		      Gross Amounts
Offset on the
Statement of
Assets and
Liabilities		      Net Amounts
of Liabilities
Presented on
the Statement
of Assets and
Liabilities		      Financial
Instruments and
Derivatives
Available for
Offset		     Non-Cash
Collateral
Pledged		     Cash
Collateral
Pledged		      Net
Amount
Payable		  

Ivy Asset Strategy Fund

                   

Unrealized depreciation on forward foreign currency contracts

    $ 732       $ —       $ 732       $ —      $ (528 )    $ —       $ 204   

Ivy Global Natural Resources Fund

                   

Unrealized depreciation on forward foreign currency contracts(1)

    $ 67       $ —       $ 67       $ (67 )    $ —      $ —       $ —   

Ivy Science and Technology Fund

                   

Written options at value

    $ 37       $ —       $ 37       $ (37 )    $ —      $ —       $ —   

 

(1) Amounts include forward contracts that have an offset to an open and close contract, but have not settled. These amounts are included on the Statement of Assets and Liabilities line item for Investment securities purchased payable.

 

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Additional Disclosure Related to Derivative Instruments

Fair values of derivative instruments as of March 31, 2016:

 

       

Assets

    

Liabilities

  
Fund   Type of Risk
Exposure		   Statement of Assets & Liabilities Location   Value     Statement of Assets & Liabilities Location   Value  
Ivy Asset Strategy Fund   Foreign currency       $ —      Unrealized depreciation on forward foreign currency contracts   $ 732   
Ivy Balanced Fund   Equity   Investments in unaffiliated securities at value*     11,228      Written options at value     1,911   
Ivy Global Natural Resources Fund   Foreign currency   Unrealized appreciation on forward foreign currency contracts     320      Unrealized depreciation on forward foreign currency contracts     65   
Ivy Science and Technology Fund   Equity   Investments in unaffiliated securities at value*     938      Written options at value     37   

 

* Purchased options are reported as investments in unaffiliated securities and are reflected on the accompanying Schedule of Investments.

Amount of realized gain (loss) on derivatives recognized on the Statement of Operations for the year ended March 31, 2016:

 

        Net realized gain (loss) on:        
Fund   Type of Risk
Exposure		   Investments in
unaffiliated
securities*		     Swap
agreements		     Futures
contracts		     Written
options		     Forward
foreign
currency
contracts		     Total  
Ivy Asset Strategy Fund   Equity   $ (205,815)      $ —      $ (48,660)      $ 103,916      $ —      $ (150,559)   
    Foreign currency     —        —        —        —        (52,506 )      (52,506 ) 

Ivy Balanced Fund

   Equity     (10,725 )      —        —        547        —        (10,178 ) 

Ivy Global Natural Resources Fund

   Foreign currency     —        —        —        —        712        712   

Ivy Science and Technology Fund

   Equity     (9,737 )      —        —        2,757        —        (6,980 ) 

* Purchased options are reported as investments in unaffiliated securities and are reflected on the accompanying Schedule of Investments.

Change in unrealized appreciation (depreciation) on derivatives recognized on the Statement of Operations for the year ended March 31, 2016:

 

        Net change in unrealized appreciation (depreciation) on:        
Fund   Type of Risk
Exposure		   Investments in
unaffiliated
securities*		     Swap
agreements		     Futures
contracts		     Written
options		     Forward
foreign
currency
contracts		     Total  
Ivy Asset Strategy Fund   Equity   $ 15,155      $ —      $ (4,323)      $ (14,500)      $ —      $ (3,668)   
    Foreign currency     —        —        —        —        7,454        7,454   

Ivy Balanced Fund

   Equity     (15,179 )      —        —        2,654        —        (12,525 ) 

Ivy Global Natural Resources Fund

   Foreign currency     —        —        —        —        (1,028 )      (1,028 ) 

Ivy Science and Technology Fund

   Equity     (493 )      —        —        1,425        —        932   

* Purchased options are reported as investments in unaffiliated securities and are reflected on the accompanying Schedule of Investments.

During the year ended March 31, 2016, the average derivative volume was as follows:

 

Fund    Forward foreign
currency contracts(1)		      Long  futures
contracts(1)		      Short  futures
contracts(1)		      Swap
agreements(2)		      Purchased
options(1)		      Written
options(1)		  

Ivy Asset Strategy Fund

    $ 60,962       $ 314,665       $ 32,589       $ —       $ 39,673       $ 30,641   

Ivy Balanced Fund

      —         —         —         —         1,927         213   

Ivy Global Natural Resources Fund

      184         —         —         —         —         —   

Ivy Science and Technology Fund

      —         —         —         —         1,448         3,384   

 

(1) Average value outstanding during the period.

 

(2) Average notional amount outstanding during the period.

 

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5.   WRITTEN OPTION ACTIVITY ($ amounts in thousands)

Transactions in written options were as follows:

 

Fund    Outstanding
at 3-31-15		      Options
written		      Options
closed		     Options
exercised		     Options
expired		     Outstanding
at 3-31-16		  

Ivy Asset Strategy Fund

               

Number of Contracts

      221,899         987,200         (430,852 )      (196,719 )      (581,528 )      N/A   

Premium Received

    $ 32,247       $ 229,229       $ (116,519 )    $ (36,204 )    $ (108,753 )      N/A   

Ivy Balanced Fund

               

Number of Contracts

      N/A         8,465         (950 )      —        —        7,515   

Premium Received

      N/A       $ 5,123       $ (558 )    $ —      $ —      $ 4,565   

Ivy Science and Technology Fund

               

Number of Contracts

      N/A         159,504         (125,354 )      (1,755 )      (3,077 )      29,318   

Premium Received

      N/A       $ 31,432       $ (29,355 )    $ (520 )    $ (95 )    $ 1,462   

 

6.   BASIS FOR CONSOLIDATION OF THE IVY ASSET STRATEGY FUND

Ivy ASF II, Ltd. (the “Subsidiary”), a Cayman Islands exempted company, was incorporated as a wholly owned subsidiary acting as an investment vehicle for the Ivy Asset Strategy Fund (referred to as “the Fund” in this subsection). Ivy ASF III (SBP), LLC and Ivy ASF, LLC (each a “Company”, collectively “the Companies”), Delaware limited liability companies, were incorporated as wholly owned companies acting as investment vehicles for the Fund. The Subsidiary and each Company acts as an investment vehicle for the Fund, in order to effect certain investments for the Fund consistent with the Fund’s investment objectives and policies as specified in its prospectus and SAI.

The Fund’s investment portfolio has been consolidated and includes the portfolio holdings of the Fund, its Subsidiary and the Companies. The consolidated financial statements include the accounts of the Fund and its Subsidiary and the Companies. All inter-company transactions and balances have been eliminated. A subscription agreement was entered into between the Fund and its Subsidiary and each Company comprising the entire issued share capital of the Subsidiary and each Company with the intent that the Fund will remain the sole shareholder and retain all rights. Under the Articles of Association, shares issued by the Subsidiary and each Company confer upon a shareholder the right to receive notice of, to attend and to vote at general meetings of the Subsidiary and each Company and shall confer upon the shareholder rights in a winding-up or repayment of capital and the right to participate in the profits or assets of the Subsidiary and each Company.

See the table below for details regarding the structure, incorporation and relationship as of March 31, 2016 of the Subsidiary and each Company to the Fund (amounts in thousands).

 

Subsidiary/Company   Date of
Incorporation		      Subscription
Agreement		      Fund Net
Assets		      Subsidiary
Net Assets		     

Percentage of Fund

Net Assets

  

Ivy ASF II, Ltd.

     1-31-13         4-10-13       $ 10,297,159       $ 651,969         6.33 % 

Ivy ASF III (SBP), LLC

     4-9-13         4-23-13       $ 10,297,159         321,341         3.12   

Ivy ASF, LLC

     12-10-12         12-18-12       $ 10,297,159         27,327         0.27   

 

7.   INVESTMENT MANAGEMENT AND PAYMENTS TO AFFILIATED PERSONS ($ amounts in thousands unless indicated otherwise)

Management Fees. IICO, a wholly owned subsidiary of Waddell & Reed Financial, Inc. (“WDR”), serves as each Fund’s investment manager. The management fee is accrued daily by each Fund at the following annual rates as a percentage of average daily net assets:

 

Fund (M - Millions)   $0 to
$500M		     $500 to
$1,000M		     $1,000 to
$2,000M		     $2,000 to
$3,000M		     $3,000 to
$5,000M		     $5,000 to
$8,000M		     $8,000 to
$10,000M		     $10,000 to
$13,000M		     $13,000 to
$28,000M		     $28,000 to
$53,000M		     Over
$53,000M		  

Ivy Asset Strategy Fund

     0.700 %      0.700 %      0.650 %      0.600 %      0.550 %      0.550 %      0.550 %      0.550 %      0.550 %      0.545 %      0.540 % 

Ivy Balanced Fund

     0.700        0.700        0.650        0.600        0.550        0.540        0.540        0.530        0.530        0.530        0.530   

Ivy Energy Fund

     0.850        0.850        0.830        0.800        0.760        0.750        0.750        0.740        0.740        0.740        0.740   

Ivy Global Natural Resources Fund

     1.000        0.850        0.830        0.800        0.760        0.730        0.730        0.700        0.700        0.700        0.700   

Ivy LaSalle Global Real Estate Fund

     0.950        0.950        0.920        0.870        0.840        0.820        0.820        0.800        0.800        0.800        0.800   

Ivy LaSalle Global Risk-Managed Real Estate Fund

     0.950        0.950        0.920        0.870        0.840        0.820        0.820        0.800        0.800        0.800        0.800   

Ivy Real Estate Securities Fund

     0.900        0.900        0.870        0.840        0.800        0.760        0.760        0.720        0.720        0.720        0.720   

Ivy Science and Technology Fund

     0.850        0.850        0.830        0.800        0.760        0.760        0.755        0.755        0.750        0.750        0.750   

 

98   ANNUAL REPORT   2016  

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For Funds managed solely by IICO, IICO has voluntarily agreed to waive a Fund’s management fee on any day that the Fund’s net assets are less than $25 million, subject to IICO’s right to change or modify this waiver. See Expense Reimbursements and/or Waivers below for amounts waived during the year ended March 31, 2016.

IICO has entered into Subadvisory Agreements with the following entities on behalf of certain Funds:

Under an agreement between IICO and Advantus Capital Management, Inc. (“Advantus”), Advantus serves as subadviser to Ivy Real Estate Securities Fund. Under an agreement between IICO and LaSalle Investment Management Securities, LLC (“LaSalle”), LaSalle serves as subadviser to Ivy LaSalle Global Real Estate Fund and Ivy LaSalle Global Risk-Managed Real Estate Fund. Each subadviser makes investment decisions in accordance with the Fund’s investment objectives, policies and restrictions under the supervision of IICO and the oversight of the Board. IICO pays all applicable costs of the subadvisers.

Accounting Services Fees. The Trust has an Accounting and Administrative Services Agreement with WRSCO, doing business as WI Services Company (“WISC”), an indirect subsidiary of WDR. Under the agreement, WISC acts as the agent in providing bookkeeping and accounting services and assistance to the Trust, including maintenance of Fund records, pricing of Fund shares and preparation of certain shareholder reports. For these services, each Fund pays WISC a monthly fee of one-twelfth of the annual fee based on the average net asset levels shown in the following table:

 

(M - Millions)    $0 to
$10M		      $10 to
$25M		      $25 to
$50M		      $50 to
$100M		      $100 to
$200M		      $200 to
$350M		      $350 to
$550M		      $550 to
$750M		      $750 to
$1,000M		      Over
$1,000M		  

Annual Fee Rate

    $ 0.00       $ 11.50       $ 23.10       $ 35.50       $ 48.40       $ 63.20       $ 82.50       $ 96.30       $ 121.60       $ 148.50   

In addition, for each class of shares in excess of one, each Fund pays WISC a monthly per-class fee equal to 2.5% of the monthly accounting services base fee.

Each Fund also pays WISC a monthly administrative fee at the annual rate of 0.01%, or one basis point, for the first $1 billion of net assets with no fee charged for net assets in excess of $1 billion. This fee is voluntarily waived by WISC until a Fund’s net assets are at least $10 million and is included in “Accounting services fee” on the Statement of Operations.

Shareholder Servicing. General. Under the Shareholder Servicing Agreement between the Trust and WISC, with respect to Class A, Class B, Class C and Class E shares, for each shareholder account that was in existence at any time during the prior month, each Fund pays a monthly fee that ranges from $1.5042 to $1.6958 per account; however, WISC has agreed to reduce that fee if the number of total shareholder accounts within the Complex (Waddell & Reed Advisors Funds, InvestEd Portfolios and Ivy Funds) reaches certain levels. Effective June 6, 2011 for Class R shares, each Fund pays a monthly fee equal to one-twelfth of 0.25 of 1% of the average daily net assets of the class for the preceding month. Prior to June 6, 2011 the fee was 0.20 of 1%. For Class I and Class Y shares, each Fund pays a monthly fee equal to one-twelfth of 0.15 of 1% of the average daily net assets of the class for the preceding month. For Class R6 shares, each Fund pays WISC a monthly fee equal to one-twelfth of 0.01 of 1% of the average daily net assets of the class for the preceding month. Each Fund also reimburses WISC for certain out-of-pocket costs for all classes.

Networked accounts. For certain networked accounts (that is, those accounts whose Fund shares are purchased through certain financial intermediaries), WISC has agreed to reduce its per account fees charged to the Funds to $0.50 per month per shareholder account. Additional fees may be paid by the Funds to those intermediaries. The Fund will reimburse WISC for such costs if the annual rate of the third-party per account charges for a Fund are less than or equal to $12.00 per account or an annual fee of 0.14 of 1% that is based on average daily net assets.

Broker accounts. Certain broker-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 WISC if the individual accounts that comprise the omnibus account were opened by their beneficial owners directly. Each Fund may pay such broker-dealers a per account fee for each open account within the omnibus account (up to $18.00 per account), or a fixed rate fee (up to an annual fee of 0.20 of 1% that is based on average daily net assets), based on the average daily NAV of the omnibus account (or a combination thereof).

Distribution and Service Plan. Class A and Class E Shares. Under a Distribution and Service Plan adopted by the Trust pursuant to Rule 12b–1 under the 1940 Act (the “Distribution and Service Plan”), each Fund may pay a distribution and/or service fee to Ivy Funds Distributors, Inc. (“IFDI”) for Class A and Class E shares in an amount not to exceed 0.25% of the Fund’s average annual net assets. The fee is to be paid to compensate IFDI for amounts it expends in connection with the distribution of the Class A and Class E shares and/or provision of personal services to Fund shareholders and/or maintenance of shareholder accounts of that class.

Class B and Class C Shares. Under the Distribution and Service Plan, each Fund may pay IFDI a service fee not to exceed 0.25% and a distribution fee not to exceed 0.75% of the Fund’s average annual net assets for Class B and Class C shares to compensate IFDI for its services in connection with the distribution of shares of that class and/or provision of personal services to Class B or Class C shareholders and/or maintenance of shareholder accounts of that class.

Class R Shares. Under the Distribution and Service Plan, each Fund may pay IFDI a fee of up to 0.50%, on an annual basis, of the average daily net assets of the Fund’s Class R shares to compensate IFDI for, either directly or through third parties, distributing the Class R shares of that Fund, providing personal services to Class R shareholders and/or maintaining Class R shareholder accounts.

Class Y Shares. Under the Distribution and Service Plan, each 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 services to Class Y shareholders and/or maintaining Class Y shareholder accounts.

 

  2016   ANNUAL REPORT   99

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Sales Charges. As principal underwriter for the Trust’s shares, IFDI receives sales commissions (which are not an expense of the Trust) for sales of Class A and Class E shares. A CDSC may be assessed against a shareholder’s redemption amount of Class B, Class C or certain Class A and Class E shares and is paid to IFDI. During the year ended March 31, 2016, IFDI received the following amounts in sales commissions and CDSCs:

 

     Gross Sales
Commissions		      CDSC      Commissions
Paid(1)		  
         Class A     Class B      Class C     Class E     

Ivy Asset Strategy Fund

    $ 1,297       $ 31      $ 869       $ 504      $ —       $ 2,475   

Ivy Balanced Fund

      1,097         12        119         98        —         1,920   

Ivy Energy Fund

      297         6        6         40        —         474   

Ivy Global Natural Resources Fund

      385         2        16         8        —         400   

Ivy LaSalle Global Real Estate Fund

      27         — *      —         — *      N/A         24   

Ivy LaSalle Global Risk-Managed Real Estate Fund

      39         — *      1         — *      N/A         39   

Ivy Real Estate Securities Fund

      335         2        8         7        —         317   

Ivy Science and Technology Fund

      1,278         3        68         143        —         2,113   

 

* Not shown due to rounding.

 

(1) IFDI reallowed/paid this portion of the sales charge to financial advisors and selling broker-dealers.

Expense Reimbursements and/or Waivers. Fund and class expense limitations and related waivers/reimbursements for the year ended March 31, 2016 were as follows:

 

Fund Name    Share
Class
Name		    Type of
Expense
Limit		    Commencement
Date		    End Date    Expense
Limit		    Amount of
Expense Waiver/
Reimbursement		   Expense Reduced

Ivy Asset Strategy Fund

    Class E    Contractual    8-1-2008    7-31-2016    1.00%      $ 85     12b-1 Fees and/or Shareholder Servicing
     Class Y    Contractual    8-1-2011    7-31-2016    Not to exceed Class A      $ 81     12b-1 Fees and/or Shareholder Servicing

Ivy Balanced Fund

    Class Y    Contractual    8-1-2011    7-31-2016    Not to exceed Class A      $ —     N/A

Ivy Energy Fund

    Class Y    Contractual    8-1-2011    7-31-2016    Not to exceed Class A      $ —     N/A

Ivy Global Natural Resources Fund

    Class E    Contractual    8-1-2008    7-31-2016    1.27%      $ 49     12b-1 Fees and/or Shareholder Servicing
     Class Y    Contractual    8-1-2011    7-31-2016    Not to exceed Class A      $ —     N/A

Ivy LaSalle Global Real Estate Fund

    Class A    Contractual    4-1-2013    7-31-2016    1.51%      $ 176     12b-1 Fees and/or Shareholder Servicing
     Class Y    Contractual    4-1-2013    7-31-2016    Not to exceed Class A      $ 3     12b-1 Fees and/or Shareholder Servicing

Ivy LaSalle Global Risk-Managed Real Estate Fund

    Class A    Contractual    4-1-2013    7-31-2016    1.51%      $ 117     12b-1 Fees and/or Shareholder Servicing
     Class Y    Contractual    4-1-2013    7-31-2016    Not to exceed Class A      $ 6     12b-1 Fees and/or Shareholder Servicing

Ivy Real Estate Securities Fund

    All Classes    Contractual    12-3-2012    7-31-2016    N/A      $ 695 (1)   Investment Management Fee
   Class E    Contractual    8-1-2008    7-31-2016    1.45%(2)      $ 8     12b-1 Fees and/or Shareholder Servicing
     Class Y    Contractual    8-1-2011    7-31-2016    Not to exceed Class A      $ —     N/A

Ivy Science and Technology Fund

    Class E    Contractual    8-1-2008    7-31-2016    1.40%(2)      $ 27     12b-1 Fees and/or Shareholder Servicing
     Class Y    Contractual    8-1-2011    7-31-2016    Not to exceed Class A      $ —     N/A

 

(1) The Fund’s investment management fee is being reduced by 0.10% of average daily net assets until July 31, 2016.

 

(2) Reflects the lower contractual expense limit which went into effect August 1, 2015.

Any amounts due to the Funds as a reimbursement but not paid as of March 31, 2016 are shown as a receivable from affiliates on the Statement of Assets and Liabilities.

 

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8.   RELATED PARTY TRANSACTIONS

Certain Funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board. The procedures have been designed to ensure that any purchase or sale of securities by the Funds from or to another fund or portfolio that are, or could be, considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the Act. Further, as defined under the procedures, each transaction is effected at the current market price. During the year ended March 31, 2016, the Funds below engaged in purchases and sales of securities pursuant to Rule 17a-7 of the Act (amounts in thousands):

 

Fund    Purchases      Sales  

Ivy Asset Strategy Fund

    $ —       $ 19,271   

Ivy Balanced Fund

      50,562         1,609   

 

9.   INTERFUND LENDING PROGRAM

Pursuant to an exemptive order issued by the SEC (“Order”), the Trust and the Advisors Fund Complex (Waddell & Reed Advisors Funds, Ivy Funds Variable Insurance Portfolios and InvestEd Portfolios; referred to with the Funds for purposes of this section as Funds) have the ability to lend money to, and borrow money from, each other pursuant to a master interfund lending agreement (“Interfund Lending Program”). Under the Interfund Lending Program, the Funds may lend or borrow money for temporary purposes directly to or from one another (each an “Interfund Loan”), subject to meeting the conditions of the Order. The interest rate to be charged on an Interfund Loan is the average of the overnight repurchase agreement rate and the short-term bank loan rate. The Funds made no Interfund Loans under the Interfund Lending Program during the year ended March 31, 2016.

 

10.   AFFILIATED COMPANY TRANSACTIONS (All amounts in thousands)

A summary of the transactions in affiliated companies during the year ended March 31, 2016 follows:

 

      3-31-15
Share
Balance		      Purchases
at cost		      Sales at
Cost		      Realized
Gain/(Loss)		     Distributions
Received		      3-31-16
Share
Balance		      3-31-16
Value		  

Ivy Asset Strategy Fund

                    

Legend Pictures LLC(1)(2)

      190       $ —       $ 352,761       $ (25,440 )    $ —         N/A         N/A   

Media Group Holdings LLC, Series H(1)

      640         —         —         —        —         640       $ 60,093   

Media Group Holdings LLC, Series I(1)

      381         —         —         —        —         381         151,166   

Media Group Holdings LLC, Series T(1)

      80         —         —         —        —         80         110,007   
           

 

 

    

 

 

        

 

 

  
            $ (25,440 )    $ —          $ 321,266   
           

 

 

    

 

 

        

 

 

  
     

3-31-15

Principal

Balance

                             Interest
Received		      3-31-16
Principal
Balance		          

Legendary Pictures Funding LLC and Legendary Finance, Inc., 8.000%, 3-15-18(2)

    $ 351,700       $ —       $ 351,700       $ (20,688 )    $ 14,068         N/A         N/A   
      3-31-15
Share
Balance		      Purchases
at cost		      Sales at
Cost		      Realized
Gain/(Loss)		     Distributions
Received		      3-31-16
Share
Balance		      3-31-16
Value		  

Ivy Science and Technology Fund

                    

ACI Worldwide, Inc(1).

      8,022       $ 13,960       $ —       $  — *    $ —         8,611       $ 179,030   

Acxiom Corp.(1)

      6,256         —         —         —        —         6,256         134,136   

Arcadia Biosciences, Inc(1).

      N/A         25,097         —         —        —         3,161         8,788   

Aspen Technology, Inc.(1)

      5,185         235         —         —        —         5,192         187,569   

Avinger, Inc.(1)

      1,361         39         —         —        —         1,363         13,062   

BioAmber, Inc.(1)

      2,558         16,385         —         —        —         4,883         20,507   

BioAmber, Inc, Warrants(1).

      1,276         —         —         —        —         1,276         2,240   

Euronet Worldwide Inc.(1)

      3,845         2,883         30,730         15,139        —         3,271         242,396   

Evogene Ltd.(1)

      1,695         1,564         —         —        —         1,852         12,056   

iGATE Corp.(1)(2)

      5,590         —         146,120         119,121        —         N/A         N/A   

Marrone Bio Innovations, Inc.(1)

      2,608         —         —         —        —         2,608         2,347   

Marrone Bio Innovations, Inc., Warrants(1)

      N/A         —         —         —        —         2,390         — * 

Nanometrics, Inc.(1)

      1,438         —         —         —        —         1,438         22,785   

Photronics, Inc.(1)

      3,717         7,145         —         —        —         4,528         47,141   

Rambus, Inc.(1)

      6,607         —         —         —        —         6,607         90,841   

Semtech Corp.(1)

      3,400         11,242         —         —        —         3,890         85,543   

Silver Spring Networks, Inc.(1)

      4,810         —         —         —        —         4,810         70,944   

WNS (Holdings) Ltd. ADR(1)

      5,981         9,656         —         —        —         6,346         194,456   
           

 

 

    

 

 

        

 

 

  
            $ 134,260      $  —          $ 1,313,841   
           

 

 

    

 

 

        

 

 

  

 

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3-31-15

Principal

Balance

                              Interest
Received		      3-31-16
Principal
Balance		          

Marrone Bio Innovations, Inc., 8.000%, 8-20-20

      N/A       $ 23,900       $ —       $ —       $ 697       $ 23,900       $ 23,876   

 

* Not shown due to rounding.

 

(1) No dividends were paid during the preceding 12 months.

 

(2) No longer affiliated as of March 31, 2016.

 

11.   INVESTMENT SECURITIES TRANSACTIONS ($ amounts in thousands)

The cost of purchases and the proceeds from maturities and sales of investment securities (excluding short-term securities) for the year ended March 31, 2016, were as follows:

 

     Purchases      Sales  
      U.S. Government      Other Issuers      U.S. Government      Other Issuers  

Ivy Asset Strategy Fund

    $ 1,689,464       $ 8,808,189       $ 216,557       $ 21,442,124   

Ivy Balanced Fund

      —         1,423,295         23,165         1,336,270   

Ivy Energy Fund

      —         240,576         —         125,032   

Ivy Global Natural Resources Fund

      —         149,636         —         341,050   

Ivy LaSalle Global Real Estate Fund

      —         21,993         —         19,899   

Ivy LaSalle Global Risk-Managed Real Estate Fund

      —         58,492         —         39,039   

Ivy Real Estate Securities Fund

      —         454,921         —         524,610   

Ivy Science and Technology Fund

      —         1,351,303         —         1,339,337   

 

12.   CAPITAL SHARE TRANSACTIONS (All amounts in thousands)

The Trust has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class of each Fund. Transactions in shares of beneficial interest were as follows:

 

     Ivy Asset Strategy Fund     Ivy Balanced Fund  
     Year ended
3-31-16		     Year ended
3-31-15		     Year ended
3-31-16		     Year ended
3-31-15		  
      Shares     Value     Shares     Value     Shares     Value     Shares     Value  

Shares issued from sale of shares:

                 

Class A

      22,948      $ 551,405        47,606      $ 1,407,953        21,298      $ 513,404        19,638      $ 493,481   

Class B

      267        5,877        824        21,113        1,129        26,117        396        9,882   

Class C

      13,159        299,265        39,829        1,105,493        15,378        363,828        10,719        267,782   

Class E

      314        7,601        371        10,986        —        —        7        178   

Class I

      38,032        921,901        139,561        4,195,420        7,443        177,748        6,731        168,878   

Class R

      1,279        30,102        1,895        55,783        367        9,060        284        7,126   

Class R6

      3,915        101,824        459        14,156        162        3,872        172        4,378   

Class Y

      5,868        142,021        10,581        311,795        2,019        48,921        2,415        60,315   

Shares issued in reinvestment of distributions to shareholders:

                 

Class A

      10,548        235,013        40,400        1,039,911        2,921        69,248        1,423        35,153   

Class B

      968        20,489        3,440        84,800        130        3,055        67        1,632   

Class C

      12,107        257,989        43,546        1,079,941        1,444        34,019        607        14,917   

Class E

      162        3,631        457        11,791        — *      11        — *      7   

Class I

      10,105        227,453        47,260        1,228,281        663        15,716        363        8,965   

Class R

      283        6,259        887        22,679        26        611        10        244   

Class R6

      214        4,824        65        1,697        10        230        2        57   

Class Y

      1,687        37,676        6,795        175,308        286        6,787        189        4,676   

Shares redeemed:

                 

Class A

      (126,737 )      (2,961,582 )      (148,932 )      (4,436,234 )      (14,265 )      (342,248 )      (9,355 )      (234,360 ) 

Class B

      (9,780 )      (213,453 )      (6,800 )      (189,484 )      (662 )      (15,714 )      (424 )      (10,505 ) 

Class C

      (148,185 )      (3,251,127 )      (91,523 )      (2,544,661 )      (6,624 )      (157,888 )      (4,079 )      (101,735 ) 

Class E

      (729 )      (17,115 )      (383 )      (11,069 )      —        —        (7 )      (178 ) 

Class I

      (283,465 )      (6,589,289 )      (262,487 )      (7,677,182 )      (4,176 )      (100,151 )      (3,496 )      (87,696 ) 

Class R

      (2,657 )      (61,416 )      (1,681 )      (48,332 )      (161 )      (3,852 )      (112 )      (2,793 ) 

Class R6

      (4,032 )      (88,444 )      (57 )      (1,529 )      (96 )      (2,431 )      (24 )      (601 ) 

Class Y

      (26,758 )      (622,635 )      (21,544 )      (631,351 )      (4,095 )      (98,653 )      (1,651 )      (41,166 ) 

Net increase (decrease)

      (480,487 )    $ (10,951,731 )      (149,431 )    $ (4,772,735 )      23,197      $ 551,690        23,875      $ 598,637   

 

* Not shown due to rounding.

 

102   ANNUAL REPORT   2016  

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     Ivy Energy Fund      Ivy Global Natural Resources Fund  
     Year ended
3-31-16		      Year ended
3-31-15		      Year ended
3-31-16		      Year ended
3-31-15		  
      Shares      Value      Shares      Value      Shares      Value      Shares      Value  

Shares issued from sale of shares:

                        

Class A

      10,111       $ 120,043         12,934       $ 196,136         5,731       $ 76,137         6,383       $ 114,855   

Class B

      111         1,212         156         2,187         23         268         27         450   

Class C

      3,899         44,748         5,209         71,618         843         9,631         899         13,582   

Class E

      —         —         10         188         65         902         64         1,142   

Class I

      6,815         82,314         8,318         133,864         2,891         42,195         5,752         112,548   

Class R

      902         10,514         930         14,355         574         7,745         773         13,792   

Class R6

      359         4,569         151         2,215         727         9,654         342         6,865   

Class Y

      3,225         38,975         3,557         57,372         584         8,054         736         13,592   

Shares issued in reinvestment of
distributions to shareholders:

                        

Class A

      —         —         —         —         —         —         —         —   

Class B

      —         —         —         —         —         —         —         —   

Class C

      —         —         —         —         —         —         —         —   

Class E

      —         —         —         —         —         —         —         —   

Class I

      —         —         —         —         —         —         —         —   

Class R

      —         —         —         —         —         —         —         —   

Class R6

      —         —         —         —         —         —         —         —   

Class Y

      —         —         —         —         —         —         —         —   

Shares redeemed:

                        

Class A

      (7,435 )       (86,675 )       (5,341 )       (81,867 )       (12,644 )       (175,626 )       (19,225 )       (356,829 ) 

Class B

      (139 )       (1,500 )       (107 )       (1,578 )       (634 )       (7,813 )       (939 )       (14,884 ) 

Class C

      (2,226 )       (23,954 )       (953 )       (13,396 )       (4,062 )       (47,940 )       (5,115 )       (77,767 ) 

Class E

      —         —         (10 )       (188 )       (83 )       (1,162 )       (57 )       (1,042 ) 

Class I

      (4,821 )       (57,789 )       (3,438 )       (52,179 )       (5,427 )       (76,283 )       (6,752 )       (121,488 ) 

Class R

      (219 )       (2,586 )       (149 )       (2,355 )       (679 )       (9,485 )       (980 )       (17,086 ) 

Class R6

      (93 )       (1,145 )       (12 )       (167 )       (143 )       (1,959 )       (51 )       (887 ) 

Class Y

      (2,019 )       (23,172 )       (2,042 )       (32,645 )       (1,641 )       (23,133 )       (1,630 )       (29,676 ) 

Net increase (decrease)

      8,470       $ 105,554         19,213       $ 293,560         (13,875 )     $ (188,815 )       (19,773 )     $ (342,833 ) 
     Ivy LaSalle Global Real Estate Fund      Ivy LaSalle Global Risk-Managed
Real Estate Fund		  
     Year ended
3-31-16		      Year ended
3-31-15		      Year ended
3-31-16		      Year ended
3-31-15		  
      Shares      Value      Shares      Value      Shares      Value      Shares      Value  

Shares issued from sale of shares:

                        

Class A

      1,129       $ 11,908         1,603       $ 17,148         3,245       $ 34,844         4,038       $ 43,610   

Class B

      4         38         4         40         22         245         21         222   

Class C

      21         218         51         547         71         754         308         3,463   

Class I

      32         342         402         4,259         86         918         1,786         19,699   

Class R

      1         15         6         60         1         10         201         2,289   

Class Y

      29         304         88         992         79         866         544         6,167   

Shares issued in reinvestment of
distributions to shareholders:

                        

Class A

      93         934         59         620         83         868         57         601   

Class B

      — *       1         — *       1         — *       1         — *       1   

Class C

      1         8         — *       4         1         16         1         7   

Class I

      2         21         2         18         2         21         1         10   

Class R

      —         —         —         —         —         —         —         —   

Class Y

      1         8         — *       3         2         17         — *       3   

Shares redeemed:

                        

Class A

      (1,059 )       (10,931 )       (1,312 )       (14,034 )       (1,412 )       (14,960 )       (2,376 )       (26,058 ) 

Class B

      (2 )       (18 )       (2 )       (20 )       (71 )       (738 )       (2 )       (16 ) 

Class C

      (20 )       (204 )       (17 )       (175 )       (25 )       (268 )       (213 )       (2,425 ) 

Class I

      (25 )       (262 )       (377 )       (4,004 )       (86 )       (892 )       (1,731 )       (19,107 ) 

Class R

      — *       (3 )       (1 )       (6 )       (1 )       (6 )       (200 )       (2,282 ) 

Class Y

      (40 )       (424 )       (60 )       (686 )       (132 )       (1,445 )       (409 )       (4,625 ) 

Net increase

      167       $ 1,955         446       $ 4,767         1,865       $ 20,251         2,026       $ 21,559   

 

* Not shown due to rounding.

 

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     Ivy Real Estate Securities Fund     Ivy Science and Technology Fund  
     Year ended
3-31-16		     Year ended
3-31-15		     Year ended
3-31-16		     Year ended
3-31-15		  
      Shares     Value     Shares     Value     Shares     Value     Shares     Value  

Shares issued from sale of shares:

                 

Class A

      3,890      $ 106,596        6,765      $ 185,538        11,585      $ 601,356        14,862      $ 790,241   

Class B

      7        189        41        1,087        183        7,964        166        7,634   

Class C

      132        3,567        343        9,334        4,753        221,674        6,311        299,679   

Class E

      21        561        37        1,031        105        5,343        92        4,879   

Class I

      328        9,121        292        8,171        11,473        652,285        17,842        1,030,856   

Class R

      40        1,080        47        1,265        1,017        51,832        816        43,023   

Class R6

      22        603        145        3,931        1,177        63,617        224        13,124   

Class Y

      532        14,790        1,169        31,677        4,242        230,423        5,695        318,164   

Shares issued in reinvestment of
distributions to shareholders:

                 

Class A

      1,064        28,062        628        17,374        939        47,673        755        39,993   

Class B

      9        220        6        171        35        1,501        32        1,479   

Class C

      32        839        18        501        486        21,684        368        17,353   

Class E

      7        187        4        96        11        548        8        409   

Class I

      26        678        14        380        599        33,085        481        27,588   

Class R

      3        82        2        55        55        2,728        40        2,109   

Class R6

      7        193        4        120        18        990        4        225   

Class Y

      333        8,788        241        6,651        358        19,079        340        18,883   

Shares redeemed:

                 

Class A

      (5,701 )      (155,961 )      (4,655 )      (127,234 )      (13,172 )      (661,718 )      (14,234 )      (759,811 ) 

Class B

      (72 )      (1,880 )      (65 )      (1,705 )      (331 )      (14,108 )      (305 )      (13,937 ) 

Class C

      (237 )      (6,374 )      (201 )      (5,337 )      (4,902 )      (214,346 )      (3,005 )      (142,289 ) 

Class E

      (23 )      (619 )      (10 )      (273 )      (55 )      (2,681 )      (29 )      (1,562 ) 

Class I

      (339 )      (9,232 )      (205 )      (5,590 )      (15,913 )      (844,167 )      (12,280 )      (700,403 ) 

Class R

      (48 )      (1,291 )      (44 )      (1,198 )      (729 )      (36,266 )      (801 )      (42,045 ) 

Class R6

      (43 )      (1,190 )      (28 )      (808 )      (120 )      (6,317 )      (23 )      (1,359 ) 

Class Y

      (1,662 )      (45,474 )      (1,156 )      (31,734 )      (6,672 )      (351,670 )      (7,379 )      (407,462 ) 

Net increase (decrease)

      (1,672 )    $ (46,465 )      3,392      $ 93,503        (4,858 )    $ (169,491 )      9,980      $ 546,771   

 

13.   FEDERAL INCOME TAX MATTERS ($ amounts in thousands)

For Federal income tax purposes, cost of investments owned at March 31, 2016 and the related unrealized appreciation (depreciation) were as follows:

 

Fund    Cost of
Investments		      Gross
Appreciation		      Gross
Depreciation		      Net
Unrealized
Appreciation
(Depreciation)		  

Ivy Asset Strategy Fund

    $ 10,596,857       $ 591,571       $ 861,294       $ (269,723 ) 

Ivy Balanced Fund

      2,666,531         231,787         97,027         134,760   

Ivy Energy Fund

      469,793         18,746         63,830         (45,084 ) 

Ivy Global Natural Resources Fund

      775,149         97,544         162,743         (65,199 ) 

Ivy LaSalle Global Real Estate Fund

      32,326         2,870         1,214         1,656   

Ivy LaSalle Global Risk-Managed Real Estate Fund

      80,417         6,186         851         5,335   

Ivy Real Estate Securities Fund

      482,103         221,386         2,029         219,357   

Ivy Science and Technology Fund

      4,074,594         1,417,250         486,046         931,204   

 

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For Federal income tax purposes, the Funds’ distributed and undistributed earnings and profit for the year ended March 31, 2016 and the post-October and late-year ordinary activity were as follows:

 

Fund   Distributed
Ordinary
Income		      Undistributed
Ordinary
Income		      Distributed
Long-Term
Capital Gains		      Undistributed
Long-Term
Capital Gains		      Tax Return
of Capital		      Post-
October
Capital
Losses
Deferred		      Late-
Year
Ordinary
Losses
Deferred		  

Ivy Asset Strategy Fund

   $ 37,222       $ —       $ 959,717       $ —       $ —       $ 281,518       $ 12,091   

Ivy Balanced Fund

     48,087         —         100,678         372         —         33,162         696   

Ivy Energy Fund

     —         —         —         —         —         —         1,202   

Ivy Global Natural Resources Fund

     —         1,433         —         —         —         —         —   

Ivy LaSalle Global Real Estate Fund

     711         492         368         —         —         512         —   

Ivy LaSalle Global Risk-Managed Real Estate Fund

     912         2,328         528         284         —         —         —   

Ivy Real Estate Securities Fund

     10,986         2,633         28,841         12,141         —         —         —   

Ivy Science and Technology Fund

     —         —         144,996         —         —         128,973         8,511   

Internal Revenue Code regulations permit each Fund to elect to defer into its next fiscal year capital losses and certain specified ordinary items incurred between each November 1 and the end of its fiscal year. Each Fund is also permitted to defer into its next fiscal year certain ordinary losses that generated between each January 1 and the end of its fiscal year.

Accumulated capital losses represent net capital loss carryovers as of March 31, 2016 that may be available to offset future realized capital gains and thereby reduce future capital gains distributions. Under the Regulated Investment Company Modernization Act of 2010 (the “Modernization Act”), a Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Any losses incurred during those future taxable years will be required to be utilized prior to any losses incurred in pre-enactment taxable years which have only an eight year carryforward period. As a result of this ordering rule, pre-enactment capital loss carryovers may expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under the previous law. The Fund’s first fiscal year end subject to the Modernization Act was March 31, 2012. The following table shows the expiration dates for capital loss carryovers from pre-enactment taxable years and the amounts of capital loss carryovers, if any, by each of the applicable Funds electing to be taxed as a regulated investment company during the year ended March 31, 2016:

 

      Pre-Enactment      Post-Enactment  
     Year of Expiration     

Short-
Term
Capital
Loss
Carryover

     

Long-
Term
Capital
Loss
Carryover

  
Fund    2017      2018        

Ivy Asset Strategy Fund

    $ —       $ —       $ 4,076       $ —   

Ivy Balanced Fund

      —         —         —         —   

Ivy Energy Fund

      —         6,022         36,821         27,087   

Ivy Global Natural Resources Fund

      —         1,529,206         277,990         373,570   

Ivy LaSalle Global Real Estate Fund

      —         —         —         —   

Ivy LaSalle Global Risk-Managed Real Estate Fund

      —         —         —         —   

Ivy Real Estate Securities Fund

      —         —         —         —   

Ivy Science and Technology Fund

      —         —         —         —   

Net investment income dividends and capital gains distributions are determined in accordance with income tax regulations which may differ from U.S. GAAP. These differences are due to differing treatments for items such as deferral of wash sales, post-October losses, late-year ordinary losses, foreign currency transactions, net operating losses, income from passive foreign investment companies (PFICs), investments held within the wholly-owned subsidiary and companies, partnership transactions, and expiring capital loss carryovers. At March 31, 2016, the following reclassifications were made:

 

Fund    Undistributed Net
Investment Income		     Accumulated Net
Realized Gain (Loss)		     Paid-In Capital  

Ivy Asset Strategy Fund

    $ (1,705 )    $ 144,627      $ (142,922 ) 

Ivy Balanced Fund

      (7,859 )      7,866        (7 ) 

Ivy Energy Fund

      398        354        (752 ) 

Ivy Global Natural Resources Fund

      (221 )      222        (1 ) 

Ivy LaSalle Global Real Estate Fund

      18        (18 )      —   

Ivy LaSalle Global Risk-Managed Real Estate Fund

      92        (92 )      —   

Ivy Real Estate Securities Fund

      —        —        —   

Ivy Science and Technology Fund

      45,697        (25,390 )      (20,307 ) 

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ivy Funds

 

 

 

To the Shareholders and Board of Trustees of Ivy Funds:

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Ivy Asset Strategy Fund, Ivy Balanced Fund, Ivy Energy Fund, Ivy Global Natural Resources Fund, Ivy LaSalle Global Real Estate Fund (formerly, Ivy Global Real Estate Fund), Ivy LaSalle Global Risk-Managed Real Estate Fund (formerly, Ivy Global Risk-Managed Real Estate Fund), Ivy Real Estate Securities Fund, and Ivy Science and Technology Fund, eight of the thirty-three funds constituting Ivy Funds (the “Funds”), as of March 31, 2016, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the statement of cash flows for the Ivy Asset Strategy Fund for the year then ended, and the financial highlights for each of the periods presented. 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.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2016, by correspondence with the custodian, agent banks, and brokers; when replies were not received from brokers, we performed other auditing procedures. 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 each of the Funds as of March 31, 2016, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, the cash flows for the Ivy Asset Strategy Fund for the year then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

 

LOGO

Kansas City, Missouri

May 23, 2016

 

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INCOME TAX INFORMATION

Ivy Funds

AMOUNTS NOT ROUNDED (UNAUDITED)

 

 

 

The Funds hereby designate the following amounts of dividends paid from net ordinary income as dividends qualifying for the 70% dividends received deduction for corporations or as qualified dividend income for individuals for the tax period ended March 31, 2016:

 

      Dividends
Received
Deduction for
Corporations		      Qualified
Dividend
Income for
Individuals		  

Ivy Asset Strategy Fund

    $ 37,221,546       $ 37,221,546   

Ivy Balanced Fund

      31,933,320         38,486,436   

Ivy Energy Fund

      —         —   

Ivy Global Natural Resources Fund

      —         —   

Ivy LaSalle Global Real Estate Fund

      —         —   

Ivy LaSalle Global Risk-Managed Real Estate Fund

      —         —   

Ivy Real Estate Securities Fund

      —         —   

Ivy Science and Technology Fund

      —         —   

The Funds hereby designate the following amounts as distributions of long-term capital gains:

 

Ivy Asset Strategy Fund

    $ 959,717,406   

Ivy Balanced Fund

      100,678,549   

Ivy Energy Fund

      —   

Ivy Global Natural Resources Fund

      —   

Ivy LaSalle Global Real Estate Fund

      368,026 (1) 

Ivy LaSalle Global Risk-Managed Real Estate Fund

      528,262   

Ivy Real Estate Securities Fund

      28,841,043 (2) 

Ivy Science and Technology Fund

      144,996,081   

 

(1) Of this amount $22,871 is Unrecaptured Section 1250 Gain.

 

(2) Of this amount $375,256 is Unrecaptured Section 1250 Gain.

Shareholders are advised to consult with their tax advisors concerning the tax treatment of dividends and distributions from all the Funds.

 

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Table of Contents

BOARD OF TRUSTEES AND OFFICERS

Ivy Funds

 

 

 

The Trust is governed by the Board of Trustees (the “Board”). A majority of the Board members are not “interested persons” as defined in Section 2(a)(19) of the 1940 Act and therefore qualify as Disinterested Trustees. The Board elects the officers who are responsible for administering the Funds’ day-to-day operations. The Waddell & Reed Fund Complex (“Fund Complex”) is comprised of the Ivy Family of Funds, the Ivy High Income Opportunities Fund (a closed-end fund) (“IVH”) and the Advisors Fund Complex, which is comprised of each of the funds in the Waddell & Reed Advisors Funds (20 funds), Ivy Funds Variable Insurance Portfolios (29 funds) and InvestEd Portfolios (3 funds). Jarold W. Boettcher, Joseph Harroz, Jr., and Henry J. Herrmann also serve as trustees of each of the funds in the Advisors Fund Complex. Each member of the Board is also a member of the Board of Trustees of IVH.

Joseph Harroz, Jr. serves as Independent Chair of the Trust’s Board and of the Board of Trustees of IVH.

A Trustee serves until his or her successor is elected and qualified or until his or her earlier death, resignation or removal. The Board appoints officers and delegates to them the management of the day-to-day operations of each of the Funds, based on policies reviewed and approved by the Board, with general oversight by the Board.

The Statement of Additional Information (“SAI”) for the Trust includes additional information about the Trust’s Trustees. The SAI is available without charge, upon request by calling 1.800.777.6472. It is also available on the Ivy Funds website, www.ivyfunds.com.

Disinterested Trustees

The following table provides information regarding each Disinterested Trustee.

 

Name, Address and
Year of Birth		   Position Held with
the Trust		   Trustee Since   Principal Occupation(s)
During Past 5 Years		   Number of Funds
in Fund
Complex
Overseen		   Other Directorships Held
During Past 5 Years

Jarold W. Boettcher, CFA

6300 Lamar Avenue

Overland Park, KS 66202

1940

   Trustee   2008  

President of Boettcher Enterprises, Inc. (agriculture products and services) (1979 to present), Boettcher Supply, Inc. (electrical and plumbing supplies distributor) (1979 to present), Boettcher Aerial, Inc. (Aerial Ag Applicator) (1982 to present).

   90   Director, Guaranty State Bank & Trust Co. (financial services) (1981 to present); Director, Guaranty, Inc. (financial services) (1985 to present); Member, Kansas Board of Regents (2007 to 2011); Audit Committee Chairperson, Kansas Bioscience Authority (2009 to present); Member, Kansas Foundation for Medical Care (until 2011); Trustee, Advisors Fund Complex (52 portfolios overseen); Trustee, IVH.

James D. Gressett

6300 Lamar Avenue

Overland Park, KS 66202

1950

   Trustee   2008  

Chief Executive Officer (CEO) of CalPac Pizza LLC (2011 to present); CEO of CalPac Pizza II LLC (2012 to present); CEO of PacPizza LLC (Pizza Hut franchise) (1999 to present); Partner, Century Bridge Partners (real estate investments) (2007 to present); Manager, Premium Gold Foods (2006 to present).

   38   Trustee, IVH.

Joseph Harroz, Jr.

6300 Lamar Avenue

Overland Park, KS 66202

1967

  

Trustee

 

Independent Chairman

  

2008

 

2008

   Dean, College of Law, Vice President, University of Oklahoma (2010 to present); President of Graymark HealthCare (a NASDAQ listed company) (2008 to 2010); Adjunct Professor, University of Oklahoma Law School (1997 to 2010); Managing Member, Harroz Investments, LLC, (commercial enterprises) (1998 to present).   90   Director and Investor, Valliance Bank (2004 to present); Director, Foundation Healthcare, (formerly Graymark HealthCare) (2008 to present); Trustee, The Mewbourne Family Support Organization (2003 to present) (non-profit); Director/Trustee, Oklahoma Foundation for Excellence (non-profit) (2008 to present); Trustee/Chairman, Advisors Fund Complex (52 portfolios overseen); Trustee, IVH.

 

108   ANNUAL REPORT   2016  

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Name, Address and
Year of Birth		   Position Held with
the Trust		   Trustee Since   Principal Occupation(s)
During Past 5 Years		   Number of Funds
in Fund
Complex
Overseen		   Other Directorships Held
During Past 5 Years

Glendon E. Johnson, Jr.

6300 Lamar Avenue

Overland Park, KS 66202

1951

   Trustee   2008   Of Counsel, Lee & Smith, PC (law firm) (1996 to present); Owner and Manager, Castle Valley Ranches, LLC (ranching) and Castle Valley Outdoors, LLC (outdoor recreation) (1995 to present); Formerly, Partner, Kelly, Drye & Warren LLP (law firm, emphasis on finance, securities, mergers and acquisitions law) (1989-1996); Partner, Lane & Edson PC (law firm) (1987-1989).   38   Director, Thomas Foundation for Cancer Research (2005 to present); Trustee, IVH.

Michael G. Smith

6300 Lamar Avenue

Overland Park, KS 66202

1944

   Trustee   2008   Retired; formerly, with Merrill Lynch as Managing Director of Global Investor Client Strategy (1996-1998), Head of Regional Institutional Sales (1995-1996) and of U.S. Central Region (1986-1995, 1999).   38   Director, Executive Board, Cox Business School, Southern Methodist University (1998 to present); Director, Northwestern Mutual Funds (2003 to present); Chairman, CTMG, Inc. (clinical testing) (2008 to present); Trustee, IVH.

Edward M. Tighe

6300 Lamar Avenue

Overland Park, KS 66202

1942

   Trustee   2008   Retired; formerly, CEO and Director of Asgard Holdings LLC (computer network and security services) (2002 to 2004); President, Citco Technology Management (1995-2000); CEO, Global Mutual Fund Services (1993-2000); Sr. Vice President, Templeton Global Investors (1988-1992).   38   Director, The Research Coast Principium Foundation, Inc. (non-profit) (2012 to 2015); Trustee, IVH.

Interested Trustees

Mr. Herrmann is “interested” by virtue of his current or former engagement as an officer of Waddell & Reed Financial, Inc. (“WDR”) or its wholly owned subsidiaries, including each Fund’s investment manager, IICO, each Fund’s principal underwriter, IFDI, and each Fund’s shareholder servicing and accounting services agent, Waddell & Reed Services Company, doing business as WI Services Company (“WISC”), as well as by virtue of his personal ownership in shares of WDR.

 

Name, Address and
Year of Birth		   Position(s) Held With
the Trust		   Trustee/Officer
Since		   Principal Occupation(s)
During Past 5 Years		   Number of Funds
in Fund
Complex
Overseen		   Other Directorships Held

Henry J. Herrmann

6300 Lamar Avenue

Overland Park, KS 66202

1942

  

President

 

Trustee

  

2008

 

2008

   Chairman, WDR (January 2010 to present); CEO, WDR (2005 to present); President, CEO and Chairman, IICO (2002 to present); President, CEO and Chairman, Waddell & Reed Investment Management Company (WRIMCO) (1993 to present); President and Trustee of each of the funds in the Fund Complex.   90   Director, WDR, IICO, WRIMCO, WISC, W&R Capital Management Group, Inc. and Waddell & Reed, Inc.; Director, Blue Cross Blue Shield of Kansas City (2007 to present); United Way of Greter Kansas City (2007 to 2012); Trustee, Advisors Fund Complex (52 portfolios overseen); Trustee, IVH.

 

  2016   ANNUAL REPORT   109

Table of Contents

 

 

 

Officers

The Board has appointed officers who are responsible for the day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Herrmann, who is President, the Trust’s principal officers are:

 

Name, Address and
Year of Birth		   Position(s) Held with
the Trust and
Fund Complex		   Officer of
Trust Since		   Officer of Fund
Complex Since*		   Principal Occupation(s) During Past 5 Years

Joseph W. Kauten

6300 Lamar Avenue Overland Park, KS 66202

1969

  

Vice President

 

Treasurer

 

Principal Accounting Officer

 

Principal Financial Officer

  

2008

 

2008

 

2008

 

2008

  

2006

 

2006

 

2006

 

2007

   Principal Financial Officer of each of the funds in the Fund Complex (2007 to present); Vice President, Treasurer and Principal Accounting Officer of each of the funds in the Fund Complex (2006 to present); Assistant Treasurer of each of the funds in the Fund Complex (2003 to 2006).

Scott J. Schneider

6300 Lamar Avenue

Overland Park, KS 66202

1968

  

Vice President

 

Chief Compliance Officer

  

2008

 

2008

  

2006

 

2004

   Chief Compliance Officer (2004 to present) and Vice President (2006 to present) of each of the funds in the Fund Complex.

Wendy J. Hills

6300 Lamar Avenue

Overland Park, KS 66202

1970

  

Vice President

 

General Counsel

 

Assistant Secretary

  

2014

 

2014

 

2014

  

2014

 

2014

 

2014

   Senior Vice President and General Counsel of WDR, Waddell & Reed, WRIMCO and WISC (2014 to present); Senior Vice President and General Counsel of IICO (2014 to present); Vice President, General Counsel and Assistant Secretary for each of the funds in the Fund Complex (2014 to present).

Philip A. Shipp

6300 Lamar Avenue

Overland Park, KS 66202

1969

   Assistant Secretary   2012   2012   Assistant Secretary of each of the funds in the Fund Complex (2012 to present).

* This is the date when the officer first became an officer of one or more of the funds that are the predecessors to current funds within Ivy Funds (each, a predecessor fund) (if applicable).

 

110   ANNUAL REPORT   2016  

Table of Contents

ANNUAL PRIVACY NOTICE

Ivy Funds

 

 

 

The following privacy notice is issued by Ivy Funds (the “Funds”), Ivy Investment Management Company (“IICO”) and Ivy Funds Distributor, Inc. (“IFDI”).

Information Collected

We collect nonpublic personal information about you from your account application and other forms that you may deliver to us, and from your transactions with us and our affiliates. This is information that regulators consider necessary for the proper servicing of your account. In order to effect your transactions and service your account properly, we may disclose all of the information that we collect, as described above, to firms that assist us in servicing your account, such as our transfer agent.

Confidentiality of Information Collected

All records containing your nonpublic personal information are kept at our various service providers. These entities include IICO, IFDI and our transfer agent and administrative services provider. We require these affiliates, and any non-affiliated service providers, to protect the confidentiality of your information and to use the information only for the purposes for which disclosure to them is made. The Funds, IICO, IFDI and other service providers restrict access to nonpublic personal information about you to those employees who need to know that information to provide products and services to you and maintain physical, electronic, and procedural safeguards that comply with federal standards to maintain the security of your nonpublic personal information.

Disclosure of Information in Limited Circumstances

We do not disclose nonpublic personal information about present or former customers to nonaffiliated third parties, except as permitted or required by law. In connection with servicing your account, your nonpublic personal information may be shared among the entities named in this notice, their affiliates, and non-affiliates, including a transfer agent or other service companies. We will adhere to the policies and practices above for both current and former customers.

 

  2016   ANNUAL REPORT   111

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PROXY VOTING INFORMATION

Ivy Funds

 

 

 

Proxy Voting Guidelines

A description of the policies and procedures Ivy Funds uses to determine how to vote proxies relating to portfolio securities is available (i) without charge, upon request, by calling 1.800.777.6472 and (ii) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.

Proxy Voting Records

Information regarding how the Trust voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on Form N-PX through the Ivy Funds’ website at www.ivyfunds.com and on the SEC’s website at www.sec.gov.

QUARTERLY PORTFOLIO SCHEDULE INFORMATION

Ivy Funds

Portfolio holdings can be found on the Trust’s website at www.ivyfunds.com. Alternatively, a complete schedule of portfolio holdings of each Fund for the first and third quarters of each fiscal year is filed with the SEC and can be found on the Trust’s Form N-Q. These holdings may be viewed in the following ways:

 

•  

On the SEC’s website at www.sec.gov.

 

•  

For review and copy at the SEC’s Public Reference Room in Washington, DC. Information on the operations of the Public Reference Room may be obtained by calling 1.800.SEC.0330.

HOUSEHOLDING NOTICE

Ivy Funds

If you currently receive one copy of the shareholder reports and prospectus for your household (even if more than one person in your household owns shares of the Trust) and you would prefer to receive separate shareholder reports and prospectuses for each account holder living at your address, you can do either of the following:

Fax your request to 800.532.2749.

Write to us at the address listed on the back cover.

Please list each account for which you would like to receive separate shareholder reports and prospectus mailings. We will resume sending separate documents within 30 days of receiving your request.

TO ALL TRADITIONAL IRA PLANHOLDERS:

Ivy Funds

As required by law, we are hereby providing notice to you that income tax may be withheld automatically from any distribution or withdrawal from a traditional IRA. A Fund is generally required to withhold taxes unless you make a written election not to have taxes withheld. The election may be made on the distribution/withdrawal form provided by Waddell & Reed, Inc. which can be obtained from your Waddell & Reed representative or by submitting Internal Revenue Service Form W–4P. Once made, an election can be revoked by providing written notice to Waddell & Reed, Inc. 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.

 

112   ANNUAL REPORT   2016  

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  2016   ANNUAL REPORT   113

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114   ANNUAL REPORT   2016  

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The Ivy Funds Family

 

 

 

Domestic Equity Funds

Ivy Core Equity Fund

Ivy Dividend Opportunities Fund

Ivy Large Cap Growth Fund

Ivy Micro Cap Growth Fund

Ivy Mid Cap Growth Fund

Ivy Mid Cap Income Opportunities Fund

Ivy Small Cap Growth Fund

Ivy Small Cap Value Fund

Ivy Tax-Managed Equity Fund

Ivy Value Fund

Global/International Funds

Ivy Cundill Global Value Fund

Ivy Emerging Markets Equity Fund

Ivy Emerging Markets Local Currency Debt Fund

Ivy European Opportunities Fund

Ivy Global Equity Income Fund

Ivy Global Growth Fund

Ivy Global Income Allocation Fund

Ivy International Core Equity Fund

Ivy Managed International Opportunities Fund

Speciality Funds

Ivy Apollo Multi-Asset Income Fund

Ivy Asset Strategy Fund

Ivy Balanced Fund

Ivy Energy Fund

Ivy Global Natural Resources Fund

Ivy LaSalle Global Real Estate Fund1

1(formerly known as Ivy Global Real Estate Fund)

Ivy LaSalle Global Risk-Managed Real Estate Fund2

2(formerly known as Ivy Global Risk-Managed Real Estate Fund)

Ivy Real Estate Securities Fund

Ivy Science and Technology Fund

Fixed Income Funds

Ivy Apollo Strategic Income Fund

Ivy Bond Fund

Ivy Global Bond Fund

Ivy High Income Fund

Ivy Limited-Term Bond Fund

Ivy Money Market Fund

Ivy Municipal Bond Fund

Ivy Municipal High Income Fund

Ivy Targeted Return Bond Fund

 

 

1.800.777.6472

Visit us online at www.ivyfunds.com

The Ivy Funds are managed by Ivy Investment Management Company and distributed by its subsidiary, Ivy Funds Distributor, Inc.

Investors should consider the investment objectives, risks, charges and expenses of a fund carefully before investing. For a prospectus containing this and other information for the Ivy Funds, call your financial advisor or visit us online at www.ivyfunds.com. Please read the prospectus, or summary prospectus, carefully before investing.

 

  2016   ANNUAL REPORT   115

Table of Contents
  

ANN-IVYSPEC (3-16)

Table of Contents

Annual Report

MARCH 31, 2016

    Ticker   
    Class A        Class B        Class C        Class E        Class I        Class R        Class R6        Class Y   
IVY FUNDS                
Ivy Bond Fund     IBOAX        IBOBX        IBOCX        IVBEX        IVBIX        IYBDX        IBNDX        IBOYX   
Ivy Core Equity Fund     WCEAX        WCEBX        WTRCX        ICFEX        ICIEX        IYCEX        ICEQX        WCEYX   
Ivy Cundill Global Value Fund     ICDAX        ICDBX        ICDCX        ICVEX        ICVIX        IYCUX        ICNGX        ICDYX   
Ivy Dividend Opportunities Fund     IVDAX        IVDBX        IVDCX        IDIEX        IVDIX        IYDVX        IDOTX        IVDYX   
Ivy Emerging Markets Equity Fund     IPOAX        IPOBX        IPOCX        IPOEX        IPOIX        IYPCX        IMEGX        IPOYX   
Ivy European Opportunities Fund     IEOAX        IEOBX        IEOCX        IVEOX        IEOIX        IYEUX        IEURX        IEOYX   
Ivy Global Bond Fund     IVSAX        IVSBX        IVSCX          IVSIX        IYGOX        IVBDX        IVSYX   
Ivy Global Equity Income Fund     IBIAX        IBIBX        IBICX          IBIIX        IYGEX        IICNX        IBIYX   
Ivy Global Growth Fund     IVINX        IVIBX        IVNCX        IIGEX        IGIIX        IYIGX        ITGRX        IVIYX   
Ivy Global Income Allocation Fund     IVBAX        IVBBX        IVBCX        IIBEX        IIBIX        IYGBX        ILIAX        IVBYX   
Ivy High Income Fund     WHIAX        WHIBX        WRHIX        IVHEX        IVHIX        IYHIX        IHIFX        WHIYX   
Ivy International Core Equity Fund     IVIAX        IIFBX        IVIFX        IICEX        ICEIX        IYITX        IINCX        IVVYX   
Ivy Large Cap Growth Fund     WLGAX        WLGBX        WLGCX        ILCEX        IYGIX        WLGRX        ILGRX        WLGYX   
Ivy Limited-Term Bond Fund     WLTAX        WLTBX        WLBCX        IVLEX        ILTIX        IYLTX        ILMDX        WLTYX   
Ivy Managed International Opportunities Fund     IVTAX        IVTBX        IVTCX        IVTEX        IVTIX        IYMGX          IVTYX   
Ivy Micro Cap Growth Fund     IGWAX        IGWBX        IGWCX          IGWIX        IYMRX        IMIGX        IGWYX   
Ivy Mid Cap Growth Fund     WMGAX        WMGBX        WMGCX        IMCEX        IYMIX        WMGRX        IGRFX        WMGYX   
Ivy Mid Cap Income Opportunities Fund     IVOAX          IVOCX        IVOEX        IVOIX        IVORX        IVOSX        IVOYX   
Ivy Money Market Fund     WRAXX        WRBXX        WRCXX        IVEXX           
Ivy Municipal Bond Fund     WMBAX        WMBBX        WMBCX          IMBIX            WMBYX   
Ivy Municipal High Income Fund     IYIAX        IYIBX        IYICX          WYMHX            IYIYX   
Ivy Small Cap Growth Fund     WSGAX        WSGBX        WRGCX        ISGEX        IYSIX        WSGRX        IRGFX        WSCYX   
Ivy Small Cap Value Fund     IYSAX        IYSBX        IYSCX        IYVIX        IVVIX        IYSMX        ISPVX        IYSYX   
Ivy Tax-Managed Equity Fund     IYEAX        IYEBX        IYECX          WYTMX            IYEYX   
Ivy Value Fund     IYVAX        IYVBX        IYVCX        IVVEX        IYAIX        IYVLX        IVALX        IYVYX   

 

     LOGO  

Table of Contents

CONTENTS

Ivy Funds

 

 

 

President’s Letter

      3   

Illustration of Fund Expenses

      4   

Management Discussion, Portfolio Highlights and Schedule of Investments:

         

Ivy Bond Fund

      11   

Ivy Core Equity Fund

      22   

Ivy Cundill Global Value Fund

      28   

Ivy Dividend Opportunities Fund

      35   

Ivy Emerging Markets Equity Fund

      42   

Ivy European Opportunities Fund

      49   

Ivy Global Bond Fund

      57   

Ivy Global Equity Income Fund

      66   

Ivy Global Growth Fund

      74   

Ivy Global Income Allocation Fund

      80   

Ivy High Income Fund

      92   

Ivy International Core Equity Fund

      104   

Ivy Large Cap Growth Fund

      111   

Ivy Limited-Term Bond Fund

      117   

Ivy Managed International Opportunities Fund

      126   

Ivy Micro Cap Growth Fund

      131   

Ivy Mid Cap Growth Fund

      137   

Ivy Mid Cap Income Opportunities Fund

      144   

Ivy Money Market Fund

      150   

Ivy Municipal Bond Fund

      155   

Ivy Municipal High Income Fund

      168   

Ivy Small Cap Growth Fund

      180   

Ivy Small Cap Value Fund

      186   

Ivy Tax-Managed Equity Fund

      192   

Ivy Value Fund

      199   

Statements of Assets and Liabilities

      205   

Statements of Operations

      209   

Statements of Changes in Net Assets

      213   

Financial Highlights

      222   

Notes to Financial Statements

      272   

Report of Independent Registered Public Accounting Firm

      306   

Income Tax Information

      307   

Board of Trustees and Officers

      309   

Annual Privacy Notice

      312   

Proxy Voting Information

      313   

Quarterly Portfolio Schedule Information

      313   

Householding Notice

      313   

IRA Disclosure

      313   

This report is submitted for the general information of the shareholders of Ivy Funds. It is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by a current Ivy Funds prospectus, or summary prospectus, and current performance information, including current Lipper ranking information.

 

2   ANNUAL REPORT   2016  

Table of Contents

PRESIDENT’S LETTER

Ivy Funds

MARCH 31, 2016 (UNAUDITED)

 

 

 

LOGO

Henry J. Herrmann, CFA

 

 

 

Dear Shareholder,

Despite moderate economic growth in the U.S., financial markets have been volatile, especially in the latter half of the fiscal year. What’s causing the fluctuations?

The simple answer is financial markets dislike uncertainty. In recent months we’ve been faced with significant uncertainty around numerous issues, including:

 

•  

Central bank actions;

 

•  

politics in the U.S., specifically surrounding the presidential election;

 

•  

credit concerns in the energy sector;

 

•  

very slow growth in Europe and Japan;

 

•  

credit quality issues in important emerging economies, including China;

 

•  

the U.K.’s June vote on exiting the European Union;

 

•  

fluctuations in currencies.

Amid the uncertain backdrop, the U.S. economic expansion has remained relatively good. Our investment team believes the U.S. is the bright spot, supported primarily by the U.S. consumer, who is benefitting from lower energy prices and lower inflation in general. The improved labor market allows for better demand for cars, homes, furnishings and various consumer goods.

When interest rates in the U.S. will rise, and by how much, remains an area of focus for the financial markets. Markets reacted negatively when the Federal Reserve raised rates slightly in December and seemed to imply more increases were likely. Since then, the Fed seems to have moderated its tightening plans. It’s clear the Fed has become attuned to very sluggish global growth. Future rate increases in the U.S. will be very slow to develop, with job growth and inflation being most important determinants of central bank policy.

Overseas, the European Central Bank and Bank of Japan are actively engaged in aggressive easing. As yet, these steps are not leading to strengthening economic activity.

China, in the face of economic softening, has turned toward more aggressive stimulus. We believe moderate economic acceleration is likely in China in 2016, which should be beneficial to broader global growth.

While challenges remain, we do see potential catalysts for growth in several areas and industries and our team continues to seek investment opportunities around the globe.

Economic Snapshot

 

 

 

     3/31/2016      3/31/2015  

S&P 500 Index

      2,059.74         2,067.89   

MSCI EAFE Index

      1,652.04         1,849.34   

10-Year Treasury Yield

      1.78%         1.94%   

U.S. unemployment rate

      5.0%         5.5%   

30-year fixed mortgage rate

      3.71%         3.69%   

Oil price per barrel

    $ 38.34       $ 47.60   

Sources: Bloomberg, U.S. Department of Labor, MBA, CME

All government statistics shown are subject to periodic revision. The S&P 500 Index is an unmanaged index that tracks the stocks of 500 primarily large-cap U.S. companies. MSCI EAFE Index is an unmanaged index comprised of securities that represent the securities markets in Europe, Australasia and the Far East. It is not possible to invest directly in any of these indexes. Mortgage rates are from BankRate and reflect the overnight national average rate on a conventional 30-year fixed loan. Oil prices reflect the market price of West Texas intermediate grade crude.

Respectfully,

 

LOGO

Henry J. Herrmann, CFA

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.

 

 

  2016   ANNUAL REPORT   3

Table of Contents

ILLUSTRATION OF FUND EXPENSES

Ivy Funds

(UNAUDITED)

 

 

 

Expense Example

 

 

As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, exchange fees and account fees; and (2) ongoing costs, including management fees, distribution and service fees, and other Fund expenses. The following table is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period ended March 31, 2016.

Actual Expenses

 

 

The first section in the following table provides information about actual account values and actual expenses for each share class. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $7,500 account value divided by $1,000 = 7.5), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. There may be additional fees charged to holders of certain accounts that are not included in the expenses shown in the table. Fees apply to Individual Retirement Accounts (IRAs), IRA Rollovers, Roth IRAs, Conversion Roth IRAs, Simplified Employee Pension (SEP), Savings Incentive Match Plan for Employees (SIMPLE) IRAs, Tax-Sheltered Accounts (TSAs), Keogh Plans, Owner Only 401(k) (Exclusive K) Plans and Final Pay Plans. As of the close of the six months covered by the table, a customer is charged an annual fee of $18 within each plan type. This fee is waived for IRA Rollovers and Conversion Roth IRAs if the customer owns another type of IRA. Coverdell Education Savings Account plans are charged an annual fee of $10 per customer. With limited exceptions, for Class A and Class C shares, if your Fund account

balance is below $650 on the Friday prior to the last full week of September of each year, the account will be assessed an account fee of $20. You should consider the additional fees that were charged to your Fund account over the six-month period when you estimate the total ongoing expenses paid over the period and the impact of these fees on your ending account value as such additional expenses are not reflected in the information provided in the following table. Additional fees have the effect of reducing investment returns.

Hypothetical Example for Comparison Purposes

 

 

The second section in the following table provides information about hypothetical account values and hypothetical expenses for each share class based on the Fund’s actual expense ratio and an assumed rate of return of five percent per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this five percent hypothetical example with the five percent hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), exchange fees or account fees. Therefore, the second section in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Expenses paid may be impacted by expense reduction arrangements. If those arrangements had not been in place, expenses paid would have been higher. See Note 7 to the Financial Statements for further information.

 

 

       Actual(1)        Hypothetical(2)         
Fund      Beginning
Account
Value
9-30-15		        Ending
Account
Value
3-31-16		        Expenses
Paid During
Period*		        Beginning
Account
Value
9-30-15		        Ending
Account
Value
3-31-16		        Expenses
Paid During
Period*		      Annualized
Expense Ratio
Based on the
Six-Month
Period		  

Ivy Bond Fund

  

                                          

Class A

      $ 1,000         $ 1,014.40         $ 5.14         $ 1,000         $ 1,019.88         $ 5.15         1.02%   

Class B**

      $ 1,000         $ 1,009.50         $ 9.95         $ 1,000         $ 1,015.07         $ 9.97         1.99%   

Class C

      $ 1,000         $ 1,010.60         $ 8.85         $ 1,000         $ 1,016.15         $ 8.87         1.77%   

Class E

      $ 1,000         $ 1,014.30         $ 5.24         $ 1,000         $ 1,019.75         $ 5.25         1.05%   

Class I

      $ 1,000         $ 1,015.80         $ 3.73         $ 1,000         $ 1,021.31         $ 3.74         0.74%   

Class R

      $ 1,000         $ 1,012.80         $ 6.74         $ 1,000         $ 1,018.26         $ 6.76         1.35%   

Class R6

      $ 1,000         $ 1,016.50         $ 2.92         $ 1,000         $ 1,022.06         $ 2.93         0.59%   

Class Y

      $ 1,000         $ 1,014.70         $ 4.94         $ 1,000         $ 1,020.07         $ 4.95         0.99%   

 

4   ANNUAL REPORT   2016  

Table of Contents

ILLUSTRATION OF FUND EXPENSES

Ivy Funds

     (UNAUDITED)

 

 

 

       Actual(1)        Hypothetical(2)         
Fund      Beginning
Account
Value
9-30-15		        Ending
Account
Value
3-31-16		        Expenses
Paid During
Period*		        Beginning
Account
Value
9-30-15		        Ending
Account
Value
3-31-16		        Expenses
Paid During
Period*		      Annualized
Expense Ratio
Based on the
Six-Month
Period		  

Ivy Core Equity Fund

  

                                          

Class A

      $ 1,000         $ 1,048.80         $ 5.84         $ 1,000         $ 1,019.26         $ 5.75         1.15%   

Class B**

      $ 1,000         $ 1,042.70         $ 10.62         $ 1,000         $ 1,014.57         $ 10.48         2.09%   

Class C

      $ 1,000         $ 1,043.60         $ 9.81         $ 1,000         $ 1,015.41         $ 9.67         1.92%   

Class E

      $ 1,000         $ 1,047.30         $ 6.35         $ 1,000         $ 1,018.76         $ 6.26         1.25%   

Class I

      $ 1,000         $ 1,049.80         $ 4.30         $ 1,000         $ 1,020.81         $ 4.24         0.84%   

Class R

      $ 1,000         $ 1,046.70         $ 7.68         $ 1,000         $ 1,017.50         $ 7.57         1.50%   

Class R6

      $ 1,000         $ 1,050.00         $ 3.90         $ 1,000         $ 1,021.23         $ 3.84         0.75%   

Class Y

      $ 1,000         $ 1,050.20         $ 4.31         $ 1,000         $ 1,020.81         $ 4.24         0.84%   

Ivy Cundill Global Value Fund

  

                                          

Class A

      $ 1,000         $ 990.60         $ 8.06         $ 1,000         $ 1,016.85         $ 8.17         1.63%   

Class B**

      $ 1,000         $ 985.80         $ 13.90         $ 1,000         $ 1,010.95         $ 14.08         2.81%   

Class C

      $ 1,000         $ 988.30         $ 11.04         $ 1,000         $ 1,013.93         $ 11.18         2.21%   

Class E

      $ 1,000         $ 992.10         $ 7.17         $ 1,000         $ 1,017.82         $ 7.26         1.44%   

Class I

      $ 1,000         $ 993.20         $ 5.68         $ 1,000         $ 1,019.31         $ 5.76         1.14%   

Class R

      $ 1,000         $ 990.80         $ 8.66         $ 1,000         $ 1,016.33         $ 8.77         1.73%   

Class R6

      $ 1,000         $ 994.60         $ 4.89         $ 1,000         $ 1,020.08         $ 4.95         0.98%   

Class Y

      $ 1,000         $ 992.20         $ 6.97         $ 1,000         $ 1,017.98         $ 7.06         1.40%   

Ivy Dividend Opportunities Fund

  

                                          

Class A

      $ 1,000         $ 1,053.30         $ 6.47         $ 1,000         $ 1,018.70         $ 6.36         1.26%   

Class B**

      $ 1,000         $ 1,050.00         $ 10.46         $ 1,000         $ 1,014.84         $ 10.28         2.03%   

Class C

      $ 1,000         $ 1,050.10         $ 9.94         $ 1,000         $ 1,015.32         $ 9.77         1.94%   

Class E

      $ 1,000         $ 1,054.40         $ 6.27         $ 1,000         $ 1,018.85         $ 6.16         1.23%   

Class I

      $ 1,000         $ 1,056.10         $ 4.83         $ 1,000         $ 1,020.31         $ 4.75         0.94%   

Class R

      $ 1,000         $ 1,052.80         $ 7.90         $ 1,000         $ 1,017.33         $ 7.77         1.53%   

Class R6

      $ 1,000         $ 1,056.40         $ 4.11         $ 1,000         $ 1,021.03         $ 4.04         0.79%   

Class Y

      $ 1,000         $ 1,054.30         $ 6.06         $ 1,000         $ 1,019.10         $ 5.96         1.18%   

Ivy Emerging Markets Equity Fund

  

                                          

Class A

      $ 1,000         $ 1,028.20         $ 7.61         $ 1,000         $ 1,017.51         $ 7.57         1.50%   

Class B**

      $ 1,000         $ 1,023.00         $ 12.64         $ 1,000         $ 1,012.47         $ 12.58         2.51%   

Class C

      $ 1,000         $ 1,023.60         $ 12.04         $ 1,000         $ 1,013.09         $ 11.98         2.38%   

Class E***

      $ 1,000         $ 1,029.10         $ 6.90         $ 1,000         $ 1,018.21         $ 6.86         1.36%   

Class I

      $ 1,000         $ 1,029.80         $ 6.29         $ 1,000         $ 1,018.77         $ 6.26         1.25%   

Class R

      $ 1,000         $ 1,026.20         $ 9.32         $ 1,000         $ 1,015.75         $ 9.27         1.85%   

Class R6

      $ 1,000         $ 1,030.30         $ 5.58         $ 1,000         $ 1,019.51         $ 5.55         1.10%   

Class Y

      $ 1,000         $ 1,028.40         $ 7.61         $ 1,000         $ 1,017.47         $ 7.57         1.50%   

See footnotes on page 10.

 

  2016   ANNUAL REPORT   5

Table of Contents

ILLUSTRATION OF FUND EXPENSES

Ivy Funds

     (UNAUDITED)

 

 

 

       Actual(1)        Hypothetical(2)         
Fund      Beginning
Account
Value
9-30-15		        Ending
Account
Value
3-31-16		        Expenses
Paid During
Period*		        Beginning
Account
Value
9-30-15		        Ending
Account
Value
3-31-16		        Expenses
Paid During
Period*		      Annualized
Expense Ratio
Based on the
Six-Month
Period		  

Ivy European Opportunities Fund

  

                                          

Class A

      $ 1,000         $ 958.60         $ 8.03         $ 1,000         $ 1,016.84         $ 8.27         1.63%   

Class B**

      $ 1,000         $ 953.30         $ 13.09         $ 1,000         $ 1,011.57         $ 13.48         2.69%   

Class C

      $ 1,000         $ 955.10         $ 11.14         $ 1,000         $ 1,013.59         $ 11.48         2.28%   

Class E***

      $ 1,000         $ 960.00         $ 6.37         $ 1,000         $ 1,018.53         $ 6.56         1.30%   

Class I

      $ 1,000         $ 960.50         $ 5.78         $ 1,000         $ 1,019.11         $ 5.96         1.18%   

Class R

      $ 1,000         $ 957.80         $ 8.71         $ 1,000         $ 1,016.11         $ 8.97         1.78%   

Class R6

      $ 1,000         $ 961.40         $ 5.10         $ 1,000         $ 1,019.83         $ 5.25         1.03%   

Class Y

      $ 1,000         $ 959.00         $ 7.35         $ 1,000         $ 1,017.55         $ 7.57         1.49%   

Ivy Global Bond Fund

  

                                          

Class A

      $ 1,000         $ 1,025.80         $ 5.06         $ 1,000         $ 1,020.05         $ 5.05         0.99%   

Class B**

      $ 1,000         $ 1,021.90         $ 8.80         $ 1,000         $ 1,016.29         $ 8.77         1.74%   

Class C

      $ 1,000         $ 1,020.80         $ 8.79         $ 1,000         $ 1,016.29         $ 8.77         1.74%   

Class I

      $ 1,000         $ 1,026.10         $ 3.75         $ 1,000         $ 1,021.30         $ 3.74         0.74%   

Class R

      $ 1,000         $ 1,023.40         $ 7.59         $ 1,000         $ 1,017.55         $ 7.57         1.49%   

Class R6

      $ 1,000         $ 1,027.10         $ 3.85         $ 1,000         $ 1,021.23         $ 3.84         0.75%   

Class Y

      $ 1,000         $ 1,025.80         $ 5.06         $ 1,000         $ 1,020.05         $ 5.05         0.99%   

Ivy Global Equity Income Fund

  

                                          

Class A

      $ 1,000         $ 1,024.30         $ 6.58         $ 1,000         $ 1,018.49         $ 6.56         1.30%   

Class B**

      $ 1,000         $ 1,021.10         $ 9.80         $ 1,000         $ 1,015.26         $ 9.77         1.95%   

Class C

      $ 1,000         $ 1,020.10         $ 9.80         $ 1,000         $ 1,015.29         $ 9.77         1.94%   

Class I

      $ 1,000         $ 1,025.20         $ 4.86         $ 1,000         $ 1,020.21         $ 4.85         0.96%   

Class R

      $ 1,000         $ 1,022.20         $ 7.89         $ 1,000         $ 1,017.21         $ 7.87         1.56%   

Class R6

      $ 1,000         $ 1,026.10         $ 4.15         $ 1,000         $ 1,020.92         $ 4.14         0.82%   

Class Y

      $ 1,000         $ 1,024.00         $ 6.07         $ 1,000         $ 1,019.04         $ 6.06         1.19%   

Ivy Global Growth Fund

  

                                          

Class A

      $ 1,000         $ 1,030.70         $ 7.51         $ 1,000         $ 1,017.64         $ 7.47         1.47%   

Class B**

      $ 1,000         $ 1,024.70         $ 13.26         $ 1,000         $ 1,011.93         $ 13.18         2.61%   

Class C

      $ 1,000         $ 1,027.00         $ 11.15         $ 1,000         $ 1,013.96         $ 11.08         2.21%   

Class E

      $ 1,000         $ 1,031.90         $ 6.10         $ 1,000         $ 1,019.03         $ 6.06         1.19%   

Class I

      $ 1,000         $ 1,032.70         $ 5.49         $ 1,000         $ 1,019.61         $ 5.45         1.08%   

Class R

      $ 1,000         $ 1,029.50         $ 8.52         $ 1,000         $ 1,016.61         $ 8.47         1.68%   

Class R6

      $ 1,000         $ 1,033.60         $ 4.78         $ 1,000         $ 1,020.33         $ 4.75         0.93%   

Class Y

      $ 1,000         $ 1,031.50         $ 6.81         $ 1,000         $ 1,018.28         $ 6.76         1.34%   

Ivy Global Income Allocation Fund

  

                                          

Class A

      $ 1,000         $ 1,034.80         $ 6.51         $ 1,000         $ 1,018.57         $ 6.46         1.29%   

Class B**

      $ 1,000         $ 1,030.60         $ 10.86         $ 1,000         $ 1,014.27         $ 10.78         2.15%   

Class C

      $ 1,000         $ 1,032.00         $ 9.55         $ 1,000         $ 1,015.55         $ 9.47         1.89%   

Class E

      $ 1,000         $ 1,034.50         $ 6.82         $ 1,000         $ 1,018.35         $ 6.76         1.33%   

Class I

      $ 1,000         $ 1,037.20         $ 4.69         $ 1,000         $ 1,020.41         $ 4.65         0.92%   

Class R

      $ 1,000         $ 1,033.60         $ 7.73         $ 1,000         $ 1,017.42         $ 7.67         1.52%   

Class R6

      $ 1,000         $ 1,038.00         $ 3.97         $ 1,000         $ 1,021.13         $ 3.94         0.77%   

Class Y

      $ 1,000         $ 1,035.30         $ 6.00         $ 1,000         $ 1,019.15         $ 5.96         1.17%   

See footnotes on page 10.

 

6   ANNUAL REPORT   2016  

Table of Contents

ILLUSTRATION OF FUND EXPENSES

Ivy Funds

     (UNAUDITED)

 

 

 

       Actual(1)        Hypothetical(2)         
Fund      Beginning
Account
Value
9-30-15		        Ending
Account
Value
3-31-16		        Expenses
Paid During
Period*		        Beginning
Account
Value
9-30-15		        Ending
Account
Value
3-31-16		        Expenses
Paid During
Period*		      Annualized
Expense Ratio
Based on the
Six-Month
Period		  

Ivy High Income Fund

  

                                          

Class A

      $ 1,000         $ 964.30         $ 4.81         $ 1,000         $ 1,020.09         $ 4.95         0.98%   

Class B**

      $ 1,000         $ 960.70         $ 8.43         $ 1,000         $ 1,016.44         $ 8.67         1.71%   

Class C

      $ 1,000         $ 960.90         $ 8.24         $ 1,000         $ 1,016.65         $ 8.47         1.67%   

Class E

      $ 1,000         $ 963.10         $ 5.89         $ 1,000         $ 1,018.99         $ 6.06         1.20%   

Class I

      $ 1,000         $ 965.50         $ 3.44         $ 1,000         $ 1,021.48         $ 3.54         0.70%   

Class R

      $ 1,000         $ 962.60         $ 6.38         $ 1,000         $ 1,018.48         $ 6.56         1.30%   

Class R6

      $ 1,000         $ 966.50         $ 2.75         $ 1,000         $ 1,022.22         $ 2.83         0.56%   

Class Y

      $ 1,000         $ 964.20         $ 4.71         $ 1,000         $ 1,020.23         $ 4.85         0.95%   

Ivy International Core Equity Fund

  

                                          

Class A

      $ 1,000         $ 1,005.70         $ 6.62         $ 1,000         $ 1,018.44         $ 6.66         1.31%   

Class B**

      $ 1,000         $ 1,001.50         $ 11.11         $ 1,000         $ 1,013.94         $ 11.18         2.21%   

Class C

      $ 1,000         $ 1,002.30         $ 10.01         $ 1,000         $ 1,015.04         $ 10.08         1.99%   

Class E

      $ 1,000         $ 1,005.70         $ 7.02         $ 1,000         $ 1,017.99         $ 7.06         1.40%   

Class I

      $ 1,000         $ 1,007.90         $ 4.92         $ 1,000         $ 1,020.11         $ 4.95         0.98%   

Class R

      $ 1,000         $ 1,004.10         $ 7.92         $ 1,000         $ 1,017.11         $ 7.97         1.58%   

Class R6

      $ 1,000         $ 1,008.20         $ 4.22         $ 1,000         $ 1,020.84         $ 4.24         0.83%   

Class Y

      $ 1,000         $ 1,006.30         $ 6.32         $ 1,000         $ 1,018.72         $ 6.36         1.26%   

Ivy Large Cap Growth Fund

  

                                          

Class A

      $ 1,000         $ 1,034.20         $ 5.80         $ 1,000         $ 1,019.25         $ 5.75         1.15%   

Class B**

      $ 1,000         $ 1,030.10         $ 10.46         $ 1,000         $ 1,014.69         $ 10.38         2.06%   

Class C

      $ 1,000         $ 1,030.90         $ 9.44         $ 1,000         $ 1,015.69         $ 9.37         1.86%   

Class E

      $ 1,000         $ 1,034.30         $ 5.80         $ 1,000         $ 1,019.26         $ 5.75         1.15%   

Class I

      $ 1,000         $ 1,035.70         $ 4.48         $ 1,000         $ 1,020.62         $ 4.45         0.88%   

Class R

      $ 1,000         $ 1,032.80         $ 7.42         $ 1,000         $ 1,017.66         $ 7.36         1.47%   

Class R6

      $ 1,000         $ 1,036.70         $ 3.67         $ 1,000         $ 1,021.38         $ 3.64         0.72%   

Class Y

      $ 1,000         $ 1,034.70         $ 5.39         $ 1,000         $ 1,019.70         $ 5.35         1.06%   

Ivy Limited-Term Bond Fund

  

                                          

Class A

      $ 1,000         $ 1,012.00         $ 4.43         $ 1,000         $ 1,020.60         $ 4.45         0.88%   

Class B**

      $ 1,000         $ 1,007.80         $ 8.53         $ 1,000         $ 1,016.51         $ 8.57         1.70%   

Class C

      $ 1,000         $ 1,008.30         $ 8.03         $ 1,000         $ 1,016.96         $ 8.07         1.61%   

Class E

      $ 1,000         $ 1,011.30         $ 5.03         $ 1,000         $ 1,020.00         $ 5.05         1.00%   

Class I

      $ 1,000         $ 1,013.20         $ 3.22         $ 1,000         $ 1,021.85         $ 3.23         0.63%   

Class R

      $ 1,000         $ 1,010.10         $ 6.23         $ 1,000         $ 1,018.79         $ 6.26         1.24%   

Class R6

      $ 1,000         $ 1,013.90         $ 2.42         $ 1,000         $ 1,022.58         $ 2.43         0.48%   

Class Y

      $ 1,000         $ 1,012.00         $ 4.43         $ 1,000         $ 1,020.59         $ 4.45         0.88%   

See footnotes on page 10.

 

  2016   ANNUAL REPORT   7

Table of Contents

ILLUSTRATION OF FUND EXPENSES

Ivy Funds

     (UNAUDITED)

 

 

 

       Actual(1)        Hypothetical(2)         
Fund      Beginning
Account
Value
9-30-15		        Ending
Account
Value
3-31-16		        Expenses
Paid During
Period*		        Beginning
Account
Value
9-30-15		        Ending
Account
Value
3-31-16		        Expenses
Paid During
Period*		      Annualized
Expense Ratio
Based on the
Six-Month
Period		  

Ivy Managed International Opportunities Fund(3)

  

                                          

Class A

      $ 1,000         $ 1,008.40         $ 2.31         $ 1,000         $ 1,022.67         $ 2.33         0.47%   

Class B**

      $ 1,000         $ 1,003.70         $ 7.01         $ 1,000         $ 1,017.99         $ 7.06         1.40%   

Class C

      $ 1,000         $ 1,004.60         $ 6.41         $ 1,000         $ 1,018.64         $ 6.46         1.27%   

Class E***

      $ 1,000         $ 1,008.90         $ 1.91         $ 1,000         $ 1,023.06         $ 1.92         0.39%   

Class I

      $ 1,000         $ 1,010.70         $ 0.80         $ 1,000         $ 1,024.21         $ 0.81         0.16%   

Class R

      $ 1,000         $ 1,008.20         $ 3.21         $ 1,000         $ 1,021.85         $ 3.23         0.63%   

Class Y

      $ 1,000         $ 1,010.00         $ 1.91         $ 1,000         $ 1,023.10         $ 1.92         0.38%   

Ivy Micro Cap Growth Fund

  

                                          

Class A

      $ 1,000         $ 865.00         $ 8.11         $ 1,000         $ 1,016.32         $ 8.77         1.74%   

Class B**

      $ 1,000         $ 861.30         $ 12.10         $ 1,000         $ 1,011.95         $ 13.08         2.61%   

Class C

      $ 1,000         $ 862.10         $ 11.45         $ 1,000         $ 1,012.71         $ 12.38         2.46%   

Class I

      $ 1,000         $ 867.00         $ 5.88         $ 1,000         $ 1,018.72         $ 6.36         1.26%   

Class R

      $ 1,000         $ 864.60         $ 8.58         $ 1,000         $ 1,015.81         $ 9.27         1.84%   

Class R6

      $ 1,000         $ 867.90         $ 5.04         $ 1,000         $ 1,019.57         $ 5.45         1.09%   

Class Y

      $ 1,000         $ 866.20         $ 6.90         $ 1,000         $ 1,017.56         $ 7.46         1.49%   

Ivy Mid Cap Growth Fund

  

                                          

Class A

      $ 1,000         $ 1,022.10         $ 6.57         $ 1,000         $ 1,018.47         $ 6.56         1.31%   

Class B**

      $ 1,000         $ 1,018.30         $ 10.50         $ 1,000         $ 1,014.64         $ 10.48         2.07%   

Class C

      $ 1,000         $ 1,018.60         $ 10.29         $ 1,000         $ 1,014.82         $ 10.28         2.04%   

Class E

      $ 1,000         $ 1,022.10         $ 6.57         $ 1,000         $ 1,018.51         $ 6.56         1.30%   

Class I

      $ 1,000         $ 1,023.60         $ 5.16         $ 1,000         $ 1,019.94         $ 5.15         1.01%   

Class R

      $ 1,000         $ 1,020.50         $ 8.08         $ 1,000         $ 1,016.99         $ 8.07         1.60%   

Class R6

      $ 1,000         $ 1,024.60         $ 4.35         $ 1,000         $ 1,020.75         $ 4.34         0.85%   

Class Y

      $ 1,000         $ 1,022.10         $ 6.27         $ 1,000         $ 1,018.77         $ 6.26         1.25%   

Ivy Mid Cap Income Opportunities Fund

  

Class A

      $ 1,000         $ 1,103.40         $ 7.15         $ 1,000         $ 1,018.25         $ 6.86         1.35% (4) 

Class C

      $ 1,000         $ 1,099.30         $ 10.92         $ 1,000         $ 1,014.65         $ 10.48         2.07% (5) 

Class E

      $ 1,000         $ 1,102.50         $ 6.83         $ 1,000         $ 1,018.50         $ 6.56         1.30% (6) 

Class I

      $ 1,000         $ 1,104.10         $ 5.58         $ 1,000         $ 1,019.75         $ 5.35         1.05% (7) 

Class R

      $ 1,000         $ 1,101.10         $ 9.45         $ 1,000         $ 1,016.00         $ 9.07         1.80% (8) 

Class R6

      $ 1,000         $ 1,104.10         $ 5.58         $ 1,000         $ 1,019.75         $ 5.35         1.05% (9) 

Class Y

      $ 1,000         $ 1,103.40         $ 7.15         $ 1,000         $ 1,018.25         $ 6.86         1.35% (10) 

Ivy Money Market Fund

  

                                          

Class A

      $ 1,000         $ 1,000.10         $ 1.80         $ 1,000         $ 1,023.18         $ 1.82         0.36%   

Class B**

      $ 1,000         $ 1,000.10         $ 1.80         $ 1,000         $ 1,023.16         $ 1.82         0.37%   

Class C**

      $ 1,000         $ 1,000.00         $ 1.80         $ 1,000         $ 1,023.16         $ 1.82         0.37%   

Class E

      $ 1,000         $ 1,000.10         $ 1.80         $ 1,000         $ 1,023.20         $ 1.82         0.36%   

See footnotes on page 10.

 

8   ANNUAL REPORT   2016  

Table of Contents

ILLUSTRATION OF FUND EXPENSES

Ivy Funds

     (UNAUDITED)

 

 

 

       Actual(1)        Hypothetical(2)         
Fund      Beginning
Account
Value
9-30-15		        Ending
Account
Value
3-31-16		        Expenses
Paid During
Period*		        Beginning
Account
Value
9-30-15		        Ending
Account
Value
3-31-16		        Expenses
Paid During
Period*		      Annualized
Expense Ratio
Based on the
Six-Month
Period		  

Ivy Municipal Bond Fund

  

                                          

Class A

      $ 1,000         $ 1,026.60         $ 4.97         $ 1,000         $ 1,020.12         $ 4.95         0.98%   

Class B**

      $ 1,000         $ 1,022.80         $ 8.70         $ 1,000         $ 1,016.40         $ 8.67         1.72%   

Class C

      $ 1,000         $ 1,022.80         $ 8.70         $ 1,000         $ 1,016.43         $ 8.67         1.71%   

Class I

      $ 1,000         $ 1,027.70         $ 3.95         $ 1,000         $ 1,021.14         $ 3.94         0.77%   

Class Y

      $ 1,000         $ 1,026.60         $ 4.97         $ 1,000         $ 1,020.12         $ 4.95         0.98%   

Ivy Municipal High Income Fund

  

Class A

      $ 1,000         $ 1,028.80         $ 4.36         $ 1,000         $ 1,020.73         $ 4.34         0.85%   

Class B**

      $ 1,000         $ 1,025.00         $ 8.20         $ 1,000         $ 1,016.92         $ 8.17         1.62%   

Class C

      $ 1,000         $ 1,025.10         $ 8.00         $ 1,000         $ 1,017.12         $ 7.97         1.58%   

Class I

      $ 1,000         $ 1,029.80         $ 3.35         $ 1,000         $ 1,021.66         $ 3.34         0.67%   

Class Y

      $ 1,000         $ 1,028.70         $ 4.36         $ 1,000         $ 1,020.73         $ 4.34         0.85%   

Ivy Small Cap Growth Fund

  

Class A

      $ 1,000         $ 1,013.30         $ 7.35         $ 1,000         $ 1,017.72         $ 7.36         1.46%   

Class B**

      $ 1,000         $ 1,008.50         $ 11.75         $ 1,000         $ 1,013.33         $ 11.78         2.33%   

Class C

      $ 1,000         $ 1,010.20         $ 10.45         $ 1,000         $ 1,014.60         $ 10.48         2.08%   

Class E

      $ 1,000         $ 1,013.40         $ 7.25         $ 1,000         $ 1,017.77         $ 7.26         1.45%   

Class I

      $ 1,000         $ 1,015.30         $ 5.34         $ 1,000         $ 1,019.71         $ 5.35         1.06%   

Class R

      $ 1,000         $ 1,012.10         $ 8.35         $ 1,000         $ 1,016.71         $ 8.37         1.66%   

Class R6

      $ 1,000         $ 1,015.70         $ 4.64         $ 1,000         $ 1,020.45         $ 4.65         0.91%   

Class Y

      $ 1,000         $ 1,013.90         $ 6.55         $ 1,000         $ 1,018.49         $ 6.56         1.30%   

Ivy Small Cap Value Fund

  

Class A

      $ 1,000         $ 1,055.20         $ 8.12         $ 1,000         $ 1,017.13         $ 7.97         1.57%   

Class B**

      $ 1,000         $ 1,049.90         $ 12.91         $ 1,000         $ 1,012.40         $ 12.68         2.52%   

Class C

      $ 1,000         $ 1,051.20         $ 11.49         $ 1,000         $ 1,013.84         $ 11.28         2.23%   

Class E***

      $ 1,000         $ 1,057.00         $ 6.27         $ 1,000         $ 1,018.88         $ 6.16         1.22%   

Class I

      $ 1,000         $ 1,057.60         $ 5.76         $ 1,000         $ 1,019.42         $ 5.65         1.12%   

Class R

      $ 1,000         $ 1,054.70         $ 8.84         $ 1,000         $ 1,016.43         $ 8.67         1.71%   

Class R6

      $ 1,000         $ 1,058.60         $ 4.94         $ 1,000         $ 1,020.17         $ 4.85         0.97%   

Class Y

      $ 1,000         $ 1,056.30         $ 7.09         $ 1,000         $ 1,018.13         $ 6.96         1.37%   

Ivy Tax-Managed Equity Fund

  

Class A

      $ 1,000         $ 1,024.70         $ 6.07         $ 1,000         $ 1,018.97         $ 6.06         1.21%   

Class B**

      $ 1,000         $ 1,021.20         $ 9.70         $ 1,000         $ 1,015.40         $ 9.67         1.92%   

Class C

      $ 1,000         $ 1,020.70         $ 10.20         $ 1,000         $ 1,014.94         $ 10.18         2.01%   

Class I

      $ 1,000         $ 1,025.80         $ 4.96         $ 1,000         $ 1,020.11         $ 4.95         0.98%   

Class Y

      $ 1,000         $ 1,025.30         $ 6.18         $ 1,000         $ 1,018.93         $ 6.16         1.21%   

See footnotes on page 10.

 

  2016   ANNUAL REPORT   9

Table of Contents

ILLUSTRATION OF FUND EXPENSES

Ivy Funds

     (UNAUDITED)

 

 

 

       Actual(1)        Hypothetical(2)         
Fund      Beginning
Account
Value
9-30-15		        Ending
Account
Value
3-31-16		        Expenses
Paid During
Period*		        Beginning
Account
Value
9-30-15		        Ending
Account
Value
3-31-16		        Expenses
Paid During
Period*		      Annualized
Expense Ratio
Based on the
Six-Month
Period		  

Ivy Value Fund

  

Class A

      $ 1,000         $ 1,016.20         $ 6.55         $ 1,000         $ 1,018.46         $ 6.56         1.31%   

Class B**

      $ 1,000         $ 1,011.10         $ 11.46         $ 1,000         $ 1,013.64         $ 11.48         2.27%   

Class C

      $ 1,000         $ 1,013.00         $ 9.66         $ 1,000         $ 1,015.39         $ 9.67         1.92%   

Class E***

      $ 1,000         $ 1,017.70         $ 5.35         $ 1,000         $ 1,019.68         $ 5.35         1.06%   

Class I

      $ 1,000         $ 1,017.80         $ 4.84         $ 1,000         $ 1,020.18         $ 4.85         0.96%   

Class R

      $ 1,000         $ 1,014.70         $ 7.86         $ 1,000         $ 1,017.22         $ 7.87         1.56%   

Class R6

      $ 1,000         $ 1,018.90         $ 4.04         $ 1,000         $ 1,020.97         $ 4.04         0.81%   

Class Y

      $ 1,000         $ 1,016.50         $ 6.15         $ 1,000         $ 1,018.90         $ 6.16         1.22%   

 

* Fund expenses for each share class are equal to the Fund’s annualized expense ratio for each share class (provided in the table), multiplied by the average account value over the period, multiplied by 183 days in the six-month period ended March 31, 2016, and divided by 366.

 

** These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

*** Class share is closed to investment.

 

(1) This section uses the Fund’s actual total return and actual Fund expenses. It is a guide to the actual expenses paid by the Fund in the period. The “Ending Account Value” shown is computed using the Fund’s actual return and the “Expenses Paid During Period” column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. A shareholder may use the information here, together with the dollar amount invested, to estimate the expenses that were paid over the period. For every thousand dollars a shareholder has invested, the expenses are listed in the last column of this section.

 

(2) This section uses a hypothetical five percent annual return and actual Fund expenses. It helps to compare the Fund’s ongoing costs with other mutual funds. A shareholder can compare the Fund’s ongoing costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

 

(3) Annualized Expense Ratio Based on the Six-Month Period does not include expenses of Underlying Ivy Funds in which Ivy Managed International Opportunities Fund invests.

 

(4) Annualized expense ratio based on the period excluding offering costs was 1.31%.

 

(5) Annualized expense ratio based on the period excluding offering costs was 2.03%.

 

(6) Annualized expense ratio based on the period excluding offering costs was 1.26%.

 

(7) Annualized expense ratio based on the period excluding offering costs was 1.01%.

 

(8) Annualized expense ratio based on the period excluding offering costs was 1.76%.

 

(9) Annualized expense ratio based on the period excluding offering costs was 1.01%.

 

(10) Annualized expense ratio based on the period excluding offering costs was 1.31%.

The above illustrations are based on ongoing costs only and do not include any transactional costs, such as sales loads or exchange fees.

 

10   ANNUAL REPORT   2016  

Table of Contents

MANAGEMENT DISCUSSION

Ivy Bond Fund

(UNAUDITED)

 

 

 

LOGO

Thomas B. Houghton

 

LOGO

David W. Land

 

LOGO

Christopher R. Sebald

Ivy Bond Fund is subadvised by Advantus Capital Management, Inc.

Below, Thomas B. Houghton, CFA; David W. Land, CFA and Christopher R. Sebald, CFA; portfolio managers of the Ivy Bond Fund, discuss positioning, performance and results for the fiscal year ended March 31, 2016. Mr. Houghton has managed the Fund since April 2005 and has 23 years of industry experience. Mr. Land has managed the Fund since April 2005 and has 26 years of industry experience. Mr. Sebald has managed the Fund since August 2003 and has 28 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 months ended March 31, 2016

         

Ivy Bond (Class A shares at net asset value)

      0.21%   

Ivy Bond (Class A shares with sales charge)

      –5.57%   

Benchmark(s) and/or Lipper Category

         

Barclays U.S. Aggregate Bond Index

      1.96%   

(generally reflects the performance of securities representing the world’s bond markets)

         

Lipper Corporate Debt A Rated Funds Universe Average

      0.36%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

 

The Fund underperformed its index and the average performance of its peer group for the 12 months ended March 31, 2016. The underperformance was due mainly to relatively poor performance of the Fund’s positions in the energy sector, as falling energy prices put pressure on the Fund’s holdings, particularly in the pipeline sector.

The Fund benefited from positive security selection results in the asset-backed and commercial mortgage-backed sectors.

Market

 

 

The Federal Reserve (Fed) raised interest rates for the first time in 9 years by 25 basis points (0.25 percent) in December 2015. Concerns about a global growth slowdown that gripped the markets in the third quarter of 2015 subsided rather quickly, despite further declines in commodity markets. As we began 2016, oil prices fell to mid-$20 a barrel and stock, commodity and credit markets all tumbled early in the quarter, bottoming out in mid-February. It wasn’t until the Fed lowered its expectation to two rate increases this year instead of four, along with improving economic data in the U.S. and globally, that markets picked up again. Oil prices returned to near $40 a barrel by the end of the first quarter, helping to boost energy stocks and bonds, and fueling the bounce back in stocks and credit spreads to where they started the year.

Interest rates initially rose at the beginning of the Fund’s fiscal year, causing bond returns to be negative for the first time since 2013. The 10-year Treasury yield rose 43 basis points (0.43 percent) during the second quarter of 2015, averaging 2.20% for the remainder of the year. However, interest rates fell in the first quarter of 2016, credit spreads were very volatile and weak fixed income liquidity accentuated the market’s wild moves. Treasury yields fell across the curve with the 2-year falling about 30 basis points (0.30 percent), and the 10-year ending the quarter at 1.77%, near the lows in early 2015.

The U.S. economy continued to chug along in 2015 with decent employment growth, supportive housing growth and strong auto sales when compared to the performance of the past couple years. However, global growth continues to be a concern. The slump in China spread to other emerging markets and weighed on both U.S. and European equity markets in 2015. We saw volatility rise significantly in most markets, due also in part to divergent monetary policy between the U.S., Japan and Europe.

Positioning

 

 

Issuance was very strong at the beginning of the fiscal year and we participated in several attractively priced new issues, particularly in the banking, pipeline, utility and health care sectors. We also added exposure in the communications sector in order to take advantage of merger and acquisition

 

  2016   ANNUAL REPORT   11

Table of Contents

MANAGEMENT DISCUSSION

Ivy Bond Fund

(UNAUDITED)

 

 

 

relative spread widening. We sold positions in real estate investment trust (REIT) bonds as we were concerned about liquidity in this sector. We also reduced exposure to high-yield corporate bonds over several months during the second quarter of 2015.

In the third and fourth quarters of 2015, we reduced risk exposure to energy in particular. The energy sector and Master Limited Partnership (MLP) bond prices were driven by the falling price of oil, despite actions to improve balance sheets and financials. We expect this sector to track oil prices leading to more downside. Within the financial sector, we first increased position in banks during 2015 and then shifted to insurance companies in 2016. The European Central Bank’s negative interest rate policy and the slow normalization of rates by the Fed in the U.S. are likely to keep the pressure on banks and limit their credit improvement. We also added to agency mortgage-backed securities (MBS) as they appear to be an undervalued segment that isn’t correlated with oil prices in the current environment.

We made no substantial changes to the interest rate positioning of the Fund over the course of the year. We maintained our view that interest rates would remain low and fairly range-bound.

Treasury futures are the only form of derivative the Fund has utilized. The Fund has historically used Treasury futures strictly to hedge interest rate positions and to help manage the duration of the Fund.

We have positioned the Fund for a continued slow-growth economy and a narrowing of non-government bond spreads.

Outlook

 

 

We expect the U.S. economy to continue its weak but steady growth trend. It improved 0.5% in the first quarter of 2016 from 1.4% in fourth quarter 2015. Longer term, slowing growth in China and other emerging markets may dampen the U.S. trend, but we don’t think it will send the U.S. economy into recession anytime soon. Long-term interest rates in the U.S. are likely to remain low as a result. The pace of credit expansion and re-leveraging has been significant in the corporate sector, but it’s been weak across the household sector and the combined corporate and household credit growth hasn’t been enough in this expansion to be a catalyst for a deep downturn.

Despite the recent rebound in credit spreads, bond market liquidity remains weak. New issue and benchmark bonds trade sometimes points above the same credit issued just last year. Dodd-Frank’s limits on market making and trading for banks continue to be a headwind against investors’ liquidity needs.

Overall, the list of risks seems to be lengthening. Protectionist policies have become popular with U.S presidential candidates and heightened rhetoric against trade would certainly be a negative for the U.S. global growth and credit. Beyond protectionism, the threat of terrorism in Europe is now expected. In addition, market uncertainty will likely rise as the United Kingdom entertains exiting the European Union in the second quarter of 2016. Stocks and credit haven’t responded well to the prospect of faster rate hikes. Should the Fed become more hawkish again and the dollar rise, the negative feedback loop may kick in again from emerging markets. While the U.S. remains the bright spot in the world economy and investment markets, the constant economic and political pressures from both inside and outside the U.S. borders make investing analysis more than just a domestic exercise.

The Fund’s performance noted above is at net asset value (NAV) and does not include the effect of any applicable sales charges. If reflected, the sales charge would reduce the performance noted.

As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

Fixed-income securities are subject to interest rate risk and, as such, the Fund’s net asset value may fall as interest rates rise. These and other risks are more fully described in the Fund’s prospectus.

Certain U.S. government securities in which the Fund may invest, such as Treasury securities and securities issued by the Government National Mortgage Association (Ginnie Mae), are backed by the full faith and credit of the U.S. government. However, other U.S. government securities in which the Fund may invest, such as securities issued by the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal Home Loan Banks (FHLB) are not backed by the full faith and credit of the U.S. government, are not insured or guaranteed by the U.S. government and, instead, may be supported only by the right of the issuer to borrow from the U.S. Treasury or by the credit of the issuer.

On Sept. 7, 2008, the Federal Housing Finance Agency (FHFA), an agency of the U.S. government, placed Fannie Mae and Freddie Mac into conservatorship, a statutory process with the objective of returning the entities to normal business operations. FHFA will act as the conservator to operate Fannie Mae and Freddie Mac until they are stabilized. It is unclear what effect this conservatorship will have on the securities issued or guaranteed by Fannie Mae or Freddie Mac.

The opinions expressed in this report are those of the portfolio managers and are current only through the end of the period of the report as stated on the cover. The managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index (indexes) noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of the Ivy Bond Fund.

 

12   ANNUAL REPORT   2016  

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Bond Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      1.2%   

Financials

      1.2%   

Bonds

      98.8%   

United States Government and Government Agency Obligations

      42.9%   

Corporate Debt Securities

      38.6%   

Asset-Backed Securities

      10.8%   

Mortgage-Backed Securities

      5.3%   

Municipal Bonds — Taxable

      1.2%   

Cash and Other Assets (Net of Liabilities),
and Cash Equivalents+

      0.0%   

Lipper Rankings

 

 

 

Category: Lipper Corporate Debt Funds A
Rated		    Rank      Percentile

1 Year

    31/47      65

3 Year

    24/42      56

5 Year

    18/38      47

10 Year

    25/31      79

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

 

Quality Weightings

 

 

 

Investment Grade

      87.7%   

AAA

      3.6%   

AA

      45.2%   

A

      9.7%   

BBB

      29.2%   

Non-Investment Grade

      11.1%   

BB

      9.3%   

B

      0.1%   

CCC

      0.2%   

Below CCC

      0.1%   

Non-rated

      1.4%   

Cash and Other Assets (Net of Liabilities),
Cash Equivalents+ and Equities

      1.2%   

Our preference is to always use ratings obtained from Standard & Poor’s. For securities not rated by Standard & Poor’s, ratings are obtained from Moody’s. We do not evaluate these ratings, but simply assign them to the appropriate credit quality category as determined by the rating agency.

 

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

 

  2016   ANNUAL REPORT   13

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Bond Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class B(4)      Class C      Class E      Class I      Class R      Class R6      Class Y  

1-year period ended 3-31-16

      -5.57%         -4.64%         -0.55%         -5.62%         0.49%         -0.11%         0.64%         0.26%   

5-year period ended 3-31-16

      2.61%         2.65%         3.06%         2.53%         4.16%         —            —            3.89%   

10-year period ended 3-31-16

      3.25%         2.95%         3.06%         —            —            —            —            3.90%   

Since Inception of Class through 3-31-16(5)

      —            —            —            2.81%         3.94%         1.90%         2.66%         —      

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) 4-2-07 for Class E shares, 4-2-07 for Class I shares, 12-19-12 for Class R shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

14   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

PREFERRED STOCKS   Shares     Value  
   

Financials

  

 

Diversified Banks – 0.6%

  

Wells Fargo & Co., 5.850%

     173      $ 4,566   
   

 

 

  
 

Reinsurance – 0.2%

  

Pitney Bowes International Holdings, Inc., Series F, 6.125% (A)

     2        1,564   
   

 

 

  
 

Specialized REITs – 0.4%

  

Ventas, Inc., 5.450%

     100        2,627   
   

 

 

  
 

Total Financials – 1.2%

  

     8,757   
 

TOTAL PREFERRED
STOCKS – 1.2%

   

   $ 8,757   

(Cost: $8,424)

      
 
ASSET-BACKED
SECURITIES		   Principal         

Air Canada Enhanced Equipment Trust Series 2015-2, Class AA,

      

6.625%, 5-15-18 (A)

   $ 460        456   

Air Canada Pass Through Certificates, Series 2015-1, Class C,

      

5.000%, 3-15-20 (A)

     5,030        4,716   

America West Airlines, Inc., Pass Through Certificates, Series 1999-1,

      

7.930%, 1-2-19

     565        601   

America West Airlines, Inc., Pass Through Certificates, Series 2000-1,

      

8.057%, 7-2-20

     874        961   

American Airlines Class B Pass Through Certificates, Series 2013-2,

      

5.600%, 7-15-20 (A)

     3,089        3,120   

American Airlines Pass-Through Trusts, Pass-Through Certificates, Series 2013-1,

      

3.700%, 5-1-23

     959        914   

American Airlines, Inc., Class A Pass Through Certificates, Series 2013-2,

      

5.625%, 1-15-21 (A)

     4,280        4,334   

Aventura Mall Trust, Series 2013-AVM, Class B,

      

3.743%,
12-5-32 (A)(B)

     3,600        3,781   

Cabela’s Master Credit Card Trust 2015-2, Class A1,

      

2.250%, 7-17-23

     1,285        1,298   
   
ASSET-BACKED
SECURITIES (Continued)		   Principal     Value  

CarMax Auto Owner Trust 2013-2, Class D:

      

1.880%, 11-15-19 (B)

   $ 1,300      $ 1,308   

2.060%, 11-15-19

     3,000        2,987   

CarMax Auto Owner Trust 2013-4, Class D,

      

2.600%, 4-15-20

     2,000        1,998   

Continental Airlines 2001-1 A-1,

      

8.048%, 11-1-20

     667        731   

Continental Airlines Pass Through Certificates, Series 2009-2,

      

7.250%, 11-10-19

     548        617   

Continental Airlines Pass Through Certificates, Series 2010-1B,

      

6.000%, 1-12-19

     1,445        1,517   

Continental Airlines, Inc. Class B Pass Through Certificates, Series 2012-1B,

      

6.250%, 4-11-20

     747        780   

CVS Caremark Corp. Pass-Through Trust:

      

6.036%, 12-10-28

     3,651        4,091   

6.943%, 1-10-30

     2,656        3,069   

Delta Air Lines, Inc. Class A Pass Through Certificates, Series 2010-2,

      

4.250%, 7-30-23

     1,785        1,749   

Delta Air Lines, Inc. Pass-Through Certificates, Series 2012-1A,

      

4.750%, 5-7-20

     1,721        1,824   

Delta Air Lines, Inc. Pass-Through Certificates, Series 2012-1B,

      

6.875%, 5-7-19 (A)

     4,090        4,295   

Fan Engine Securitization Ltd., Series 2013-1X,

      

3.000%, 10-15-19 (A)

     773        773   

Hawaiian Airlines Pass Through Certificates, Series 2013-1,

      

4.950%, 1-15-22

     3,966        3,768   

Hyundai Auto Receivables Trust 2014-A, Class D:

      

2.020%, 8-15-19

     1,000        1,000   

1.780%, 7-15-20

     2,500        2,480   

2.530%, 7-15-20

     1,000        1,006   

Longtrain Leasing III LLC, Series 2015A-1,

      

2.980%, 1-15-45 (A)

     1,218        1,176   

Longtrain Leasing III LLC, Series 2015A-2,

      

4.060%, 1-15-45 (A)

     6,275        5,847   

SoFi Professional Loan Program LLC, Series 2015-A2,

      

2.420%, 3-25-30 (A)

     2,078        2,053   

Tal Advantage V LLC,

      

3.510%, 2-22-39 (A)

     748        710   
ASSET-BACKED
SECURITIES (Continued)		   Principal     Value  

TCF Auto Receivables Owner Trust 2015-2, Class A3,

      

2.060%,
4-15-20 (A)(B)

   $ 3,665      $ 3,668   

U.S. Airways, Inc. Class A Pass-Through Certificates, Series 2012-1,

      

5.900%, 10-1-24

     839        937   

U.S. Airways, Inc. Class C Pass-Through Certificates, Series 2012-2,

      

5.450%, 6-3-18

     2,000        2,000   

U.S. Airways, Inc., Series 2012-2, Class A,

      

6.750%, 6-3-21

     1,963        2,041   

United Airlines Pass-Through Certificates, Series 2014-1B,

      

4.750%, 4-11-22

     1,095        1,084   

United Airlines Pass-Through Certificates, Series 2014-2B,

      

4.625%, 9-3-22

     3,889        3,851   

Virgin Australia 2013-1B Trust,

      

6.000%, 10-23-20 (A)

     1,439        1,453   

World Omni Automobile Lease Securitization Trust 2015-A, Class B,

      

1.940%, 12-15-20

     3,940        3,946   
   

 

 

  
 

TOTAL ASSET-BACKED SECURITIES – 10.8%

           $ 82,940   

(Cost: $83,489)

      
 
CORPORATE DEBT SECURITIES         

Consumer Discretionary

  

 

Apparel Retail – 0.4%

  

Limited Brands, Inc.,

      

6.625%, 4-1-21

     2,340        2,632   
   

 

 

  
 

Auto Parts & Equipment – 0.3%

  

Dana Holding Corp.,

      

6.750%, 2-15-21

     1,500        1,541   

Tenneco, Inc.,

      

6.875%, 12-15-20

     965        999   
   

 

 

  
      2,540   
   

 

 

  
 

Household Appliances – 0.3%

  

Stanley Black & Decker, Inc.,

      

5.750%, 12-15-53

     2,115        2,221   
   

 

 

  
 

Housewares & Specialties – 0.9%

  

Newell Rubbermaid, Inc.,

      

3.850%, 4-1-23

     6,875        7,133   
   

 

 

  
 

Total Consumer
Discretionary – 1.9%

   

     14,526   
 

 

  2016   ANNUAL REPORT   15

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

CORPORATE DEBT
SECURITIES (Continued)		   Principal     Value  

Energy

  

 

Oil & Gas Drilling – 0.1%

  

Noble Holding International Ltd.,

      

4.000%, 3-16-18

   $ 350      $ 325   
   

 

 

  
 

Oil & Gas Equipment & Services – 0.6%

  

Enterprise Products Operating L.P. (GTD by Enterprise Products Partners L.P.),

      

7.034%, 1-15-68

     4,763        4,830   
   

 

 

  
 

Oil & Gas Refining & Marketing – 1.4%

  

NuStar Logistics L.P. (GTD by NuStar Energy L.P. and NuStar Pipeline Operating Partnership L.P.):

      

8.150%, 4-15-18 (B)

     5,345        5,345   

4.800%, 9-1-20

     2,340        2,059   

6.750%, 2-1-21

     1,011        945   

Tesoro Corp.,

      

4.250%, 10-1-17

     2,645        2,685   
   

 

 

  
      11,034   
   

 

 

  
 

Oil & Gas Storage & Transportation – 3.3%

  

Boardwalk Pipeline Partners L.P.,

      

5.200%, 6-1-18

     2,500        2,498   

Boardwalk Pipelines L.P. (GTD by Boardwalk Pipeline Partners L.P.),

      

5.750%, 9-15-19

     3,975        3,971   

Buckeye Partners L.P.,

      

5.600%, 10-15-44

     5,715        4,787   

Gulfstream Natural Gas System LLC,

      

4.600%, 9-15-25 (A)

     1,975        1,956   

Regency Energy Partners L.P. and Regency Energy Finance Corp.:

      

6.500%, 7-15-21

     3,600        3,546   

5.875%, 3-1-22

     3,000        2,916   

Sunoco Logistics Partners Operations L.P.,

      

6.850%, 2-15-40

     1,265        1,195   

Tennessee Gas Pipeline Co.,

      

8.375%, 6-15-32

     4,000        4,324   
   

 

 

  
      25,193   
   

 

 

  
 

Total Energy – 5.4%

  

     41,382   

Financials

  

 

Asset Management & Custody Banks – 0.3%

  

State Street Corp., Series F,

      

5.250%, 12-29-49

     2,275        2,304   
   

 

 

  
 

Consumer Finance – 4.2%

  

Capital One Financial Corp., Series E,

      

5.550%, 12-29-49

     5,770        5,770   
CORPORATE DEBT
SECURITIES (Continued)		   Principal     Value  

Consumer Finance (Continued)

  

Discover Bank:

      

8.700%, 11-18-19

   $ 458      $ 534   

3.100%, 6-4-20

     4,525        4,560   

Ford Motor Credit Co. LLC,

      

2.943%, 1-8-19

     3,400        3,452   

General Motors Financial Co., Inc. (GTD by AmeriCredit Financial Services, Inc.):

      

3.500%, 7-10-19

     1,645        1,687   

3.150%, 1-15-20

     1,400        1,405   

4.375%, 9-25-21

     1,080        1,117   

5.250%, 3-1-26

     3,600        3,778   

Hyundai Capital America,

      

2.400%, 10-30-18 (A)

     3,725        3,750   

Synchrony Financial,

      

2.600%, 1-15-19

     5,850        5,863   

Union 13 Leasing LLC,

      

1.870%, 6-28-24

     821        823   
   

 

 

  
      32,739   
   

 

 

  
 

Diversified Banks – 5.2%

  

Bank of America Corp.:

      

5.750%, 12-1-17

     2,405        2,556   

5.875%, 1-5-21

     665        761   

4.000%, 1-22-25

     3,250        3,256   

3.950%, 4-21-25

     1,515        1,509   

6.300%, 12-29-49

     4,000        4,130   

Bank of America N.A.,

      

5.300%, 3-15-17

     1,469        1,520   

Bank of New York Mellon Corp. (The),

      

4.950%, 12-29-49

     2,800        2,796   

Citizens Bank N.A.,

      

2.300%, 12-3-18

     2,500        2,515   

Comerica, Inc.,

      

4.000%, 7-27-25

     2,150        2,158   

Compass Bank,

      

3.875%, 4-10-25

     5,000        4,692   

HSBC Bank USA N.A.,

      

6.000%, 8-9-17

     4,235        4,457   

Huntington Bancshares, Inc.,

      

3.150%, 3-14-21

     5,650        5,734   

Huntington National Bank,

      

2.200%, 11-6-18

     2,000        2,009   

KeyCorp.,

      

2.900%, 9-15-20

     2,050        2,084   
   

 

 

  
      40,177   
   

 

 

  
 

Investment Banking & Brokerage – 1.7%

  

Goldman Sachs Group, Inc. (The),

      

5.250%, 7-27-21

     1,000        1,126   

Morgan Stanley:

      

6.250%, 8-28-17

     3,200        3,400   

5.500%, 1-26-20

     1,552        1,730   

5.500%, 7-28-21

     1,090        1,245   

5.450%, 12-29-29

     3,700        3,496   

5.550%, 12-29-49

     2,275        2,243   
   

 

 

  
      13,240   
   

 

 

  
CORPORATE DEBT
SECURITIES (Continued)		   Principal     Value  

Life & Health Insurance – 1.1%

  

Manulife Financial Corp.,

      

5.375%, 3-4-46

   $ 5,375      $ 5,593   

Symetra Financial Corp.,

      

6.125%, 4-1-16 (A)

     2,755        2,755   
   

 

 

  
      8,348   
   

 

 

  
 

Multi-Line Insurance – 0.4%

  

Aon plc (GTD by Aon Corp.),

      

3.875%, 12-15-25

     2,925        2,981   
   

 

 

  
 

Other Diversified Financial Services – 1.5%

  

Fidelity National Information Services, Inc.,

      

2.850%, 10-15-18

     1,410        1,433   

JPMorgan Chase & Co.,

      

5.000%, 12-29-49

     2,600        2,483   

TIAA Asset Management Finance Co. LLC:

      

2.950%, 11-1-19 (A)

     2,500        2,538   

4.125%, 11-1-24 (A)

     2,125        2,197   

Ulani MSN 37894 LLC,

      

2.184%, 12-20-24

     2,842        2,885   
   

 

 

  
      11,536   
   

 

 

  
 

Property & Casualty Insurance – 1.8%

  

Assurant, Inc.,

      

2.500%, 3-15-18

     1,670        1,672   

CNA Financial Corp.,

      

4.500%, 3-1-26

     5,700        5,781   

Trinity Acquisition plc (GTD by Willis Towers Watson Public Ltd. Co.):

      

3.500%, 9-15-21

     2,700        2,748   

4.400%, 3-15-26

     3,368        3,418   
   

 

 

  
      13,619   
   

 

 

  
 

Real Estate Development – 0.7%

  

ARC Properties Operating Partnership L.P. and Clark Acquisition LLC,

      

2.000%, 2-6-17

     5,450        5,396   
   

 

 

  
 

Regional Banks – 0.7%

  

Synovus Financial Corp.:

      

7.875%, 2-15-19

     3,025        3,350   

5.750%, 12-15-25

     2,000        2,040   
   

 

 

  
      5,390   
   

 

 

  

Retail REITs – 0.4%

  

Retail Properties of America, Inc.,

      

4.000%, 3-15-25

     2,950        2,784   
   

 

 

  
 

Specialized REITs – 1.5%

  

American Tower Trust I,

      

1.551%, 3-15-18 (A)

     3,070        3,068   

Crown Castle International Corp.,

      

6.113%, 1-15-20 (A)

     5,215        5,754   

Hospitality Properties Trust,

      

4.650%, 3-15-24

     1,200        1,178   
 

 

16   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

CORPORATE DEBT
SECURITIES (Continued)		   Principal     Value  

Specialized REITs (Continued)

  

Ventas Realty L.P. and Ventas Capital Corp.,

      

2.700%, 4-1-20

   $ 1,867      $ 1,880   
   

 

 

  
      11,880   
   

 

 

  
 

Total Financials – 19.5%

  

     150,394   

Health Care

  

 

Biotechnology – 0.7%

  

Biogen, Inc.,

      

3.625%, 9-15-22

     4,900        5,184   
   

 

 

  
 

Health Care Facilities – 0.3%

  

NYU Hospitals Center,

      

4.428%, 7-1-42

     2,170        2,199   
   

 

 

  
 

Health Care Supplies – 0.9%

  

Bio-Rad Laboratories, Inc.,

      

4.875%, 12-15-20

     5,000        5,467   

Sinai Health System,

      

3.034%, 1-20-36

     1,795        1,835   
   

 

 

  
      7,302   
   

 

 

  
 

Total Health Care – 1.9%

  

     14,685   

Industrials

  

 

Airlines – 0.4%

  

British Airways plc,

      

5.625%, 6-20-20 (A)

     1,098        1,115   

U.S. Airways Group, Inc., Class A,

      

6.250%, 4-22-23

     958        1,053   

U.S. Airways Group, Inc., Class B,

      

8.500%, 4-22-17

     457        478   

United Air Lines, Inc.,

      

10.400%, 11-1-16

     239        249   
   

 

 

  
      2,895   
   

 

 

  
 

Industrial Machinery – 0.8%

  

Pentair Finance S.A.,

      

3.625%, 9-15-20

     6,000        6,049   
   

 

 

  
 

Railroads – 0.9%

  

BNSF Funding Trust I,

      

6.613%, 12-15-55

     6,280        6,782   
   

 

 

  
 

Trading Companies & Distributors – 0.2%

  

AmeriGas Finance Corp. and AmeriGas Finance LLC,

      

6.750%, 5-20-20

     1,500        1,538   

AmeriGas Partners L.P. and AmeriGas Finance Corp.,

      

6.500%, 5-20-21

     477        484   
   

 

 

  
      2,022   
   

 

 

  
CORPORATE DEBT
SECURITIES (Continued)		   Principal     Value  

Trucking – 0.1%

  

Tagua Leasing LLC,

      

1.900%, 7-12-24

   $ 944      $ 947   
   

 

 

  
 

Total Industrials – 2.4%

  

     18,695   

Information Technology

  

 

Application Software – 0.7%

  

Block Financial LLC (GTD by H&R Block, Inc.),

      

4.125%, 10-1-20

     5,000        5,164   
   

 

 

  
 

Communications Equipment – 0.7%

  

Juniper Networks, Inc.,

      

3.125%, 2-26-19

     5,150        5,239   
   

 

 

  
 

Technology Hardware, Storage &
Peripherals – 0.8%

   

Hewlett Packard Enterprise Co.:

  

    

2.850%, 10-5-18 (A)

     4,325        4,398   

4.400%,
10-15-22 (A)

     1,600        1,672   
   

 

 

  
      6,070   
   

 

 

  
 

Total Information
Technology – 2.2%

   

     16,473   

Telecommunication Services

  

 

Integrated Telecommunication
Services – 1.0%

   

AT&T, Inc.,

      

5.550%, 8-15-41

     1,625        1,742   

Frontier Communications Corp.:

      

8.875%, 9-15-20 (A)

     2,000        2,087   

6.250%, 9-15-21

     750        693   

SBA Tower Trust,

      

2.240%, 4-16-18 (A)

     3,120        3,098   
   

 

 

  
      7,620   
   

 

 

  
 

Wireless Telecommunication Service – 0.2%

  

MetroPCS Communications, Inc.,

      

6.625%, 4-1-23

     500        526   

T-Mobile USA, Inc.,

      

6.000%, 4-15-24

     1,250        1,266   
   

 

 

  
      1,792   
   

 

 

  
 

Total Telecommunication
Services – 1.2%

   

     9,412   

Utilities

  

 

Electric Utilities – 2.5%

  

El Paso Electric Co.,

      

5.000%, 12-1-44

     2,225        2,398   

Entergy Corp.,

      

4.000%, 7-15-22

     2,400        2,546   

Exelon Corp.,

      

5.100%, 6-15-45 (A)

     2,550        2,777   

Exelon Generation Co. LLC,

      

2.950%, 1-15-20

     4,785        4,817   
CORPORATE DEBT
SECURITIES (Continued)		   Principal     Value  

Electric Utilities (Continued)

  

Indianapolis Power &
Light Co.,

      

4.700%, 9-1-45 (A)

   $ 3,750      $ 3,990   

IPALCO Enterprises, Inc.,

      

3.450%, 7-15-20

     2,800        2,811   
   

 

 

  
      19,339   
   

 

 

  

Gas Utilities – 1.2%

  

AGL Capital Corp.,

      

3.875%, 11-15-25

     3,250        3,366   

Brooklyn Union Gas Co.,

      

4.504%, 3-10-46 (A)

     5,600        5,857   
   

 

 

  
      9,223   
   

 

 

  
 

Multi-Utilities – 0.4%

  

Dominion Resources, Inc.,

      

5.750%, 10-1-54

     3,300        3,165   
   

 

 

  
 

Total Utilities – 4.1%

  

     31,727   
 

TOTAL CORPORATE DEBT SECURITIES – 38.6%

   

   $ 297,294   

(Cost: $295,800)

      
 
MORTGAGE-BACKED SECURITIES  

Commercial Mortgage-Backed
Securities – 2.9%

   

7 WTC Depositor LLC Trust 2012-WTC Commercial Mortgage Pass-Through Certificates, Series 2012-7WTC,

      

4.082%, 3-13-31 (A)

     1,231        1,245   

BAMLL Commercial Mortgage Securities Trust 2014-520M,
Class A,

      

4.185%,
8-15-46 (A)(B)

     6,130        6,436   

Citigroup Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2013-SMPD,

      

2.911%,
1-12-30 (A)(B)

     1,240        1,230   

Extended Stay America Trust, Commercial Mortgage Pass-Through Certificates, Series 2013-ESH MZ,

      

2.295%, 12-5-31 (A)

     2,000        2,000   

GS Mortgage Securities Corp. Trust, Commercial Mortgage Pass-Through Certificates, Series 2012-BWTR,

      

3.329%,
11-5-34 (A)(B)

     1,000        978   
 

 

  2016   ANNUAL REPORT   17

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

MORTGAGE-BACKED
SECURITIES (Continued)		   Principal     Value  

Commercial Mortgage-Backed Securities (Continued)

   

Helios Leasing I LLC,

      

2.018%, 5-29-24

   $ 1,016      $ 1,025   

Hometown Commercial Capital LLC, Hometown Commercial Mortgage Pass-Through Notes 2006-1,

      

5.506%,
11-11-38 (A)

     491        411   

Hometown Commercial Trust, Commercial Mortgage-Backed Notes, Series 2007-1,

      

6.057%, 6-11-39 (A)

     77        55   

JPMorgan Chase Commercial Mortgage Securities Trust 2009-IWST, Commercial Mortgage Pass-Through Certificates, Series 2009-IWST:

      

1.915%,
12-5-27 (A)(B)

     5,733        362   

7.151%, 12-5-27 (A)

     1,425        1,642   

7.446%,
12-5-27 (A)(B)

     2,600        3,036   

Mellon Residential Funding,

      

6.750%, 6-25-28

     1        1   

Multi Security Asset Trust L.P., Commercial Mortgage-Backed Securities Pass-Through Certificates, Series 2005-RR4,

      

5.880%,
11-28-35 (A)(B)

     1,280        1,203   

Vornado DP LLC Trust 2010, Commercial Mortgage Pass-Through Certificates, Series 2010-VNO,

      

5.280%, 9-13-28 (A)

     1,200        1,309   

Wells Fargo Commerical Mortgage Trust, Series 2012-LC5 A3,

      

3.148%, 5-15-48

     700        718   

WFRBS Commercial Mortgage Trust 2011-C5,

      

3.667%,
11-15-44 (B)

     435        467   
   

 

 

  
      22,118   
   

 

 

  
 

Other Mortgage-Backed Securities – 2.4%

  

ABFS Mortgage Loan Trust 2001-2,

      

7.490%,
12-25-31 (B)

     316        294   
MORTGAGE-BACKED
SECURITIES (Continued)		   Principal     Value  

Other Mortgage-Backed Securities (Continued)

  

Banc of America Mortgage Trust 2004-03,

      

4.875%, 4-25-19

   $ 27      $ 26   

Bank of America Mortgage Securities, Inc., Mortgage Pass-Through Certificates, Series 2003-3,

      

5.500%, 5-25-33

     308        313   

Bear Stearns Mortgage Securities, Inc.,

      

8.000%, 11-25-29

     123        102   

C-Bass 2006-MH1 Trust,

      

5.414%,
10-25-36 (A)(B)

     3,109        3,238   

CCG Receivables Trust, Series 2015-1, Class A3,

      

1.920%,
1-17-23 (A)(B)

     3,000        2,999   

CHL Mortgage Pass-Through Trust 2004-J4,

      

5.250%, 5-25-34

     93        91   

Collateralized Mortgage Obligation Trust,

      

5.000%, 7-1-18

     2        2   

COMM 2012-9W57 Mortgage Trust, Class A,

      

2.365%, 2-10-29 (A)

     2,250        2,264   

Connecticut Avenue Securities, Series 2013-C01,

      

1.383%, 5-25-24 (B)

     2,443        2,416   

CountryPlace Manufactured Housing Contract Trust 2005-1:

      

4.800%,
12-15-35 (A)(B)

     103        104   

5.200%,
12-15-35 (A)(B)

     300        313   

CWHEQ Home Equity Loan Trust, Series 2007-S2,

      

5.934%, 5-25-37 (B)

     293        271   

GMACM Home Equity Loan Trust 2007-HE1,

      

5.952%, 8-25-37 (B)

     570        531   

Green Tree Financial Corp., Manufactured Housing Contract, Pass-Through Certificates, Series 1993-3A7,

      

6.400%, 10-15-18

     7        7   

JPMorgan Mortgage Trust 2004-A3,

      

2.714%, 7-25-34 (B)

     166        166   

Merrill Lynch Mortgage Investors, Inc., Mortgage Pass-Through Certificates, Series 1997-C2,

      

6.250%, 12-10-29

     368        367   
MORTGAGE-BACKED
SECURITIES (Continued)		   Principal     Value  

Other Mortgage-Backed Securities (Continued)

  

Morgan Stanley Capital I Trust 2012-STAR, Class A-2,

      

3.201%, 8-5-34 (A)

   $ 1,350      $ 1,395   

Morgan Stanley Capital I Trust 2012-STAR, Class B,

      

3.451%, 8-5-34 (A)

     930        937   

Morgan Stanley Capital I Trust, Series 2012-C4,

      

1.085%, 3-15-45

     53        53   

Origen Manufactured Housing Contract Trust 2005-A,

      

5.860%, 6-15-36 (B)

     46        49   

Origen Manufactured Housing Contract Trust 2005-B,

      

5.910%, 1-15-37

     596        618   

Prudential Home Mortgage Securities:

      

6.730%, 4-28-24 (A)(B)

     — *      — * 

7.865%,
9-28-24 (A)(B)

     1        1   

RASC, Series 2003-KS10 Trust,

      

6.410%, 12-25-33

     159        74   

Salomon Brothers Mortgage Securities VII, Inc., Mortgage Pass-Through Certificates, Series 1997-HUD1,

      

6.682%,
12-25-30 (B)

     742        519   

Structured Asset Mortgage Investments, Inc.,

      

1.655%, 5-2-30 (B)

     6        1   

TimberStar Trust I,

      

6.208%,
10-15-36 (A)

     1,560        1,567   
   

 

 

  
      18,718   
   

 

 

  
 

TOTAL MORTGAGE-BACKED
SECURITIES – 5.3%

   

   $ 40,836   

(Cost: $41,836)

      
 
MUNICIPAL BONDS – TAXABLE         

Alabama – 0.0%

  

Util Debt Securitization Auth, Restructuring Bonds, Ser 2013T,

      

3.435%, 12-15-25

     470        504   
   

 

 

  

Florida – 0.1%

  

Sarasota Cnty, FL, Cap Impvt Rev Bonds, Ser 2010A,

      

7.016%, 10-1-40

     520        613   
   

 

 

  
 

 

18   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

MUNICIPAL BONDS –
TAXABLE (Continued)		   Principal     Value  

New York – 0.9%

  

Port Auth of NY & NJ Consolidated Bonds, 168th Ser,

      

4.926%, 10-1-51

   $ 3,190      $ 3,666   

Port Auth of NY & NJ Consolidated Bonds, Ser 174,

      

4.458%, 10-1-62

     3,000        3,144   
   

 

 

  
      6,810   
   

 

 

  

Washington – 0.2%

  

Pub Util Dist No. 1, Douglas Cnty, WA, Wells Hydroelec Bonds, Ser 2010A,

      

5.450%, 9-1-40

     1,205        1,417   
   

 

 

  
 

TOTAL MUNICIPAL BONDS – TAXABLE – 1.2%

   

   $ 9,344   

(Cost: $8,271)

      
 
UNITED STATES GOVERNMENT AGENCY
OBLIGATIONS		  

Agency Obligations – 0.5%

  

Federal Farm Credit Bank,

      

2.990%, 2-4-28

     3,600        3,600   
   

 

 

  
 

Mortgage-Backed Obligations – 29.5%

  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO:

      

2.086%, 8-25-24 (B)

     918        921   

2.636%, 9-25-24 (B)

     5,250        5,184   

1.933%, 7-25-25 (B)

     2,262        2,262   

5.300%, 1-15-33

     95        106   

Federal Home Loan Mortgage Corp. Fixed Rate Participation Certificates:

      

5.500%, 12-1-17

     29        30   

5.500%, 9-1-19

     63        66   

5.000%, 4-1-23

     265        284   

3.500%, 8-1-26

     661        702   

2.500%, 3-1-28

     688        709   

2.500%, 4-1-28

     672        694   

5.000%, 5-1-29

     71        78   

3.500%, 5-1-32

     1,410        1,495   

6.500%, 9-1-32

     44        53   

6.000%, 11-1-33

     58        66   

5.500%, 5-1-34

     539        619   

6.500%, 5-1-34

     132        160   

5.500%, 6-1-34

     155        175   

5.000%, 9-1-34

     3        3   

5.500%, 9-1-34

     7        7   

5.500%, 10-1-34

     241        274   

5.500%, 7-1-35

     70        79   

5.000%, 8-1-35

     71        79   

5.500%, 10-1-35

     72        82   

5.000%, 11-1-35

     172        189   

5.000%, 12-1-35

     49        54   

6.500%, 7-1-36

     71        81   

7.000%, 12-1-37

     77        89   

5.500%, 2-1-39

     327        366   
UNITED STATES
GOVERNMENT AGENCY
OBLIGATIONS
(Continued)		   Principal     Value  

Mortgage-Backed Obligations (Continued)

  

5.000%, 11-1-39

   $ 172      $ 193   

5.000%, 1-1-40

     1,028        1,150   

5.000%, 3-1-40

     1,554        1,750   

5.000%, 4-1-40

     333        369   

5.000%, 8-1-40

     304        336   

4.000%, 10-1-40

     923        993   

4.000%, 11-1-40

     906        987   

4.500%, 1-1-41

     918        999   

4.000%, 2-1-41

     1,664        1,795   

4.000%, 3-1-41

     529        574   

4.500%, 3-1-41

     448        491   

4.500%, 4-1-41

     1,184        1,310   

4.000%, 6-1-41

     578        628   

4.000%, 8-1-41

     379        408   

4.000%, 11-1-41

     4,539        4,876   

3.500%, 3-1-42

     2,025        2,133   

3.000%, 8-1-42

     1,353        1,391   

3.500%, 8-1-42

     3,596        3,784   

3.000%, 1-1-43

     1,631        1,677   

3.000%, 2-1-43

     1,981        2,044   

3.500%, 7-1-44

     3,056        3,202   

3.500%, 12-1-44

     6,007        6,295   

3.500%, 5-25-45

     8,892        9,165   

3.000%, 7-1-45

     9,714        9,958   

3.500%, 2-1-46

     2,992        3,136   

Federal National Mortgage Association Fixed Rate Pass-Through Certificates:

      

6.000%, 9-1-17

     4        5   

6.000%, 1-1-18

     22        22   

5.500%, 2-1-18

     20        20   

5.500%, 3-1-18

     4        4   

5.000%, 5-1-18

     74        77   

5.000%, 6-1-18

     17        17   

5.000%, 7-1-18

     8        9   

5.000%, 10-1-18

     53        55   

5.500%, 9-1-19

     23        24   

3.000%, 9-1-22

     884        925   

5.000%, 7-1-23

     147        162   

6.000%, 8-1-23

     144        159   

5.500%, 2-1-24

     61        68   

4.500%, 4-1-25

     235        252   

3.500%, 5-1-25 TBA

     125        132   

3.500%, 11-1-25

     435        463   

3.500%, 6-1-26

     694        735   

2.500%, 11-1-27

     1,348        1,380   

3.000%, 4-1-28

     4,630        4,837   

2.500%, 4-1-29

     705        724   

6.000%, 8-1-29

     51        58   

7.500%, 5-1-31

     18        20   

7.000%, 9-1-31

     8        9   

7.000%, 11-1-31

     104        123   

6.500%, 12-1-31

     10        12   

6.500%, 2-1-32

     105        124   

7.000%, 2-1-32

     79        96   

7.000%, 3-1-32

     118        142   

6.500%, 4-1-32

     20        23   

6.500%, 5-1-32

     45        53   

6.500%, 7-1-32

     13        16   

6.500%, 8-1-32

     20        24   

6.000%, 9-1-32

     22        26   
UNITED STATES
GOVERNMENT AGENCY
OBLIGATIONS
(Continued)		   Principal     Value  

Mortgage-Backed Obligations (Continued)

  

6.500%, 9-1-32

   $ 49      $ 57   

6.000%, 10-1-32

     392        455   

6.500%, 10-1-32

     46        55   

6.000%, 11-1-32

     276        319   

3.500%, 12-1-32

     2,033        2,153   

6.000%, 3-1-33

     497        578   

5.500%, 4-1-33

     311        356   

6.000%, 4-1-33

     22        25   

5.500%, 5-1-33

     35        39   

6.000%, 6-1-33

     76        86   

6.500%, 8-1-33

     16        19   

6.000%, 10-1-33

     41        47   

6.000%, 12-1-33

     90        104   

5.500%, 1-1-34

     168        190   

6.000%, 1-1-34

     54        62   

5.000%, 3-1-34

     334        372   

5.500%, 3-1-34

     35        39   

5.500%, 4-1-34

     31        35   

5.000%, 5-1-34

     19        21   

6.000%, 8-1-34

     77        88   

5.500%, 9-1-34

     265        303   

6.000%, 9-1-34

     103        118   

6.500%, 9-1-34

     196        225   

5.500%, 11-1-34

     339        381   

6.000%, 11-1-34

     135        155   

6.500%, 11-1-34

     11        13   

5.000%, 12-1-34

     490        545   

5.500%, 1-1-35

     318        357   

5.500%, 2-1-35

     755        862   

6.500%, 3-1-35

     186        224   

5.000%, 4-1-35

     92        102   

5.500%, 4-1-35

     170        193   

4.500%, 5-1-35

     316        344   

5.500%, 6-1-35

     10        11   

4.500%, 7-1-35

     268        293   

5.000%, 7-1-35

     667        741   

5.500%, 7-1-35

     84        96   

5.500%, 8-1-35

     10        12   

5.500%, 10-1-35

     350        403   

5.500%, 11-1-35

     204        230   

5.500%, 12-1-35

     211        239   

5.000%, 2-1-36

     51        57   

5.500%, 2-1-36

     138        148   

6.500%, 2-1-36

     40        45   

5.500%, 9-1-36

     239        271   

5.500%, 11-1-36

     106        119   

6.000%, 11-1-36

     68        78   

6.000%, 1-1-37

     47        54   

6.000%, 5-1-37

     126        146   

5.500%, 6-1-37

     64        74   

6.000%, 8-1-37

     70        80   

6.000%, 9-1-37

     82        95   

7.000%, 10-1-37

     17        18   

5.500%, 3-1-38

     231        267   

5.000%, 4-1-38

     307        348   

5.500%, 5-1-38

     63        71   

6.000%, 10-1-38

     226        260   

6.000%, 12-1-38

     143        164   

4.500%, 6-1-39

     186        205   

5.000%, 12-1-39

     419        476   

5.500%, 12-1-39

     283        322   

5.000%, 3-1-40

     1,029        1,155   
 

 

  2016   ANNUAL REPORT   19

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

UNITED STATES
GOVERNMENT AGENCY
OBLIGATIONS
(Continued)		   Principal     Value  

Mortgage-Backed Obligations (Continued)

  

6.000%, 6-1-40

   $ 134      $ 152   

4.500%, 10-1-40

     887        967   

4.000%, 12-1-40

     1,273        1,364   

3.500%, 4-1-41

     2,136        2,253   

4.000%, 4-1-41

     1,329        1,437   

4.500%, 4-1-41

     2,227        2,445   

5.000%, 4-1-41

     258        291   

4.500%, 7-1-41

     1,163        1,269   

4.000%, 8-1-41

     946        1,013   

4.000%, 9-1-41

     1,509        1,630   

4.000%, 10-1-41

     1,590        1,718   

3.500%, 11-1-41

     3,576        3,775   

3.500%, 1-1-42

     4,581        4,819   

3.000%, 3-1-42

     1,350        1,388   

3.500%, 4-1-42

     6,376        6,702   

4.000%, 5-1-42 TBA

     6,000        6,403   

3.500%, 8-1-42

     2,134        2,252   

3.000%, 9-1-42

     2,230        2,293   

3.500%, 1-1-43

     1,184        1,245   

3.500%, 2-1-43

     1,545        1,641   

3.500%, 3-1-43

     2,232        2,368   

3.000%, 5-1-43

     22,990        23,577   

4.000%, 1-1-44

     1,330        1,456   

4.000%, 4-1-44

     3,882        4,149   

3.500%, 5-1-45

     2,346        2,461   

3.500%, 6-1-45

     2,116        2,231   

3.500%, 7-1-45

     1,615        1,695   

3.500%, 8-1-45

     2,645        2,780   

3.500%, 9-1-45

     1,400        1,471   

3.500%, 10-1-45

     1,516        1,590   

3.000%, 12-1-45

     1,453        1,492   

3.000%, 1-1-46

     3,881        3,985   

Government National Mortgage Association Agency REMIC/CMO:

      

0.643%, 7-16-40 (B)(C)

     124        — * 

0.000%, 3-16-42 (B)(C)

     671        — * 

0.008%, 6-17-45 (B)(C)

     453        — * 

Government National Mortgage Association Fixed Rate Pass-Through Certificates:

      

6.250%, 7-15-24

     59        64   

4.000%, 8-20-31

     741        799   

5.000%, 7-15-33

     182        203   

5.000%, 7-15-34

     138        154   

5.500%, 12-15-34

     174        197   

5.000%, 1-15-35

     192        215   

3.250%, 11-20-35

     680        709   
UNITED STATES
GOVERNMENT AGENCY
OBLIGATIONS
(Continued)		   Principal     Value  

Mortgage-Backed Obligations (Continued)

  

5.000%, 12-15-35

   $ 320      $ 359   

4.000%, 6-20-36

     1,088        1,173   

5.500%, 7-15-38

     192        220   

5.500%, 10-15-38

     229        263   

5.500%, 2-15-39

     74        82   

5.000%, 12-15-39

     160        181   

5.000%, 1-15-40

     1,063        1,178   

4.500%, 6-15-40

     540        601   

5.000%, 7-15-40

     353        392   

4.000%, 12-20-40

     611        667   

4.000%, 1-15-41

     842        904   

4.000%, 10-15-41

     514        555   

3.500%, 10-20-43

     2,137        2,264   

4.000%, 12-20-44

     889        950   

3.500%, 2-20-45

     4,022        4,257   

3.000%, 3-15-45

     3,921        4,061   

3.000%, 3-20-45

     2,323        2,411   

3.500%, 3-20-45

     2,640        2,794   

3.000%, 4-1-45

     365        378   

3.500%, 4-20-45

     5,918        6,264   

U.S. Department of Veterans Affairs, Guaranteed REMIC Pass-Through Certificates, Vendee Mortgage Trust 1995-1, Class 1,

      

7.244%, 2-15-25 (B)

     70        80   

U.S. Department of Veterans Affairs, Guaranteed REMIC Pass-Through Certificates, Vendee Mortgage Trust 1995-1, Class 2,

      

7.793%, 2-15-25

     19        22   
   

 

 

  
      227,456   
   

 

 

  
 

TOTAL UNITED STATES GOVERNMENT AGENCY OBLIGATIONS – 30.0%

    

   $ 231,056   

(Cost: $226,930)

      
 
UNITED STATES GOVERNMENT
OBLIGATIONS		  

Treasury Obligations – 12.9%

  

U.S. Treasury Bonds:

      

5.375%, 2-15-31 (D)

     4,940        7,086   

3.000%, 11-15-45

     42,700        46,114   
UNITED STATES
GOVERNMENT
OBLIGATIONS
(Continued)		   Principal     Value  

Treasury Obligations (Continued)

  

U.S. Treasury Notes:

      

0.750%, 2-28-18

   $ 4,100      $ 4,102   

1.125%, 2-28-21

     5,599        5,579   

1.500%, 2-28-23

     30,325        30,250   

1.625%, 2-15-26

     6,515        6,424   
   

 

 

  
      99,555   
   

 

 

  
 

TOTAL UNITED STATES GOVERNMENT OBLIGATIONS – 12.9%

    

   $ 99,555   

(Cost: $97,014)

      
 
SHORT-TERM SECURITIES         

Commercial Paper (E) – 3.3%

  

BorgWarner, Inc.,

      

0.490%, 4-21-16

     5,000        4,998   

Mondelez International, Inc.,

      

0.570%, 4-1-16

     2,411        2,411   

Rockwell Automation, Inc.,

      

0.360%, 4-11-16

     8,000        7,999   

W.W. Grainger, Inc.,

      

0.340%, 4-4-16

     3,500        3,500   

Wisconsin Gas LLC:

      

0.380%, 4-4-16

     2,000        2,000   

0.400%, 4-7-16

     4,000        4,000   
   

 

 

  
      24,908   
   

 

 

  

Master Note – 0.2%

  

Toyota Motor Credit Corp.,

      

0.443%, 4-6-16 (F)

     1,835        1,835   
   

 

 

  
 

TOTAL SHORT-TERM
SECURITIES – 3.5%

   

   $ 26,743   

(Cost: $26,743)

      
 

TOTAL INVESTMENT
SECURITIES – 103.5%

           $ 796,525   

(Cost: $788,507)

      
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (3.5)%

   

     (26,785 ) 
 

NET ASSETS – 100.0%

           $ 769,740   
 

 

Notes to Schedule of Investments

 

* Not shown due to rounding.

 

(A) Securities were 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 March 31, 2016 the total value of these securities amounted to $117,683 or 15.3% of net assets.

 

(B) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016.

 

(C) Interest-only security. Amount shown as principal represents notional amount for computation of interest.

 

(D) All or a portion of securities with an aggregate value of $402 have been pledged as collateral on open futures contracts.

 

20   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

 

(E) Rate shown is the yield to maturity at March 31, 2016.

 

(F) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following futures contracts were outstanding at March 31, 2016 (contracts unrounded):

 

Description    Type     

Expiration

Date

     

Number of

Contracts

      Value     Unrealized
Appreciation		  

U.S. 10-Year Treasury Note

      Short         6-30-16         152       $ (19,819 )    $ 37   

U.S. Treasury Long Bond

      Short         6-30-16         70         (11,511 )      62   

U.S. 5-Year Treasury Note

      Long         7-6-16         42         5,089        2   
           

 

 

  
            $ (26,241 )    $ 101   
           

 

 

  

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Preferred Stocks

   $ 7,193       $ 1,564       $ —   

Asset-Backed Securities

     —         82,167         773   

Corporate Debt Securities

     —         297,294         —   

Mortgage-Backed Securities

     —         40,835         1   

Municipal Bonds

     —         9,344         —   

United States Government Agency Obligations

     —         231,056         —   

United States Government Obligations

     —         99,555         —   

Short-Term Securities

     —         26,743         —   

Total

   $ 7,193       $ 788,558       $ 774   

Futures Contracts

   $ 101       $ —       $ —   

During the year ended March 31, 2016, there were no transfers between any levels.

The following acronyms are used throughout this schedule:

CMO = Collateralized Mortgage Obligation

GTD = Guaranteed

REIT = Real Estate Investment Trust

REMIC = Real Estate Mortgage Investment Conduit

TBA = To Be Announced

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   21

Table of Contents

MANAGEMENT DISCUSSION

Ivy Core Equity Fund

(UNAUDITED)

 

 

 

LOGO

Erik R. Becker

 

LOGO

Gustaf C. Zinn

Below, Erik R. Becker, CFA, and Gustaf C. Zinn, CFA, portfolio managers of Ivy Core Equity Fund, discuss positioning, performance and results for the fiscal year ended March 31, 2016. They have co-managed the Fund since 2006. Both have 17 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy Core Equity Fund (Class A shares at net asset value)

      –4.22%   

Ivy Core Equity Fund (Class A shares including sales charges)

      –9.72%   

Benchmark(s) and/or Lipper Category

         

S&P 500 Index

      1.78%   

(generally reflects the performance of large- and medium-sized U.S. stocks)

         

Lipper Large-Cap Core Funds Universe Average

      –1.24%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

 

Key drivers

 

 

Market returns as measured by the S&P 500 Index, the Fund’s benchmark, have been very moderate over the past fiscal year at 1.78%. While the period was pretty unexciting from a return standpoint, there was significant volatility versus recent history.

The bull market for U.S. stocks, which reached seven years on March 9, 2016, had proceeded without much of a pause until the first 10% pullback in August 2015. This pullback was primarily centered on a significant economic growth slowdown in China and the potential ramifications if that country were to devalue its currency. Then, after a strong fourth quarter market rebound in 2015, macro-related concerns resurfaced at the start of 2016. These concerns prompted many to view the Federal Reserve’s (Fed) December rate hike as a mistake and called into question its internal forecasts for multiple rate hikes in 2016, which seemed increasingly disconnected from the consequences of further dollar strength and a likely continued drop in the price of oil. Much like August 2015, fears of China’s slowing economic growth were centered on the U.S. dollar and the inability of China to maintain export competitiveness while its currency remained pegged to the dollar. These fears helped drive the price of oil below $30 per barrel, triggering a whole new set of concerns in the debt markets, including rating agency downgrades in the energy sector, as well as contagion effects in the financial sector due to rising default risk.

Entering February 2016, with credit markets under significant pressure, predictions of an upcoming U.S. recession were gaining credibility. Concerns were so significant that the Fed began to change its commentary in February and March, acknowledging that the desire to normalize interest rates in the U.S. had too many negative consequences for the global economy. We believe this changing commentary from the Fed was the key driver for a weakening U.S .dollar, an increase in the price of oil and a significant rally in equity markets that more than made up for the beginning of the first quarter swoon. We would not be surprised to see more coordinated quantitative easing from major central banks around the world (primarily the U.S. Fed, the European Central Bank and the Bank of Japan) that would focus more on asset purchases instead of competitive currency devaluations. This development would be a welcomed change for equity markets.

Within a small gain for the fiscal year, there was some significant divergence between sectors. As one might predict, the more defensive sectors of the market, utilities, telecommunications and consumer staples, all posted double-digit returns for the fiscal year. It is also not surprising that with the significant price declines across the commodity complex that energy and materials were the worst performing sectors for the period. The biggest surprise from a sector standpoint was the negative performance of the health care sector, which historically has performed more in line with the defensive areas of the market, but was put under significant pressure over the past six months due to uncertainty surrounding the upcoming U.S. presidential election. The selloff in health care, and greater than expected decline in the commodity complex, made for a most difficult fiscal year on a relative basis over the past 10 years that we have managed the Fund.

Contributors and detractors

 

 

The Fund underperformed its benchmark and peer group for the fiscal year ending March 31, 2016. Stock selection across the health care, industrials and consumer discretionary sectors accounted for over 90% of this underperformance. In addition, the previous three months accounted for 300 of the 600 basis points of performance, as there was significant outperformance of the telecommunications and utility sectors and underperformance of the health care sector. Many health care companies are in the process of completing large merger and acquisition (M&A) transactions, which have pressured these stocks due to regulatory uncertainty more than the group as a whole. Much like the health care related political uncertainty due to the upcoming election, we believe the issues around M&A will be resolved in the next few quarters and the stocks will perform materially better than they have over the past several months.

 

22   ANNUAL REPORT   2016  

Table of Contents

 

 

The Fund’s earnings-based philosophy continues to favor health care as the best defensive area in the market where we believe there is the potential for double-digit growth with valuations well below the market. The utilities and telecommunications sectors, as we have been writing many times over the past several quarters, are historically expensive versus their tepid earnings growth. While higher dividend-paying stocks remain in favor with interest rates low, we don’t think continued outperformance of these stocks, with little to no earnings growth, is sustainable. As it relates to health care, the political noise has been the primary headwind for the sector. We do not think the long-term earnings power of the Fund’s holdings will change based on the next president, and we expect the stocks to recover as the election nears and uncertainty fades.

Recent moves in the Fund included a continued increase in the energy weighting, with the high-conviction belief that current oil prices will result in falling production over the next fiscal year. At some point in 2017, we think the world will need the U.S. to resume oil production growth and this will benefit both the high-quality exploration and production companies as well as the services sector. We believe that certain Fund holdings such as EOG Resources, Inc., Cimarex Energy Co. and Haliburton Co. could materially benefit from this development.

Outlook

 

 

Despite the recent underperformance, our longer-term macroeconomic outlook has not changed. Slower-than-desired economic growth should continue to keep interest rates low and favor a more defensive positioning for the Fund overall.

Our sector overweight positions in consumer staples and health care are likely to remain in place. We expect companies to continue to look for attractive acquisition opportunities as a way to increase earnings power through cost and revenue synergies. Another symptom of continued slow growth so late in the recovery is the increased frequency of predictions that the U.S. economy is headed back into recession. We expect these negative views to result in increased volatility like we saw in the first quarter of 2016. We believe that patience likely will be rewarded, as investor mindsets transition from fear to greed and vice versa on a more regular basis. Oil price increases also could help our portfolio, as foreign exchange pressure on U.S. multinational earnings lessens. We believe foreign exchanges could act as a tailwind for U.S. multinational companies over the coming quarters.

Most importantly, we firmly believe that over a multi-year period, stocks will follow investor expectations for long-term earnings power. We continue to implement this belief by owning companies that we think have strong and improving competitive positions as well as underappreciated multi-year earnings catalysts. This belief is fundamental to our philosophy and we believe it has served us well over the past decade.

Performance shown at NAV does not include the effects of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investments. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the portfolio managers and are current only through the end of the period of the report as stated on the cover. The portfolio managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged, includes reinvested dividends and does not include fees. One cannot invest directly in an index, nor is an index representative of Ivy Core Equity Fund’s performance.

 

  2016   ANNUAL REPORT   23

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Core Equity Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      99.4%   

Information Technology

      24.0%   

Health Care

      18.2%   

Consumer Discretionary

      13.6%   

Consumer Staples

      12.8%   

Energy

      8.2%   

Financials

      6.9%   

Industrials

      6.1%   

Telecommunication Services

      5.8%   

Materials

      3.8%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      0.6%   

Lipper Rankings

 

 

 

Category: Lipper Large-Cap Core Funds    Rank      Percentile

1 Year

    707/874      81

3 Year

    573/793      73

5 Year

    484/705      69

10 Year

    81/515      16

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

 

 

Top 10 Equity Holdings

 

 

 

Company    Sector      Industry

Philip Morris International, Inc.

   

Consumer Staples

     

Tobacco

Microsoft Corp.

   

Information Technology

     

Systems Software

Alphabet, Inc., Class A

   

Information Technology

     

Internet Software & Services

Teva Pharmaceutical Industries Ltd. ADR

   

Health Care

     

Pharmaceuticals

Applied Materials, Inc.

   

Information Technology

     

Semiconductor Equipment

American Tower Corp., Class A

   

Telecommunication Services

     

Wireless Telecommunication Service

Kraft Foods Group, Inc.

   

Consumer Staples

     

Packaged Foods & Meats

NXP Semiconductors N.V.

   

Information Technology

     

Semiconductors

American International Group, Inc.

   

Financials

     

Multi-Line Insurance

Allergan plc

   

Health Care

     

Pharmaceuticals

See your advisor or www.ivyfunds.com for more information on the Fund’s most recently published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

24   ANNUAL REPORT   2016  

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Core Equity Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class B(4)      Class C      Class E      Class I      Class R      Class R6      Class Y  

1-year period ended 3-31-16

      -9.72%         -8.69%         -5.00%         -9.90%         -3.93%         -4.53%         -3.84%         -3.91%   

5-year period ended 3-31-16

      7.81%         7.86%         8.26%         7.65%         9.45%         —            —            9.36%   

10-year period ended 3-31-16

      6.51%         6.28%         6.31%         —            —            —            —            7.35%   

Since Inception of Class through 3-31-16(5)

      —            —            —            6.17%         7.49%         10.58%         1.95%         —      

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) 4-2-07 for Class E shares, 4-2-07 for Class I shares, 12-19-12 for Class R shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

  2016   ANNUAL REPORT   25

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Core Equity Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Consumer Discretionary

  

 

Apparel, Accessories & Luxury Goods – 0.9%

  

Polo Ralph Lauren Corp.

     101      $ 9,693   
   

 

 

  
 

Auto Parts & Equipment – 1.7%

  

Magna International, Inc.

     451        19,392   
   

 

 

  
 

Cable & Satellite – 2.5%

  

Comcast Corp., Class A

     466        28,482   
   

 

 

  
 

Footwear – 2.3%

  

NIKE, Inc., Class B

     416        25,565   
   

 

 

  
 

General Merchandise Stores – 0.5%

  

Dollar General Corp.

     66        5,675   
   

 

 

  
 

Home Improvement Retail – 1.8%

  

Home Depot, Inc. (The)

     154        20,588   
   

 

 

  
 

Internet Retail – 1.8%

  

Amazon.com, Inc.(A)

     35        20,769   
   

 

 

  
 

Restaurants – 2.1%

  

Chipotle Mexican
Grill, Inc., Class A (A)

     49        23,125   
   

 

 

  
 

Total Consumer Discretionary – 13.6%

   

     153,289   

Consumer Staples

  

 

Brewers – 3.8%

  

Anheuser-Busch InBev S.A. ADR

     160        19,958   

Molson Coors Brewing Co., Class B

     235        22,622   
   

 

 

  
      42,580   
   

 

 

  
 

Hypermarkets & Super Centers – 2.0%

  

Costco Wholesale Corp.

     147        23,211   
   

 

 

  
 

Packaged Foods & Meats – 2.8%

  

Kraft Foods Group, Inc.

     410        32,209   
   

 

 

  
 

Tobacco – 4.2%

  

Philip Morris International, Inc.

     481        47,159   
   

 

 

  
 

Total Consumer Staples – 12.8%

  

     145,159   

Energy

  

 

Oil & Gas Equipment & Services – 2.4%

  

Halliburton Co.

     777        27,754   
   

 

 

  
 

Oil & Gas Exploration & Production – 5.8%

  

Cabot Oil & Gas Corp.

     770        17,480   

Cimarex Energy Co.

     259        25,206   

EOG Resources, Inc.

     313        22,703   
   

 

 

  
      65,389   
   

 

 

  
 

Total Energy – 8.2%

  

     93,143   
COMMON STOCKS
(Continued)		   Shares     Value  

Financials

  

 

Multi-Line Insurance – 2.8%

  

American International Group, Inc.

     573      $ 30,971   
   

 

 

  
 

Other Diversified Financial Services – 4.1%

  

Citigroup, Inc.

     507        21,163   

JPMorgan Chase & Co.

     428        25,328   
   

 

 

  
      46,491   
   

 

 

  
 

Total Financials – 6.9%

  

     77,462   

Health Care

  

 

Biotechnology – 3.4%

  

Alexion Pharmaceuticals, Inc.(A)

     163        22,627   

Celgene Corp.(A)

     159        15,938   
   

 

 

  
      38,565   
   

 

 

  
 

Health Care Equipment – 1.4%

  

Medtronic plc

     204        15,315   
   

 

 

  
 

Health Care Facilities – 2.1%

  

HCA Holdings, Inc.(A)

     307        23,961   
   

 

 

  
 

Managed Health Care – 0.5%

  

Anthem, Inc.

     40        5,559   
   

 

 

  
 

Pharmaceuticals – 10.8%

  

Allergan plc(A)

     115        30,794   

Bristol-Myers Squibb Co.

     381        24,340   

Shire Pharmaceuticals Group plc ADR

     179        30,729   

Teva Pharmaceutical Industries Ltd. ADR

     682        36,502   
   

 

 

  
      122,365   
   

 

 

  
 

Total Health Care – 18.2%

  

     205,765   

Industrials

  

 

Aerospace & Defense – 1.7%

  

Rockwell Collins, Inc.

     206        18,968   
   

 

 

  
 

Railroads – 3.1%

  

Canadian Pacific Railway Ltd.

     138        18,312   

Kansas City Southern

     200        17,081   
   

 

 

  
      35,393   
   

 

 

  
 

Trucking – 1.3%

  

J.B. Hunt Transport Services, Inc.

     172        14,498   
   

 

 

  
 

Total Industrials – 6.1%

  

     68,859   

Information Technology

  

 

Application Software – 2.7%

  

Adobe Systems, Inc.(A)

     328        30,720   
   

 

 

  
COMMON STOCKS
(Continued)		   Shares     Value  

Data Processing & Outsourced Services – 4.3%

   

MasterCard, Inc., Class A

     266      $ 25,099   

Visa, Inc., Class A

     314        23,992   
   

 

 

  
      49,091   
   

 

 

  
 

Internet Software & Services – 5.6%

  

Alphabet, Inc.,
Class A(A)

     54        41,273   

Facebook, Inc., Class A(A)

     196        22,363   
   

 

 

  
      63,636   
   

 

 

  
 

IT Consulting & Other Services – 1.5%

  

Cognizant Technology Solutions Corp., Class A(A)

     270        16,954   
   

 

 

  
 

Semiconductor Equipment – 3.1%

  

Applied Materials, Inc.

     1,632        34,562   
   

 

 

  
 

Semiconductors – 2.8%

  

NXP Semiconductors N.V.(A)

     383        31,072   
   

 

 

  
 

Systems Software – 4.0%

  

Microsoft Corp.

     826        45,614   
   

 

 

  
 

Total Information
Technology – 24.0%

   

     271,649   

Materials

  

 

Industrial Gases – 2.2%

  

Air Products and Chemicals, Inc.

     172        24,805   
   

 

 

  
 

Specialty Chemicals – 1.6%

  

Sherwin-Williams Co. (The)

     62        17,707   
   

 

 

  
 

Total Materials – 3.8%

  

     42,512   

Telecommunication Services

  

 

Alternative Carriers – 2.7%

  

Level 3 Communications, Inc.(A)

     582        30,754   
   

 

 

  
 

Wireless Telecommunication Service – 3.1%

  

American Tower Corp., Class A

     336        34,355   
   

 

 

  
 

Total Telecommunication Services – 5.8%

   

     65,109   
 

TOTAL COMMON
STOCKS – 99.4%

   

   $ 1,122,947   

(Cost: $1,017,513)

  

 

 

26   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Core Equity Fund (in thousands)

MARCH 31, 2016

 

 

 

SHORT-TERM SECURITIES   Principal     Value  

Commercial Paper(B) – 0.1%

  

    

J.M. Smucker Co. (The),

      

0.650%, 4-1-16

   $ 1,379      $ 1,379   
   

 

 

  

Master Note – 0.1%

  

Toyota Motor Credit Corp.,

      

0.443%, 4-6-16 (C)

     1,180        1,180   
   

 

 

  
SHORT-TERM
SECURITIES (Continued)		        Value  

TOTAL SHORT-TERM
SECURITIES – 0.2%

       $ 2,559   

(Cost: $2,559)

  

 

TOTAL INVESTMENT SECURITIES – 99.6%

   $ 1,125,506   

(Cost: $1,020,072)

  

          Value  

CASH AND OTHER
ASSETS, NET OF
LIABILITIES – 0.4%

   $ 4,376   
 

NET ASSETS – 100.0%

   $ 1,129,882   
 

 

Notes to Schedule of Investments

 

(A) No dividends were paid during the preceding 12 months.

 

(B) Rate shown is the yield to maturity at March 31, 2016.

 

(C) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 1,122,947       $ —       $ —   

Short-Term Securities

     —         2,559         —   

Total

   $ 1,122,947       $ 2,559       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

The following acronym is used throughout this schedule:

ADR = American Depositary Receipts

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   27

Table of Contents

MANAGEMENT DISCUSSION

Ivy Cundill Global Value Fund

(UNAUDITED)

 

 

 

Below, Andrew Massie, portfolio manager of the Ivy Cundill Global Value Fund, discusses positioning, performance and results for the fiscal year ended March 31, 2016. Mr. Massie has 33 years of industry experience and has managed the Fund since December 2007. Effective March 30, 2016, Jonathan D. Norwood and Richard Y.C. Wong joined Mr. Massie as additional portfolio managers on the Fund.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy Cundill Global Value Fund (Class A shares at net asset value)

      –12.51%   

Ivy Cundill Global Value Fund (Class A shares including sales load)

      –17.55%   

Benchmark(s) and/or Lipper Category

         

MSCI ACWI Value Index

      –5.70%   

(generally reflects the performance of value-oriented securities that represent the global stock market, including emerging markets)

         

Lipper Global Multi-Cap Value Funds Universe Average

      –5.34%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

Poor performance in volatile markets

 

 

For the 12 months ended March 31, 2016, the Fund posted losses and underperformed its benchmark. The largest drivers of underperformance were adverse utilization of forward currency contracts, poor stock selection in the energy sector, and an underweight allocation to the consumer staples sector. Additionally, a lack of exposure to the telecommunication services and utilities sectors negatively impacted the Fund’s performance. Conversely, strong stock selection in the consumer discretionary and information technology sectors benefitted the Fund’s performance.

From a geographic standpoint, a slight overweight to Japan benefitted performance, while an overweight allocation to South Korea detracted from the Fund’s performance. The largest detractor from a geographic standpoint was a lack of exposure to the domestic U.S. market, which was exacerbated by poor stock selection.

Strategies and techniques

 

 

The fiscal year was generally challenging for fundamental, deep value investors, particularly in the U.S. market. During the 12 months ended March 31, 2016, the Fund reduced its exposure to interest-rate sensitive stocks such as insurers and banks, with the exception of the Fund’s addition of Fairfax Financial Holdings Ltd., a property and casualty and reinsurance company. We also refined energy exposure, exiting exploration and production companies, notably Encana Corp. and the common shares of Chesapeake Energy Corp (Chesapeake). The Fund sold its common shares in Chesapeake to move up the capital structure of Chesapeake, which resulted in the purchase of the company’s convertible preferred shares. The sale of Encana resulted in the purchase of U.K.-based Weir plc, a manufacturer of pumps and allied equipment to the energy and minerals industries. Technology and media stocks posted gains and those allocations were trimmed mainly in Europe. The Fund’s exposure to South Korea remained largely unchanged, though the Fund sold its relatively small allocation to food, beverage and tobacco stocks. In addition, the Fund reduced its position in Hyundai Motor Co. The Fund added to domestic health care through purchases in McKesson Corp., a pharmaceutical distributor.

Outlook

 

 

We believe ongoing volatility in the global equity markets will present opportunities for value managers. In the U.S., a profit recession has loomed as currency headwinds and lower commodity prices continue to pressure energy companies, exporters and multinationals. Further, it appears that operating margins are peaking as labor force capacity tightens. The U.S. domestic economy has continued its slow growth and monetary tightening is now expected to occur at a slower pace this year. This latter point is evidenced by the U.S. Federal Reserve’s (Fed) expanding financial lexicon which now includes “downside risks to the global economy” as part of its rationale for slower rate normalization.

Going forward, our view is that lower oil prices will continue to punish U.S. shale producers, but benefit U.S. consumers. As a result, we believe investor sentiment, spending and economic activity will improve. That said, despite the benefit to consumers, lower energy prices are putting tremendous pressure on the budgets of many Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC nations. New capital investment in the energy sector has contracted despite growing global demand. We think that, in the near term, positioning and decisions from OPEC could drive significant volatility. We remain vigilant in the energy sector, seeking to gauge value versus risk.

The U.S. dollar has also pulled back following the Fed’s recent dovish message. This could help to reduce foreign exchange headwinds and provide some relief to repatriated foreign earnings. Interest rates also remain historically low on an absolute basis, which we believe will make comparable fixed-return asset classes look unappealing relative to equities. We would classify the overall margin of safety in U.S. equities as moderate, with the most compelling opportunities in financials, health care, industrials and energy.

Internationally, we believe the political risks and mixed economic data out of the European Union and the U.K. should create investment opportunities. In our view, we are seeing better value in more segments of the market, including financials, health care and industrials. China’s shift to

 

28   ANNUAL REPORT   2016  

Table of Contents

 

 

a more consumer-driven economy may present opportunities. However, the commodity demand outlook for that country is cloudy. We remain watchful about risks in commodities even as some stocks in this sector seem depressed. In addition, we are mindful of the potential drag emerging markets present from a gradually slowing China.

In summary, we are seeing opportunities in volatile markets. Portfolio construction remains — and we anticipate will remain — concentrated, while seeking to reflect a diversity of value-creation drivers.

Performance shown at NAV does not include the effect of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. The value of the Fund’s shares will change, and you could lose money on your investment.

Value stocks are stocks of companies that may have experienced adverse business or industry developments or may be subject to special risks that have caused the stocks to be out of favor and, in the opinion of the Fund’s manager, undervalued. The value of a security believed by the Fund’s manager to be undervalued may never reach what the manager believes to be its full value, or such security’s value may decrease.

International investing involves additional risks, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the Fund’s portfolio managers and are current only through the end of the period of the report as stated on the cover. The portfolio managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged and include reinvested dividends. One cannot invest directly in an index, nor is an index representative of the Ivy Cundill Global Value Fund’s performance.

 

  2016   ANNUAL REPORT   29

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Cundill Global Value Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      94.5%   

Financials

      32.9%   

Consumer Discretionary

      26.0%   

Energy

      11.4%   

Industrials

      10.9%   

Materials

      7.4%   

Information Technology

      4.7%   

Health Care

      1.2%   

Bonds

      3.6%   

Corporate Debt Securities

      3.5%   

Other Government Securities

      0.1%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      1.9%   

Lipper Rankings

 

 

 

Category: Lipper Global Multi-Cap Value
Funds		    Rank      Percentile

1 Year

    107/113      94

3 Year

    67/70      95

5 Year

    52/58      89

10 Year

    36/38      93

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

Country Weightings

 

 

 

North America

      45.0%   

United States

      34.9%   

Canada

      10.1%   

Europe

      28.4%   

Germany

      8.7%   

France

      6.3%   

Italy

      4.1%   

Other Europe

      9.3%   

Pacific Basin

      23.8%   

South Korea

      9.5%   

Japan

      7.2%   

Hong Kong

      6.4%   

Other Pacific Basin

      0.7%   

South America

      0.9%   

Cash and Other Assets (Net of Liabilities),
and Cash Equivalents+

      1.9%   
 

 

Top 10 Equity Holdings

 

 

 

Company    Country    Sector    Industry

American International Group, Inc.

   

United States

   

Financials

   

Multi-Line Insurance

Citigroup, Inc.

   

United States

   

Financials

   

Other Diversified Financial Services

POSCO

   

South Korea

   

Materials

   

Steel

Munchener Ruckversicherungs-Gesellschaft AG, Registered Shares

   

Germany

   

Financials

   

Reinsurance

adidas AG

   

Germany

   

Consumer Discretionary

   

Apparel, Accessories & Luxury Goods

Bank of America Corp.

   

United States

   

Financials

   

Diversified Banks

Mediaset S.p.A.

   

Italy

   

Consumer Discretionary

   

Broadcasting

Microsoft Corp.

   

United States

   

Information Technology

   

Systems Software

Hyundai Motor Co.

   

South Korea

   

Consumer Discretionary

   

Automobile Manufacturers

Melco PBL Entertainment (Macau) Ltd. ADR

   

Hong Kong

   

Consumer Discretionary

   

Casinos & Gaming

See your advisor or www.ivyfunds.com for more information on the Fund’s most recent published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

30   ANNUAL REPORT   2016  

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Cundill Global Value Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)   Class A(3)     Class B(4)     Class C     Class E     Class I     Class R     Class R6     Class Y  

1-year period ended 3-31-16

     -17.55%        -16.95%        -12.98%        -17.41%        -12.11%        -12.53%        -11.92%        -12.32%   

5-year period ended 3-31-16

     -0.51%        -0.62%        0.09%        -0.38%        1.18%        —           —           1.01%   

10-year period ended 3-31-16

     0.35%        0.19%        0.36%        —           —           —           —           1.40%   

Since Inception of Class through 3-31-16(5)

     —           —           —           -0.63%        0.54%        1.75%        -12.28%        —      

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) 4-2-07 for Class E shares, 4-2-07 for Class I shares, 12-19-12 for Class R shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

  2016   ANNUAL REPORT   31

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Cundill Global Value Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Brazil

  

 

Energy – 0.0%

  

Petro Rio S.A. (A)

     28      $ 28   
   

 

 

  
 

Financials – 0.9%

  

BR Properties S.A.

     821        1,999   
   

 

 

  
 

Total Brazil – 0.9%

           $ 2,027   

Canada

  

 

Energy – 1.7%

  

Cenovus Energy, Inc.

     287        3,738   
   

 

 

  
 

Financials – 3.1%

  

Fairfax Financial
Holdings Ltd.

     12        6,595   
   

 

 

  
 

Materials – 1.8%

  

Canfor Corp. (A)

     285        3,920   
   

 

 

  
 

Total Canada – 6.6%

           $ 14,253   

China

  

 

Information Technology – 0.7%

  

Baidu.com, Inc. ADR (A)

     7        1,423   
   

 

 

  
 

Total China – 0.7%

           $ 1,423   

France

  

 

Industrials – 6.3%

  

Compagnie de Saint-Gobain

     155        6,840   

Vinci

     90        6,716   
   

 

 

  
      13,556   
   

 

 

  
 

Total France – 6.3%

           $ 13,556   

Germany

  

 

Consumer Discretionary – 4.2%

  

adidas AG

     78        9,122   
   

 

 

  
 

Financials – 4.5%

  

Munchener Ruckversicherungs-Gesellschaft AG, Registered Shares

     48        9,680   
   

 

 

  
 

Total Germany – 8.7%

           $ 18,802   

Greece

  

 

Consumer Discretionary – 0.3%

  

Intralot S.A. Integrated Lottery Systems and Services (A)

     562        723   
   

 

 

  
 

Financials – 0.8%

  

EFG Eurobank Ergasias S.A. (A)

     1,923        1,705   
   

 

 

  
 

Total Greece – 1.1%

           $ 2,428   
COMMON STOCKS
(Continued)		   Shares     Value  

Hong Kong

  

 

Consumer Discretionary – 3.3%

  

Melco PBL Entertainment (Macau) Ltd. ADR

     436      $ 7,205   
   

 

 

  
 

Financials – 3.1%

  

Cheung Kong
(Holdings) Ltd.

     158        2,051   

First Pacific Co. Ltd.

     6,167        4,603   
   

 

 

  
      6,654   
   

 

 

  
 

Total Hong Kong – 6.4%

           $ 13,859   

Italy

  

 

Consumer Discretionary – 3.8%

  

Mediaset S.p.A.

     1,980        8,168   
   

 

 

  
 

Industrials – 0.3%

  

Fiat Industrial S.p.A.

     89        603   
   

 

 

  
 

Total Italy – 4.1%

           $ 8,771   

Japan

  

 

Consumer Discretionary – 7.2%

  

Honda Motor Co. Ltd.

     191        5,231   

SANKYO Co. Ltd.

     188        7,003   

Sega Sammy
Holdings, Inc.

     299        3,261   
   

 

 

  
      15,495   
   

 

 

  
 

Total Japan – 7.2%

           $ 15,495   

Luxembourg

  

 

Energy – 2.8%

  

Tenaris S.A.

     486        6,059   
   

 

 

  
 

Total Luxembourg – 2.8%

           $ 6,059   

Netherlands

  

 

Industrials – 1.0%

  

TNT Express N.V.

     235        2,112   
   

 

 

  
 

Total Netherlands – 1.0%

           $ 2,112   

South Korea

  

 

Consumer Discretionary – 3.3%

  

Hyundai Motor Co.

     54        7,252   
   

 

 

  
 

Information Technology – 0.6%

  

Samsung Electronics
Co. Ltd.

     1        1,222   
   

 

 

  
 

Materials – 5.6%

  

POSCO

     61        11,751   

POSCO ADR

     7        336   
   

 

 

  
      12,087   
   

 

 

  
 

Total South Korea – 9.5%

           $ 20,561   
COMMON STOCKS
(Continued)		   Shares     Value  

Switzerland

  

 

Energy – 1.0%

  

Transocean Ltd.

     243      $ 2,217   
   

 

 

  
 

Total Switzerland – 1.0%

           $ 2,217   

United Kingdom

  

 

Industrials – 3.3%

  

G4S plc

     2,059        5,636   

Weir Group plc (The)

     90        1,437   
   

 

 

  
      7,073   
   

 

 

  
 

Total United Kingdom – 3.3%

  

   $ 7,073   

United States

  

 

Consumer Discretionary – 3.9%

  

GameStop Corp., Class A

     113        3,579   

TRI Pointe Group,
Inc. (A)

     413        4,861   
   

 

 

  
      8,440   
   

 

 

  
 

Energy – 4.4%

  

Apache Corp.

     87        4,232   

Rowan Cos., Inc.

     325        5,239   
   

 

 

  
      9,471   
   

 

 

  
 

Financials – 20.5%

  

American International Group, Inc.

     330        17,835   

Bank of America Corp.

     652        8,815   

Berkshire Hathaway, Inc., Class B (A)

     24        3,462   

Citigroup, Inc. (B)

     341        14,247   
   

 

 

  
      44,359   
   

 

 

  
 

Health Care – 1.2%

  

McKesson Corp.

     16        2,494   
   

 

 

  
 

Information Technology – 3.4%

  

Microsoft Corp.

     132        7,307   
   

 

 

  
 

Total United
States – 33.4%

           $ 72,071   
 

TOTAL COMMON
STOCKS – 93.0%

           $ 200,707   

(Cost: $198,569)

      
 
PREFERRED STOCKS              

United States

  

 

Energy – 1.5%

  

Chesapeake Energy Corp., 5.750%, Cumulative

     19        3,338   
   

 

 

  
 

Total United States – 1.5%

           $ 3,338   
 

TOTAL PREFERRED STOCKS – 1.5%

           $ 3,338   

(Cost: $14,904)

      
 

 

32   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Cundill Global Value Fund (in thousands)

MARCH 31, 2016

 

 

 

CORPORATE DEBT
SECURITIES		   Principal     Value  

Canada

  

 

Telecommunication Services – 3.5%

  

BlackBerry Ltd., Convertible

      

6.000%, 11-13-20

   $ 7,020      $ 7,507   
   

 

 

  
 

Total Canada – 3.5%

           $ 7,507   
 

TOTAL CORPORATE DEBT
SECURITIES – 3.5%

   

   $ 7,507   

(Cost: $7,020)

      
 

OTHER GOVERNMENT
SECURITIES (C)

   

        

Greece – 0.1%

  

Hellenic Republic:

      

2.000%, 2-24-23 (D)

     EUR18        15   

2.000%, 2-24-24 (D)

     18        14   

2.000%, 2-24-25 (D)

     18        14   

2.000%, 2-24-26 (D)

     18        14   

2.000%, 2-24-27 (D)

     18        13   

2.000%, 2-24-28 (D)

     19        14   
OTHER GOVERNMENT
SECURITIES (C) (Continued)		   Principal     Value  

Greece (Continued)

  

2.000%, 2-24-29 (D)

     EUR19      $ 14   

2.000%, 2-24-30 (D)

     19        14   

2.000%, 2-24-31 (D)

     19        13   

2.000%, 2-24-32 (D)

     19        13   

2.000%, 2-24-33 (D)

     19        13   

2.000%, 2-24-34 (D)

     19        13   

2.000%, 2-24-35 (D)

     19        13   

2.000%, 2-24-36 (D)

     19        12   

2.000%, 2-24-37 (D)

     19        12   

2.000%, 2-24-38 (D)

     19        12   

2.000%, 2-24-39 (D)

     19        12   

2.000%, 2-24-40 (D)

     19        12   

2.000%, 2-24-41 (D)

     19        12   

2.000%, 2-24-42 (D)

     19        12   

0.000%, 10-15-42 (D) (E)

     378        1   
   

 

 

  
      262   
   

 

 

  
 

TOTAL OTHER GOVERNMENT SECURITIES – 0.1%

   

   $ 262   

(Cost: $96)

      
SHORT-TERM
SECURITIES		   Principal     Value  
 

United States Government Agency
Obligations – 2.2%

   

Overseas Private Investment Corp. (GTD by U.S. Government):

   

    

0.360%, 4-6-16 (F)

   $ 691      $ 692   

0.400%, 4-6-16 (F)

     1,303        1,303   

0.400%, 4-7-16 (F)

     2,500        2,500   

0.360%, 4-7-16 (F)

     333        333   
   

 

 

  
      4,828   
   

 

 

  
 

TOTAL SHORT-TERM
SECURITIES – 2.2%

   

   $ 4,828   

(Cost: $4,828)

      
 

TOTAL INVESTMENT
SECURITIES – 100.3%

   

   $ 216,642   

(Cost: $225,417)

      
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (0.3)%

   

     (718 ) 
 

NET ASSETS – 100.0%

  

   $ 215,924   
 

 

Notes to Schedule of Investments

 

(A) No dividends were paid during the preceding 12 months.

 

(B) All or a portion of securities with an aggregate value of $1,614 are held in collateralized accounts for OTC derivatives collateral as governed by International Swaps and Derivatives Association, Inc. Master Agreements.

 

(C) Other Government Securities may include emerging markets sovereign, quasi-sovereign, corporate and supranational agency and organization debt securities.

 

(D) Principal amounts are denominated in the indicated foreign currency, where applicable (EUR — Euro).

 

(E) Zero coupon bond.

 

(F) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following forward foreign currency contracts were outstanding at March 31, 2016:

 

      Currency to be
Delivered		            Currency to be
Received		      Settlement
Date		      Counterparty    Unrealized
Appreciation		      Unrealized
Depreciation		  

Euro

      20,710       U.S. Dollar      22,529         4-15-16       Morgan Stanley International    $ —       $ 1,045   

Japanese Yen

      1,000,000       U.S. Dollar      8,273         4-27-16       Morgan Stanley International      —         619   

Japanese Yen

      565,000       U.S. Dollar      5,022         5-18-16       Morgan Stanley International      —         5   

British Pound

      2,435       U.S. Dollar      3,552         5-13-16       State Street Global Markets      54         —   

Euro

      1,805       U.S. Dollar      2,000         5-20-16       State Street Global Markets      —         56   
                 

 

 

  
                  $ 54       $ 1,725   
                 

 

 

  

 

  2016   ANNUAL REPORT   33

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Cundill Global Value Fund (in thousands)

MARCH 31, 2016

 

 

 

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 200,707       $ —       $ —   

Preferred Stocks

     514         2,824         —   

Corporate Debt Securities

     —         7,507         —   

Other Government Securities

     —         262         —   

Short-Term Securities

     —         4,828         —   

Total

   $ 201,221       $ 15,421       $ —   

Forward Foreign Currency Contracts

   $ —       $ 54       $ —   

Liabilities

        

Forward Foreign Currency Contracts

   $ —       $ 1,725       $ —   

During the year ended March 31, 2016, securities totaling $9,127 were transferred from Level 3 to Level 2 due to increased availability of observable market data due to increased market activity or information for these securities. Transfers out of Level 3 represent the values as of the beginning of the reporting period. There were no transfers between Level 1 and 2 during the year.

The following acronyms are used throughout this schedule:

ADR = American Depositary Receipts

GTD = Guaranteed

 

Market Sector Diversification

  

(as a % of net assets)

  

Financials

      32.9 % 

Consumer Discretionary

      26.0 % 

Energy

      11.4 % 

Industrials

      10.9 % 

Materials

      7.4 % 

Information Technology

      4.7 % 

Telecommunication Services

      3.5 % 

Health Care

      1.2 % 

Other Government Securities

      0.1 % 

Other+

      1.9 % 
 

 

+ Includes cash and other assets (net of liabilities), and cash equivalents

 

See Accompanying Notes to Financial Statements.

 

34   ANNUAL REPORT   2016  

Table of Contents

MANAGEMENT DISCUSSION

Ivy Dividend Opportunities Fund

(UNAUDITED)

 

 

 

LOGO

Christopher J. Parker

Below, Christopher J. Parker, CFA, portfolio manager of Ivy Dividend Opportunities Fund, discusses positioning, performance and results for the fiscal year ended March 31, 2016. He has managed the Fund since August 2014 and has 20 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy Dividend Opportunities Fund (Class A shares at net asset value)

      –4.65%   

Ivy Dividend Opportunities Fund (Class A shares including sales charges)

      –10.12%   

Benchmark(s) and/or Lipper Category

         

Russell 1000 Index

      0.50%   

(generally reflects the performance of stocks that represent the equity market)

         

Lipper Equity Income Funds Universe Average

      –1.48%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

 

Key drivers

 

 

The Russell 1000 Index, the Fund’s benchmark was roughly flat, and Lipper Equity Income Funds peer group was down slightly over the past fiscal year. During the period, we entered a new chapter with respect to post global financial crisis monetary policy — divergence. Over the course of 2015, the U.S. Federal Reserve (Fed) prepared the market for an eventual increase in the Fed Funds rate, with the first hike occurring at the December meeting. Simultaneously, European policymakers began to make good on a long-standing promise to do “whatever it takes,” commencing a quantitative easing program that drove sovereign rates into negative territory for several nations. This division in policy caused the dollar to rise against the Euro, aiding Eurozone activity while dampening U.S. industrial activity. Adding an incremental variable, China allowed a “controlled” (we use the quotes as it was not well controlled at all) devaluation of the Yuan over the summer of 2015, while moving to alter its currency peg to a trade-weighted basket and away from the dollar. This was one of several unexpected or questionable moves, ranging from fueling a stock market bubble that eventually burst to doubling-down on deficit funded economic stimulus. All of this was done on the part of a central government that was working hard to steer a clearly slowing economy. Finally, a series of competitive devaluations across a number of emerging market nations layered another dimension into the mix. This confluence of actions marks a shift from the past several years when virtually every major central bank was executing some form of stimulus designed to add fuel to the global economy. Now the objective functions and actions of various players have begun to move in differing and sometimes opposing directions. This creates a new policy management dynamic, whereby players must think more deeply about the impact of actions on various other parties, and the response function of those parties when considering the appropriate course of action to achieve their own individual objectives. In our mind, with the global economy at such a sluggish level of growth this increases the risks of a policy error. We believe this increases uncertainty across the system, is likely to drive higher volatility and reduces the odds of higher valuations across equity markets.

The strongest performing sectors over the past year were telecommunications, utilities and consumer staples. These sectors feature a combination of above average dividend yields and reasonably predictable earnings (albeit with a fairly low level of growth in the earnings over time), making them attractive to investors seeking some basic certainty of return in uncertain times. Each of these sectors rose by over 10% over the course of the past fiscal year. In the case of telecommunications and utilities, a large amount of this return was realized in first quarter 2016. In our view, this move was not in response to an improvement in fundamentals, but was instead fueled by the flow of capital to income-generating securities in response to deeper moves into negative rates in Europe and an initial move negative in Japan. Though these sectors generate favorable levels of current income, the Fund has been underweight these areas as we have found valuations underwhelming relative to fundamentals (in particular for certain consumer staples stocks), and opportunities for dividend growth (a key part of our process) to be limited in telecommunications and utilities. If overall corporate earnings growth is materially slower than we expect over a longer duration (and not simply due to sharp negative earnings in energy and the translation drag of a stronger dollar), then our reluctance to participate in this space will have been misplaced.

On the other end of the spectrum, energy was the worst performing sector over the past 12 months, though performance in energy equities has turned positive in the first quarter of 2016. The issues in the energy sector are now well-trodden ground, as are the collateral impacts on the industrials sector. The proverbial tide has now flowed out, revealing what has been hiding below the waterline. While the path to recovery is still uncharted, we have a clear sense of where the unanticipated exposure existed. Additionally, we believe we have now learned the cash flow and earnings break-evens and pain points for the various participants. Within the past several months the banking system has entered a discovery process with respect to energy-related credit losses. The ultimate loss content has not been fully flushed out and is an equation incorporating (amongst many variables) time, any potential double-dip in the price of crude below $30 (which appears to be the level that creates substantial stress from a credit viewpoint), and the ability of exploration and production (E&P) companies and others to repair balance sheets via secondary equity offerings. The propagation of the downturn in the energy sector onto bank balance sheets was a factor that caused the financials sector to decline over the past fiscal year in spite of the Fed finally raising interest rates at its December meeting. It appears crude has bottomed and is beginning a recovery process, though the durability and pace will be a function of the resilience of global demand and capital discipline on the part of U.S. E&Ps — both of which

 

  2016   ANNUAL REPORT   35

Table of Contents

MANAGEMENT DISCUSSION

Ivy Dividend Opportunities Fund

(UNAUDITED)

 

 

 

are subject to debate. We believe overall recovery in the commodity and in activity levels will be uneven and likely more of a 2017-2018 event, though numerous equities in the space and adjacent areas seem to be discounting something much sooner.

Contributors and detractors

 

 

The Fund underperformed its benchmark and peer group for the fiscal year ended March 31, 2016. From a sector allocation viewpoint, the Fund benefited from being underweight energy over the course of the fiscal year. The Fund’s overweight in the health care sector and underweights in utilities and telecommunication services negatively impacted performance. Performance in the health care sector was adversely impacted by rising political rhetoric with respect to drug pricing and availability — which was exacerbated by company-specific issues related to pricing activity and possible accounting and internal control issues at Valeant Pharmaceuticals (not a Fund holding). Relative to the benchmark, the Fund was significantly underweight technology, a sector that performed well. However, a fair portion of the universe of technology stocks within the benchmark does not fall within our investable universe (as they do not generate dividends). When adjusted for this factor, technology was a neutral from a sector allocation view.

From an individual stock perspective, McDonald’s Corp. was the most favorable contributor to Fund performance. The quick service restaurant chain took significant action under its new CEO to improve operating performance, rationalize costs and manage its capital structure more optimally. Microsoft Corp. also performed well, as the growth in its cloud services business began to gain steam and positively impacted financial results. Philip Morris International, Time Warner Cable and PPL Corp. rounded out the top five relative contributors.

The worst contributors from a relative performance perspective were highlighted by three names in energy: Master Limited Partnership (MLP) holdings Energy Transfer Equity and Markwest Energy Partners, and E&P holding Devon Energy. (These three names are no long Fund holdings). While we were correct in being underweight in energy over the course of the fiscal year, we over-estimated the defensiveness of MLPs and under-estimated the degree to which the migration of credit goal posts would impact MLPs. For each of the energy equities alluded to, the sensitivity around leverage and credit was exacerbated by merger activity and/or asset purchases that weakened the future credit profile of each. This dynamic was worsened by a slower than necessarily rationalization of future growth programs in light of the evolving investment and credit landscape across the sector. Citigroup Inc. and Teva Pharmaceuticals were also noteworthy detractors from relative performance over the past fiscal year.

Strategy and outlook

 

 

Our outlook for equities remains neutral to cautious. We believe weak or negative earnings growth is likely to persist in the near-term before eventually improving, and valuations could have a hard time increasing due to slow growth and the reappearance of substantial monetary policy uncertainty.

Over the past 6 -12 months our view on overall earnings growth has been fairly negative as we felt the impact of the downturn in energy, rising U.S. dollar and slowing global growth would all be negatives for profitability. We remain of a view that earnings growth over the next one to two quarters will be negative to flat at best. The accounting impact of currency is no longer a headwind at current exchange rates, but energy remains a drag for E&Ps, oil services, parts of the industrials complex and now financials as credit costs hit bank income statements. We anticipate a positive inflection in earnings as these headwinds subside later in 2016. Upside drivers to growth look limited beyond cycling against easy comparisons. U.S. corporate spending is back toward the upper band of historical ranges. Thus, barring an acceleration in revenues, we would expect growth in corporate spending to be muted. U.S. consumers have received the benefit of an “energy cost cut,” wage data has been favorable and employment trends remain good — though the quality of job creation in this recovery has been mediocre (especially with relatively higher paying jobs in the energy patch having dried up). We believe consumer trends should remain favorable, but are skeptical of a large uptick in spending that could fuel a notable increase in overall corporate earnings.

From a global growth perspective, we remain concerned that economic growth in China could be a source of downside risk given the law of large numbers, declining returns on stimulus and increasing financial leverage across the economy. Trees do not grow to the sky, and trees rooted in leverage sometimes topple. The near-term risk of a devaluation and possible round of competitive responses from others in the region looks to have ebbed, but remains a non-zero risk over time in our minds. Economic activity in Europe is creeping upward from a low level of growth as stimulus, time and improved confidence (off low levels) are having positive effects. Sustainability is still a crucial unanswered question.

Market valuations using a variety of criteria do not appear especially compelling outside of certain sectors within health care. Even when adjusting for sectors and sub-sectors of the market that are generating losses (such as energy), which would mathematically inflate multiples, valuations are not broadly compelling. We believe this combination of fair to elevated valuation metrics and increasingly macro uncertainty will drive volatility within the equity markets and act to dampen the potential for multiple expansion without some mitigation of those macro risk factors. In summary, we have muted expectations at best as earnings growth is sluggish, upside from multiple expansion looks limited and macro risks have re-emerged — even if they have dropped out of the headlines for now.

The Fund’s basic objective and strategy remains unchanged. We are seeking to provide investors with an above-average dividend yield, better growth in income than the market as a whole and attractive capital appreciation. To accomplish this objective we employ two broad strategies. The first is to seek companies trading at an above-average yield that also feature a compelling valuation based on cash flow. The combination of these factors typically indicates skepticism regarding some aspect of a company’s future prospects, and is a fertile hunting ground for attractive investments. To enhance the return profile of this strategy and incrementally mitigate value trap risk we apply the additional criteria of being able to grow income to shareholders at a faster rate than average rate over time. The second broad strategy centers on companies with the potential to grow their dividend at a

 

36   ANNUAL REPORT   2016  

Table of Contents

 

 

rate well above the market over a multi-year period. We focus on two sub-groups within this strategy. First companies in the midst of a change in the social contract with shareholders whereby capital management and return of capital is being increasingly emphasized. Such a substantial increase in payout drives strong growth in income, and a possibility for a positive re-rating due to a more favorable stance toward shareholders. The second sub-group focuses on rapid dividend growth at a reasonable price. This growth can come from either a durable pace of notably above-average earnings growth, or a combination of strong earnings growth and a steadily increasing payout of earnings to shareholders. We have no prescriptive policy with respect to how the Fund will be positioned across these approaches, beyond the general viewpoint that over time the majority of the Fund’s assets are expected to be deployed in the high yield, attractive valuation arena as this is generally the most robust universe of opportunities. However, if at times we find dividend growth focused names feature greater return potential or more attractive fundamental characteristics our approach would skew more toward this direction (though we would generally not expect this area to be the bulk of the Fund’s assets over time).

Performance shown at NAV does not include the effects of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investments. Dividend-paying instruments may not experience the same price appreciation as non-dividend paying investments. There is no guarantee that the companies in which the Fund invests will declare dividends in the future or that dividends, if declared, will remain at current levels or increase over time. The amount of any dividend paid by the company may fluctuate significantly. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the portfolio manager and are current only through the end of the period of the report as stated on the cover. The manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged, includes reinvested dividends and does not include fees. One cannot invest directly in an index, nor is an index representative of Ivy Dividend Opportunities Fund’s performance.

 

  2016   ANNUAL REPORT   37

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Dividend Opportunities Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      90.1%   

Financials

      17.5%   

Health Care

      14.7%   

Information Technology

      13.3%   

Industrials

      13.1%   

Consumer Discretionary

      11.4%   

Consumer Staples

      8.5%   

Materials

      5.1%   

Energy

      4.4%   

Utilities

      2.1%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      9.9%   

Lipper Rankings

 

 

 

Category: Lipper Equity Income Funds    Rank      Percentile

1 Year

    392/510      77

3 Year

    247/408      61

5 Year

    263/303      87

10 Year

    145/200      73

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

 

 

Top 10 Equity Holdings

 

 

 

Company    Sector      Industry

Pfizer, Inc.

   

Health Care

     

Pharmaceuticals

Microsoft Corp.

   

Information Technology

     

Systems Software

Teva Pharmaceutical Industries Ltd. ADR

   

Health Care

     

Pharmaceuticals

JPMorgan Chase & Co.

   

Financials

     

Other Diversified Financial Services

Applied Materials, Inc.

   

Information Technology

     

Semiconductor Equipment

Philip Morris International, Inc.

   

Consumer Staples

     

Tobacco

General Electric Co.

   

Industrials

     

Industrial Conglomerates

CVS Caremark Corp.

   

Consumer Staples

     

Drug Retail

American International Group, Inc.

   

Financials

     

Multi-Line Insurance

Medtronic plc

   

Health Care

     

Health Care Equipment

See your advisor or www.ivyfunds.com for more information on the Fund’s most recently published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

38   ANNUAL REPORT   2016  

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Dividend Opportunities Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)   Class A(3)     Class B(4)     Class C     Class E     Class I     Class R     Class R6     Class Y  

1-year period ended 3-31-16

     -10.12%        -8.79%        -5.26%        -10.08%        -4.27%        -4.87%        -4.16%        -4.53%   

5-year period ended 3-31-16

     5.13%        5.35%        5.65%        5.04%        6.73%        —           —           6.46%   

10-year period ended 3-31-16

     4.44%        4.30%        4.34%        —           —           —           —           5.19%   

Since Inception of Class through 3-31-16(5)

     —           —           —           3.51%        4.71%        9.46%        1.39%        —      

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) 4-2-07 for Class E shares, 4-2-07 for Class I shares, 12-19-12 for Class R shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

  2016   ANNUAL REPORT   39

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Dividend Opportunities Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Consumer Discretionary

  

 

Advertising – 1.6%

  

Omnicom Group, Inc.

     68      $ 5,635   
   

 

 

  
 

Apparel Retail – 1.4%

  

Limited Brands, Inc.

     60        5,269   
   

 

 

  
 

Cable & Satellite – 2.9%

  

Comcast Corp., Class A

     139        8,502   

Time Warner Cable, Inc.

     10        1,944   
   

 

 

  
      10,446   
   

 

 

  
 

Home Improvement Retail – 1.8%

  

Home Depot, Inc. (The)

     49        6,518   
   

 

 

  
 

Housewares & Specialties – 1.3%

  

Newell Rubbermaid, Inc.

     106        4,715   
   

 

 

  
 

Restaurants – 2.4%

  

McDonalds Corp.

     68        8,552   
   

 

 

  
 

Total Consumer
Discretionary – 11.4%

   

     41,135   
 

Consumer Staples

  

 

Brewers – 1.6%

  

Anheuser-Busch InBev
S.A. ADR

     46        5,709   
   

 

 

  
 

Drug Retail – 2.5%

  

CVS Caremark Corp.

     89        9,258   
   

 

 

  
 

Packaged Foods & Meats – 1.7%

  

Unilever plc (A)

     137        6,194   
   

 

 

  
 

Tobacco – 2.7%

  

Philip Morris International, Inc.

     99        9,733   
   

 

 

  
 

Total Consumer Staples – 8.5%

  

     30,894   
 

Energy

  

 

Integrated Oil & Gas – 1.7%

  

Occidental Petroleum Corp.

     89        6,121   
   

 

 

  
 

Oil & Gas Equipment & Services – 0.9%

  

Halliburton Co.

     89        3,186   
   

 

 

  
 

Oil & Gas Exploration & Production – 1.8%

  

Noble Energy, Inc.

     213        6,678   
   

 

 

  
 

Total Energy – 4.4%

             15,985   
 

Financials

  

 

Diversified Banks – 1.8%

  

Wells Fargo & Co.

     133        6,408   
   

 

 

  
COMMON STOCKS
(Continued)		   Shares     Value  

Industrial REITs – 1.7%

  

ProLogis

     139      $ 6,143   
   

 

 

  
 

Investment Banking & Brokerage – 1.5%

  

Morgan Stanley

     215        5,388   
   

 

 

  
 

Multi-Line Insurance – 2.5%

  

American International
Group, Inc.

     168        9,094   
   

 

 

  
 

Other Diversified Financial Services – 5.6%

  

Citigroup, Inc.

     181        7,567   

JPMorgan Chase & Co.

     216        12,786   
   

 

 

  
      20,353   
   

 

 

  
 

Property & Casualty Insurance – 1.7%

  

ACE Ltd.

     53        6,291   
   

 

 

  
 

Regional Banks – 0.3%

  

PNC Financial Services
Group, Inc. (The)

     13        1,087   
   

 

 

  
 

Specialized REITs – 2.4%

  

Crown Castle International Corp.

     100        8,663   
   

 

 

  
 

Total Financials – 17.5%

  

     63,427   
 

Health Care

  

 

Health Care Equipment – 2.5%

  

Medtronic plc

     119        8,951   
   

 

 

  
 

Managed Health Care – 1.6%

  

Anthem, Inc.

     41        5,733   
   

 

 

  
 

Pharmaceuticals – 10.6%

  

Bristol-Myers Squibb Co.

     116        7,392   

Pfizer, Inc.

     574        17,022   

Teva Pharmaceutical
Industries Ltd. ADR

     263        14,057   
   

 

 

  
      38,471   
   

 

 

  
 

Total Health Care – 14.7%

  

     53,155   
 

Industrials

  

 

Aerospace & Defense – 4.1%

  

BAE Systems plc (A)

     704        5,146   

Boeing Co. (The)

     23        2,970   

Honeywell International, Inc.

     58        6,516   
   

 

 

  
      14,632   
   

 

 

  
 

Commercial Printing – 2.1%

  

Corrections Corp. of America

     240        7,676   
   

 

 

  
 

Industrial Conglomerates – 2.7%

  

General Electric Co.

     305        9,694   
   

 

 

  
COMMON STOCKS
(Continued)		   Shares     Value  

Industrial Machinery – 1.3%

  

Eaton Corp.

     77      $ 4,830   
   

 

 

  
 

Railroads – 1.8%

  

Union Pacific Corp.

     84        6,647   
   

 

 

  
 

Research & Consulting Services – 1.1%

  

Nielsen Holdings plc

     75        3,947   
   

 

 

  
 

Total Industrials – 13.1%

  

     47,426   
 

Information Technology

  

 

Communications Equipment – 1.2%

  

Harris Corp.

     57        4,446   
   

 

 

  
 

Data Processing & Outsourced
Services – 1.5%

   

Paychex, Inc.

     101        5,460   
   

 

 

  
 

Semiconductor Equipment – 3.1%

  

Applied Materials, Inc.

     533        11,281   
   

 

 

  
 

Semiconductors – 3.3%

  

Cypress Semiconductor Corp.

     626        5,424   

Texas Instruments, Inc.

     116        6,672   
   

 

 

  
      12,096   
   

 

 

  
 

Systems Software – 4.2%

  

Microsoft Corp.

     272        15,009   
   

 

 

  
 

Total Information
Technology – 13.3%

   

     48,292   
 

Materials

  

 

Diversified Chemicals – 2.1%

  

PPG Industries, Inc.

     67        7,431   
   

 

 

  
 

Industrial Gases – 1.9%

  

Air Products and Chemicals, Inc.

     47        6,770   
   

 

 

  
 

Paper Products – 1.1%

  

International Paper Co.

     101        4,133   
   

 

 

  
 

Total Materials – 5.1%

             18,334   
 

Utilities

  

 

Electric Utilities – 2.1%

  

PPL Corp.

     196        7,477   
   

 

 

  
 

Total Utilities – 2.1%

             7,477   
 

TOTAL COMMON
STOCKS – 90.1%

   

   $ 326,125   

(Cost: $267,049)

      
 

 

40   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Dividend Opportunities Fund (in thousands)

MARCH 31, 2016

 

 

 

SHORT-TERM
SECURITIES		   Principal     Value  

Commercial Paper (B) – 8.9%

  

Baxter International, Inc.,

  

    

0.720%, 4-5-16

   $ 5,000      $ 5,000   

Danaher Corp.,

      

0.450%, 4-6-16

     4,000        4,000   

Harley-Davidson Financial
Services (GTD by
Harley-Davidson Credit Corp.),

    

    

0.490%, 4-22-16

     4,000        3,999   

John Deere Canada ULC
(GTD by Deere & Co.),

   

    

0.320%, 4-12-16

     5,000        4,999   

NBCUniversal Enterprise, Inc.,

  

    

0.770%, 4-5-16

     3,000        3,000   

Novartis Finance Corp.
(GTD by Novartis AG),

   

    

0.350%, 4-18-16

     2,500        2,499   

Rockwell Automation, Inc.,

  

    

0.610%, 4-1-16

     2,984        2,984   

United Technologies Corp.,

  

    

0.680%, 4-6-16

     2,867        2,867   

W.W. Grainger, Inc.,

  

    

0.340%, 4-4-16

     3,000        3,000   
 

 

 

  
      32,348   
 

 

 

  
SHORT-TERM
SECURITIES (Continued)		   Principal     Value  

Master Note – 0.9%

  

Toyota Motor Credit Corp.,

  

    

0.443%, 4-6-16 (C)

   $ 3,143      $ 3,143   
   

 

 

  
 

TOTAL SHORT-TERM
SECURITIES – 9.8%

   

   $ 35,491   

(Cost: $35,490)

      
 

TOTAL INVESTMENT
SECURITIES – 99.9%

   

   $ 361,616   

(Cost: $302,539)

      
 

CASH AND OTHER ASSETS, NET
OF LIABILITIES – 0.1%

   

     468   
 

NET ASSETS – 100.0%

           $ 362,084   
 

 

Notes to Schedule of Investments

 

(A) Listed on an exchange outside the United States.

 

(B) Rate shown is the yield to maturity at March 31, 2016.

 

(C) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  
       

Assets

        

Investments in Securities

        

Common Stocks

   $ 326,125       $ —       $ —   

Short-Term Securities

     —         35,491         —   

Total

   $ 326,125       $ 35,491       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

The following acronyms are used throughout this schedule:

ADR = American Depositary Receipts

GTD = Guaranteed

REIT = Real Estate Investment Trusts

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   41

Table of Contents

MANAGEMENT DISCUSSION

Ivy Emerging Markets Equity Fund

(UNAUDITED)

 

 

 

LOGO

Frederick Jiang

 

LOGO

Jonas Krumplys

Below, Frederick Jiang, CFA, and Jonas M. Krumplys, CFA, portfolio managers of Ivy Emerging Markets Equity Fund, discuss positioning, performance and results for the fiscal year ended March 31, 2016. Mr. Jiang has 22 years in the industry and 12 years with the Fund. Mr. Krumplys has 34 years in the industry and two years with the Fund. Effective May 14, 2016, Frederick Jiang will no longer serve as a co-portfolio manager of the Fund.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy Emerging Markets Equity Fund (Class A shares at net asset value)

      –14.49%   

Ivy Emerging Markets Equity Fund (Class A shares including sales charges)

      –19.41%   

Benchmark(s) and/or Lipper Category

         

MSCI Emerging Markets Index

      –12.03%   

(generally reflects the performance of stocks across emerging market countries worldwide)

         

Lipper Emerging Markets Funds Universe Average

      –11.54%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

 

Volatile markets driven by policy makers

 

 

Slowing global growth was exacerbated by what many considered to be missteps of policy makers across the globe. In China, policy makers surprised the world with a one-off currency devaluation in August 2015 and a mishandled intervention after crashes in its onshore (A share) stock market both in the summer and at the beginning of 2016. These actions combined with the U.S. Federal Reserve (Fed) taking an on-again, off-again start to raising interest rates caused global equity investors to go through what turned out to be the worst start to a calendar year in many decades. Once investors realized that China was not going to sharply devalue its currency and that the Fed was not going to raise rates dramatically, calm returned to the equity, fixed income, currency and commodity markets. Most global central banks continued to cut interest rates to stimulate demand in their economies. Earlier this year the Bank of Japan followed other European banks into negative interest rate territories. Nearly a quarter of the world’s economies are now at below zero interest rates. It is unclear what the unintended consequences may be from these policy moves.

Fund allocations drove performance

 

 

The Fund had a negative return for the fiscal year and underperformed its benchmark index and peer group average, both of which also had negative returns. Absolute and relative performance was hurt by overweight positions in Chinese and Indian equities. The issues with policy makers in China and the disappointing pace of economic reforms in these countries led to disappointing performance in both markets. We have subsequently cut back exposure to both.

The Fund was overweight versus the benchmark index in Russian equities (7% of assets under management at year end). That economy has been mired in a deep recession with a high inflation rate. At the trough, the combination of European Union (EU) and U.S. economic sanctions tied to Russia’s moves in the Ukraine and the crash in global oil prices pushed GDP growth to mid-single digit declines and inflation rates to the high-teens. Recent figures show a significant improvement in these statistics, with GDP forecast at or near a positive figure by the end of 2016. Inflation has eased to high single digits and we think it is likely to improve through the balance of the year. We also expect the Russian Central Bank to begin lowering interest rates later this year.

We also are overweight Brazilian equities in the Fund (10% of assets under management at year end). The economy is in the second year of a sharp slowdown. The combination of high inflation, weak domestic growth and the inability of the government to implement fiscal reforms would not necessarily lead to strong investment opportunities. However, investor sentiment has shifted well before economic statistics have improved. There may be a significant change to Brazil’s prospects as a widespread corruption scandal has put the country’s president at risk of impeachment and potentially hundreds of top politicians and corporate executives at risk of criminal charges. Although Brazilian President Dilma Rouseff may survive the first attempt to impeach her, we think the negative information leaked to the press makes it unlikely she will complete her second term in office. We also think the Brazilian equity market and currency market will continue to outperform if there is a change in government in a reasonably short period of time. Depending on how a new government was structured, we believe there is the potential for the economy to begin a slow return to growth and offer longer-term investment opportunities.

We typically have used foreign currency hedges to protect the Fund from losses from the depreciation of local currencies versus the U.S. dollar. We bought the Malaysian ringgit, South African rand and Mexican peso late in the fiscal year. We think these commodity-driven currencies are undervalued and represent attractive investments.

Key contributors to the Fund’s performance were Sberbank Russia, Russia’s largest bank with dominant shares in retail and corporate banking; Raia Drogasil S.A. (RD), Brazil’s largest drugstore chain which has been able accelerate new store openings at prime locations; and Celltrion, Inc., a South Korea-based biotechnology company which has received approvals for biosimilar products in the EU and U.S.

 

42   ANNUAL REPORT   2016  

Table of Contents

 

 

Key detractors to performance were CAR Inc., China’s largest auto rental company which generated disappointing fleet growth; Red Star Macalline Group, a developer and operator of malls and retail home improvement outlets; and Larsen & Toubro Ltd, India’s largest infrastructure and engineering firm. At the end of the fiscal year, Sberbank, Raia Drogasil and Celltrion were among the top ten holdings of the Fund. CAR Inc. and Red Star Macalline were not held as of the period’s end. The Larsen & Toubro position was substantially decreased.

Outlook

 

 

As has been the case since the global financial crisis, geopolitics and central bank policy moves are likely to drive market performance. Among the key issues to follow for the balance of the year are the potential impeachment of Brazil’s president, the potential for the U.K. to vote to leave the EU, the U.S. presidential election in November, the potential for unintended consequences of negative interest rates in Japan and across Europe, the question of whether the Organization of Petroleum Exporting Countries and Russia can stabilize global energy markets, and concerns about the handling of a wave of refugees and migrants into Europe and its neighbors.

We have positioned the Fund for a low-growth global environment. For the near term, we believe that the worst is behind us for a potential currency war and energy sector collapse. We will continue to emphasize investments in companies that have strong local market positions.

Performance shown at NAV does not include the effect of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

International investing involves additional risks, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. The value of the Fund’s investments, as measured in U.S. dollars, may be unfavorably affected by changes in foreign currency exchange rates and exchange control regulations.

Investments in countries with emerging economies or securities markets may carry greater risk than investments in more developed countries. Political and economic structures in many such countries may be undergoing significant evolution and rapid development, and such countries may lack the social, political and economic stability characteristics of more developed countries. Investments in securities issued in these countries may be more volatile and less liquid than securities issued in more developed countries. These and other risks are more fully described in the Fund’s prospectus.

In early 2014, economic sanctions were imposed on Russian officials and banks following Russia’s annexation of the Ukrainian territory of Crimea. Such events and resulting sanctions could negatively affect the value of the Fund’s investments in Russian securities.

The Shanghai-Hong Kong Stock Connect Program (Connect Program) is subject to quota limitations, and an investor cannot purchase and sell the same security on the same trading day, which may restrict the Fund’s ability to invest in China A-shares through the Connect Program and to enter into or exit trades on a timely basis. The Shanghai market may be open at a time when the Connect Program is not trading, with the result that prices of China A-shares may fluctuate at times when the Fund is unable to add to or exit its position. Only certain China A-shares are eligible to be accessed through the Connect Program. Such securities may lose their eligibility at any time, in which case they could be sold, but could no longer be purchased through the Connect Program.

The opinions expressed in this report are those of the portfolio managers and are current only through the end of the period of the report as stated on the cover. The managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The indexes noted are unmanaged, include reinvested dividends and do not include fees. One cannot invest directly in an index, nor is an index representative of the Ivy Emerging Markets Equity Fund’s performance.

 

  2016   ANNUAL REPORT   43

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Emerging Markets Equity Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      84.3%   

Information Technology

      20.1%   

Financials

      16.0%   

Materials

      9.5%   

Consumer Staples

      8.6%   

Consumer Discretionary

      8.6%   

Health Care

      5.9%   

Energy

      5.6%   

Industrials

      4.4%   

Utilities

      4.1%   

Telecommunication Services

      1.5%   

Purchased Options

      0.6%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      15.1%   

Lipper Rankings

 

 

 

Category: Lipper Emerging
Markets Funds		    Rank      Percentile

1 Year

    656/816      81

3 Year

    36/573      7

5 Year

    127/400      32

10 Year

    46/163      29

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

Country Weightings

 

 

 

Pacific Basin

      57.6%   

South Korea

      17.5%   

China

      12.6%   

India

      9.2%   

Taiwan

      8.1%   

Indonesia

      3.9%   

Other Pacific Basin

      6.3%   

South America

      8.2%   

Brazil

      8.2%   

Europe

      7.4%   

Russia

      5.8%   

Other Europe

      1.6%   

Other

      5.9%   

South Africa

      4.3%   

Israel

      1.6%   

North America

      5.2%   

Mexico

      3.8%   

Other North America

      1.4%   

Cash and Other Assets (Net of Liabilities),
Cash Equivalents+ and Purchased Options

      15.7%   
 

 

Top 10 Equity Holdings

 

 

 

Company    Country      Sector      Industry

Samsung Electronics Co. Ltd.

   

South Korea

     

Information Technology

     

Semiconductors

Sberbank of Russia ADR

   

Russia

     

Financials

     

Diversified Banks

Naspers Ltd., Class N

   

South Africa

     

Consumer Discretionary

     

Cable & Satellite

Raia Drogasil S.A.

   

Brazil

     

Consumer Staples

     

Drug Retail

Taiwan Semiconductor Manufacturing Co. Ltd.

   

Taiwan

     

Information Technology

     

Semiconductors

Celltrion, Inc.

   

South Korea

     

Health Care

     

Pharmaceuticals

Korea Electric Power Corp.

   

South Korea

     

Utilities

     

Electric Utilities

Fosun International Ltd.

   

Hong Kong

     

Materials

     

Steel

LG Chem Ltd.

   

South Korea

     

Materials

     

Commodity Chemicals

Tencent Holdings Ltd.

   

China

     

Information Technology

     

Internet Software & Services

See your advisor or www.ivyfunds.com for more information on the Fund’s most recent published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

44   ANNUAL REPORT   2016  

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Emerging Markets Equity Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class B(4)      Class C      Class E(5)      Class I      Class R      Class R6      Class Y  

1-year period ended 3-31-16

      -19.41 %       -18.75 %       -15.20 %       -19.32 %       -14.30 %       -14.82 %       -14.20 %       -14.48 % 

5-year period ended 3-31-16

      -4.02 %       -4.15 %       -3.67 %       -3.75 %       -2.48 %       —         —         -2.74 % 

10-year period ended 3-31-16

      2.94 %       2.62 %       2.75 %       —         —         —         —         3.77 % 

Since Inception of Class through 3-31-16(6)

      —         —         —         1.32 %       2.14 %       -0.64 %       -7.98 %       —   

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) Class E shares are not currently available for investment.

 

(6) 4-2-07 for Class E shares, 4-2-07 for Class I shares, 12-19-12 for Class R shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

  2016   ANNUAL REPORT   45

Table of Contents

CONSOLIDATED SCHEDULE OF INVESTMENTS

Ivy Emerging Markets Equity Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Brazil

  

 

Consumer Staples – 4.6%

  

Hypermarcas S.A. (A)

     1,245      $ 9,704   

Raia Drogasil S.A.

     1,014        14,713   
   

 

 

  
      24,417   
   

 

 

  
 

Financials – 1.8%

  

Itau Unibanco Holdings S.A.

     1,089        9,422   
   

 

 

  
 

Materials – 1.8%

  

Vale S.A.

     2,329        9,889   
   

 

 

  
 

Total Brazil – 8.2%

  

   $ 43,728   

China

  

 

Consumer Discretionary – 1.7%

  

Bona Film Group Ltd. ADR (A)(B)

     213        2,887   

JD.com, Inc. ADR (A)

     224        5,936   
   

 

 

  
      8,823   
   

 

 

  
 

Consumer Staples – 1.9%

  

WH Group Ltd. (A)

     13,772        9,977   
   

 

 

  
 

Financials – 2.0%

  

China Overseas Land & Investment Ltd.

     3,362        10,640   

China Overseas Property Holdings Ltd. (A)

     771        112   
   

 

 

  
      10,752   
   

 

 

  
 

Health Care – 1.8%

  

CSPC Pharmaceutical Group Ltd.

     10,873        9,840   
   

 

 

  
 

Industrials – 1.5%

  

AviChina Industry & Technology Co. Ltd., H Shares

     10,448        7,838   
   

 

 

  
 

Information Technology – 2.1%

  

Tencent Holdings Ltd.

     553        11,292   
   

 

 

  
 

Utilities – 1.6%

  

China Gas Holdings Ltd.

     5,868        8,654   
   

 

 

  
 

Total China – 12.6%

  

   $ 67,176   

Hong Kong

  

 

Materials – 2.5%

  

Fosun International Ltd.

     9,203        13,097   
   

 

 

  
 

Total Hong Kong – 2.5%

  

   $ 13,097   

India

  

 

Consumer Discretionary – 2.4%

  

Maruti Suzuki India Ltd.

     136        7,651   

Page Industries Ltd.

     30        5,477   
   

 

 

  
      13,128   
   

 

 

  
 

Consumer Staples – 1.1%

  

ITC Ltd.

     1,141        5,658   
   

 

 

  

COMMON STOCKS

(Continued)

   Shares     Value  
 

Energy – 1.1%

  

Coal India Ltd.

     1,308      $ 5,767   
   

 

 

  

Financials – 2.4%

  

Axis Bank Ltd.

     876        5,876   

HDFC Bank Ltd.

     435        7,034   
   

 

 

  
      12,910   
   

 

 

  
 

Industrials – 1.1%

  

Larsen & Toubro Ltd.

     318        5,839   
   

 

 

  
 

Information Technology – 1.1%

  

HCL Technologies Ltd.

     492        6,046   
   

 

 

  
 

Total India – 9.2%

  

   $ 49,348   

Indonesia

  

 

Financials – 3.1%

  

PT Bank Mandiri (Persero) Tbk

     13,018        10,112   

PT Lippo Karawaci Tbk

     81,662        6,435   
   

 

 

  
      16,547   
   

 

 

  
 

Industrials – 0.8%

  

PT Jasa Marga (Persero) Tbk

     10,602        4,318   
   

 

 

  
 

Total Indonesia – 3.9%

  

   $ 20,865   

Israel

  

 

Health Care – 1.6%

  

Teva Pharmaceutical Industries Ltd. ADR (B)

     163        8,714   
   

 

 

  
 

Total Israel – 1.6%

  

   $ 8,714   

Mexico

  

 

Industrials – 1.0%

  

Promotora y Operadora de Infraestructura S.A.B. de C.V.

     379        5,025   
   

 

 

  
 

Materials – 1.3%

  

CEMEX S.A.B. de C.V. (A)

     9,598        6,972   
   

 

 

  
 

Telecommunication Services – 1.5%

  

America Movil S.A.B. de C.V., Series L(A)

     10,530        8,191   
   

 

 

  
 

Total Mexico – 3.8%

  

   $ 20,188   

Netherlands

  

 

Information Technology – 1.6%

  

Yandex N.V., Class A (A)

     570        8,736   
   

 

 

  
 

Total Netherlands – 1.6%

  

   $ 8,736   

Russia

  

 

Consumer Staples – 1.0%

  

Magnit PJSC GDR

     135        5,405   
   

 

 

  
 

Energy – 1.6%

  

PJSC LUKOIL

     150        5,779   

PJSC LUKOIL ADR

     68        2,643   
   

 

 

  
      8,422   
   

 

 

  
COMMON STOCKS
(Continued)		   Shares     Value  

Financials – 3.2%

  

Sberbank of Russia ADR

     2,428      $ 16,899   
   

 

 

  
 

Total Russia – 5.8%

  

   $ 30,726   

South Africa

  

 

Consumer Discretionary – 2.8%

  

Naspers Ltd., Class N

     108        15,059   
   

 

 

  
 

Energy – 1.5%

  

Sasol Ltd.

     272        8,120   
   

 

 

  
 

Total South Africa – 4.3%

  

   $ 23,179   

South Korea

  

 

Financials – 1.4%

  

Samsung Fire & Marine Insurance Co. Ltd.

     29        7,432   
   

 

 

  
 

Health Care – 2.5%

  

Celltrion, Inc. (A)

     140        13,431   
   

 

 

  
 

Information Technology – 7.2%

  

Naver Corp.

     16        9,102   

Samsung Electronics Co. Ltd.

     21        24,081   

SK hynix, Inc.

     209        5,144   
   

 

 

  
      38,327   
   

 

 

  
 

Materials – 3.9%

  

LG Chem Ltd.

     45        12,861   

POSCO

     43        8,259   
   

 

 

  
      21,120   
   

 

 

  
 

Utilities – 2.5%

  

Korea Electric Power Corp.

     250        13,142   
   

 

 

  
 

Total South Korea – 17.5%

  

   $ 93,452   

Taiwan

  

 

Information Technology – 8.1%

  

Advanced Semiconductor Engineering, Inc.

     4,909        5,712   

Catcher Technology Co. Ltd.

     737        6,046   

Hon Hai Precision Industry Co. Ltd.

     2,095        5,520   

Largan Precision Co. Ltd.

     96        7,442   

Taiwan Semiconductor Manufacturing Co. Ltd.

     2,860        14,397   

Zhen Ding Technology Holding Ltd.

     1,793        4,011   
   

 

 

  
      43,128   
   

 

 

  
 

Total Taiwan – 8.1%

  

   $ 43,128   

Thailand

  

 

Consumer Discretionary – 1.7%

  

Minor International Public Co. Ltd.

     8,551        8,993   
   

 

 

  
 

Total Thailand – 1.7%

  

   $ 8,993   
 

 

46   ANNUAL REPORT   2016  

Table of Contents

CONSOLIDATED SCHEDULE OF INVESTMENTS

Ivy Emerging Markets Equity Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS
(Continued)		   Shares     Value  

Turkey

  

 

Financials – 2.1%

  

Akbank T.A.S.

     1,959      $ 5,576   

Turkiye Garanti Bankasi Anonim Sirketi

     1,926        5,633   
   

 

 

  
      11,209   
   

 

 

  
 

Total Turkey – 2.1%

  

   $ 11,209   

United States

  

 

Energy – 1.4%

  

Halliburton Co. (B)

     216        7,730   
   

 

 

  
 

Total United States – 1.4%

  

   $ 7,730   
 

TOTAL COMMON STOCKS – 84.3%

   

   $ 450,269   

(Cost: $399,913)

  

PURCHASED
OPTIONS		   Number of
Contracts
(Unrounded)		     Value  

China Petroleum & Chemical Corp.,

      

Call HKD4.40, Expires 4-28-16, OTC (Ctrpty: Citibank N.A.) (C)

     7,725      $ 1,414   

iShares MSCI Brazil Capped ETF,

      

Put $25.00, Expires
6-17-16, OTC
(Ctrpty: Morgan Stanley & Co., Inc.)

     7,778        1,314   

iShares MSCI Emerging Markets ETF,

      

Call $35.00, Expires 5-20-16, OTC (Ctrpty: Morgan Stanley & Co., Inc.)

     7,776        529   
   

 

 

  
 

TOTAL PURCHASED OPTIONS – 0.6%

   

   $ 3,257   

(Cost: $2,045)

  

SHORT-TERM
SECURITIES		   Principal     Value  

Commercial Paper (D) – 4.8%

  

Air Products and Chemicals, Inc.

      

0.380%, 4-18-16

   $ 4,000      $ 3,999   

Baxter International, Inc.

      

0.700%, 4-7-16

     5,000        5,000   

DTE Gas Co.

      

0.480%, 4-1-16

     2,184        2,184   

Essilor International S.A.

      

0.400%, 5-2-16

     5,000        4,998   

Rockwell Automation, Inc.

      

0.550%, 4-7-16

     3,000        3,000   

St. Jude Medical, Inc.

      

0.480%, 4-19-16

     3,000        2,999   

Wisconsin Gas LLC

      

0.440%, 4-14-16

     3,000        3,000   
   

 

 

  
      25,180   
   

 

 

  

Master Note – 0.9%

  

Toyota Motor Credit Corp.

      

0.443%, 4-6-16(E)

     4,935        4,935   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 5.7%

   

   $ 30,115   

(Cost: $30,114)

  

 

TOTAL INVESTMENT SECURITIES – 90.6%

   

   $ 483,641   

(Cost: $432,072)

  

 

CASH AND OTHER ASSETS, NET OF LIABILITIES(B)(F) – 9.4%

   

     50,261   
 

NET ASSETS – 100.0%

  

   $ 533,902   
 

 

Notes to Consolidated Schedule of Investments

 

(A) No dividends were paid during the preceding 12 months.

 

(B) All or a portion of securities with an aggregate value of $14,303 and cash of $3,450 are held in collateralized accounts to cover potential obligations with respect to outstanding written options.

 

(C) Exercise prices are denominated in the indicated foreign currency, where applicable (HKD - Hong Kong Dollar).

 

(D) Rate shown is the yield to maturity at March 31, 2016.

 

(E) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

 

(F) Cash of $2,710 is held in collateralized accounts for OTC derivatives collateral as governed by International Swaps and Derivatives Association, Inc. Master Agreements.

The following forward foreign currency contracts were outstanding at March 31, 2016:

 

     Currency to be
Delivered		          Currency to be
Received		     Settlement
Date		     Counterparty   Unrealized
Appreciation		     Unrealized
Depreciation		       

Chinese Yuan Renminbi

     334,000      U.S. Dollar     50,398        8-19-16      Barclays Capital, Inc.   $ —      $ 926     

U.S. Dollar

     17,890      Malaysian Ringgit     72,100        4-26-16      Deutsche Bank AG     676        —     

U.S. Dollar

     11,688      South African Rand     180,200        4-26-16      Deutsche Bank AG     464        —     

U.S. Dollar

     19,676      Mexican Peso     343,800        4-26-16      Morgan Stanley International     183        —     
           

 

 

            $ 1,323      $ 926     
           

 

 

 

  2016   ANNUAL REPORT   47

Table of Contents

CONSOLIDATED SCHEDULE OF INVESTMENTS

Ivy Emerging Markets Equity Fund (in thousands)

MARCH 31, 2016

 

 

 

The following written options were outstanding at March 31, 2016 (contracts and exercise prices unrounded):

 

Underlying Security   

Counterparty,

if OTC

    Type      Number
of
Contracts		      Expiration
Month		      Exercise
Price		      Premium
Received		      Value       

China Petroleum & Chemical Corp.

    Citibank N.A.      Put         7,725         April 2016         HKD3.60       $ 443       $ (20 )   

iShares MSCI Brazil Capped ETF

    Morgan Stanley & Co., Inc.      Put         7,778         June 2016       $ 19.00         218         (210 )   
   Morgan Stanley & Co., Inc.      Call         7,778         June 2016         32.00         482         (412 )   

iShares MSCI Emerging Markets ETF

    Morgan Stanley & Co., Inc.      Put         7,776         May 2016         30.00         350         (129 )   

Lukoil Co. ADR

    Morgan Stanley & Co., Inc.      Put         980         June 2016         38.00         798         (235 )   

YPF Sociedad Amonima ADR

    UBS AG      Put         2,000         April 2016         28.00         2,255         (2,050 )   
                 

 

 

                  $ 4,546       $ (3,056 )   
                 

 

 

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 450,269       $ —       $ —   

Purchased Options

     —         3,257         —   

Short-Term Securities

     —         30,115         —   

Total

   $ 450,269       $ 33,372       $ —   

Forward Foreign Currency Contracts

   $ —       $ 1,323       $ —   

Liabilities

        

Forward Foreign Currency Contracts

   $ —       $ 926       $ —   

Written Options

   $ —       $ 3,056       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

The following acronyms are used throughout this schedule:

ADR = American Depositary Receipts

GDR = Global Depositary Receipts

OTC = Over the Counter

 

Market Sector Diversification

  

(as a % of net assets)

  

Information Technology

      20.1 % 

Financials

      16.0 % 

Materials

      9.5 % 

Consumer Staples

      8.6 % 

Consumer Discretionary

      8.6 % 

Health Care

      5.9 % 

Energy

      5.6 % 

Industrials

      4.4 % 

Utilities

      4.1 % 

Telecommunication Services

      1.5 % 

Other+

      15.7 % 
 

 

+ Includes cash and other assets (net of liabilities), cash equivalents and purchased options

 

See Accompanying Notes to Financial Statements.

 

48   ANNUAL REPORT   2016  

Table of Contents

MANAGEMENT DISCUSSION

Ivy European Opportunities Fund

(UNAUDITED)

 

 

 

LOGO

Robert E. Nightingale

Below, Robert E. Nightingale, portfolio manager of the Ivy European Opportunities Fund, discusses positioning, performance and results for the fiscal year ended March 31, 2016. Mr. Nightingale has managed the Fund since October 2013, and he has 20 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy European Opportunities Fund (Class A shares at net asset value)

      –9.62%   

Ivy European Opportunities Fund (Class A shares including sales load)

      –14.82%   

Benchmark(s) and/or Lipper Category

         

MSCI Europe Index

      –8.44%   

(generally reflects the performance of securities representing the European stock market)

         

Lipper European Region Funds Universe Average

      –5.76%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

 

A down year for European markets in U.S. dollars

 

 

Global equity markets were volatile in the fiscal year ended March 31, 2016. The global recovery experienced setbacks throughout the year, though we believe the gradual recovery should continue. Global growth for 2016 is expected to be weaker and more uneven than earlier forecasts. In the developed markets, the U.S. is emerging as the main driver for global growth, followed by the U.K. and the eurozone. For the fiscal year, European markets performed poorly, with the Fund’s benchmark index down more than 8%. All sectors in the benchmark posted losses for the fiscal year except for consumer staples.

After many false starts, in the fourth quarter of 2015 the U.S. Federal Reserve (Fed) raised rates for the first time since June 2006 despite lackluster economic data. Expectations are high for an additional rate increase in 2016, though the Fed has downplayed the idea of more than one additional rate increase over the course of the year. As a result, the U.S. dollar was mixed relative to major currencies — weaker to the euro and yen but stronger to the British pound. This is not surprising as markets were discounting the change in interest rate policy by the Fed. Monetary policy in Europe and Japan remain very aggressive. Policy heads suggest they are prepared to do more, though the market was disappointed with European Central Bank (ECB) President Mario Draghi’s tempered announcement during the December ECB meeting. The ECB lowered deposit rates to -0.3% and expanded its quantitative easing programs. In our opinion, the ECB’s monetary posturing is the glue stabilizing the European Union (EU) markets. That said, potential turmoil remains as Britain set June 23 as the date for a referendum on the country’s membership in the EU. In early 2015, the chances of a “Brexit” — Britain departing from the EU — seemed remote. Today, largely due to Europe’s migration crisis and regulation concerns, the chances of a Brexit have increased. We believe the European market was hurt from a lack of real momentum in reforms and stimulus from the eurozone. This left the market embedded with slow gross domestic product (GDP) growth and political uncertainty in Spain, Italy, France and Germany.

The Middle East was the center of geopolitical strife during the fiscal year. Refugees fleeing the region continued to pour into Europe, while ISIS and other militant Middle Eastern groups were behind deadly attacks on civilians around the world, notably in Europe (Paris and Brussels).

China continues to be a significant driver of investor concern as uncertainty abounds in several areas. Key concerns include the economy’s overall global competitiveness; the ability to rotate to a service- and consumption-based economy; and the sustainability of a controlled exchange rate. China’s currency was granted SDR (Special Drawing Rights) status by the International Monetary Fund. The country also announced that it would be adjusting its currency from a dollar peg to a “basket” peg, which should help its competiveness as the dollar strengthens with rising interest rates.

The decline in energy prices that started mid-year 2014 gathered steam during the fiscal year, as robust North American production, in addition to the recovery of oil supplies in OPEC nations (Iraq and now Iran), has overwhelmed tepid global demand for the commodity. The continued downgrading of demand growth through the year, along with OPEC’s unwillingness to support price levels by curtailing output, led to the rapid decline in price levels. While the sharp fall in oil prices adversely affected the energy sector and oil-producing countries, we believe this will aid consumer-based economies/countries if the price stays at a relatively low level for an extended period.

Portfolio strategy — hits and misses

 

 

The Fund underperformed its benchmark and Lipper peer group for the fiscal year ended March 31, 2016. The Fund’s sector allocation benefitted performance, with an underweight allocation to the poor-performing financial sector posting large relative gains. Overweight allocations to industrials and information technology aided performance as well. On the other hand, an underweight allocation to consumer staples detracted from performance for the period, as did the Fund’s utilization of forward currency contracts. During the fiscal year, the Fund utilized currency hedges to the U.S. dollar ranging from 10-35% of Fund assets in an effort to protect the Fund against a weaker euro and British pound relative to the U.S. dollar. In our view, relatively stronger U.S. growth will likely initiate the further rise of interest rates in the U.S. In addition, the “Brexit” vote could weaken the euro if the referendum results in a move to leave the EU.

 

  2016   ANNUAL REPORT   49

Table of Contents

MANAGEMENT DISCUSSION

Ivy European Opportunities Fund

(UNAUDITED)

 

 

 

Stock selection helped the Fund’s performance, with stock picks in industrials, consumer discretionary and consumer staples more than offsetting poor selection in energy (exploration and production) and health care. The Fund’s country allocations neither benefitted nor detracted to performance, though strong stock selection in France and the U.S. helped performance.

Positioning

 

 

As the fiscal year progressed, we slightly increased our weighting to more defensive sectors versus the benchmark due to slow global growth concerns in China and volatility in credit markets. The Fund increased its allocation to consumer staples and telecommunication services at the expense of information technology and financials. The Fund also lowered its exposure to Switzerland and Italy, while increasing exposure to France and the Netherlands. From a country allocation standpoint, we continue to be overweight French stocks, as we feel investor sentiment will improve and stocks should rebound if business conditions recover in France and in the rest of the world.

The Fund remains overweight industrials and information technology, while underweight energy, financials and materials. We believe our overweight positions provide solid growth prospects, while our underweight allocations tend to have high relative valuations or poor fundamentals. In the industrial sector, we have invested in companies we believe should benefit from the ongoing recovery in Europe and continued growth in the U.S. In information technology, we believe semiconductor chips for smart cars and additional automation, as well as online and mobile payment systems and security, offer the prospect of long-term growth. We are maintaining our underweight position in financials as we believe there are challenges facing European financials due to increased regulation and extremely low interest rates. However, we recognize the low valuations in the area and may reduce our underweight allocation. In our view, our underweight allocation to materials tends to have high relative valuations and poor fundamentals as the emerging-market growth engine sputters.

As calendar year 2016 progresses, we intend to add to holdings we believe will realize secular growth or have better business models in this slow-growth world. In Europe, we expect slow but steady economic growth, which could hinder earnings per share growth. As a result, many of our holdings will have exposure to the faster growing U.S.

Outlook: opportunities exist — some progress, but issues remain

 

 

We think global economic growth will remain slow and face additional headwinds by slower-than-anticipated emerging-market growth. We believe monetary policy is likely to remain aggressive for the foreseeable future, but to a lesser extent in the U.S. We think the Fed will continue to raise interest rates in 2016, which will keep the markets on edge. We, as well as many investors, are concerned how the U.S. election will affect the stock market, as policies of the candidates vary on many issues.

Economic and political issues continue to simmer in Europe, which could result in market fluctuations. However, we believe the European economy is on firmer footing and will likely see steady slow expansion over the next 24 months. We are concerned about the recent terrorist attacks and the effects the large refugee influx will have on European politics and the economy. The constant drag of over- indebted governments in southern Europe and the U.K. should limit any fiscal stimulus to the economy. In our view, the European market has started to reflect this reality. We continue to follow policies stemming from Europe, including stimulation, reforms and regulation measures from foreign governments and the ECB. We believe the U.K. referendum on remaining in the EU will be close and will likely put pressure on the currency as the U.K. is running current account and government deficits.

We continue to target sectors, countries and stocks we believe best reflect our mixed economic outlook. We believe lower energy prices will benefit consumer balance sheets. We believe the odds of a recession are low, as there has not been a boom in spending, excluding some property markets around the world. We remain cautious on commodity sensitive areas until we see emerging markets begin to reaccelerate. In our view, the strongest long-term GDP growth should still occur in emerging markets and the U.S. due to better demographics. In an effort to capture this growth, we intend to continue investing in U.S. firms or European multinationals having exposure to the U.S. and/or emerging markets.

We believe China is in a hard landing, and its multi-year rebalancing to a more consumer-based economy, as well as its anticorruption efforts, need to be monitored. In our view, these changes could have lasting impacts throughout the global marketplace in shaping GDP growth, commodity prices and multinational profits based in Europe and the U.S.

As always, we remain focused on stocks that we consider higher quality or improving, which means they offer growth potential and are positioned well in their industries.

Performance shown at NAV does not include the effect of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

International investing involves additional risks, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. The value of the Fund’s investments, as measured in U.S. dollars, may be unfavorably affected by changes in foreign currency exchange rates and exchange control regulations. Focusing on a single geographic region involves increased currency, political, regulatory and other risks. These and other risks are more fully described in the Fund’s prospectus.

 

50   ANNUAL REPORT   2016  

Table of Contents

 

 

The opinions expressed in this report are those of the Fund’s portfolio manager and are current only through the end of the period of the report as stated on the cover. The portfolio manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index (indexes) noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of the Ivy European Opportunities Fund.

 

  2016   ANNUAL REPORT   51

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy European Opportunities Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      99.6%   

Industrials

      17.4%   

Consumer Staples

      15.7%   

Financials

      14.7%   

Health Care

      13.8%   

Consumer Discretionary

      12.2%   

Information Technology

      7.4%   

Telecommunication Services

      5.6%   

Energy

      4.8%   

Utilities

      4.4%   

Materials

      3.6%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      0.4%   

Lipper Rankings

 

 

 

Category: Lipper European Region Funds    Rank      Percentile

1 Year

    108/148      73

3 Year

    73/107      68

5 Year

    59/85      69

10 Year

    59/70      84

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

Country Weightings

 

 

 

Europe

      97.8%   

United Kingdom

      31.3%   

France

      28.5%   

Germany

      8.7%   

Netherlands

      8.4%   

Switzerland

      5.5%   

Italy

      4.0%   

Ireland

      3.9%   

Other Europe

      7.5%   

North America

      1.8%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      0.4%   
 

 

Top 10 Equity Holdings

 

 

 

Company    Country      Sector      Industry

Renault S.A.

   

France

     

Consumer Discretionary

     

Automobile Manufacturers

Shire plc

   

United Kingdom

     

Health Care

     

Pharmaceuticals

Societe Generale S.A.

   

France

     

Financials

     

Diversified Banks

Prudential plc

   

United Kingdom

     

Financials

     

Life & Health Insurance

Thales

   

France

     

Industrials

     

Aerospace & Defense

Roche Holdings AG, Genusscheine

   

Switzerland

     

Health Care

     

Pharmaceuticals

Banca Intesa S.p.A.

   

Italy

     

Financials

     

Diversified Banks

Imperial Tobacco Group plc

   

United Kingdom

     

Consumer Staples

     

Tobacco

Safran

   

France

     

Industrials

     

Aerospace & Defense

Axa S.A.

   

France

     

Financials

     

Multi-Line Insurance

See your advisor or www.ivyfunds.com for more information on the Fund’s most recent published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

52   ANNUAL REPORT   2016  

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy European Opportunities Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class B(4)      Class C      Class E(5)      Class I      Class R      Class R6      Class Y  

1-year period ended 3-31-16

      -14.82 %       -14.23 %       -10.24 %       -14.57 %       -9.24 %       -9.77 %       -9.11 %       -9.52 % 

5-year period ended 3-31-16

      0.77 %       0.64 %       1.31 %       1.20 %       2.53 %       —         —         2.26 % 

10-year period ended 3-31-16

      0.12 %       -0.05 %       0.08 %       —         —         —         —         1.03 % 

Since Inception of Class through 3-31-16(6)

      —         —         —         -1.65 %       -0.85 %       3.28 %       -3.77 %       —   

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) Class E shares are not currently available for investment.

 

(6) 4-2-07 for Class E shares, 4-2-07 for Class I shares, 12-19-12 for Class R shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

  2016   ANNUAL REPORT   53

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy European Opportunities Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Belgium

  

 

Consumer Staples – 1.0%

  

Ontex Group N.V.

     67      $ 2,199   
   

 

 

  
 

Health Care – 1.0%

  

UCB S.A./N.V.

     30        2,319   
   

 

 

  
 

Total Belgium – 2.0%

  

   $ 4,518   

Denmark

  

 

Health Care – 1.2%

  

Novo Nordisk A/S,
Class B

     50        2,689   
   

 

 

  
 

Industrials – 0.6%

  

Vestas Wind
Systems A/S

     17        1,209   
   

 

 

  
 

Total Denmark – 1.8%

  

   $ 3,898   

France

  

 

Consumer Discretionary – 6.0%

  

Compagnie Generale des Etablissements Michelin,
Class B

     31        3,192   

LVMH Moet Hennessy - Louis Vuitton

     7        1,186   

Renault S.A.

     66        6,599   

Valeo S.A.

     15        2,360   
   

 

 

  
      13,337   
   

 

 

  
 

Consumer Staples – 1.3%

  

Pernod Ricard

     27        3,005   
   

 

 

  
 

Energy – 1.5%

  

Total S.A.

     73        3,337   
   

 

 

  
 

Financials – 4.2%

  

Axa S.A.

     187        4,412   

Societe Generale S.A.

     136        5,019   
   

 

 

  
      9,431   
   

 

 

  
 

Industrials – 7.7%

  

Compagnie de
Saint-Gobain

     72        3,159   

Dassault Aviation S.A.

     1        1,201   

European Aeronautic Defence and
Space Co.

     18        1,195   

Safran

     63        4,434   

Thales

     55        4,859   

Vinci

     32        2,420   
   

 

 

  
      17,268   
   

 

 

  
 

Information Technology – 4.1%

  

Alcatel Lucent,
Class A (A)

     941        3,514   

Cap Gemini S.A.

     27        2,535   

Ingenico Group

     27        3,138   
   

 

 

  
      9,187   
   

 

 

  
COMMON STOCKS
(Continued)		   Shares     Value  

Telecommunication Services – 2.6%

  

Orange S.A.

     206      $ 3,603   

Vivendi Universal

     108        2,274   
   

 

 

  
      5,877   
   

 

 

  
 

Utilities – 1.1%

  

Suez Environment Co.

     127        2,337   
   

 

 

  
 

Total France – 28.5%

  

   $ 63,779   

Germany

  

 

Health Care – 3.6%

  

Bayer AG

     25        2,953   

Fresenius SE & Co. KGaA

     32        2,324   

Merck KGaA

     33        2,765   
   

 

 

  
      8,042   
   

 

 

  
 

Industrials – 1.7%

  

KION Holding 1 GmbH

     45        2,641   

KUKA Aktiengesellschaft

     11        1,184   
   

 

 

  
      3,825   
   

 

 

  
 

Information Technology – 2.4%

  

Infineon Technologies AG

     187        2,661   

United Internet AG

     54        2,694   
   

 

 

  
      5,355   
   

 

 

  
 

Telecommunication Services – 1.0%

  

Deutsche Telekom AG, Registered Shares

     130        2,337   
   

 

 

  
 

Total Germany – 8.7%

  

   $ 19,559   

Ireland

  

 

Consumer Staples – 1.8%

  

Glanbia plc

     130        2,663   

Kerry Group plc,
Class A

     14        1,307   
   

 

 

  
      3,970   
   

 

 

  
 

Industrials – 1.0%

  

Ryanair Holdings plc

     143        2,307   
   

 

 

  
 

Materials – 1.1%

  

CRH plc

     88        2,483   
   

 

 

  
 

Total Ireland – 3.9%

  

   $ 8,760   

Italy

  

 

Financials – 2.1%

  

Banca Intesa S.p.A.

     1,671        4,629   
   

 

 

  
 

Industrials – 1.4%

  

Atlantia S.p.A.

     108        3,007   
   

 

 

  
 

Utilities – 0.5%

  

Snam S.p.A.

     192        1,202   
   

 

 

  
 

Total Italy – 4.0%

  

   $ 8,838   
COMMON STOCKS
(Continued)		   Shares     Value  

Netherlands

  

 

Consumer Discretionary – 1.3%

  

Koninklijke Philips Electronics N.V., Ordinary Shares

     106      $ 3,033   
   

 

 

  
 

Consumer Staples – 2.2%

  

Heineken N.V.

     27        2,408   

Unilever N.V., Certicaaten Van Aandelen

     55        2,443   
   

 

 

  
      4,851   
   

 

 

  
 

Financials – 1.9%

  

ING Groep N.V., Certicaaten Van Aandelen

     353        4,273   
   

 

 

  
 

Industrials – 1.5%

  

Randstad Holding N.V.

     62        3,445   
   

 

 

  
 

Materials – 1.5%

  

Royal DSM Heerlen

     59        3,258   
   

 

 

  
 

Total Netherlands – 8.4%

  

   $ 18,860   

Norway

  

 

Consumer Staples – 1.9%

  

Marine Harvest ASA

     275        4,231   
   

 

 

  
 

Total Norway – 1.9%

  

   $ 4,231   

Spain

  

 

Financials – 0.5%

  

Banco Bilbao Vizcaya Argentaria S.A.

     166        1,104   
   

 

 

  
 

Utilities – 1.3%

  

Iberdrola S.A.

     426        2,841   
   

 

 

  
 

Total Spain – 1.8%

  

   $ 3,945   

Switzerland

  

 

Consumer Staples – 1.1%

  

Nestle S.A., Registered Shares

     32        2,410   
   

 

 

  
 

Financials – 1.0%

  

Julius Baer Group Ltd.

     53        2,279   
   

 

 

  
 

Health Care – 3.4%

  

Lonza Group Ltd., Registered Shares

     17        2,837   

Roche Holdings AG, Genusscheine

     20        4,841   
   

 

 

  
      7,678   
   

 

 

  
 

Total Switzerland – 5.5%

  

   $ 12,367   
 

 

54   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy European Opportunities Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS
(Continued)		   Shares     Value  

United Kingdom

  

 

Consumer Discretionary – 4.9%

  

GKN plc

     531      $ 2,202   

Taylor Wimpey plc

     997        2,726   

UBM plc

     408        3,519   

WPP Group plc

     107        2,507   
   

 

 

  
      10,954   
   

 

 

  
 

Consumer Staples – 6.4%

  

Diageo plc

     107        2,905   

Imperial Tobacco
Group plc

     82        4,577   

Reckitt Benckiser
Group plc

     25        2,433   

SABMiller plc

     72        4,408   
   

 

 

  
      14,323   
   

 

 

  
 

Energy – 3.3%

  

Genel Energy plc (A)

     1,443        1,813   

Royal Dutch Shell plc, Class A

     142        3,435   

Tullow Oil plc (A)

     748        2,115   
   

 

 

  
      7,363   
   

 

 

  
 

Financials – 5.0%

  

Barclays plc

     1,457        3,138   

HSBC Holdings plc

     518        3,229   

Prudential plc

     263        4,913   
   

 

 

  
      11,280   
   

 

 

  

Health Care – 2.8%

  

Shire plc

     109        6,212   
   

 

 

  
COMMON STOCKS
(Continued)		   Shares     Value  

Industrials – 3.5%

  

Ashtead Group plc

     182      $ 2,256   

BAE Systems plc

     454        3,317   

International Consolidated Airlines Group S.A.

     277        2,205   
   

 

 

  
      7,778   
   

 

 

  
 

Information Technology – 0.9%

  

JUST EAT plc (A)

     371        2,012   
   

 

 

  
 

Materials – 1.0%

  

Essentra plc

     190        2,253   
   

 

 

  
 

Telecommunication Services – 2.0%

  

BT Group plc

     357        2,258   

Vodafone Group plc

     732        2,326   
   

 

 

  
      4,584   
   

 

 

  
 

Utilities – 1.5%

  

National Grid plc

     236        3,346   
   

 

 

  
 

Total United Kingdom – 31.3%

  

   $ 70,105   

United States

  

 

Health Care – 1.8%

  

Allergan plc (A)

     15        4,096   
   

 

 

  

Total United States – 1.8%

  

   $ 4,096   
 

TOTAL COMMON
STOCKS – 99.6%

   

   $ 222,956   

(Cost: $214,642)

  

SHORT-TERM
SECURITIES		   Principal     Value  

Master Note – 1.0%

  

    

Toyota Motor Credit Corp.

      

0.443%, 4-6-16 (B)

   $ 2,308      $ 2,308   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 1.0%

   

   $ 2,308   

(Cost: $2,308)

  

 

TOTAL INVESTMENT SECURITIES – 100.6%

           $ 225,264   

(Cost: $216,950)

  

 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (0.6)%

   

     (1,355 ) 
 

NET ASSETS – 100.0%

  

   $ 223,909   
 

 

Notes to Schedule of Investments

 

(A) No dividends were paid during the preceding 12 months.

 

(B) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following forward foreign currency contracts were outstanding at March 31, 2016:

 

      Currency to be
Delivered		            Currency to be
Received		      Settlement
Date		      Counterparty    Unrealized
Appreciation		      Unrealized
Depreciation		       

British Pound

      15,293       U.S. Dollar      22,124         4-26-16       Citibank N.A.    $ 158       $ —     

Euro

      22,116       U.S. Dollar      25,051         4-26-16       State Street Global Markets      —         131     
                 

 

 

                  $ 158       $ 131     
                 

 

 

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 222,956       $ —       $ —   

Short-Term Securities

     —         2,308         —   

Total

   $ 222,956       $ 2,308       $ —   

Forward Foreign Currency Contracts

   $ —       $ 158       $ —   

Liabilities

        

Forward Foreign Currency Contracts

   $ —       $ 131       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

 

  2016   ANNUAL REPORT   55

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy European Opportunities Fund (in thousands)

MARCH 31, 2016

 

 

 

Market Sector Diversification

  

(as a % of net assets)

  

Industrials

      17.4 % 

Consumer Staples

      15.7 % 

Financials

      14.7 % 

Health Care

      13.8 % 

Consumer Discretionary

      12.2 % 

Information Technology

      7.4 % 

Telecommunication Services

      5.6 % 

Energy

      4.8 % 

Utilities

      4.4 % 

Materials

      3.6 % 

Other+

      0.4 % 
 

 

+ Includes cash and other assets (net of liabilities), and cash equivalents

 

See Accompanying Notes to Financial Statements.

 

56   ANNUAL REPORT   2016  

Table of Contents

MANAGEMENT DISCUSSION

Ivy Global Bond Fund

(UNAUDITED)

 

 

 

LOGO

Mark G. Beischel

Below, Mark G. Beischel, CFA, portfolio manager of Ivy Global Bond Fund, discusses positioning, performance and results for the fiscal year ended March 31, 2016. Mr. Beischel has been a manager of the Fund since 2008 and has 22 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 months ended March 31, 2016

         

Ivy Global Bond Fund (Class A shares at net asset value)

      –1.54%   

Ivy Global Bond Fund (Class A shares with sales charge)

      –7.24%   

Benchmark(s) and/or Lipper Category

         

Barclays Multiverse Index

      4.36%   

(generally reflects the performance of the global bond market)

         

Lipper Global Income Funds Universe Average

      0.08%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable investment fees and expenses, whereas the index returns do not include any such fees. The performance discussion below is at net asset value.

 

Performance

 

 

The Ivy Global Bond Fund underperformed its Lipper average and its benchmark index for the year ending March 31, 2016. With 93% of its assets in the U.S. dollar, the Portfolio’s performance was hindered relative to the indexes, as developed market currencies appreciated vs. the dollar over the year. The euro and yen had a 6.0% and 6.7% return, respectively, as the market priced in a less aggressive Federal Open Market Committee (FOMC). The Fund included a slight exposure to derivatives through the use of futures and currency forwards hedging. Together, these resulted in a slight loss. Additionally the Fund’s shorter effective duration relative to the indexes hurt the performance, as the term structure of interest rates were sharply down with the Negative Interest Rate Policies (NIRP) enacted by the European Central Bank (ECB) and Bank of Japan (BOJ). Finally, the Fund’s overweight exposure to credit hurt its relative performance, with credit spreads widening over the course of the year.

The Fund’s performance was enhanced by its underweight exposure in Emerging Market (EM) currencies. Asian and Latin American commodity currencies underperformed the U.S. dollar as the markets priced in a slowing China and the lower global commodity prices. The portfolio return was also enhanced by the large portion of its investments in cash and U.S. Treasuries that acted as a buffer from the volatility in the currency, credit, and rate markets.

Slower global recovery

 

 

The global recovery has experienced setbacks over the past year. Although we believe the gradual recovery will continue, global growth in 2016 is now expected to be weaker and more uneven than earlier forecasts. In developed markets, the U.S. is emerging as the main driver for global growth followed by the United Kingdom (U.K.), Eurozone, and Japan. The FOMC started the normalization process of raising interest rates in December. Their projections for more rate moves were more aggressive than market expectations. This process led to a tightening in the global financial conditions. The U.S. dollar strengthened, credit spreads widened, and equity prices fell. Chairwoman Yellen appeased the market in February 2016 with a more dovish interpretation of the economic data and a reduction of estimated rate increases for the rest of the year.

The U.K. outperformed Europe with a 2.4% growth rate in 2015. There is enough momentum to sustain this rate throughout 2016. After much speculation about the Bank of England (BOE) raising rates in the first quarter of 2015, the market began discounting a rate hike in the second half of the year. Most participants feel that the BOE will wait and start their normalization process after the Fed raises its policy rate. Regardless of when the hikes commence, officials have emphasized that the pace of normalization in the U.K. is likely to be gradual as well. “Brexit” (British exit) fears are starting to work their way into U.K. securities, as the market tries to price the potential of the U.K. leaving the European Union (EU).

In the euro area, the ECB is struggling with weaker-than-expected growth and inflation expectations. ECB President Mario Draghi’s most recent announcement of purchasing corporate credit and deemphasizing NIRP (Negative Interest Rate Policy) allows the central banks to move away from the controversial “Beggar thy neighbors” policies.

In China, the economy’s potential growth rate is slowing significantly. The government’s anti-corruption policy has created an atmosphere of “fear”. Government official are delaying any major projects because of the fear of reprisals from this campaign. Additionally, with the emphasis shifting towards reform, higher tolerance for lower growth will be allowed in the short run. Officials now speak about a “new normal” of slower growth, but they would like to hold growth close to 7%. The impact of a slowing China in global commodities has been painful, to say the least. The most recent announcement of reforming the currency’s value to a “basket’ of currency versus a “peg” to the U.S. dollar has capital markets anticipating a devaluation of the currency over the next few years.

And finally, the economic and political situation in Brazil continues to offer concern. With the deterioration of the energy markets and downgrade of the sovereign, estimates for 2016 gross domestic product in the country are -4%. In addition, the congress is starting the political process of impeaching President Dilma Rousseff.

 

  2016   ANNUAL REPORT   57

Table of Contents

MANAGEMENT DISCUSSION

Ivy Global Bond Fund

(UNAUDITED)

 

 

 

Seeking low volatility

 

 

Amid this volatility, we are currently maintaining a low duration in the Fund and have built what we believe to be an adequate level of liquidity. We believe shorter duration will enable the Fund to focus on higher-yielding corporate bonds, while greater liquidity will allow us to be more responsive to changing market environments.

We continue to focus on maintaining what we believe to be proper diversification for the Fund. The Fund has the opportunity to invest in different securities, sectors, countries and currencies. This flexibility allows us to seek less volatility with a reasonable yield that we believe will reward investors over the longer term.

Given the volatility and uncertainty in some global markets, the Fund’s majority of currency exposure remains in the U.S. dollar. We believe there will be better opportunities to add foreign currency bonds to the portfolio going forward, especially in the emerging markets.

We continue to search for value in the corporate bond space. Some of the best returns have been, and we think will continue to be, from emerging market bonds. There will be more opportunities to redeploy liquidity due to the volatility associated with Washington’s politics and the Fed’s normalization of interest rates.

Looking ahead

 

 

Given our expectation of slow growth globally in 2016, we expect interest rates to remain low overall. The Fed has started the normalization process and will gradually increase the policy rates as warranted by the economic data. The short end of the Treasury yield curve (five years and in) is expected to be less volatile due to the Fed’s commitment to low policy rates. However, longer-term Treasury rates are expected to be more volatile and subject to market emotions regarding fiscal and monetary policies. The structural change in the financial markets has led us to build up more liquidity in the portfolio. Wall Street’s incentives to carry high inventory levels of corporate bonds have been reduced by higher capital requirements. As a result, market liquidity has been reduced and there are more opportunities for dislocations in corporate bonds going further.

The Eurozone’s growth outlook has stagnated. Macroeconomic adjustments are still underway in the peripheral countries, and the debt overhang remains a major impediment to economic activities. The euro area is still dependent on the global economic environment and remains vulnerable to any external shock. Geopolitical risks remain elevated; the most recent terrorist attacks in Paris have brought the surging refugee situation into question and will lead to more discussions about the open border environment which is the crux of the EU project.

Growth in emerging market economies remains generally lackluster, albeit with large regional differences. Despite China’s loss of momentum, the rest of EM Asia is holding up well, while Latin America remains below trend and Europe, the Middle East and Africa suffer from a weaker Europe and geopolitics. The wild card will be the price of commodities going forward. Brazil is confronting a major scandal with Petrobras that has left investors questioning its transparency and corporate governance. The company has lost a lot of credibility from the capital markets with its inability to manage the complex capital spending program that it initiated 3 years ago.

The Fund’s performance noted above is at net asset value (NAV), and does not include the effect of any applicable sales charges. If reflected, the sales charge would reduce the performance noted.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

International investing involves additional risks including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations.

The Fund invests in derivative instruments, primarily total return swaps, futures on indexes and options, both written and purchased, in an attempt to increase exposure to various sectors and markets or to hedge market risk. Such investments involve additional risks, as the fluctuations in the values of the derivatives may not correlate perfectly with the overall markets or with the underlying asset from which the derivative’s value is derived.

Fixed income securities are subject to interest rate risk and, as such, the net asset value of the Fund may fall as interest rates rise. These and other risks are more fully described in the fund’s prospectus.

Certain U.S. government securities in which the Fund may invest, such as Treasury securities and securities issued by the Government National Mortgage Association (GinnieMae), are backed by the full faith and credit of the U.S. government. However, other U.S. government securities in which the Fund may invest, such as securities issued by the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal Home Loan Banks (FHLB), are not backed by the full faith and credit of the U.S. government, are not insured or guaranteed by the U.S. government and, instead, may be supported only by the right of the issuer to borrow from the U.S. Treasury or by the credit of the issuer.

The opinions expressed in this report are those of the portfolio managers and are current only through the end of the period of the report as stated on the cover. The managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index (indexes) noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of the Ivy Global Bond Fund.

 

58   ANNUAL REPORT   2016  

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Global Bond Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      6.5%   

Utilities

      2.5%   

Energy

      1.3%   

Financials

      1.1%   

Health Care

      0.8%   

Information Technology

      0.8%   

Bonds

      87.9%   

Corporate Debt Securities

      67.0%   

United States Government and Government Agency Obligations

      16.1%   

Loans

      2.4%   

Other Government Securities

      2.4%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      5.6%   

Quality Weightings

 

 

 

Investment Grade

      37.8%   

AA

      16.1%   

A

      2.2%   

BBB

      19.5%   

Non-Investment Grade

      50.1%   

BB

      24.4%   

B

      17.4%   

CCC

      4.2%   

Non-rated

      4.1%   

Cash and Other Assets (Net of Liabilities), Cash Equivalents+ and Equities

      12.1%   

Our preference is to always use ratings obtained from Standard & Poor’s. For securities not rated by Standard & Poor’s, ratings are obtained from Moody’s. We do not evaluate these ratings, but simply assign them to the appropriate credit quality category as determined by the rating agency.

Lipper Rankings

 

 

 

Category: Lipper Global Income Funds    Rank      Percentile

1 Year

    162/208      78

3 Year

    136/184      74

5 Year

    87/135      64

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

Country Weightings

 

 

 

North America

      39.9%   

United States

      32.0%   

Mexico

      4.7%   

Other North America

      3.2%   

Europe

      26.2%   

United Kingdom

      7.8%   

Luxembourg

      6.2%   

Netherlands

      4.7%   

Other Europe

      7.5%   

South America

      18.8%   

Brazil

      6.2%   

Argentina

      4.7%   

Chile

      4.0%   

Other South America

      3.9%   

Pacific Basin

      5.2%   

Bahamas/Caribbean

      2.7%   

Other

      1.6%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      5.6%   
 

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

  2016   ANNUAL REPORT   59

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Global Bond Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class B(4)      Class C      Class I      Class R      Class R6      Class Y  

1-year period ended 3-31-16

      -7.24%         -6.11%         -2.39%         -1.39%         -2.02%         -1.30%         -1.54%   

5-year period ended 3-31-16

      0.07%         0.30%         0.47%         1.49%         —            —            1.24%   

10-year period ended 3-31-16

      —            —            —            —            —            —            —      

Since Inception of Class through 3-31-16(5)

      1.67%         1.66%         1.66%         2.67%         -0.53%         -2.72%         2.43%   

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) 4-4-08 for Class A shares, 4-4-08 for Class B shares, 4-4-08 for Class C shares, 4-4-08 for Class I shares, 12-19-12 for Class R shares, 7-31-14 for Class R6 shares and 4-4-08 for Class Y shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

60   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Global Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Brazil

  

 

Utilities – 1.0%

  

Alupar Investimento S.A.

     199      $ 816   

Transmissora Alianca de Energia Eletrica S.A.

     181        1,013   
   

 

 

  
      1,829   
   

 

 

  
 

Total Brazil – 1.0%

  

   $ 1,829   

Chile

  

 

Utilities – 0.3%

  

Aguas Andinas S.A.

     1,051        600   
   

 

 

  
 

Total Chile – 0.3%

  

   $ 600   

Panama

  

 

Financials – 1.1%

  

Banco Latinoamericano de Comercio Exterior S.A.

     82        1,983   
   

 

 

  
 

Total Panama – 1.1%

  

   $ 1,983   

United Kingdom

  

 

Energy – 1.3%

  

Royal Dutch Shell plc, Class A

     87        2,097   

Seadrill Partners LLC

     69        239   
   

 

 

  
      2,336   
   

 

 

  
 

Total United Kingdom – 1.3%

  

   $ 2,336   

United States

  

 

Health Care – 0.8%

  

Bristol-Myers Squibb Co.

     23        1,442   
   

 

 

  
 

Information Technology – 0.8%

  

Intel Corp.

     46        1,492   
   

 

 

  
 

Utilities – 1.2%

  

PPL Corp.

     57        2,187   
   

 

 

  
 

Total United States – 2.8%

  

   $ 5,121   
 

TOTAL COMMON
STOCKS – 6.5%

   

   $ 11,869   

(Cost: $13,711)

      
 
CORPORATE DEBT
SECURITIES		   Principal         

Argentina

  

 

Consumer Discretionary – 0.6%

  

Arcos Dorados Holdings, Inc.

      

10.250%,
7-13-16 (A)

     BRL4,070        1,053   
   

 

 

  

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Energy – 1.7%

  

Pan American Energy LLC:

      

7.875%, 5-7-21

   $ 500      $ 496   

7.875%, 5-7-21 (B)

     1,000        992   

YPF Sociedad Anonima:

      

8.875%,
12-19-18 (B)

     1,300        1,352   

8.500%, 3-23-21 (B)

     250        250   
   

 

 

  
      3,090   
   

 

 

  

Industrials – 0.6%

  

Aeropuertos Argentina 2000 S.A.:

      

10.750%,
12-1-20 (B)

     926        984   

10.750%, 12-1-20

     67        71   
   

 

 

  
      1,055   
   

 

 

  

Materials – 0.3%

  

IRSA Inversiones y Representaciones S.A.

      

8.500%, 2-2-17

     625        642   
   

 

 

  

Utilities – 0.2%

  

Transportadora de Gas del Sur S.A.

      

7.875%, 5-14-17

     376        372   
   

 

 

  
 

Total Argentina – 3.4%

  

   $ 6,212   

Brazil

  

 

Consumer Staples – 1.2%

  

BFF International Ltd.

      

7.250%, 1-28-20 (B)

     2,000        2,115   
   

 

 

  

Energy – 0.0%

  

Lancer Finance Co. (SPV) Ltd.

      

5.850%,
12-12-16 (B)(C)

     252        — * 
   

 

 

  

Financials – 0.5%

  

Banco Bradesco S.A.

      

4.125%, 5-16-16 (B)

     850        850   

Banco Cruzeiro do Sul S.A.

      

8.500%,
2-20-15 (B)(C)

     1,500        60   
   

 

 

  
      910   
   

 

 

  

Industrials – 1.9%

  

Embraer Overseas Ltd.

      

6.375%, 1-24-17

     2,675        2,752   

Odebrecht Drilling Norbe VII/IX Ltd.

      

6.350%, 6-30-21 (B)

     2,218        699   
   

 

 

  
      3,451   
   

 

 

  

Materials – 1.4%

  

Suzano Trading Ltd.

      

5.875%, 1-23-21 (B)

     2,500        2,525   
   

 

 

  

Telecommunication Services – 0.2%

  

OI S.A.

      

9.750%, 9-15-16 (A)

     BRL4,800        442   
   

 

 

  
 

Total Brazil – 5.2%

  

   $ 9,443   

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

British Virgin Islands

  

 

Energy – 0.5%

  

QGOG Atlantic/Alaskan
Rigs Ltd.:

      

5.250%, 7-30-18 (B)

   $ 1,189      $ 886   

5.250%, 7-30-18

     130        97   
   

 

 

  
      983   
   

 

 

  
 

Total British Virgin
Islands – 0.5%

           $ 983   

Canada

  

 

Financials – 0.6%

  

Bank of Montreal

      

1.800%, 7-31-18

     1,100        1,105   
   

 

 

  
 

Total Canada – 0.6%

  

   $ 1,105   

Cayman Islands

  

 

Consumer Staples – 0.6%

  

Marfrig Overseas Ltd.

      

9.500%, 5-4-20 (B)

     1,000        1,015   
   

 

 

  

Financials – 0.5%

  

Banco Bradesco S.A.

      

4.500%, 1-12-17 (B)

     900        912   
   

 

 

  

Industrials – 0.0%

  

Odebrecht Offshore Drilling Finance

      

6.750%, 10-1-22 (B)

     440        97   
   

 

 

  

Telecommunication Services – 0.7%

  

Sable International Finance Ltd.

      

6.875%, 8-1-22 (B)

     1,200        1,200   
   

 

 

  
 

Total Cayman
Islands – 1.8%

           $ 3,224   

Chile

  

 

Industrials – 1.5%

  

Guanay Finance Ltd.

      

6.000%, 12-15-20 (B)

     1,435        1,389   

LATAM Airlines Group S.A.

      

7.250%, 6-9-20 (B)

     1,500        1,380   
   

 

 

  
      2,769   
   

 

 

  

Materials – 2.2%

  

Inversiones CMPC S.A. (GTD by Empresas CMPC S.A.):

      

4.750%, 1-19-18 (B)

     2,925        3,021   

4.375%, 5-15-23 (B)

     1,000        1,006   
   

 

 

  
      4,027   
   

 

 

  
 

Total Chile – 3.7%

  

   $ 6,796   
 

 

  2016   ANNUAL REPORT   61

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Global Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Columbia

  

 

Energy – 1.1%

  

Empresas Publicas de Medellin E.S.P.

      

8.375%,
2-1-21 (A)

     COP6,300,000      $ 1,999   
   

 

 

  

Financials – 0.9%

      

Banco de Bogota S.A.

      

5.000%,
1-15-17 (B)

   $ 1,600        1,620   
   

 

 

  

Utilities – 1.2%

      

Emgesa S.A. E.S.P.

      

8.750%,
1-25-21 (A)

     COP6,930,000        2,214   
   

 

 

  
 

Total Columbia – 3.2%

  

   $ 5,833   

France

  

 

Financials – 0.7%

  

Societe Generale S.A.

      

5.922%,
4-29-49 (B)

   $ 1,350        1,336   
   

 

 

  
 

Total France – 0.7%

  

   $ 1,336   

Hong Kong

  

 

Telecommunication Services – 0.6%

  

Hutchison Whampoa Ltd.

      

1.625%,
10-31-17 (B)

     1,000        1,000   
   

 

 

  
 

Total Hong Kong – 0.6%

  

   $ 1,000   

India

  

 

Financials – 0.7%

  

ICICI Bank Ltd.

      

4.750%,
11-25-16 (B)

     1,250        1,273   
   

 

 

  
 

Industrials – 0.7%

  

Adani Ports and Special Economic Zone Ltd.

      

3.500%,
7-29-20 (B)

     1,300        1,305   
   

 

 

  
 

Utilities – 0.2%

  

Tata Electric Co.

      

8.500%,
8-19-17

     250        263   
   

 

 

  
 

Total India – 1.6%

  

   $ 2,841   

CORPORATE DEBT
SECURITIES 

(Continued)

   Principal     Value  

Indonesia

  

 

Utilities – 1.4%

  

Majapahit Holding B.V.

      

7.750%, 10-17-16

   $ 2,500      $ 2,581   
   

 

 

  
 

Total Indonesia – 1.4%

  

   $ 2,581   

Ireland

  

 

Energy – 0.4%

  

Novatek Finance Ltd.

      

7.750%,
2-21-17 (A)(B)

     RUB55,000        795   
   

 

 

  
 

Financials – 0.7%

  

MTS International Funding Ltd.

      

5.000%,
5-30-23 (B)

   $ 750        725   

VEB Finance Ltd.

      

5.375%,
2-13-17 (B)

     600        608   
   

 

 

  
      1,333   
   

 

 

  
 

Industrials – 0.2%

  

Russian Railways via RZD Capital Ltd.

      

8.300%, 4-2-19 (A)

     RUB19,000        268   
   

 

 

  
 

Telecommunication Services – 0.4%

  

Mobile TeleSystems OJSC

      

5.000%, 5-30-23

   $ 700        677   
   

 

 

  
 

Total Ireland – 1.7%

  

   $ 3,073   

Jamaica

  

 

Telecommunication Services – 0.4%

  

Digicel Group Ltd.

      

6.000%,
4-15-21 (B)

     800        716   
   

 

 

  
 

Total Jamaica – 0.4%

  

   $ 716   

Luxembourg

  

 

Consumer Discretionary – 0.9%

  

Altice S.A.

      

7.625%,
2-15-25 (B)

     1,700        1,628   
   

 

 

  
 

Financials – 3.0%

  

OJSC Russian Agricultural Bank

      

5.100%,
7-25-18 (B)

     2,950        2,997   

VTB Capital S.A.

      

6.000%,
4-12-17 (B)

     2,335        2,397   
   

 

 

  
      5,394   
   

 

 

  

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Industrials – 0.2%

  

Silver II Borrower SCA and Silver II U.S. Holdings

      

7.750%, 12-15-20 (B)

   $ 500      $ 395   
   

 

 

  
 

Information Technology – 2.1%

  

BC Luxco 1 S.A.:

      

7.375%, 1-29-20 (B)

     3,700        3,413   

7.375%, 1-29-20

     550        507   
   

 

 

  
      3,920   
   

 

 

  
 

Total Luxembourg – 6.2%

  

   $ 11,337   

Mexico

  

 

Consumer Discretionary – 0.8%

  

Tenedora Nemak S.A. de C.V.

      

5.500%, 2-28-23 (B)

     1,500        1,541   
   

 

 

  
 

Financials – 0.4%

  

PLA Administradora Industrial

      

5.250%, 11-10-22 (B)

     750        724   
   

 

 

  
 

Materials – 3.5%

  

C5 Capital (SPV) Ltd.

      

4.908%,
12-29-49 (B)(D)

     1,600        1,336   

CEMEX S.A.B. de C.V.:

      

6.500%, 12-10-19 (B)

     3,600        3,703   

7.250%, 1-15-21 (B)

     1,200        1,248   
   

 

 

  
      6,287   
   

 

 

  
 

Total Mexico – 4.7%

  

   $ 8,552   

Netherlands

  

 

Consumer Discretionary – 0.9%

  

VTR Finance B.V.

      

6.875%, 1-15-24 (B)

     1,680        1,647   
   

 

 

  
 

Consumer Staples – 0.8%

  

Marfrig Holdings (Europe) B.V.:

      

8.375%, 5-9-18 (B)

     1,000        1,005   

6.875%, 6-24-19 (B)

     500        476   
   

 

 

  
      1,481   
   

 

 

  
 

Energy – 0.6%

  

Petrobras Global Finance (GTD by Petroleo Brasileiro S.A.)

      

4.875%, 3-17-20

     1,375        1,144   
   

 

 

  

Materials – 0.7%

  

Cimpor Financial Operations B.V. (GTD by InterCement Participacoes S.A. and InterCement Brasil S.A.)

      

5.750%, 7-17-24 (B)

     1,850        1,341   
   

 

 

  
 

 

62   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Global Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  
 

Telecommunication Services – 0.2%

  

VimpleCom Holdings B.V.

      

9.000%,
2-13-18 (A)(B)

     RUB25,000      $ 358   
   

 

 

  
 

Utilities – 1.5%

  

Listrindo Capital B.V.

      

6.950%, 2-21-19 (B)

   $ 2,550        2,624   
   

 

 

  
 

Total Netherlands – 4.7%

  

   $ 8,595   

Panama

  

 

Financials – 1.5%

  

Banco Latinoamericano de Comercio Exterior S.A.

      

3.750%, 4-4-17 (B)

     2,700        2,744   
   

 

 

  
 

Total Panama – 1.5%

  

   $ 2,744   

Peru

  

 

Financials – 0.7%

  

InRetail Shopping Malls

      

5.250%,
10-10-21 (B)

     1,300        1,297   
   

 

 

  
 

Total Peru – 0.7%

  

   $ 1,297   

Qatar

  

 

Energy – 0.1%

  

Ras Laffan Liquefied Natural Gas Co. Ltd.

      

5.832%, 9-30-16

     107        110   
   

 

 

  
 

Total Qatar – 0.1%

  

   $ 110   

Russia

  

 

Industrials – 1.2%

  

SCF Capital Ltd.:

      

5.375%,
10-27-17 (B)

     1,000        1,012   

5.375%, 10-27-17

     1,150        1,164   
   

 

 

  
      2,176   
   

 

 

  
 

Materials – 0.9%

  

Steel Capital S.A.

      

6.250%, 7-26-16 (B)

     500        505   

Uralkali Finance Ltd.

      

3.723%, 4-30-18 (B)

     1,100        1,081   
   

 

 

  
      1,586   
   

 

 

  
 

Total Russia – 2.1%

  

   $ 3,762   

CORPORATE DEBT
SECURITIES 

(Continued)

   Principal     Value  

Singapore

  

 

Consumer Staples – 2.2%

  

Olam International Ltd.:

      

5.750%, 9-20-17

   $ 1,150      $ 1,194   

7.500%, 8-12-20

     2,500        2,753   
   

 

 

  
      3,947   
   

 

 

  
 

Telecommunication Services – 0.8%

  

TBG Global Pte. Ltd.

      

4.625%, 4-3-18 (B)

     1,500        1,504   
   

 

 

  
 

Total Singapore – 3.0%

  

   $ 5,451   

Spain

  

 

Financials – 0.9%

  

Banco Bilbao Vizcaya Argentaria S.A.

      

9.000%, 5-29-49

     1,600        1,644   
   

 

 

  
 

Total Spain – 0.9%

  

   $ 1,644   

United Arab Emirates

  

 

Financials – 1.1%

  

ICICI Bank Ltd.:

      

4.800%, 5-22-19 (B)

     500        532   

3.500%, 3-18-20 (B)

     1,400        1,439   
   

 

 

  
      1,971   
   

 

 

  
 

Total United Arab Emirates – 1.1%

  

   $ 1,971   

United Kingdom

  

 

Financials – 5.9%

  

Barclays plc

      

8.250%, 12-29-49

     1,500        1,497   

HSBC Holdings plc

      

5.625%, 12-29-49

     1,200        1,153   

Royal Bank of Scotland Group plc (The)

      

7.640%, 3-29-49

     2,000        1,945   

State Bank of India:

      

4.125%, 8-1-17 (B)

     1,200        1,233   

3.250%, 4-18-18 (B)

     3,750        3,816   

3.622%, 4-17-19 (B)

     1,000        1,032   
   

 

 

  
      10,676   
   

 

 

  
 

Materials – 0.6%

  

Vedanta Resources plc

      

6.000%, 1-31-19 (B)

     1,550        1,048   
   

 

 

  
 

Total United Kingdom – 6.5%

  

   $ 11,724   

United States

  

 

Consumer Discretionary – 0.8%

  

B-Corp Merger Sub, Inc.

      

8.250%, 6-1-19

     725        565   

Globo Comunicacoe e Participacoes S.A.

      

5.307%,
5-11-22 (B)(D)

     850        841   
   

 

 

  
      1,406   
   

 

 

  

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Consumer Staples – 0.7%

  

SABMiller Holdings, Inc.

      

2.200%, 8-1-18 (B)

   $ 854      $ 874   

Simmons Foods, Inc.

      

7.875%, 10-1-21 (B)

     475        400   
   

 

 

  
      1,274   
   

 

 

  
 

Energy – 0.7%

  

Brand Energy & Infrastructure Services

      

8.500%, 12-1-21 (B)

     1,300        1,222   
   

 

 

  
 

Financials – 2.8%

  

Aircastle Ltd.

      

4.625%, 12-15-18

     1,900        1,962   

Citigroup, Inc.

      

8.400%, 4-29-49

     1,250        1,372   

UBS Preferred Funding Trust V

      

6.243%, 5-29-49

     1,000        1,000   

Wells Fargo & Co.

      

7.980%, 3-29-49

     750        776   
   

 

 

  
      5,110   
   

 

 

  
 

Health Care – 0.4%

  

Fresenius U.S. Finance II, Inc.

      

4.500%, 1-15-23 (B)

     675        685   
   

 

 

  
 

Industrials – 0.9%

  

TransDigm, Inc.

      

6.000%, 7-15-22

     1,607        1,601   
   

 

 

  
 

Information Technology – 1.1%

  

Alliance Data Systems Corp.

      

5.250%, 12-1-17 (B)

     1,600        1,620   

Micron Technology, Inc.

      

5.875%, 2-15-22

     450        389   
   

 

 

  
      2,009   
   

 

 

  
 

Materials – 0.5%

  

Hillman Group, Inc. (The)

      

6.375%, 7-15-22 (B)

     1,218        1,017   
   

 

 

  
 

Telecommunication Services – 2.8%

  

American Tower Corp.

      

3.400%, 2-15-19

     1,400        1,437   

T-Mobile USA, Inc.

      

6.000%, 3-1-23

     2,977        3,051   

Verizon Communications, Inc.

      

2.625%, 2-21-20

     697        717   
   

 

 

  
      5,205   
   

 

 

  
 

Total United States – 10.7%

  

   $ 19,529   
 

TOTAL CORPORATE DEBT SECURITIES – 67.0%

   

   $ 121,859   

(Cost: $135,764)

  

 

 

  2016   ANNUAL REPORT   63

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Global Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

OTHER GOVERNMENT
SECURITIES (E)		   Principal     Value  

Argentina – 1.3%

  

City of Buenos Aires

      

9.950%, 3-1-17 (B)

   $ 700      $ 731   

Province of Buenos Aires

      

9.950%, 6-9-21

     1,596        1,676   
   

 

 

  
      2,407   
   

 

 

  
 

Russia – 0.7%

  

Russian Federation

      

3.500%, 1-16-19 (B)

     1,200        1,206   
   

 

 

  
 

Supranational – 0.4%

  

Central American Bank for Economic Integration

      

3.875%, 2-9-17 (B)

     800        806   
   

 

 

  
 

TOTAL OTHER GOVERNMENT SECURITIES – 2.4%

   

   $ 4,419   

(Cost: $4,214)

      
 

LOANS (D)

                

United States

  

 

Energy – 0.1%

  

Empresas ICA S.A.

      

7.595%, 6-20-17

     942        235   
   

 

 

  
 

Industrials – 1.4%

  

TransDigm, Inc.

      

3.750%, 2-28-20

     2,627        2,590   
   

 

 

  
 

Information Technology – 0.4%

  

Magic Newco LLC

      

5.000%, 12-12-18

     742        742   
   

 

 

  
 

Materials – 0.5%

  

BakerCorp International

      

4.250%, 2-7-20

     886        793   
   

 

 

  
 

Total United States – 2.4%

  

   $ 4,360   
 

TOTAL LOANS – 2.4%

  

   $ 4,360   

(Cost: $5,180)

  

UNITED STATES
GOVERNMENT AGENCY
OBLIGATIONS		   Principal     Value  

United States – 0.1%

  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO:

      

4.000%,
7-15-23 (F)

   $ 144      $ 1   

4.000%,
2-15-24 (F)

     109        5   

4.000%,
4-15-24 (F)

     163        14   

5.500%,
1-15-38 (F)

     358        68   

Federal National Mortgage Association Fixed Rate Pass-Through Certificates

      

5.000%, 3-1-22

     49        52   

Government National Mortgage Association Agency REMIC/CMO

      

4.500%,
11-20-36 (F)

     109        1   
   

 

 

  
      141   
   

 

 

  
 

TOTAL UNITED STATES GOVERNMENT AGENCY OBLIGATIONS – 0.1%

    

   $ 141   

(Cost: $1,427)

      
 

UNITED STATES GOVERNMENT OBLIGATIONS

                

United States – 16.0%

  

U.S. Treasury Bonds

      

2.250%, 11-15-25

     1,800        1,874   

U.S. Treasury Notes:

      

0.875%, 2-28-17

     11,000        11,024   

3.500%, 5-15-20

     1,980        2,170   

2.625%, 11-15-20

     4,500        4,788   

2.125%, 8-15-21

     3,500        3,646   

1.750%, 5-15-22

     5,475        5,569   
   

 

 

  
      29,071   
   

 

 

  
 

TOTAL UNITED STATES GOVERNMENT
OBLIGATIONS – 16.0%

    

   $ 29,071   

(Cost: $28,299)

  

SHORT-TERM
SECURITIES		   Principal     Value  

Commercial Paper (G) – 3.3%

  

Bemis Co., Inc.

      

0.470%, 4-13-16

   $ 3,000      $ 2,999   

St. Jude Medical, Inc.

      

0.720%, 4-1-16

     2,869        2,869   
   

 

 

  
      5,868   
   

 

 

  
 

Master Note – 0.9%

  

Toyota Motor Credit Corp.

      

0.443%, 4-6-16 (H)

     1,717        1,717   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 4.2%

   

   $ 7,585   

(Cost: $7,585)

      
 

TOTAL INVESTMENT SECURITIES – 98.6%

           $ 179,304   

(Cost: $196,180)

      
 

CASH AND OTHER ASSETS, NET OF LIABILITIES – 1.4%

   

     2,601   
 

NET ASSETS – 100.0%

  

   $ 181,905   
 

 

64   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Global Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

Notes to Schedule of Investments

 

* Not shown due to rounding.

 

(A) Principal amounts are denominated in the indicated foreign currency, where applicable (BRL - Brazilian Real, COP - Columbian Peso and RUB - Russian Ruble).

 

(B) Securities were 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 March 31, 2016 the total value of these securities amounted to $83,589 or 46.0% of net assets.

 

(C) Non-income producing as the issuer has either missed its most recent interest payment or declared bankruptcy.

 

(D) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016.

 

(E) Other Government Securities may include emerging markets sovereign, quasi-sovereign, corporate and supranational agency and organization debt securities.

 

(F) Interest-only security. Amount shown as principal represents notional amount for computation of interest.

 

(G) Rate shown is the yield to maturity at March 31, 2016.

 

(H) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following forward foreign currency contracts were outstanding at March 31, 2016:

 

      Currency to be
Delivered		            Currency to be
Received		      Settlement Date      Counterparty    Unrealized
Appreciation		      Unrealized
Depreciation		  

British Pound

      1,500       U.S. Dollar      2,171         4-26-16       Barclays Capital, Inc.    $ 16       $ —   

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 11,869       $ —       $ —   

Corporate Debt Securities

     —         121,859         —   

Other Government Securities

     —         4,419         —   

Loans

     —         3,332         1,028   

United States Government Agency Obligations

     —         141         —   

United States Government Obligations

     —         29,071         —   

Short-Term Securities

     —         7,585         —   

Total

   $ 11,869       $ 166,407       $ 1,028   

Forward Foreign Currency Contracts

   $ —       $ 16       $ —   

During the year ended March 31, 2016, there were no transfers between any levels.

The following acronyms are used throughout this schedule:

CMO = Collateralized Mortgage Obligation

GTD = Guaranteed

REMIC = Real Estate Mortgage Investment Conduit

 

Market Sector Diversification

  

(as a % of net assets)

  

Financials

      22.0 % 

United States Government and Government Agency Obligations

      16.1 % 

Materials

      10.6 % 

Industrials

      8.6 % 

Utilities

      7.0 % 

Energy

      6.5 % 

Telecommunication Services

      6.1 % 

Consumer Staples

      5.5 % 

Information Technology

      4.4 % 

Consumer Discretionary

      4.0 % 

Other Government Securities

      2.4 % 

Health Care

      1.2 % 

Other+

      5.6 % 
 

 

+ Includes cash and other assets (net of liabilities), and cash equivalents

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   65

Table of Contents

MANAGEMENT DISCUSSION

Ivy Global Equity Income Fund

(UNAUDITED)

 

 

 

LOGO

Robert E. Nightingale

Below, Robert E. Nightingale, portfolio manager of the Ivy Global Equity Income Fund, discusses positioning, performance and results for the fiscal year ended March 31, 2016. Mr. Nightingale has managed the Fund since its inception in June 2012, and he has 20 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy Global Equity Income Fund (Class A shares at net asset value)

      –5.22%   

Ivy Global Equity Income Fund (Class A shares including sales load)

      –10.65%   

Benchmark(s) and/or Lipper Category

         

MSCI World High Dividend Yield Index

      0.22%   

(generally reflects the performance of equities (excluding REITs) with higher-than-average dividend yields that are both sustainable and persistent)

         

Lipper Global Equity Income Funds Universe Average

      –2.38%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

 

A volatile year

 

 

Global equity markets were volatile in the fiscal year ended March 31, 2016. The global recovery experienced setbacks throughout the year, though we believe the gradual recovery should continue. Global growth for 2016 is expected to be weaker and more uneven than earlier forecasts. In the developed markets, the U.S. is emerging as the main driver for global growth, followed by the U.K. and the eurozone. The Fund’s benchmark, the MSCI World High Dividend Yield Index, was relatively flat (in U.S. dollars) for the year, returning 0.22%. The Fund posted subpar performance, underperforming the benchmark by more than 5%.

After many false starts, in the fourth quarter of 2015, the U.S. Federal Reserve (Fed) raised rates for the first time since June 2006 despite lackluster economic data. Expectations are high for an additional rate increase in 2016, though the Fed has downplayed the idea of more than one additional rate increase over the course of the year. As a result, the U.S. dollar was mixed relative to major currencies — weaker to the euro and yen but stronger to the British pound. This is not surprising as markets were discounting the change in interest rate policy by the Fed. Monetary policy in Europe and Japan remain very aggressive. Policy heads suggest they are prepared to do more, though the market was disappointed with European Central Bank (ECB) President Mario Draghi’s tempered announcement during the December ECB meeting. The ECB lowered deposit rates to -0.3% and expanded its quantitative easing programs. In our opinion, the ECB’s monetary posturing is the glue stabilizing the European Union (EU) markets. That said, potential turmoil remains as Britain set June 23 as the date for a referendum on the country’s membership in the EU. In early 2015, the chances of a “Brexit” — Britain departing from the EU — seemed remote. Today, largely due to Europe’s migration crisis and regulation concerns, the chances of a Brexit have increased.

China continues to be a significant driver of investor concern as uncertainty abounds in several areas. Key concerns include the economy’s overall global competitiveness; the ability to rotate to a service and consumption based economy; and the sustainability of a controlled exchange rate. China’s currency was granted SDR (Special Drawing Rights) status by the International Monetary Fund. The country also announced it would be adjusting its currency from a dollar peg to a “basket” peg, which should help its competiveness as the dollar strengthens with rising interest rates.

The Middle East was the center of geopolitical strife during the fiscal year. Refugees fleeing the region continued to pour into Europe, while ISIS and other militant Middle Eastern groups were behind deadly attacks on civilians around the world, notably in Europe (Paris and Brussels).

The decline in energy prices that started mid-year 2014 gathered steam during the fiscal year as robust North American production, in addition to the recovery of oil supplies in OPEC nations (Iraq and now Iran), has overwhelmed tepid global demand for the commodity. The continued downgrading of demand growth through the year, along with OPEC’s unwillingness to support price levels by curtailing output, led to the rapid decline in price levels. While the sharp fall in oil prices adversely affected the energy sector and oil-producing countries, we believe this will aid consumer-based economies/countries if the price stays at a relatively low level for an extended period.

Portfolio strategy — hits and misses

 

 

The Fund underperformed its benchmark and Lipper peer group for the fiscal year ended March 31, 2016, with the last quarter in the year providing the vast majority of the underperformance. Weak stock selection and currency hedges drove underperformance. In particular, security selection in financials, utilities, health care and energy were key contributors to underperformance and offset solid stock selection in materials and industrials. Additionally, the Fund’s overweight allocations to Europe contributed to relative underperformance. In our view, U.S. dividend stocks remained relatively more expensive to comparable international stocks over the course of the year. As such, we purchased European stocks we believed possessed cheaper valuations, higher dividend yields and similar earnings growth. We assumed the U.S. dollar would continue to strengthen relative to European currencies. Top detractors to performance were Abengoa Yield Plc, a U.S. listed yield company with assets disseminated from the

 

66   ANNUAL REPORT   2016  

Table of Contents

 

 

Spanish parent, and Crescent Point Energy, a Canadian oil stock. The Fund no longer holds Abengoa Yield Plc or Crescent Point Energy. Top individual contributors to performance included Marine Harvest ASA, a Norwegian-based salmon fish farmer and Taylor Wimpey plc, a U.K.-based house builder.

During the year, the Fund utilized currency hedges to the U.S. dollar ranging from 10-35% of Fund assets. The Fund’s hedges to the euro, yen and Australian dollar hurt performance as the year progressed.

Positioning

 

 

As the fiscal year progressed, we slightly increased our weighting to more defensive sectors versus the benchmark due to slow global growth concerns in China and volatility in credit markets. The Fund increased its allocation to consumer staples, energy and telecommunication services at the expense of industrials and financials. The Fund also lowered its exposure to Switzerland, Japan and the eurozone, while increasing exposure to the U.S. and the U.K. The Fund’s cash allocation remained relatively stable over the course of year, hovering around 1%. The Fund’s average dividend yield is around 4.3%, which is above the benchmark index.

The Fund’s largest sector overweights include consumer discretionary and telecommunication services where we continue to find companies we believe provide good dividend yield and growth prospects. In our view, our underweight allocations to energy and information technology tend to have high relative valuations and poor fundamentals as the emerging-market growth engine sputters.

As calendar year 2016 progresses, we intend to add to holdings that we believe should sustain a solid dividend in a slow-growth world. In Europe, we expect slow but steady economic growth and are targeting companies with strong global growth prospects. We believe this should lead to steady or slowly growing dividends with earnings. The Fund has maintained its overweight allocation in France as we continue to find large cap, quality firms that pay good dividends and offer recovery or growth potential. In Asia, we eliminated our overweight to Japan, due to our belief that governmental reforms are not being implemented with enough urgency to offset the grinding impact of an aging population. The Fund ended the fiscal year with a 0% allocation to emerging markets, though a portion of its developed market exposure is tied indirectly to emerging-market economies.

Outlook — Opportunities exist, but issues remain

 

 

We think global economic growth will remain slow and face additional headwinds by slower-than-anticipated emerging-market growth. We believe monetary policy is likely to remain aggressive for the foreseeable future, but to a lesser extent in the U.S. We think the Fed will continue to raise interest rates in 2016, which will keep the markets on edge. We continue to look at U.S. dividend-paying companies, as firms in a slower growth world accompanied by lower interest rates may see value in an increased dividend. We, as well as most investors, are concerned how the U.S. election will affect the stock market, as policies of the candidates vary on many issues.

Economic and political issues continue to simmer in Europe, which could result in market fluctuations. However, we believe the European economy is on firmer footing and will likely see steady slow expansion over the next 24 months. We are concerned about the recent terrorist attacks and the effects the large refugee influx will have on European politics and the economy. The constant drag of over- indebted governments in southern Europe and the U.K. should limit any fiscal stimulus to the economy. In our view, the European market has started to reflect this reality. We continue to follow policies stemming from Europe, including stimulation, reforms and regulation measures from foreign governments and the ECB. We believe the U.K. referendum on remaining in the EU will be close and will likely put pressure on the currency as the U.K. is running current account and government deficits.

We continue to target sectors, countries and stocks we believe best reflect our mixed economic outlook. We believe lower energy prices will benefit consumer balance sheets. We believe the odds of a recession are low as there has not been a boom in spending, excluding some property markets around the world. We remain cautious on commodity sensitive areas until we see emerging markets begin to reaccelerate. In our view, the strongest long-term gross domestic product (GDP) growth should still occur in emerging markets and the U.S. due to better demographics. In an effort to capture this growth, we intend to continue investing in U.S. firms or European multinationals having exposure to the U.S. and/or emerging markets.

We believe China is in a hard landing, and its multi-year rebalancing to a more consumer-based economy as well as its anticorruption efforts need to be monitored. In our view, these changes could have lasting impacts throughout the global marketplace in shaping GDP growth, commodity prices and multinational profits based in Europe and the U.S.

As always, we remain focused on stocks with solid dividend yields, and continue to look for companies that we consider to be of above-average quality and well positioned in their industries throughout the world.

Performance shown at NAV does not include the effect of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

International investing involves additional risks including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. The value of the Fund’s investments, as measured in U.S. dollars, may be unfavorably affected by changes in foreign currency exchange rates and exchange control regulations. Focusing on a single geographic region involves increased currency, political, regulatory and other risks. These risks are magnified in emerging markets.

 

  2016   ANNUAL REPORT   67

Table of Contents

MANAGEMENT DISCUSSION

Ivy Global Equity Income Fund

(UNAUDITED)

 

 

 

Dividend-paying stocks may fall out of favor with investors and underperform non-dividend paying stocks and the market as a whole. In addition, dividend-paying companies may not pay dividends in the future; such dividends, if declared, may not remain at current levels or increase over time. The amount of any dividend the company may pay may fluctuate significantly. Dividend-paying stocks can decline in value when interest rates rise; this risk may be greater during the current period of historically low interest rates. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the Fund’s portfolio manager and are current only through the end of the period of the report as stated on the cover. The portfolio manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index (indexes) noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of the Ivy Global Equity Income Fund.

 

68   ANNUAL REPORT   2016  

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Global Equity Income Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      100.0%   

Health Care

      15.5%   

Consumer Staples

      15.3%   

Telecommunication Services

      13.1%   

Industrials

      11.6%   

Financials

      10.4%   

Consumer Discretionary

      10.3%   

Utilities

      8.6%   

Energy

      7.8%   

Materials

      4.6%   

Information Technology

      2.8%   

Cash and Other Assets (Net of Liabilities),
and Cash Equivalents+

      0.0%   

Lipper Rankings

 

 

 

Category: Lipper Global Equity
Income Funds		    Rank      Percentile

1 Year

    130/167      78

3 Year

    53/141      38

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

Country Weightings

 

 

 

Europe

      52.8%   

United Kingdom

      21.9%   

France

      13.1%   

Netherlands

      4.7%   

Switzerland

      3.5%   

Other Europe

      9.6%   

North America

      35.3%   

United States

      33.8%   

Other North America

      1.5%   

Pacific Basin

      8.3%   

Australia

      3.8%   

Other Pacific Basin

      4.5%   

Other

      3.6%   

Israel

      3.6%   

Cash and Other Assets (Net of Liabilities),
and Cash Equivalents+

      0.0%   
 

 

Top 10 Equity Holdings

 

 

 

Company    Country      Sector      Industry

Johnson & Johnson

   

United States

     

Health Care

     

Pharmaceuticals

AT&T, Inc.

   

United States

     

Telecommunication Services

     

Integrated Telecommunication Services

Pfizer, Inc.

   

United States

     

Health Care

     

Pharmaceuticals

Royal Dutch Shell plc, Class A

   

United Kingdom

     

Energy

     

Integrated Oil & Gas

Microsoft Corp.

   

United States

     

Information Technology

     

Systems Software

Marine Harvest ASA

   

Norway

     

Consumer Staples

     

Packaged Foods & Meats

Occidental Petroleum Corp.

   

United States

     

Energy

     

Integrated Oil & Gas

Total S.A.

   

France

     

Energy

     

Integrated Oil & Gas

Orange S.A.

   

France

     

Telecommunication Services

     

Integrated Telecommunication Services

Unilever N.V., Certicaaten Van Aandelen

   

Netherlands

     

Consumer Staples

     

Packaged Foods & Meats

See your advisor or www.ivyfunds.com for more information on the Fund’s most recent published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

  2016   ANNUAL REPORT   69

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Global Equity Income Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class B(4)      Class C      Class I      Class R      Class R6      Class Y  

1-year period ended 3-31-16

      -10.65%         -9.40%         -5.83%         -4.96%         -5.46%         -4.74%         -5.15%   

5-year period ended 3-31-16

      —            —            —            —            —            —            —      

10-year period ended 3-31-16

      —            —            —            —            —            —            —      

Since Inception of Class through 3-31-16(5)

      8.31%         8.62%         9.27%         10.38%         6.43%         -0.53%         10.10%   

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) 6-4-12 for Class A shares, 6-4-12 for Class B shares, 6-4-12 for Class C shares, 6-4-12 for Class I shares, 12-19-12 for Class R shares, 7-31-14 for Class R6 shares and 6-4-12 for Class Y shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

70   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Global Equity Income Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Australia

  

 

Industrials – 0.9%

  

Spotless Group Holdings Ltd.

     2,764      $ 2,670   
   

 

 

  

Materials – 1.7%

  

Amcor Ltd.

     320        3,522   

Pact Group Holdings Ltd.

     403        1,540   
   

 

 

  
      5,062   
   

 

 

  

Telecommunication Services – 1.2%

  

Telstra Corp. Ltd. ADR

     819        3,347   
   

 

 

  
 

Total Australia – 3.8%

  

   $ 11,079   

Canada

  

 

Financials – 1.5%

  

Bank of Montreal

     69        4,213   
   

 

 

  
 

Total Canada – 1.5%

  

   $ 4,213   

France

  

 

Energy – 2.4%

  

Total S.A.

     151        6,878   
   

 

 

  
 

Financials – 1.0%

  

Axa S.A.

     118        2,770   
   

 

 

  
 

Health Care – 1.2%

  

Sanofi-Aventis

     45        3,590   
   

 

 

  
 

Industrials – 3.7%

  

Compagnie de Saint-Gobain

     69        3,041   

Safran

     55        3,844   

Vinci

     52        3,894   
   

 

 

  
      10,779   
   

 

 

  
 

Telecommunication Services – 3.5%

  

Orange S.A.

     377        6,611   

Vivendi Universal

     174        3,653   
   

 

 

  
      10,264   
   

 

 

  
 

Utilities – 1.3%

  

ENGIE

     236        3,666   
   

 

 

  
 

Total France – 13.1%

  

   $ 37,947   

Ireland

  

 

Materials – 0.5%

  

CRH plc

     52        1,455   
   

 

 

  
 

Total Ireland – 0.5%

  

   $ 1,455   

Israel

  

 

Health Care – 2.0%

  

Teva Pharmaceutical Industries Ltd. ADR

     106        5,653   
   

 

 

  
 

Telecommunication Services – 1.6%

  

Bezeq – Israel Telecommunication Corp. Ltd. (The)

     2,080        4,693   
   

 

 

  
 

Total Israel – 3.6%

  

   $ 10,346   

COMMON STOCKS

(Continued)

   Shares     Value  

Italy

  

 

Industrials – 1.6%

  

Atlantia S.p.A.

     161      $ 4,464   
   

 

 

  
 

Utilities – 0.5%

  

Snam S.p.A.

     247        1,546   
   

 

 

  
 

Total Italy – 2.1%

  

   $ 6,010   

Japan

  

 

Consumer Discretionary – 1.6%

  

Bridgestone Corp.

     124        4,616   
   

 

 

  
 

Financials – 0.9%

  

Sumitomo Mitsui Financial Group, Inc.

     83        2,511   
   

 

 

  
 

Total Japan – 2.5%

  

   $ 7,127   

Netherlands

  

 

Consumer Staples – 2.0%

  

Unilever N.V., Certicaaten Van Aandelen

     132        5,930   
   

 

 

  
 

Financials – 1.6%

  

ING Groep N.V., Certicaaten Van Aandelen

     376        4,545   
   

 

 

  
 

Materials – 1.1%

  

Royal DSM Heerlen

     56        3,095   
   

 

 

  
 

Total Netherlands – 4.7%

  

   $ 13,570   

New Zealand

  

 

Telecommunication Services – 1.1%

  

Spark New Zealand Ltd.

     1,271        3,207   
   

 

 

  
 

Total New Zealand – 1.1%

  

   $ 3,207   

Norway

  

 

Consumer Staples – 2.7%

  

Marine Harvest ASA

     514        7,922   
   

 

 

  
 

Total Norway – 2.7%

  

   $ 7,922   

Singapore

  

 

Consumer Discretionary – 0.9%

  

Asian Pay Television Trust

     6,306        2,620   
   

 

 

  
 

Total Singapore – 0.9%

  

   $ 2,620   

Spain

  

 

Utilities – 2.3%

  

Enagas S.A.

     46        1,395   

Iberdrola S.A.

     789        5,263   
   

 

 

  
      6,658   
   

 

 

  
 

Total Spain – 2.3%

  

   $ 6,658   

Sweden

  

 

Industrials – 1.0%

  

SKF AB, Class B

     163        2,939   
   

 

 

  

COMMON STOCKS

(Continued)

   Shares     Value  
 

Telecommunication Services – 1.0%

  

TeliaSonera AB

     562      $ 2,922   
   

 

 

  
 

Total Sweden – 2.0%

  

   $ 5,861   

Switzerland

  

 

Consumer Staples – 1.1%

  

Nestle S.A., Registered Shares

     44        3,269   
   

 

 

  

Financials – 1.0%

  

Zurich Financial Services, Registered Shares

     13        2,909   
   

 

 

  

Health Care – 1.4%

  

Roche Holdings AG, Genusscheine

     16        4,017   
   

 

 

  
 

Total Switzerland – 3.5%

  

   $ 10,195   

United Kingdom

  

 

Consumer Discretionary – 5.4%

  

GKN plc

     719        2,981   

Taylor Wimpey plc

     1,542        4,216   

UBM plc

     588        5,073   

WPP Group plc

     139        3,247   
   

 

 

  
      15,517   
   

 

 

  
 

Consumer Staples – 5.1%

  

Diageo plc

     129        3,477   

Imperial Tobacco Group plc

     103        5,730   

SABMiller plc

     91        5,554   
   

 

 

  
      14,761   
   

 

 

  

Energy – 2.9%

  

Royal Dutch Shell plc, Class A

     346        8,359   
   

 

 

  
 

Financials – 3.4%

  

HSBC Holdings plc

     650        4,051   

Lloyds Banking Group plc

     3,014        2,944   

Prudential plc

     146        2,732   
   

 

 

  
      9,727   
   

 

 

  

Industrials – 1.9%

  

BAE Systems plc

     768        5,612   
   

 

 

  

Telecommunication Services – 1.2%

  

Vodafone Group plc

     1,108        3,519   
   

 

 

  

Utilities – 2.0%

  

National Grid plc

     401        5,691   
   

 

 

  
 

Total United Kingdom – 21.9%

  

   $ 63,186   

United States

  

 

Consumer Discretionary – 2.4%

  

McDonalds Corp.

     29        3,612   

Omnicom Group, Inc.

     39        3,220   
   

 

 

  
      6,832   
   

 

 

  
 

 

  2016   ANNUAL REPORT   71

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Global Equity Income Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS

(Continued)

   Shares     Value  
 

Consumer Staples – 4.4%

  

Altria Group, Inc.

     91      $ 5,695   

Philip Morris International, Inc.

     58        5,702   

Procter & Gamble Co. (The)

     17        1,417   
   

 

 

  
      12,814   
   

 

 

  
 

Energy – 2.5%

  

Occidental Petroleum Corp.

     105        7,185   
   

 

 

  
 

Financials – 1.0%

  

JPMorgan Chase & Co.

     48        2,865   
   

 

 

  
 

Health Care – 10.9%

  

Bristol-Myers Squibb Co.

     44        2,835   

Eli Lilly and Co.

     38        2,751   

Johnson & Johnson

     98        10,552   

Merck & Co., Inc.

     109        5,783   

Pfizer, Inc.

     328        9,711   
   

 

 

  
      31,632   

Industrials – 2.5%

  

Eaton Corp.

     26        1,646   

Lockheed Martin Corp.

     25        5,540   
   

 

 

  
      7,186   
   

 

 

  

COMMON STOCKS

(Continued)

   Shares     Value  
 

Information Technology – 2.8%

  

Microsoft Corp.

     146      $ 8,042   
   

 

 

  
 

Materials – 1.3%

  

International Paper Co.

     88        3,618   
   

 

 

  
 

Telecommunication Services – 3.5%

  

AT&T, Inc.

     258        10,106   
   

 

 

  
 

Utilities – 2.5%

  

American Electric Power Co., Inc.

     43        2,872   

PPL Corp.

     115        4,370   
   

 

 

  
      7,242   
   

 

 

  
 

Total United States – 33.8%

  

   $ 97,522   
 

TOTAL COMMON
STOCKS – 100.0%

   

   $ 288,918   

(Cost: $279,672)

      
SHORT-TERM
SECURITIES		   Principal     Value  
 

Master Note – 0.4%

  

Toyota Motor Credit Corp.

      

0.443%, 4-6-16(A)

   $ 1,293      $ 1,293   
   

 

 

  
 

TOTAL SHORT-TERM
SECURITIES – 0.4%

   

   $ 1,293   

(Cost: $1,293)

      
 

TOTAL INVESTMENT
SECURITIES – 100.4%

   

   $ 290,211   

(Cost: $280,965)

      
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (0.4)%

   

     (1,278 ) 
 

NET ASSETS – 100.0%

  

   $ 288,933   
 

 

Notes to Schedule of Investments

 

(A) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following forward foreign currency contracts were outstanding at March 31, 2016:

 

      Currency to be
Delivered		            Currency to be
Received		      Settlement
Date		      Counterparty    Unrealized
Appreciation		      Unrealized
Depreciation		  

British Pound

      19,275       U.S. Dollar      27,884         4-26-16       Citibank N.A.    $ 198       $ —   

Australian Dollar

      11,730       U.S. Dollar      8,933         4-26-16       State Street Global Markets      —         50   

Euro

      38,453       U.S. Dollar      43,557         4-26-16       State Street Global Markets      —         227   
                 

 

 

  
                  $ 198       $ 277   
                 

 

 

  

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 288,918       $ —       $ —   

Short-Term Securities

     —         1,293         —   

Total

   $ 288,918       $ 1,293       $ —   

Forward Foreign Currency Contracts

   $ —       $ 198       $ —   

Liabilities

        

Forward Foreign Currency Contracts

   $ —       $ 277       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

The following acronym is used throughout this schedule:

ADR = American Depositary Receipts

 

72   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Global Equity Income Fund (in thousands)

MARCH 31, 2016

 

 

 

 

Market Sector Diversification

  

(as a% of net assets)

  

Health Care

      15.5%   

Consumer Staples

      15.3%   

Telecommunication Services

      13.1%   

Industrials

      11.6%   

Financials

      10.4%   

Consumer Discretionary

      10.3%   

Utilities

      8.6%   

Energy

      7.8%   

Materials

      4.6%   

Information Technology

      2.8%   

Other+

      —%   
 

 

+ Includes cash and other assets (net of liabilities), and cash equivalents

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   73

Table of Contents

MANAGEMENT DISCUSSION

Ivy Global Growth Fund

(UNAUDITED)

 

 

 

LOGO

Sarah C. Ross

Below, Sarah C. Ross, CFA, portfolio manager of the Ivy Global Growth Fund, discusses positioning, performance and results for the fiscal year ended March 31, 2016. Ms. Ross has 20 years of industry experience and has managed the Fund since August 2014.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy Global Growth Fund (Class A shares at net asset value)

      –6.12%   

Ivy Global Growth Fund (Class A shares including sales load)

      –11.52%   

Benchmark(s) and/or Lipper Category

         

MSCI World Index

      –3.45%   

(generally reflects the performance of securities markets around the world)

         

Lipper Global Large-Cap Growth Funds Universe Average

      –2.33%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

 

Economic uncertainty dominates markets

 

 

Global equity markets ended lower for the fiscal year ended March 31, 2016, as global gross domestic product (GDP) and corporate earnings growth continued to slow. Incremental monetary policy efforts in Japan and elsewhere yielded minimal results, giving rise to the concern that governments have fewer options at their disposal to affect economic stimulus. In particular, China faced a significant slowdown in economic growth as a result of the Chinese government’s focus on an aggressive anti-corruption campaign. As a result, China’s equity markets underperformed during the fiscal year. Weakness in the region negatively impacted global industrials, high-end luxury and many multinationals with significant Chinese exposure. Europe faced uncertainty as well with the upcoming vote in the U.K. to possibly exit the European Union. Latin American markets were materially negative for the 12-month period, despite a significant rally in the last quarter of the period. Political risks and significant commodity exposures (early in the 12-month period) negatively impacted the region. Most of Asia and Latin America underperformed, including China and Brazil, despite an emerging-market recovery in the last quarter of the fiscal year. Given macroeconomic pressures, we do not think it is surprising that larger, more established U.S. companies outperformed the broader global equity markets.

Global consumer-oriented companies (particularly staples, non-luxury and technology) fared much better than the broader market. Commodities took a significant hit from the slowdown in fixed-asset investment in China. During the fiscal year, energy underperformed (despite a last quarter rally), along with materials, financials and health care. Outperforming sectors included consumer staples, utilities, telecommunications and information technology.

Performance for the Year

 

 

The Fund underperformed its benchmark, the MSCI World Index, for the fiscal year. While sector allocation was a positive, negative stock selection and the negative impact of currency hedges more than offset the positives. Most of the pressure on performance came in the last quarter of the 12-month period when quality growth significantly underperformed the broader market. Stock selection in financials, industrials and information technology detracted from performance. While stock selection in financials hurt performance, an underweight allocation in both the poor-performing financial and energy sectors was a slight contributor.

Outlook

 

 

Despite the backdrop of a weakening global economy, we believe there are opportunities for growth within pockets of the market. We continue to favor the middle-income consumer globally with most of our consumer exposure in the U.S. and China. Unemployment in the U.S. is as low as it has been since the financial crisis, and consumers continue to spend on discretionary items including home improvement. In China, while luxury goods are under intense pressure due to the anti-corruption campaign, demand for household items continues to increase. We believe the loosening of the one child policy could be another boost to incremental household spending. We prefer exposure to consumer areas that have an incremental boost from secular share gains such as the shift to online retailing from bricks and mortar as well as the secular shift in many regions towards travel. We remain underweight in energy and materials. We believe health care can offer sustainable earnings growth in this uncertain environment.

Despite uncertainties in the market, we believe our portfolio of strong global growers with sustainable competitive advantages and unique products that serve large end-markets can continue to drive shareholder value over time.

Performance shown at NAV does not include the effect of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

 

74   ANNUAL REPORT   2016  

Table of Contents

 

 

International investing involves additional risks including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the Fund’s portfolio manager and are current only through the end of the period of the report as stated on the cover. The manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of the Ivy Global Growth Fund’s performance.

 

  2016   ANNUAL REPORT   75

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Global Growth Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      92.6%   

Health Care

      23.5%   

Information Technology

      22.8%   

Consumer Discretionary

      18.4%   

Industrials

      11.6%   

Consumer Staples

      5.4%   

Financials

      5.2%   

Telecommunication Services

      3.1%   

Energy

      2.6%   

Cash and Other Assets (Net of Liabilities),
and Cash Equivalents+

      7.4%   

Lipper Rankings

 

 

 

Category: Lipper Global Large-Cap
Growth Funds		    Rank      Percentile

1 Year

    89/113      79

3 Year

    82/96      85

5 Year

    64/69      92

10 Year

    38/50      75

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

Country Weightings

 

 

 

North America

      57.8%   

United States

      56.4%   

Other North America

      1.4%   

Europe

      22.2%   

Germany

      5.7%   

France

      4.0%   

United Kingdom

      3.7%   

Netherlands

      3.6%   

Other Europe

      5.2%   

Pacific Basin

      9.7%   

China

      8.6%   

Other Pacific Basin

      1.1%   

Other

      2.3%   

South America

      0.6%   

Cash and Other Assets (Net of Liabilities),
and Cash Equivalents+

      7.4%   
 

 

Top 10 Equity Holdings

 

 

 

Company   Country   Sector   Industry

Visa, Inc., Class A

  

United States

  

Information Technology

  

Data Processing & Outsourced Services

Amazon.com, Inc.

  

United States

  

Consumer Discretionary

  

Internet Retail

Alphabet, Inc., Class C

  

United States

  

Information Technology

  

Internet Software & Services

Carnival Corp.

  

United States

  

Consumer Discretionary

  

Hotels, Resorts & Cruise Lines

Anthem, Inc.

  

United States

  

Health Care

  

Managed Health Care

JD.com, Inc. ADR

  

China

  

Consumer Discretionary

  

Internet Retail

Level 3 Communications, Inc.

  

United States

  

Telecommunication Services

  

Alternative Carriers

MasterCard, Inc., Class A

  

United States

  

Information Technology

  

Data Processing & Outsourced Services

Fresenius SE & Co. KGaA

  

Germany

  

Health Care

  

Health Care Services

J.B. Hunt Transport Services, Inc.

  

United States

  

Industrials

  

Trucking

See your advisor or www.ivyfunds.com for more information on the Fund’s most recent published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

76   ANNUAL REPORT   2016  

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Global Growth Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class B(4)      Class C      Class E      Class I      Class R      Class R6      Class Y  

1-year period ended 3-31-16

      -11.52%         -10.74%         -6.79%         -11.27%         -5.73%         -6.32%         -5.61%         -6.00%   

5-year period ended 3-31-16

      3.31%         3.32%         3.69%         3.57%         4.93%         —            —            4.66%   

10-year period ended 3-31-16

      3.22%         2.98%         2.89%         —            —            —            —            3.95%   

Since Inception of Class through 3-31-16(5)

      —            —            —            2.10%         3.01%         5.03%         -1.50%         —      

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) 4-2-07 for Class E shares, 4-2-07 for Class I shares, 12-19-12 for Class R shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

  2016   ANNUAL REPORT   77

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Global Growth Fund (in thousands)

MARCH 31, 2016

 

 

 

 

COMMON STOCKS   Shares     Value  

Belgium

  

 

Consumer Staples – 2.2%

  

InBev N.V.

     90      $ 11,221   
   

 

 

  
 

Total Belgium – 2.2%

  

   $ 11,221   

Brazil

  

 

Information Technology – 0.6%

  

MercadoLibre, Inc.

     26        3,066   
   

 

 

  
 

Total Brazil – 0.6%

  

   $ 3,066   

Canada

  

 

Industrials – 1.4%

  

Canadian Pacific Railway Ltd.

     52        6,941   
   

 

 

  
 

Total Canada – 1.4%

  

   $ 6,941   

China

  

 

Consumer Discretionary – 3.3%

  

JD.com, Inc. ADR (A)

     631        16,717   
   

 

 

  
 

Industrials – 0.4%

  

CAR, Inc. (A)

     1,824        2,139   
   

 

 

  
 

Information Technology – 4.9%

  

Alibaba Group Holding Ltd. ADR (A)

     151        11,929   

Tencent Holdings Ltd.

     608        12,409   
   

 

 

  
      24,338   
   

 

 

  
 

Total China – 8.6%

  

   $ 43,194   

France

  

 

Industrials – 4.0%

  

European Aeronautic Defence and Space Co.

     140        9,307   

Safran

     152        10,647   
   

 

 

  
      19,954   
   

 

 

  
 

Total France – 4.0%

  

   $ 19,954   

Germany

  

 

Consumer Discretionary – 1.9%

  

Continental AG

     42        9,642   
   

 

 

  
 

Health Care – 3.8%

  

Bayer AG

     36        4,198   

Fresenius SE & Co. KGaA

     203        14,829   
   

 

 

  
      19,027   
   

 

 

  
 

Total Germany – 5.7%

  

   $ 28,669   

India

  

 

Consumer Staples – 1.1%

  

ITC Ltd.

     1,168        5,790   
   

 

 

  
 

Total India – 1.1%

  

   $ 5,790   

COMMON STOCKS

(Continued)

   Shares     Value  

Ireland

  

 

Health Care – 1.7%

  

Medtronic plc

     112      $ 8,366   
   

 

 

  
 

Total Ireland – 1.7%

  

   $ 8,366   

Israel

  

 

Health Care – 2.3%

  

Teva Pharmaceutical Industries Ltd. ADR

     220        11,770   
   

 

 

  
 

Total Israel – 2.3%

  

   $ 11,770   

Italy

  

 

Financials – 1.3%

  

Banca Intesa S.p.A.

     2,372        6,569   
   

 

 

  
 

Total Italy – 1.3%

  

   $ 6,569   

Netherlands

  

 

Consumer Discretionary – 1.1%

  

Koninklijke Philips Electronics N.V., Ordinary Shares

     191        5,437   
   

 

 

  
 

Information Technology – 2.5%

  

ASML Holding N.V., NY Registry Shares

     59        5,953   

NXP Semiconductors N.V. (A)

     84        6,830   
   

 

 

  
      12,783   
   

 

 

  
 

Total Netherlands – 3.6%

           $ 18,220   

United Kingdom

  

 

Financials – 1.6%

  

Prudential plc

     435        8,132   
   

 

 

  
 

Health Care – 2.1%

  

Shire plc

     181        10,274   
   

 

 

  
 

Total United Kingdom – 3.7%

  

   $ 18,406   

United States

  

 

Consumer Discretionary – 12.1%

  

Amazon.com, Inc. (A)

     35        20,617   

Carnival Corp.

     369        19,496   

Home Depot, Inc. (The)

     70        9,405   

Limited Brands, Inc.

     76        6,717   

TripAdvisor, Inc. (A)

     68        4,517   
   

 

 

  
      60,752   
   

 

 

  
 

Consumer Staples – 2.1%

  

Coca-Cola Co. (The)

     230        10,655   
   

 

 

  
 

Energy – 2.6%

  

Halliburton Co.

     226        8,056   

Schlumberger Ltd.

     67        4,939   
   

 

 

  
      12,995   
   

 

 

  

COMMON STOCKS

(Continued)

   Shares     Value  
 

Financials – 2.3%

  

JPMorgan Chase & Co.

     66      $ 3,931   

Signature Bank (A)

     58        7,880   
   

 

 

  
      11,811   
   

 

 

  
 

Health Care – 13.6%

  

Acadia Healthcare Co., Inc. (A)

     161        8,845   

Allergan plc (A)

     29        7,904   

Anthem, Inc.

     121        16,821   

Biogen, Inc. (A)

     32        8,305   

Bristol-Myers Squibb Co.

     82        5,225   

Gilead Sciences, Inc.

     91        8,382   

HCA Holdings, Inc. (A)

     165        12,912   
   

 

 

  
      68,394   
   

 

 

  
 

Industrials – 5.8%

  

J.B. Hunt Transport Services, Inc.

     167        14,043   

Kansas City Southern

     64        5,427   

Rockwell Collins, Inc.

     104        9,552   
   

 

 

  
      29,022   
   

 

 

  
 

Information Technology – 14.8%

  

Alphabet, Inc., Class C(A)

     27        20,406   

Cognizant Technology Solutions Corp., Class A(A)

     145        9,089   

Facebook, Inc., Class A(A)

     51        5,779   

MasterCard, Inc., Class A

     157        14,871   

Visa, Inc., Class A

     316        24,194   
   

 

 

  
      74,339   
   

 

 

  
 

Telecommunication Services – 3.1%

  

Level 3 Communications, Inc. (A)

     300        15,830   
   

 

 

  
 

Total United States – 56.4%

  

   $ 283,798   
 

TOTAL COMMON
STOCKS – 92.6%

   

   $ 465,964   

(Cost: $421,914)

      
 
SHORT-TERM
SECURITIES		   Principal         

Commercial Paper (B) – 8.0%

  

Becton Dickinson & Co.

      

0.761%, 4-5-16

   $ 5,000        5,000   

Caterpillar Financial Services Corp. (GTD by Caterpillar, Inc.)

      

0.350%, 4-6-16

     3,000        3,000   

Corporacion Andina de Fomento

      

0.340%, 4-15-16

     3,000        2,999   

General Mills, Inc.

      

0.650%, 4-4-16

     5,000        5,000   

Kroger Co. (The)

      

0.670%, 4-6-16

     5,000        5,000   
 

 

78   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Global Growth Fund (in thousands)

MARCH 31, 2016

 

 

 

SHORT-TERM
SECURITIES

(Continued)

   Principal     Value  

Commercial Paper (B) (Continued)

  

Mondelez International, Inc.

      

0.570%, 4-1-16

   $ 2,049      $ 2,049   

Novartis Finance Corp. (GTD by Novartis AG):

      

0.350%, 4-18-16

     5,000        4,999   

0.410%, 4-4-16

     2,000        2,000   

Novartis Securities Investment Ltd. (GTD by Novartis AG)

      

0.330%, 4-18-16

     6,000        5,999   

United Technologies Corp.

      

0.470%, 4-13-16

     4,000        3,999   
   

 

 

  
      40,045   
   

 

 

  
 

Master Note – 0.5%

  

Toyota Motor Credit Corp.

      

0.443%, 4-6-16 (C)

     2,732        2,732   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 8.5%

   

   $ 42,777   

(Cost: $42,775)

      
          Value  

TOTAL INVESTMENT SECURITIES – 101.1%

   $ 508,741   

(Cost: $464,689)

      
 

LIABILITIES, NET OF
CASH AND OTHER
ASSETS – (1.1)%

     (5,431 ) 
 

NET ASSETS – 100.0%

   $ 503,310   
 

 

Notes to Schedule of Investments

 

(A) No dividends were paid during the preceding 12 months.

 

(B) Rate shown is the yield to maturity at March 31, 2016.

 

(C) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  
       

Assets

        

Investments in Securities

        

Common Stocks

   $ 465,964       $ —       $ —   

Short-Term Securities

     —       $ 42,777         —   

Total

   $ 465,964       $ 42,777       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

The following acronyms are used throughout this schedule:

ADR = American Depositary Receipts

GTD = Guarenteed

 

Market Sector Diversification

 

 

(as a% of net assets)

  

Health Care

      23.5%   

Information Technology

      22.8%   

Consumer Discretionary

      18.4%   

Industrials

      11.6%   

Consumer Staples

      5.4%   

Financials

      5.2%   

Telecommunication Services

      3.1%   

Energy

      2.6%   

Other+

      7.4%   
 

 

+ Includes cash and other assets (net of liabilities), and cash equivalents

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   79

Table of Contents

MANAGEMENT DISCUSSION

Ivy Global Income Allocation Fund

(UNAUDITED)

 

 

 

LOGO

W. Jeffery Surles

Below, W. Jeffery Surles, CFA, Ivy Global Income Allocation Fund manager, discusses positioning, performance and results for the fiscal year ended March 31, 2016. Mr. Surles has managed the Fund since June 2012 and has 14 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy Global Income Allocation Fund (Class A shares at net asset value)

      –5.74%   

Ivy Global Income Allocation Fund (Class A shares including sales load)

      –11.16%   

Benchmark(s) and/or Lipper Category

         

Barclays Multiverse Index

      4.37%   

(generally reflects the performance of fixed-income securities that represent the global bond market)

         

MSCI World High Dividend Yield Index

      0.22%   

(generally reflects the performance of equities with higher-than-average dividend yields that are both sustainable and persistent)

         

60% MSCI World High Dividend Yield / 40% Barclays Multiverse

      2.05%   

(generally reflects the performance of equities with higher-than-average dividend yields that are both sustainable and persistent and fixed-income securities that represent the global bond market)

         

Lipper Flexible Portfolio Funds

      –5.36%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value. Multiple indexes are present because the Fund invests in multiple asset classes.

 

Market Review

 

 

This fiscal year was marked by international equity markets generally underperforming their U.S. counterparts. Much of this came late in the fiscal year when major central banks outside of the U.S. embarked further down the path of extraordinary monetary easing. The Bank of Japan (BOJ) surprised markets by introducing negative interest rates, as the European Central Bank (ECB) took rates further into negative territory and stepped up both its asset purchase program and liquidity provisions. Unlike previous rounds of monetary easing, which usually produced rallies in equity market prices, the additional rounds of stimulus were instead met by skepticism about the overall effectiveness of the monetary policy. Conversely, developed market yield curves have rallied in some cases to unprecedented levels as investors seek safer asset classes in the face of increasing uncertainties. The one exception to this in fixed income markets is credit, especially riskier parts of the credit markets. High-yield credit in particular was characterized by large amounts of volatility and underperformance in December around the Federal Reserve’s (Fed) first interest rate increase in almost ten years.

Fund Performance

 

 

The Fund materially underperformed its blended benchmark during the fiscal year. Both the equity and fixed income portions of the portfolio underperformed their benchmarks, and asset allocation added to underperformance. Our underperformance was particularly acute on the equity side, where returns were materially negative even as the benchmark posted a slightly positive return for the fiscal year. While the fixed income portion also underperformed, it still managed a positive return for the year. While we correctly abandoned our overweight allocation in equities in November in favor of a more neutral asset allocation to the benchmark, our underweight to fixed income resulted in the Fund’s asset allocation slightly detracting from performance during the fiscal year as well.

More specifically with respect to equities, given the income orientation of the Fund, we have long held high-yield-generating securities such as publically traded Real Estate Investment Trusts (“REITs”), yieldco’s and limited liability companies, which differ from traditional equities as part of the equity portfolio. These types of investments usually have stable cash-flowing assets, which are leveraged with debt, allowing them to pay out high cash-flow streams. The Fund had anywhere from 6-10 percent of its assets invested in these types of securities during the fiscal year. Around the time of the Fed’s interest rate increase in December, any asset which had a small amount of equity value sitting on a decent amount of debt, regardless of cash-flow stability, began to materially underperform as credit markets became disjointed.

Additionally, three of our holdings within the category, Terraform Global Inc., Abengoa Yield plc and Fortress Transportation and Infrastructure Investors LLC, had specific issues. The parent companies of both Terraform Global Inc. and Abengoa Yield plc came to the brink of bankruptcy when credit markets seized up. Additionally, Fortress Transportation and Infrastructure Investors LLC owns an underutilized crude oil terminal which comprised roughly 30 percent of its asset base. All three of these entities drastically repriced, causing almost 450bps (4.5 percent) of underperformance within the equity portfolio. The Fund exited its position in Terraform Global Inc. at a loss, while Abengoa Yield plc and Fortress Transportation and Infrastructure Investors LLC remain in the Fund. We lost confidence in Terraform Global Inc.’s management’s independence from its parent company as the parent company struggled to fend off bankruptcy. In contrast, Abengoa Yield plc is successfully separating its management and operations from the parent company and has an alternative energy asset base that we continue to find attractive. Similarly, Fortress Transportation and Infrastructure Investors LLC ‘s crude terminal sits in a strategic location outside of Houston, and is in a position to feed a number of new chemical plants coming on line next year. We continue to believe in the longer-term fundamentals of its asset base, which also include aviation leasing and transportation.

 

80   ANNUAL REPORT   2016  

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While these three assets caused the bulk of the Fund’s underperformance over the fiscal year, we were again hit by the significant divergence in returns between U.S. and international equity markets. Greater yield in international markets has long biased us to an overweight position, which acted as a headwind for the second straight year. In November, as part of our reallocation out of equities and into fixed income, we reduced the international overweight but not enough to avoid it hindering the Fund’s performance. The international overweight allocation constrained performance in the first quarter of 2016 as investors began to question the effectiveness of additional monetary easing by the ECB and BOJ.

The fixed income portion of the portfolio also underperformed its benchmark during the fiscal year. The underperformance is not surprising given the Fund’s natural positioning to being overweight in credit and underweight in Japan relative to its benchmark. As an income fund we are looking for yield, which means our credit exposure is naturally high, and we have never owned a fixed income security in Japan given the low level of yields. That does not mean low-yielding securities cannot provide significant returns, as Japanese government bonds returned almost 12.5 percent during the fiscal year. Japanese government bonds represent 16.4 percent of our fixed income benchmark, the second highest weight behind the United States. Our zero weight fixed income allocation in Japan was by far the largest contributor to underperformance. As mentioned previously, the other detractor was credit, where we are naturally overexposed given our income focus. The overweight allocation of the Fund’s credit holdings detracted from performance, even though our credit holdings held up relatively well compared to the credit portion of the index during the December and January market volatility.

The Fund continued its use of currency forwards during the year to both hedge and mitigate risk within the portfolio. We also used equity derivatives at times to express positive or negative positions on certain stocks as part of our security selection process. In some, but not all cases, the use of equity derivatives was additive to performance. We tend to only use derivative strategies when we believe dislocations in derivatives markets, either through volatility or skew, are significantly in our favor around the positioning we would like to take. Keep in mind that there are risks involved in the use of derivatives, including market, counterparty, liquidity and interconnection risks.

Outlook

 

 

We view the Fed’s decision on whether to continue to normalize monetary policy as the most important factor going forward. The Fed has long stated it will be data dependent with regard to interest rate increases. We believe the Fed will instead be market dependent in respect to raising interest rates. Given the low unemployment rate and inflation that is close to target levels, one could argue the Fed should have raised interest rates multiple times already. Each time the market began pricing Fed interest rate increases, bouts of market volatility caused the Fed to decline to raise interest rates. Finally in December, the Fed increased interest rates and as well signaled the possibility for additional increases in the future; however, the Fed was forced to remove signals of future rate increases after financial markets became extremely volatile following their initial increase. Our belief going forward is that the Fed will be market dependent, only raising interest rates if financial markets allow them to through relatively benign financial conditions. As the prospect of Fed rate hikes seems to foretell volatility, at this point we believe it is unlikely that the Fed will raise interest rates significantly during the year. On the international front, we also continue to believe central banks globally will maintain an aggressive stance and increase monetary stimulus further. We think any additional easing by the BOJ is likely to result in the direct purchase of equity securities as Japan tries to stave off deflation. The ECB is also likely to be preparing additional measures if the programs announced in January do not have the desired impact.

Fund Positioning

 

 

We believe that the market will continue to question whether central banks will be successful in achieving their ultimate goal of higher nominal rates of gross domestic product. As a result, we are now implementing a more conservative asset allocation that is slightly underweight in equities relative to the benchmark. We have also become more focused on higher-quality investments, as the average credit quality of the Fund has been raised from BB- to BB+. In short, we are running closer to benchmark allocations than we ever have during the life of the Fund. This is also reflected in the fact we have little conviction for making big allocation bets in this uncertain macro-environment and would prefer to try to generate performance through individual security selection.

Performance shown at NAV does not include the effect of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

International investing involves additional risks including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets.

Fixed-income securities are subject to interest-rate risk and, as such, the net asset value of the Fund may fall as interest rates rise. Investing in high-income securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the Fund’s portfolio manager and are current only through the end of the period of the report as stated on the cover. The manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

 

  2016   ANNUAL REPORT   81

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MANAGEMENT DISCUSSION

Ivy Global Income Allocation Fund

(UNAUDITED)

 

 

 

The index noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of the Ivy Global Income Allocation Fund’s performanceerformance shown at NAV does not include the effect of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

International investing involves additional risks including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets.

Fixed-income securities are subject to interest-rate risk and, as such, the net asset value of the Fund may fall as interest rates rise. Investing in high-income securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the Fund’s portfolio manager and are current only through the end of the period of the report as stated on the cover. The manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of the Ivy Global Income Allocation Fund’s performance.

 

82   ANNUAL REPORT   2016  

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PORTFOLIO HIGHLIGHTS

Ivy Global Income Allocation Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      57.7%   

Financials

      15.8%   

Consumer Staples

      9.2%   

Industrials

      8.7%   

Consumer Discretionary

      8.2%   

Health Care

      4.5%   

Telecommunication Services

      3.3%   

Energy

      3.1%   

Information Technology

      2.6%   

Utilities

      1.3%   

Materials

      1.0%   

Purchased Options

      0.2%   

Bonds

      39.4%   

Corporate Debt Securities

      30.1%   

Loans

      4.5%   

United States Government and Government Agency Obligations

      3.3%   

Other Government Securities

      1.5%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      2.7%   

Lipper Rankings

 

 

 

Category: Lipper Flexible Portfolio Funds    Rank      Percentile

1 Year

    368/586      63

3 Year

    244/428      57

5 Year

    190/289      66

10 Year

    86/129      67

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

Country Weightings

 

 

 

North America

      43.9%   

United States

      41.0%   

Other North America

      2.9%   

Europe

      39.4%   

United Kingdom

      12.2%   

Spain

      5.8%   

France

      4.2%   

Other Europe

      17.2%   

Pacific Basin

      9.8%   

Australia

      6.3%   

Other Pacific Basin

      3.5%   

South America

      1.9%   

Other

      1.6%   

Bahamas/Caribbean

      0.5%   

Cash and Other Assets (Net of Liabilities), Cash Equivalents+ and Purchased Options

      2.9%   
 

 

Top 10 Equity Holdings

 

 

 

Company    Country    Sector    Industry

Blackstone Mortgage Trust, Inc., Class A

   

United States

   

Financials

   

Mortgage REITs

Sampo plc, A Shares

   

Finland

   

Financials

   

Multi-Line Insurance

ProSiebenSat. 1 Media SE

   

Germany

   

Consumer Discretionary

   

Broadcasting

Philip Morris International, Inc.

   

United States

   

Consumer Staples

   

Tobacco

Ferrovial S.A.

   

Spain

   

Industrials

   

Construction & Engineering

Ares Capital Corp.

   

United States

   

Financials

   

Asset Management & Custody Banks

McDonalds Corp.

   

United States

   

Consumer Discretionary

   

Restaurants

Taylor Wimpey plc

   

United Kingdom

   

Consumer Discretionary

   

Homebuilding

Marine Harvest ASA

   

Norway

   

Consumer Staples

   

Packaged Foods & Meats

Frontier Communications Corp., Convertible Series A, 11.125%

   

United States

   

Telecommunication Services

   

Integrated Telecommunication Services

See your advisor or www.ivyfunds.com for more information on the Fund’s most recent published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

  2016   ANNUAL REPORT   83

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Global Income Allocation Fund

(UNAUDITED)

 

 

 

LOGO

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

Effective June 4, 2012, Ivy International Balanced Fund changed its name to Ivy Global Income Allocation Fund. As a result, the Fund’s benchmark was changed to a blended index composed of 60% MSCI World High Dividend Yield Index and 40% Barclays Multiverse Index. We believe this index is more representative of the types of equity and fixed-income securities in which the Fund invests.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class B(4)      Class C      Class E      Class I      Class R      Class R6      Class Y  

1-year period ended 3-31-16

      -11.16 %       -10.13 %       -6.26 %       -11.14 %       -5.35 %       -5.90 %       -5.21 %       -5.61 % 

5-year period ended 3-31-16

      1.42 %       1.51 %       1.97 %       1.43 %       3.06 %       —         —         2.78 % 

10-year period ended 3-31-16

      3.03 %       2.83 %       2.95 %       —         —         —         —         3.79 % 

Since Inception of Class through 3-31-16(5)

      —         —         —         1.46 %       2.63 %       2.68 %       -2.95 %       —   

 

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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Global Income Allocation Fund

(UNAUDITED)

 

 

 

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) 4-2-07 for Class E shares, 4-2-07 for Class I shares, 12-19-12 for Class R shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

  2016   ANNUAL REPORT   85

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Global Income Allocation Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Australia

  

 

Energy – 1.3%

  

Caltex Australia Ltd.

     350      $ 9,127   
   

 

 

  
 

Financials – 1.6%

  

National Australia Bank Ltd.

     300        6,034   

Westpac Banking Corp.

     261        6,069   
   

 

 

  
      12,103   
   

 

 

  
 

Industrials – 0.5%

  

Spotless Group Holdings Ltd.

     3,930        3,796   
   

 

 

  
 

Materials – 1.0%

  

Amcor Ltd.

     683        7,517   
   

 

 

  
 

Total Australia – 4.4%

  

   $ 32,543   

Belgium

  

 

Consumer Staples – 1.4%

  

Anheuser-Busch InBev S.A. ADR

     83        10,347   
   

 

 

  
 

Total Belgium – 1.4%

  

   $ 10,347   

Canada

  

 

Energy – 1.0%

  

Inter Pipeline Ltd.

     360        7,415   
   

 

 

  
 

Total Canada – 1.0%

  

   $ 7,415   

Denmark

  

 

Financials – 1.1%

  

Danske Bank A.S.

     285        8,051   
   

 

 

  
 

Total Denmark – 1.1%

  

   $ 8,051   

Finland

  

 

Financials – 1.8%

  

Sampo plc, A Shares

     290        13,774   
   

 

 

  
 

Total Finland – 1.8%

  

   $ 13,774   

France

  

 

Financials – 1.0%

  

Axa S.A.

     333        7,842   
   

 

 

  
 

Industrials – 1.0%

  

Compagnie de Saint-Gobain

     163        7,171   
   

 

 

  
 

Telecommunication Services – 0.9%

  

Orange S.A.

     387        6,780   
   

 

 

  
 

Total France – 2.9%

  

   $ 21,793   
COMMON STOCKS
(Continued)		   Shares     Value  

Germany

  

 

Consumer Discretionary – 1.8%

  

ProSiebenSat. 1 Media SE

     260      $ 13,368   
   

 

 

  
 

Industrials – 1.1%

  

Deutsche Post AG

     300        8,336   
   

 

 

  
 

Total Germany – 2.9%

  

   $ 21,704   

Israel

  

 

Health Care – 1.0%

  

Teva Pharmaceutical Industries Ltd. ADR

     136        7,277   
   

 

 

  
 

Total Israel – 1.0%

  

   $ 7,277   

Italy

  

 

Financials – 1.1%

  

Banca Intesa S.p.A.

     3,000        8,309   
   

 

 

  
 

Total Italy – 1.1%

  

     $8,309   

Japan

  

 

Consumer Discretionary – 1.0%

  

Bridgestone Corp.

     200        7,473   
   

 

 

  
 

Total Japan – 1.0%

  

     $7,473   

New Zealand

  

 

Consumer Discretionary – 0.7%

  

SKYCITY Entertainment Group Ltd.

     1,579        5,467   
   

 

 

  
 

Total New Zealand – 0.7%

  

     $5,467   

Norway

  

 

Consumer Staples – 1.5%

  

Marine Harvest ASA

     717        11,055   
   

 

 

  
 

Total Norway – 1.5%

  

   $ 11,055   

Singapore

  

 

Consumer Discretionary – 0.5%

  

Asian Pay Television Trust

     8,571        3,561   
   

 

 

  
 

Telecommunication Services – 0.9%

  

Singapore Telecommunications Ltd.

     2,450        6,944   
   

 

 

  
 

Total Singapore – 1.4%

           $ 10,505   

Spain

  

 

Industrials – 2.7%

  

ACS Actividades de Construccion y Servicios S.A.

     266        7,922   

Ferrovial S.A.

     569        12,236   
   

 

 

  
      20,158   
   

 

 

  
COMMON STOCKS
(Continued)		   Shares     Value  
 

Utilities – 1.3%

  

Abengoa Yield plc

     567      $ 10,087   
   

 

 

  
 

Total Spain – 4.0%

  

   $ 30,245   

Switzerland

  

 

Consumer Staples – 1.0%

  

Nestle S.A., Registered Shares

     100        7,472   
   

 

 

  
 

Total Switzerland – 1.0%

  

   $ 7,472   

United Kingdom

  

 

Consumer Discretionary – 1.5%

  

Taylor Wimpey plc

     4,080        11,152   
   

 

 

  
 

Consumer Staples – 1.3%

  

Imperial Tobacco Group plc

     170        9,432   
   

 

 

  
 

Financials – 2.8%

  

Legal & General Group plc

     2,491        8,414   

St. James’s Place plc

     625        8,245   

Standard Life plc

     926        4,738   
   

 

 

  
      21,397   
   

 

 

  
 

Industrials – 1.2%

  

BAE Systems plc

     1,200        8,773   
   

 

 

  
 

Total United Kingdom – 6.8%

  

   $ 50,754   

United States

  

 

Consumer Discretionary – 2.7%

  

Limited Brands, Inc.

     100        8,781   

McDonalds Corp.

     90        11,311   
   

 

 

  
      20,092   
   

 

 

  
 

Consumer Staples – 4.0%

  

Kraft Foods Group, Inc.

     120        9,428   

Philip Morris International, Inc.

     128        12,535   

Procter & Gamble Co. (The)

     100        8,231   
   

 

 

  
      30,194   
   

 

 

  
 

Energy – 0.8%

  

ONEOK, Inc.

     200        5,972   
   

 

 

  
 

Financials – 4.8%

  

Blackstone Mortgage Trust, Inc., Class A

     535        14,363   

Crown Castle International Corp.

     95        8,217   

Fortress Transportation and Infrastructure Investors LLC

     698        6,949   

Starwood Property Trust, Inc.

     350        6,626   
   

 

 

  
      36,155   
   

 

 

  
 

 

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SCHEDULE OF INVESTMENTS

Ivy Global Income Allocation Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS
(Continued)		   Shares     Value  
 

Health Care – 2.9%

  

Amgen, Inc.

     50      $ 7,496   

Bristol-Myers Squibb Co.

     126        8,080   

Pfizer, Inc.

     220        6,521   
   

 

 

  
      22,097   
   

 

 

  
 

Industrials – 2.2%

  

Lockheed Martin Corp.

     35        7,752   

Rockwell Automation, Inc.

     74        8,418   
   

 

 

  
      16,170   
   

 

 

  
 

Information Technology – 2.6%

  

Paychex, Inc.

     174        9,414   

Texas Instruments, Inc.

     170        9,761   
   

 

 

  
      19,175   
   

 

 

  
 

Total United States – 20.0%

  

   $ 149,855   
 

TOTAL COMMON
STOCKS – 54.0%

   

   $ 404,039   

(Cost: $403,969)

      
 
INVESTMENT FUNDS              

United States – 1.6%

  

Ares Capital Corp.

     815        12,095   
   

 

 

  
 

TOTAL INVESTMENT
FUNDS – 1.6%

   

   $ 12,095   

(Cost: $14,153)

      
 
PREFERRED STOCKS              

Israel

  

 

Health Care – 0.6%

  

Teva Pharmaceutical Industries Ltd., Convertible, 7.000% (A)

     5        4,420   
   

 

 

  
 

Total Israel – 0.6%

  

   $ 4,420   

United States

  

 

Telecommunication Services – 1.5%

  

Frontier Communications Corp., Convertible Series A, 11.125%

     104        10,817   
   

 

 

  
 

Total United States – 1.5%

  

   $ 10,817   
 

TOTAL PREFERRED
STOCKS – 2.1%

   

   $ 15,237   

(Cost: $14,865)

      
PURCHASED
OPTIONS		   Number of
Contracts
(Unrounded)		     Value  

Compagnie Financiere Richemont S.A.,

      

Put CHF58.00, Expires 6-17-16, OTC (Ctrpty: Barclays Bank plc) (B)

     2,500      $ 326   

ONEOK, Inc.,

      

Call $30.00, Expires 7-15-16, OTC (Ctrpty: UBS AG)

     3,600        900   
   

 

 

  
 

TOTAL PURCHASED
OPTIONS – 0.2%

   

   $ 1,226   

(Cost: $979)

      
 
CORPORATE DEBT
SECURITIES		   Principal         

Argentina

  

 

Consumer Discretionary – 0.2%

  

Arcos Dorados Holdings, Inc.

      

10.250%, 7-13-16 (B)(C)

     BRL5,000        1,293   
   

 

 

  
 

Industrials – 0.7%

  

Aeropuertos Argentina 2000 S.A.:

      

10.750%, 12-1-20 (C)

   $ 665        707   

10.750%, 12-1-20

     4,323        4,595   
   

 

 

  
      5,302   
   

 

 

  
 

Total Argentina – 0.9%

  

   $ 6,595   

Australia

  

 

Materials – 1.5%

  

BlueScope Steel (Finance) Ltd. and BlueScope Steel Finance (USA) LLC

      

7.125%, 5-1-18 (C)

     3,000        3,015   

FMG Resources Pty Ltd.:

      

8.250%, 11-1-19 (C)

     4,000        3,820   

6.875%, 4-1-22 (C)

     5,750        4,600   
   

 

 

  
      11,435   
   

 

 

  
 

Total Australia – 1.5%

  

   $ 11,435   

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Barbados

  

 

Consumer Discretionary – 0.1%

  

Columbus International, Inc.

      

7.375%, 3-30-21 (C)

   $ 1,000      $ 1,065   
   

 

 

  
 

Total Barbados – 0.1%

  

   $ 1,065   

Brazil

  

 

Consumer Staples – 0.3%

  

AmBev International Finance Co. Ltd.

      

9.500%, 7-24-17 (B)

     BRL7,500        1,962   
   

 

 

  
 

Total Brazil – 0.3%

  

   $ 1,962   

Canada

  

 

Information Technology – 0.8%

  

Kronos Acquisition Holdings, Inc.

      

9.000%, 8-15-23 (C)

   $ 6,250        5,719   
   

 

 

  
 

Total Canada – 0.8%

  

   $ 5,719   

Cayman Islands

  

 

Telecommunication Services – 0.4%

  

Sable International Finance Ltd.

      

6.875%, 8-1-22 (C)

     3,080        3,080   
   

 

 

  
 

Total Cayman Islands – 0.4%

  

   $ 3,080   

Chile

  

 

Industrials – 0.2%

  

LATAM Airlines Group S.A.

      

7.250%, 6-9-20 (C)

     2,000        1,840   
   

 

 

  
 

Total Chile – 0.2%

  

   $ 1,840   

Columbia

  

 

Energy – 0.2%

  

Empresas Publicas de Medellin E.S.P.

      

8.375%, 2-1-21 (B)

     COP3,888,000        1,234   
   

 

 

  
 

Total Columbia – 0.2%

  

   $ 1,234   
 

 

  2016   ANNUAL REPORT   87

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Global Income Allocation Fund (in thousands)

MARCH 31, 2016

 

 

 

CORPORATE DEBT
SECURITIES
(Continued)		   Principal     Value  

France

  

 

Financials – 1.3%

  

Societe Generale S.A.:

      

8.250%, 11-29-49

   $ 7,000      $ 7,053   

7.875%, 12-31-49 (C)

     3,000        2,797   
   

 

 

  
      9,850   
   

 

 

  
 

Total France – 1.3%

  

   $ 9,850   

Guernsey

  

 

Financials – 0.9%

  

Credit Suisse Group (Guernsey) I Ltd.

      

7.875%, 2-24-41

     6,843        6,932   
   

 

 

  
 

Total Guernsey – 0.9%

  

   $ 6,932   

Hong Kong

  

 

Utilities – 0.3%

  

China Resources Power Holdings Co. Ltd.

      

7.250%, 5-9-49 (D)

     2,000        2,002   
   

 

 

  
 

Total Hong Kong – 0.3%

  

   $ 2,002   

Ireland

  

 

Energy – 0.0%

  

Novatek Finance Ltd.

      

7.750%, 2-21-17 (B)(C)

     RUB25,000        362   
   

 

 

  
 

Financials – 0.7%

  

Aquarius + Investments plc (GTD by Swiss Reinsurance Co. Ltd.)

      

6.375%, 9-1-24

   $ 5,000        5,217   
   

 

 

  
 

Industrials – 0.1%

  

Russian Railways via RZD Capital Ltd.

      

8.300%, 4-2-19 (B)

     RUB50,000        703   
   

 

 

  
 

Total Ireland – 0.8%

  

   $ 6,282   

Italy

  

 

Financials – 1.1%

  

Intesa Sanpaolo S.p.A.:

      

6.500%, 2-24-21 (C)

   $ 5,000        5,704   

7.700%, 12-29-49 (C)

     3,000        2,756   
   

 

 

  
      8,460   
   

 

 

  
 

Total Italy – 1.1%

  

   $ 8,460   
CORPORATE DEBT
SECURITIES
(Continued)		   Principal     Value  

Jersey

  

 

Financials – 0.7%

  

UBS Group Funding Ltd.

      

4.125%,
4-15-26 (C)

   $ 5,000      $ 4,999   
   

 

 

  
 

Total Jersey – 0.7%

  

   $ 4,999   

Luxembourg

  

 

Consumer Discretionary – 1.2%

  

Altice S.A.

      

7.625%, 2-15-25 (C)

     9,188        8,798   
   

 

 

  
 

Information Technology – 0.8%

  

BC Luxco 1 S.A.

      

7.375%, 1-29-20 (C)

     7,000        6,457   
   

 

 

  
 

Total Luxembourg – 2.0%

  

   $ 15,255   

Mexico

  

 

Materials – 0.2%

  

CEMEX S.A.B. de C.V.

      

9.500%, 6-15-18 (C)

     1,500        1,588   
   

 

 

  
 

Telecommunication Services – 0.2%

  

America Movil S.A.B. de C.V.

      

6.450%,
12-5-22 (B)

     MXN22,000        1,213   
   

 

 

  
 

Total Mexico – 0.4%

  

   $ 2,801   

Netherlands

  

 

Materials – 0.5%

  

Constellium N.V.

      

8.000%,
1-15-23 (C)

   $ 4,253        3,525   
   

 

 

  
 

Telecommunication Services – 0.1%

  

VimpleCom Holdings B.V.

      

9.000%,
2-13-18 (B)(C)

     RUB50,000        717   
   

 

 

  
 

Total Netherlands – 0.6%

  

   $ 4,242   

Norway

  

 

Energy – 0.3%

  

Det norske oljeselskap ASA

      

10.250%,
5-27-22 (C)

   $ 2,600        2,392   
   

 

 

  
 

Total Norway – 0.3%

  

   $ 2,392   

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Singapore

  

 

Consumer Staples – 0.0%

  

Olam International Ltd.

      

6.000%,
8-10-18 (B)

     SGD250      $ 194   
   

 

 

  
 

Total Singapore – 0.0%

  

   $ 194   

Spain

  

 

Financials – 1.2%

  

Banco Bilbao Vizcaya Argentaria S.A.

      

9.000%, 5-29-49

   $ 8,800        9,042   
   

 

 

  
 

Industrials – 0.6%

  

ACI Airport Sudamerica S.A.

      

6.875%,
11-29-32 (C)

     5,000        4,137   
   

 

 

  
 

Total Spain – 1.8%

  

   $ 13,179   

United Kingdom

  

 

Consumer Discretionary – 0.7%

  

British Sky Broadcasting Group plc

      

9.500%,
11-15-18 (C)

     4,130        4,871   
   

 

 

  
 

Financials – 4.7%

  

Barclays plc

      

8.250%, 12-29-49

     11,085        11,062   

Lloyds Banking Group plc

      

7.500%, 4-30-49

     6,000        5,939   

Royal Bank of Scotland Group plc (The):

      

7.640%, 3-29-49

     11,000        10,698   

8.000%, 12-29-49

     2,000        1,907   

7.500%, 12-29-49

     6,000        5,580   
   

 

 

  
      35,186   
   

 

 

  
 

Total United Kingdom – 5.4%

  

   $ 40,057   

United States

  

 

Consumer Discretionary – 1.0%

  

B-Corp Merger Sub, Inc.

      

8.250%, 6-1-19

     6,000        4,680   

General Motors Co.

      

6.600%, 4-1-36

     2,500        2,752   
   

 

 

  
      7,432   
   

 

 

  
 

Energy – 2.1%

  

Brand Energy & Infrastructure Services

      

8.500%, 12-1-21 (C)

     3,000        2,820   

HollyFrontier Corp.

      

5.875%, 4-1-26

     5,000        4,979   

Laredo Petroleum, Inc.

      

7.375%, 5-1-22

     3,500        3,032   

PBF Holding Co. LLC and PBF Finance Corp.

      

7.000%,
11-15-23 (C)

     5,000        4,744   
   

 

 

  
      15,575   
   

 

 

  
 

 

88   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Global Income Allocation Fund (in thousands)

MARCH 31, 2016

 

 

 

CORPORATE DEBT
SECURITIES
(Continued)		   Principal     Value  

Financials – 5.3%

  

Bank of America Corp.:

      

6.250%, 9-29-49

   $ 3,000      $ 2,940   

8.000%, 12-29-49

     6,000        5,872   

BGC Partners, Inc.

      

5.375%, 12-9-19

     6,000        6,305   

JPMorgan Chase & Co.:

      

7.900%, 4-29-49

     3,000        3,000   

6.125%, 12-29-49

     5,000        5,119   

New Cotai LLC and New Cotai Capital Corp.

      

10.625%,
5-1-19 (C)(E)

     5,266        3,738   

UBS Preferred Funding Trust V

      

6.243%, 5-29-49

     2,000        2,000   

Wells Fargo & Co.

      

7.980%, 3-29-49

     10,534        10,902   
   

 

 

  
      39,876   
   

 

 

  
 

Industrials – 1.1%

  

HD Supply, Inc.

      

11.500%, 7-15-20

     5,000        5,547   

TRAC Intermodal LLC and TRAC Intermodal Corp.

      

11.000%, 8-15-19

     262        280   

TransDigm Group, Inc.

      

7.500%, 7-15-21

     2,270        2,378   
   

 

 

  
      8,205   
   

 

 

  
 

Telecommunication Services – 0.6%

  

Sprint Corp.

      

7.625%, 2-15-25

     6,000        4,455   
   

 

 

  
 

Total United States – 10.1%

  

   $ 75,543   
 

TOTAL CORPORATE DEBT SECURITIES – 30.1%

   

   $ 225,118   

(Cost: $240,180)

  

    
 
OTHER
GOVERNMENT
SECURITIES (F)		              

Argentina – 0.3%

  

Province of Buenos Aires

      

9.125%,
3-16-24 (C)

     2,000        2,056   
   

 

 

  
 

Australia – 0.4%

  

New South Wales Treasury Corp.

      

5.500%,
3-1-17 (B)

     AUD4,000        3,162   
   

 

 

  
OTHER GOVERNMENT
SECURITIES (F)
(Continued)		   Principal     Value  

Canada – 0.7%

  

City of Toronto

      

3.500%,
12-6-21 (B)

     CAD2,000      $ 1,679   

Province of Ontario

      

4.400%,
6-2-19 (B)

     2,000        1,697   

Regional Municipality of York

      

4.000%,
6-30-21 (B)

     2,000        1,716   
   

 

 

  
      5,092   
   

 

 

  
 

Malaysia – 0.1%

  

Malaysia Government Bond

      

3.314%,
10-31-17 (B)

     MYR3,000        775   
   

 

 

  
 

TOTAL OTHER GOVERNMENT SECURITIES – 1.5%

   

   $ 11,085   

(Cost: $13,491)

      
 
LOANS (D)              

United States

  

 

Consumer Staples – 0.5%

  

Focus Brands, Inc.,

      

10.250%, 8-21-18

   $ 1,000        994   

GOBP Holdings, Inc.

      

9.250%, 10-21-22

     2,906        2,688   
   

 

 

  
      3,682   
   

 

 

  
 

Energy – 1.6%

  

Callon Petroleum Co.

      

8.500%, 10-8-21

     12,107        11,623   

Empresas ICA S.A.

      

7.595%, 6-20-17

     2,825        706   
   

 

 

  
      12,329   
   

 

 

  
 

Financials – 0.6%

  

WP Mustang Holdings LLC

      

8.500%, 5-29-22

     5,000        4,916   
   

 

 

  
 

Industrials – 0.3%

  

Hampton Rubber Co.
& SEI Holding Corp.

      

9.000%, 3-27-22

     3,333        2,000   
   

 

 

  
 

Information Technology – 1.4%

  

Active Network, Inc.
(The)

      

9.500%, 11-15-21

     3,000        2,580   

Misys plc and Magic
Newco LLC

      

12.000%, 6-12-19

     7,500        7,692   
   

 

 

  
      10,272   
   

 

 

  

LOANS (D)

(Continued)

   Principal     Value  

Materials – 0.1%

  

EP Minerals LLC

      

8.500%, 8-20-21

   $ 781      $ 703   
   

 

 

  
 

Total United States – 4.5%

  

   $ 33,902   
 

TOTAL LOANS – 4.5%

  

   $ 33,902   

(Cost: $38,770)

  

    
 
UNITED STATES
GOVERNMENT
OBLIGATIONS		              

United States – 3.3%

  

U.S. Treasury Bonds:

      

8.000%, 11-15-21

     6,000        8,167   

7.250%, 8-15-22

     5,000        6,767   

7.125%, 2-15-23

     5,000        6,838   

6.125%, 11-15-27

     2,000        2,884   
   

 

 

  
      24,656   
   

 

 

  
 

TOTAL UNITED STATES
GOVERNMENT
OBLIGATIONS – 3.3%

    

   $ 24,656   

(Cost: $24,007)

  

    
 
SHORT-TERM
SECURITIES		              

Commercial Paper (G) – 2.6%

  

Danaher Corp.

      

0.450%, 4-6-16

     4,000        4,000   

Essilor International S.A.

      

0.430%, 4-4-16

     3,000        3,000   

John Deere Financial
Ltd. (GTD by John
Deere Capital Corp.)

      

0.360%, 4-19-16

     8,000        7,998   

Mondelez
International, Inc.

      

0.570%, 4-1-16

     1,980        1,980   

St. Jude Medical, Inc.

      

0.480%, 4-19-16

     3,000        2,999   
   

 

 

  
      19,977   
   

 

 

  

Master Note – 0.2%

  

Toyota Motor Credit Corp.

      

0.443%,
4-6-16 (H)

     1,198        1,198   
   

 

 

  
 

TOTAL SHORT-TERM
SECURITIES – 2.8%

   

   $ 21,175   

(Cost: $21,175)

  

    
 

TOTAL INVESTMENT
SECURITIES – 100.1%

   

   $ 748,533   

(Cost: $771,589)

  

    
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (0.1)%

   

     (709 ) 
 

NET ASSETS – 100.0%

  

   $ 747,824   
 

 

  2016   ANNUAL REPORT   89

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Global Income Allocation Fund (in thousands)

MARCH 31, 2016

 

 

 

Notes to Schedule of Investments

 

(A) No dividends were paid during the preceding 12 months.

 

(B) Principal amounts or exercise prices are denominated in the indicated foreign currency, where applicable (AUD—Australian Dollar, BRL—Brazilian Real, CAD—Canadian Dollar, CHF—Swiss Franc, COP—Columbian Peso, MXN—Mexican Peso, MYR—Malaysian Ringgit, RUB—Russian Ruble and SGD—Singapore Dollar).

 

(C) Securities were 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 March 31, 2016 the total value of these securities amounted to $87,600 or 11.7% of net assets.

 

(D) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016.

 

(E) Payment-in-kind bonds.

 

(F) Other Government Securities may include emerging markets sovereign, quasi-sovereign, corporate and supranational agency and organization debt securities.

 

(G) Rate shown is the yield to maturity at March 31, 2016.

 

(H) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following forward foreign currency contracts were outstanding at March 31, 2016:

 

      Currency to be
Delivered		            Currency to be
Received		      Settlement
Date		      Counterparty    Unrealized
Appreciation		      Unrealized
Depreciation		       

British Pound

      14,900       U.S. Dollar      21,567         4-26-16       UBS AG    $ 166       $ —     

Euro

      40,700       U.S. Dollar      46,090         4-26-16       UBS AG      —         254     
                 

 

 

                  $ 166       $ 254     
                 

 

 

The following written options were outstanding at March 31, 2016 (contracts and exercise prices unrounded):

 

Underlying Security    Counterparty, if OTC    Type    Number of
Contracts		      Expiration Month      Exercise Price    Premium
Received		      Value       

Compagnie Financiere Richemont S.A.

    Barclays Bank plc    Put      2,500         June 2016       CHF50.00    $ 79       $ (84 )   

ONEOK, Inc.

    UBS AG    Put      2,400         July 2016       $20.00      444         (102 )   
                 

 

 

                  $ 523       $ (186 )   
                 

 

 

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 404,039       $ —       $ —   

Investment Funds

     12,095         —         —   

Preferred Stocks

     15,237         —         —   

Purchased Options

     —         1,226         —   

Corporate Debt Securities

     —         225,118         —   

Other Government Securities

     —         11,085         —   

Loans

     —         32,493         1,409   

United States Government Obligations

     —         24,656         —   

Short-Term Securities

     —         21,175         —   

Total

   $ 431,371       $ 315,753       $ 1,409   

Forward Foreign Currency Contracts

   $ —       $ 166       $ —   

Liabilities

        

Forward Foreign Currency Contracts

   $ —       $ 254       $ —   

Written Options

   $ —       $ 186       $ —   

During the year ended March 31, 2016, securities totaling $5,000 were transferred from Level 3 to Level 2 due to increased availability of observable market data due to increased market activity or information for these securities. Transfers out of Level 3 represent the values as of the beginning of the reporting period. There were no transfers between Level 1 and 2 during the year.

The following acronyms are used throughout this schedule:

ADR = American Depositary Receipts

GTD = Guaranteed

OTC = Over the Counter

REIT = Real Estate Investment Trust

 

90   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Global Income Allocation Fund (in thousands)

MARCH 31, 2016

 

 

 

Market Sector Diversification

 

 

 

(as a% of net assets)

  

Financials

      32.3%   

Industrials

      11.7%   

Consumer Discretionary

      11.4%   

Consumer Staples

      10.0%   

Energy

      7.3%   

Information Technology

      5.6%   

Telecommunication Services

      4.6%   

Health Care

      4.5%   

United States Government and Government Agency Obligations

      3.3%   

Materials

      3.3%   

Utilities

      1.6%   

Other Government Securities

      1.5%   

Other+

      2.9%   
 

 

+ Includes cash and other assets (net of liabilities), cash equivalents and purchased options

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   91

Table of Contents

MANAGEMENT DISCUSSION

Ivy High Income Fund

(UNAUDITED)

 

 

 

LOGO

Chad A. Gunther

Below, Chad Gunther, portfolio manager of Ivy High Income Fund, discusses positioning, performance and results for the fiscal year ended March 31, 2016. Mr. Gunther was appointed portfolio manager of the Fund on July 9, 2014, and has 18 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 months ended March 31, 2016

         

Ivy High Income Fund (Class A shares at net asset value)

      –7.75%   

Ivy High Income Fund (Class A shares with sales charge)

      –13.02%   

Benchmark(s) and/or Lipper Category

         

Bank of America Merrill Lynch High Yield Index

      –3.99%   

(reflects the performance of securities generally representing the high-yield sector of the bond market)

         

Lipper High Yield Funds Universe Average

      –4.01%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable investment fees and expenses, while index returns do not include any such fees. The performance discussion below is at net asset value.

 

Market volatility

 

 

Concerns over slowing global growth; continued weakness in commodity prices; the first U.S. Federal Reserve (Fed) interest rate hike in almost a decade; substantial outflows in the asset class; a risk-off mentality in the investor base and concerns over liquidity after the shuttering of a distressed-debt focused fund all contributed to a significant widening in spreads and yields during the fiscal year ended March 31, 2016. Spreads on the Bank of America Merrill Lynch High Yield Index saw a widening of 223 basis points from March 31, 2015 to March 31, 2016, ending the fiscal year at a 705 basis point spread. This lowered the index yield to 8.36% for the fiscal year-end, compared to 6.28% on March 31, 2015. Flows for the high-yield asset class were unfavorable, with $20.7 billion exiting the space. Of the $20.7 billion, only a small portion consisted of passively managed accounts, with outflows totaling approximately $100 million.

Investment performance

 

 

The Fund underperformed its benchmark and Lipper universe average for the fiscal year ending March 31, 2016. Underperformance relative to the benchmark was primarily attributable to the Fund’s approximate 26% allocation to senior loans. Senior loans are not included in the benchmark and had a -9.45% return for the fiscal year. Additionally, poor credit selection in the retail and services sectors detracted from Fund performance.

While not enough to offset the negative performance from the categories mentioned above, our underweight allocation to the energy sector (approximate 8.25% underweight) positively impacted Fund performance during the fiscal year. Pressure on oil prices during the fiscal year negatively impacted the high-yield credit markets.

While the Fund used derivatives during the reporting period, they had minimal impact on the performance of the Fund.

Outlook

 

 

Recent economic data is pointing to continued slowing in manufacturing activity. There are also few signs of inflation, and companies continue to struggle to exhibit top-line growth. Finally, instability in China continues to weigh on the markets. Given this environment, we think the Fed could have a hard time making the case for any additional increases throughout 2016.

Given all of these uncertainties, we believe it is prudent to maintain a higher cash balance going forward as well as to maintain a more balanced portfolio in regards to liquidity and risk.

Our goal of finding businesses that offer the best risk-adjusted return characteristics will continue as it is our belief that bottom-up fundamental credit analysis should produce better relative performance in both up and down credit cycles.

The Fund’s performance noted above is at net asset value (NAV), and does not include the effect of any applicable sales charges. If reflected, the sales charge would reduce the performance noted. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

Fixed-income securities are subject to interest rate risk and, as such, the Fund’s net asset value may fall as interest rates rise. Investing in high-income securities may carry a greater risk of non-payment of interest or principal than higher-rated bonds. In addition to the risks typically associated with fixed-income securities, loan participations in which the fund may invest carry other risks including the risk of

 

92   ANNUAL REPORT   2016  

Table of Contents

 

 

insolvency of the lending bank or other intermediary. Loan participations may be unsecured or not fully collateralized, may be subject to restrictions on resale and sometimes trade infrequently on the secondary market. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the portfolio manager and are current only through the end of the period of the report as stated on the cover. The manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of the Ivy High Income Fund’s performance.

 

  2016   ANNUAL REPORT   93

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy High Income Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      1.6%   

Telecommunication Services

      1.2%   

Financials

      0.4%   

Consumer Discretionary

      0.0%   

Warrants

      0.0%   

Bonds

      88.2%   

Corporate Debt Securities

      65.7%   

Loans

      22.5%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      10.2%   

Lipper Rankings

 

 

 

Category: Lipper High Yield Funds    Rank      Percentile

1 Year

    606/660      92

3 Year

    405/541      75

5 Year

    104/438      24

10 Year

    12/290      5

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

Quality Weightings

 

 

 

Investment Grade

      0.9%   

BBB

      0.9%   

Non-Investment Grade

      87.3%   

BB

      12.8%   

B

      27.6%   

CCC

      42.3%   

Below CCC

      1.2%   

Non-rated

      3.4%   

Cash and Other Assets (Net of Liabilities), Cash Equivalents+ and Equities

      11.8%   

Our preference is to always use ratings obtained from Standard & Poor’s. For securities not rated by Standard & Poor’s, ratings are obtained from Moody’s. We do not evaluate these ratings, but simply assign them to the appropriate credit quality category as determined by the rating agency.

 

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

94   ANNUAL REPORT   2016  

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy High Income Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)   Class A(3)     Class B(4)     Class C     Class E     Class I     Class R     Class R6     Class Y  

1-year period ended 3-31-16

     -13.02%        -11.84%        -8.40%        -13.26%        -7.52%        -8.07%        -7.36%        -7.76%   

5-year period ended 3-31-16

     3.44%        3.76%        3.96%        3.07%        4.95%        —           —           4.70%   

10-year period ended 3-31-16

     6.39%        6.26%        6.24%        —           —           —           —           7.09%   

Since Inception of Class through 3-31-16(5)

     —           —           —           5.49%        6.97%        1.29%        -4.41%        —      

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) 4-2-07 for Class E shares, 4-2-07 for Class I shares, 12-19-12 for Class R shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

  2016   ANNUAL REPORT   95

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy High Income Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Consumer Discretionary

  

 

Casinos & Gaming – 0.0%

  

New Cotai Participation Corp., Class B (A)

     —*      $ 699   
   

 

 

  
 

Housewares & Specialties – 0.0%

  

Provo Craft & Novelty, Inc. (A)(B)

     6,090        —*   
   

 

 

  
 

Total Consumer
Discretionary – 0.0%

   

     699   

Financials

  

 

Specialized Finance – 0.4%

  

Maritime Finance Co. Ltd.(A)(B)(C)

     1,750        16,887   
   

 

 

  
 

Total Financials – 0.4%

  

     16,887   
 

TOTAL COMMON STOCKS – 0.4%

  

   $ 17,586   

(Cost: $30,821)

      
 
PREFERRED STOCKS              

Telecommunication Services

  

 

Integrated Telecommunication
Services – 1.2%

   

Frontier Communications Corp., Convertible Series A, 11.125%

     548        57,229   
   

 

 

  
 

Total Telecommunication
Services – 1.2%

   

     57,229   
 

TOTAL PREFERRED
STOCKS – 1.2%

   

   $ 57,229   

(Cost: $55,092)

      
 
WARRANTS              

Agricultural Products – 0.0%

  

ASG Consolidated LLC, expires 5-15-18 (D)

     13        19   
   

 

 

  

Apparel Retail – 0.0%

  

St. John Knits International, Inc. (D)

     48        512   
   

 

 

  
 

TOTAL WARRANTS – 0.0%

  

   $ 531   

(Cost: $798)

      
 
CORPORATE DEBT
SECURITIES		   Principal         

Consumer Discretionary

  

 

Advertising – 0.8%

  

Acosta, Inc.,

      

7.750%, 10-1-22 (E)

   $ 22,646        21,004   

Lamar Media Corp.,

      

5.375%, 1-15-24

     6,757        7,046   

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Advertising (Continued)

  

Outfront Media Capital LLC and Outfront Media Capital Corp.:

      

5.250%, 2-15-22

   $ 2,900      $ 2,973   

5.625%, 2-15-24

     8,212        8,551   
   

 

 

  
      39,574   
   

 

 

  
 

Apparel Retail – 2.0%

  

Bon-Ton Stores, Inc. (The),

      

8.000%, 6-15-21

     44,412        18,986   

Hot Topic, Inc.,

      

9.250%, 6-15-21 (E)

     42,321        42,427   

HT Intermediate Holdings Corp.,

      

12.000%,
5-15-19 (E)(F)

     12,946        11,781   

Neiman Marcus Group Ltd., Inc.,

      

8.000%, 10-15-21 (E)

     20,368        17,516   

Nine West Holdings, Inc.,

      

8.250%, 3-15-19 (E)

     18,148        4,991   
   

 

 

  
      95,701   
   

 

 

  
 

Automotive Retail – 0.5%

  

Group 1 Automotive, Inc.,

      

5.000%, 6-1-22

     3,436        3,402   

Sonic Automotive, Inc.,

      

5.000%, 5-15-23

     22,233        21,899   
   

 

 

  
      25,301   
   

 

 

  
 

Broadcasting – 1.8%

  

AMC Networks, Inc.,

      

5.000%, 4-1-24

     1,811        1,818   

Clear Channel Communications, Inc.,

      

10.000%, 1-15-18

     12,274        3,928   

Clear Channel Outdoor Holdings, Inc.,

      

6.500%, 11-15-22

     47,658        46,879   

Clear Channel Worldwide Holdings, Inc., Series A,

      

7.625%, 3-15-20

     3,032        2,592   

Clear Channel Worldwide Holdings, Inc., Series B,

      

7.625%, 3-15-20

     10,252        9,406   

Cumulus Media, Inc.,

      

7.750%, 5-1-19

     33,969        12,908   

iHeartCommunications, Inc. (GTD by iHeartMedia Capital I LLC),

      

10.625%, 3-15-23

     9,924        6,872   
   

 

 

  
      84,403   
   

 

 

  
 

Cable & Satellite – 6.6%

  

Altice Financing S.A.,

      

6.625%, 2-15-23 (E)

     6,992        7,009   

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Cable & Satellite (Continued)

  

Altice S.A.:

      

7.250%,
5-15-22 (E)(G)

   EUR 3,821      $ 4,297   

7.750%,
5-15-22 (E)

   $ 68,474        67,384   

6.250%,
2-15-25 (E)(G)

   EUR 3,496        3,576   

7.625%,
2-15-25 (E)

   $ 14,356        13,746   

Cablevision Systems Corp.,

      

5.875%, 9-15-22

     20,100        16,934   

Columbus International, Inc.,

      

7.375%,
3-30-21 (E)

     5,116        5,448   

DISH DBS Corp.:

      

6.750%, 6-1-21

     17,085        17,640   

5.875%, 7-15-22

     10,630        10,072   

5.000%, 3-15-23

     5,265        4,686   

5.875%, 11-15-24

     3,054        2,798   

Neptune Finco Corp.:

      

10.125%,
1-15-23 (E)

     21,285        22,775   

6.625%,
10-15-25 (E)

     6,478        7,004   

10.875%,
10-15-25 (E)

     16,255        17,759   

Sirius XM Radio, Inc.,

      

4.625%, 5-15-23 (E)

     33,613        33,235   

VTR Finance B.V.,

      

6.875%,
1-15-24 (E)

     47,584        46,647   

Wave Holdco LLC and Wave Holdco Corp.,

      

8.250%,
7-15-19 (E)(F)

     9,480        9,243   

WaveDivision Escrow LLC and WaveDivision Escrow Corp.,

      

8.125%,
9-1-20 (E)

     22,439        22,158   
   

 

 

  
      312,411   
   

 

 

  
 

Casinos & Gaming – 1.5%

  

Boyd Gaming Corp.,

      

6.375%,
4-1-26 (E)

     2,417        2,508   

Gateway Casinos & Entertainment Ltd.,

      

8.500%,
11-26-20 (E)(G)

   CAD  22,446        16,246   

MCE Finance Ltd.,

      

5.000%,
2-15-21 (E)

   $ 6,299        5,999   

Studio City Finance Ltd.,

      

8.500%,
12-1-20 (E)

     8,000        8,020   
 

 

96   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy High Income Fund (in thousands)

MARCH 31, 2016

 

 

 

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Casinos & Gaming (Continued)

  

Wynn Macau Ltd.,

      

5.250%,
10-15-21 (E)

   $ 40,272      $ 37,956   
   

 

 

  
      70,729   
   

 

 

  
 

Distributors – 1.3%

  

Pinnacle Operating Corp.,

      

9.000%,
11-15-20 (E)

     71,371        61,557   
   

 

 

  
 

Education Services – 2.7%

  

Laureate Education, Inc.,

      

10.000%,
9-1-19 (E)(H)

     173,631        127,619   
   

 

 

  
 

Leisure Facilities – 0.3%

  

Palace Entertainment
Holdings LLC,

      

8.875%, 4-15-17 (E)

     15,302        14,843   
   

 

 

  
 

Movies & Entertainment – 1.3%

  

AMC Entertainment, Inc.,

      

5.750%, 6-15-25

     3,098        3,168   

Cinemark USA, Inc.:
5.125%,12-15-22

     1,258        1,288   

4.875%, 6-1-23

     22,239        22,427   

WMG Acquisition Corp.,

      

6.750%, 4-15-22 (E)

     36,900        36,531   
   

 

 

  
      63,414   
   

 

 

  
 

Publishing – 0.1%

  

MDC Partners, Inc.,

      

6.500%, 5-1-24 (E)

     4,230        4,320   
   

 

 

  
 

Specialized Consumer Services – 2.1%

  

B-Corp Merger Sub, Inc.,

      

8.250%, 6-1-19

     86,366        67,365   

Carlson Travel Holdings,

      

7.500%,
8-15-19 (E)(F)

     17,224        16,191   

Nielsen Finance,

      

5.500%, 10-1-21 (E)

     3,151        3,277   

Nielsen Finance LLC and Nielsen Finance Co.,

      

5.000%, 4-15-22 (E)

     15,039        15,415   
   

 

 

  
      102,248   
   

 

 

  
 

Specialty Stores – 1.7%

  

Jo-Ann Stores Holdings, Inc.,

      

9.750%, 10-15-19 (E)(F)

     91,450        73,160   

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Specialty Stores (Continued)

  

Jo-Ann Stores, Inc.,

      

8.125%,
3-15-19 (E)

   $ 9,283      $ 8,540   
   

 

 

  
      81,700   
   

 

 

  
 

Total Consumer
Discretionary – 22.7%

   

     1,083,820   

Consumer Staples

  

 

Food Distributors – 1.0%

  

7.875%,
10-1-21 (E)

     55,643        46,879   
   

 

 

  
 

Packaged Foods & Meats – 1.5%

  

Bumble Bee Foods LLC,

      

9.625%, 3-15-18 (E)(F)

     18,982        18,697   

JBS Investments GmbH (GTD by JBS S.A. and JBS Hungary Holdings Kft.),

      

7.750%, 10-28-20 (E)

     2,300        2,277   

JBS USA LLC and JBS USA Finance, Inc.:

      

7.250%, 6-1-21 (E)

     2,418        2,408   

5.875%, 7-15-24 (E)

     28,772        25,967   

5.750%, 6-15-25 (E)

     13,407        11,731   

Post Holdings, Inc.:

      

7.750%, 3-15-24 (E)

     4,786        5,253   

8.000%, 7-15-25 (E)

     4,410        4,928   
   

 

 

  
      71,261   
   

 

 

  
 

Total Consumer Staples – 2.5%

  

     118,140   

Energy

  

 

Coal & Consumable Fuels – 0.5%

  

Foresight Energy LLC and Foresight Energy Finance Corp.,

      

7.875%, 8-15-21 (E)(I)

     36,063        24,883   
   

 

 

  
 

Oil & Gas Drilling – 0.9%

  

Globe Luxembourg SCA,

      

9.625%, 5-1-18 (E)(H)

     8,625        6,533   

KCA DEUTAG UK Finance plc,

      

7.250%,
5-15-21 (E)

     20,636        12,898   

Offshore Drilling Holding S.A.,

      

8.375%,
9-20-20 (E)(H)

     42,138        20,121   

Offshore Group Investment Ltd.,

      

0.000%, 11-1-19

    14,866        —   

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Oil & Gas Drilling (Continued)

  

Offshore Group Investment Ltd., Units,

      

1.726%,
12-31-30 (M)

   $ 27      $ 2,987   
   

 

 

  
      42,539   
   

 

 

  
 

Oil & Gas Equipment & Services – 0.3%

  

Brand Energy & Infrastructure Services,

      

8.500%, 12-1-21 (E)

     15,871        14,919   
   

 

 

  
 

Oil & Gas Exploration & Production – 2.3%

  

Bellatrix Exploration Ltd.,

      

8.500%, 5-15-20 (E)

     20,556        10,329   

California Resources Corp.:

      

8.000%,
12-15-22 (E)

     17,804        6,855   

6.000%,11-15-24

     10,034        2,258   

Chesapeake Energy Corp.:

      

6.500%, 8-15-17

     17,742        11,887   

7.250%,12-15-18

     1,334        727   

Clayton Williams Energy, Inc.,

      

7.750%, 4-1-19

     45,917        22,958   

Crownrock L.P.,

      

7.750%, 2-15-23 (E)

     6,941        6,715   

EnCana Corp.,

      

6.500%, 8-15-34

     7,113        6,034   

Endeavor Energy Resources L.P.:

      

7.000%, 8-15-21 (E)

     19,368        18,109   

8.125%, 9-15-23 (E)

     6,829        6,488   

Gulfport Energy Corp.,

      

6.625%, 5-1-23

     2,064        1,920   

Laredo Petroleum, Inc.,

      

7.375%, 5-1-22

     10,535        9,126   

Midstates Petroleum Co., Inc. and Midstates Petroleum Co. LLC,

      

10.000%, 6-1-20

     15,053        5,607   
   

 

 

  
      109,013   
   

 

 

  
 

Oil & Gas Refining & Marketing – 1.3%

  

PBF Holding Co. LLC and PBF Finance Corp.,

      

7.000%,
11-15-23 (E)

     17,612        16,709   

Seven Generations Energy Ltd.:

      

8.250%, 5-15-20 (E)

     14,207        14,243   

6.750%, 5-1-23 (E)

     30,327        28,735   
   

 

 

  
      59,687   
   

 

 

  
 

Total Energy – 5.3%

  

     251,041   

Financials

  

 

Consumer Finance – 1.2%

  

Creditcorp,

      

12.000%,
7-15-18 (E)

     40,520        21,476   

Quicken Loans, Inc.,

      

5.750%, 5-1-25 (E)

     23,889        23,172   
 

 

  2016   ANNUAL REPORT   97

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy High Income Fund (in thousands)

MARCH 31, 2016

 

 

 

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Consumer Finance (Continued)

  

Speedy Cash Intermediate Holdings Corp.,

      

10.750%,
5-15-18 (E)

   $ 8,232      $ 4,939   

Speedy Group Holdings Corp.,

      

12.000%,
11-15-17 (E)

     14,715        5,886   
   

 

 

  
      55,473   
   

 

 

  

Diversified Capital Markets – 1.1%

  

Patriot Merger Corp.,

      

9.000%, 7-15-21 (E)

     56,736        54,467   
   

 

 

  
 

Industrial REITs – 0.2%

  

Aircastle Ltd.:

      

5.500%, 2-15-22

     4,223        4,405   

5.000%, 4-1-23

     6,553        6,586   
   

 

 

  
      10,991   
   

 

 

  
 

Investment Banking & Brokerage – 0.3%

  

GFI Group, Inc.,

      

8.375%, 7-19-18 (H)

     11,120        11,787   
   

 

 

  
 

Other Diversified Financial Services – 2.9%

  

AAF Holdings LLC and AAF Finance Co.,

      

12.000%, 7-1-19 (E)(F)

     22,405        19,492   

Balboa Merger Sub, Inc.,

      

11.375%,
12-1-21 (E)

     22,692        19,855   

Greektown Holdings LLC
and Greektown Mothership Corp.,

      

8.875%, 3-15-19 (E)

     25,225        25,856   

New Cotai LLC and New Cotai Capital Corp.,

      

10.625%, 5-1-19 (E)(F)

     99,472        70,625   
   

 

 

  
      135,828   
   

 

 

  
 

Property & Casualty Insurance – 1.2%

  

Hub International Ltd.,

      

7.875%, 10-1-21 (E)

     4,004        3,944   

Onex USI Acquisition Corp.,

      

7.750%, 1-15-21 (E)

     51,892        51,892   
   

 

 

  
      55,836   
   

 

 

  

Real Estate Development – 0.3%

  

Hub Holdings LLC and Hub Holdings Finance, Inc.,

      

8.125%, 7-15-19 (E)(F)

     17,764        16,432   
   

 

 

  
 

Specialized Finance – 1.7%

  

Flexi-Van Leasing, Inc.,

      

7.875%, 8-15-18 (E)

     25,687        25,430   

TMX Finance LLC and TitleMax Finance Corp.,

      

8.500%, 9-15-18 (E)

     71,555        57,244   
   

 

 

  
      82,674   
   

 

 

  

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Thrifts & Mortgage Finance – 0.6%

  

Provident Funding Associates L.P. and PFG
Finance Corp.,

      

6.750%, 6-15-21 (E)

   $  31,010      $ 29,382   
   

 

 

  
 

Total Financials – 9.5%

             452,870   

Health Care

  

 

Health Care Facilities – 1.4%

  

Centene Escrow Corp.:

      

5.625%, 2-15-21 (E)

     4,279        4,461   

6.125%, 2-15-24 (E)

     3,056        3,216   

Greatbatch Ltd.,

      

9.125%, 11-1-23 (E)

     22,946        22,745   

HCA, Inc.,

      

5.250%, 6-15-26

     4,228        4,334   

Surgery Center Holdings, Inc.,

      

8.875%, 4-15-21 (E)

     31,340        31,340   
   

 

 

  
      66,096   
   

 

 

  
 

Health Care Services – 0.6%

  

Truven Health Analytics, Inc.,

      

10.625%, 6-1-20

     25,475        27,169   
   

 

 

  
 

Health Care Supplies – 0.5%

  

Ortho-Clinical Diagnostics,

      

6.625%, 5-15-22 (E)

     19,028        14,366   

Universal Hospital Services, Inc.,

      

7.625%, 8-15-20

     13,052        12,073   
   

 

 

  
      26,439   
   

 

 

  

Pharmaceuticals – 2.0%

  

Concordia Healthcare Corp.,

      

9.500%, 10-21-22 (E)

     56,106        54,142   

JLL/Delta Dutch Pledgeco B.V.,

      

8.750%, 5-1-20 (E)(F)

     30,539        29,776   

VPII Escrow Corp.,

      

7.500%, 7-15-21 (E)

     6,802        5,667   

VRX Escrow Corp.,

      

5.375%, 3-15-20 (E)

     8,875        7,233   
   

 

 

  
      96,818   
   

 

 

  
 

Total Health Care – 4.5%

  

     216,522   

Industrials

  

 

Aerospace & Defense – 1.9%

  

KLX, Inc.,

      

5.875%, 12-1-22 (E)

     3,838        3,800   

Silver II Borrower SCA and Silver II U.S. Holdings,

      

7.750%, 12-15-20 (E)

     63,807        50,408   

TransDigm, Inc.,

      

6.500%, 7-15-24

     34,813        34,541   
   

 

 

  
      88,749   
   

 

 

  

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Air Freight & Logistics – 0.4%

  

TRAC Intermodal LLC and TRAC Intermodal Corp.,

      

11.000%, 8-15-19

   $  10,478      $ 11,211   

XPO Logistics, Inc.,

      

6.500%, 6-15-22 (E)

     6,036        5,863   
   

 

 

  
      17,074   
   

 

 

  
 

Building Products – 0.7%

  

Ply Gem Industries, Inc.,

      

6.500%, 2-1-22

     25,046        24,716   

Summit Materials LLC and Summit Materials Finance Corp.:

      

8.500%, 4-15-22 (E)

     2,416        2,494   

6.125%, 7-15-23

     5,046        4,794   
   

 

 

  
      32,004   
   

 

 

  
 

Diversified Support Services – 0.2%

  

Algeco Scotsman Global Finance plc:

      

8.500%, 10-15-18 (E)

     11,656        8,975   

10.750%, 10-15-19 (E)

     6,007        1,787   
   

 

 

  
      10,762   
   

 

 

  
 

Environmental & Facilities Services – 0.5%

  

GFL Environmental, Inc.,

      

7.875%, 4-1-20 (E)

     25,429        25,238   
   

 

 

  
 

Railroads – 0.9%

  

Florida East Coast Holdings Corp. and Florida East Coast Industries LLC:

      

6.750%, 5-1-19 (E)

     33,639        33,639   

9.750%, 5-1-20 (E)

     15,221        10,959   
   

 

 

  
      44,598   
   

 

 

  
 

Trading Companies & Distributors – 0.2%

  

HD Supply, Inc.,

      

5.750%, 4-15-24 (E)

     10,544        10,834   
   

 

 

  
 

Total Industrials – 4.8%

  

     229,259   

Information Technology

  

 

Application Software – 1.6%

  

Ensemble S Merger Sub, Inc.,

      

9.000%, 9-30-23 (E)

     12,030        11,789   

Infor Software Parent LLC and Infor Software Parent, Inc.,

      

7.125%, 5-1-21 (E)(F)

     23,196        17,339   

Kronos Acquisition Holdings, Inc.,

      

9.000%, 8-15-23 (E)

     51,450        47,077   
   

 

 

  
      76,205   
   

 

 

  
 

Communications Equipment – 0.2%

  

West Corp.,

      

5.375%, 7-15-22 (E)

     10,909        10,007   
   

 

 

  
 

 

98   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy High Income Fund (in thousands)

MARCH 31, 2016

 

 

 

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Data Processing & Outsourced
Services – 1.6%

   

Alliance Data Systems Corp.,

      

5.375%, 8-1-22 (E)

   $  29,711      $ 27,854   

Italics Merger Sub, Inc.,

      

7.125%, 7-15-23 (E)

     50,783        49,006   
   

 

 

  
      76,860   
   

 

 

  
 

Electronic Manufacturing Services – 0.2%

  

KEMET Corp.,

      

10.500%, 5-1-18

     14,981        10,974   
   

 

 

  
 

IT Consulting & Other Services – 1.0%

  

NCR Escrow Corp.:

      

5.875%, 12-15-21

     22,601        23,110   

6.375%, 12-15-23

     22,549        23,225   
   

 

 

  
      46,335   
   

 

 

  
 

Semiconductors – 0.6%

  

Micron Technology, Inc.:

      

5.875%, 2-15-22

     29,790        25,768   

5.500%, 2-1-25

     1,943        1,575   
   

 

 

  
      27,343   
   

 

 

  
 

Technology Hardware, Storage &
Peripherals – 0.1%

   

Western Digital Corp.:

      

7.375%, 4-1-23 (E)

     3,009        3,069   

10.500%, 4-1-24 (E)

     3,009        3,011   
   

 

 

  
      6,080   
   

 

 

  
 

Total Information
Technology – 5.3%

   

     253,804   

Materials

  

 

Aluminum – 1.6%

  

Constellium N.V.:

      

8.000%,
1-15-23 (E)

   $ 34,437      $ 28,540   

5.750%,
5-15-24 (E)

     16,523        11,855   

Wise Metals Group LLC,

      

8.750%,
12-15-18 (E)

     23,189        20,406   

Wise Metals Intermediate Holdings,

      

9.750%,
6-15-19 (E)(F)

     39,976        18,189   
   

 

 

  
      78,990   
   

 

 

  
 

Construction Materials – 0.9%

  

Hillman Group, Inc. (The),

      

6.375%,
7-15-22 (E)

     51,844        43,290   
   

 

 

  
 

Diversified Chemicals – 0.1%

  

PSPC Escrow II Corp.,

      

10.375%,
5-1-21 (E)

     3,928        3,800   
   

 

 

  

Diversified Metals & Mining – 1.6%

  

Artsonig Pty Ltd.,

      

11.500%,
4-1-19 (E)(F)

     43,953        4,395   

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Diversified Metals & Mining (Continued)

  

Crystal Merger Sub, Inc.,

      

7.625%,
10-15-21 (E)

   $ 7,359      $ 4,305   

FMG Resources Pty Ltd.:

      

8.250%,
11-1-19 (E)

     40,001        38,201   

9.750%,
3-1-22 (E)

     3,438        3,430   

6.875%,
4-1-22 (E)

     28,227        22,582   

Lundin Mining Corp.:

      

7.500%,
11-1-20 (E)

     1,178        1,132   

7.875%,
11-1-22 (E)

     3,980        3,781   
   

 

 

  
      77,826   
   

 

 

  
 

Metal & Glass Containers – 1.6%

  

Ardagh Finance Holdings,

      

8.625%, 6-15-19 (E)(F)

     18,662        18,008   

Ardagh Packaging Finance plc and Ardagh Holdings USA, Inc.,

      

6.000%,
6-30-21 (E)

     3,229        3,068   

BlueScope Steel (Finance) Ltd. and BlueScope Steel Finance (USA) LLC,

      

7.125%, 5-1-18 (E)

     30,837        30,991   

Consolidated Container Co. LLC and Consolidated Container Capital, Inc.,

      

10.125%, 7-15-20 (E)

     18,752        15,377   

Signode Industrial Group,

      

6.375%, 5-1-22 (E)

     11,052        10,044   
   

 

 

  
      77,488   
   

 

 

  
 

Paper Packaging – 0.4%

  

Beverage Packaging Holdings II Issuer, Inc. and Beverage Packaging Holdings (Luxembourg) II S.A.,

      

6.000%, 6-15-17 (E)

     9,988        9,907   

Exopack Holdings S.A.,

      

7.875%, 11-1-19 (E)

     8,310        7,437   
   

 

 

  
      17,344   
   

 

 

  
 

Total Materials – 6.2%

  

     298,738   

Telecommunication Services

  

 

Alternative Carriers – 0.2%

  

Consolidated Communications Finance II Co.,

      

6.500%, 10-1-22

     9,598        8,374   
   

 

 

  

CORPORATE DEBT
SECURITIES

(Continued)

   Principal     Value  

Integrated Telecommunication
Services – 2.9%

   

BCP (Singapore) VI Cayman Financing Co. Ltd.,

      

8.000%,
4-15-21 (E)

   $ 5,694      $ 3,772   

Frontier Communications Corp.:

      

8.875%,
9-15-20 (E)

     22,650        23,641   

6.250%, 9-15-21

     15,908        14,705   

10.500%, 9-15-22 (E)

     8,332        8,540   

7.125%, 1-15-23

     2,412        2,135   

6.875%, 1-15-25

     8,428        7,117   

11.000%, 9-15-25 (E)

     14,998        15,073   

GCI, Inc.,

      

6.875%, 4-15-25

     26,986        27,526   

Sprint Corp.:

      

7.250%, 9-15-21

     43,872        33,507   

7.875%, 9-15-23

     1,141        870   
   

 

 

  
      136,886   
   

 

 

  
 

Wireless Telecommunication Service – 1.8%

  

Sable International Finance Ltd.,

      

6.875%, 8-1-22 (E)

     26,720        26,720   

Sprint Nextel Corp.:

      

6.000%, 12-1-16

     6,128        6,090   

9.125%, 3-1-17

     3,022        3,075   

8.375%, 8-15-17

     10,308        10,192   

9.000%,
11-15-18 (E)

     3,686        3,861   

7.000%, 8-15-20

     3,022        2,402   

T-Mobile USA, Inc.:

      

6.731%, 4-28-22

     5,891        6,155   

6.000%, 4-15-24

     12,050        12,201   

6.500%, 1-15-26

     16,374        17,008   
   

 

 

  
      87,704   
   

 

 

  
 

Total Telecommunication Services – 4.9%

   

     232,964   
 

TOTAL CORPORATE DEBT SECURITIES – 65.7%

   

   $ 3,137,158   

(Cost: $3,660,041)

      
 
LOANS (H)              

Consumer Discretionary

  

 

Advertising – 0.3%

  

Advantage Sales & Marketing, Inc.,

      

7.500%,
7-25-22

     18,474        16,603   
   

 

 

  
 

Apparel Retail – 2.3%

  

Talbots, Inc. (The):

      

5.500%, 3-19-20

     21,636        20,158   

9.500%, 3-19-21

     60,086        55,930   
 

 

  2016   ANNUAL REPORT   99

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy High Income Fund (in thousands)

MARCH 31, 2016

 

 

 

LOANS (H)

(Continued)

   Principal     Value  

Apparel Retail (Continued)

  

True Religion Apparel, Inc.:

      

5.875%,
7-30-19

   $ 57,007      $ 25,082   

5.875%,
7-30-19

     19,933        8,771   
   

 

 

  
      109,941   
   

 

 

  
 

Auto Parts & Equipment – 0.5%

  

Direct ChassisLink, Inc.,

      

8.250%,
11-12-19

     23,350        22,106   
   

 

 

  
 

Casinos & Gaming – 0.2%

  

Gateway Casinos & Entertainment Ltd.:

      

5.250%,
11-26-19 (G)

     CAD14,644        11,247   
   

 

 

  
 

General Merchandise Stores – 1.2%

  

BJ’s Wholesale Club, Inc.,

      

8.500%, 3-31-20

   $ 34,836        31,995   

Orchard Acquisition Co. LLC,

      

7.000%, 2-8-19

     63,765        26,143   
   

 

 

  
      58,138   
   

 

 

  
 

Housewares & Specialties – 0.3%

  

KIK Custom Products, Inc.,

      

6.000%, 8-26-22

     13,345        12,839   

Provo Craft & Novelty, Inc.,

      

10.000%,
9-20-17 (F)

     461        —   
   

 

 

  
      12,839   
   

 

 

  

Movies & Entertainment – 0.5%

  

Formula One Holdings Ltd. and Delta Two S.a.r.l.,

      

7.750%, 7-29-22

     23,439        21,461   
   

 

 

  
 

Specialized Consumer Services – 0.1%

  

Wand Intermediate I L.P.,

  

8.250%, 9-17-22

     4,719        4,247   
   

 

 

  
 

Total Consumer
Discretionary – 5.4%

   

     256,611   

Consumer Staples

  

 

Food Distributors – 0.1%

  

Performance Food Group, Inc.:

      

6.000%, 11-14-19

     884        884   

7.500%, 11-14-19

     3,767        3,767   
   

 

 

  
      4,651   
   

 

 

  

LOANS (H)

(Continued)

   Principal     Value  

Food Retail – 0.3%

  

Focus Brands, Inc.,

      

10.250%, 8-21-18

   $  15,399      $  15,303   
   

 

 

  
 

Hypermarkets & Super Centers – 0.3%

  

GOBP Holdings, Inc.,

      

9.250%, 10-21-22

     15,658        14,484   
   

 

 

  
 

Packaged Foods & Meats – 0.4%

  

Shearer’s Foods LLC,

      

7.750%, 6-30-22

     18,980        17,461   
   

 

 

  
 

Total Consumer Staples – 1.1%

  

     51,899   

Energy

  

 

Coal & Consumable Fuels – 0.2%

  

Westmoreland Coal Co.,

      

7.500%, 12-16-20

     20,259        11,987   
   

 

 

  
 

Oil & Gas Drilling – 0.5%

  

KCA Deutag Alpha Ltd.,

      

6.250%, 5-16-20

     33,556        22,595   
   

 

 

  
 

Oil & Gas Exploration & Production – 0.0%

  

Sabine Oil & Gas LLC,

      

11.750%,
12-31-18 (I)

     7,527        188   
   

 

 

  
 

Oil & Gas Storage & Transportation – 1.2%

  

Bowie Resources Holdings LLC:

      

6.750%, 8-12-20

     39,685        35,319   

11.750%, 2-16-21

     26,759        22,210   
   

 

 

  
      57,529   
   

 

 

  
 

Total Energy – 1.9%

  

     92,299   

Financials

  

 

Consumer Finance – 0.2%

  

TransFirst, Inc.,

      

10.500%, 11-12-22

     11,395        11,388   
   

 

 

  
 

Total Financials – 0.2%

  

     11,388   

Health Care

  

 

Life Sciences Tools & Services – 0.7%

  

Atrium Innovations, Inc.,

      

7.750%, 8-10-21

     40,260        32,409   
   

 

 

  
 

Total Health Care – 0.7%

  

     32,409   

Industrials

  

 

Building Products – 1.5%

  

C.H.I. Overhead Doors, Inc.,

      

8.750%, 7-31-23

     11,909        11,076   

GYP Holdings III Corp.,

      

7.750%, 4-1-22

     50,245        44,090   

Hampton Rubber Co. & SEI Holding Corp.,

      

9.000%, 3-27-22

     23,667        14,200   
   

 

 

  
      69,366   
   

 

 

  
 

Construction & Engineering – 0.3%

  

Tensar International Corp.:

      

5.750%, 7-10-21

     6,297        5,101   

LOANS (H)

(Continued)

   Principal     Value  

Construction & Engineering (Continued)

  

9.500%, 7-10-22

   $ 15,197      $ 9,422   
   

 

 

  
      14,523   
   

 

 

  
 

Industrial Conglomerates – 0.1%

  

Crosby Worldwide Ltd.,

      

7.000%, 11-22-21

     10,976        6,439   
   

 

 

  
 

Industrial Machinery – 0.9%

  

Dynacast International LLC,

      

9.500%, 1-30-23

     48,836        44,929   
   

 

 

  
 

Research & Consulting Services – 0.4%

  

Larchmont Resources LLC,

      

9.750%, 8-7-19

     40,606        17,867   
   

 

 

  
 

Total Industrials – 3.2%

  

     153,124   

Information Technology

  

 

Application Software – 4.5%

  

Applied Systems, Inc.,

      

7.500%, 1-23-22

     34,872        32,823   

Aptean Holdings, Inc.,

      

5.250%, 2-27-20

     7,929        7,705   

Misys plc and Magic Newco LLC,

      

12.000%, 6-12-19

     156,027        160,026   

TIBCO Software, Inc.:

      

0.000%, 12-4-20 (J)

     6,075        5,446   

6.500%, 12-4-20

     13,483        12,087   
   

 

 

  
      218,087   
   

 

 

  
 

Internet Software & Services – 1.3%

  

TravelCLICK, Inc. & TCH-2 Holdings LLC:

      

5.500%, 5-12-21

     27,990        26,591   

8.750%, 11-12-21

     39,154        34,455   
   

 

 

  
      61,046   
   

 

 

  
 

IT Consulting & Other Services – 1.8%

  

Active Network, Inc. (The):

      

5.500%, 11-15-20

     20,103        19,048   

9.500%, 11-15-21

     40,964        35,229   

Triple Point Group Holdings, Inc.:

      

5.250%, 7-13-20

     27,472        19,620   

9.250%, 7-13-21

     24,243        11,152   
   

 

 

  
      85,049   
   

 

 

  
 

Total Information
Technology – 7.6%

   

     364,182   

Materials

  

 

Diversified Metals & Mining – 0.4%

  

EP Minerals LLC,

      

8.500%, 8-20-21

     12,375        11,138   

FMG Resources Pty Ltd,

      

0.000%, 6-30-19 (J)

     8,454        7,120   

FMG Resources Pty Ltd.,

      

4.250%, 6-30-19

     2,992        2,520   
   

 

 

  
      20,778   
   

 

 

  
 

Paper Packaging – 0.9%

  

FPC Holdings, Inc.,

      

9.250%, 5-27-20

     32,147        20,574   
 

 

100   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy High Income Fund (in thousands)

MARCH 31, 2016

 

 

 

LOANS (H)

(Continued)

   Principal     Value  

Paper Packaging (Continued)

  

Ranpak (Rack Merger),

      

8.250%, 10-1-22

   $  22,856      $ 19,428   
   

 

 

  
      40,002   
   

 

 

  
 

Specialty Chemicals – 1.1%

  

Chemstralia Ltd.,

      

7.250%, 2-26-22

     43,031        41,740   

Chromaflo Technologies Corp.,

      

8.250%, 6-2-20

     11,000        8,250   

MacDermid, Inc.,

      

0.000%,
6-7-20 (J)

     1,801        1,737   
   

 

 

  
      51,727   
   

 

 

  
 

Total Materials – 2.4%

  

     112,507   
 

TOTAL LOANS – 22.5%

  

   $ 1,074,390   

(Cost: $1,311,298)

      
 
SHORT-TERM
SECURITIES		              

Commercial Paper (K) – 8.2%

  

Baxter International, Inc.:

      

0.710%, 4-1-16

     8,000        8,000   

0.730%, 4-4-16

     21,800        21,799   

0.720%, 4-5-16

     5,000        5,000   

0.460%, 4-11-16

     7,000        6,999   

Becton Dickinson & Co.:

  

    

0.490%, 4-20-16

     10,000        9,997   

0.500%, 5-3-16

     5,711        5,708   

SHORT-TERM

SECURITIES

(Continued)

   Principal     Value  

Commercial Paper (K) (Continued)

  

Bemis Co., Inc.:

      

0.760%, 4-6-16

   $  10,000      $ 9,999   

0.760%, 4-7-16

     15,275        15,274   

0.460%, 4-12-16

     20,000        19,997   

0.500%, 4-26-16

     5,000        4,998   

Campbell Soup Co.:

      

0.440%, 4-19-16

     6,000        5,999   

0.460%, 4-26-16

     10,000        9,997   

Clorox Co. (The):

      

0.460%, 4-11-16

     4,000        3,999   

0.480%, 4-18-16

     7,000        6,998   

0.500%, 4-26-16

     5,300        5,298   

DTE Gas Co.:

      

0.480%, 4-1-16

     1,042        1,042   

0.550%, 4-5-16

     20,000        19,999   

0.650%, 4-6-16

     5,000        5,000   

Ecolab, Inc.,

      

0.700%, 4-7-16

     5,000        4,999   

General Mills, Inc.,

      

0.650%, 4-4-16

     5,000        5,000   

Harley-Davidson Financial Services (GTD by Harley-Davidson Credit Corp.),

      

0.580%, 4-4-16

     15,000        14,999   

HP, Inc.:

      

0.831%, 4-4-16

     6,000        6,000   

0.340%, 4-15-16

     20,000        19,997   

0.360%, 4-18-16

     10,000        9,998   

Kroger Co. (The):

      

0.700%, 4-4-16

     28,000        27,999   

0.670%, 4-6-16

     15,000        14,999   

Medtronic Global Holdings SCA:

      

0.630%, 4-4-16

     9,000        9,000   

0.570%, 4-5-16

     5,000        5,000   

Mondelez International, Inc.:

      

0.460%, 4-11-16

     5,000        4,999   

0.500%, 4-26-16

     6,000        5,998   

SHORT-TERM

SECURITIES

(Continued)

   Principal     Value  

Commercial Paper (K) (Continued)

  

NBCUniversal Enterprise, Inc.,

      

0.770%, 4-5-16

   $  25,000      $ 24,998   

Northern Illinois Gas Co.,

  

    

0.470%, 4-13-16

     6,000        5,999   

St. Jude Medical, Inc.,

      

0.630%, 4-6-16

     18,000        17,999   

United Technologies Corp.:

      

0.730%, 4-4-16

     12,000        11,999   

0.680%, 4-6-16

     25,000        24,998   

Virginia Electric and Power Co.,

      

0.460%, 4-25-16

     10,000        9,997   
   

 

 

  
      391,081   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 8.2%

           $ 391,081   

(Cost: $391,061)

      
 

TOTAL INVESTMENT SECURITIES – 98.0%

   

   $ 4,677,975   

(Cost: $5,449,111)

      
 

CASH AND OTHER ASSETS, NET OF
LIABILITIES (L) – 2.0%

    

     93,245   
 

NET ASSETS – 100.0%

  

   $ 4,771,220   
 

 

Notes to Schedule of Investments

 

* Not shown due to rounding.

 

(A) No dividends were paid during the preceding 12 months.

 

(B) Restricted securities. At March 31, 2016, the Fund owned the following restricted securities:

 

Security      Acquisition Date(s)      Shares      Cost        Market Value  

Maritime Finance Co. Ltd.

      9-19-13      1,750      $ 30,173         $ 16,887   

Provo Craft & Novelty, Inc.

      9-15-11      6,090        —           — * 
              

 

 

  
               $ 30,173         $ 16,887   
              

 

 

  

The total value of these securities represented 0.4% of net assets at March 31, 2016.

 

(C) Deemed to be an affiliate due to the Fund owning at least 5% of the voting securities.

 

(D) Warrants entitle the Fund to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any.

 

(E) Securities were 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 March 31, 2016 the total value of these securities amounted to $2,402,391 or 50.4% of net assets.

 

(F) Payment-in-kind bonds.

 

(G) Principal amounts are denominated in the indicated foreign currency, where applicable (CAD - Canadian Dollar and EUR - Euro).

 

(H) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016.

 

(I) Non-income producing as the issuer has either missed its most recent interest payment or declared bankruptcy.

 

  2016   ANNUAL REPORT   101

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy High Income Fund (in thousands)

MARCH 31, 2016

 

 

 

 

(J) All or a portion of this position has not settled. Full contract rates do not take effect until settlement date.

 

(K) Rate shown is the yield to maturity at March 31, 2016.

 

(L) Cash of $4,380 is held in collateralized accounts for OTC derivatives collateral as governed by International Swaps and Derivatives Association, Inc. Master Agreements.

 

(M) Unit is comprised of $172.61 principal amount of New Secured Convertible PIK Notes and one New Common Share.

The following forward foreign currency contracts were outstanding at March 31, 2016:

 

      Currency to be
Delivered		            Currency to be
Received		      Settlement
Date		      Counterparty    Unrealized
Appreciation		      Unrealized
Depreciation		       

Canadian Dollar

      36,230       U.S. Dollar      27,876         4-26-16       Morgan Stanley International    $  —       $ 21     

Euro

      7,000       U.S. Dollar      7,920         4-26-16       Morgan Stanley International      —         51     
                 

 

 

                  $ —       $ 72     
                 

 

 

The following total return swap agreements were outstanding at March 31, 2016:

 

Counterparty    Underlying Security    Termination Date      Notional Amount(1)      Financing Fee(2)(3)    Unrealized
Appreciation		       

Morgan Stanley & Co., Inc.

    iBoxx $ Liquid High Yield Index      06/20/2016       $ 15,857       3M LIBOR less 0.41528%    $ 102     

 

(1) Notional amount changes by the percentage change of the price of the index applied to the notional amount.

 

(2) The Fund pays the financing fee multiplied by the notional amount each quarter.

 

(3) At the termination date, a net cash flow is exchanged where the market-linked total return is equivalent to the return of the underlying security less a financing rate, if any. As the payer, a Fund would receive payments on any net positive total return, and would owe payments in the event of a negative total return.

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ —       $ —       $ 17,586   

Preferred Stocks

     57,229         —         —   

Warrants

     —         531         —   

Corporate Debt Securities

     —         3,137,158         —   

Loans

     —         747,378         327,012   

Short-Term Securities

     —         391,081         —   

Total

   $ 57,229       $ 4,276,148       $ 344,598   

Total Return Swaps

   $ —       $ 102       $ —   

Liabilities

        

Forward Foreign Currency Contracts

   $ —       $ 72       $ —   

The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

 

     Common
Stocks		     Warrants     Loans  

Beginning Balance 4-1-15

   $ 31,309      $ 595      $ 472,642   

Net realized gain (loss)

     (1 )      —        (27,340 ) 

Net change in unrealized appreciation (depreciation)

     (8,894 )      —        (51,216 ) 

Purchases

     —        —        352   

Sales

     (4,828 )      —        (223,793 ) 

Amortization/Accretion of premium/discount

     —        —        1,052   

Transfers into Level 3 during the period

     —        —        314,532   

Transfers out of Level 3 during the period

     —        (595 )      (159,217 ) 

Ending Balance 3-31-16

   $ 17,586      $ —      $ 327,012   

Net change in unrealized appreciation (depreciation) for all Level 3 investments still held as of 3-31-16

   $ (8,895 )    $ —      $ (62,612 ) 

Transfers from Level 2 to Level 3 occurred primarily due to the lack of observable market data due to decreased market activity or information for these securities. Transfers from Level 3 to Level 2 occurred primarily due to the increased availability of observable market data due to increased market activity or information. As shown above, transfers in and out of Level 3 represent the values as of the beginning of the reporting period. During the year ended March 31, 2016, there were no transfers between Levels 1 and 2.

 

 

102   ANNUAL REPORT   2016  

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SCHEDULE OF INVESTMENTS

Ivy High Income Fund (in thousands)

MARCH 31, 2016

 

 

 

Information about Level 3 fair value measurements:

 

      Fair Value at
3-31-16		      Valuation Technique(s)    Unobservable Input(s)

Assets

         

Common Stocks

    $ 699       Broker    Broker quotes
     16,887       Third-party vendor pricing service    Broker quotes

Loans

      327,012       Third-party vendor pricing service    Broker quotes

The following acronyms are used throughout this schedule:

GTD = Guaranteed

REIT = Real Estate Investment Trust

OTC = Over the Counter

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   103

Table of Contents

MANAGEMENT DISCUSSION

Ivy International Core Equity Fund

(UNAUDITED)

 

 

 

LOGO

John C. Maxwell

Below, John C. Maxwell, CFA, portfolio manager of Ivy International Core Equity Fund, discusses positioning, performance and results for the fiscal year ended March 31, 2016. Mr. Maxwell has managed the Fund since February 2006 and has 24 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy International Core Equity Fund (Class A shares at net asset value)

      –9.95%   

Ivy International Core Equity Fund (Class A shares including sales load)

      –15.12%   

Benchmark(s) and/or Lipper Category

         

MSCI EAFE Index

      –8.27%   

(generally reflects the performance of securities in Europe, Australasia and the Far East)

         

Lipper International Large-Cap Core Funds Universe Average

      –9.78%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

 

International markets posted negative gains

 

 

Equity markets were volatile in the fiscal year ended March 31, 2016. The Fund and its peer universe average were each down approximately 10%, while the Fund’s benchmark index was down approximately 8%. The Fund’s biggest detractor to performance was our top-down view that economic growth was going to be better than expected from March through November 2015. In the end, developed market and emerging market economic growth generally disappointed. The foundation for our belief of better growth was threefold: more competitive currencies (devaluations) in the major markets; extremely low rates and increased lending in key markets; and the dramatically lower cost of oil and energy. In the end, these three beliefs failed to deliver the growth we had expected. In November, we transitioned from our bullish growth outlook to a viewpoint of longer-term, low global growth.

Around the world

 

 

China continues to be at the forefront of investor concerns as uncertainty abounds in several areas. Key concerns include the economy’s overall global competitiveness; the ability to rotate to a service and consumption based economy; and the sustainability of a controlled exchange rate. The International Monetary Fund granted China’s currency special drawing rights status. The People’s Bank of China also announced that it will be adjusting its currency from a dollar peg to a “basket” peg, which we think could help China’s competiveness as the dollar strengthens with rising rates. After many false starts, the U.S. Federal Reserve (Fed) raised rates for the first time in nearly a decade despite lackluster economic data. That said, the Fed has become more dovish post the raise. Monetary policy in Europe and Japan remains aggressive, but the role of the increasingly dovish Fed has been more important since the beginning of the calendar year, as the yen and euro have strengthened.

The weaker U.S. dollar since the beginning of the calendar year has reversed the negative spiral in commodity prices and provided a relief valve to potential stresses in bond markets. As a result, high-yield credit spreads have narrowed. In our belief, this has reduced the risk of financial contagion and ultimately, global recession.

Actions in the Fund during the year

 

 

We positioned the Fund to benefit from better-than-consensus economic growth to start the fiscal year. As such, from an asset allocation standpoint, we were happy to have a relative 5% overweight to cyclicals and were seeking to find companies with both operating, and, to a lesser extent, financial leverage. This strategy ultimately did not produce positive results. In June, the market started to trade off as the China A-shares market went into free fall despite aggressive policy moves by its government. Additionally, Greece experienced trouble forming a government and was in the process of negotiating its obligations to the European Union — increasing fears of a Greek exit from the Eurozone. As a result, we increased the liquidity of individual holdings in the Fund by selling smaller companies in favor of larger ones. In August, the market started to trade off as the Chinese yuan lost value, viewing such devaluation as confirmation that the Chinese economy was struggling. We continued to hold out for better economic growth, but began to sell positions in companies with the most financial leverage as spreads were widening. By fiscal year end, the Fund had a significantly lower financial leverage profile than the benchmark index, which profile aligned with the Fund’s historical positioning.

In November, we transitioned from the better-than-expected economic growth outlook to the new normal outlook — slow growth ahead. We refocused on good business models we believed would perform well independent of the economy. That said, we continued to hold some of the names that should benefit from cheaper oil as we believe that the effects of lower oil prices often take more than a year to filter into the economy. Despite attractive valuations through the year, we reduced the Fund’s weighting directly to emerging markets, as we found a number of attractively priced emerging market proxies in developed markets. We maintained the Fund’s hedge on the Chinese yuan at about 10% of assets until March. At that time, we removed the Fund’s hedge on the yuan and proceeded to initiate an approximate 7.5% hedge on our euro exposure.

 

104   ANNUAL REPORT   2016  

Table of Contents

 

 

From a geographic standpoint, country allocations were mixed, with holdings in Australia and emerging markets outperforming the index. Conversely, Japan detracted from performance. In the end, the outperforming regions were places the Fund generally owned more defensive stocks, while the underperformers were regions that had cyclical stocks. In Japan, for example, the Fund had a heavy concentration of cyclical names and virtually no defensives.

From a sector standpoint, our underweight allocation to the relatively poor-performing financials sector and strong stock selection in the consumer staples sector were the top contributors to Fund performance. Top individual contributors to performance included Fresenius SE & Co. and Svenska Cellulosa Aktiebolaget SCA. Poor stock selection and underweight allocations to the utilities and telecommunication services sectors were the top detractors to relative performance.

What we seek

 

 

As we move forward, we continue to look for companies that are underpriced relative to their prospects in both the growth and value parts of the market. We expect to keep the Fund balanced between defensives and cyclicals. Through the past fiscal year, our key themes did not change. We continue to seek exposure to:

 

•  

Disproportionate growth of emerging market consumers, particularly in the Asia-Pacific region

 

•  

Strong growth in infrastructure — with a focus on the internet

 

•  

Strong and believable dividend yields

 

•  

Stocks that we think will benefit from increased mergers and acquisition activity

In addition to the new normal outlook, we have adopted a view that margins (in aggregate) have peaked. The foundation for this is slow global growth; China moving from a low cost outsourcer to a direct competitor; internet disintermediation of established business models; and government moving up the stakeholder stack as they become more desperate for growth. We are seeking to create a portfolio of companies we believe are positioned to perform “better” in this environment — leading to a preference for high-quality companies across the valuation spectrum.

Outlook

 

 

Last calendar year, the combination of lower energy costs, more available and cheaper money, and generally weaker currencies outside the U.S. failed to deliver the better economic growth we were expecting. Therefore, we are returning to our stance that economic growth could remain muted for the longer term, which is in line with the general consensus. Global monetary policy remains at the extremes of easy and we do not see that changing materially any time soon. We believe relative valuation remains supportive for international equities, while absolute valuations are less attractive. Equities outside of emerging markets are trading at valuation levels above their historic averages (over the last 25 years), while bonds are trading at a dramatic historic premium to long-term averages. Emerging market equities are trading at valuation levels below historic averages.

Long term, we believe emerging market countries will try to improve their populations’ standards of living. Our view is that, to accomplish this feat, those countries will require solid real economic growth, which currently is not being achieved. There are increasing signs of stress in these emerging market countries, though in many cases their growth remains ahead of their developed market counterparts. In the end, we believe maintaining some exposure to emerging markets makes sense.

We continue to seek opportunities that are in line with the Fund’s current investment themes: disproportionate growth of emerging market consumers; believable and sustainable dividend yield; companies benefiting from increased mergers and acquisitions; and infrastructure development, particularly the internet.

Performance shown at NAV does not include the effect of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

International investing involves additional risks, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. Investments in countries with emerging economies or securities markets may carry greater risk than investments in more developed countries. Political and economic structures in many such countries may be undergoing significant evolution and rapid development, and such countries may lack the social, political and economic stability characteristics of more developed countries. Investments in securities issued in these countries may be more volatile and less liquid than securities issued in more developed countries. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the Fund’s portfolio manager and are current only through the end of the period of the report as stated on the cover. The portfolio manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged and include reinvested dividends. One cannot invest directly in an index, nor is an index representative of the Ivy International Core Equity Fund’s performance.

 

  2016   ANNUAL REPORT   105

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy International Core Equity Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      96.2%   

Financials

      17.7%   

Health Care

      15.0%   

Consumer Discretionary

      13.9%   

Industrials

      12.8%   

Consumer Staples

      9.6%   

Information Technology

      8.4%   

Materials

      7.9%   

Energy

      5.0%   

Telecommunication Services

      4.5%   

Utilities

      1.4%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      3.8%   

Lipper Rankings

 

 

 

Category: Lipper Large-Cap Core Funds    Rank      Percentile

1 Year

    707/874      81

3 Year

    573/793      73

5 Year

    484/705      69

10 Year

    81/515      16

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

Country Weightings

 

 

 

Europe

      53.8%   

United Kingdom

      19.7%   

Germany

      8.1%   

France

      5.9%   

Ireland

      5.6%   

Switzerland

      4.6%   

Sweden

      4.0%   

Other Europe

      5.9%   

Pacific Basin

      31.5%   

Japan

      17.5%   

China

      4.9%   

Australia

      4.9%   

Other Pacific Basin

      4.2%   

North America

      6.0%   

Other

      4.0%   

South America

      0.9%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      3.8%   
 

 

Top 10 Equity Holdings

 

 

 

Company    Country    Sector    Industry

SoftBank Group Corp.

   

Japan

   

Telecommunication Services

   

Wireless Telecommunication Service

Bridgestone Corp.

   

Japan

   

Consumer Discretionary

   

Tires & Rubber

Teva Pharmaceutical Industries Ltd. ADR

   

Israel

   

Health Care

   

Pharmaceuticals

Fresenius SE & Co. KGaA

   

Germany

   

Health Care

   

Health Care Services

BAE Systems plc

   

United Kingdom

   

Industrials

   

Aerospace & Defense

Svenska Cellulosa Aktiebolaget SCA (publ), Class B

   

Sweden

   

Materials

   

Paper Products

WPP Group plc

   

United Kingdom

   

Consumer Discretionary

   

Advertising

Honda Motor Co. Ltd.

   

Japan

   

Consumer Discretionary

   

Automobile Manufacturers

Shire Pharmaceuticals Group plc ADR

   

Ireland

   

Health Care

   

Pharmaceuticals

Cognizant Technology Solutions Corp., Class A

   

United States

   

Information Technology

   

IT Consulting & Other Services

See your advisor or www.ivyfunds.com for more information on the Fund’s most recent published Top 10 Equity Holdings.

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

106   ANNUAL REPORT   2016  

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy International Core Equity Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)   Class A(3)     Class B(4)     Class C     Class E     Class I     Class R     Class R6     Class Y  

1-year period ended 3-31-16

     -15.12%        -14.27%        -10.54%        -15.23%        -9.63%        -10.15%        -9.52%        -9.88%   

5-year period ended 3-31-16

     1.16%        1.32%        1.70%        1.08%        2.77%        —           —           2.50%   

10-year period ended 3-31-16

     3.46%        3.36%        3.39%        —           —           —           —           4.23%   

Since Inception of Class through 3-31-16(5)

     —           —           —           1.89%        3.13%        5.26%        -5.56%        —      

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) 4-2-07 for Class E shares, 4-2-07 for Class I shares, 12-19-12 for Class R shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

  2016   ANNUAL REPORT   107

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy International Core Equity Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Australia

  

 

Energy – 0.6%

  

Oil Search Ltd.

     2,284      $ 11,835   

Santos Ltd.

     4,972        15,358   
   

 

 

  
      27,193   
   

 

 

  
 

Financials – 1.6%

  

Westpac Banking Corp.

     3,220        74,907   
   

 

 

  
 

Health Care – 1.0%

  

Cochlear Ltd.

     578        45,288   
   

 

 

  
 

Materials – 1.7%

  

Amcor Ltd.

     7,009        77,099   
   

 

 

  
 

Total Australia – 4.9%

  

   $ 224,487   

Brazil

  

 

Consumer Staples – 0.9%

  

Hypermarcas S.A.(A)

     5,502        42,877   
   

 

 

  
 

Total Brazil – 0.9%

  

   $ 42,877   

Canada

  

 

Energy – 0.9%

  

Suncor Energy, Inc.

     1,573        43,820   
   

 

 

  

Industrials – 1.2%

  

Canadian Pacific Railway Ltd.

     405        53,673   
   

 

 

  
 

Total Canada – 2.1%

  

   $ 97,493   

China

  

 

Consumer Discretionary – 1.4%

  

JD.com, Inc. ADR(A)

     2,403        63,676   
   

 

 

  

Consumer Staples – 1.6%

  

Kweichow Moutai Co. Ltd., Class A

     1,883        72,094   
   

 

 

  

Financials – 1.2%

  

PICC Property and Casualty Co. Ltd., H Shares

     30,698        56,272   
   

 

 

  

Information Technology – 0.7%

  

Alibaba Group Holding Ltd. ADR(A)(B)

     411        32,489   
   

 

 

  
 

Total China – 4.9%

  

   $ 224,531   

Denmark

  

 

Financials – 1.4%

  

Danske Bank A.S.

     2,284        64,536   
   

 

 

  
 

Total Denmark – 1.4%

  

   $ 64,536   

Finland

  

 

Information Technology – 2.0%

  

Nokia Corp., Series A ADR

     5,873        34,707   

Nokia OYJ

     9,261        55,059   
   

 

 

  
      89,766   
   

 

 

  
 

Total Finland – 2.0%

  

   $ 89,766   

COMMON STOCKS

(Continued)

   Shares     Value  

France

  

 

Consumer Staples – 1.7%

  

Pernod Ricard

     703      $ 78,372   
   

 

 

  

Industrials – 2.8%

  

Bouygues S.A.

     1,588        64,798   

European Aeronautic Defence and Space Co.

     927        61,578   
   

 

 

  
      126,376   
   

 

 

  

Utilities – 1.4%

  

ENGIE

     4,196        65,121   
   

 

 

  
 

Total France – 5.9%

  

   $ 269,869   

Germany

  

 

Consumer Staples – 0.6%

  

METRO AG

     838        25,963   
   

 

 

  

Financials – 0.6%

  

Deutsche Boerse AG

     328        27,969   
   

 

 

  

Health Care – 5.1%

  

Bayer AG

     485        57,054   

Fresenius Medical Care AG & Co. KGaA

     781        69,167   

Fresenius SE & Co. KGaA

     1,448        105,807   
   

 

 

  
      232,028   
   

 

 

  

Industrials – 1.8%

  

Deutsche Post AG

     3,014        83,753   
   

 

 

  
 

Total Germany – 8.1%

  

   $ 369,713   

Hong Kong

  

 

Financials – 3.0%

  

AIA Group Ltd.

     13,780        78,070   

Cheung Kong (Holdings) Ltd.

     4,534        58,853   
   

 

 

  
      136,923   
   

 

 

  
 

Total Hong Kong – 3.0%

  

   $ 136,923   

Ireland

  

 

Financials – 0.9%

  

Bank of Ireland(A)

     139,425        40,456   
   

 

 

  

Health Care – 1.9%

  

Shire Pharmaceuticals Group plc ADR

     506        87,040   
   

 

 

  

Materials – 2.8%

  

CRH plc

     2,450        69,183   

James Hardie Industries plc, Class C

     4,415        60,443   
   

 

 

  
      129,626   
   

 

 

  
 

Total Ireland – 5.6%

  

   $ 257,122   

COMMON STOCKS

(Continued)

   Shares     Value  

Israel

  

 

Health Care – 2.3%

  

Teva Pharmaceutical Industries Ltd. ADR(B)

     2,005      $ 107,262   
   

 

 

  
 

Total Israel – 2.3%

  

   $ 107,262   

Italy

  

 

Financials – 1.3%

  

Banca Intesa S.p.A.

     21,868        60,565   
   

 

 

  
 

Total Italy – 1.3%

  

   $ 60,565   

Japan

  

 

Consumer Discretionary – 6.3%

  

Bridgestone Corp.

     3,211        119,987   

Honda Motor Co. Ltd.

     3,310        90,766   

Isuzu Motors Ltd.

     5,317        54,894   

Nissin Kogyo Co. Ltd.

     1,808        24,354   
   

 

 

  
      290,001   
   

 

 

  

Energy – 0.9%

  

Inpex Corp.

     5,544        42,046   
   

 

 

  

Financials – 3.0%

  

Dai-ichi Mutual Life Insurance Co. (The)

     3,817        46,209   

Sumitomo Mitsui Financial Group, Inc.

     1,519        46,036   

Tokio Marine Holdings, Inc.

     1,367        46,142   
   

 

 

  
      138,387   
   

 

 

  

Industrials – 3.2%

  

Komatsu Ltd.

     3,693        62,874   

Mitsubishi Heavy Industries Ltd.

     22,814        84,753   
   

 

 

  
      147,627   
   

 

 

  

Information Technology – 0.8%

  

Seiko Epson Corp.

     2,181        35,234   
   

 

 

  

Telecommunication Services – 3.3%

  

SoftBank Group Corp.

     3,130        149,215   
   

 

 

  
 

Total Japan – 17.5%

  

   $ 802,510   

Mexico

  

 

Telecommunication Services – 1.2%

  

America Movil S.A.B. de C.V.

     41        640   

America Movil S.A.B. de C.V., Series L(A)

     68,522        53,303   
   

 

 

  
      53,943   
   

 

 

  
 

Total Mexico – 1.2%

  

   $ 53,943   

Netherlands

  

 

Financials – 1.2%

  

ING Groep N.V., Certicaaten Van Aandelen

     4,473        54,105   
   

 

 

  
 

Total Netherlands – 1.2%

  

   $ 54,105   
 

 

108   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy International Core Equity Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS
(Continued)		   Shares     Value  

South Africa

  

 

Consumer Discretionary – 1.7%

  

Naspers Ltd., Class N

     554      $ 77,282   
   

 

 

  
 

Total South Africa – 1.7%

  

   $ 77,282   

South Korea

  

 

Information Technology – 1.2%

  

Samsung Electronics Co. Ltd.

     49        56,513   
   

 

 

  
 

Total South Korea – 1.2%

  

   $ 56,513   

Sweden

  

 

Information Technology – 1.8%

  

Telefonaktiebolaget LM Ericsson ADR

     1,532        15,361   

Telefonaktiebolaget LM Ericsson, B Shares

     6,812        68,217   
   

 

 

  
      83,578   
   

 

 

  

Materials – 2.2%

  

Svenska Cellulosa Aktiebolaget SCA (publ), Class B

     3,118        97,424   
   

 

 

  
 

Total Sweden – 4.0%

  

   $ 181,002   

Switzerland

  

 

Consumer Staples – 0.6%

  

Nestle S.A., Registered Shares

     344        25,690   
   

 

 

  

Health Care – 2.4%

  

Novartis AG ADR

     243        17,574   

Novartis AG, Registered Shares

     608        44,065   

Roche Holdings AG, Genusscheine

     203        49,996   
   

 

 

  
      111,635   
   

 

 

  

Industrials – 1.6%

  

Adecco S.A.

     1,149        74,858   
   

 

 

  
 

Total Switzerland – 4.6%

  

   $ 212,183   

United Kingdom

  

 

Consumer Discretionary – 3.7%

  

Carnival plc

     543        29,274   

Marks and Spencer Group plc

     7,355        42,911   

WPP Group plc

     4,122        96,328   
   

 

 

  
      168,513   
   

 

 

  

Consumer Staples – 4.2%

  

Diageo plc

     1,560        42,143   

Diageo plc ADR

     211        22,800   

Imperial Tobacco Group plc

     1,141        63,316   

Unilever plc

     1,368        61,956   
   

 

 

  
      190,215   
   

 

 

  

COMMON STOCKS

(Continued)

   Shares     Value  

Energy – 2.6%

  

BP plc

     10,419      $ 52,396   

Royal Dutch Shell plc, Class A

     55        1,327   

Royal Dutch Shell plc, Class B

     2,621        63,986   
   

 

 

  
      117,709   
   

 

 

  

Financials – 3.5%

  

Aviva plc

     10,483        68,673   

HSBC Holdings plc

     4,228        26,380   

Legal & General Group plc

     18,957        64,036   
   

 

 

  
      159,089   
   

 

 

  

Health Care – 2.3%

  

Shire plc

     704        40,019   

Smith & Nephew plc

     4,071        67,128   
   

 

 

  
      107,147   
   

 

 

  

Industrials – 2.2%

  

BAE Systems plc

     14,065        102,825   
   

 

 

  

Materials – 1.2%

  

Rio Tinto plc

     1,479        41,547   

Rio Tinto plc ADR

     486        13,742   
   

 

 

  
      55,289   
   

 

 

  
 

Total United Kingdom – 19.7%

  

   $ 900,787   

United States

  

 

Consumer Discretionary – 0.8%

  

Carnival Corp.

     738        38,918   
   

 

 

  

Information Technology – 1.9%

  

Cognizant Technology Solutions Corp., Class A(A)

     1,361        85,324   
   

 

 

  
 

Total United States – 2.7%

  

   $ 124,242   
 

TOTAL COMMON STOCKS – 96.2%

   

   $ 4,407,711   

(Cost: $4,511,847)

      
 
SHORT-TERM
SECURITIES		   Principal         

Commercial Paper(C) – 2.8%

  

    

Becton Dickinson & Co.:

      

0.760%, 4-4-16

   $ 17,000        16,999   

0.761%, 4-5-16

     5,000        5,000   

Corporacion Andina de Fomento

      

0.370%, 5-2-16

     25,000        24,992   

DTE Gas Co.

      

0.480%, 4-1-16

     2,700        2,700   

Ecolab, Inc.

      

0.720%, 4-4-16

     5,000        5,000   

General Mills, Inc.

      

0.470%, 4-1-16

     5,000        5,000   

GlaxoSmithKline Finance plc (GTD by GlaxoSmithKline plc)

      

0.400%, 4-29-16

     25,000        24,992   
SHORT-TERM
SECURITIES
(Continued)		   Principal     Value  

Harley-Davidson Financial Services (GTD by Harley-Davidson Credit Corp.)

      

0.490%, 4-22-16

   $ 4,000      $ 3,999   

Kroger Co. (The)

      

0.600%, 4-5-16

     10,000        9,999   

McCormick & Co., Inc.

      

0.470%, 4-27-16

     10,000        9,996   

NBCUniversal Enterprise, Inc.

      

0.650%, 4-7-16

     6,000        5,999   

Virginia Electric and Power Co.:

      

0.450%, 4-19-16

     5,000        4,999   

0.460%, 4-20-16

     5,000        4,999   

Wisconsin Gas LLC

      

0.440%, 4-14-16

     3,000        2,999   
   

 

 

  
      127,673   
   

 

 

  

Master Note – 0.0%

  

    

Toyota Motor Credit Corp.

      

0.443%, 4-6-16(D)

     1,035        1,035   
   

 

 

  

United States Government Agency Obligations – 0.0%

   

    

Overseas Private Investment Corp. (GTD by U.S. Government)

      

0.360%, 4-7-16(D)

     1,750        1,750   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 2.8%

   

   $ 130,458   

(Cost: $130,455)

      
 

TOTAL INVESTMENT SECURITIES – 99.0%

   

   $ 4,538,169   

(Cost: $4,642,302)

      
 

CASH AND OTHER ASSETS, NET OF LIABILITIES – 1.0%

   

     43,589   
 

NET ASSETS – 100.0%

  

   $ 4,581,758   
 

 

  2016   ANNUAL REPORT   109

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy International Core Equity Fund (in thousands)

MARCH 31, 2016

 

 

 

Notes to Schedule of Investments

 

(A) No dividends were paid during the preceding 12 months.

 

(B) All or a portion of securities with an aggregate value of $791 are held in collateralized accounts for OTC derivatives collateral as governed by International Swaps and Derivatives Association, Inc. Master Agreements.

 

(C) Rate shown is the yield to maturity at March 31, 2016.

 

(D) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following forward foreign currency contracts were outstanding at March 31, 2016:

 

      Currency
to be
Delivered		            Currency
to be
Received		      Settlement
Date		      Counterparty    Unrealized
Appreciation		      Unrealized
Depreciation		       

Euro

      301,400       U.S. Dollar      341,314         4-26-16       Barclays Capital, Inc.    $ —       $ 1,876     

The following written options were outstanding at March 31, 2016 (contracts and exercise prices unrounded):

 

Underlying Security    Counterparty, if OTC      Type      Number
of
Contracts		      Expiration
Month		      Exercise
Price		      Premium
Received		      Value       

Hypermarcas S.A.

      Morgan Stanley & Co., Inc.         Call         438,000         April 2016         BRL27.00       $ 73       $ (182 )   
     Morgan Stanley & Co., Inc.         Call         438,000         April 2016         28.00         82         (99 )   
                 

 

 

                  $ 155       $ (281 )   
                 

 

 

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 4,407,711       $ —       $ —   

Short-Term Securities

     —         130,458         —   

Total

   $ 4,407,711       $ 130,458       $ —   

Liabilities

        

Forward Foreign Currency Contracts

   $ —       $ 1,876       $ —   

Written Options

   $ —       $ 281       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

The following acronyms are used throughout this schedule:

ADR = American Depositary Receipts

GTD = Guaranteed

OTC = Over the Counter

 

Market Sector Diversification

  

(as a% of net assets)

  

Financials

      17.7 % 

Health Care

      15.0 % 

Consumer Discretionary

      13.9 % 

Industrials

      12.8 % 

Consumer Staples

      9.6 % 

Information Technology

      8.4 % 

Materials

      7.9 % 

Energy

      5.0 % 

Telecommunication Services

      4.5 % 

Utilities

      1.4 % 

Other+

      3.8 % 
 

 

+ Includes cash and other assets (net of liabilities), and cash equivalents

See Accompanying Notes to Financial Statements.

 

110   ANNUAL REPORT   2016  

Table of Contents

MANAGEMENT DISCUSSION

Ivy Large Cap Growth Fund

(UNAUDITED)

 

 

 

LOGO

Daniel P. Becker

 

 

LOGO

Philip J. Sanders

Below, Daniel P. Becker, CFA, and Philip J. Sanders, CFA, portfolio managers of Ivy Large Cap Growth Fund, discuss positioning, performance and results for the fiscal year ended March 31, 2016. Mr. Becker has managed the Fund since 2000 and Mr. Sanders has managed the Fund since 2006. Both men have 27 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy Large Cap Growth Fund (Class A shares at net asset value)

      –2.08%   

Ivy Large Cap Growth Fund (Class A shares including sales charges)

      –7.70%   

Benchmark(s) and/or Lipper Category

         

Russell 1000 Growth Index

      2.52%   

(generally reflects the performance of securities that represent the large-cap growth market)

         

Lipper Large-Cap Growth Funds Universe Average

      –1.43%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

 

Key drivers

 

 

The Russell 1000 Growth Index, the Fund’s benchmark, recorded a modest gain for the fiscal year ended March 31, 2016. The slight positive return falls far short of telling the story of what was a very volatile 12-month period in equities. Several times during the measurement period, the index was in negative, double-digit territory, reflecting the many potential outcomes of the removal of Federal Reserve (Fed) monetary policy in the current slow global economic environment. Prospects for continued volatility associated with a complex mix of variables, such as Chinese and emerging economy debt levels, the strength of the U.S. dollar and aggressive monetary policy accommodation from foreign central banks, remain with us as we enter spring 2016.

There exists much discussion concerning the divergence in both monetary policy and economic growth rates that the U.S. is experiencing relative to other markets and economies around the world. The continued divergence in monetary policy reached a climax during first quarter 2016 as interest rate differentials, as well as the assumed path for future interest rate moves, contributed to a meaningful appreciation in the U.S. dollar. Due to aggressive monetary easing in other global economies and specific Asian currency values that are pegged to the dollar, a tipping point was reached where potential future increases in the dollar may have caused capital flight from emerging economies. This situation had the potential to negatively impact the global banking system and financial markets.

In short, there was a risk that the combined actions of global central banks would create an error in monetary policy, thrusting fragile economies into recession and prompting a further downward spiral in commodity-led economies with large U.S. dollar-denominated debt burdens. In our view, the Fed acted appropriately by eventually acknowledging these risks and suggesting a less aggressive path to normalizing short-term interest rates over the rest of 2016. This acknowledgment ignited a stock market recovery late in first quarter 2016 that particularly benefited the most at-risk stocks and business models at the expense of growth stocks, much like what happened in early 2009.

The U.S. remains the stable pillar of hope (and growth) within an uncertain global macroeconomic environment. As such, investors continue to hold a more favorable view on the prospects for the U.S. economy primarily based on the positive indicators at work domestically, such as employment gains, solid consumer spending and low interest rates. However, these positives should be balanced by manufacturing data that has been less favorable and small signals that the downshift in energy investment is rippling into the industrial economy.

The index’s fiscal year return attribution suggests that financial characteristics such as return on equity, dividend yield/dividend growth and free cash flow yield have been key variables in driving stock performance over the past few months. Our underrepresentation in stocks matching these value style factors minimized what was previously a fairly good start to the fiscal year through the end of calendar 2015. Recently, the market has continued to reward perceived “safe” stocks, with dividend yield and cash flow as the primary determinants of safety. Growth stocks have recently been out of favor; however, we believe this situation could change later in calendar year 2016.

Performance, strategies employed and attribution

 

 

For the fiscal year ended March 31, 2016, the Fund underperformed its benchmark index and peer group. Despite the recent underperformance, the Fund’s philosophy has remained consistent — a process that seeks to identify structurally advantaged companies that can generate superior levels of profitability and growth over time. In many cases, short-term dislocations and volatility provided by macro uncertainty offer a favorable entry point for structurally advantaged businesses. We believe that the rapid changes in sentiment within the capital markets continue to create opportunities for patient growth stock investors.

 

  2016   ANNUAL REPORT   111

Table of Contents

MANAGEMENT DISCUSSION

Ivy Large Cap Growth Fund

(UNAUDITED)

 

 

 

In terms of performance attribution, the Fund’s underperformance was largely driven by the health care sector, both in terms of an overweight position and unfavorable stock selection. Security selection and overall limited exposure in consumer staples also contributed to the Fund’s underperformance during the fiscal period.

Concurrent to the above mentioned global macroeconomic events, the U.S. Presidential election and the negative disclosures by Valeant Pharmaceuticals (not a Fund holding) created a hostile environment for most health care companies, especially those that have benefitted from pricing power in therapeutic categories where list prices appear relatively high. This environment has catalyzed a potential move in public policy by both political parties’ candidates that we believe would disrupt the health care industry, if implemented. While it would likely require a more liberal and united Congress to significantly change policy, the ongoing headlines may continue to depress stock performance leading up to the election. We believe some of these stocks could rebound later in 2016, as the market determines the actual path of policy may not be as detrimental as the campaign rhetoric would imply. Health care was by far the biggest negative contributor to the Fund’s relative performance during the measurement period. There have been several favorable tailwinds benefiting health care over the past several years — exceptional innovation, strong commercial launches, supportive U.S. Food and Drug Administration and access to cheap funding — and many of these variables remained in place during the measurement period. However, there was a significant change in terms of perceived risk around the government’s potential to enact regulations designed to curb increases in drug prices. The introduction of this risk and others created a poor investment climate that reduced health care stock valuations fairly rapidly despite limited changes in near-term fundamentals.

Consumer discretionary and technology sector exposure provided positive attribution, although not material enough to overcome pressures in health care. In consumer discretionary, a significant overweight in Amazon.com helped contribute positively toward performance. Amazon’s performance during the fiscal year was outstanding and driven by much needed improvements in margins and additional disclosures that showed the growth and margin profile of the company’s cloud computing business. In technology, positive contribution was generated by overweight positions in the fast growing companies such as Adobe Systems, Inc. and Facebook, Inc. Underweight positions in Apple, Inc., Starbuck’s Corp., O’Reilly Automotive Inc. and NIKE, Inc. also helped performance during the fiscal period.

Outlook and positioning

 

 

Entering the next fiscal year feels a little like déjà vu, as many of the debates from the prior period remain, such as global growth instability and the timing of the Fed’s move to a “normalized” monetary policy. The latter issue appears to have evolved into the “pace” at which the Fed will move interest rates higher. We expect continued sluggish economic growth out of the U.S. economy, likely in the 2% to 3% range, but stubbornly disappointing. We expect the direction of the U.S. economy will become a larger focal point in the coming fiscal year.

Particularly noteworthy, in our view, is the effort by the European Central Bank to increase the size and scope of its quantitative easing program, by purchasing more government and corporate bonds. This tactical change is a welcome move, as it should prevent further decline in low or already negative interest rates, thus taking pressure off the rising U.S. dollar. Since this shift was announced, the dollar has depreciated against most major currencies, helping to reduce systemic risk. As the dollar has appreciated so strongly over the past 18 months, we think some depreciation will be beneficial to fixed income, currency and equity markets globally.

Looking ahead, we continue to expect a slow rate of economic growth, limited profit growth and low inflation, conditions which usually support growth stocks. In the short term, value stocks may continue to outperform; however, many of these value stocks were priced for significant economic distress, especially if their revenues are exposed to global commodity market trends. After these distressed valuations improve, we expect the growth stock cycle to resume, as many of the Fund’s growth stocks are now supported by attractive valuations and profit outlooks. These include some of the Fund’s largest holdings, such as Visa, Inc., MasterCard, Inc., Alphabet, Inc. (Google), Celgene Corp., Microsoft Corp. and Gilead Sciences, Inc. We are selectively increasing exposure to these and other stocks that have been depressed by recent market weakness.

The Fund’s positioning for coming fiscal year will focus more on seeking to take advantage of these sudden swings in risk appetite and more proactively adding exposure to long-term investments, as inevitable stock price dislocations occur relative to minimal actual fundamental changes. We continue to pursue a strategy that focuses on the smaller subset of companies that we believe have strong business models that originate and are maintained by a high and sustainable level of competitive advantage within their served addressable markets. Thank you for your continued confidence and support.

Performance shown at NAV does not include the effects of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

Prices of growth stocks may be more sensitive to changes in current or expected earnings than the prices of other stocks. Growth stocks may not perform as well as value stocks or the stock market in general. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the Fund’s portfolio managers and are current only through the end of the period of the report as stated on the cover. The portfolio managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged, includes reinvested dividends and does not include fees. One cannot invest directly in an index, nor is an index representative of the Ivy Large Cap Growth Fund’s performance.

 

112   ANNUAL REPORT   2016  

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Large Cap Growth Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

 

Asset Allocation

 

 

 

Stocks

      97.5%   

Information Technology

      39.0%   

Consumer Discretionary

      20.8%   

Health Care

      18.2%   

Industrials

      10.2%   

Financials

      3.2%   

Consumer Staples

      1.7%   

Energy

      1.5%   

Telecommunication Services

      1.5%   

Materials

      1.4%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      2.5%   

Lipper Rankings

 

 

 

Category: Lipper Large-Cap Growth
Funds		    Rank      Percentile

1 Year

    405/663      61

3 Year

    217/611      36

5 Year

    226/540      42

10 Year

    178/393      46

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

 

 

Top 10 Equity Holdings

 

 

 

Company    Sector      Industry

MasterCard, Inc., Class A

   

Information Technology

     

Data Processing & Outsourced Services

Visa, Inc., Class A

   

Information Technology

     

Data Processing & Outsourced Services

Microsoft Corp.

   

Information Technology

     

Systems Software

Home Depot, Inc. (The)

   

Consumer Discretionary

     

Home Improvement Retail

Facebook, Inc., Class A

   

Information Technology

     

Internet Software & Services

Alphabet, Inc., Class A

   

Information Technology

     

Internet Software & Services

Celgene Corp.

   

Health Care

     

Biotechnology

Gilead Sciences, Inc.

   

Health Care

     

Biotechnology

Lam Research Corp.

   

Information Technology

     

Semiconductor Equipment

Cognizant Technology Solutions Corp., Class A

   

Information Technology

     

IT Consulting & Other Services

See your advisor or www.ivyfunds.com for more information on the Fund’s most recently published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

  2016   ANNUAL REPORT   113

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Large Cap Growth Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)   Class A(3)     Class B(4)     Class C     Class E     Class I     Class R     Class R6     Class Y  

1-year period ended 3-31-16

     -7.70%        -6.57%        -2.74%        -7.71%        -1.79%        -2.39%        -1.64%        -2.03%   

5-year period ended 3-31-16

     9.49%        9.62%        9.96%        9.48%        11.10%        10.43%        –           10.88%   

10-year period ended 3-31-16

     6.46%        6.12%        6.21%        –           –           6.76%        –           7.19%   

Since Inception of Class through 3-31-16(5)

     –           –           –           6.97%        8.04%        –           6.65%        –      

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) 4-2-07 for Class E shares, 4-2-07 for Class I shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

114   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Large Cap Growth Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Consumer Discretionary

  

 

Automotive Retail – 3.6%

  

AutoZone, Inc.(A)

     38      $ 30,593   

O’Reilly Automotive, Inc.(A)

     118        32,401   
   

 

 

  
      62,994   
   

 

 

  

Cable & Satellite – 2.0%

  

Comcast Corp., Class A

     562        34,321   
   

 

 

  

Casinos & Gaming – 1.5%

  

Las Vegas Sands, Inc.

     514        26,548   
   

 

 

  

Footwear – 1.0%

  

NIKE, Inc., Class B

     280        17,236   
   

 

 

  

Home Improvement Retail – 4.1%

  

Home Depot, Inc. (The)

     536        71,492   
   

 

 

  

Internet Retail – 2.5%

  

Amazon.com, Inc.(A)

     75        44,404   
   

 

 

  

Movies & Entertainment – 1.1%

  

Walt Disney Co. (The)

     201        19,912   
   

 

 

  

Restaurants – 3.9%

  

McDonalds Corp.

     319        40,029   

Starbucks Corp.

     466        27,808   
   

 

 

  
      67,837   
   

 

 

  

Specialty Stores – 1.1%

  

Ulta Salon, Cosmetics &
Fragrance, Inc.(A)

     103        19,936   
   

 

 

  
 

Total Consumer Discretionary – 20.8%

   

     364,680   

Consumer Staples

  

 

Tobacco – 1.7%

  

Philip Morris International, Inc.

     302        29,610   
   

 

 

  
 

Total Consumer Staples – 1.7%

  

     29,610   

Energy

  

 

Oil & Gas Exploration & Production – 1.5%

  

EOG Resources, Inc.

     357        25,875   
   

 

 

  
 

Total Energy – 1.5%

  

     25,875   

Financials

  

 

Investment Banking & Brokerage – 1.5%

  

Charles Schwab Corp. (The)

     944        26,437   
   

 

 

  

Specialized Finance – 1.7%

  

CME Group, Inc.

     303        29,074   
   

 

 

  
 

Total Financials – 3.2%

  

     55,511   

COMMON STOCKS

(Continued)

   Shares     Value  

Health Care

  

 

Biotechnology – 8.9%

  

Alexion Pharmaceuticals, Inc.(A)

     57      $ 7,936   

Biogen, Inc.(A)

     103        26,869   

Celgene Corp.(A)

     572        57,251   

Gilead Sciences, Inc.

     605        55,575   

Vertex Pharmaceuticals, Inc.(A)

     97        7,671   
   

 

 

  
      155,302   
   

 

 

  

Health Care Equipment – 0.4%

  

DexCom, Inc.(A)

     105        7,158   
   

 

 

  

Health Care Facilities – 2.3%

  

HCA Holdings, Inc.(A)

     516        40,281   
   

 

 

  

Pharmaceuticals – 6.6%

  

Allergan plc(A)

     161        43,038   

Bristol-Myers Squibb Co.

     776        49,590   

Shire Pharmaceuticals Group plc ADR

     138        23,688   
   

 

 

  
      116,316   
   

 

 

  
 

Total Health Care – 18.2%

  

     319,057   

Industrials

  

 

Aerospace & Defense – 4.4%

  

Boeing Co. (The)

     103        13,075   

Honeywell International, Inc.

     273        30,567   

Lockheed Martin Corp.

     132        29,327   

Northrop Grumman Corp.

     22        4,373   
   

 

 

  
      77,342   
   

 

 

  

Industrial Conglomerates – 1.1%

  

Danaher Corp.

     206        19,560   
   

 

 

  

Railroads – 4.7%

  

Canadian Pacific Railway Ltd.

     334        44,279   

Union Pacific Corp.

     486        38,645   
   

 

 

  
      82,924   
   

 

 

  
 

Total Industrials – 10.2%

  

     179,826   

Information Technology

  

 

Application Software – 2.6%

  

Adobe Systems, Inc.(A)

     486        45,549   
   

 

 

  

Data Processing & Outsourced Services – 9.8%

   

FleetCor Technologies,
Inc.(A)

     166        24,693   

MasterCard, Inc., Class A

     782        73,899   

Visa, Inc., Class A

     950        72,648   
   

 

 

  
      171,240   
   

 

 

  

Internet Software & Services – 10.1%

  

Alphabet, Inc., Class A(A)

     78        59,201   

Alphabet, Inc., Class C(A)

     66        49,206   

Facebook, Inc., Class A(A)

     595        67,901   
   

 

 

  
      176,308   
   

 

 

  

COMMON STOCKS

(Continued)

   Shares     Value  

IT Consulting & Other Services – 3.0%

  

Cognizant Technology Solutions Corp., Class A(A)

     849      $ 53,207   
   

 

 

  

Semiconductor Equipment – 3.1%

  

Lam Research Corp.

     656        54,161   
   

 

 

  

Semiconductors – 3.3%

  

Microchip Technology, Inc.

     653        31,450   

NXP Semiconductors N.V.(A)

     333        27,021   
   

 

 

  
      58,471   
   

 

 

  

Systems Software – 4.1%

  

Microsoft Corp.

     1,299        71,727   
   

 

 

  

Technology Hardware, Storage & Peripherals – 3.0%

   

Apple, Inc.

     481        52,444   
   

 

 

  
 

Total Information Technology – 39.0%

   

     683,107   

Materials

  

 

Diversified Chemicals – 1.4%

  

PPG Industries, Inc.

     223        24,840   
   

 

 

  
 

Total Materials – 1.4%

  

     24,840   

Telecommunication Services

  

 

Wireless Telecommunication Service – 1.5%

  

American Tower Corp., Class A

     252        25,767   
   

 

 

  
 

Total Telecommunication Services – 1.5%

   

     25,767   
 

TOTAL COMMON STOCKS – 97.5%

           $ 1,708,273   

(Cost: $1,227,218)

      
 
SHORT-TERM
SECURITIES		   Principal         

Commercial Paper (B) – 2.6%

  

BMW U.S. Capital LLC (GTD by BMW AG),

      

0.370%, 4-14-16

   $ 7,000        6,999   

Caterpillar Financial Services Corp. (GTD by Caterpillar, Inc.),

      

0.410%, 5-3-16

     5,000        4,998   

Northern Illinois Gas Co.,

      

0.610%, 4-1-16

     3,000        3,000   

Novartis Finance Corp. (GTD by Novartis AG),

      

0.360%, 4-25-16

     10,000        9,997   

Rockwell Automation, Inc.:

      

0.550%, 4-7-16

     2,500        2,500   

0.440%, 4-13-16

     5,475        5,474   
 

 

  2016   ANNUAL REPORT   115

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Large Cap Growth Fund (in thousands)

MARCH 31, 2016

 

 

 

 

SHORT-TERM
SECURITIES

(Continued)

   Principal     Value  

Commercial Paper (B) (Continued)

  

Wisconsin Electric Power Co.,

      

0.400%, 4-4-16

   $ 4,279      $ 4,279   

Wisconsin Gas LLC:

      

0.380%, 4-4-16

     4,000        4,000   

0.440%, 4-14-16

     5,000        4,999   
   

 

 

  
      46,246   
   

 

 

  

Master Note – 0.1%

      

Toyota Motor Credit Corp.,

      

0.443%, 4-6-16 (C)

     1,733        1,733   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 2.7%

   

   $ 47,979   

(Cost: $47,980)

      
 

TOTAL INVESTMENT SECURITIES – 100.2%

   

   $ 1,756,252   

(Cost: $1,275,198)

      
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (0.2)%

    

     (3,548 ) 
 

NET ASSETS – 100.0%

  

   $ 1,752,704   

 

 

 

 

Notes to Schedule of Investments

 

(A) No dividends were paid during the preceding 12 months.

 

(B) Rate shown is the yield to maturity at March 31, 2016.

 

(C) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  
       

Assets

        

Investments in Securities

        

Common Stocks

   $ 1,708,273       $ —       $ —   

Short-Term Securities

     —         47,979         —   

Total

   $ 1,708,273       $ 47,979       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

The following acronyms are used throughout this schedule:

ADR = American Depositary Receipts

GTD = Guaranteed

 

 

See Accompanying Notes to Financial Statements.

 

116   ANNUAL REPORT   2016  

Table of Contents

MANAGEMENT DISCUSSION

Ivy Limited-Term Bond Fund

(UNAUDITED)

 

 

 

LOGO

Susan Regan

Below, Susan K. Regan, portfolio manager of Ivy Limited-Term Bond Fund, discuss positioning, performance and results for the fiscal year ended March 31, 2016. Ms. Regan was named portfolio manager in 2014 and has 28 years industry experience. She co-managed the Fund from 2014 until April 30, 2015, when her co-manager, Mark J. Otterstrom, retired. Mr. Otterstrom had managed the Fund since 2010.

Fiscal Year Performance

 

 

 

For the 12 months ended March 31, 2016

         

Ivy Limited-Term Bond Fund (Class A shares at net asset value)

      0.95%   

Ivy Limited-Term Bond Fund (Class A shares with sales charge)

      –1.57%   

Benchmark(s) and/or Lipper Category

         

Barclays 1-5 Year U.S. Government/Credit Index

      1.62%   

(generally reflects the performance of securities representing the bond market with greater than one and less than five years until maturity)

         

Lipper Short-Intermediate Investment Grade Debt Funds Universe Average

      0.73%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that the Fund returns include applicable investment fees and expenses, whereas the index returns do not include any such fees. The performance discussion below is at net asset value.

 

The Ivy Limited-Term Bond fund performed better than the Barclays 1-5 Year U.S. Government/Credit Index before fees are included in the Fund’s yield calculation. The Ivy Limited-Term Bond fund also had a greater return than the average of its Lipper peer group for the year ended March 31, 2016.

One of the keys to the Fund’s performance was the decision to keep duration relatively close to the benchmark. Another key was credit selection and mortgage-backed security selection, as both those asset classes produced returns above the benchmark.

The U.S. Treasury market experienced significant volatility over the course of the twelve months beginning March 31, 2015. The high and low yields on the two-year note were 1.09% and 0.49%, respectively. The Federal Open Market Committee (FOMC) has said for some time that the timing of rate hikes is data dependent. As a result, each economic data release has the ability to move the market in either direction. This contributed to the volatility seen in the bond market over the past year.

In mid-August, we saw a string of weak manufacturing data out of China, confirming the world’s second largest economy was slowing. Globally, equities sold off sharply, leading to a big move lower in U.S. Treasuries as the flight-to-quality trade resurfaced. The Federal Reserve had prepared the markets for a rate hike at their September meeting. After discussing the status of equities and emerging markets from the weakness in China, the FOMC instead chose to delay a rate hike when they met.

In December, the FOMC began the slow process of normalizing rates with a 25 basis point (0.25 percent) increase in the federal funds rate. The rate hike was so well telegraphed and so well received that market disruptions were minimal.

The energy and commodities sectors have seen extreme volatility in the last year. Oil prices have an impact on many markets across the world. When oil slipped close to $30 in January and February 2016, deflation fears were growing and default fears were felt throughout the high-yield credit market. At the end of 1Q, the price of oil stabilized close to $40 per barrel.

Over the course of the twelve months included in this report, the Fund’s duration didn’t vary from the benchmark by more than ten percent and often was much closer to the benchmark. With all the uncertainty about the timing and path of interest rates, we thought it made sense to keep duration in check. We began employing a slight barbell strategy in late 2014. As part of this strategy, the Fund was overweight at the very front end of the curve and had a relatively small exposure past five years, comprising the two ends of the barbell.

We increased the Fund’s U.S. Treasury and government agency bond holdings over the period. We also increased its mortgage-backed securities exposure. We did this by reducing corporate bond exposure. The Fund is still currently overweight in investment-grade credit, but less so than a year ago. We have reduced the Fund’s credit exposure as a response to the overall increase in leverage we are seeing in the credit market. Balance sheets, while still generally strong, have deteriorated somewhat. Liquidity in the corporate bond market is also a concern going forward. We feel we are nearer the end of the credit cycle than the beginning and feel having less credit exposure is prudent. These sector changes have naturally increased the quality in the portfolio as U.S. Treasuries, government agency bonds and government agency mortgage-backed securities are typically rated higher than most corporate bonds.

Fed Chair Janet Yellen, at a speech in late March 2016, again reiterated the data dependent nature of potential future interest rate hikes. The Federal Reserve realizes economies and markets around the world are very connected to one another. Growth in both the Eurozone and Japan are so weak that their central banks have engaged in negative interest rate programs as part of their efforts to stimulate their respective economies. While approximately 70% of the gross domestic product in the United States is generated by United States consumers, there is still a strong connection to the rest of the world. We will be watching U.S. gross domestic product, which has not exactly been robust — 2% for all of 2015, and first quarter 2016 is expected to be close to 1%. While the Fed would like to get rates higher, they are expected to raise rates slowly in the face of such external factors.

 

  2016   ANNUAL REPORT   117

Table of Contents

MANAGEMENT DISCUSSION

Ivy Limited-Term Bond Fund

(UNAUDITED)

 

 

 

They don’t want to raise rates so quickly that they derail the limited economic growth. They also do not want take rates higher than the country and world can handle. We think that this slow steady course of action probably translates into one, possibly two rate hikes in 2016. We believe the Fund should continue to perform well in this environment.

The Fund’s performance noted above is at net asset value (NAV), and does not include the effect of any applicable sales charges. If reflected, the sales charge would reduce the performance noted.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

Fixed-income securities are subject to interest rate risk and, as such, the Fund’s net asset value may fall as interest rates rise. These and other risks are more fully described in the Fund’s prospectus.

Certain U.S. government securities in which the Fund may invest, such as Treasury securities and securities issued by the Government National Mortgage Association (Ginnie Mae), are backed by the full faith and credit of the U.S. government. However, other government securities in which the Fund may invest, such as securities issued by the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal Home Loan Banks (FHLB), are not backed by the full faith and credit of the U.S. government, are not insured or guaranteed by the U.S. government and, instead, may be supported only by the right of the issuer to borrow from the U.S. Treasury or by the credit of the issuer.

On September 7, 2008, the Federal Housing Finance Agency (FHFA), an agency of the U.S. government, placed Fannie Mae and Freddie Mac into conservatorship, a statutory process with the objective of returning the entities to normal business operations. FHFA will act as the conservator to operate Fannie Mae and Freddie Mac until they are stabilized. It is unclear what effect this conservatorship will have on the securities issued or guaranteed by Fannie Mae or Freddie Mac.

The opinions expressed in this report are those of the portfolio manager and are current only through the end of the period of the report as stated on the cover. The manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index (indexes) noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of the Ivy Limited-Term Bond Fund.

 

118   ANNUAL REPORT   2016  

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Limited-Term Bond Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Bonds

      94.6%   

Corporate Debt Securities

      61.2%   

United States Government and Government Agency Obligations

      32.2%   

Municipal Bonds – Taxable

      1.0%   

Mortgage-Backed Securities

      0.2%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      5.4%   

Lipper Rankings

 

 

 

Category: Lipper Short-Intermediate
Investment Grade Debt Funds		    Rank      Percentile

1 Year

    82/182      45

3 Year

    117/154      76

5 Year

    94/112      84

10 Year

    53/87      61

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

Quality Weightings

 

 

 

Investment Grade

      86.6%   

AAA

      0.9%   

AA

      35.8%   

A

      20.6%   

BBB

      29.3%   

Non-Investment Grade

      8.0%   

BB

      4.0%   

Non-rated

      4.0%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      5.4%   

Our preference is to always use ratings obtained from Standard & Poor’s. For securities not rated by Standard & Poor’s, ratings are obtained from Moody’s. We do not evaluate these ratings, but simply assign them to the appropriate credit quality category as determined by the rating agency.

 

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

  2016   ANNUAL REPORT   119

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Limited-Term Bond Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1)The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class B(4)      Class C      Class E      Class I      Class R      Class R6      Class Y  

1-year period ended  3-31-16

      -1.57%         -3.86%         0.22%         -1.69%         1.20%         0.59%         1.35%         0.95%   

5-year period ended 3-31-16

      1.03%         0.50%         0.79%         0.92%         1.79%         —            —            1.54%   

10-year period ended 3-31-16

      3.12%         2.69%         2.60%         —            —            —            —            3.42%   

Since Inception of Class through 3-31-16(5)

      —            —            —            2.91%         3.60%         0.35%         1.60%         —      

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 2.50%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) 4-2-07 for Class E shares, 4-2-07 for Class I shares, 12-19-12 for Class R shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

120   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Limited-Term Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

CORPORATE DEBT
SECURITIES		   Principal     Value  

Consumer Discretionary

  

 

Apparel Retail – 0.5%

  

Limited Brands, Inc.,

      

8.500%, 6-15-19

   $ 5,040      $ 5,898   

TJX Cos., Inc. (The),

      

2.750%, 6-15-21

     3,500        3,633   
   

 

 

  
      9,531   
   

 

 

  
 

Apparel, Accessories & Luxury Goods – 1.6%

  

Hanesbrands, Inc.,

      

6.375%, 12-15-20

     17,102        17,700   

LVMH Moet Hennessy - Louis Vuitton,

      

1.625%, 6-29-17 (A)

     10,275        10,339   
   

 

 

  
      28,039   
   

 

 

  
 

Automobile Manufacturers – 2.0%

  

General Motors Co.,

      

4.875%, 10-2-23

     10,500        11,008   

Toyota Motor Credit Corp.:

      

2.000%, 9-15-16

     13,250        13,330   

2.000%, 10-24-18

     5,125        5,218   

Volkswagen Group of America, Inc.,

      

2.125%, 5-23-19 (A)

     6,350        6,281   
   

 

 

  
      35,837   
   

 

 

  
 

Cable & Satellite – 1.3%

  

DIRECTV Holdings LLC and DIRECTV Financing Co., Inc.:

      

5.875%, 10-1-19

     3,900        4,409   

5.200%, 3-15-20

     3,000        3,332   

Lender Processing Services, Inc. and Black Knight Lending Solutions, Inc.,

      

5.750%, 4-15-23

     4,058        4,202   

Time Warner Cable, Inc.,

      

5.850%, 5-1-17

     6,830        7,120   

Time Warner Co., Inc. (GTD by Time Warner, Inc.),

      

7.250%, 10-15-17

     4,000        4,336   
   

 

 

  
      23,399   
   

 

 

  
 

General Merchandise Stores – 0.9%

  

Dollar General Corp.:

      

4.125%, 7-15-17

     12,500        12,904   

1.875%, 4-15-18

     3,000        3,018   
   

 

 

  
      15,922   
   

 

 

  
 

Home Improvement Retail – 0.6%

  

Lowe’s Co., Inc.,

      

2.125%, 4-15-16

     11,366        11,371   
   

 

 

  
 

Internet Retail – 1.1%

  

Amazon.com, Inc.:

      

1.200%, 11-29-17

     8,000        8,014   

3.800%, 12-5-24

     10,305        11,265   
   

 

 

  
      19,279   
   

 

 

  
CORPORATE DEBT
SECURITIES (Continued)		   Principal     Value  

Leisure Products – 0.1%

  

Mattel, Inc.,

      

2.500%, 11-1-16

   $ 2,500      $ 2,519   
   

 

 

  
 

Total Consumer
Discretionary – 8.1%

   

     145,897   

Consumer Staples

  

 

Brewers – 0.5%

  

Anheuser-Busch InBev S.A./N.V.,

      

3.300%, 2-1-23

     8,185        8,512   
   

 

 

  
 

Distillers & Vintners – 0.6%

  

Beam, Inc.,

      

1.750%, 6-15-18

     10,000        10,009   
   

 

 

  
 

Drug Retail – 1.0%

  

CVS Caremark Corp.,

      

2.250%, 12-5-18

     11,000        11,269   

CVS Health Corp.,

      

2.800%, 7-20-20

     6,050        6,282   
   

 

 

  
      17,551   
   

 

 

  
 

Food Distributors – 0.1%

  

ConAgra Foods, Inc.,

      

5.819%, 6-15-17

     2,500        2,625   
   

 

 

  
 

Packaged Foods & Meats – 1.0%

  

Hershey Co. (The),

      

1.600%, 8-21-18

     8,860        8,933   

Tyson Foods, Inc. (GTD by Tyson Fresh Meats, Inc.),

      

2.650%, 8-15-19

     9,450        9,694   
   

 

 

  
      18,627   
   

 

 

  
 

Soft Drinks – 0.2%

  

Bottling Group LLC,

      

5.125%, 1-15-19

     4,059        4,488   
   

 

 

  
 

Total Consumer Staples – 3.4%

  

     61,812   

Energy

  

 

Integrated Oil & Gas – 0.2%

  

Statoil ASA (GTD by Statoil Petroleum AS),

      

1.950%, 11-8-18

     3,500        3,530   
   

 

 

  
 

Oil & Gas Equipment & Services – 1.2%

  

Enterprise Products Operating LLC (GTD by Enterprise Products Partners L.P.),

      

6.500%, 1-31-19

     8,250        9,040   

Schlumberger Investment S.A. (GTD by Schlumberger Ltd.):

      

1.950%, 9-14-16 (A)

     3,000        3,008   

1.250%, 8-1-17 (A)

     5,000        4,973   
CORPORATE DEBT
SECURITIES (Continued)		   Principal     Value  

Oil & Gas Equipment & Services (Continued)

  

Schlumberger Norge A.S. (GTD by Schlumberger Ltd.):

      

1.950%, 9-14-16 (A)

   $ 3,000      $ 3,007   

1.250%, 8-1-17 (A)

     2,435        2,418   
   

 

 

  
      22,446   
   

 

 

  
 

Oil & Gas Exploration & Production – 1.6%

  

BP Capital Markets plc (GTD by BP plc),

      

1.674%, 2-13-18

     13,500        13,518   

ConocoPhillips Co. (GTD by ConocoPhillips),

      

3.350%, 11-15-24

     4,000        3,866   

EQT Corp.,

      

8.125%, 6-1-19

     11,520        12,416   
   

 

 

  
      29,800   
   

 

 

  
 

Oil & Gas Storage & Transportation – 2.0%

  

El Paso Corp.,

      

7.000%, 6-15-17

     7,550        7,922   

Kinder Morgan Energy Partners L.P.,

      

5.950%, 2-15-18

     7,000        7,328   

Sunoco Logistics Partners Operations L.P. (GTD by Sunoco Logistics Partners L.P.),

      

4.400%, 4-1-21

     14,500        14,246   

TransCanada PipeLines Ltd.,

      

3.125%, 1-15-19

     5,750        5,813   
   

 

 

  
      35,309   
   

 

 

  
 

Total Energy – 5.0%

  

     91,085   

Financials

  

 

Asset Management & Custody Banks – 0.9%

  

Ares Capital Corp.,

      

3.875%, 1-15-20

     16,515        16,928   
   

 

 

  
 

Consumer Finance – 5.4%

  

American Express Co.,

      

7.000%, 3-19-18

     10,000        10,979   

American Express Credit Corp.,

      

1.300%, 7-29-16

     5,320        5,329   

American Honda Finance Corp.:

      

1.500%, 9-11-17 (A)

     6,000        6,013   

7.625%, 10-1-18 (A)

     5,000        5,715   

Capital One Financial Corp.,

      

6.750%, 9-15-17

     9,000        9,588   

Caterpillar Financial Services Corp.,

      

1.000%, 11-25-16

     2,000        2,004   

Discover Financial Services,

      

3.950%, 11-6-24

     14,150        13,990   

Ford Motor Credit Co. LLC:

      

1.500%, 1-17-17

     9,650        9,638   

5.000%, 5-15-18

     10,000        10,560   
 

 

  2016   ANNUAL REPORT   121

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Limited-Term Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

CORPORATE DEBT
SECURITIES (Continued)		   Principal     Value  

Consumer Finance (Continued)

  

General Motors Financial Co., Inc. (GTD by AmeriCredit Financial Services, Inc.):

      

3.500%, 7-10-19

   $ 4,500      $ 4,615   

4.200%, 3-1-21

     6,500        6,717   

Hyundai Capital America:

      

1.875%, 8-9-16 (A)

     4,000        4,007   

2.875%, 8-9-18 (A)

     5,525        5,624   

Total System Services, Inc.,

      

3.800%, 4-1-21

     2,500        2,572   
   

 

 

  
      97,351   
   

 

 

  
 

Diversified Banks – 4.6%

  

Ally Financial, Inc.,

      

5.500%, 2-15-17

     9,265        9,435   

Bank of America Corp.,

      

5.650%, 5-1-18

     6,000        6,442   

Bank of New York Mellon Corp. (The),

      

2.300%, 9-11-19

     12,750        13,070   

HSBC Bank plc,

      

3.100%, 5-24-16 (A)

     6,000        6,020   

HSBC Holdings plc,

      

3.400%, 3-8-21

     6,500        6,634   

Huntington Bancshares, Inc.,

      

3.150%, 3-14-21

     6,500        6,596   

Huntington National Bank,

      

2.200%, 11-6-18

     4,000        4,017   

KeyCorp.,

      

2.900%, 9-15-20

     12,000        12,202   

Wachovia Corp.,

      

5.750%, 2-1-18

     13,500        14,536   

Wells Fargo & Co.,

      

2.125%, 4-22-19

     4,425        4,499   
   

 

 

  
      83,451   
   

 

 

  
 

Industrial REITs – 0.1%

  

Aircastle Ltd.,

      

5.000%, 4-1-23

     2,494        2,506   
   

 

 

  
 

Investment Banking & Brokerage – 2.5%

  

Goldman Sachs Group, Inc. (The):

      

5.625%, 1-15-17

     14,589        15,051   

2.750%, 9-15-20

     3,200        3,250   

Merrill Lynch & Co., Inc.,

      

6.400%, 8-28-17

     11,000        11,693   

Morgan Stanley,

      

2.450%, 2-1-19

     14,190        14,401   
   

 

 

  
      44,395   
   

 

 

  
 

Life & Health Insurance – 2.2%

  

Aflac, Inc.,

      

3.625%, 11-15-24

     8,546        8,908   

Athene Global Funding,

      

2.875%, 10-23-18 (A)

     15,450        15,210   

New York Life Global Funding,

      

1.550%, 11-2-18 (A)

     6,500        6,516   
CORPORATE DEBT
SECURITIES (Continued)		   Principal     Value  

Life & Health Insurance (Continued)

  

Principal Life Global Funding II,

      

2.625%, 11-19-20 (A)

   $ 9,500      $ 9,635   
   

 

 

  
      40,269   
   

 

 

  
 

Other Diversified Financial Services – 3.2%

  

Citigroup, Inc.:

      

1.300%, 11-15-16

     5,215        5,222   

2.550%, 4-8-19

     6,662        6,763   

Fidelity National Financial, Inc.,

      

6.600%, 5-15-17

     12,215        12,774   

Fidelity National Information Services, Inc.,

      

2.850%, 10-15-18

     5,000        5,082   

JPMorgan Chase & Co.:

      

6.000%, 1-15-18

     8,500        9,155   

2.550%, 3-1-21

     4,000        4,037   

USAA Capital Corp.,

      

2.450%, 8-1-20 (A)

     13,865        14,206   
   

 

 

  
      57,239   
   

 

 

  
 

Property & Casualty Insurance – 1.9%

  

ACE INA Holdings, Inc. (GTD by ACE Ltd.),

      

2.300%, 11-3-20

     5,500        5,594   

Berkshire Hathaway Finance Corp.,

      

1.700%, 3-15-19

     4,550        4,624   

Berkshire Hathaway, Inc.:

      

1.900%, 1-31-17

     4,000        4,036   

2.100%, 8-14-19

     7,375        7,519   

2.750%, 3-15-23

     13,260        13,527   
   

 

 

  
      35,300   
   

 

 

  
 

Regional Banks – 1.0%

  

PNC Bank N.A.:

      

1.300%, 10-3-16

     2,000        2,004   

2.400%, 10-18-19

     5,500        5,615   

PNC Funding Corp. (GTD by PNC Financial Services Group, Inc.),

      

6.700%, 6-10-19

     8,500        9,722   
   

 

 

  
      17,341   
   

 

 

  
 

Specialized REITs – 0.2%

  

Crown Castle International Corp.,

      

5.250%, 1-15-23

     2,745        2,951   
   

 

 

  
 

Total Financials – 22.0%

  

     397,731   

Health Care

  

 

Biotechnology – 0.4%

  

Amgen, Inc.:

      

2.125%, 5-15-17

     5,500        5,558   

1.250%, 5-22-17

     1,950        1,954   
   

 

 

  
      7,512   
   

 

 

  
CORPORATE DEBT
SECURITIES (Continued)		   Principal     Value  

Health Care Services – 0.4%

  

Quest Diagnostics, Inc.,

      

3.200%, 4-1-16

   $ 6,966      $ 6,966   
   

 

 

  
 

Health Care Supplies – 2.0%

  

Catholic Health Initiatives,

      

2.600%, 8-1-18

     11,871        12,093   

DENTSPLY International, Inc.,

      

2.750%, 8-15-16

     4,000        4,022   

Medtronic, Inc.,

      

3.500%, 3-15-25

     16,152        17,241   

Stryker Corp.,

      

2.625%, 3-15-21

     3,025        3,084   
   

 

 

  
      36,440   
   

 

 

  
 

Pharmaceuticals – 0.8%

  

AbbVie, Inc.,

      

2.500%, 5-14-20

     5,000        5,093   

Merck & Co., Inc.,

      

1.100%, 1-31-18

     4,925        4,942   

Mylan, Inc.,

      

1.350%, 11-29-16

     4,291        4,262   
   

 

 

  
      14,297   
   

 

 

  
 

Total Health Care – 3.6%

  

     65,215   

Industrials

  

 

Aerospace & Defense – 2.0%

  

BAE Systems Holdings, Inc.,

      

3.850%,
12-15-25 (A)

     5,500        5,662   

Exelis, Inc.:

      

4.250%, 10-1-16

     12,406        12,581   

5.550%, 10-1-21

     2,566        2,862   

Huntington Ingalls Industries, Inc.,

      

5.000%,
11-15-25 (A)

     13,868        14,527   
   

 

 

  
      35,632   
   

 

 

  
 

Airlines – 0.6%

  

Southwest Airlines Co.:

      

5.125%, 3-1-17

     5,000        5,169   

2.650%, 11-5-20

     6,000        6,120   
   

 

 

  
      11,289   
   

 

 

  
 

Environmental & Facilities Services – 1.7%

  

Republic Services, Inc.,

      

3.800%, 5-15-18

     14,690        15,320   

Waste Management, Inc.:

      

6.100%, 3-15-18

     10,000        10,925   

4.750%, 6-30-20

     1,675        1,863   

7.100%, 8-1-26

     2,450        3,189   
   

 

 

  
      31,297   
   

 

 

  
 

Industrial Conglomerates – 0.9%

  

General Electric Capital Corp.,

      

5.012%, 1-1-24

     14,657        16,176   
   

 

 

  
 

 

122   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Limited-Term Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

CORPORATE DEBT
SECURITIES (Continued)		   Principal     Value  

Trading Companies & Distributors – 0.5%

  

HD Supply, Inc.,

      

5.250%, 12-15-21 (A)

   $ 9,249      $ 9,711   
   

 

 

  
 

Total Industrials – 5.7%

  

     104,105   

Information Technology

  

 

Communications Equipment – 1.0%

  

Cisco Systems, Inc.:

      

2.200%, 2-28-21

     4,050        4,139   

2.600%, 2-28-23

     5,920        6,092   

Harris Corp.,

      

2.700%, 4-27-20

     1,094        1,097   

Juniper Networks, Inc.,

      

3.125%, 2-26-19

     6,000        6,103   
   

 

 

  
      17,431   
   

 

 

  
 

Data Processing & Outsourced
Services – 1.7%

   

Alliance Data Systems Corp.:

      

5.250%,
12-1-17 (A)

     6,600        6,682   

6.375%,
4-1-20 (A)

     6,000        6,105   

Visa, Inc.,

      

2.800%, 12-14-22

     17,500        18,269   
   

 

 

  
      31,056   
   

 

 

  
 

Electronic Equipment & Instruments – 0.4%

  

Xerox Corp.,

      

6.350%, 5-15-18

     6,175        6,590   
   

 

 

  
 

Electronic Manufacturing Services – 0.7%

  

Jabil Circuit, Inc.,

      

7.750%, 7-15-16

     12,676        12,859   
   

 

 

  
 

Semiconductors – 0.2%

  

Intel Corp.,

      

2.450%, 7-29-20

     4,000        4,141   
   

 

 

  
 

Systems Software – 1.2%

  

CA, Inc.,

      

5.375%, 12-1-19

     5,000        5,470   

Microsoft Corp.,

      

2.000%, 11-3-20

     16,000        16,400   
   

 

 

  
      21,870   
   

 

 

  
 

Technology Hardware, Storage &
Peripherals – 0.7%

   

Apple, Inc.,

      

1.550%, 2-7-20

     12,400        12,454   
   

 

 

  
 

Total Information
Technology – 5.9%

   

     106,401   

Materials

  

 

Diversified Chemicals – 0.4%

  

Dow Chemical Co. (The),

      

4.250%, 11-15-20

     7,049        7,671   
   

 

 

  
CORPORATE DEBT
SECURITIES (Continued)		   Principal     Value  

Metal & Glass Containers – 0.5%

  

FBG Finance Ltd.,

      

7.875%,
6-1-16 (A)

   $ 9,000      $ 9,096   
   

 

 

  
 

Specialty Chemicals – 0.8%

  

Methanex Corp.,

      

3.250%, 12-15-19

     14,669        13,653   
   

 

 

  
 

Total Materials – 1.7%

  

     30,420   

Telecommunication Services

  

 

Integrated Telecommunication
Services – 2.1%

   

AT&T, Inc.,

      

2.950%, 5-15-16

     6,715        6,730   

CC Holdings GS V LLC,

      

2.381%, 12-15-17

     8,335        8,407   

SBA Tower Trust,

      

2.240%,
4-16-18 (A)

     6,720        6,672   

Verizon Communications, Inc.,

      

6.350%, 4-1-19

     14,000        15,862   
   

 

 

  
      37,671   
   

 

 

  
 

Wireless Telecommunication Service – 1.3%

  

American Tower Corp.:

      

3.300%, 2-15-21

     2,500        2,544   

5.900%, 11-1-21

     14,500        16,571   

Crown Castle Towers LLC,

      

3.222%,
5-15-22 (A)

     4,000        4,006   
   

 

 

  
      23,121   
   

 

 

  
 

Total Telecommunication
Services – 3.4%

   

     60,792   

Utilities

  

 

Electric Utilities – 1.4%

  

Entergy Texas, Inc.,

      

2.550%, 6-1-21

     7,225        7,262   

Kansas City Power & Light Co.,

      

7.150%, 4-1-19

     13,555        15,599   

National Rural Utilities Cooperative Finance Corp.,

      

1.650%, 2-8-19

     3,600        3,611   
   

 

 

  
      26,472   
   

 

 

  
 

Multi-Utilities – 1.0%

  

Dominion Resources, Inc.,

      

6.400%, 6-15-18

     11,118        12,094   

Dominion Resources, Inc., Series A,

      

1.400%, 9-15-17

     5,850        5,824   
   

 

 

  
      17,918   
   

 

 

  
 

Total Utilities – 2.4%

  

     44,390   
CORPORATE DEBT
SECURITIES (Continued)		   Principal     Value  

TOTAL CORPORATE DEBT SECURITIES – 61.2%

   

   $ 1,107,848   

(Cost: $1,094,467)

      
 
MORTGAGE-BACKED
SECURITIES		         

Other – 0.2%

  

CFCRE Commercial Mortgage Trust, Series 2015-RUM, Class B,

      

2.577%, 7-15-30 (A)(B)

   $ 3,942        3,822   
   

 

 

  
 

TOTAL MORTGAGE-BACKED SECURITIES – 0.2%

   

   $ 3,822   

(Cost: $3,904)

      
 
MUNICIPAL BONDS – TAXABLE         

California – 0.9%

  

Alameda Corridor Trans Auth, Taxable Sr Lien Rev Bonds, Ser 1999C,

      

6.500%, 10-1-19

     7,170        7,855   

The Regents of the Univ of CA, Gen Rev Bonds, Ser 2013AH,

      

1.796%, 7-1-19

     7,615        7,786   
   

 

 

  
      15,641   
   

 

 

  
 

Hawaii – 0.1%

  

Cnty of Kauai, Taxable GO Bonds, Ser 2010A,

      

3.335%, 8-1-16

     2,600        2,626   
   

 

 

  
 

TOTAL MUNICIPAL BONDS – TAXABLE – 1.0%

   

   $ 18,267   

(Cost: $18,057)

      
 
UNITED STATES GOVERNMENT
AGENCY OBLIGATIONS		         

Agency Obligations – 0.6%

  

Federal Home Loan Bank:

      

4.780%, 1-25-17

     848        868   

2.750%, 3-2-26

     10,000        9,964   
   

 

 

  
      10,832   
   

 

 

  
 

Mortgage-Backed Obligations – 20.5%

  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO:

      

3.548%,
2-25-22 (A)(B)

     4,000        3,693   

4.000%, 6-15-26

     12,494        13,581   

4.500%, 5-15-32

     220        221   

5.000%, 12-15-34

     546        611   
 

 

  2016   ANNUAL REPORT   123

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Limited-Term Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

UNITED STATES
GOVERNMENT AGENCY
OBLIGATIONS (Continued)		   Principal     Value  

Mortgage-Backed Obligations (Continued)

  

4.881%,
7-25-44 (A)(B)

   $ 5,870      $ 6,118   

4.949%,
8-25-44 (A)(B)

     4,000        4,350   

4.161%,
9-25-44 (A)(B)

     8,200        8,438   

4.349%,
12-25-44 (A)(B)

     17,000        18,019   

3.751%,
2-25-45 (A)(B)

     8,500        8,747   

4.344%,
1-25-46 (A)(B)

     5,958        6,312   

4.595%,
11-25-46 (A)(B)

     8,000        8,577   

5.167%,
2-25-47 (A)(B)

     5,120        5,612   

4.423%,
12-25-48 (A)(B)

     18,196        19,372   

Federal Home Loan Mortgage Corp. Fixed Rate Participation Certificates:

      

5.500%, 4-1-20

     470        497   

3.000%, 8-1-28

     11,654        12,199   

3.000%, 9-1-28

     11,417        11,951   

3.500%, 1-1-29

     2,227        2,354   

3.000%, 1-1-33

     7,476        7,818   

3.000%, 5-15-44

     3,769        3,956   

4.286%,
7-25-48 (A)(B)

     5,200        5,243   

Federal National Mortgage Association Agency REMIC/CMO:

      

5.500%, 12-25-17

     751        771   

3.510%, 4-25-29

     11,750        11,972   

2.375%, 2-24-31

     8,500        8,499   

2.000%, 4-25-39

     9,729        9,681   

2.000%, 4-25-40

     7,243        7,290   

2.500%, 11-25-45

     18,286        18,735   

Federal National Mortgage Association Fixed Rate Pass-Through Certificates:

      

5.500%, 9-1-17

     707        719   

0.875%, 10-26-17

     15,000        15,030   

4.513%, 12-1-19

     11,039        12,082   

4.637%, 7-1-20

     9,783        10,726   

4.380%, 6-1-21

     14,377        15,970   

5.500%, 10-1-21

     1,850        1,971   

5.450%, 10-18-21

     8,028        8,224   

5.500%, 2-1-22

     994        1,063   

6.000%, 7-1-22

     725        798   

3.500%, 8-1-26

     6,009        6,382   

2.375%, 4-25-28

     15,250        15,249   

3.000%, 7-1-28

     10,993        11,498   

2.000%, 10-25-41

     16,627        16,707   

2.000%, 12-25-42

     2,689        2,739   

2.500%, 7-25-45

     3,733        3,827   

UNITED STATES
GOVERNMENT
AGENCY OBLIGATIONS

(Continued)

   Principal     Value  

Mortgage-Backed Obligations (Continued)

  

2.500%, 9-25-45

   $ 5,897      $ 6,048   

2.500%, 12-25-45

     17,602        18,016   

Government National Mortgage Association Agency REMIC/CMO,

      

2.000%, 3-16-42

     9,111        9,065   

Government National Mortgage Association Fixed Rate Pass-Through Certificates,

      

3.500%, 4-20-34

     10,295        10,757   
   

 

 

  
      371,488   
   

 

 

  
 

TOTAL UNITED STATES GOVERNMENT AGENCY OBLIGATIONS – 21.1%

    

   $ 382,320   

(Cost: $380,534)

      
 
UNITED STATES GOVERNMENT
OBLIGATIONS		         

Treasury Obligations – 11.1%

  

U.S. Treasury Notes:

      

1.750%, 5-31-16

     13,000        13,031   

1.500%, 7-31-16

     15,000        15,056   

0.625%, 9-30-17

     100,000        99,875   

2.750%, 2-28-18

     35,000        36,340   

1.375%, 8-31-20

     20,000        20,196   

2.000%, 8-15-25

     17,000        17,333   
   

 

 

  
      201,831   
   

 

 

  
 

TOTAL UNITED STATES GOVERNMENT
OBLIGATIONS – 11.1%

    

   $ 201,831   

(Cost: $200,742)

      
 
SHORT-TERM SECURITIES         

Commercial Paper (C) – 5.0%

  

Bemis Co., Inc.,

      

0.760%, 4-6-16

     5,000        5,000   

BMW U.S. Capital LLC (GTD by BMW AG),

      

0.400%, 4-1-16

     8,000        8,000   

Campbell Soup Co.,

      

0.440%, 4-19-16

     5,000        4,999   

Clorox Co. (The),

      

0.741%, 4-4-16

     10,000        9,999   

Danaher Corp.,

      

0.450%, 4-6-16

     5,000        5,000   

DTE Electric Co.,

      

0.440%, 4-13-16

     10,000        9,998   

DTE Gas Co.,

      

0.650%, 4-6-16

     5,000        5,000   

Essilor International S.A.,

      

0.400%, 5-2-16

     6,000        5,998   
SHORT-TERM
SECURITIES		   Principal     Value  

Commercial Paper (C) (Continued)

  

J.M. Smucker Co. (The),

      

0.650%, 4-1-16

   $ 1,146      $ 1,146   

John Deere Canada ULC (GTD by Deere & Co.),

      

0.320%, 4-12-16

     2,500        2,500   

Malayan Banking Berhad (GTD by Wells Fargo Bank N.A.),

      

0.400%, 4-14-16

     5,000        4,999   

Medtronic Global Holdings SCA,

      

0.570%, 4-5-16

     5,000        5,000   

Mondelez International, Inc.,

      

0.640%, 4-5-16

     5,000        5,000   

Northern Illinois Gas Co.,

      

0.470%, 4-13-16

     5,000        4,999   

Rockwell Automation, Inc.:

      

0.570%, 4-6-16

     6,000        5,999   

0.360%, 4-11-16

     5,000        4,999   
   

 

 

  
      88,636   
   

 

 

  
 

Master Note – 0.0%

  

Toyota Motor Credit Corp.,

      

0.443%,
4-6-16 (D)

     648        648   
   

 

 

  

United States Government

  

Agency Obligations – 0.0%

  

Overseas Private Investment Corp. (GTD by U.S. Government),

      

0.360%,
4-6-16 (D)

     670        670   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 5.0%

           $ 89,954   

(Cost: $89,952)

      
 

TOTAL INVESTMENT SECURITIES – 99.6%

   

   $ 1,804,042   

(Cost: $1,787,656)

      
 

CASH AND OTHER ASSETS, NET OF LIABILITIES – 0.4%

   

     6,457   
 

NET ASSETS – 100.0%

  

   $ 1,810,499   
 

 

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SCHEDULE OF INVESTMENTS

Ivy Limited-Term Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

Notes to Schedule of Investments

 

(A) Securities were 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 March 31, 2016 the total value of these securities amounted to $263,736 or 14.6% of net assets.

 

(B) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016.

 

(C) Rate shown is the yield to maturity at March 31, 2016.

 

(D) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  
       

Assets

        

Investments in Securities

        

Corporate Debt Securities

   $ —       $ 1,107,848       $ —   

Mortgage-Backed Securities

     —         3,822         —   

Municipal Bonds

     —         18,267         —   

United States Government Agency Obligations

     —         382,320         —   

United States Government Obligations

     —         201,831         —   

Short-Term Securities

     —         89,954         —   

Total

   $ —       $ 1,804,042       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

The following acronyms are used throughout this schedule:

CMO = Collateralized Mortgage Obligation

GTD = Guaranteed

REMIC = Real Estate Mortgage Investment Conduit

REIT = Real Estate Investment Trust

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   125

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MANAGEMENT DISCUSSION

Ivy Managed International Opportunities Fund

(UNAUDITED)

 

 

 

LOGO

Michael L. Avery

Below, Michael L. Avery, portfolio manager of the Ivy Managed International Opportunities Fund, discusses the positioning, performance and results for the fiscal year ended March 31, 2016. He has managed the Fund since its inception on April 2, 2007, and he has 37 years of industry experience. Mr. Avery will retire from the firm effective June 30, 2016.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy Managed International Opportunities Fund (Class A shares at net asset value)

      –9.41%   

Ivy Managed International Opportunities Fund (Class A shares including sales charges)

      –14.61%   

Benchmark

         

MSCI AC World ex USA Index

      –9.19%   

(generally reflects the performance of overseas stocks)

         

Please note that Fund returns include applicable fees and expenses, whereas index returns do not include any such fees. The performance discussion below is at net asset value.

 

Volatility marks the year

 

 

Fear seemed to be the operative word in 2015 and early in 2016 in global equity, fixed income and currency markets, though the beginning and end points masked the volatility throughout the fiscal year. The U.S. Treasury 10-year yield began the year at 1.94%, peaking around 2.50% in June 2015 and hitting a trough around 1.63% in February 2016 before ending the fiscal year at 1.78%. Similarly, the S&P 500 Index began and ended the fiscal year at 2059, but had four +10% swings in between.

The U.S. dollar had been in a strengthening trend for many months but began to weaken during the final quarter of the fiscal year. The dollar strengthened broadly against developed market currencies such as the yen, Canadian dollar and the euro, but the currencies of emerging areas such as Russia, Brazil, Thailand, Argentina and Colombia suffered as well. The yen has rallied to start 2016, despite the Bank of Japan moving to a negative interest rate policy in January with the intent of weakening the yen. Similarly, though not as dramatic as the yen, the euro has moved off its lows of November 2015 and onto a slightly stronger trajectory in 2016, even as the European Central Bank continued to cut rates and expand its quantitative easing (QE) facility.

Commodities prices weakened through most of the year, but showed signs of stabilization in the second half of the fiscal year. West Texas Intermediate crude oil prices (the U.S. benchmark) have perhaps found a floor in early 2016, closing below $27 in February but above $40 at the end of March on reduced supply expectations and a weaker U.S. dollar. Though inflation expectations continue to look well-contained, the consumer price index has trended higher because of energy, and the core measure excluding food and energy is running above the target of 2% because of increases in core goods and housing-related indicators.

Fed funds futures had an interest rate hike priced in from the U.S. Federal Reserve (Fed) during the second half of calendar 2015, though the odds were lower after Greece’s “No” vote in its July referendum on austerity and debt relief, and following the market correction after China’s yuan devaluation. We had doubts the Fed would be able to begin the normalization process of moving off of the “zero-bound” after seven years, given the macroeconomic risks globally. However, in spite of increasingly volatile markets, the Fed raised its base rate by 0.25% at its December meeting. Several years into the economic cycle, we believe the Fed prefers to build capacity to cut rates in the future, when warranted.

It is impossible to fully know the amount of leverage amassed in the global financial system, though we know there has been massive buildup in debt on emerging market country balance sheets — corporates and sovereigns alike. We think this is not a great recipe and the magnitude of the global impact is one of the most important questions facing investors today. The multiple growth scares during the fiscal year typically gain potency in a highly levered, low-growth world.

As of the end of the fiscal year, the Fed had not acted to raise rates again and softened its rhetoric on what would prompt further hikes. This, combined with a renewed pro-cyclical shift from China, changed the markets’ tone in February.

Global growth decelerated to roughly 3% in 2015 and we expect a further slowdown in 2016, with developed market gross domestic product (GDP) growth below 2% and emerging market economies coming in at 3.5-4.0%. The U.S. is likely to continue to lead developed economies, though estimates for the U.S. were revised lower after the final release of fourth-quarter 2015 GDP. Growth in Europe and Japan remains positive, but fails to show signs of real acceleration despite the central bank accommodation in place. The ongoing trends of slower growth and rising debt will continue to magnify the effects of slight changes in the markets’ assumptions for global growth.

Portfolio review

 

 

The Fund ended the fiscal year with a negative return that nearly matched its benchmark index. The Fund’s performance reflected the negative returns for the fiscal year in all of the underlying funds and the allocation weighting to them.

We ended the fiscal year with the largest percentage of the Fund’s assets allocated to Ivy International Core Equity Fund at about 29%, above the 20% weighting of a year ago, for its exposure to holdings in international markets. We increased the allocation to the Ivy Global Growth Fund to about

 

126   ANNUAL REPORT   2016  

Table of Contents

 

 

26% from 20% the prior year in order to maintain wide exposure to global markets overall. The allocation to Ivy European Opportunities Fund increased to about 19% from roughly 10% a year earlier, and Ivy Global Income Allocation Fund increased to nearly 16% from 10%. The largest allocation change was in the Ivy Emerging Markets Equity Fund, which ended the year at about 10%, down significantly from the 40% weighting a year earlier. Allocations in general reflected the slowing economic growth in across emerging markets, led primarily by China, along with a theme focused on the rising discretionary incomes of consumers in many countries.

Facing several headwinds

 

 

Looking ahead, we think the unintended consequences associated with global central bank policies are a primary risk for the markets and we expect to see increased volatility as central bankers attempt to reconcile a number of uncertainties. Those headwinds include a relatively stronger U.S. economy, but concern regarding the timing of additional rate hikes; the fading effects of easier monetary policy combined with slow growth and mounting global leverage, geopolitical events, and China’s growth prospects although that country’s economic data have strengthened recently in response to fiscal policy changes to stimulate investment areas within infrastructure.

Emerging market consumers have had a prominent role within the portfolio since the financial crisis — particularly in China — and we continue to believe in their long-term growth as the rise in discretionary income is likely to continue to eclipse that of their developed market counterparts. However, we believe the growth rate for consumption will be slower and, from here, more dependent on structural reforms. In addition, multinationals are seeing increased competition from local companies as quality improves.

Absent a perceived policy mistake (monetary or fiscal) or global shock, the equity markets could experience another year of volatility and bond yields with little movement in one direction or another, particularly at the long end and in spite of the Fed’s desire to normalize rates.

Performance shown at NAV does not include the effect of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

International investing involves additional risks, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the Fund’s portfolio manager and are current only through the end of the period of the report as stated on the cover. The manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged, includes reinvested dividends and does not include fees. One cannot invest directly in an index, nor is an index representative of Ivy Managed International Opportunities Fund’s performance.

 

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Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Managed International Opportunities Fund

  

ALL DATA IS AS OF MARCH 31, 2016

(UNAUDITED)

 

 

 

Ivy Managed International Opportunities Fund

 

 

Ivy International Core Equity Fund, Class I

    29.4%

Ivy Global Growth Fund, Class I

    25.7%

Ivy European Opportunities Fund, Class I

    19.2%

Ivy Global Income Allocation Fund, Class I

    15.7%

Ivy Emerging Markets Equity Fund, Class I

    9.9%

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

    0.1%

The percentages of investments in the underlying funds may not currently be within the target allocation ranges disclosed in the Fund’s prospectus due to market movements; these percentages are expected to change over time, and deviation from the target allocation ranges due to market movements is permitted by the prospectus.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.
 

 

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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Managed International Opportunities Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class B(4)      Class C      Class E(5)      Class I      Class R      Class Y  

1-year period ended 3-31-16

      -14.61%         -14.00%         -10.30%         -14.55%         -9.00%         -9.55%         -9.28%   

5-year period ended 3-31-16

      -0.10%         -0.03%         0.28%         -0.03%         1.38%         —            1.17%   

10-year period ended 3-31-16

      —            —            —            —            —            —            —      

Since Inception of Class through 3-31-16(6)

      0.65%         0.57%         0.53%         0.74%         1.64%         2.82%         1.37%   

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) Class E shares are not currently available for investment.

 

(6) 4-2-07 for Class A shares, 4-2-07 for Class B shares, 4-2-07 for Class C shares, 4-2-07 for Class E shares, 4-2-07 for Class I shares, 12-19-12 for Class R shares and 4-2-07 for Class Y shares (the date on which shares were first acquired by shareholders).

On March 17, 2014, the Ivy Managed European/Pacific Fund merged into the Fund. Performance prior to such time in part reflects the Ivy Pacific Opportunities Fund’s former strategy and may have differed if the merger had not taken place.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

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Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Managed International Opportunities Fund (in thousands)

MARCH 31, 2016

 

 

 

AFFILIATED
MUTUAL FUNDS		   Shares     Value  

Ivy Emerging Markets Equity Fund, Class I

     1,397      $ 19,499   

Ivy European Opportunities Fund, Class I

     1,435        38,032   

Ivy Global Growth Fund, Class I

     1,276        50,815   

Ivy Global Income Allocation Fund,
Class I

     2,201        30,990   

Ivy International Core Equity Fund, Class I

     3,620        58,177   
   

 

 

  
 

TOTAL AFFILIATED MUTUAL FUNDS – 99.9%

           $ 197,513   

(Cost: $167,723)

      
SHORT-TERM
SECURITIES		   Principal     Value  

Master Note – 0.1%

  

Toyota Motor Credit Corp.,

      

0.443%, 4-6-16 (A)

   $ 279      $ 279   
   

 

 

  
 

TOTAL SHORT-TERM
SECURITIES – 0.1%

           $ 279   

(Cost: $279)

      
 

TOTAL INVESTMENT
SECURITIES – 100.0%

           $ 197,792   

(Cost: $168,002)

      
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – 0.0%

             (63 ) 
 

NET ASSETS – 100.0%

  

   $ 197,729   
 

 

Notes to Schedule of Investments

 

(A) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following table is a summary of the valuation of the Fund investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  
       

Assets

        

Investments in Securities

        

Affiliated Mutual Funds

   $ 197,513       $ —       $ —   

Short-Term Securities

     —         279         —   

Total

   $ 197,513       $ 279       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

 

See Accompanying Notes to Financial Statements.

 

130   ANNUAL REPORT   2016  

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MANAGEMENT DISCUSSION

Ivy Micro Cap Growth Fund

(UNAUDITED)

 

 

 

 

LOGO

John Bichelmeyer

John P. Bichelmeyer, CFA, who has 19 years of industry experience, became portfolio manager of Ivy Micro Cap Growth Fund on July 1, 2015. Prior to July 1, 2015, the Fund was subadvised by Wall Street Associates (WSA), which managed the Fund since its inception in February 2009. Below, Mr. Bichelmeyer discusses positioning, performance and results for the fiscal year ended March 31, 2016.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy Micro Cap Growth Fund (Class A shares at net asset value)

      –23.51%   

Ivy Micro Cap Growth Fund (Class A shares including sales charges)

      –27.91%   

Benchmark(s) and/or Lipper Category

         

Russell 2000 Growth Index

      –11.84%   

(generally reflects the performance of smaller market cap company stocks within the growth market)

         

Russell Microcap Growth Index

      –17.02%   

(generally reflects the performance of stocks in the smallest category of publicly traded companies within the growth market)

         

Lipper Small-Cap Growth Funds Universe Average

      –12.11%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. Multiple indexes are shown because the Fund’s portfolio manager expects to typically invest in companies within a wider range of market capitalization. The performance discussion below is at net asset value.

 

Key Drivers

 

 

For the fiscal year ended March 31, 2016, equity investors, especially those focused on the smallest of companies, have been subjected to an extremely challenging and volatile investment landscape. Economies around the world continue to experience difficulty in achieving and/or maintaining healthy economic growth even though interest rates have fallen to unprecedented levels , including negative rates. Despite the lack of sustained economic growth, the Federal Reserve (Fed) complicated the matter further in December 2015 by raising interest rates for the first time after seven years of near zero rates and indicated more increases were on the horizon. This in turn exacerbated the strength of the U.S. dollar and the pressure it was putting on most commodities and foreign countries that hold significant amounts of dollar-denominated debt. The level of strain in the financial system continued to mount until late February/early March 2016, when the Fed toned down its rhetoric about the pace of future interest rate increases, at which time equites began to trend higher into the fiscal year end. Given this set of circumstances, investors’ appetite for risk, and smaller companies in general, continued to diminish throughout the fiscal period.

Since the spring of 2014 when the Fed first began to discuss the possibility of rising interest rates, micro-cap growth equities have trailed larger capitalization companies by over 27%, as measured by the Russell Microcap Growth Index and the S&P 500 index. After such a strong multi-year run of outperformance that ended in early 2014, it is not uncommon to see this type of underperformance; however, this doesn’t make the returns any more palatable. The indiscriminate selling that has been so common in the marketplace today has created a situation where the median stock is down much more than the index, creating a difficult investment backdrop for active managers over the past fiscal year.

Performance

 

 

In regard to the Fund’s benchmarks, for the fiscal year ended March 31, 2016, the Russell 2000 Growth Index declined 11.84% while the Russell Microcap Growth Index fell 17.02%. The Fund dropped -23.51% for the fiscal period.

For the fiscal year, energy and health care were worst two performing sectors in the Russell Microcap Growth Index. The collapse in crude oil prices was the obvious reason for energy weakness while risk aversion and lack of positive cash flow and earnings were key factors in health care’s decline. The Fund did not have any meaningful exposure to energy, thus its impact was limited for the year. Health care, on the other hand, was a meaningful detractor from the Fund’s absolute return given the decline of approximately 21% for the holdings in this sector. Despite this sharp drawdown, the Fund compared favorably to the Russell Microcap Growth Index’s decline of approximately 31% in the health care sector. Strong stock selection led to this relative outperformance, as several companies advanced their commercial development efforts by reporting positive clinical trial data while several holdings were acquired at significant premiums by larger companies.

Sectors that detracted most from the Fund’s relative performance for the fiscal year included technology, industrials and materials. Despite having an in-line weighting in technology, stocks that the Fund held within this sector declined meaningfully more than the Russell Microcap Growth Index benchmark. While some of this underperformance is a result of poor management execution and/or loss of competitive position, we believe other stocks were sold indiscriminately. In situations where a particular company’s future prospects appeared impaired, decisions were made to eliminate the positions. However, in cases where our research led us to conclude that investors had lost focus of the long-term opportunity, positions sizes were increased. Another area of weakness was the industrials sector, as many companies in this sector sell to businesses in the energy and materials sectors. This made for

 

  2016   ANNUAL REPORT   131

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MANAGEMENT DISCUSSION

Ivy Micro Cap Growth Fund

(UNAUDITED)

 

 

 

a challenging business environment that caused several of the Fund’s holding to suffer. Lastly, the materials sector, while only representing a small percentage of the Fund, had two holdings in particular that declined meaningfully as a result of the extreme collapse in commodity prices.

Fund positioning

 

 

Over the past fiscal year, the Fund has been repositioned with the average position size increasing as the Fund has held significantly fewer issuers. Health care remains the largest weighting in the Fund, but it is below the benchmark’s weighting, and biotech exposure has been reduced in favor of more medical instrument and services-related companies. The weighting within technology has shifted toward companies that have a software-as-a-service (SaaS) business model and away from businesses that are more hardware-related. The Fund is now meaningfully overweight the benchmark in the technology sector. Consumer discretionary remains an area of focus and the Fund’s relative overweight in that sector has increased since last year’s annual report. The job market remains healthy, wages are rising, home values are increasing and lower energy prices are acting like a tax cut for consumers, which should provide a healthy backdrop for discretionary spending. As a group, the energy, materials and industrials sectors are underweight; however, the steep sell off in early 2016 created what appears to be buying opportunities for existing positions, as well as good entry points for new holdings that have the potential to be attractive long-term investments. Financials and consumer staples remain a small portion of the benchmark and the Fund’s overall portfolio. Telecommunications represents a small portion of the benchmark but it is a relative overweight given the trend toward next generation communications services.

Outlook

 

 

The past fiscal year was yet again another reminder of the emotional roller coaster ride that equities can take investors on. The many cross currents facing the market today make it especially easy for emotions to drive trading behavior, both up and down, in the short term, yet we believe fundamentals will always win out over time.

Our primary focus during challenging times is to double down on our research efforts to seek to enhance the Fund’s holdings and return potential. The objective is to focus on areas of the economy that are experiencing longer-term secular growth tailwinds, and more importantly, the companies that we believe should benefit from this. Further, the goal is to identify what we believe are innovative companies with strong business models and management teams that can execute against the opportunity. Companies as described above could be affected by the economic environment surrounding them, but ideally their robust end market opportunity, innovative and/or unique products and services could allow them to emerge stronger once the economic weakness subsides. Given the weakness in some stock prices over the past fiscal year, we were able to add to some of our favorite holdings at what we believe to be attractive prices, as well as add many new holdings to the portfolio. Rather than being emotional and reactionary, the Fund’s primary goal is to follow the research to wherever it leads. We believe this strategy will uncover companies with quite favorable prospects for long-term capital appreciation. So while we don’t wish for anymore sudden, dramatic declines in equity prices, we know there will always be times like this and our objective will be to take advantage of those investment opportunities when they present themselves.

Performance shown at NAV does not include the effects of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment. Investing in micro-cap stocks may carry more risk than investing in stocks of larger, more established companies. Prices of growth stocks may be more sensitive to changes in current or expected earnings than the prices of other stocks. Growth stocks may not perform as well as value stocks or the stock market in general. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the portfolio manager and are current only through the end of the period of the report as stated on the cover. The portfolio manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The indexes noted are unmanaged, include reinvested dividends and do not include fees. One cannot invest directly in an index, nor is an index representative of the Ivy Micro Cap Growth Fund’s performance.

 

132   ANNUAL REPORT   2016  

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Micro Cap Growth Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      95.3%   

Health Care

      26.4%   

Information Technology

      23.7%   

Consumer Discretionary

      21.4%   

Industrials

      8.2%   

Telecommunication Services

      6.8%   

Consumer Staples

      3.5%   

Financials

      1.9%   

Energy

      1.9%   

Materials

      1.5%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      4.7%   

Lipper Rankings

 

 

 

Category: Lipper Small-Cap
Growth Funds		    Rank      Percentile

1 Year

    539/554      98

3 Year

    471/492      96

5 Year

    398/436      92

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

 

 

Top 10 Equity Holdings

 

 

 

Company    Sector      Industry

Tile Shop Holdings, Inc.

   

Consumer Discretionary

     

Home Improvement Retail

8x8, Inc.

   

Telecommunication Services

     

Alternative Carriers

Nautilus Group, Inc. (The)

   

Consumer Discretionary

     

Leisure Products

Sportsman’s Warehouse Holdings, Inc.

   

Consumer Discretionary

     

Specialty Stores

Motorcar Parts of America, Inc.

   

Consumer Discretionary

     

Auto Parts & Equipment

MYR Group, Inc.

   

Industrials

     

Construction & Engineering

Cornerstone OnDemand, Inc.

   

Information Technology

     

Internet Software & Services

Zix Corp.

   

Information Technology

     

Application Software

Intersect ENT, Inc.

   

Health Care

     

Pharmaceuticals

LogMeIn, Inc.

   

Information Technology

     

Internet Software & Services

See your advisor or www.ivyfunds.com for more information on the Fund’s most recently published Top 10 Equity Holdings.

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

  2016   ANNUAL REPORT   133

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Micro Cap Growth Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class B(4)      Class C      Class I      Class R      Class R6      Class Y  

1-year period ended 3-31-16

      -27.91%         -27.06%         -24.06%         -23.14%         -23.63%         -23.03%         -23.36%   

5-year period ended 3-31-16

      2.05%         2.07%         2.49%         3.72%         —            —            3.89%   

10-year period ended 3-31-16

      —            —            —            —            —            —            —      

Since Inception of Class through 3-31-16(5)

      12.51%         12.16%         12.54%         13.92%         5.43%         -8.27%         13.89%   

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) 2-17-09 for Class A shares, 2-17-09 for Class B shares, 2-17-09 for Class C shares, 2-17-09 for Class I shares, 12-19-12 for Class R shares, 7-31-14 for Class R6 shares and 2-17-09 for Class Y shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

134   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Micro Cap Growth Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Consumer Discretionary

  

 

Auto Parts & Equipment – 3.0%

  

Motorcar Parts of America, Inc. (A)

     121      $ 4,592   
   

 

 

  
 

Broadcasting – 1.6%

  

Entravision Communications Corp.

     337        2,508   
   

 

 

  
 

Education Services – 1.5%

  

2U, Inc. (A)

     102        2,298   
   

 

 

  
 

Home Improvement Retail – 3.8%

  

Tile Shop Holdings, Inc. (A)

     391        5,822   
   

 

 

  
 

Leisure Products – 3.4%

  

Nautilus Group, Inc. (The) (A)

     263        5,089   
   

 

 

  
 

Restaurants – 5.0%

  

Dave & Buster’s Entertainment, Inc. (A)

     70        2,719   

Kona Grill, Inc. (A)

     221        2,858   

Potbelly Corp. (A)

     142        1,938   
   

 

 

  
      7,515   
   

 

 

  
 

Specialty Stores – 3.1%

  

Sportsman’s Warehouse Holdings, Inc. (A)

     368        4,639   
   

 

 

  
 

Total Consumer Discretionary – 21.4%

   

     32,463   

Consumer Staples

  

 

Packaged Foods & Meats – 1.1%

  

Inventure Foods, Inc. (A)

     307        1,734   
   

 

 

  
 

Personal Products – 2.4%

  

Inter Parfums, Inc.

     117        3,628   
   

 

 

  
 

Total Consumer Staples – 3.5%

  

     5,362   

Energy

  

 

Oil & Gas Equipment &
Services – 1.4%

   

Natural Gas Services Group, Inc. (A)

     97        2,097   
   

 

 

  
 

Oil & Gas Exploration &
Production – 0.5%

   

Laredo Petroleum Holdings, Inc. (A)

     103        813   
   

 

 

  
 

Total Energy – 1.9%

  

     2,910   

Financials

  

 

Asset Management & Custody
Banks – 1.9%

   

Hannon Armstrong Sustainable Infrastructure Capital, Inc.

     147        2,823   
   

 

 

  
 

Total Financials – 1.9%

  

     2,823   
COMMON STOCKS
(Continued)		   Shares     Value  

Health Care

  

 

Biotechnology – 2.5%

  

Natera, Inc. (A)

     137      $ 1,308   

NewLink Genetics Corp. (A)

     42        755   

Repligen Corp. (A)

     66        1,778   
   

 

 

  
      3,841   
   

 

 

  
 

Health Care Equipment – 3.6%

  

Avinger, Inc. (A)

     163        1,563   

K2M Group Holdings, Inc. (A)

     135        2,002   

Oxford Immunotec Global plc (A)

     188        1,864   
   

 

 

  
      5,429   
   

 

 

  
 

Health Care Facilities – 2.3%

  

Surgical Care Affiliates, Inc. (A)

     75        3,462   
   

 

 

  
 

Health Care Services – 1.6%

  

Adeptus Health, Inc.,
Class A (A)

     44        2,459   
   

 

 

  
 

Health Care Supplies – 4.1%

  

Endologix, Inc. (A)

     303        2,531   

ICU Medical, Inc. (A)

     36        3,696   
   

 

 

  
      6,227   
   

 

 

  
 

Health Care Technology – 6.7%

  

Evolent Health, Inc., Class A (A)

     129        1,366   

Imprivata, Inc. (A)

     292        3,686   

Omnicell, Inc. (A)

     104        2,899   

Press Ganey Holdings, Inc. (A)

     70        2,112   
   

 

 

  
      10,063   
   

 

 

  
 

Pharmaceuticals – 5.6%

  

Aerie Pharmaceuticals, Inc. (A)

     140        1,706   

Intersect ENT, Inc. (A)

     215        4,089   

Intra-Cellular Therapies, Inc. (A)

     69        1,929   

Revance Therapeutics, Inc. (A)

     44        772   
   

 

 

  
      8,496   
   

 

 

  
 

Total Health Care – 26.4%

  

     39,977   

Industrials

  

 

Building Products – 3.0%

  

American Woodmark Corp. (A)

     28        2,111   

PGT, Inc. (A)

     253        2,493   
   

 

 

  
      4,604   
   

 

 

  
 

Construction & Engineering – 2.9%

  

MYR Group, Inc. (A)

     171        4,304   
   

 

 

  
 

Electrical Components &
Equipment – 1.7%

   

Thermon Group Holdings, Inc. (A)

     143        2,513   
   

 

 

  
COMMON STOCKS
(Continued)		   Shares     Value  

Heavy Electrical Equipment – 0.6%

  

Power Solutions International, Inc. (A)

     68      $ 936   
   

 

 

  
 

Total Industrials – 8.2%

  

     12,357   

Information Technology

  

 

Application Software – 3.1%

  

Globant S.A. (A)

     20        614   

Zix Corp. (A)

     1,049        4,122   
   

 

 

  
      4,736   
   

 

 

  
 

Communications Equipment – 3.0%

  

Bookham, Inc. (A)

     363        1,963   

Ruckus Wireless, Inc. (A)

     263        2,577   
   

 

 

  
      4,540   
   

 

 

  
 

Electronic Manufacturing
Services – 1.1%

   

Mercury Computer Systems, Inc. (A)

     84        1,705   
   

 

 

  
 

Internet Software & Services – 12.2%

  

comScore, Inc. (A)

     117        3,524   

Cornerstone OnDemand, Inc. (A)

     127        4,155   

LogMeIn, Inc. (A)

     76        3,828   

Q2 Holdings, Inc. (A)

     147        3,539   

SPS Commerce, Inc. (A)

     81        3,461   
   

 

 

  
      18,507   
   

 

 

  
 

Semiconductor Equipment – 1.9%

  

PDF Solutions, Inc. (A)

     216        2,891   
   

 

 

  
 

Semiconductors – 2.4%

  

NVE Corp.

     63        3,573   
   

 

 

  
 

Total Information Technology – 23.7%

   

     35,952   
 

Materials

  

 

Specialty Chemicals – 1.5%

  

Flotek Industries, Inc. (A)

     315        2,309   
   

 

 

  
 

Total Materials – 1.5%

  

     2,309   

Telecommunication Services

  

 

Alternative Carriers – 3.6%

  

8x8, Inc. (A)

     545        5,478   
   

 

 

  
 

Integrated Telecommunication
Services – 1.9%

   

GTT Communications, Inc. (A)

     170        2,815   
   

 

 

  
 

Wireless Telecommunication
Service – 1.3%

   

RingCentral, Inc.,
Class A (A)

     125        1,975   
   

 

 

  
 

Total Telecommunication
Services – 6.8%

   

     10,268   
 

TOTAL COMMON STOCKS – 95.3%

   

   $ 144,421   

(Cost: $142,879)

  

    
 

 

  2016   ANNUAL REPORT   135

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Micro Cap Growth Fund (in thousands)

MARCH 31, 2016

 

 

 

 

SHORT-TERM
SECURITIES		   Principal     Value  

Commercial Paper (B) – 2.3%

  

    

Wisconsin Electric Power Co.,

      

0.400%, 4-1-16

   $ 3,408      $ 3,408   
   

 

 

  
 

Master Note – 2.5%

  

    

Toyota Motor Credit Corp.,

      

0.443%, 4-6-16 (C)

     3,855        3,855   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 4.8%

           $ 7,263   

(Cost: $7,263)

      
         

Value

  

TOTAL INVESTMENT SECURITIES – 100.1%

   $ 151,684   

(Cost: $150,142)

  

 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (0.1)%

     (113 ) 
 

NET ASSETS – 100.0%

   $ 151,571   
 

 

Notes to Schedule of Investments

 

(A) No dividends were paid during the preceding 12 months.

 

(B) Rate shown is the yield to maturity at March 31, 2016.

 

(C) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  
       

Assets

        

Investments in Securities

        

Common Stocks

   $ 144,421       $ —       $ —   

Short-Term Securities

     —         7,263         —   

Total

   $ 144,421       $ 7,263       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

 

See Accompanying Notes to Financial Statements.

 

136   ANNUAL REPORT   2016  

Table of Contents

MANAGEMENT DISCUSSION

Ivy Mid Cap Growth Fund

(UNAUDITED)

 

 

 

LOGO

Kimberly A. Scott

Below, Kimberly A. Scott, CFA, portfolio manager of Ivy Mid Cap Growth Fund, discusses positioning, performance and results for the fiscal year ended March 31, 2016. She has managed the Fund since 2001 and has 29 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy Mid Cap Growth Fund (Class A shares at net asset value)

      –10.27%   

Ivy Mid Cap Growth Fund (Class A shares including sales charges)

      –15.43%   

Benchmark(s) and/or Lipper Category

         

Russell Midcap Growth Index

      –4.74%   

(generally reflects the performance of securities that represent the mid-cap sector of the stock market)

         

Lipper Mid-cap Growth Funds Universe Average

      –8.46%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

 

The mid-cap growth sector of the market as measured by Russell Midcap Growth Index, the Fund’s benchmark, lost 4.75% in the 12-month period ended March 31, 2016. During this same period, the Ivy Mid Cap Growth Fund lost -10.27% before accounting for sales charges.

Contributors and detractors over the period

 

 

The primary factors in the Fund’s underperformance were stock selection issues in the consumer discretionary and consumer staples sectors. An overweight position in the poorly performing energy sector was also a significant, factor contributing to the Fund’s relative underperformance. Technology was the other sector that negatively impacted performance in 2016. All other sectors contributed to relative performance, with the greatest positive impacts coming from the financials, materials, health care and industrials sectors. The Fund’s exposure in utilities and telecommunications also generated positive relative performance for the fiscal year. Our cash position, which averaged approximately 1% across the period, was seven basis points positive to performance, while the performance of our equity options, used primarily for hedging purposes, or to build or exit positions, was seven basis points negative to performance.

The Fund’s consumer discretionary sector exposure made the greatest negative contribution to its return for the fiscal year. We were underweight this underperforming sector, but our exposure to retail and related sectors was a liability for the Fund in a year when e-commerce activity accelerated, taking market share and requiring many retailers to step up investment to try to maintain competitiveness and relevance to consumers. These costs and higher labor expenses pressured the profitability of many companies in the portfolio, such as Bed Bath and Beyond, Inc., Williams-Sonoma and DSW, Inc. Other key factors significantly impacting retailers over the past 12 months were weak demand in emerging markets and the appreciation of the dollar, which hurt many retailers based both on currency translation effects and the ultimate negative impact on travel to the U.S. from abroad. Related demand for retail goods in flagship stores in markets such as New York City also hurt many retailers. Companies in our portfolio that struggled related to these issues included Tiffany & Co., Polo Ralph Lauren Corp., Burberry Group and Kate Spade & Co. Another notably weak name in our consumer discretionary sector was Polaris Industries, a manufacturer and marketer of all-terrain vehicles, Indian motorcycles, and snowmobiles. Weakness in energy and agriculture began to hurt demand for their products in the last half of 2015, and then a very warm and mild start to winter in many of their key markets piled on as we closed out the calendar year and began 2016. Several names in this sector, however, managed to perform well last year. Companies such as Mattel, Inc., which posted a very strong return after a prolonged period of weakness, Ulta Salon, Cosmetics and Fragrance, Carter’s Inc., the children’s clothing retailer, and Under Armour, Inc., the fast-growing athletic apparel company, generated strong positive returns last year. Ulta and Carter’s are no longer Fund holdings. The greater domestic market exposure for most of these names was a benefit to their business versus many other companies.

An opportunity cost for the Fund’s consumer discretionary performance came from lack of exposure to Netflix, which was in our benchmark index for part of the year, returning greater than 56% while in the benchmark, and contributing 38 basis points to index performance for the fiscal year.

Our consumer staples names were broadly weak over the past fiscal year, and contributed significantly to the Fund’s underperformance. We were underweight a strongly outperforming group, and had stock selection issues. The issues were varied. Both Hain Celestial Group and Whole Foods Market, Inc. struggled with issues related largely to competitive pressures in the market for organic and natural foods. Both of these companies have been highly successful leaders in the growth of this industry, setting a pace and example that has fostered competition. We believe these companies will continue to lead in this robust sector, and we think the stocks will once again reflect as management teams address the nearer-term dislocations and questions about their positions in the marketplace. Mead Johnson Nutrition Company, the maker of Enfamil infant formula and a stellar consumer product company, struggled last fiscal year related to competitive issues in China, significant changes in product distribution patterns in that country, and the foreign currency translation impact of a strong dollar. A stock that ended the fiscal year on a strong note was Blue Buffalo Pet Products, which produces and sells pet food made from natural ingredients. The stock was weak for much of the period following its initial public offering in 2015, but it delivered strong performance in the first quarter of 2016 as the strength of its business became clearer to investors.

The negative contribution from our technology exposure resided in a number of names, including Pandora Media, Teradata Corp. (no longer a Fund holding), GrubHub, Inc., ServiceNow, Harris Corp. and Alliance Data Systems (no longer a Fund holding). We were also underweight the strong

 

  2016   ANNUAL REPORT   137

Table of Contents

MANAGEMENT DISCUSSION

Ivy Mid Cap Growth Fund

(UNAUDITED)

 

 

 

semiconductor and computer services sectors. One of our biggest disappointments in the technology sector this fiscal year was Pandora, the internet radio service company. The stock struggled for much of the period under the weight of concern about a 2015 Copyright Royalty Board rate decision. That decision materialized as a neutral to positive factor for Pandora’s business going forward, as we expected, but the stock continued to be weak as concerns mounted regarding the company’s future investments to expand and diversify its business. We continue to believe that Pandora is the premier asset in the internet radio space with a strong and growing commercial opportunity. We retain the name in the portfolio. Weakness in Teradata continued related to concerns about its place in a rapidly changing computing and storage infrastructure marketplace. The Fund held some stocks that performed very well in the group over that past 12-month period, including Electronic Arts, SanDisk Corp. (no longer a Fund holding), which received a buyout offer, Ellie Mae, Inc., a rapidly growing software-as-a-service provider to the mortgage industry, and Trimble Navigation Ltd., a recent re-addition to the portfolio.

Energy names were weak across the board, as the swift decline in the price of oil from June through December of 2015 became a woodshed moment for the group generally, and our names, specifically. Our largest negative contribution for the fiscal year came from the names we own with exposure to domestic shale oil drilling in the Bakken region. Oasis Petroleum, Continental Resources and Southwestern Energy all delivered significantly weak performance. (Oasis is no longer a Fund holding). Cabot Oil & Gas Corporation, which is heavily exposed to the natural gas market, also struggled. We understood the severe reaction by investors to the rapid changes in the economics of oil and gas related companies, but we were of the opinion that the problem became considerably discounted, as the dynamics of shale oil drilling may be such that the oversupply problem is solved with greater expediency than we’ve seen historically. We retained most of our energy positions in the portfolio, and have added exposure since late 2014, in both new and existing positions, where we have seen stock price opportunities present themselves. Noble Energy and Cimarex Energy are both new to the portfolio since late 2014. We eliminated two positions, Southwestern Energy and Dril-Quip, given our concern that the problems of deep water drillers, such as Petrobras, to whom Dril-Quip sells its equipment, would be severe and protracted.

Our financial names made the greatest positive contribution to the Fund’s performance over the past 12 months, largely based on stock selection. We were overweight this underperforming group, delivering a strong positive return against a sector that had a negative return in the benchmark. Two of our bank stocks led the performance, based on strong growth in their businesses and a more favorable interest rate environment. First Republic Bank and Signature Bank of New York have been perennially strong growth banks. CME Group was another strong performer in the Fund. Northern Trust Corporation, a high quality moderately growing trust bank, was slightly weak, but outperformed the financials sector. UMB Financial Corp., conversely, did not capitalize on the benefits to banks and their stocks last fiscal year, as difficulties in its asset management business offset solid loan growth at the bank.

When compared to the index, our materials exposure performed strongly on the back of a takeout in one of our two names, Valspar Corp., which is being acquired by Sherwin-Williams. Scotts Miracle-Gro Corp. also delivered a strong positive return on strength in its business.

Our health care stocks made a positive contribution to performance, largely based on stock selection. We were overweight this underperforming group, and our names delivered significantly better performance that those in the benchmark. Most of our stocks in this well-diversified group of holdings posted positive returns for the fiscal year. Strength came from Align Technology, the maker of Invisilign braces, Henry Schein, Inc., a long-term holding, Incyte Corp., a biotechnology stock that we have sold, and Edwards Lifesciences, a relatively recent addition. Weakness in the group was led by our biotechnology names, including Alkermes plc, BioMarin, ACADIA Pharmaceuticals and Medivation. Alkermes, in particular, was very weak late in the fiscal year following disappointing data related to a clinical trial for a new drug to treat depression. The company is doing additional research on this drug and is confident in its ultimate success. Alkermes has a strong base business of central nervous system compounds, and a sizeable pipeline of new drugs. The health care sector continues to offer opportunities for both growth and defensiveness, often in the same name. We added aspects of both to the sector last period with purchases of Laboratory Corp. of America, a moderately growing laboratory diagnostics business, and Edwards Lifesciences Corp., an innovator in the area of heart valves.

The Fund’s industrials exposure added to performance in the past 12-month period. We were slightly underweight industrials and our names rose in value as a group, while the sector in the index posted a loss. We had reduced our exposure to energy-related industrial companies, which was a benefit to performance. Still, those names, including Flowserve and Joy Global, among others, had a negative impact on the group in our portfolio and were sold. Names that performed well and helped deliver the outperformance included Fortune Brand Home & Security, which is benefitting from a better housing economy related to its sale of cabinets, faucets, and its Master Lock security products; Fastenal Co., a long term holding whose performance began to improve based on optimism for demand for its products related to improvements in the energy and manufacturing areas of our economy, and Verisk Analytics and Willis Towers Watson plc., both business services companies with relatively consistent operating models.

The Fund’s lack of exposure to utilities and telecommunications, both underperformers in the index, was slightly positive to performance.

We were overweight health care and technology, financials and energy last fiscal year, and underweight consumer staples, materials, consumer discretionary, industrials, telecommunications and utilities.

Outlook

 

 

The markets became more volatile and unsettled in the back half of 2015 than in some time, and that volatility was magnified as we entered 2016. Weakness in commodity markets and dollar strength has threatened profitability for many companies in energy, materials and industrials, with risk of a wider impact based on related stresses in credit markets. Concerns about economic growth in emerging markets, including China, where there is considerable murkiness around the pace of growth and the functioning of the country’s capital markets has been a source of angst, as is the direction and level of conviction of the Federal Reserve (Fed) with respect to future interest rate increases.

 

138   ANNUAL REPORT   2016  

Table of Contents

 

 

Complicating the assessment of the current and future investing environment is the rapid pace of change that is in motion for many sectors of our economy. The technology industry is always rapidly evolving, but even there, concentration of computing power in the hands a few big companies is changing the economics and demand dynamics for many users and producers of equipment, software and services. Consumer discretionary is finding new fault lines in many subsectors as consumer migration to e-commerce and over-the-top media consumption upends brick and mortar retailing, the business models of cable television providers and their content partners, and advertising models in general, all at an accelerating pace. The success of technological innovation as applied to oil and gas exploration by frackers in shale formations in the U.S. has led to both a boom and a bust for that industry that is currently reverberating throughout the domestic and world economies.

Transportation is another area that we think could benefit from applied information and logistics, at the same time that it is reeling from the downturn in energy and agriculture, not to mention the yet uncertain impact of the evolving brick and mortar retail landscape. The commercial real estate sector has yet to experience the full impact of many of these changes, but as evidenced by the restructuring announced by Macy’s in the first week of January 2016, we believe much change lies ahead for that area. The automobile industry is in the early stages of extreme innovation as it moves from focusing on improving fuel efficiency and controlling emissions to delivering fail safe driver assist safety features and autonomously operating vehicles. We believe that semiconductor and software companies that can develop the operating systems and hardware that can lead these innovations will be huge beneficiaries.

In the financials sector, regulation has brought many changes and unintended consequences for capital markets, much of which we have likely not yet witnessed, but technology promises to bring even greater change as payment systems and methodologies evolve to meet the demands of mobile consumers who want to shop and pay whenever, wherever, with great efficiency and the highest levels of security. We believe the status quo will be challenged and today’s financial system giants will be tasked with maintaining relevance and profitability. Health care is another important area where we think changes in product development, the delivery of care, and the use of information to tie it all together and make it perform at an even higher level in the future will have significant implications for patients, providers and investors.

All of this, across all of the economy is just the beginning. As investors we must balance the stresses of the current environment with the challenges and opportunities of the future — even as the future seems to be speeding toward us at an unprecedented pace. The worry over the current state of affairs in the economy and the stock market, while appropriate, seems a little late to us. The hit to our economy from oil price weakness, dollar strength and emerging market growth difficulties began to develop over a year ago, gaining strength and impact as 2015 developed. A recession has been at hand across much of our economy and stocks across energy, industrials, materials and consumer discretionary have logged significant losses relative to the broader stock market indices. While the all-clear signal has yet to sound, we believe opportunity is developing in the stocks of very good companies across all of these groups. Many market participants are loathe to risk finding that opportunity in such a rapidly changing and challenging environment, especially as the Fed has signaled that it will be less accommodative as the year progresses. In addition, the stresses in the credit markets from the troubles in the energy sector will become more widespread, presenting a risk to broad economic activity. We believe, however, that there are many encouraging offsets to the negatives we see in the economy, including low oil prices, which are a big benefit to consumers, solid job growth, encouraging wage gains, firmness in the service sector, several quarters of strong household formation activity, and growth in the housing market. Many stocks have discounted serious concerns and are poised for better performance as investors look beyond the safety of consensus leaders in the market to find differentiated return opportunities. We think a shift in investor perspective about real value in the market will be a benefit to the Fund and we will continue to invest in companies that present a balance of growth and valuation which we think should yield substantial return opportunities for our shareholders over time.

Performance shown at NAV does not include the effects of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

Investing in mid-cap stocks may carry more risk than investing in stocks of larger, more-established companies. Prices of growth stocks may be more sensitive to changes in current or expected earnings than the prices of other stocks. Growth stocks may not perform as well as value stocks or the stock market in general. The use of derivatives presents several risks, including the risk that these instruments may change in value in a manner that adversely affects the Fund’s NAV and the risk that fluctuations in the value of the derivatives may not correlate with securities markets or the underlying asset upon which the derivative’s value is based. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the Fund’s portfolio manager and are current only through the end of the period of the report as stated on the cover. The manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged, includes reinvested dividends and does not include fees. One cannot invest directly in an index, nor is an index representative of the Ivy Mid Cap Growth Fund’s performance.

 

  2016   ANNUAL REPORT   139

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Mid Cap Growth Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

 

Asset Allocation

 

 

  

Stocks

      100.7%   

Consumer Discretionary

      24.3%   

Information Technology

      17.8%   

Health Care

      17.1%   

Industrials

      15.1%   

Financials

      11.8%   

Consumer Staples

      7.1%   

Energy

      4.7%   

Materials

      2.8%   

Purchased Options

      0.0%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      -0.7%   

 

Lipper Rankings

 

 

Category: Lipper Mid-Cap Growth Funds    Rank      Percentile

1 Year

    280/396      71

3 Year

    270/347      78

5 Year

    223/316      71

10 Year

    57/227      25

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

 

 

Top 10 Equity Holdings

 

 

Company    Sector    Industry

Fastenal Co.

   

Industrials

   

Trading Companies & Distributors

Zoetis, Inc.

   

Health Care

   

Pharmaceuticals

Intuitive Surgical, Inc.

   

Health Care

   

Health Care Equipment

Electronic Arts, Inc.

   

Information Technology

   

Home Entertainment Software

CME Group, Inc.

   

Financials

   

Specialized Finance

Microchip Technology, Inc.

   

Information Technology

   

Semiconductors

Mead Johnson Nutrition Co.

   

Consumer Staples

   

Packaged Foods & Meats

Fortune Brands Home & Security, Inc.

   

Industrials

   

Building Products

Mattel, Inc.

   

Consumer Discretionary

   

Leisure Products

Northern Trust Corp.

   

Financials

   

Asset Management & Custody Banks

See your advisor or www.ivyfunds.com for more information on the Fund’s most recently published Top 10 Equity Holdings.

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

140   ANNUAL REPORT   2016  

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Mid Cap Growth Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)   Class A(3)     Class B(4)     Class C     Class E     Class I     Class R     Class R6     Class Y  

1-year period ended 3-31-16

     -15.43%        -14.12%        -10.92%        -15.57%        -10.00%        -10.55%        -9.85%        -10.26%   

5-year period ended 3-31-16

     5.09%        5.31%        5.58%        4.83%        6.68%        6.05%        —           6.42%   

10-year period ended 3-31-16

     6.45%        6.25%        6.33%        —           —           6.90%        —           7.32%   

Since Inception of Class through 3-31-16(5)

     —           —           —           6.43%        7.91%        —           0.68%        —      

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) 4-2-07 for Class E shares, 4-2-07 for Class I shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

  2016   ANNUAL REPORT   141

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Mid Cap Growth Fund (in thousands)

MARCH 31, 2016

 

 

 

 

COMMON STOCKS   Shares     Value  

Consumer Discretionary

  

 

Apparel Retail – 1.3%

  

DSW, Inc., Class A

     1,474      $ 40,741   
   

 

 

  
 

Apparel, Accessories & Luxury
Goods – 5.8%

   

Burberry Group plc (A)

     1,983        38,875   

Kate Spade & Co. (B)

     1,694        43,242   

lululemon athletica, Inc. (B)

     448        30,366   

Polo Ralph Lauren Corp. (C)

     411        39,610   

Under Armour, Inc., Class A (B)

     323        27,435   
   

 

 

  
      179,528   
   

 

 

  
 

Auto Parts & Equipment – 1.5%

  

BorgWarner, Inc.

     1,249        47,981   
   

 

 

  
 

Homebuilding – 1.7%

  

D.R. Horton, Inc.

     1,696        51,266   
   

 

 

  
 

Homefurnishing Retail – 2.8%

  

Bed Bath & Beyond, Inc. (B)

     960        47,642   

Williams-Sonoma, Inc.

     748        40,945   
   

 

 

  
      88,587   
   

 

 

  
 

Internet Retail – 1.1%

  

TripAdvisor, Inc. (B)

     522        34,723   
   

 

 

  
 

Leisure Products – 4.7%

  

Mattel, Inc.

     2,290        76,991   

Polaris Industries, Inc.

     690        67,986   
   

 

 

  
      144,977   
   

 

 

  
 

Restaurants – 1.9%

  

Dunkin’ Brands Group, Inc. (C)

     1,225        57,787   
   

 

 

  
 

Specialty Stores – 3.5%

  

Tiffany & Co.

     720        52,855   

Tractor Supply Co.

     636        57,505   
   

 

 

  
      110,360   
   

 

 

  
 

Total Consumer
Discretionary – 24.3%

   

     755,950   

Consumer Staples

  

 

Food Retail – 1.6%

  

Whole Foods Market, Inc.

     1,591        49,498   
   

 

 

  
 

Packaged Foods & Meats – 5.5%

  

Blue Buffalo Pet Products, Inc. (B)

     1,529        39,223   

Hain Celestial Group, Inc. (The)(B)

     1,313        53,705   

Mead Johnson Nutrition Co. (C)

     936        79,533   
   

 

 

  
      172,461   
   

 

 

  
 

Total Consumer Staples – 7.1%

  

     221,959   

COMMON STOCKS

(Continued)

   Shares     Value  

Energy

  

 

Oil & Gas Exploration & Production – 4.7%

  

Cabot Oil & Gas Corp.

     1,536      $ 34,877   

Cimarex Energy Co.

     344        33,458   

Continental Resources, Inc. (B)

     1,526        46,338   

Noble Energy, Inc.

     1,020        32,036   
   

 

 

  
      146,709   
   

 

 

  
 

Total Energy – 4.7%

  

     146,709   

Financials

  

 

Asset Management & Custody
Banks – 3.5%

   

Northern Trust Corp.

     1,176        76,624   

Oaktree Capital Group LLC

     630        31,088   
   

 

 

  
      107,712   
   

 

 

  
 

Insurance Brokers – 2.0%

  

Willis Towers Watson plc

     519        61,549   
   

 

 

  
 

Regional Banks – 3.6%

  

First Republic Bank

     841        56,054   

Signature Bank (B)

     421        57,287   
   

 

 

  
      113,341   
   

 

 

  
 

Specialized Finance – 2.7%

  

CME Group, Inc.

     893        85,808   
   

 

 

  
 

Total Financials – 11.8%

  

     368,410   
 

Health Care

  

 

Biotechnology – 4.0%

  

ACADIA Pharmaceuticals, Inc. (B)

     752        21,016   

Alkermes plc (B)

     1,028        35,142   

BioMarin Pharmaceutical, Inc. (B)

     503        41,496   

Medivation, Inc. (B)

     608        27,969   
   

 

 

  
      125,623   
   

 

 

  
 

Health Care Distributors – 1.2%

  

Henry Schein, Inc. (B)

     224        38,639   
   

 

 

  
 

Health Care Equipment – 4.3%

  

Edwards Lifesciences Corp. (B)

     474        41,780   

Intuitive Surgical, Inc. (B)

     152        91,548   
   

 

 

  
      133,328   
   

 

 

  
 

Health Care Facilities – 0.9%

  

Acadia Healthcare Co., Inc. (B)

     478        26,347   
   

 

 

  
 

Health Care Services – 2.2%

  

Diplomat Pharmacy, Inc. (B)

     712        19,517   

Laboratory Corp. of America Holdings (B)

     418        48,940   
   

 

 

  
      68,457   
   

 

 

  

COMMON STOCKS

(Continued)

   Shares     Value  
 

Health Care Supplies – 1.5%

  

Align Technology, Inc. (B)

     654      $ 47,543   
   

 

 

  
 

Pharmaceuticals – 3.0%

  

Zoetis, Inc.

     2,116        93,783   
   

 

 

  
 

Total Health Care – 17.1%

  

     533,720   

Industrials

  

 

Air Freight & Logistics – 2.0%

  

Expeditors International of Washington, Inc.

     1,282        62,587   
   

 

 

  
 

Building Products – 2.5%

  

Fortune Brands Home & Security, Inc. (C)

     1,378        77,217   
   

 

 

  
 

Electrical Components &
Equipment – 0.8%

   

Generac Holdings, Inc. (B)

     685        25,527   
   

 

 

  
 

Industrial Machinery – 2.2%

  

IDEX Corp.

     541        44,841   

Woodward, Inc.

     463        24,080   
   

 

 

  
      68,921   
   

 

 

  
 

Research & Consulting
Services – 3.9%

   

CoStar Group, Inc. (B)(D)

     397        74,700   

Verisk Analytics, Inc., Class A(B)

     601        48,045   
   

 

 

  
      122,745   
   

 

 

  
 

Trading Companies &
Distributors – 3.7%

   

Fastenal Co. (C)

     2,329        114,106   
   

 

 

  
 

Total Industrials – 15.1%

  

     471,103   

Information Technology

  

 

Application Software – 3.0%

  

ANSYS, Inc. (B)

     512        45,776   

Ellie Mae, Inc. (B)

     254        23,064   

Guidewire Software, Inc. (B)

     466        25,388   
   

 

 

  
      94,228   
   

 

 

  
 

Communications Equipment – 1.5%

  

Harris Corp.

     582        45,318   
   

 

 

  
 

Electronic Manufacturing Services – 1.3%

  

Trimble Navigation Ltd. (B)

     1,690        41,903   
   

 

 

  
 

Home Entertainment Software – 2.8%

  

Electronic Arts, Inc. (B)(C)

     1,327        87,717   
   

 

 

  
 

 

142   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Mid Cap Growth Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS

(Continued)

   Shares     Value  

Internet Software & Services – 3.0%

  

Akamai Technologies, Inc. (B)

     200      $ 11,132   

GrubHub, Inc. (B)

     1,482        37,231   

Pandora Media, Inc. (B)

     4,880        43,672   
   

 

 

  
      92,035   
   

 

 

  
 

Semiconductors – 2.9%

  

Maxim Integrated Products, Inc.

     264        9,707   

Microchip Technology, Inc.

     1,701        81,970   
   

 

 

  
      91,677   
   

 

 

  
 

Systems Software – 3.3%

  

Red Hat, Inc. (B)

     679        50,627   

ServiceNow, Inc. (B)

     840        51,379   
   

 

 

  
      102,006   
   

 

 

  
 

Total Information
Technology – 17.8%

   

     554,884   

COMMON
STOCKS

(Continued)

   Shares     Value  

Materials

  

 

Fertilizers & Agricultural Chemicals – 1.3%

  

Scotts Miracle-Gro Co. (The)

     537      $ 39,043   
   

 

 

  
 

Specialty Chemicals – 1.5%

  

Valspar Corp. (The)

     445        47,593   
   

 

 

  
 

Total Materials – 2.8%

  

     86,636   
 

TOTAL COMMON STOCKS – 100.7%

           $ 3,139,371   

(Cost: $2,846,596)

      
 
PURCHASED
OPTIONS		   Number of
Contracts
(Unrounded)		     Value  

Russell 2000 Index,

      

Put $1,050.00, Expires 4-8-16, OTC (Ctrpty: Morgan Stanley & Co., Inc.)

     2,010        131   

PURCHASED
OPTIONS

(Continued)

   Number of
Contracts
(Unrounded)		     Value  

S&P 500 Index,

      

Put $1,965.00, Expires 4-8-16

     775      $ 54   

SPDR S&P Midcap 400 ETF Trust,

      

Put $247.50, Expires 4-8-16, OTC (Ctrpty: Citibank N.A.)

     9,760        49   
   

 

 

  
 

TOTAL PURCHASED OPTIONS – 0.0%

   

     234   

(Cost: $6,510)

      
 

TOTAL INVESTMENT SECURITIES – 100.7%

   

   $ 3,139,605   

(Cost: $2,853,106)

  

    
 

LIABILITIES, NET OF CASH AND OTHER
ASSETS – (0.7)%

    

     (20,319 ) 
 

NET ASSETS – 100.0%

  

   $ 3,119,286   

 

 

Notes to Schedule of Investments

 

* Not shown due to rounding.

 

(A) Listed on an exchange outside the United States.

 

(B) No dividends were paid during the preceding 12 months.

 

(C) All or a portion of securities with an aggregate value of $11,740 are held in collateralized accounts for OTC derivatives collateral as governed by International Swaps and Derivatives Association, Inc. Master Agreements.

 

(D) All or a portion of securities with an aggregate value of $36,881 are held in collateralized accounts to cover potential obligations with respect to outstanding written options.

The following written options were outstanding at March 31, 2016 (contracts and exercise prices unrounded):

 

Underlying Security    Counterparty, if OTC    Type      Number of
Contracts		      Expiration
Month		      Exercise
Price		      Premium
Received		      Value  

lululemon athletica, Inc.

    N/A      Put         206         April 2016       $ 55.00       $ 35       $ — * 

Pacira Pharmaceuticals, Inc.

    Goldman Sachs International      Put         2,887         May 2016         85.00         8,947         (9,166 ) 
                 

 

 

  
                  $ 8,982       $ (9,166 ) 
                 

 

 

  

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 3,139,371       $ —       $ —   

Purchased Options

     54         180         —   

Total

   $ 3,139,425       $ 180       $ —   

Liabilities

        

Written Options

   $ —       $ 9,166       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

The following acronym is used throughout this schedule:

OTC = Over the Counter

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   143

Table of Contents

MANAGEMENT DISCUSSION

Ivy Mid Cap Income Opportunities Fund

(UNAUDITED)

 

 

 

LOGO

Kimberly A. Scott

 

LOGO

Nathan A. Brown

Below, Kimberly A. Scott, CFA, and Nathan A. Brown, CFA, portfolio managers of Ivy Mid Cap Income Opportunities Fund, discuss positioning, performance and results for the fiscal year ended March 31, 2016. Ms. Scott has 29 years of industry experience and Mr. Brown has 16 years of industry experience. They have co-managed the Fund since its inception on October 1, 2014.

Fiscal Year Performance

 

 

 

For the 12 months ended March 31, 2016

         

Ivy Mid Cap Income Opportunities Fund (Class A shares at net asset value)

      0.06%   

Ivy Mid Cap Income Opportunities Fund (Class A shares including sales charges)

      –5.72%   

Benchmark(s) and/or Lipper Category

         

Russell Midcap Index

      –4.04%   

(generally reflects the performance of securities that represent the mid-cap sector of the stock market)

         

Lipper Mid-Cap Core Funds Universe Average

      –6.27%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

 

Key drivers

 

 

The Russell Midcap Index, the Fund’s benchmark, struggled over the past 12 months, generating a decline of 4.04%. The most significant event during the fiscal year was the continued decline in commodity prices, particularly oil, throughout the period with an annual decline of 23% for WTI (West Texas Intermediate, a grade of crude oil used as a benchmark in oil pricing). While this obviously put pressure on the energy sector, the weakness extended to the materials and industrials sectors as well. Despite a better backdrop from a macroeconomic perspective, certain consumer discretionary stocks struggled during the fiscal year given the secular realities of a growing piece of sales that is garnered by e-commerce as well as the impact of an unseasonably warm winter that caused less demand for winter apparel.

The best performing categories were consumer staples, as activism has helped create more discipline in that sector, and utilities, as investors sought safety in the down market coupled with continued low interest rates despite an increase in the Fed Funds rate in December. Financials and technology both outperformed the benchmark, but still produced negative total returns. Health care experienced significant negative pressure to start calendar year 2016 after being an outperformer for multiple years. This pressure is likely associated with political risk given the rhetoric about reducing prescription drug prices.

Stocks with income yields (both return of capital or dividends), particularly higher-yielding securities, saw significant outperformance during the fiscal year. The highest quartile of dividend-yielding securities posted positive returns while the lowest quartile was the worst performing group. We attribute this performance to both the negative returns in the overall market and a muted move in long-term interest rates keeping dividend yields attractive versus fixed-income instruments.

Strategy, contributors and detractors

 

 

The Fund, while remaining relatively flat for the fiscal year ending March 31, 2016, significantly outperformed its benchmark, before sales charges. Dividend income produced 3.7% of performance during the period. The outperformance is explained by strong stock selection and preference for high-yielding income stocks as the Fund’s sector allocation was a headwind during the fiscal year.

The Fund’s sector allocation stayed consistent throughout the fiscal year. Overweight sectors continue to be materials, energy and consumer staples while underweighted sectors were financials, utilities and health care. These weightings predominantly the result of finding good growth opportunities at reasonable valuations that also have a substantial dividend yield.

The outperformance in the Fund fell predominately into four sectors: materials, technology, consumer staples and consumer discretionary. All of our stocks in the materials sector outperformed both the sector and benchmark, with exceptionally strong performance from Avery Dennison Corp., as underlying strength in its business helped produce better-than-expected revenues with lower commodity costs. Our semiconductor exposure through Xilinx Inc., Maxim Integrated Products and Microchip Technology drove much of the outperformance in the technology sector as the proliferation of semiconductors continued beyond the traditional consumer electronics end market. While the consumer staples sector had many strong performers during the fiscal year, our exposure through McCormick & Co., Kellogg Co. and Clorox Co. bested the overall strong sector performance. Each of these companies has a renewed focus on cost containment given increased activism in the overall sector. In addition, these companies are also producing better than market expectations for constant currency revenue growth. Finally, a significant operational and financial turnaround appears to be unfolding at Mattel, which was one of the Fund’s best performing stocks during the fiscal year, and was the reason for outperformance in consumer discretionary.

 

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Fund performance in the energy sector was quite challenged during the fiscal year. Weakness in that sector was caused by both a large overweight position and exposure to master limited partnerships through Targa Resources Partnership and Plains All American Pipeline. Both companies were very weak during the period for both fundamental as well as technical reasons. During the fiscal year, Targa Resources Partnership was acquired by its parent Targa Resources Corp. and the company saw significant appreciation after the close date, which limited some of the negative performance in this sector.

Financials was also an area of weakness in performance caused predominately by Fund exposure to Artisan Partners Asset Management. This asset manager experienced difficult relative performance in some of its largest mutual funds, which caused net redemptions for the company during the period. This, coupled with negative equity markets, likely drove the pressures in the stock.

Outlook

 

 

Since inception of the Fund, we have been watching several key variables to determine positioning. These variables (domestic economic growth, change in interest rates, change in commodity prices and foreign economic growth) have remained consistent over the fiscal year of the Fund and continue to be monitored.

Domestic economic growth: Many early indicators are pointing to much better growth for the industrial economy in the U.S. Commodity prices have begun to firm and the ISM Manufacturing Index has improved above 50 with very strong new orders in the survey. While we are a bit skeptical about the magnitude of the improvement, we expect the industrial side of the economy will show some sequential improvement from a miserable fourth quarter of 2015 as inventory was being liquidated. The consumer environment remains very constructive. The job market remains accretive, the wage environment appears to be tilting toward inflationary, and non-disposable spending on items like utilities and gasoline are still benefiting the consumer because of low commodity prices. This continues to create an environment where consumers have the ability to spend and we believe they will continue to do so. We believe the U.S. economy will grow at a faster pace than in recent years, but still remain below historical growth averages.

Change in interest rates: After what seemed like years of threats, the Federal Reserve (Fed) finally increased interest rates. The overall result within the interest rate environment has been muted, particularly in longer-dated securities. Global yields remain very low and seem to be putting pressure on the U.S. yield curve. We expect that short-term yields will continue to increase as the Fed slowly steps up the Fed Funds rates, but we remain less confident in the direction of longer-term yields. We believe the current scenario is quite favorable for the Fund to enable it to offer a competitive yield component to other securities in the market but also have the potential for capital appreciation.

Change in commodity prices: We believe the next change in commodity prices to be decisively positive, particularly for oil. This outlook is based on the declining production we have already seen and will likely continue to see in the U.S. given the realities of the lower oil price since the beginning of the calendar year. Inventories are still high and will get worked off over the ensuing months, which should help to increase prices. Higher prices will be met with more production, so a spike seems very unlikely at this time. We remain comfortable with Fund’s overweight position in energy.

Pressures on foreign economies: China’s growth continues to disappoint and based on regular dialog we have with individual companies, the growth appears to be even slower than the economic numbers would suggest. The currency benefit that many companies were able to take advantage of over the past year appears to have run out of steam as most currency rates are now flat on a year-over-year basis versus the dollar. This has the potential to put pressure on some of the large exporting nations; however, we think it likely that economies that are dependent on commodities should see a benefit as most commodities are priced in dollars. Latin America and the Middle East remain areas that garner attention, but both are relatively small and their ability to dramatically impact global markets should be contained. We believe that negative interest rates in multiple countries across the global should cause skepticism about the overall strength of the world’s markets, but their biggest impact in the short term is that our Fund’s investment style should remain in favor.

Performance shown at NAV does not include the effects of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

Investing in mid-cap stocks may carry more risk than investing in stocks of larger, more-established companies. Dividend-paying instruments may not experience the same price appreciation as non-dividend paying investments. There is no guarantee that the companies in which the Fund invests will declare dividends in the future or that dividends, if declared, will remain at current levels or increase over time. The amount of any dividend paid by the company may fluctuate significantly. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the Fund’s portfolio managers and are current only through the end of the period of the report as stated on the cover. The managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged, includes reinvested dividends and does not include fees. One cannot invest directly in an index, nor is an index representative of the Ivy Mid Cap Income Opportunities Fund’s performance.

 

  2016   ANNUAL REPORT   145

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Mid Cap Income Opportunities Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      95.2%   

Industrials

      16.5%   

Information Technology

      16.1%   

Consumer Discretionary

      13.7%   

Financials

      13.5%   

Consumer Staples

      8.4%   

Health Care

      8.3%   

Materials

      8.2%   

Energy

      7.7%   

Utilities

      2.8%   

Cash and Other Assets (Net of Liabilities),
and Cash Equivalents+

      4.8%   

Lipper Rankings

 

 

 

Category: Lipper Mid-Cap Core Funds
Universe Average		    Rank      Percentile

1 Year

    29/418      7

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

 

 

Top 10 Equity Holdings

 

 

 

Company    Sector      Industry

McCormick & Co., Inc.

   

Consumer Staples

     

Packaged Foods & Meats

HNI Corp.

   

Industrials

     

Office Services & Supplies

Mattel, Inc.

   

Consumer Discretionary

     

Leisure Products

Artisan Partners Asset Management, Inc.

   

Financials

     

Asset Management & Custody Banks

KAR Auction Services, Inc.

   

Industrials

     

Diversified Support Services

Kellogg Co.

   

Consumer Staples

     

Packaged Foods & Meats

RPM International, Inc.

   

Materials

     

Specialty Chemicals

HealthSouth Corp.

   

Health Care

     

Health Care Facilities

Limited Brands, Inc.

   

Consumer Discretionary

     

Apparel Retail

Leggett & Platt, Inc.

   

Consumer Discretionary

     

Home Furnishings

See your advisor or www.ivyfunds.com for more information on the Fund’s most recently published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Mid Cap Income Opportunities Fund

(UNAUDITED)

 

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class C      Class E      Class I      Class R      Class R6      Class Y  

1-year period ended 3-31-16

      -5.72%         -0.70%         -5.76%         0.28%         -0.41%         0.28%         -0.03%   

5-year period ended 3-31-16

      —            —            —            —            —            —            —      

10-year period ended 3-31-16

      —            —            —            —            —            —            —      

Since Inception of Class through 3-31-16(4)

      3.45%         6.89%         3.50%         7.95%         7.18%         7.95%         7.63%   

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) 10-1-14 for Class A shares, 10-1-14 for Class C shares, 10-1-14 for Class E shares, 10-1-14 for Class I shares, 10-1-14 for Class R shares, 10-1-14 for Class R6 shares and 10-1-14 for Class Y shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

  2016   ANNUAL REPORT   147

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Mid Cap Income Opportunities Fund (in thousands)

MARCH 31, 2016

 

 

 

 

COMMON STOCKS   Shares     Value  

Consumer Discretionary

  

 

Apparel Retail – 2.8%

  

Limited Brands, Inc.

     38      $ 3,333   
   

 

 

  
 

Home Furnishings – 2.8%

  

Leggett & Platt, Inc.

     69        3,320   
   

 

 

  
 

Leisure Products – 2.8%

  

Mattel, Inc.

     101        3,397   
   

 

 

  
 

Movies & Entertainment – 2.6%

  

Cinemark Holdings, Inc.

     88        3,170   
   

 

 

  
 

Restaurants – 2.7%

  

Cracker Barrel Old Country Store, Inc.

     22        3,284   
   

 

 

  
 

Total Consumer Discretionary – 13.7%

             16,504   

Consumer Staples

  

 

Household Products – 2.7%

  

Clorox Co. (The)

     26        3,247   
   

 

 

  
 

Packaged Foods & Meats – 5.7%

  

Kellogg Co.

     44        3,348   

McCormick & Co., Inc.

     35        3,444   
   

 

 

  
      6,792   
   

 

 

  
 

Total Consumer Staples – 8.4%

  

     10,039   

Energy

  

 

Oil & Gas Drilling – 2.7%

  

Helmerich & Payne, Inc.

     54        3,193   
   

 

 

  
 

Oil & Gas Storage & Transportation – 5.0%

  

Plains All American Pipeline L.P.

     135        2,831   

Targa Resources Corp.

     109        3,253   
   

 

 

  
      6,084   
   

 

 

  
 

Total Energy – 7.7%

             9,277   

Financials

  

 

Asset Management & Custody Banks – 2.8%

  

Artisan Partners Asset Management, Inc.

     110        3,390   
   

 

 

  
 

Insurance Brokers – 2.7%

  

Arthur J. Gallagher & Co.

     73        3,244   
   

 

 

  
 

Regional Banks – 8.0%

  

BankUnited, Inc.

     92        3,184   

Glacier Bancorp, Inc.

     125        3,174   

Umpqua Holdings Corp.

     200        3,174   
   

 

 

  
      9,532   
   

 

 

  
 

Total Financials – 13.5%

             16,166   

COMMON STOCKS

(Continued)

   Shares     Value  

Health Care

  

 

Health Care Equipment – 2.8%

  

Becton Dickinson & Co.

     22      $ 3,304   
   

 

 

  
 

Health Care Facilities – 2.8%

  

HealthSouth Corp.

     89        3,341   
   

 

 

  
 

Health Care Supplies – 2.7%

  

Cardinal Health, Inc.

     40        3,286   
   

 

 

  
 

Total Health Care – 8.3%

             9,931   

Industrials

  

 

Air Freight & Logistics – 2.7%

  

C.H. Robinson Worldwide, Inc.

     44        3,288   
   

 

 

  
 

Commercial Printing – 2.7%

  

Corrections Corp. of America

     103        3,288   
   

 

 

  
 

Diversified Support Services – 2.8%

  

KAR Auction Services, Inc.

     88        3,352   
   

 

 

  
 

Environmental & Facilities Services – 2.7%

  

Republic Services, Inc., Class A

     68        3,258   
   

 

 

  
 

Office Services & Supplies – 5.6%

  

Avery Dennison Corp.

     45        3,266   

HNI Corp.

     87        3,406   
   

 

 

  
    6,672   
   

 

 

  
 

Total Industrials – 16.5%

  

     19,858   

Information Technology

  

 

Communications Equipment – 2.6%

  

Harris Corp.

     40        3,114   
   

 

 

  
 

Data Processing & Outsourced
Services – 5.4%

   

Broadridge Financial Solutions, Inc.

     55        3,285   

Paychex, Inc.

     59        3,176   
   

 

 

  
    6,461   
   

 

 

  
 

Semiconductors – 8.1%

  

Maxim Integrated Products, Inc.

     90        3,293   

Microchip Technology, Inc.

     67        3,248   

Xilinx, Inc.

     68        3,245   
   

 

 

  
      9,786   
   

 

 

  
 

Total Information
Technology – 16.1%

   

     19,361   

Materials

  

 

Fertilizers & Agricultural Chemicals – 2.7%

  

Scotts Miracle-Gro Co. (The)

     45        3,254   
   

 

 

  

COMMON STOCKS

(Continued)

   Shares     Value  
 

Paper Packaging – 2.7%

  

Sonoco Products Co.

     67      $ 3,270   
   

 

 

  
 

Specialty Chemicals – 2.8%

  

RPM International, Inc.

     71        3,348   
   

 

 

  
 

Total Materials – 8.2%

             9,872   

Utilities

  

 

Water Utilities – 2.8%

  

American Water Works Co., Inc.

     48        3,318   
   

 

 

  
 

Total Utilities – 2.8%

             3,318   
 

TOTAL COMMON STOCKS – 95.2%

           $ 114,326   

(Cost: $104,974)

      
 
SHORT-TERM
SECURITIES		   Principal         
 

Master Note – 3.8%

  

Toyota Motor Credit Corp.,

      

0.443%, 4-6-16 (A)

   $ 4,557        4,557   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 3.8%

           $ 4,557   

(Cost: $4,557)

      
 

TOTAL INVESTMENT SECURITIES – 99.0%

           $ 118,883   

(Cost: $109,531)

      
 

CASH AND OTHER ASSETS, NET OF LIABILITIES – 1.0%

             1,199   
 

NET ASSETS – 100.0%

           $ 120,082   
 

 

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SCHEDULE OF INVESTMENTS

Ivy Mid Cap Income Opportunities Fund (in thousands)

MARCH 31, 2016

 

 

 

Notes to Schedule of Investments

 

(A) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  
       

Assets

        

Investments in Securities

        

Common Stocks

   $ 114,326       $ —       $ —   

Short-Term Securities

     —         4,557         —   

Total

   $ 114,326       $ 4,557       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   149

Table of Contents

MANAGEMENT DISCUSSION

Ivy Money Market Fund

(UNAUDITED)

 

 

 

LOGO

Mira Stevovich

Below, Mira Stevovich, CFA, portfolio manager of the Ivy Money Market Fund, discusses positioning, performance and results for the fiscal year ended March 31, 2016. She has managed the Fund for 15 years and has 29 years of industry experience.

 

The Fund’s fiscal year ended on March 31, 2016 with short-term rates higher due to the 0.25 percent rate increase by the Federal Reserve Board (Fed) on December 16, 2015. The Fed continued to maintain an accommodative policy that provided liquidity to the economy during most of the Fund’s fiscal year. However, the move by the Fed in December began the process of draining liquidity from the economy, albeit gradually. During the fiscal year, the money markets continued to be affected by low rates, as well as regulatory changes in the banking sector. The economy showed signs of improvement, and although there was some anticipation that the Fed would increase short-term rates by 0.25 percent by its September 2015 board meeting, the low rate of inflation and economic turmoil in other parts of the world allowed for the continuation of an ultra-low federal funds target rate until the December rate increase.

Lower rates, higher-quality bias

 

 

The Fund’s fiscal year started with the federal funds rate ranging from 0 percent to 0.25 percent, and changed on December 16, 2015 to a rate ranging from 0.25 percent to 0.50 percent. The Fed had been testing a “Reverse Repo Program” to determine if reverse repurchase agreements could be integral to managing the federal funds’ rate once the Fed began increasing short-term rates. This program helped the short-term market manage liquidity and provided the Fed with useful data. The Reverse Repo Program had been capped at $300 billion, but with the rate increase, the cap on this program was lifted to allow for better management of short-term rates in the 0.25 percent to 0.50 percent target range. Although there is anticipation that the Fed will increase the federal funds’ rate during 2016, it is anticipated that the process would remain gradual. As a result, we continue to manage the Fund based on the interest rate environment, closely monitoring any potential rate changes and adjusting investments accordingly.

The drastically low rates of interest during the fiscal year restrained the performance of the Fund and rates on money market investments, in general. The Securities and Exchange Commission’s (SEC) regulation requiring that at least 30% of the Fund’s holdings mature in five business days or less also affected the Fund’s return because very short maturities tend to carry the lowest interest rates.

Also acting to depress rates on the shortest maturities are new banking regulations that make short-term borrowing by banks more difficult. These new regulations have reduced the supply of securities in the short maturity range, adding downward pressure on rates. Within the confines of the Fund’s liquidity and maturity requirements, we sought to maintain yield by purchasing longer-dated securities when credit spreads were wide. We also invested in floating rate notes based on the one- or three-month London Interbank Offered Rate (LIBOR). These notes carry an attractive rate of investment, while allowing us to maintain a modest weighted average maturity of the Fund. The 3-month LIBOR rate began the fiscal year at 0.27075 percent and has moved gradually upwards until the December rate move, ending the fiscal year higher at 0.62860 percent. The one-month LIBOR rate began the fiscal year at 0.1755 percent and ended the fiscal year considerably higher at 0.43725 percent. Investments based on these indexes provide quick upward rate resets as rates increase.

Credit quality remained an important factor in the management and performance of the Fund. We are cautious in our review of the companies and securities in which we invest. We select investments that we believe to be of the highest credit quality, based on our credit risk constraints, although this higher-quality bias can negatively affect yield.

Staying the course

 

 

This past fiscal year, we have emphasized investments of the highest credit quality from many industries and sectors, and we intend to continue to do so going forward. We remain very selective of our investments. Corporate debt was used as an alternative investment when possible. We continue to use floating-rate securities in anticipation of future rate increases. We will also consider investing in U.S. Treasury and government agency securities, as necessary.

We are managing the Fund to comply with recent amendments to SEC regulations of money market funds. The SEC adopted such amendments in an effort to provide money market fund investors with greater protection and more timely information about the fund in which they invest. To this end, we are maintaining daily and weekly liquidity levels according to the regulations to provide for the liquidity needs of our shareholders. We continue to manage the Fund in a prudent manner and in accordance with SEC regulations.

You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.

The opinions expressed in this report are those of the portfolio manager and are current only through the end of the period of the report as stated on the cover. The manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

 

150   ANNUAL REPORT   2016  

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Money Market Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Corporate Obligations

      68.7%   

Commercial Paper

      38.1%   

Notes

      18.7%   

Certificate Of Deposit

      10.2%   

Master Note

      1.7%   

United States Government and Government Agency Obligations

      17.2%   

Municipal Obligations

      14.2%   

Cash and Other Assets (Net of Liabilities)

      -0.1%   

Lipper Rankings

 

 

 

Category: Lipper Money Market Funds    Rank      Percentile

1 Year

    41/160      26

3 Year

    34/159      22

5 Year

    29/153      19

10 Year

    48/127      38

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

 

 

  2016   ANNUAL REPORT   151

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Money Market Fund (in thousands)

MARCH 31, 2016

 

 

 

CORPORATE
OBLIGATIONS		   Principal     Value  

Certificate Of Deposit

  

Banco del Estado de Chile:

      

0.788%, 4-14-16 (A)

   $ 2,100      $ 2,100   

0.778%, 4-22-16 (A)

     1,000        1,000   

0.780%, 4-22-16 (A)

     3,500        3,500   

Bank of America N.A.,

      

0.670%, 7-6-16

     1,700        1,700   

Bank of Montreal:

      

0.781%, 4-7-16 (A)

     2,500        2,500   

0.781%, 4-17-16 (A)

     3,000        3,000   

BMO Harris Bank N.A.,

      

0.770%, 4-7-16 (A)

     2,500        2,500   

Toyota Motor Credit Corp.,

      

0.740%, 4-18-16 (A)

     3,500        3,500   

U.S. Bank National Association,

      

0.540%, 4-21-16

     3,000        3,000   
   

 

 

  
 

Total Certificate Of
Deposit – 10.2%

   

     22,800   

Commercial Paper (B)

  

Air Products and Chemicals, Inc.,

      

0.480%, 5-2-16

     4,200        4,198   

American Honda Finance Corp. (GTD by Honda Motor Co.),

      

0.460%, 5-18-16

     1,000        999   

BMW U.S. Capital LLC (GTD by BMW AG),

      

0.410%, 4-25-16

     1,700        1,700   

Coca-Cola Co. (The):

      

0.840%, 11-14-16

     1,400        1,393   

1.000%, 1-5-17

     1,400        1,389   

Corporacion Andina de Fomento:

      

0.360%, 4-15-16

     2,550        2,550   

0.370%, 4-18-16

     2,400        2,399   

0.500%, 6-1-16

     4,000        3,997   

Essilor International S.A.:

      

0.500%, 4-1-16

     1,565        1,565   

0.430%, 4-4-16

     2,000        2,000   

0.470%, 4-7-16

     5,000        5,000   

0.450%, 4-14-16

     1,000        1,000   

0.490%, 4-25-16

     2,000        1,999   

J.M. Smucker Co. (The),

      

0.650%, 4-1-16

     1,100        1,100   

John Deere Financial Ltd. (GTD by John Deere Capital Corp.),

      

0.410%, 4-28-16

     1,000        1,000   

Kroger Co. (The),

      

0.550%, 4-1-16

     1,082        1,082   

Malayan Banking Berhad (GTD by Wells Fargo Bank N.A.):

      

0.640%, 4-20-16

     1,200        1,200   

0.440%, 5-5-16

     465        465   

0.700%, 5-9-16

     4,000        3,997   

0.690%, 5-19-16

     1,750        1,748   

0.500%, 6-1-16

     435        434   

0.490%, 6-16-16

     2,100        2,097   
CORPORATE
OBLIGATIONS (Continued)		   Principal     Value  

Commercial Paper (B) (Continued)

  

Mondelez International, Inc.,

      

0.570%, 4-1-16

   $ 1,100      $ 1,100   

Northern Illinois Gas Co.:

      

0.570%, 4-5-16

     3,400        3,400   

0.570%, 4-12-16

     4,100        4,099   

0.570%, 4-13-16

     3,500        3,499   

Pfizer, Inc.,

      

0.490%, 5-11-16

     2,700        2,698   

River Fuel Co. #2, Inc. (GTD by Bank of Nova Scotia),

      

0.550%, 4-29-16

     5,900        5,897   

River Fuel Funding Co. #3, Inc. (GTD by Bank of Nova Scotia),

      

0.620%, 6-1-16

     5,700        5,694   

Roche Holdings, Inc.,

      

0.430%, 4-18-16

     8,000        7,998   

Wisconsin Electric Power Co.:

      

0.400%, 4-4-16

     2,100        2,100   

0.650%, 4-6-16

     2,200        2,200   

Wisconsin Gas LLC,

      

0.400%, 4-8-16

     3,000        3,000   
   

 

 

  
 

Total Commercial Paper – 38.1%

  

     84,997   

Master Note

  

Toyota Motor Credit Corp.,

      

0.443%, 4-6-16 (A)

     3,894        3,894   
   

 

 

  
 

Total Master Note – 1.7%

  

     3,894   

Notes

  

American Honda Finance Corp.,

      

1.010%, 5-26-16 (A)

     2,650        2,652   

Banco del Estado de Chile,

      

0.780%, 4-26-16 (A)

     4,500        4,500   

Bank of Nova Scotia (The):

      

1.140%, 4-17-16 (A)

     1,500        1,502   

0.780%, 4-19-16 (A)

     3,500        3,500   

BMO Harris Bank N.A.,

      

0.890%, 4-18-16 (A)

     3,000        3,000   

GE Capital International Funding Co.,

      

0.964%, 4-15-16

     10,078        10,079   

General Electric Co. (GTD by General Electric Co.),

      

0.790%, 5-13-16 (A)

     500        500   

JPMorgan Chase Bank N.A.:

      

0.780%, 4-22-16 (A)

     1,250        1,250   

0.840%, 6-7-16 (A)

     3,550        3,550   

Rabobank Nederland,

      

0.680%, 6-1-16 (A)

     1,000        1,000   

Royal Bank of Canada:

      

0.740%, 6-12-16 (A)

     1,000        999   

2.300%, 7-20-16

     850        854   

Toyota Motor Credit Corp.,

      

0.630%, 4-14-16 (A)

     1,500        1,500   
CORPORATE
OBLIGATIONS
(Continued)		   Principal     Value  

Notes (Continued)

  

Wells Fargo Bank N.A.:

      

0.680%, 4-20-16 (A)

   $ 2,000      $ 2,000   

0.710%, 4-20-16 (A)

     1,600        1,600   

0.760%, 6-10-16 (A)

     1,500        1,500   

0.750%, 6-15-16 (A)

     1,800        1,800   
   

 

 

  
 

Total Notes – 18.7%

  

     41,786   
 

TOTAL CORPORATE OBLIGATIONS – 68.7%

   

   $ 153,477   

(Cost: $153,477)

      
 
MUNICIPAL OBLIGATIONS         

California – 2.1%

  

CA Statewide Cmnty Dev Auth, Multifam Hsng Rev Bonds (Wyndover Apts), Ser 2004 LL (GTD by FNMA),

      

0.410%, 4-7-16 (A)

     700        700   

San Francisco City and Cnty, Pub Util Comnty Water Rev, Series A1T (Taxable), (GTD by Royal Bank of Canada),

      

0.440%, 5-3-16

     3,900        3,900   
   

 

 

  
      4,600   
   

 

 

  
 

Colorado – 1.5%

  

Castle Rock, CO, Cert of Part, Ser 2008 (GTD by Wells Fargo Bank N.A.),

      

0.460%, 4-7-16 (A)

     320        320   

CO Hsng and Fin Auth, Multifam Hsng Rev Bonds (Greentree Vlg Apts Proj), Ser 2007 (GTD by U.S. Bank N.A.),

      

0.410%, 4-7-16 (A)

     2,700        2,700   

Sheridan Redev Agy CO Tax, Var Rfdg S Santa Fe Dr Corridor Redev PJ, Ser A-1 (GTD by JPMorgan Chase & Co.),

      

0.600%, 4-7-16 (A)

     250        250   
   

 

 

  
      3,270   
   

 

 

  
 

Georgia – 1.4%

  

Muni Elec Auth GA, Gen Resolution Proj Bond Anticipation Notes, Ser B (Taxable), (GTD by TD Bank N.A.),

      

0.450%, 4-6-16

     3,150        3,150   
   

 

 

  
 

 

152   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Money Market Fund (in thousands)

MARCH 31, 2016

 

 

 

MUNICIPAL

OBLIGATIONS (Continued)

   Principal     Value  

Kansas – 0.9%

  

Univ of KS Hosp Auth, Var Rate Demand Hlth Fac Rev Bonds (KU Hlth Sys), Ser 2004 (GTD by U.S. Bank N.A.),

      

0.400%, 4-1-16 (A)

   $ 2,040      $ 2,040   
   

 

 

  
 

Louisiana – 1.7%

  

LA Pub Fac Auth, Rev Bonds (Air Products and Chemicals Proj), Ser 2008A (GTD by Air Products and Chemicals, Inc.),

      

0.390%, 4-1-16 (A)

     2,911        2,911   

Parish of St. Bernard, LA, Exempt Fac Rev Bonds (Mobil Oil Corp. Proj), Ser 1996 (GTD by Exxon Mobil Corp.),

      

0.370%, 4-1-16 (A)

     1,000        1,000   
   

 

 

  
      3,911   
   

 

 

  
 

Maryland – 0.8%

  

MD Hlth and Higher Edu Fac Auth Rev Bonds, Anne Arundel Hlth Sys Issue, Ser 2009A (GTD by Toronto Dominion Bank),

      

0.400%, 4-7-16 (A)

     1,900        1,900   
   

 

 

  
 

Michigan – 1.1%

  

MI Strategic Fund, Var Rate Demand Ltd. Oblig Rev Bonds (Air Prods and Chemicals, Inc. Proj), Ser 2007 (GTD by Air Prods and Chemicals, Inc.),

      

0.390%, 4-1-16 (A)

     2,500        2,500   
   

 

 

  
 

Missouri – 0.4%

  

Kansas City, MO, Var Rate Demand Taxable Spl Oblig Rfdg Bonds (President Hotel Redev Proj), Ser 2009B (GTD by JPMorgan Chase & Co.),

      

0.400%, 4-7-16 (A)

     950        950   
   

 

 

  
 

New Jersey – 0.5%

  

Trap Rock Industries, Inc., Var Demand Bonds, Ser 2005 (GTD by Wachovia Bank N.A.),

      

0.430%, 4-7-16 (A)

     1,045        1,045   
   

 

 

  
 

New York – 1.0%

  

NY Hsng Fin Agy, Related-Caroline Apt Hsng Rev Bonds, Ser 2008A (GTD by Federal Home Loan Mortgage Corp.),

      

0.410%, 4-7-16 (A)

     500        500   
   

 

 

  
MUNICIPAL
OBLIGATIONS (Continued)		   Principal     Value  

New York (Continued)

  

NY State Hsng Fin Agy, Maestro West Chelsea Hsng Rev Bonds, Ser 2015B (GTD by Wells Fargo Bank N.A.),

      

0.450%, 4-7-16 (A)

   $ 1,000      $ 1,000   

NYC GO Bonds, Fiscal 2006 Ser E (GTD by Bank of America N.A.),

      

0.390%, 4-7-16 (A)

     644        644   
   

 

 

  
      2,144   
   

 

 

  
 

Ohio – 0.1%

  

Columbus Rgnl Arpt Auth, Cap Funding Rev Bonds (OASBO Expanded Asset Pooled Fin Prog), Sr Ser 2006 (GTD by U.S. Bank N.A.),

      

0.410%, 4-7-16 (A)

     300        300   
   

 

 

  
 

Tennessee – 0.3%

  

Johnson City, TN Hlth and Edu Fac, Hosp Rev Bonds (Mountain States Hlth Alliance), Ser 2013A (GTD by U.S. Bank N.A.),

      

0.410%, 4-7-16 (A)

     760        760   
   

 

 

  
 

Texas – 1.8%

  

Port Arthur Nav Dist Indl Dev Corp., Exempt Fac Var Rate Rev Bonds (Air Products Proj), Ser 2006 (GTD by Air Products and Chemicals, Inc.),

      

0.390%, 4-1-16 (A)

     1,000        1,000   

Port Arthur Nav Dist Indl Dev Corp., Exempt Fac Var Rate Rev Bonds (Air Prdts Proj), Ser 2005 (GTD by Air Products and Chemicals, Inc.),

      

0.390%, 4-1-16 (A)

     2,925        2,925   
   

 

 

  
      3,925   
   

 

 

  
 

Wyoming – 0.6%

  

Uinta Cnty, WY, Pollutn Ctl Rfdg Rev Bonds (Chevron USA, Inc. Proj), Ser 1992 (GTD by Chevron Corp.),

      

0.370%, 4-1-16 (A)

     1,283        1,283   
 

TOTAL MUNICIPAL OBLIGATIONS – 14.2%

           $ 31,778   

(Cost: $31,778)

      
UNITED STATES
GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS		   Principal     Value  

United States Government Agency
Obligations – 16.5%

   

Federal Home Loan Bank:

  

    

0.720%, 2-17-17

   $ 2,500      $ 2,500   

0.790%, 3-30-17

     1,000        1,000   
   

 

 

  
      3,500   
   

 

 

  

Overseas Private Investment Corp. (GTD by U.S. Government):

      

0.360%, 4-6-16 (A)

     3,951        3,951   

0.400%, 4-6-16 (A)

     8,027        8,028   

0.360%, 4-7-16 (A)

     667        667   

0.400%, 4-7-16 (A)

     18,822        18,822   

0.400%, 4-29-16 (A)

     2,000        2,000   
   

 

 

  
      33,468   
   

 

 

  
 

United States Government Obligations – 0.7%

U.S. Treasury Notes,

  

  

0.470%, 4-2-16 (A)

     1,500        1,496   
   

 

 

  
 

TOTAL UNITED STATES GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS – 17.2%

     

   $ 38,464   

(Cost: $38,464)

      
 

TOTAL INVESTMENT
SECURITIES – 100.1%

   

   $ 223,719   

(Cost: $223,719)

      
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (0.1)%

   

     (137)   
 

NET ASSETS – 100.0%

  

   $ 223,582   
 

 

  2016   ANNUAL REPORT   153

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Money Market Fund (in thousands)

MARCH 31, 2016

 

 

 

Notes to Schedule of Investments

 

(A) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

 

(B) Rate shown is the yield to maturity at March 31, 2016.

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  
       

Assets

        

Investments in Securities

        

Corporate Obligations

   $ —       $ 153,477       $ —   

Municipal Obligations

     —         31,778         —   

United States Government and Government Agency Obligations

     —         38,464         —   

Total

   $ —       $ 223,719       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

The following acronym is used throughout this schedule:

GTD = Guaranteed

 

See Accompanying Notes to Financial Statements.

 

154   ANNUAL REPORT   2016  

Table of Contents

MANAGEMENT DISCUSSION

Ivy Municipal Bond Fund

(UNAUDITED)

 

 

 

LOGO

Bryan J. Bailey

Below, Bryan J. Bailey, CFA, portfolio manager of the Ivy Municipal Bond Fund (the “Fund”), discusses positioning, performance and results for the fiscal year ending March 31, 2016. He has managed the Fund since 2008 and previously was the manager of the Fund from 2000 through 2007. He has 27 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 months ended March 31, 2016

         

Ivy Municipal Bond Fund (Class A shares at net asset value)

      2.87%   

Ivy Municipal Bond Fund (Class A shares with sales charge)

      –1.53%   

Benchmark(s) and/or Lipper Category

         

S&P Municipal Bond Index

      3.84%   

(generally reflects the performance of the U.S. municipal bond market)

         

Lipper General & Insured Municipal Debt Funds Universe Average

      3.49%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable investment fees and expenses, while index returns do not include any such fees. The performance discussion below is at net asset value.

 

1. How did the fund/portfolio perform relative to its benchmark?

 

 

The Fund underperformed its benchmark index and Lipper peer group for the fiscal year (“FY”) ending March 31, 2016. Underperformance can be explained by a defensive-to-neutral duration (interest rate sensitivity) and an overall defensive portfolio structure.

2. What market conditions or events affected the Fund’s return?

 

 

The beginning of the FY brought about an abrupt shift in investor sentiment. Investor flows, which had been very strong in Q1 2015, quickly turned negative as market expectations that the Federal Reserve Board (Fed) would finally begin moving the Fed funds rate off of 0% (“liftoff”) began to gain traction. Comments at the March 2015 Federal Open Market Committee (FOMC) meeting that additional Fed action would be “data dependent” elevated volatility in the market, and daily market moves saw wide swings up and down, depending on the strength/weakness of the most recently reported economic data point. This high level of uncertainty around the timing of the initial Fed funds rate liftoff, coupled with the seemingly non-stop media discourse on the topic, appeared to add an element of confusion on the part of municipal investors. As a result, demand for the product was muted in Q2 and Q3 of 2015.

Q3 2015 brought an elevated level of concern regarding the slowing Chinese, Japanese, and European economies, as well as continued downward pressure on commodity prices. While the U.S. economy appeared to be growing modestly, global equity markets sold off aggressively. U.S. equity market sentiment turned negative on the belief that problems outside of the U.S. would eventually constrain U.S. growth and that continued U.S. dollar strength would increase the odds of a deflationary spiral. Against this backdrop, market expectations for the initial Fed rate liftoff were pushed back. The result was an aggressive flight-to-quality that drove Treasury and municipal bond yields lower. This in turn stimulated a renewed interest in the municipal bond space as investor flows once again turned positive heading into Q4 2015. Constrained supply and high demand for municipal bonds in Q4 2015 set the stage for impressive municipal bond market performance, once again stimulating increased investor flows into the sector. While the Fed finally lifted the funds rate to 0.25% in December 2015, the market seemingly continues to question the strength of the U.S. economic recovery, and therefore the trajectory and schedule of potential additional monetary policy actions.

In Q1 2016, constrained supply and high demand within the municipal bond market continued. In our view, absolute yields continue to be attractive relative to most global investment-grade fixed income alternatives, including foreign investors, and flows into the asset class continues to be robust. Returns for the asset class continue to be positive as we enter Q2 2016.

3. What strategies and techniques did you employ that affected fund performance?

 

 

The Fund both began and ended the fiscal year positioned defensively in anticipation of the increasing interest rate cycle and the potential end of the 30-year bull market in bonds. Fund sensitivity to interest rates was held at a neutral-to-slightly-lower sensitivity level relative to the Fund’s benchmark index throughout the FY. This was achieved by holding an elevated cash position as well as approximately 5.5% exposure to municipal floating rate notes and municipal auction rate notes. The shorter duration strategy hindered performance over the fiscal year, and the elevated cash position reduced the income contribution to total return modestly. Portfolio turnover remained very low, as we felt that the Fund was structured appropriately entering the FY.

4. What sectors (if applicable) did you emphasize during the fiscal year?

 

 

Overall performance was negatively impacted by the portfolio’s defensive structure, as well as its elevated cash position. The elevated cash position was intended to provide a cushion against potential redemptions as we entered the most recently completed FY, as well as a tactical position to redeploy into anticipated higher-yielding investments as the year progressed. Neither of these events materialized and, while the market traded in a

 

  2016   ANNUAL REPORT   155

Table of Contents

MANAGEMENT DISCUSSION

Ivy Municipal Bond Fund

(UNAUDITED)

 

 

 

narrow range over the course of the year, the resulting income sacrifice from the cash allocation constrained overall performance. The Fund has a long-term track record of providing above-average total returns to shareholders with what we consider to be one of the lowest volatility measures in the industry. We will not compromise our investment principles. Therefore, we are not willing to take excessive credit and duration risks or utilize leverage in an effort to produce out-sized returns that historically have been unsustainable. We believe doing so subjects investors to increased risks of the likely downside and a higher level of NAV volatility. We will not compromise our management discipline. Preservation of capital is an important consideration in our efforts.

5. What is your outlook for the year ahead?

 

 

We enter the new fiscal year facing many of the same challenges that we faced entering FY 2015: interest rate risk, geopolitical risk, global slowdown/deflation risk and currency risk, as well as having to deal with speculation and uncertainty regarding the Fed’s timetable and trajectory for U.S. monetary policy moving forward. There is also the issue of municipal headline risk — when you must deal with negative press coverage that could affect either the entire bond market, or even just a specific sector or state.

We believe these are very trying and volatile times for investors. While we anticipate U.S. gross domestic product numbers to grow at a respectable level over the next year, there is much that could go wrong and curtail what appears to be a moderate U.S. economic recovery. While the Fed has begun to tighten monetary policy, recent rhetoric and comments from Fed Chairwoman Yellen, as well as other FOMC Governors, apparently has introduced more uncertainty and confusion than clarity into the market. Geopolitical and terrorism (i.e., ISIS) tensions continue to be elevated in the Middle East and across Europe. The Chinese and Japanese economies have been slowing, and most European economies are either in or near recession. However, despite all of these negative factors, we remain cautiously optimistic that the U.S. economy will continue to grow modestly and that situations outside of U.S. borders will not be powerful enough to derail the recovery. Recent dollar weakness, viewed by many as a counterintuitive response to the Fed funds rate increase, has provided a welcomed respite for U.S. exporters and has stabilized commodity prices. There is also scant evidence that expectations for inflation may be picking up, as the U.S. labor market continues to tighten. Another uncertain factor that could impact markets in 2016 is the upcoming contentious U.S. Presidential election.

We could be entering a challenging period for fixed income investors, and total return expectations should probably be tempered to some degree. We believe it is unlikely that outsized total returns will continue into the future, especially given that interest rates are still extremely low by all historical measures. In this low-yield environment, the Fund’s yield cushion does not provide much protection from capital losses when measuring total return. However, if and when rates begin to rise, more attractive reinvestment opportunities may become available, which could potentially boost portfolio income. We believe that the Fund’s cash position will be able to provide reinvestment opportunities at higher prevailing future rates.

We believe that market volatility will remain elevated as a result of the risk-on/risk-off trades playing out in the Treasury market. When investors are nervous, they tend to shift their investments to the treasury market, which offers a lower general risk level (risk-off). Conversely, as they feel confident about the economy, they will shift away from treasuries into investments that may offer a greater return and more risk (risk-on). We continue to be very cognizant that the pendulum may at some point swing back to renewed interest outside of the municipal bond asset class, which would potentially result in less interest (and increased liquidations) in the investment-grade municipal bond space. While we believe that the 30+ year bull market in bonds is nearing the end, or has already ended, we do not believe that a bear market is necessarily imminent in the short run. Bond yields could stay in a low, narrow range for the remainder of 2016, into 2017, or even longer. Very low, even negative, interest rates across the globe could continue to boost demand for higher-yielding U.S. Treasury and municipal bonds, despite an improvement in the U.S. economy and increased domestic inflation expectations. Municipal bond new issue volume trends will need to be monitored closely. We will remain proactive and vigilant in assessing risk to the portfolio from a change in inflation expectations, as monetary policy continues to be extraordinarily accommodative. Inflation does not appear to be on the immediate horizon, and recent dialogue from the Fed suggests that they view deflation as a bigger risk.

We anticipate an elevated level of headline risk in our market. However, despite all of the naysayers, in our opinion, the municipal bond market is, and will remain, a very strong market from a credit perspective. Since the 2008 financial crisis, there has been an average of 4.5 municipal defaults per year, up from an average of 1.3 defaults annually from 1970 to 2007, according to Moody’s. There were four defaults among Moody’s rated municipal issuers in 2015. Municipal bond defaults continue to be heavily concentrated in the high-yield category.

Given these crosscurrents, the high level of uncertainty on all fronts, and our aforementioned viewpoint on the eventual direction of interest rates, we expect to keep the interest rate sensitivity of the Fund lower than, or neutral to, the benchmark index. The Fund will continue to hold an overweight cash position to give us the flexibility to take advantage of what we hope to be more attractive investment opportunities in the future. The Fund will continue to hold a reduced level of overweight positions in low A — BBB investment grade credits in an attempt to capture additional refinancing opportunities and credit upgrades. However, we do not anticipate actively adding lower quality exposure, and at this time we anticipate future investments to be higher quality in nature. The municipal yield curve continued to flatten over the last FY, and is currently much flatter than the 10-year average slope. Going forward, we expect to keep the average credit quality of the Fund in the A-AA range, while actively seeking relative value opportunities between sectors, states, and security structures. Positioning and asset distribution across the yield curve will continue to be a vital part of our investment strategy, as well as monitoring cross market technical factors. We will occasionally attempt to exploit trading opportunities in the high yield space without compromising our style discipline. We believe that the Fund is well positioned relative to its peers entering Q2 2016. The objective of the Fund remains the same: to seek to provide the level of current income consistent with preservation of capital and that is not subject to Federal income tax. To achieve that objective, we plan to continue investing in short, intermediate and longer-term investment grade (primarily) municipal bonds with an emphasis on overall quality and capital preservation with minimal yield sacrifice.

 

156   ANNUAL REPORT   2016  

Table of Contents

 

 

6. Were any derivatives used and, if so, what impact did they have?

 

 

No derivatives were used in the fiscal year.

The Fund’s performance noted above is at net asset value (NAV) and does not include the effect of any applicable sales charges. If reflected, the sales charge would reduce the performance noted.

As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

Fixed-income securities are subject to interest rate risk and, as such, the Fund’s net asset value may fall as interest rates rise. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the portfolio managers and are current only through the end of the period of the report as stated on the cover. The managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index (indexes) noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of the Ivy Municipal Bond Fund.

The Fund may include a significant portion of its investments that will pay interest that is taxable under the Alternative Minimum Tax (AMT). Exempt-interest dividends the Fund pays may be subject to state and local income taxes. The portion of the dividends the Fund pays that is attributable to interest earned on U.S. government securities generally is not subject to those taxes, although distributions by the Fund to its shareholders of net realized gains on the sale of those securities are fully subject to those taxes. The municipal securities market generally, or certain municipal securities in particular, may be significantly affected by adverse political, legislative or regulatory changes or litigation at the Federal or state level. These and other risks are more fully described in the fund’s prospectus. Not all funds or fund classes may be offered at all broker/ dealers.

 

  2016   ANNUAL REPORT   157

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Municipal Bond Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      3.0%   

Financials

      3.0%   

Bonds

      78.2%   

Municipal Bonds

      78.2%   

Cash and Other Assets (Net of Liabilities),
and Cash Equivalents+

      18.8%   

Lipper Rankings

 

 

 

Category: Lipper General Municipal Debt
Funds		    Rank      Percentile

1 Year

    193/263      74

3 Year

    192/228      84

5 Year

    166/210      79

10 Year

    71/153      47

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

Quality Weightings

 

 

 

Investment Grade

      72.5%   

AAA

      2.3%   

AA

      33.4%   

A

      27.4%   

BBB

      9.4%   

Non-Investment Grade

      5.7%   

BB

      1.0%   

CCC

      0.3%   

Non-rated

      4.4%   

Cash and Other Assets (Net of Liabilities),
and Cash Equivalents+ and Equities

      21.8%   

Our preference is to always use ratings obtained from Standard & Poor’s. For securities not rated by Standard & Poor’s, ratings are obtained from Moody’s. We do not evaluate these ratings, but simply assign them to the appropriate credit quality category as determined by the rating agency.

 

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

158   ANNUAL REPORT   2016  

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Municipal Bond Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class B(4)      Class C      Class I      Class Y(5)  

1-year period ended 3-31-16

      -1.53%         -1.89%         2.12%         3.09%         2.87%   

5-year period ended 3-31-16

      4.09%         4.06%         4.22%         5.23%         5.01%   

10-year period ended 3-31-16

      3.89%         3.70%         3.55%         —            4.27%   

Since Inception of Class through 3-31-16(6)

      —            —            —            4.78%         —      

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A shares carry a maximum front-end sales load of 4.25%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) The return shown for Class Y is hypothetical because there were no shares or assets for the period from September 24, 2008 through October 7, 2009. Class A data has been substituted for Class Y data during that period.

 

(6) 11-4-09 for Class I shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

  2016   ANNUAL REPORT   159

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Municipal Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Financials

  

 

Registered Investment Companies – 3.0%

  

iShares National AMT-Free Muni Bond ETF

     60      $ 6,710   
   

 

 

  
 

Total Financials – 3.0%

  

     6,710   
 

TOTAL COMMON
STOCKS – 3.0%

   

   $ 6,710   

(Cost: $6,678)

  

MUNICIPAL BONDS   Principal         

Alabama – 1.0%

  

The Pub Edu Bldg Auth of Tuscaloosa, Student Hsng Rev Bonds (Univ of AL Ridgecrest Residential Proj), Ser 2008,

      

6.750%, 7-1-33

   $ 500        555   

The Spl Care Fac Fin Auth of Birmingham – Children’s Hosp, Hlth Care Fac Rev Bonds, Ser 2009,

      

6.000%, 6-1-39

     750        865   

Water Works Board of Birmingham, AL, Water Rev Bonds, Ser 2009-A,

      

5.125%, 1-1-34

     750        828   
   

 

 

  
      2,248   
   

 

 

  
 

Arizona – 1.0%

  

AZ Cert of Part, Ser 2010A (Insured by AGM),

      

5.250%, 10-1-26

     1,000        1,119   

Rio Nuevo Multipurp Fac Dist (Tucson, AZ), Sub Lien Excise Tax Rev Bonds, Ser 2008,

      

6.625%, 7-15-25

     500        566   

Univ Med Ctr Corp. (Tucson, AZ), Hosp Rev Bonds, Ser 2009,

      

6.500%, 7-1-39

     500        588   
   

 

 

  
      2,273   
   

 

 

  
 

Arkansas – 0.4%

  

Board of Trustees of the Univ of AR, Var Fac Rev Bonds (Fayetteville Campus), Rfdg and Impvt Ser 2016A,

      

5.000%, 11-1-37 (A)

     745        894   
   

 

 

  
MUNICIPAL BONDS
(Continued)		   Principal     Value  

California – 10.6%

  

Bay Area Toll Auth, San Francisco Bay Area Toll Bridge Rev Bonds, Ser 2008 D-1 Index Rate Bonds,

      

1.210%, 4-1-45 (B)

   $ 1,000      $ 1,001   

Bay Area Toll Auth, San Francisco Bay Area Toll Bridge Rev Bonds, Ser 2008 G-1,

      

1.500%, 4-1-45 (B)

     1,500        1,488   

CA Cmnty Trans Rev (Installment Sale), Cert of Part (T.R.I.P. — Total Road Impvt Prog), Ser 2012B,

      

5.250%, 6-1-42

     345        387   

CA Muni Fin Auth, Cmnty Hosp of Cent CA Oblig Group Cert of Part,

      

5.500%, 2-1-39

     460        510   

CA Pollutn Ctl Fin Auth, Solid Waste Disp Rev Bonds (Republic Svc, Inc. Proj), Ser 2002B,

      

5.250%, 6-1-23

     415        442   

CA Sch Fin Auth, Charter Sch Rev Bonds (Coastal Academy Proj), Ser 2013A,

      

5.000%, 10-1-22

     375        416   

CA Statewide Cmnty Dev Auth, Insd Rev Bonds (Henry Mayo Newhall Mem Hosp), Ser 2007A,

      

5.000%, 10-1-37

     500        533   

CA Statewide Cmnty Dev Auth, Student Hsng Rev Bonds (Univ of CA, Irvine East Campus Apt, Phase I Rfdg-CHF-Irvine LLC), Ser 2011,

      

5.000%, 5-15-21

     1,365        1,598   

CA Various Purp GO Bonds:

      

5.250%, 9-1-26

     1,500        1,812   

5.250%, 10-1-29

     500        573   

6.500%, 4-1-33

     1,000        1,167   

6.000%, 11-1-39

     500        588   

CA Various Purp GO Rfdg Bonds,

      

5.000%, 2-1-33

     2,000        2,363   

City of Los Angeles, Wastewater Sys Rev Bonds, Rfdg Ser 2015-D,

      

5.000%, 6-1-34

     1,190        1,450   

Cnty of Sacramento, Arpt Sys Sub and PFC/Grant Rev Bonds, Ser 2009,

      

5.125%, 7-1-25

     500        545   
MUNICIPAL BONDS
(Continued)		   Principal     Value  

California (Continued)

  

Golden State Tob Securitization Corp., Enhanced Tob Stlmt Asset-Bkd Bonds, Ser 2013A,

      

5.000%, 6-1-30

   $ 1,000      $ 1,181   

La Quinta Redev Proj Areas No. 1 and 2, Tax Alloc Rfdg Bonds, Ser 2014A,

      

5.000%, 9-1-34

     750        878   

Los Angeles Unif Sch Dist (Cnty of Los Angeles, CA), GO Bonds, Election of 2005, Ser 2009F,

      

5.000%, 1-1-34

     500        561   

Modesto, CA, Irrigation Dist Fin Auth, Elec Sys Rev Bonds, Ser 2015A,

      

5.000%, 10-1-36

     670        787   

Mountain View Shoreline Reg Park Comnty (Santa Clara Cnty, CA), Rev Bonds, Ser 2011A,

      

5.000%, 8-1-21

     250        295   

Palomar Pomerado Hlth, San Diego Cnty, CA, Cert of Part,

      

6.750%, 11-1-39

     250        280   

Redev Agy for Riverside, Interstate 215 Corridor Redev Proj Area, 2010 Tax Alloc Bonds, Ser E,

      

5.250%, 10-1-20

     570        651   

Redev Agy for Riverside, Interstate 215 Corridor Redev Proj Area, Ser 2010E,

      

6.000%, 10-1-25

     445        522   

San Jose, CA, Arpt Rev Bonds, Ser 2011A-1,

      

5.250%, 3-1-21

     500        587   

Santa Ana Unif Sch Dist (Orange County, CA), Election of 2008 Gen Oblig Bond, Series B,

      

0.000%, 8-1-37 (C)

     1,455        662   

Southn CA Pub Power Auth, Transmission Proj Rev Bonds (Southn Transmission Proj), Ser 2008B,

      

6.000%, 7-1-27

     500        559   

State Pub Works Board of CA, Lease Rev Bonds (Various Cap Proj), Ser 2011A:

      

5.250%, 10-1-24

     500        607   

5.000%, 12-1-24

     500        602   
 

 

160   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Municipal Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

MUNICIPAL BONDS
(Continued)		   Principal     Value  

California (Continued)

  

Trustees of the CA State Univ, Systemwide Rev Bonds, Ser 2015A,

      

5.000%, 11-1-38

   $ 500      $ 597   

Upland Unif Sch Dist (San Bernardino Cnty, CA), Election of 2008 GO Bonds, Ser A,

      

0.000%, 8-1-31 (C)

     150        90   

Vernon Elec Sys Rev Bonds, Ser 2012A,

      

5.500%, 8-1-41

     315        360   
   

 

 

  
      24,092   
   

 

 

  
 

Colorado – 1.7%

  

Adams 12 Five Star Sch, Adams and Broomfield Cnty, CO Cert of Part, Ser 2008,

      

5.000%, 12-1-25

     500        551   

City and Cnty of Broomfield, CO, Rfdg Cert of Part, Ser 2010,

      

5.000%, 12-1-23

     500        575   

Joint Sch Dist No. 28J, Adams and Arapahoe Cnty, CO, GO Bonds, Ser 2008,

      

6.000%, 12-1-28

     500        568   

Lincoln Park Metro Dist, Douglas Cnty, CO, GO Rfdg and Impvt Bonds, Ser 2008,

      

6.125%, 12-1-30

     500        543   

Platte Vly Fire Protection Dist, Weld Cnty, CO, Cert of Part, Ser 2012,

      

5.000%, 12-1-36

     300        318   

Rgnl Trans Dist of CO, Cert of Part, Ser 2015A,

      

5.000%, 6-1-35

     435        510   

Rgnl Trans Dist, Private Activity Bonds (Denver Transit Partn Eagle P3 Proj), Ser 2010,

      

6.500%, 1-15-30

     750        888   
   

 

 

  
      3,953   
   

 

 

  
 

Connecticut – 0.6%

  

Cap City Econ Dev Auth, Prkg and Enrg Fee Rev Bonds, Ser 2008D,

      

5.000%, 6-15-22

     370        402   

CT GO Bonds, Ser 2012D,

      

1.320%, 9-15-19 (B)

     1,000        999   
   

 

 

  
      1,401   
   

 

 

  
MUNICIPAL BONDS
(Continued)		   Principal     Value  

District Of Columbia – 1.2%

  

DC GO Rfdg Bonds, Ser 2008F (Insured by BHAC),

      

5.000%, 6-1-19

   $ 1,000      $ 1,094   

DC Hosp Rev Bonds (Sibley Mem Hosp Issue), Ser 2009,

      

6.375%, 10-1-39

     750        890   

Metro WA DC Arpt Auth, Dulles Toll Road, Second Sr Lien Rev Bonds, Ser 2009C,

      

0.000%, 10-1-41 (C)

     500        640   
   

 

 

  
      2,624   
   

 

 

  
 

Florida – 5.7%

  

Brevard Cnty Hlth Fac Auth, Hlth Rev Bonds (Hlth First, Inc. Proj), Ser 2009B,

      

7.000%, 4-1-39

     500        589   

Brevard Cnty, FL, Indl Dev Rev Bonds (TUFF FL Tech Proj), Ser 2009,

      

6.750%, 11-1-39

     500        546   

Citizens Ppty Ins Corp., Sr Secured Rev Bonds, Ser 2010A-1,

      

5.250%, 6-1-17

     400        421   

Hillsborough Cnty Aviation Auth, FL Intl Arpt, Sub Rev Bonds, Ser 2015B,

      

5.000%, 10-1-35

     300        344   

Hillsborough Cnty Indl Dev Auth, Indl Dev Rev Bonds, Hlth Fac Proj (Univ Cmnty Hosp), Ser 2008A,

      

5.625%, 8-15-29

     555        618   

Hillsborough Cnty Indl Dev Auth, Indl Dev Rev Bonds, Hlth Fac Proj (Univ Cmnty Hosp), Ser 2008B,

      

8.000%, 8-15-32

     600        746   

Miami-Dade Cnty, FL, Aviation Rev Bonds, Miami Intl Arpt (Hub of the Americas), Ser 2009A,

      

5.500%, 10-1-36

     500        569   

Miami-Dade Cnty, FL, Aviation Rev Bonds, Ser 2010B,

      

5.000%, 10-1-23

     500        581   

Miami-Dade Cnty, FL, GO Bonds (Bldg Better Cmnty Prog), Ser 2008B,

      

6.250%, 7-1-26

     500        560   
MUNICIPAL BONDS
(Continued)		   Principal     Value  

Florida (Continued)

  

Miami-Dade Cnty, FL, Water and Sewer Sys Rev Rfdg Bonds, Ser 2008B (Insured by AGM),

      

5.250%, 10-1-22

   $ 500      $ 616   

Miami-Dade Cnty, FL, Water and Sewer Sys Rev Rfdg Bonds, Ser 2008C (Insured by BHAC),

      

5.000%, 10-1-17

     500        531   

Mid-Bay Bridge Auth, Springing Lien Rev Bonds, Ser 2011A,

      

7.250%, 10-1-34

     500        656   

Osceola Cnty, FL, Sales Tax Rev Rfdg Bonds, Ser 2016A,

      

5.000%, 10-1-37 (A)

     2,005        2,342   

Palm Beach Co, Hlth Fac Auth Rev Bonds (Lifespace Cmnty, Inc.), Ser 2015C,

      

5.000%, 5-15-30

     1,000        1,156   

Pinellas Cnty Edu Fac Auth, Rev Rfdg Prog Bonds (Barry Univ Proj), Ser 2012,

      

5.250%, 10-1-30

     750        850   

Port St. Lucie, FL, Spl Assmt Rfdg Bonds (City Ctr Spl Assmt Dist), Ser 2008A,

      

5.750%, 7-1-20

     500        546   

St. Johns Cnty Indl Dev Auth, Rev Bonds (Presbyterian Ret Cmnty Proj), Ser 2010A,

      

5.875%, 8-1-40

     500        558   

Volusia Cnty Edu Fac Auth, Edu Fac Rev Rfdg Bonds (Embry-Riddle Aeronautical Univ, Inc. Proj), Ser 2011,

      

5.250%, 10-15-22

     500        586   
   

 

 

  
      12,815   
   

 

 

  
 

Georgia – 0.9%

  

Dev Auth of Burke Cnty (GA), Pollutn Ctl Rev Bonds (Oglethorpe Power Corp. Vogtle Proj), Ser 2003A,

      

0.767%, 1-1-24 (B)

     1,500        1,455   

Muni Elec Auth of GA, Proj One Sub Bonds, Ser 2008D,

      

5.750%, 1-1-20

     500        555   
   

 

 

  
      2,010   
   

 

 

  
 

 

  2016   ANNUAL REPORT   161

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Municipal Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

MUNICIPAL BONDS
(Continued)		   Principal     Value  

Hawaii – 1.3%

  

HI Arpt Sys Rev Bond, Rfdg Ser 2011,

      

5.000%, 7-1-21

   $ 1,000      $ 1,169   

HI Dept of Budget and Fin, Spl Purp Rev Bonds (The Queen’s Hlth Sys), Ser 2015A,

      

5.000%, 7-1-35

     1,500        1,778   
   

 

 

  
      2,947   
   

 

 

  
 

Illinois – 5.5%

  

Belleville, IL, Tax Incr Rfdg Rev Bonds (Frank Scott Pkwy Redev Proj), Ser 2007A,

      

5.000%, 5-1-26

     165        167   

Build IL Sales Tax Rev Bonds, Ser 2011,

      

5.000%, 6-15-27

     500        570   

Chicago O’Hare Intl Arpt, Gen Arpt Sr Lien Rev Rfdg Bonds, Ser 2015B,

      

5.000%, 1-1-34

     1,000        1,170   

City of Chicago, Second Lien Water Rev Bonds, Ser 2014,

      

5.000%, 11-1-39

     1,500        1,630   

IL Fin Auth, DePaul Univ Rev Bonds, Ser 2016,

      

5.000%, 10-1-41 (A)

     2,410        2,766   

IL Fin Auth, Rev and Rfdg Bonds (Roosevelt Univ Proj), Ser 2009,

      

6.500%, 4-1-39

     500        551   

IL Fin Auth, Rev Bonds, The Univ of Chicago, Ser 2008B,

      

5.500%, 7-1-19

     500        552   

IL Fin Auth, Student Hsng Rev Bonds (CHF-DeKalb LLC – Northn IL Univ Proj), Ser 2011,

      

5.750%, 10-1-21

     395        439   

IL GO Bonds, Ser 2012A,

      

4.000%, 1-1-23

     1,000        1,051   

IL Muni Elec Agy, Power Supply Sys Rev Rfdg Bonds, Ser 2015A,

      

5.000%, 2-1-32

     695        819   

IL Sales Tax Rev Bonds (Jr Oblig), Ser 2013,

      

5.000%, 6-15-26

     300        356   

IL State Toll Hwy Auth, Toll Hwy Sr Rev Bonds, 2013 Ser A,

      

5.000%, 1-1-35

     1,100        1,255   

IL State Toll Hwy Auth, Toll Hwy Sr Rev Bonds, Ser B,

      

5.000%, 1-1-37

     500        584   

State of IL GO Bonds,

      

5.500%, 7-1-26

     500        567   
   

 

 

  
      12,477   
   

 

 

  
MUNICIPAL BONDS
(Continued)		   Principal     Value  

Indiana – 1.0%

  

Hammond, IN, Redev Dist Rev Bonds (Marina Area Proj), Ser 2008,

      

6.000%, 1-15-17

   $ 125      $ 126   

IN Fin Auth, Fac Rev Rfdg Bonds (Miami Correctional Fac — Phase II), Ser 2008C,

      

5.000%, 7-1-17

     500        527   

IN Muni Power Agy, Power Supply Sys Rfdg Rev Bonds, Ser 2016C,

      

5.000%, 1-1-39

     1,000        1,173   

Mt. Vernon Sch Bldg Corp. of Hancock Cnty, IN, First Mtg Bonds, Ser 2007 (Insured by AGM),

      

5.250%, 1-15-32

     500        533   
   

 

 

  
      2,359   
   

 

 

  
 

Iowa – 0.8%

  

Altoona, IA, Annual Appropriation Urban Renewal Tax Incr Rev Bonds, Ser 2008,

      

6.000%, 6-1-34

     1,000        1,077   

IA Higher Edu Loan Auth, Private College Fac Rev Bonds (Upper IA Univ Proj), Ser 2012,

      

5.000%, 9-1-33

     750        760   
   

 

 

  
      1,837   
   

 

 

  
 

Kansas – 0.8%

  

Arkansas City, KS, Pub Bldg Comsn, Rev Bonds (South Cent KS Rgnl Med Ctr), Ser 2009,

      

7.000%, 9-1-38

     500        525   

Shawnee Cnty, KS, Cert of Part (First Responders Comm Proj), Ser 2012,

      

5.000%, 9-1-24

     1,050        1,200   
   

 

 

  
      1,725   
   

 

 

  
 

Kentucky – 1.2%

  

Cmnwlth of KY, State Ppty and Bldg Comsn, Rev and Rev Rfdg Bonds,
Proj No. 90,

      

5.750%, 11-1-19

     500        560   

KY Econ Dev Fin Auth, Hosp Rev Bonds, Ser 2010A:

      

5.500%, 6-1-21

     500        579   

6.500%, 3-1-45

     675        778   

Louisville Rgnl Arpt Auth, Arpt Sys Rev Bonds, Ser 2008A,

      

5.250%, 7-1-28

     500        548   
MUNICIPAL BONDS
(Continued)		   Principal     Value  

Kentucky (Continued)

  

Tpk Auth of KY, Econ Dev Road Rev Bonds (Revitalization Proj), Ser 2008A,

      

5.000%, 7-1-16

   $ 330      $ 334   
   

 

 

  
      2,799   
   

 

 

  
 

Louisiana – 2.2%

  

LA Citizens Prop Ins Corp., Assmt Rev Rfdg Bonds, Ser 2012,

      

5.000%, 6-1-24

     500        592   

LA Local Govt Envirnmt Fac and Cmnty Dev Auth, Hosp Rev Bonds (Women’s Hosp Fndtn Gulf Opp Zone Proj), Ser 2010B,

      

6.000%, 10-1-44

     750        871   

New Orleans Aviation Board, Rev Rfdg Bonds (Restructuring GARBs), Ser 2009A-1,

      

6.000%, 1-1-23

     500        564   

New Orleans, LA, GO Rfdg Bonds, Ser 2012 (Insured by AGM),

      

5.000%, 12-1-26

     1,500        1,760   

Rgnl Transit Auth, New Orleans, LA, Sales Tax Rev Bonds, Ser 2010 (Insured by AGM),

      

5.000%, 12-1-22

     1,000        1,154   
   

 

 

  
      4,941   
   

 

 

  
 

Maine – 1.2%

  

ME Tpk Auth, Tpk Rev Rfdg Bonds, Ser 2015,

      

5.000%, 7-1-34

     2,255        2,704   
   

 

 

  
 

Maryland – 0.7%

  

MD Econ Dev Corp., Pollutn Ctl Rev Rfdg Bonds (Potomac Elec Proj), Ser 2006,

      

6.200%, 9-1-22

     500        573   

MD Hlth and Higher Edu Fac Auth, Rev Bonds, Johns Hopkins Hlth Sys Oblig Group Issue, Ser 2012D,

      

1.124%,
5-15-38 (B)

     995        995   
   

 

 

  
      1,568   
   

 

 

  
 

Massachusetts – 0.5%

  

MA Dev Fin Agy, Rev Bonds, Foxborough Rgnl Charter Sch Issue, Ser 2010,

      

6.375%, 7-1-30

     485        544   

MA Edu Fin Auth, Edu Loan Rev Bonds, Issue I, Ser 2009,

      

6.000%, 1-1-28

     640        679   
   

 

 

  
      1,223   
   

 

 

  
 

 

162   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Municipal Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

MUNICIPAL BONDS
(Continued)		   Principal     Value  

Michigan – 3.4%

  

Kalamazoo Hosp Fin Auth, Hosp Rev Rfdg Bonds (Bronson Methodist Hosp), Ser 2003A,

      

5.000%, 5-15-26

   $ 500      $ 539   

Lincoln Consolidated Sch Dist, Cnty of Washtenaw and Wayne, MI, Rfdg Bonds, Ser 2016A,

      

5.000%, 5-1-35 (A)

     500        578   

MI Fin Auth, Rev Bonds (Detroit Sch Dist), Ser 2011,

      

5.500%, 6-1-21

     1,000        1,078   

MI Fin Auth, Hosp Rev and Rfdg Bonds (Trinity Hlth Credit Group), Ser 2015MI,

      

5.000%, 12-1-35

     500        572   

MI State Bldg Auth, Rev and Rfdg Bonds (Fac Prog), Ser 2015I,

      

5.000%, 4-15-34

     500        595   

MI State Hosp Fin Auth, Hosp Rev and Rfdg Bonds (Henry Ford Hlth Sys), Ser 2009,

      

5.750%, 11-15-39

     750        853   

MI State Hosp Fin Auth, Var Rate Rev Bonds (Ascension Hlth Credit Group), Ser 1999B-4,

      

5.000%, 11-15-32

     2,000        2,402   

State Bldg Auth, MI, 2006 Rev Rfdg Bonds (Fac Prog), Ser IA (Insured by FGIC),

      

0.000%, 10-15-22 (C)

     1,000        749   

State Bldg Auth, MI, 2008 Rev Rfdg Bonds (Fac Prog), Ser I,

      

5.000%, 10-15-18

     305        336   
   

 

 

  
      7,702   
   

 

 

  
 

Minnesota – 0.3%

  

Minneapolis-St. Paul Metro Arpt Comsn, Sub Arpt Rev Rfdg Bonds, Ser 2010D,

      

5.000%, 1-1-20

     500        566   
   

 

 

  
 

Mississippi – 0.4%

  

The Univ of Southn MS, S.M. Edu Bldg Corp., Rev Bonds (Campus Fac Impvt Proj), Ser 2009,

      

5.375%, 9-1-36

     750        862   
   

 

 

  
 

Missouri – 3.6%

  

Broadway-Fairview Trans Dev Dist (Columbia, MO), Trans Sales Tax Rev Bonds, Ser 2006A,

      

6.125%, 12-1-36

     175        140   
MUNICIPAL BONDS
(Continued)		   Principal     Value  

Missouri (Continued)

  

Hlth and Edu Fac Auth, Hlth Fac Rev Bonds (The Children’s Mercy Hosp), Ser 2009,

      

5.625%, 5-15-39

   $ 750      $ 837   

Indl Dev Auth of Joplin, MO, Hlth Fac Rev Bonds (Freeman Hlth Sys), Ser 2011,

      

5.500%, 2-15-31

     750        835   

MO Joint Muni Elec Util Comsn, Power Proj Rev Rfdg Bonds (Iatan 2 Proj), Ser 2015A,

      

5.000%, 12-1-37

     1,000        1,161   

MO Joint Muni Elec Util Comsn, Power Proj Rev Rfdg Bonds (Prairie State Proj), Ser 2016A,

      

5.000%, 12-1-40

     1,000        1,160   

Platte Cnty R-III Sch Dist Bldg Corp., Leasehold Rfdg and Impvt Rev Bonds, Ser 2008,

      

5.000%, 3-1-28

     340        363   

Pub Water Supply Dist No. 1 of Lincoln Cnty, MO, Cert of Part, Ser 2009,

      

6.750%, 6-15-35

     500        503   

St. Louis Cnty, MO, Indl Dev Auth, Sr Living Fac Rev Bonds (Friendship Vlg Sunset Hills), Ser 2012,

      

5.000%, 9-1-32

     1,120        1,223   

St. Louis Muni Fin Corp., Compound Int Leasehold Rev Bonds (Convention Ctr Cap Impvt Proj), Ser 2010A (Insured by AGM),

      

0.000%,
7-15-36 (C)

     2,350        1,077   

The Indl Dev Auth of Platte Cnty, MO, Trans Rev Bonds (Zona Rosa Phase II Retail Proj), Ser 2007,

      

6.850%, 4-1-29

     200        205   

The Indl Dev Auth of St. Joseph, MO, Spl Oblig Rev Bonds (St. Joseph Sewage Sys Impvt Proj), Ser 2007,

      

4.375%, 4-1-18

     100        104   

The Indl Dev Auth of St. Louis, MO, Sr Living Fac Rev Bonds (Friendship Vlg of West Cnty), Ser 2007A,

      

5.500%, 9-1-28

     500        512   
   

 

 

  
      8,120   
   

 

 

  
MUNICIPAL BONDS
(Continued)		   Principal     Value  

Nebraska – 1.0%

  

Omaha, NE, Pub Power Dist, Separate Elec Sys Rev Bonds (NE City 2), Ser 2016A,

      

5.000%,
2-1-41 (A)

   $ 1,000      $ 1,162   

Omaha, NE, Pub Power Dist, Separate Elec Sys Rev Bonds (NE City 2), Ser 2015A,

      

5.000%, 2-1-33

     1,000        1,182   
   

 

 

  
      2,344   
   

 

 

  
 

Nevada – 0.6%

  

Las Vegas Redev Agy, NV, Tax Incr Rev Bonds, Ser 2009A,

      

8.000%, 6-15-30

     500        575   

Overton Power Dist No. 5 (NV), Spl Oblig Rev Bonds, Ser 2008:

      

6.000%, 12-1-16

     75        78   

6.250%, 12-1-17

     270        295   

6.500%, 12-1-18

     290        333   
   

 

 

  
      1,281   
   

 

 

  
 

New Hampshire – 0.4%

  

NH Hlth and Edu Fac Auth, Rev Bonds, Rivermead Issue, Ser 2011A,

      

6.875%, 7-1-41

     150        170   

NH Hlth and Edu Fac Auth, FHA Insd Mtg Rev Bonds, LRG Hlthcare Issue, Ser 2009 (Insured by FHA),

      

7.000%, 4-1-38

     500        600   

NH Hsng Fin Auth, Sngl Fam Mtg Acquisition Rev Bonds, Ser 2008,

      

6.000%, 7-1-38

     210        216   
   

 

 

  
      986   
   

 

 

  
 

New Jersey – 3.3%

  

NJ Econ Dev Auth, Rev Bonds (Provident Group-Montclair Ppty LLC — Montclair St Univ Student Hsng Proj), Ser 2010A,

      

5.750%, 6-1-31

     850        958   

NJ Econ Dev Auth, Sch Fac Constr Notes, Ser 2012H,

      

1.300%, 2-1-17 (B)

     2,000        1,980   

NJ Econ Dev Auth, Sch Fac Constr Rfdg Bonds, Ser 2011EE,

      

5.250%, 9-1-24

     500        546   

NJ Higher Edu Student Assistance Auth, Student Loan Rev Bonds, Ser 2011-1,

      

5.000%, 12-1-19

     500        550   
 

 

  2016   ANNUAL REPORT   163

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Municipal Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

MUNICIPAL BONDS
(Continued)		   Principal     Value  

New Jersey (Continued)

  

NJ Hlth Care Fac Fin Auth, Rev and Rfdg Bonds, Barnabas Hlth Issue, Ser 2011A,

      

5.625%, 7-1-37

   $ 500      $ 580   

NJ Hlth Care Fac Fin Auth, Rev Bonds, Virtua Hlth Issue, Ser 2009A,

      

5.500%, 7-1-38

     500        562   

NJ Trans Trust Fund Auth, Trans Sys Bonds (Cap Apprec Bonds), Ser 2010A,

      

0.000%, 12-15-40 (C)

     2,000        569   

NJ Trans Trust Fund Auth, Trans Sys Bonds, Ser 2006A (Insured by AGM/CR),

      

5.500%, 12-15-22

     500        587   

NJ Trans Trust Fund Auth, Trans Sys Bonds, Ser 2003B-2,

      

5.000%, 12-15-16

     500        514   

Passaic Vly Sewerage Commissioners (NJ), Sewer Sys Bonds, Ser G,

      

5.750%, 12-1-21

     435        520   
   

 

 

  
      7,366   
   

 

 

  
 

New Mexico – 0.1%

  

NM Mtg Fin Auth, Sngl Fam Mtg Prog Class I Bonds, Ser 2006D (Insured by GNMA/FNMA/FHLMC),

      

6.000%, 1-1-37

     225        233   

NM Mtg Fin Auth, Sngl Fam Mtg Prog Class I Bonds, Ser 2008D-2 (Insured by GNMA/FNMA/FHLMC),

      

5.250%, 7-1-30

     65        66   
   

 

 

  
      299   
   

 

 

  
 

New York – 8.9%

  

Buffalo and Erie Cnty Indl Land Dev Corp., Oblig Group Rev Bonds (Catholic Hlth Sys, Inc. Proj), Ser 2015,

      

5.250%, 7-1-35

     750        875   

Dormitory Auth of the State of NY, State Personal Income Tax Rev Bonds (Gen Purp), Ser 2015C (Tax-Exempt),

      

5.000%, 2-15-38

     750        880   

Long Island Power Auth, Elec Sys Gen Rev Bonds, Ser 2014A (Insured by AGM),

      

5.000%, 9-1-39

     1,500        1,733   

Metro Trans Auth, Trans Rev Bonds, Ser 2014C,

      

5.000%, 11-15-36

     1,500        1,751   
MUNICIPAL BONDS
(Continued)		   Principal     Value  

New York (Continued)

  

Metro Trans Auth, Trans Rev Green Bonds, Ser 2016A-1,

      

5.000%, 11-15-41

   $ 500      $ 587   

NY Convention Ctr Dev Corp., Rev Rfdg Bonds (Hotel Unit Fee Secured), Ser 2015,

      

5.000%, 11-15-34

     1,000        1,196   

NY Dormitory Auth, Mercy Med Ctr Rev Bonds (Catholic Hlth of Long Island Oblig Group), Ser 1999B,

      

0.740%, 7-1-29 (B)

     1,425        1,329   

NY Enrg Research and Dev Auth, Pollutn Ctl Rev Bonds (Niagara Mohowak Power Corp. Proj), Ser 1985A (Insured by AMBAC),

      

1.088%, 12-1-23 (B)

     1,380        1,325   

NY State Enrg Research and Dev Auth, Fac Rev Bonds (Consolidated Edison Co. of NY, Inc. Proj), Sub Ser 1999A-1 (Insured by AMBAC),

      

0.398%, 5-1-34 (B)

     2,000        1,800   

NYC GO Bonds, Fiscal 2014 Ser G,

      

5.000%, 8-1-30

     1,000        1,202   

NYC Hsng Dev Corp., Multi-Fam Hsng Rev Bonds, Ser 2009K,

      

4.950%, 11-1-39

     415        433   

NYC Indl Dev Agy, Pilot Rev Bonds (Yankee Stadium Proj), Ser 2009A:

      

0.000%, 3-1-25 (C)

     500        400   

0.000%, 3-1-26 (C)

     500        383   

0.000%, 3-1-27 (C)

     500        368   

NYC Muni Water Fin Auth, Water and Sewer Sys Second Gen Resolution Rev Bonds, Ser 2015HH,

      

5.000%, 6-15-37

     1,500        1,782   

NYC Transitional Fin Auth, Bldg Aid Rev Bonds, Ser 2016S-1,

      

5.000%, 7-15-37

     1,000        1,192   

NYC Transitional Fin Auth, Future Tax Secured Tax-Exempt Sub Bonds, Ser 2013I,

      

5.000%, 5-1-29

     400        484   

Port Auth of NY & NJ Consolidated Bonds, One Hundred Fifty-Second Ser (Insured by BHAC),

      

5.750%, 11-1-30

     500        549   
MUNICIPAL BONDS
(Continued)		   Principal     Value  

New York (Continued)

  

Util Debt Securitization Auth, Restructuring Bonds, Ser 2013TE,

      

5.000%, 12-15-31

   $ 1,500      $ 1,823   
   

 

 

  
      20,092   
   

 

 

  
 

North Carolina – 0.4%

  

NC Eastn Muni Power Agy, Power Sys Rev Bonds, Ser 2008C,

      

6.000%, 1-1-19

     110        120   

NC Tpk Auth, Triangle Expressway Sys Rev Bonds, Ser 2009A,

      

0.000%, 1-1-37 (C)

     500        238   

Oak Island, NC, Enterprise Sys Rev Bonds, Ser 2009,

      

6.000%, 6-1-34

     500        580   
   

 

 

  
      938   
   

 

 

  
 

Ohio – 0.6%

  

OH Air Quality Dev Auth, Envirnmt Impvt Rev Bonds (Buckeye Power, Inc. Proj), Ser 2010,

      

5.750%, 12-1-30

     500        579   

OH Major New State Infra Proj Rev Bonds, Ser 2008-I,

      

6.000%, 6-15-17

     395        421   

Toledo-Lucas Cnty Port Auth, Dev Rev Bonds (NW OH Bond Fund) (Midwest Terminals Proj), Ser 2007C,

      

6.000%, 11-15-27

     380        397   
   

 

 

  
      1,397   
   

 

 

  
 

Oklahoma – 0.4%

  

Grand River Dam Auth, Rev Bonds, Ser 2008A (Insured by BHAC),

      

5.000%, 6-1-18

     905        987   
   

 

 

  
 

Oregon – 0.7%

  

Hosp Fac Auth of Clackamas Cnty, OR, Rev Bonds (Legacy Hlth Sys), Ser 2009A,

      

5.500%, 7-15-35

     250        278   

Port of Portland, OR, Portland Intl Arpt Rfdg Rev Bonds, Ser Twenty-Three,

      

5.000%, 7-1-34

     1,000        1,192   
   

 

 

  
      1,470   
   

 

 

  
 

 

164   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Municipal Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

MUNICIPAL BONDS
(Continued)		   Principal     Value  

Pennsylvania – 3.5%

  

Allegheny Cnty Arpt Auth, Arpt Rev Rfdg Bonds (Pittsburg Intl Arpt), Ser 2010A,

      

5.000%, 1-1-17

   $ 250      $ 258   

Cumberland Cnty Muni Auth, Rfdg Rev Bonds (Asbury PA Oblig Group), Ser 2012,

      

3.000%, 1-1-17

     455        458   

Dauphin Cnty Gen Auth, Hlth Sys Rev Bonds (Pinnacle Hlth Sys Proj), Ser 2009A,

      

6.000%, 6-1-36

     600        683   

Lycoming Cnty Auth, Hlth Sys Rev Bonds (Susquehanna Hlth Sys Proj), Ser 2009A,

      

5.750%, 7-1-39

     500        560   

PA Auth for Indl Dev, Rev Bonds (MaST Charter Sch Proj), Ser 2010,

      

6.000%, 8-1-35

     750        832   

PA Higher Edu Fac Auth, Rev Bonds (Shippensburg Univ Student Svc, Inc. Student Hsng Proj at Shippensburg Univ of PA), Ser 2011,

      

6.000%, 10-1-26

     500        561   

PA Tpk Comsn, Tpk Sub Rev Bonds, Ser 2009D,

      

5.500%, 12-1-41

     750        839   

PA Tpk Comsn, Tpk Sub Rev Bonds, Ser 2010B-2,

      

0.000%,
12-1-28 (C)

     1,500        1,760   

PA Tpk Comsn, Tpk Sub Rev Rfdg Bonds, Ser 2016,

      

5.000%, 6-1-38

     1,000        1,141   

Philadelphia Auth Indl Dev, Rev Bonds (Mariana Bracetti Academy Charter Sch Proj), Ser 2011,

      

7.250%, 12-15-31

     400        452   

Philadelphia, PA, GO Rfdg Bonds, Ser 2008A
(Insured by AGM),

      

5.250%, 12-15-24

     445        493   
   

 

 

  
      8,037   
   

 

 

  
 

Rhode Island – 0.2%

  

RI Student Loan Auth, Student Loan Prog Rev Bonds, Sr Ser 2008A,

      

5.250%, 12-1-18

     405        431   
   

 

 

  
 

South Carolina – 0.5%

  

SC Pub Svc Auth, Tax-Exempt Rfdg and Impvt Rev Oblig, Ser 2015A,

      

5.000%, 12-1-29

     1,000        1,205   
   

 

 

  
MUNICIPAL BONDS
(Continued)		   Principal     Value  

Tennessee – 0.6%

  

Memphis-Shelby Cnty Arpt Auth, Arpt Rfdg Rev Bonds, Ser 2010B,

      

5.750%, 7-1-25

   $ 750      $ 856   

The Hlth, Edu and Hsng Fac Board of Shelby, TN, Rev Bonds (Methodist Le Bonheur Hlthcare), Ser 2008C,

      

5.250%, 6-1-18

     500        543   
   

 

 

  
      1,399   
   

 

 

  
 

Texas – 7.4%

  

Arlington, TX, Spl Tax Rev Bonds, Ser 2008 (Insured by BHAC),

      

5.000%, 8-15-18

     300        324   

Austin, TX, Arpt Sys Rev Bonds (Travis, Williamson and Hays Counties), Ser 2014,

      

5.000%, 11-15-39

     1,000        1,123   

Board of Regents, TX State Univ Sys, Rev Fin Sys Rev Bonds, Ser 2008,

      

5.250%, 3-15-19

     355        386   

Cass Cnty Indl Dev Corp., Envirnmt Impvt Rev Rfdg Bonds, Ser 2009A,

      

9.250%, 3-1-24

     500        603   

Clifton Higher Edu Fin Corp., Edu Rev Bonds (IDEA Pub Sch), Ser 2011,

      

5.750%, 8-15-41

     500        561   

Clifton Higher Edu Fin Corp., Edu Rev Bonds (Uplift Edu), Ser 2014A,

      

4.250%, 12-1-34

     1,000        1,023   

El Paso, TX (El Paso Cnty), Water and Sewer Rev Rfdg Bonds, Ser 2008C,

      

5.000%, 3-1-17

     500        520   

Harris Cnty Cultural Edu Fac Fin Corp., Med Fac Rev Rfdg Bonds (Baylor College of Medicine), Ser 2008D,

      

5.000%, 11-15-16

     200        205   

Hopkins Cnty Hosp Dist, Hosp Rev Bonds, Ser 2008,

      

6.000%, 2-15-33

     1,000        1,015   

Houston Higher Edu Fin Corp., Edu Rev Bonds (Cosmos Fndtn, Inc.), Ser 2011A,

      

6.500%, 5-15-31

     1,000        1,230   

Houston, TX, Arpt Sys, Sub Lien Rev Rfdg Bonds, Ser 2012A,

      

5.000%, 7-1-32

     500        559   
MUNICIPAL BONDS
(Continued)		   Principal     Value  

Texas (Continued)

  

Houston, TX, Combined Util Sys, First Lien Rev Rfdg Bonds (SIFMA Index Floating Rate Bonds), Ser 2012C,

      

1.000%,
5-15-34 (B)

   $ 500      $ 500   

Howard Cnty, TX, GO Bonds, Ser 2008,

      

4.650%, 2-15-24

     505        542   

Lower Colorado River Auth, Rfdg Rev Bonds, Ser 2008A,

      

5.750%, 5-15-23

     500        552   

Mission Econ Dev Corp., Solid Waste Disp Rev Bonds (Dallas Clean Enrg McCommas Bluff LLC Proj), Ser 2011,

      

5.625%, 12-1-17

     505        523   

North TX Twy Auth, Sys Rev Rfdg Bonds, Ser 2008D,

      

0.000%,
1-1-30 (C)

     2,000        1,262   

North TX Twy Auth, Sys Rev Rfdg Bonds (First Tier Current Int Bonds), Ser 2008A,

      

6.000%, 1-1-25

     500        545   

Prosper, TX (Collin Cnty), Combination Tax and Rev Cert of Oblig, Ser 2008,

      

5.500%, 2-15-20

     500        541   

Tarrant Cnty Cultural Edu Fac Fin Corp., Ret Fac Rev Bonds (Buckingham Sr Living Cmnty, Inc. Proj), Ser 2007,

      

5.625%, 11-15-27

     250        258   

Tarrant Cnty, TX, Cultural Edu Fac Fin Corp., Ret Fac Rev Bonds (Buckingham Sr Living Cmnty Proj), Ser 2015A,

      

5.250%, 11-15-35

     400        422   

Trinity River Auth of TX (Tarrant Cnty Water Proj), Impvt Rev Bonds, Ser 2008,

      

5.750%, 2-1-26

     325        354   

TX Muni Gas Acquisition and Supply Corp. III, Gas Supply Rev Bonds, Ser 2012,

      

5.000%, 12-15-16

     1,000        1,030   

TX Private Activity Bond Surface Trans Corp., Sr Lien Rev Bonds (North Tarrant Express Managed Lanes Proj), Ser 2009,

      

6.875%, 12-31-39

     500        590   
 

 

  2016   ANNUAL REPORT   165

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Municipal Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

MUNICIPAL BONDS
(Continued)		   Principal     Value  

Texas (Continued)

  

TX Private Activity Bond Surface Trans Corp., Sr Lien Rev Bonds (LBJ Infra Group LLC IH-635 Managed Lanes Proj), Ser 2010,

      

7.500%, 6-30-33

   $ 750      $ 929   

TX Trans Comsn, Cent TX Tpk Sys Rev Bonds (First Tier Rev Rfdg Bonds), Ser 2015-B,

      

5.000%, 8-15-37

     1,000        1,153   
   

 

 

  
      16,750   
   

 

 

  
 

Utah – 0.3%

  

Midvale, UT, Muni Bldg Auth Lease Rev Bonds (City Hall Proj), Ser 2012:

      

2.000%, 10-15-16

     195        196   

2.000%, 10-15-17

     465        473   
   

 

 

  
      669   
   

 

 

  
 

Virgin Islands – 0.7%

  

VI Pub Fin Auth, Sub Rev Bonds (VI Matching Fund Loan Note – Cruzan Proj), Ser 2009A,

      

6.000%, 10-1-39

     500        550   

VI Pub Fin Auth, Sub Rev Bonds (VI Matching Fund Loan Note – Diageo Proj), Ser 2009A,

      

5.000%, 10-1-25

     1,000        1,106   
   

 

 

  
      1,656   
   

 

 

  
 

Virginia – 0.4%

  

Indl Dev Auth of Washington Cnty, VA, Hosp Rev Bonds (Mountain States Hlth Alliance), Ser 2009C,

      

7.500%, 7-1-29

     500        570   

VA Pub Bldg Auth, Pub Fac Rev Bonds, Ser 2008B,

      

5.250%, 8-1-22

     250        275   
   

 

 

  
      845   
   

 

 

  
 

Washington – 0.4%

  

Port of Seattle, Intermediate Lien Rev Rfdg Bonds, Ser 2015B,

      

5.000%, 3-1-35

     300        350   

WA Hlth Care Fac Auth, Rev Bonds (Virginia Mason Med Ctr), Ser 2007C,

      

5.500%, 8-15-36

     500        527   
   

 

 

  
      877   
   

 

 

  
MUNICIPAL BONDS
(Continued)		    Principal      Value  

West Virginia – 0.2%

  

WV Hosp Fin Auth, Hosp Rev Rfdg and Impvt Bonds (WV Utd Hlth Sys Oblig Group), Ser 2009C,

        

5.500%, 6-1-39

    $ 500       $ 550   
     

 

 

  
 

Wisconsin – 0.8%

  

Milwaukee Cnty, WI, Arpt Rev Rfdg Bonds, Ser 2010B,

        

5.000%, 12-1-19

      1,000         1,128   

WI Hlth and Edu Fac Auth, Rev Bonds (Pro Hlth Care, Inc. Oblig Group), Ser 2009,

        

6.625%, 2-15-39

      500         581   
     

 

 

  
        1,709   
     

 

 

  
 

Wyoming – 0.8%

  

WY Cmnty Dev Auth, Hsng Rev Bonds, 2014 Ser 1,

        

3.950%, 12-1-30

      1,250         1,321   

WY Muni Power Agy, Power Supply Sys Rev Bonds, Ser 2008A,

        

5.250%, 1-1-23

      500         537   
     

 

 

  
        1,858   
     

 

 

  
 

TOTAL MUNICIPAL BONDS – 78.2%

   

    $ 177,286   

(Cost: $163,535)

        
 
SHORT-TERM
SECURITIES		                

Commercial Paper (D) – 7.9%

  

Army & Air Force Exchange Service,

        

0.350%, 4-1-16

      2,000         2,000   

Campbell Soup Co.,

        

0.791%, 4-6-16

      4,600         4,599   

Clorox Co. (The),

        

0.500%, 5-4-16

      2,000         1,999   

DTE Gas Co.,

        

0.650%, 4-6-16

      4,000         4,000   

Wisconsin Electric Power Co.,

        

0.400%, 4-1-16

      3,345         3,345   

Wisconsin Gas LLC,

        

0.380%, 4-4-16

      2,000         2,000   
     

 

 

  
        17,943   
     

 

 

  
 

Master Note – 2.1%

  

Toyota Motor Credit Corp.,

        

0.443%,
4-6-16 (E)

      4,771         4,771   
     

 

 

  
SHORT-TERM
SECURITIES
(Continued)		    Principal      Value  

Municipal Obligations – 10.9%

  

CA Hlth Fac Fin Auth, Var Rate Hosp Rev Bonds (Adventist Hlth Sys/West), Ser 1998B (GTD by U.S. Bank N.A.),

        

0.360%,
4-1-16 (E)

    $ 800       $ 800   

Columbus Rgnl Arpt Auth, Cap Funding Rev Bonds (OASBO Expanded Asset Pooled Fin Prog), Sr Ser 2006 (GTD by U.S. Bank N.A.),

        

0.410%,
4-7-16 (E)

      4,500         4,500   

Fremont (Alameda Cnty, CA), Fremont Public Fin Auth (GTD by U.S. Bank N.A.),

        

0.400%,
4-7-16 (E)

      3,475         3,475   

Harris Cnty Hosp Dist, Sr Lien Rfdg Rev Bonds, Ser 2010 (GTD by JPMorgan Chase & Co.),

        

0.430%,
4-7-16 (E)

      4,900         4,900   

Irvine Unif Sch Dist, Cmnty Fac Dist No. 09-1, Adj Rate Spl Tax Bonds, Ser 2012A (GTD by U.S. Bank N.A.),

        

0.360%,
4-1-16 (E)

      900         900   

MN Office of Higher Edu, Adj Rate Supplemental Student Loan Prog Rev Bonds, Ser 2008B (Tax-Exempt), (GTD by U.S. Bank N.A.),

        

0.430%,
4-7-16 (E)

      3,200         3,200   

Muni Elec Auth GA, Gen Resolution Proj Bond Anticipation Notes, Ser A (Taxable),
(GTD by Wells Fargo Bank N.A.),

        

0.420%, 4-7-16

      2,000         2,000   
 

 

166   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Municipal Bond Fund (in thousands)

MARCH 31, 2016

 

 

 

SHORT-TERM
SECURITIES
(Continued)		    Principal      Value  

Municipal Obligations (Continued)

  

Tuscaloosa Cnty Indl Dev Auth, Gulf Opp Zone Bonds (Hunt Refining Proj), Ser 2011I (GTD by Bank of Nova Scotia),

        

0.410%,
4-7-16 (E)

    $ 5,000       $ 5,000   
     

 

 

  
        24,775   
     

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 20.9%

   

    $ 47,489   

(Cost: $47,489)

  

           

Value

  

TOTAL INVESTMENT SECURITIES – 102.1%

    $ 231,485   

(Cost: $217,702)

  

 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (2.1)%

      (4,710 ) 
 

NET ASSETS – 100.0%

    $ 226,775   
 

 

Notes to Schedule of Investments

 

(A) Purchased on a when-issued basis with settlement subsequent to March 31, 2016.

 

(B) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016.

 

(C) Zero coupon bond.

 

(D) Rate shown is the yield to maturity at March 31, 2016.

 

(E) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 6,710       $ —       $ —   

Municipal Bonds

     —         177,286         —   

Short-Term Securities

     —         47,489         —   

Total

   $ 6,710       $ 224,775       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

The following acronyms are used throughout this schedule:

AGM = Assured Guaranty Municipal

AMBAC = American Municipal Bond Assurance Corp.

BHAC = Berkshire Hathaway Assurance Corporation

CR = Custodial Receipts

FGIC = Financial Guaranty Insurance Co.

FHA = Federal Housing Administration

FHLMC = Federal Home Loan Mortgage Corp.

FNMA = Federal National Mortgage Association

GNMA = Government National Mortgage Association

GTD = Guaranteed

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   167

Table of Contents

MANAGEMENT DISCUSSION

Ivy Municipal High Income Fund

(UNAUDITED)

 

 

 

LOGO

Michael J. Walls

Below, Michael J. Walls, portfolio manager of the Ivy Municipal High Income Fund (the “Fund”), discusses positioning, performance and results for the fiscal year ended March 31, 2016. He has managed the Fund for six years and has 18 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 months ended March 31, 2016

         

Municipal High Income Fund (Class A shares at net asset value)

      3.61%   

Municipal High Income Fund (Class A shares with sales charge)

      –0.87%   

Benchmark(s) and/or Lipper Category

         

Barclays Municipal High Yield Index

      3.45%   

(reflects the performance of securities generally representing the municipal bond market)

         

Lipper High Yield Municipal Debt Funds Universe Average

      4.85%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees.

 

Fund performance

 

 

The underperformance of the Ivy Municipal High Income Fund vs. the Barclays Municipal High Yield Index (“Index”) when sales charges are included can be attributed primarily to two investment decisions: one concerned duration positioning and the other a credit issue. First, and as discussed more fully below, as the municipal market rallied over the course of the past year, the Fund underperformed because it had a relatively shorter duration than the Index. Second, the Fund owned one municipal bond that significantly underperformed during the first quarter of 2016. When performance is looked at without sales charges, the Fund performed slightly better than its benchmark. It is important to note that the Fund did not invest in any derivative products over the last 12 months.

Market commentary

 

 

The municipal bond market remained full speed ahead for the fiscal year ending March 31, 2016 and, as concerns over global growth and geopolitical risks persisted, bond prices continued to rally. Fund inflows continued to be strongly positive. These inflows — as well as the continued lack of supply of new issuances — resulted in the high yield municipal bond market being once again one of the top performing asset classes.

Duration and credit management

 

 

During the fiscal year ended March 31, 2016, funds with longer durations outperformed those with shorter durations (excluding any potential price movements based on credit issues). The Fund had a modified adjusted duration of approximately 5.05 years vs. the Index, which weighed in at 12.68 years. Obviously, this was a negative driver in the Fund’s underperformance. While shorter duration proved a negative this past year, we feel that positioning the Fund with a shorter duration is warranted at the current time, as interest rates are at historic lows and spreads are at very tight levels. We believe the Fund will benefit over the long term, as we anticipate that the Federal Reserve Bank will continue to raise rates. While our primary goal is for the Fund to obtain high levels of tax-exempt income, we also want to protect the investor’s downside risk as rates rise.

While duration management is important for any asset class, credit selection is paramount when investing in a high-yield municipal bond fund. With that being said, the Fund holds an investment that has had negative credit issues in the first quarter of 2016. It is important to note that, while it has negatively affected performance, we believe that as the issuer works through the project’s issues the investment should be able to become a positive performer in the future. We are optimistic the result will be a performing bond with potential to provide tax-exempt interest for our shareholders.

Looking ahead

 

 

With another strong year behind us, we have become less constructive on the high-yield municipal space. We believe new issues are coming to market fully priced and offer very little in the way of security provisions for the investor. We will continue to participate selectively in the new issue market, although attractive deals have been difficult to find. That being said, even with our concern over new issue spreads and weak covenants, we believe the near-term demand for municipal bonds should cause continued positive performance as a result of higher taxes. We continue to believe municipals will provide high net worth investors with attractive levels of income over the long term.

The Fund’s performance noted above is at net asset value (NAV), and does not include the effect of any applicable sales charges. If reflected, the sales charge would reduce the performance noted.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

Fixed-income securities are subject to interest-rate risk, so the NAV of the Fund’s shares may fall as interest rates rise. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the portfolio manager and are current only through the end of the period of the report as stated on the cover. The manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index (indexes) noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of the Ivy Municipal High Income Fund.

 

168   ANNUAL REPORT   2016  

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Municipal High Income Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      0.1%   

Bonds

      91.5%   

Municipal Bonds

      91.3%   

Corporate Debt Securities

      0.2%   

Cash and Other Assets (Net of Liabilities),
and Cash Equivalents+

      8.4%   

Lipper Rankings

 

 

 

Category: Lipper High Yield Municipal
Debt Funds		    Rank      Percentile

1 Year

    120/144      83

3 Year

    104/124      84

5 Year

    89/109      81

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

Quality Weightings

 

 

 

Investment Grade

      29.9%   

AA

      1.8%   

A

      6.0%   

BBB

      22.1%   

Non-Investment Grade

      61.6%   

BB

      10.5%   

B

      4.8%   

CCC

      2.2%   

Below CCC

      2.7%   

Non-rated

      41.4%   

Cash and Other Assets (Net of Liabilities),
and Cash Equivalents+ and Equities

      8.5%   

Our preference is to always use ratings obtained from Standard & Poor’s. For securities not rated by Standard & Poor’s, ratings are obtained from Moody’s. We do not evaluate these ratings, but simply assign them to the appropriate credit quality category as determined by the rating agency.

 

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

  2016   ANNUAL REPORT   169

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Municipal High Income Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class B(4)      Class C      Class I(5)      Class Y(6)  

1-year period ended 3-31-16

      -0.87%         -1.14%         2.87%         3.80%         3.60%   

5-year period ended 3-31-16

      5.86%         5.80%         6.01%         6.97%         6.80%   

10-year period ended 3-31-16

      —            —            —            5.58%         —      

Since Inception of Class through 3-31-16(7)

      7.51%         7.35%         7.39%         —            8.03%   

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A shares carry a maximum front-end sales load of 4.25%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) The Class Y shares of Waddell & Reed Advisors Municipal High Income Fund were reorganized as the Class I shares of Ivy Municipal High Income Fund on May 18, 2009. The performance shown for periods prior to this date is that of the Class Y shares of Waddell & Reed Advisors Municipal High Income Fund. Performance has not been restated to reflect the estimated annual operating expenses of the Ivy Municipal High Income Fund. If those expenses were reflected, performance shown would differ.

 

(6) The return shown for Class Y is hypothetical because there were no shares or assets for the period from July 28, 2009 through October 7, 2009. Class A data has been substituted for Class Y data during that period.

 

(7) 5-18-09 for Class A shares, 5-18-09 for Class B shares, 5-18-09 for Class C shares and 5-18-09 for Class Y shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

170   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Municipal High Income Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Consumer Discretionary

  

 

Education Services – 0.1%

  

1155 Island Avenue LLC (A)(B)

     6,578      $ 1,250   
 

TOTAL COMMON
STOCKS – 0.1%

   

   $ 1,250   

(Cost: $1,075)

      
 
CORPORATE DEBT
SECURITIES		   Principal         

Education – 0.2%

  

1155 Island Avenue LLC:

      

10.000%,
12-11-24 (B)(C)

   $ 2,960        2,960   

10.000%,
12-11-24 (B)

     395        395   
   

 

 

  
      3,355   
   

 

 

  
 

TOTAL CORPORATE DEBT SECURITIES – 0.2%

   

   $ 3,355   

(Cost: $2,967)

      
 
MUNICIPAL BONDS              

Alabama – 1.8%

  

AL 21st Century Auth, Tob Stlmt Rev Bonds, Ser 2012-A,

      

5.000%, 6-1-21

     1,000        1,165   

Fairfield, AL, GO Warrants, Ser 2012,

      

6.000%, 6-1-37

     8,485        9,266   

Jefferson Cnty, AL, Swr Rev Bonds, Ser 2013-D,

      

6.500%, 10-1-53

     2,500        3,024   

Lower AL Gas Dist, Gas Proj Rev Bonds, Ser 2016A,

      

5.000%, 9-1-46

     9,000        11,182   
   

 

 

  
      24,637   
   

 

 

  
 

Alaska – 0.7%

  

Northn Tob Securitization Corp., Tob Stlmt Asset-Bkd Bonds, Ser 2006A Sr Cur Int Bonds,

      

5.000%, 6-1-46

     10,500        9,309   
   

 

 

  
 

American Samoa – 0.4%

  

American Samoa Econ Dev Auth, Gen Rev and Rfdg Bonds, Ser 2015A,

      

6.625%, 9-1-35

     5,000        5,105   
   

 

 

  
 

Arizona – 1.5%

  

Indl Dev Auth of Mohave Cnty, Correctional Fac Contract Rev Bonds (Mohave Prison LLC Expansion Proj), Ser 2008,

      

8.000%, 5-1-25

     7,500        8,433   

MUNICIPAL BONDS

(Continued)

   Principal     Value  

Arizona (Continued)

  

Indl Dev Auth of Pima, Edu Rev Bonds (Noah Webster Sch – Pima Proj), Tax-Exempt Ser 2014A,

      

7.000%, 12-15-43

   $ 1,500      $ 1,743   

Indl Dev Auth of Tempe, AZ, Rev Rfdg Bonds (Friendship Vlg of Tempe), Ser 2012A:

      

6.000%, 12-1-27

     2,390        2,645   

6.250%, 12-1-42

     2,150        2,348   

6.250%, 12-1-46

     1,000        1,091   

Indl Dev Auth of Yavapai, Edu Rev Bonds (AZ Agribusiness and Equine Ctr, Inc. Proj), Ser 2011,

      

7.875%, 3-1-42

     3,500        4,104   
   

 

 

  
      20,364   
   

 

 

  
 

California – 7.8%

  

Adelanto Pub Auth, Fixed Rate Rfdg Rev Bonds (Util Sys Proj), Ser 2009A,

      

6.750%, 7-1-39

     4,000        4,552   

CA Muni Fin Auth, Charter Sch Rev Bonds (Palmdale Aerospace Academy Proj), Ser 2016A,

      

5.000%, 7-1-41 (D)

     1,750        1,874   

CA Muni Fin Auth, Edu Fac Rev Bonds (American Heritage Edu Fndtn Proj), Ser 2006A,

      

5.250%, 6-1-36

     1,150        1,152   

CA Muni Fin Auth, Edu Fac Rev Bonds (King/Chavez Academies Proj), Ser 2009A,

      

8.750%, 10-1-39

     1,505        1,712   

CA Muni Fin Auth, Edu Fac Rev Bonds (King/Chavez Academies Proj), Taxable Ser 2009B,

      

8.000%, 10-1-22

     400        454   

CA Muni Fin Auth, Edu Fac Rev Bonds (Literacy First Proj), Ser 2010B,

      

6.000%, 9-1-30

     2,170        2,383   

CA Sch Fin Auth, Charter Sch Rev Bonds (Coastal Academy Proj), Ser 2013A,

      

5.000%, 10-1-42

     1,200        1,250   

CA Statewide Cmnty Dev Auth, Edu Fac Rev Bonds (Independence Support LLC Proj), Ser 2015,

      

7.000%, 6-1-45

     4,000        4,002   

CA Statewide Cmnty Dev Auth, Rev Bonds (Lancer Plaza Proj), Ser 2013:

      

5.625%, 11-1-33

     1,400        1,474   

5.875%, 11-1-43

     1,890        1,988   

MUNICIPAL BONDS

(Continued)

   Principal     Value  

California (Continued)

  

CA Statewide Cmnty Dev Auth, Sch Fac Rev Bonds (Aspire Pub Sch), Ser 2010:

      

6.000%, 7-1-40

   $ 7,365      $ 8,362   

6.350%, 7-1-46

     250        286   

CA Statewide Cmnty Dev Auth, Sr Living Rev Bonds (Southn CA Presbyterian Homes), Ser 2009:

      

6.625%, 11-15-24

     2,490        2,896   

7.000%, 11-15-29

     2,000        2,335   

7.250%, 11-15-41

     6,000        6,973   

CA Various Purp GO Bonds,

      

6.000%, 4-1-35

     500        575   

Cert of Part, Oro Grande Elem Sch Dist, Ser 2013,

      

5.125%, 9-15-42

     2,760        2,996   

Golden State Tob Securitization Corp., Tob Stlmt Asset-Bkd Bonds, Ser 2007A-1,

      

5.125%, 6-1-47

     13,140        12,224   

Palomar Pomerado Hlth, San Diego Cnty, CA, Cert of Part:

      

6.750%, 11-1-39

     4,935        5,528   

6.000%, 11-1-41

     3,000        3,206   

Redev Agy of San Buenaventura, Merged San Buenaventura Redev Proj, 2008 Tax Alloc Bonds,

      

8.000%, 8-1-38

     100        104   

San Buenaventura Rev Bonds (Cmnty Mem Hlth Sys), Ser 2011:

      

8.000%, 12-1-26

     1,400        1,830   

8.000%, 12-1-31

     9,400        11,902   

San Mateo Cmnty Fac Dist No. 2008-1 (Bay Meadows), Spl Tax Bonds, Ser 2012,

      

6.000%, 9-1-42

     8,000        9,182   

Tob Securitization Auth of Southn CA, Tob Stlmt Asset-Bkd Bonds (San Diego Cnty Tob Asset Securitization Corp.), Ser 2006A Sr Current Int Bonds,

      

5.000%, 6-1-37

     17,395        17,259   
   

 

 

  
      106,499   
   

 

 

  
 

Colorado – 2.7%

  

Arkansas River Power Auth, CO, Power Rev Impvt Bonds, Ser 2008,

      

6.000%, 10-1-40

     5,780        6,044   
 

 

  2016   ANNUAL REPORT   171

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Municipal High Income Fund (in thousands)

MARCH 31, 2016

 

 

 

MUNICIPAL BONDS

(Continued)

   Principal     Value  

Colorado (Continued)

  

Arkansas River Power Auth, CO, Power Rev Impvt Bonds, Ser 2010,

      

6.125%, 10-1-40

   $ 5,000      $ 5,496   

CO Edu and Cultural Fac Auth, Charter Sch Rev Bonds (The Classical Academy Proj), Ser 2008A,

      

7.400%, 12-1-38

     85        100   

CO Edu and Cultural Fac Auth, Charter Sch Rev Bonds (Twin Peaks Charter Academy Proj), Ser 2008,

      

7.000%, 11-15-38

     230        266   

CO Edu and Cultural Fac Auth, Independent Sch Rev Rfdg Bonds (Vail Mountain Sch Proj), Ser 2010,

      

6.125%, 5-1-40

     1,000        1,102   

CO High Performance Trans Enterprise, U.S. 36 and I-25 Managed Lanes Sr Rev Bonds, Ser 2014,

      

5.750%, 1-1-44

     3,250        3,519   

CO Hlth Fac Auth, Rev Bonds (CO Sr Residences Proj), Ser 2012:

      

6.750%, 6-1-32 (E)

     2,610        2,098   

7.125%, 6-1-47 (E)

     3,000        2,411   

CO Hlth Fac Auth, Rev Bonds (Total Longterm Care Natl Oblig Group Proj), Ser 2010A,

      

6.250%, 11-15-40

     1,250        1,528   

Lincoln Park Metro Dist, Douglas Cnty, CO, GO Rfdg and Impvt Bonds, Ser 2008,

      

6.200%, 12-1-37

     3,500        3,806   

Littleton Vlg Metro Dist No. 2, Ltd. Tax GO and Spl Rev Bonds, Ser 2015,

      

5.375%, 12-1-45

     1,700        1,725   

Rgnl Trans Dist, Private Activity Bonds (Denver Transit Partn Eagle P3 Proj), Ser 2010,

      

6.500%, 1-15-30

     3,000        3,553   

Tallgrass Metro Dist, Arapahoe Cnty, CO, GO Ltd. Tax Rfdg and Impvt Bonds, Ser 2007,

      

5.250%, 12-1-37

     3,500        3,506   

Wildgrass Metro Dist, Broomfield Cnty, CO, GO Ltd. Tax Rfdg Bonds, Ser 2007,

      

6.200%, 12-1-34

     1,511        1,568   
   

 

 

  
      36,722   
   

 

 

  

MUNICIPAL BONDS

(Continued)

   Principal     Value  

Connecticut – 0.6%

  

Harbor Point Infra Impvt Dist (Harbor Point Proj), Spl Oblig Rev Bonds, Ser 2010A,

      

7.875%, 4-1-39

   $ 2,000      $ 2,370   

Stamford, CT, Spl Oblig Rev Bonds (Mill River Corridor Proj), Ser 2011A,

      

7.000%, 4-1-41

     5,000        6,357   
   

 

 

  
      8,727   
   

 

 

  

Delaware – 0.5%

  

DE Econ Dev Auth, Exempt Fac Rev Bonds (Indian River Power LLC Proj), Ser 2010,

      

5.375%, 10-1-45

     7,000        7,306   
 

District Of Columbia – 0.1%

  

Metro WA DC Arpt Auth, Dulles Toll Road, Second Sr Lien Rev Bonds, Ser 2010B,

      

0.000%, 10-1-44 (F)

     1,000        1,140   
   

 

 

  
 

Florida – 3.6%

  

Brevard Cnty, FL, Indl Dev Rev Bonds (TUFF FL Tech Proj), Ser 2009:

      

6.500%, 11-1-29

     875        951   

6.750%, 11-1-39

     2,060        2,250   

Cap Trust Agy, First Mtg Rev Bonds (Silver Creek St. Augustin Proj), Ser 2014A,

      

8.250%, 1-1-49

     3,000        2,576   

Cap Trust Agy, FL, First Mtg Rev Bonds (Silver Creek St. Augustine Proj), Ser 2016A,

      

5.750%, 1-1-50

     645        645   

Cap Trust Agy, FL, First Mtg Rev Bonds (Silver Creek St. Augustine Proj), Ser 2016B,

      

7.000%, 1-1-35

     555        555   

Cap Trust Agy, Rev Bonds (Million Air One LLC Gen Aviation Fac Proj), Ser 2011,

      

7.750%, 1-1-41

     3,640        3,306   

FL Dev Fin Corp., Edu Fac Rev Bonds (Renaissance Charter Sch, Inc. Proj), Ser 2010A:

      

6.000%, 9-15-40

     4,000        4,184   

6.125%, 6-15-43

     5,500        5,832   

FL Dev Fin Corp., Edu Fac Rev Bonds (Renaissance Charter Sch, Inc. Proj), Ser 2014A,

      

6.125%, 6-15-44

     5,300        5,458   

MUNICIPAL BONDS

(Continued)

   Principal     Value  

Florida (Continued)

  

FL Dev Fin Corp., Edu Fac Rev Bonds (Renaissance Charter Sch, Inc. Proj), Ser 2015A,

      

6.000%, 6-15-35

   $ 2,000      $ 2,055   

FL Dev Fin Corp., Taxable Edu Fac Rev Bonds (Renaissance Charter Sch, Inc. Proj), Ser 2012B,

      

7.500%, 6-15-18

     800        810   

Lee Cnty Indl Dev Auth, Hlthcare Fac Rfdg Rev Bonds (Cypress Cove at Health Park FL, Inc. Proj), Ser 2012,

      

6.500%, 10-1-47

     6,000        6,752   

Miami-Dade Cnty Indl Dev Auth, Rev Bonds (Youth Co-Op Charter Sch Proj), Ser 2015A,

      

6.000%, 9-15-45

     3,250        3,354   

Mid-Bay Bridge Auth, 1st Sr Lien Rev Bonds, Ser 2015A,

      

5.000%, 10-1-40

     2,000        2,242   

Mid-Bay Bridge Auth, Springing Lien Rev Bonds, Ser 2011A,

      

7.250%, 10-1-40

     4,800        6,298   

Osceola Cnty, Expressway Sys Rev Bonds (Poinciana Prkwy Proj), Ser 2014A,

      

5.375%, 10-1-47

     2,000        2,206   
   

 

 

  
      49,474   
   

 

 

  
 

Georgia – 0.7%

  

Greene Cnty Dev Auth, GA, First Mtg Rev Bonds (Glen-I LLC Proj), Ser 2015A,

      

7.250%, 1-1-46

     9,000        9,192   
   

 

 

  
 

Guam – 0.9%

  

Cert of Part (JFK High Sch Proj), Dept of Edu, GU, Ser 2010A:

      

6.625%, 12-1-30

     1,400        1,535   

6.875%, 12-1-40

     3,500        3,854   

Govt of GU, GO Bonds, Ser 2009A,

      

7.000%, 11-15-39

     6,000        7,302   
   

 

 

  
      12,691   
   

 

 

  
 

Hawaii – 0.5%

  

Dept of Budget and Fin of HI, Spl Purp Sr Living Rev Bonds (15 Craigside Proj), Ser 2009A,

      

9.000%, 11-15-44

     4,200        5,180   
 

 

172   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Municipal High Income Fund (in thousands)

MARCH 31, 2016

 

 

 

MUNICIPAL BONDS

(Continued)

   Principal     Value  

Hawaii (Continued)

  

Kaua’I Cmnty Fac Dist No. 2008-1 (Kukul’ula Dev Proj), Spl Tax Rev Bonds, Ser 2012,

      

5.750%, 5-15-42

   $ 2,000      $ 2,090   
   

 

 

  
      7,270   
   

 

 

  
 

Idaho – 0.1%

  

ID Hsng and Fin Assoc (Compass Pub Charter Sch, Inc. Proj), Ser 2010A:

      

6.250%, 7-1-40

     1,000        1,075   

6.250%, 7-1-45

     550        590   
   

 

 

  
      1,665   
   

 

 

  
 

Illinois – 10.0%

  

Belleville, IL, Tax Incr Rfdg Rev Bonds (Frank Scott Pkwy Redev Proj), Ser 2007A,

      

5.700%, 5-1-36

     4,160        4,210   

Cert of Part, Metra Market of Chicago LLC Redev Proj, Ser A,

      

6.870%, 2-15-24

     1,100        1,104   

Chicago Midway Arpt, Second Lien Rev and Rev Rfdg Bonds, Ser 2014B,

      

5.000%, 1-1-35

     4,500        5,065   

Chicago Midway Arpt, Second Lien Rev Rfdg Bonds, Ser 2013B,

      

5.000%, 1-1-35

     3,000        3,350   

Chicago Multi-Fam Hsng Rev Bonds (Goldblatts Supportive Living Proj), Ser 2013,

      

6.125%, 12-1-43

     6,000        5,639   

Chicago O’Hare Intl Arpt, Gen Arpt Sr Lien Rev Bonds, Ser 2015D,

      

5.000%, 1-1-46

     2,000        2,291   

Chicago O’Hare Intl Arpt, Gen Arpt Third Lien Rev Bonds, Ser 2011A,

      

5.750%, 1-1-39

     1,000        1,165   

Cook Cnty, IL, Recovery Zone Fac Rev Bonds (Navistar Intl Corp. Proj), Ser 2010,

      

6.500%, 10-15-40

     2,000        2,003   

Fairview Heights, IL, Tax Incr Rfdg Rev Bonds (Shoppes at St. Clair Square Redev Proj), Ser 2009A,

      

8.000%, 12-1-28

     150        158   

IL Fin Auth, Rev and Rfdg Bonds (Roosevelt Univ Proj), Ser 2009,

      

6.500%, 4-1-44

     12,000        13,201   

MUNICIPAL BONDS

(Continued)

   Principal     Value  

Illinois (Continued)

  

IL Fin Auth, Rev Bonds (Admiral at the Lake Proj), Ser 2010A:

      

8.000%, 5-15-40

   $ 15,000      $ 17,133   

8.000%, 5-15-46

     4,500        5,135   

IL Fin Auth, Rev Bonds (Lutheran Home and Svs Oblig Group), Ser 2012,

      

5.625%, 5-15-42

     5,300        5,638   

IL Fin Auth, Rev Bonds (Navistar Intl Corp. Proj), Ser 2010,

      

6.500%, 10-15-40

     9,500        9,514   

IL Fin Auth, Rev Bonds (Silver Cross Hosp and Med Ctrs), Ser 2009,

      

7.000%, 8-15-44

     7,000        8,399   

IL Fin Auth, Rev Bonds (Three Crowns Park Proj), Ser 2006A:

      

5.875%, 2-15-26

     1,000        1,001   

5.875%, 2-15-38

     3,000        3,003   

Springfield, Sangamon Cnty, IL, Spl Svc Area (Legacy Pointe), Tax Bonds, Ser 2009,

      

7.875%, 3-1-32

     500        519   

Springfield, Sangamon Cnty, IL, Spl Svc Area (Legacy Pointe), Tax Bonds, Ser 2010,

      

7.500%, 3-1-32

     1,500        1,552   

SW IL Dev Auth, Local Govt Prog Rev Bonds (City of Belleville-Carlyle/Green Mount Redev Proj), Ser 2011A,

      

7.000%, 7-1-41

     6,000        6,322   

SW IL Dev Auth, Local Govt Prog Rev Bonds (Granite City Proj), Ser 2008,

      

7.000%, 12-1-22

     1,630        1,841   

SW IL Dev Auth, Local Govt Prog Rev Bonds (Granite City Proj), Ser 2009,

      

8.000%, 1-15-22

     240        257   

SW IL Dev Auth, Local Govt Prog Rev Rfdg Bonds (Granite City Proj), Ser 2012,

      

5.250%, 3-1-23

     4,385        4,577   

Upper IL River Vly Dev Auth (Pleasant View Luther Home Proj), Rev Bonds, Ser 2010:

      

7.250%, 11-15-40

     1,100        1,182   

7.375%, 11-15-45

     1,500        1,610   

Upper IL River Vly Dev Auth, Multi-Fam Hsng Rev Bonds (Deer Park of Huntley Proj), Ser 2012,

      

6.500%, 12-1-32

     4,935        5,173   

MUNICIPAL BONDS

(Continued)

   Principal     Value  

Illinois (Continued)

  

Vlg of Bridgeview, Cook Cnty, IL, GO Bonds, Ser 2015A:

      

5.750%, 12-1-35

   $ 2,705      $ 2,925   

5.625%, 12-1-41

     3,365        3,526   

Vlg of Bridgeview, Cook Cnty, IL, GO Rfdg Bonds, Ser 2014A,

      

5.500%, 12-1-43

     5,000        5,068   

Vlg of East Dundee, Kane and Cook Cnty, IL, Ltd. Oblig Tax Incr Rev Bonds (Route 25 South Redev Proj), Ser 2012,

      

5.625%, 12-1-31

     1,505        1,513   

Vlg of Matteson, Cook Cnty, IL, GO Cap Apprec Debt Cert, Ser 2010,

      

0.000%, 12-1-29 (F)

     1,840        1,284   

Vlg of Riverdale, Cook Cnty, IL, Unlimited Tax GO Bonds, Ser 2011,

      

8.000%, 10-1-36

     9,910        10,897   
   

 

 

  
      136,255   
   

 

 

  
 

Indiana – 2.8%

  

City of Carmel, IN, Rev Bonds, Ser 2012A:

      

7.000%, 11-15-27

     1,575        1,794   

7.000%, 11-15-32

     2,000        2,260   

7.125%, 11-15-42

     7,500        8,483   

Hammond, IN, Redev Dist Rev Bonds (Marina Area Proj), Ser 2008,

      

6.000%, 1-15-17

     5        5   

IN Fin Auth, Midwestrn Disaster Relief Rev Bonds (OH Vly Elec Corp. Proj), Ser 2012A,

      

5.000%, 6-1-39

     10,000        10,519   

Lake Station 2008 Bldg Corp., Lake Station, IN, First Mtg Bonds, Ser 2010,

      

6.000%, 7-15-27

     3,170        3,493   

Terre Haute, IN, Rev Bonds (Westminister Vlg Proj), Ser 2012,

      

6.000%, 8-1-39

     5,000        5,110   

Whitestown, IN, Econ Dev Tax Incr Rev Bonds (Perry Indl Park and Whitestown Crossing Proj), Ser 2010A,

      

7.000%, 2-1-30

     1,880        2,004   

Whiting, IN, Redev Dist Tax Incr Rev Bonds (Lakefront Dev Proj), Ser 2010,

      

6.750%, 1-15-32

     1,100        1,216   
 

 

  2016   ANNUAL REPORT   173

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Municipal High Income Fund (in thousands)

MARCH 31, 2016

 

 

 

MUNICIPAL BONDS

(Continued)

   Principal     Value  

Indiana (Continued)

  

Whiting, IN, Redev Dist Tax Incr Rev Bonds (Standard Avenue Proj), Ser 2006,

      

5.350%, 1-15-27

   $ 3,430      $ 3,476   
   

 

 

  
      38,360   
   

 

 

  
 

Iowa – 0.2%

  

IA Fin Auth, Ret Cmnty Rev Bonds (Edgewater LLC Proj), Ser 2007A,

      

6.750%, 11-15-37

     3,000        3,290   
   

 

 

  
 

Kansas – 1.0%

  

Arkansas City, KS, Pub Bldg Comsn, Rev Bonds (South Cent KS Rgnl Med Ctr), Ser 2009,

      

7.000%, 9-1-38

     500        524   

Atchison, KS, Hosp Rev Bonds (Atchison Hosp Assoc), Ser 2009,

      

4.480%, 9-1-30 (G)

     1,000        1,013   

Kansas City, Wyandotte Cnty, KS, Unif Govt Spl Oblig Rev Sales Tax Bonds (Vacation Vlg Proj), Ser 2015A,

      

5.750%, 9-1-32

     4,000        4,070   

Lawrence, KS (The Bowersock Mills & Power Co. Hydroelec Proj), Indl Rev Bonds (Recovery Zone Fac Bonds), Ser 2010A,

      

7.625%, 8-1-37

     4,000        4,303   

Unif Govt of Wyandotte Cnty, Kansas City, KS, Spl Oblig Rfdg and Impvt Rev Bonds (Wyandotte Plaza Redev Proj), Ser 2016,

      

5.000%, 12-1-34

     3,000        3,071   
   

 

 

  
      12,981   
   

 

 

  

Kentucky – 2.1%

  

KY Econ Dev Fin Auth, Hosp Rev Bonds, Ser 2010A:

      

6.375%, 6-1-40

     12,000        13,801   

6.500%, 3-1-45

     6,000        6,919   

KY Pub Trans Infra Auth, First Tier Toll Rev Bonds, Ser 2013A,

      

5.750%, 7-1-49

     5,000        5,721   

Murray, KY, Hosp Fac Rev Bonds (Murray-Calloway Cnty Pub Hosp Corp. Proj), Ser 2010,

      

6.375%, 8-1-40

     2,000        2,210   
   

 

 

  
      28,651   
   

 

 

  

MUNICIPAL BONDS

(Continued)

   Principal     Value  

Louisiana – 1.4%

  

LA Local Govt Envirnmt Fac and Cmnty Dev Auth, Rev and Rfdg Bonds (CDF Hlthcare of LA LLC Proj), Ser 2015A,

      

5.625%, 6-1-45

   $ 5,000      $ 5,116   

LA Pub Fac Auth, Solid Waste Disp Fac Rev Bonds (LA Pellets, Inc. Proj – Phase IIA), Ser 2014A,

      

8.375%, 7-1-39 (E)

     13,500        7,857   

LA Pub Fac Auth, Solid Waste Disp Fac Rev Bonds (LA Pellets, Inc. Proj), Ser 2013B,

      

10.500%, 7-1-39 (E)

     6,000        3,490   

Shreveport, LA, Water and Sewer Rev and Rfdg Bonds, Ser 2015,

      

5.000%, 12-1-40

     2,500        2,869   
   

 

 

  
      19,332   
   

 

 

  
 

Maine – 0.2%

  

ME Hlth and Higher Edu Fac Auth, Rev Bonds (Eastn ME Med Ctr Oblig Group Issue), Ser 2013,

      

5.000%, 7-1-43

     2,000        2,169   
   

 

 

  
 

Maryland – 0.3%

  

MD Econ Dev Corp., Econ Dev Rev Bonds (Terminal Proj), Ser B,

      

5.750%, 6-1-35

     500        547   

MD Econ Dev Corp., Port Fac Rfdg Rev Bonds (CNX Marine Terminals, Inc. Port of Baltimore Fac), Ser 2010,

      

5.750%, 9-1-25

     3,350        3,225   
   

 

 

  
      3,772   
   

 

 

  
 

Massachusetts – 1.9%

  

MA Port Auth, Spl Fac Rev Bonds (Delta Air Lines, Inc. Proj), Ser 2001B (Auction Rate Sec) (Insured by AMBAC),

      

0.689%, 1-1-31 (G)

     30,000        26,287   
   

 

 

  

Michigan – 4.9%

  

Detroit, MI, GO Bonds, Ser 2004-A (1) (Insured by AMBAC),

      

5.250%, 4-1-23

     220        220   

Econ Dev Corp. of Oakland Cnty, Ltd. Oblig Rev Rfdg Bonds (The Roman Catholic Archdiocese of Detroit), Ser 2011,

      

6.500%, 12-1-20

     3,905        4,140   

MUNICIPAL BONDS

(Continued)

   Principal     Value  

Michigan (Continued)

  

Kent Hosp, Fin Auth Rev Bonds (Metro Hosp Proj), Ser 2005A,

      

6.250%, 7-1-40

   $ 15,500      $ 15,540   

MI Fin Auth, Hosp Rev and Rfdg Bonds (Presbyterian Vlg of MI), Ser 2015,

      

5.250%, 11-15-35

     3,000        3,092   

MI Fin Auth, Local Govt Loan Prog Rev Bonds (City of Detroit Unlimited Tax GO Restructured Local Proj Bonds), Ser 2014G (Insured by AMBAC),

      

5.250%, 4-1-23

     1,200        1,200   

MI Fin Auth, Pub Sch Academy Ltd. Oblig Rev and Rev Rfdg Bonds (MI Technical Academy Proj), Ser 2012:

      

7.100%, 10-1-31

     1,000        1,024   

7.450%, 10-1-41

     2,000        2,054   

MI Fin Auth, Pub Sch Academy Ltd. Oblig Rev Bonds (Hanley Intl Academy, Inc. Proj), Ser 2010A,

      

6.125%, 9-1-40

     4,535        4,795   

MI Fin Auth, Rev Bonds (Sch Dist of Detroit), Ser 2012,

      

5.000%, 6-1-20

     1,425        1,575   

MI Fin Auth, Sr Edu Fac Rev Bonds (St. Catherine of Siena Academy Proj), Ser 2010A,

      

8.500%, 10-1-45 (E)

     13,000        7,801   

MI Fin Auth, State Aid Rev Notes (Detroit Sch Dist), Ser 2001A-1,

      

8.000%, 10-1-30 (E)

     2,480        1,488   

MI Pub Edu Fac Auth, Ltd. Oblig Rev Bonds (Old Redford Academy Proj), Ser 2005A,

      

5.875%, 12-1-30

     1,720        1,720   

MI Tob Stlmt Fin Auth, Tob Stlmt Asset-Bkd Bonds, Ser 2008A,

      

6.875%, 6-1-42

     16,500        17,028   

MI Tob Stlmt Fin Auth, Tob Stlmt Asset-Bkd Bonds, Sr Current Int Bonds, Ser 2007A,

      

5.125%, 6-1-22

     5,760        5,562   
   

 

 

  
      67,239   
   

 

 

  

Minnesota – 0.4%

  

Minneapolis Hlth Care Sys Rev Bonds (Fairview Hlth Svc), Ser 2008B:

      

6.500%, 11-15-38

     4,350        4,914   
   

 

 

  
 

 

174   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Municipal High Income Fund (in thousands)

MARCH 31, 2016

 

 

 

MUNICIPAL BONDS

(Continued)

   Principal     Value  

Missouri – 2.4%

  

Arnold, MO, Real Ppty Tax Incr Rev Bonds (Arnold Triangle Redev Proj), Ser 2009A,

      

7.750%, 5-1-28

   $ 455      $ 480   

Belton, MO, Tax Incr Rev Bonds (Belton Marketplace Redev Proj), Ser 2012,

      

6.375%, 12-1-29

     1,360        1,396   

Broadway-Fairview Trans Dev Dist (Columbia, MO), Trans Sales Tax Rev Bonds, Ser 2006A,

      

6.125%, 12-1-36

     200        160   

Grindstone Plaza Trans Dev Dist (Columbia, MO), Trans Sales Tax Rev Bonds, Ser 2006A:

      

5.250%, 10-1-21

     250        246   

5.400%, 10-1-26

     385        368   

5.500%, 10-1-31

     425        395   

5.550%, 10-1-36

     325        294   

Jennings, MO, Tax Incr and Cmnty Impvt Rfdg Rev Bonds (Northland Redev Area Proj), Ser 2006,

      

5.000%, 11-1-23

     2,340        2,342   

Lakeside 370 Levee Dist (St. Charles Cnty, MO), Levee Dist Impvt Bonds, Ser 2008:

      

0.000%, 4-1-55 (F)

     988        148   

5.750%, 4-1-55

     715        701   

Land Clearance for Redev Auth of St. Louis, Recovery Zone Fac Bonds (Kiel Opera House Proj), Ser 2010B,

      

7.000%, 9-1-35

     975        1,018   

Lee’s Summit, MO, Tax Incr Rev Bonds (Summit Fair Proj), Ser 2011,

      

7.250%, 4-1-30

     5,000        5,187   

Meadows Trans Dev Dist (Lake Saint Louis, MO), Ser 2010,

      

5.400%, 5-1-35

     875        907   

MO Dev Fin Board, Research Fac Rev Bonds (Midwest Research Institute Proj), Ser 2007,

      

4.500%, 11-1-27

     225        238   

St. Louis Cnty, MO, Rev Notes (Lambert Arpt Eastn Perimeter Redev Proj-RPA1), Sr Ser B,

      

9.000%, 11-1-31

     7,975        8,761   

St. Louis Muni Fin Corp., Compound Int Leasehold Rev Bonds (Convention Ctr Cap Impvt Proj), Ser 2010A (Insured by AGM):

      

0.000%, 7-15-36 (F)

     750        344   

0.000%, 7-15-37 (F)

     1,500        658   

MUNICIPAL BONDS

(Continued)

   Principal     Value  

Missouri (Continued)

  

Tax Incr Fin Comsn of Kansas City, MO, Tax Incr Rev Bonds (Brywood Ctr Proj), Ser 2010A,

      

8.000%, 4-1-33 (E)

   $ 3,950      $ 1,382   

The Elm Point Commons Cmnty Impvt Dist (St. Charles, MO), Spl Assmt Bonds, Ser 2007,

      

5.750%, 3-1-27

     105        108   

The Indl Dev Auth of Kansas City, MO, Hlth Care Fac First Mtg Rev Bonds (The Bishop Spencer Place Proj), Ser 1994:

      

6.250%, 1-1-24

     1,035        1,037   

6.500%, 1-1-35

     3,000        3,005   

The Indl Dev Auth of Lee’s Summit, MO, Infra Fac Rev Bonds (Kensington Farms Impvt Proj), Ser 2007,

      

5.750%, 3-1-29

     1,000        611   

The Indl Dev Auth of Platte Cnty, MO, Trans Rev Bonds (Zona Rosa Phase II Retail Proj), Ser 2007,

      

6.850%, 4-1-29

     200        205   

The Indl Dev Auth of St. Joseph, MO, Hlthcare Rev Bonds (Living Cmnty of St. Joseph Proj), Ser 2002,

      

7.000%, 8-15-32

     3,000        3,005   
   

 

 

  
      32,996   
   

 

 

  
 

Nebraska – 0.7%

  

Cent Plains Enrg Proj, Gas Proj Rev Bonds (Proj No. 3), Ser 2012:

      

5.250%, 9-1-37

     5,000        5,597   

5.000%, 9-1-42

     3,000        3,262   
   

 

 

  
      8,859   
   

 

 

  
 

Nevada – 0.2%

  

Las Vegas Redev Agy, NV, Tax Incr Rev Bonds, Ser 2009A,

      

8.000%, 6-15-30

     1,500        1,727   

Overton Power Dist No. 5 (NV), Spl Oblig Rev Bonds, Ser 2008,

      

8.000%, 12-1-38

     265        314   
   

 

 

  
      2,041   
   

 

 

  

New Hampshire – 0.2%

  

NH Hlth and Edu Fac Auth, Rev Bonds, Rivermead Issue, Ser 2011A,

      

6.875%, 7-1-41

     2,300        2,606   
   

 

 

  

MUNICIPAL BONDS

(Continued)

   Principal     Value  

New Jersey – 2.0%

  

NJ Econ Dev Auth, Cigarette Tax Rev Rfdg Bonds, Ser 2012:

      

5.000%, 6-15-26

   $ 1,000      $ 1,082   

5.000%, 6-15-28

     1,000        1,076   

5.000%, 6-15-29

     500        536   

NJ Econ Dev Auth, Spl Fac Rev Bonds (Continental Airlines, Inc. Proj), Ser 2000A,

      

5.625%, 11-15-30

     2,500        2,863   

NJ Edu Fac Auth, Rev Rfdg Bonds, Univ of Medicine and Dentistry of NJ Issue, Ser 2009B:

      

7.125%, 12-1-23

     850        1,010   

7.500%, 12-1-32

     450        540   

NJ Hlth Care Fac Fin Auth, Rev and Rfdg Bonds (Univ Hosp Issue), Ser 2015A,

      

5.000%, 7-1-46

     2,355        2,663   

Tob Stlmt Fin Auth, Tob Stlmt Asset-Bkd Bonds, Ser 2007-1A Sr Current Int Bonds,

      

4.750%, 6-1-34

     5,000        4,599   

Tob Stlmt Fin Corp., Tob Stlmt Asset-Bkd Bonds, Ser 2007-1A,

      

5.000%, 6-1-41

     13,750        12,459   
   

 

 

  
      26,828   
   

 

 

  
 

New Mexico – 0.2%

  

NM Hosp Equip Loan Council, Hosp Impvt and Rfdg Rev Bonds (Gerald Champion Rgnl Med Ctr Proj), Ser 2012A,

      

5.500%, 7-1-42

     2,750        2,994   
   

 

 

  
 

New York – 4.7%

  

Build NYC Res Corp., Rev Bonds (Albert Einstein Sch of Medicine, Inc. Proj), Ser 2015,

      

5.500%, 9-1-45

     2,500        2,790   

Dormitory Auth, Sch Dist Rev Bond Fin Prog, Ser 2010A (Insured by AGM),

      

5.000%, 10-1-22

     1,000        1,162   

Nassau Cnty Indl Dev Agy, Continuing Care Ret Cmnty Rev Bonds (Amsterdam at Harborside Proj), Ser 2014A2,

      

6.500%, 1-1-32

     5,269        5,298   

Nassau Cnty Indl Dev Agy, Continuing Care Ret Cmnty Rev Bonds (Amsterdam at Harborside Proj), Ser 2014A4,

      

6.700%, 1-1-49

     9,000        8,963   
 

 

  2016   ANNUAL REPORT   175

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Municipal High Income Fund (in thousands)

MARCH 31, 2016

 

 

 

MUNICIPAL BONDS

(Continued)

   Principal     Value  

New York (Continued)

  

Nassau Cnty Indl Dev Agy, Continuing Care Ret Cmnty Rev Bonds (Amsterdam at Harborside Proj), Ser 2014A5,

      

6.700%, 1-1-49

   $ 2,179      $ 2,173   

Nassau Cnty Indl Dev Agy, Continuing Care Ret Cmnty Rev Bonds (Amsterdam at Harborside Proj), Ser 2014B,

      

5.500%, 7-1-20

     4,202        4,211   

Nassau Cnty Indl Dev Agy, Continuing Care Ret Cmnty Rev Bonds (Amsterdam at Harborside Proj), Ser 2014C,

      

2.000%, 1-1-49

     7,653        957   

NY Liberty Dev Corp., Rev Bonds (3 World Trade Center Proj), Ser 2014,

      

5.000%, 11-15-44

     25,000        26,901   

The Orange Co. Funding Corp. (NY), Assisted Living Residence Rev Bonds (The Hamlet at Wallkill Assisted Living Proj), Ser 2012,

      

6.500%, 1-1-46

     11,500        11,674   
   

 

 

  
      64,129   
   

 

 

  
 

North Carolina – 0.1%

  

NC Med Care Comsn, Ret Fac First Mtg Rev Bonds (Galloway Ridge Proj), Ser 2010A,

      

6.000%, 1-1-39

     1,520        1,630   
   

 

 

  
 

Ohio – 2.1%

  

Cleveland-Cuyahoga Cnty Port Auth, Dev Rev Bonds (Flats East Dev Proj), Ser 2010B,

      

7.000%, 5-15-40

     2,550        2,915   

Cleveland-Cuyahoga Cnty Port Auth, Dev Rev Bonds (Garfield Heights Proj), Ser 2004D,

      

5.250%, 5-15-23

     960        961   

Cnty of Muskingum, OH, Hosp Fac Rev Bonds (Genesis Hlth Care Sys Oblig Group Proj), Ser 2013,

      

5.000%, 2-15-48

     8,000        8,265   

Columbus-Franklin Cnty Fin Auth, Dev Rev Bonds (Cent OH Rgnl Bond Fund), (One Neighborhood Proj), Ser 2010A,

      

6.500%, 11-15-39

     1,225        1,253   

MUNICIPAL BONDS

(Continued)

   Principal     Value  

Ohio (Continued)

  

Greene Cnty Port Auth, Adult Svc Fac Rev Bonds (Greene, Inc. Proj), Ser 2009,

      

7.500%, 12-1-33

   $ 500      $ 594   

SE OH Port Auth, Hosp Fac Rev Rfdg and Impvt Bonds (Mem Hlth Sys of OH), Ser 2012,

      

6.000%, 12-1-42

     3,750        4,176   

Toledo-Lucas Cnty Port Auth, Dev Rev Bonds (Toledo Sch for the Arts Proj), Ser 2007B,

      

5.500%, 5-15-28

     810        843   

Toledo-Lucas Cnty Port Auth, Spl Assmt Rev Bonds (Crocker Park Pub Impvt Proj), Ser 2003,

      

5.375%, 12-1-35

     9,000        9,010   
   

 

 

  
      28,017   
   

 

 

  
 

Oklahoma – 0.7%

  

OK Cnty Fin Auth, Ret Fac Rev Bonds (Concordia Life Care Cmnty), Ser 2005:

      

6.125%, 11-15-25

     2,000        2,003   

6.000%, 11-15-38

     7,495        7,502   
   

 

 

  
      9,505   
   

 

 

  
 

Oregon – 0.9%

  

Hosp Fac Auth of Deschutes Cnty, OR, Hosp Rev Rfdg Bonds (Cascade Hlthcare Cmnty, Inc.), Ser 2008,

      

8.250%, 1-1-38

     1,240        1,487   

Hosp Fac Auth of Salem, OR, Rev Rfdg Bonds (Cap Manor, Inc.), Ser 2012,

      

6.000%, 5-15-42

     1,900        2,126   

OR Fac Auth, Rev Bonds (Concordia Univ Proj), Ser 2010A:

      

6.125%, 9-1-30

     930        996   

6.375%, 9-1-40

     1,750        1,892   

Port of Portland, OR, Portland Intl Arpt Passenger Fac Charge Rev Bonds, Ser 2011A,

      

5.500%, 7-1-30

     5,180        5,972   
   

 

 

  
      12,473   
   

 

 

  
 

Pennsylvania – 4.9%

  

Butler Cnty Hosp Auth, Hosp Rev Bonds (Butler Hlth Sys Proj), Ser 2009B,

      

7.250%, 7-1-39

     200        240   

Cumberland Cnty Muni Auth, Rfdg Rev Bonds (Asbury PA Oblig Group), Ser 2010,

      

6.125%, 1-1-45

     5,000        5,355   

MUNICIPAL BONDS

(Continued)

   Principal     Value  

Pennsylvania (Continued)

  

Delaware Cnty Indl Dev Auth, Charter Sch Rev Bonds (Chester Cmnty Charter Sch Proj), Ser 2010A,

      

6.125%, 8-15-40

   $ 14,500      $ 14,731   

PA Higher Edu Fac Auth, Rev Bonds (Edinboro Univ Fndtn Student Hsng Proj at Edinboro Univ of PA), Ser 2010,

      

6.000%, 7-1-43

     2,530        2,733   

PA Higher Edu Fac Auth, Student Hsng Rev Bonds (Univ Ppty, Inc. Student Hsng Proj at East Stroudsburg Univ of PA), Ser 2010,

      

6.000%, 7-1-21

     1,000        1,129   

PA Tpk Comsn, Tpk Sub Rev Bonds, Ser 2009E,

      

0.000%, 12-1-38 (F)

     18,000        21,485   

Philadelphia Auth Indl Dev, Rev Bonds (Global Leadership Academy Charter Sch Proj), Ser 2010,

      

6.375%, 11-15-40

     1,000        1,074   

Philadelphia Auth Indl Dev, Rev Bonds (Mariana Bracetti Academy Charter Sch Proj), Ser 2011:

      

7.150%, 12-15-36

     6,000        6,725   

7.625%, 12-15-41

     6,925        7,927   

Philadelphia Auth Indl Dev, Rev Bonds (New Foundations Charter Sch Proj), Ser 2012,

      

6.625%, 12-15-41

     3,500        3,948   

Philadelphia, PA, Gas Works Rev Bonds (1998 Gen Ordinace), Ninth Ser,

      

5.250%, 8-1-40

     1,250        1,398   

The Borough of Langhorne Manor, Higher Edu and Hlth Auth (Bucks Cnty, PA), Hosp Rev Bonds (Lower Bucks Hosp), Ser 1992,

      

7.300%, 7-1-12 (E)

     70        17   
   

 

 

  
      66,762   
   

 

 

  
 

Puerto Rico – 3.8%

  

Cmnwlth of PR, GO Bonds of 2014, Ser A,

      

8.000%, 7-1-35

     11,000        7,605   

Cmnwlth of PR, Pub Impvt Rfdg GO Bonds, Ser 2011C,

      

6.500%, 7-1-40

     3,000        1,831   
 

 

176   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Municipal High Income Fund (in thousands)

MARCH 31, 2016

 

 

 

MUNICIPAL BONDS

(Continued)

   Principal     Value  

Puerto Rico (Continued)

  

Cmnwlth of PR, Pub Impvt Rfdg GO Bonds, Ser 2012A:

      

5.750%, 7-1-28

   $ 3,000      $ 1,812   

5.500%, 7-1-39

     5,000        2,995   

PR Aqueduct and Sewer Auth, Rev Bonds, Ser 2012A (Sr Lien),

      

5.250%, 7-1-24

     9,000        6,093   

PR Aqueduct and Sewer Auth, Rev Bonds, Ser A,

      

6.000%, 7-1-47

     12,000        8,078   

PR Elec Power Auth, Power Rev Bonds, Ser 2010XX,

      

5.750%, 7-1-36

     2,415        1,492   

PR Elec Power Auth, Power Rev Bonds, Ser 2012A,

      

5.000%, 7-1-42

     5,000        3,088   

PR Elec Power Auth, Power Rev Bonds, Ser 2013A,

      

7.000%, 7-1-43

     14,000        8,671   

PR Pub Bldg Auth, Govt Fac Rev Rfdg Bonds, Ser U,

      

5.250%, 7-1-42

     8,755        4,685   

PR Pub Fin Corp. (Cmnwlth Approp Bonds), 2011 Ser B:

      

6.000%, 8-1-25 (E)

     5,025        597   

6.000%, 8-1-26 (E)

     1,000        119   

PR Sales Tax Fin Corp., Sales Tax Rev Bonds, First Sub Ser 2009A,

      

6.375%, 8-1-39

     5,500        2,346   

PR Sales Tax Fin Corp., Sales Tax Rev Bonds, First Sub Ser 2010A,

      

5.375%, 8-1-39

     5,000        2,055   

PR Sales Tax Fin Corp., Sales Tax Rev Bonds, First Sub Ser 2010C,

      

6.500%, 8-1-35

     1,000        427   
   

 

 

  
      51,894   
   

 

 

  
 

South Carolina – 0.1%

  

Piedmont Muni Pwr Agy, SC, Elec Rev Rfdg Bonds, Ser 2008C,

      

5.750%, 1-1-34

     1,550        1,831   
 

Tennessee – 0.2%

  

Metro Nashville Arpt Auth, Arpt Impvt Rev Bonds, Ser 2015A,

      

5.000%, 7-1-40

     2,000        2,344   
 

Texas – 14.5%

  

Cap Area Cultural Edu Fac Fin Corp., Rev Bonds (The Roman Catholic Diocese of Austin), Ser 2005B,

      

6.125%, 4-1-45

     3,150        3,609   

MUNICIPAL BONDS

(Continued)

   Principal     Value  

Texas (Continued)

  

Cass Cnty Indl Dev Corp., Envirnmt Impvt Rev Bonds, Ser 2009A,

      

9.500%, 3-1-33

   $ 500      $ 603   

Cent TX Rgnl Mobility Auth, Sr Lien Rev Bonds, Ser 2010:

      

0.000%, 1-1-36 (F)

     500        228   

0.000%, 1-1-40 (F)

     500        190   

Cent TX Rgnl Mobility Auth, Sr Lien Rev Bonds, Ser 2015A,

      

5.000%, 1-1-45

     4,000        4,548   

Cent TX Rgnl Mobility Auth, Sub Lien Rev Rfdg Bonds, Ser 2013:

      

5.000%, 1-1-33

     6,000        6,670   

5.000%, 1-1-42

     3,000        3,237   

Dallas/Fort Worth Intl Arpt, Joint Rev Impvt Bonds, Ser 2013A,

      

5.000%, 11-1-45

     8,000        8,720   

Grand Prkwy Trans Corp., First Tier Toll Rev Bonds, Ser 2013A,

      

5.500%, 4-1-53

     10,000        11,289   

Hackberry, TX, Combination Spl Assmt and Contract Rev Road Bonds (Hackberry Hidden Cove Pub Impvt Dist No. 2 Proj), Ser 2009A:

      

8.625%, 9-1-29

     120        132   

9.000%, 9-1-38

     1,245        1,371   

Harris Cnty Cultural Edu Fac Fin Corp., Rev Rfdg Bonds (Space Ctr Houston Proj), Sr Ser 2009,

      

7.000%, 8-15-28

     500        544   

Hopkins Cnty Hosp Dist, Hosp Rev Bonds, Ser 2008:

      

6.000%, 2-15-33

     2,000        2,029   

6.000%, 2-15-38

     250        253   

Houston Higher Edu Fin Corp., Edu Rev Bonds (Cosmos Fndtn, Inc.), Ser 2011A,

      

6.875%, 5-15-41

     3,800        4,884   

Houston, TX, Arpt Sys Spec Fac Rev Rfdg Bonds (United Airlines, Inc. Arpt Impvt Proj), Ser 2015C,

      

5.000%, 7-15-20

     10,000        10,911   

Houston, TX, Arpt Sys, Sub Lien Rev Rfdg Bonds, Ser 2011B:

      

5.000%, 7-1-25

     1,000        1,174   

5.000%, 7-1-26

     2,680        3,147   

La Vernia Higher Edu Fin Corp. (KIPP, Inc.), Ser 2009A,

      

6.375%, 8-15-44

     2,000        2,356   

MUNICIPAL BONDS

(Continued)

   Principal     Value  

Texas (Continued)

  

La Vernia Higher Edu Fin Corp. (Winfree Academy Charter Sch), Edu Rev Bonds, Ser 2009,

      

9.000%, 8-15-38

   $ 2,460      $ 2,757   

Lubbock Hlth Fac Dev Corp., First Mtg Rev and Rfdg Bonds (Carillon Sr Life Care Cmnty Proj), Ser 2005A:

      

6.500%, 7-1-26

     1,500        1,523   

6.625%, 7-1-36

     7,000        7,102   

Mission Econ Dev Corp., Solid Waste Disp Rev Bonds (Dallas Clean Enrg McCommas Bluff LLC Proj), Ser 2011,

      

6.875%, 12-1-24

     2,540        2,639   

North TX Twy Auth, Spl Proj Sys Rev Bonds Convertible Cap Apprec Bonds, Ser 2011C,

      

0.000%, 9-1-43 (F)

     11,000        10,683   

Pharr, TX, Higher Edu Fin Auth, Edu Rev Bonds (Idea Pub Sch), Ser 2009A:

      

6.250%, 8-15-29

     350        389   

6.500%, 8-15-39

     200        224   

Sanger, TX, Indl Dev Corp., Indl Dev Rev Bonds (TX Pellets Proj), Ser 2012B,

      

8.000%, 7-1-38

     12,870        11,484   

Tarrant Cnty Cultural Edu Fac Fin Corp., Charter Sch Rev Bonds (Trinity Basin Preparatory Proj), Ser 2009A,

      

7.750%, 6-1-39

     155        188   

Tarrant Cnty Cultural Edu Fac Fin Corp., Ret Fac Rev Bonds (Buckingham Sr Living Cmnty, Inc. Proj), Ser 2007:

      

5.500%, 11-15-22

     2,000        2,073   

5.625%, 11-15-27

     250        258   

5.750%, 11-15-37

     6,840        6,999   

Tarrant Cnty Cultural Edu Fac Fin Corp., Ret Fac Rev Bonds (Mirador Proj), Ser 2010A:

      

8.000%, 11-15-29

     2,500        2,148   

8.125%, 11-15-39

     5,000        4,298   

Tarrant Cnty, TX, Cultural Edu Fac Fin Corp., Ret Fac Rev Bonds (Buckingham Sr Living Cmnty Proj),
Ser 2015B-1,

      

4.500%, 11-15-21

     6,000        6,062   

TX Muni Gas Acquisition and Supply Corp. III, Gas Supply Rev Bonds, Ser 2012,

      

5.000%, 12-15-32

     3,000        3,350   
 

 

  2016   ANNUAL REPORT   177

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Municipal High Income Fund (in thousands)

MARCH 31, 2016

 

 

 

 

MUNICIPAL BONDS

(Continued)

   Principal     Value  

Texas (Continued)

  

TX Private Activity Bond Surface Trans Corp., Sr Lien Rev Bonds (LBJ Infra Group LLC IH-635 Managed Lanes Proj), Ser 2010:

      

7.500%, 6-30-32

   $ 2,000      $ 2,477   

7.500%, 6-30-33

     2,700        3,344   

7.000%, 6-30-40

     13,430        16,238   

TX Private Activity Bond Surface Trans Corp., Sr Lien Rev Bonds (North Tarrant Express Managed Lanes Proj), Ser 2009,

      

6.875%, 12-31-39

     12,975        15,313   

TX Pub Fin Auth Charter Sch Fin Corp., Edu Rev Bonds (Cosmos Fndtn, Inc.), Ser 2010A,

      

6.200%, 2-15-40

     10,000        11,956   

TX Pub Fin Auth Charter Sch Fin Corp., Edu Rev Bonds (Odyssey Academy, Inc.), Ser 2010A,

      

7.125%, 2-15-40

     2,000        2,463   

TX Trans Comsn, Cent TX Tpk Sys First Tier Rev Rfdg Bonds, Ser 2012-A,

      

5.000%, 8-15-41

     10,000        11,232   

Wise Cnty, TX, Lease Rev Bonds (Parker Cnty Jr College Dist Proj), Ser 2011,

      

8.000%, 8-15-34

     5,000        6,031   
   

 

 

  
      197,126   
   

 

 

  
 

Utah – 0.4%

  

UT State Charter Sch Fin Auth, Charter Sch Rev Bonds (North Davis Preparatory Academy), Ser 2010,

      

6.250%, 7-15-30

     1,015        1,115   

UT State Charter Sch Fin Auth, Charter Sch Rev Bonds (North Star Academy Proj), Ser 2010B,

      

7.000%, 7-15-45

     2,100        2,315   

UT State Charter Sch Fin Auth, Charter Sch Rev Bonds (Paradigm High Sch), Ser 2010,

      

6.375%, 7-15-40

     2,160        2,234   
   

 

 

  
      5,664   
   

 

 

  

MUNICIPAL BONDS

(Continued)

   Principal     Value  

Virgin Islands – 0.1%

  

VI Pub Fin Auth, Sub Rev Bonds (VI Matching Fund Loan Note – Diageo Proj), Ser 2009A,

      

6.625%, 10-1-29

   $ 935      $ 1,045   
   

 

 

  
 

Virginia – 2.0%

  

Econ Dev Auth of James City Cnty, VA, Residential Care Fac Rev Bonds (VA Utd Methodist Homes of Williamsburg, Inc.), Ser 2013A:

      

6.000%, 6-1-43

     3,039        2,998   

2.000%, 10-1-48

     983        44   

Indl Dev Auth of Smyth Cnty, VA, Hosp Rev Bonds (Mountain States Hlth Alliance), Ser 2009A,

      

8.000%, 7-1-38

     450        515   

Indl Dev Auth of Washington Cnty, VA, Hosp Rev Bonds (Mountain States Hlth Alliance), Ser 2009C:

      

7.250%, 7-1-19

     490        535   

7.500%, 7-1-29

     25        29   

Mosaic Dist Cmnty Dev Auth, Fairfax Cnty, VA, Rev Bonds, Ser 2011A,

      

6.875%, 3-1-36

     4,300        4,959   

Norfolk Redev and Hsng Auth, Multifam Rental Hsng Fac Rev Bonds (1016 L.P. – Sussex Apt Proj), Ser 1996,

      

8.000%, 9-1-26

     380        380   

VA Small Business Fin Auth, Sr Lien Rev Bonds (Elizabeth River Crossing Opco LLC Proj), Ser 2012:

      

6.000%, 1-1-37

     8,000        9,353   

5.500%, 1-1-42

     7,500        8,371   
   

 

 

  
      27,184   
   

 

 

  
 

Washington – 1.6%

  

Indl Dev Corp of the Port of Seattle, Spl Fac Rev Rfdg Bonds (Delta Air Lines, Inc. Proj), Ser 2012,

      

5.000%, 4-1-30

     4,000        4,282   

Port of Sunnyside, Yakima Cnty, WA, Rev Bonds (Indl Wastewater Treatment Sys), Ser 2008,

      

6.625%, 12-1-21

     1,775        1,912   

WA Hlth Care Fac Auth, Rev Bonds (Cent WA Hlth Svcs Assoc), Ser 2009:

      

6.250%, 7-1-24

     795        912   

MUNICIPAL BONDS

(Continued)

   Principal     Value  

Washington (Continued)

  

7.000%, 7-1-31

   $ 1,680      $ 2,006   

7.000%, 7-1-39

     2,000        2,388   

WA Hlth Care Fac Auth, Rev Bonds (Seattle Cancer Care Alliance), Ser 2008,

      

7.375%, 3-1-38

     250        295   

WA State Hsng Fin Comsn (Rockwood Ret Cmnty Proj), Nonprofit Hsng Rev and Rfdg Rev Bonds, Ser 2014A,

      

7.500%, 1-1-49

     8,000        9,245   
   

 

 

  
      21,040   
   

 

 

  
 

West Virginia – 0.3%

  

Brooke Cnty, WV, Rev Bonds (Bethany College), Ser 2011A,

      

6.750%, 10-1-37

     4,000        4,422   
   

 

 

  
 

Wisconsin – 2.1%

  

Pub Fin Auth, Sr Arpt Fac Rev and Rfdg Bonds (TrIps Obligated Group), Ser 2012B,

      

5.000%, 7-1-42

     5,000        5,276   

WI Hlth and Edu Fac Auth, Rev Bonds (Beloit College), Ser 2010A:

      

6.125%, 6-1-35

     1,220        1,365   

6.125%, 6-1-39

     250        278   

WI Hlth and Edu Fac Auth, Rev Bonds (Saint John’s Cmnty, Inc.), Ser 2009:

      

7.250%, 9-15-29

     2,180        2,603   

7.625%, 9-15-39

     5,500        6,708   

WI Hlth and Edu Fac Auth, Rev Bonds (Woodland Hills Sr Hsng Proj), Ser 2014,

      

5.000%, 12-1-44

     4,000        4,090   

WI Pub Fin Auth, Edu Rev Bonds (Cornerstone Charter Academy Proj), Ser 2016A,

      

5.125%, 2-1-46

     4,000        3,993   

WI Pub Fin Auth, Edu Rev Bonds (Triad Edu Svc), Ser 2015A,

      

5.500%, 6-15-45

     4,000        4,037   
   

 

 

  
      28,350   
   

 

 

  
 

TOTAL MUNICIPAL BONDS – 91.3%

   

   $ 1,243,091   

(Cost: $1,201,880)

  

    
 

 

178   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Municipal High Income Fund (in thousands)

MARCH 31, 2016

 

 

 

SHORT-TERM
SECURITIES		   Principal     Value  

Commercial Paper (H) – 5.4%

  

Baxter International, Inc.,

      

0.710%, 4-1-16

   $ 8,000      $ 8,000   

0.730%, 4-4-16

     10,000        9,999   

Becton Dickinson & Co.,

      

0.760%, 4-4-16

     10,000        9,999   

Bemis Co., Inc.,

      

0.500%, 4-26-16

     3,000        2,999   

BorgWarner, Inc.,

      

0.490%, 4-21-16

     5,000        4,999   

Campbell Soup Co.,

      

0.440%, 4-19-16

     5,000        4,999   

Clorox Co. (The),

      

0.570%, 4-8-16

     4,680        4,679   

0.460%, 4-11-16

     2,200        2,200   

0.480%, 4-18-16

     8,300        8,298   

0.500%, 5-4-16

     5,000        4,998   

J.M. Smucker Co. (The),

      

0.650%, 4-1-16

     2,148        2,148   

Kroger Co. (The),

      

0.460%, 4-11-16

     7,500        7,499   

NBCUniversal Enterprise, Inc.,

      

0.650%, 4-7-16

     3,000        3,000   
   

 

 

  
      73,817   
   

 

 

  
 

Master Note – 0.3%

  

Toyota Motor Credit Corp.,

      

0.443%, 4-6-16 (I)

     3,766        3,766   
   

 

 

  
 

Municipal Obligations – 1.3%

  

Castle Rock, CO, Cert of Part, Ser 2008 (GTD by Wells Fargo Bank N.A.),

      

0.460%, 4-7-16 (I)

     5,400        5,400   

SHORT-TERM

SECURITIES

(Continued)

   Principal     Value  

Municipal Obligations (Continued)

  

Columbus Rgnl Arpt Auth, Cap Funding Rev Bonds (OASBO Expanded Asset Pooled Fin Prog), Sr Ser 2005 (GTD by U.S. Bank N.A.),

      

0.410%, 4-7-16 (I)

   $ 700      $ 700   

Columbus Rgnl Arpt Auth, Cap Funding Rev Bonds (OASBO Expanded Asset Pooled Fin Prog), Sr Ser 2006 (GTD by U.S. Bank N.A.),

      

0.410%, 4-7-16 (I)

     1,400        1,400   

Harris Cnty Hosp Dist, Sr Lien Rfdg Rev Bonds, Ser 2010 (GTD by JPMorgan Chase & Co.),

      

0.430%, 4-7-16 (I)

     2,100        2,100   

MN Office of Higher Edu, Adj Rate Supplemental Student Loan Prog Rev Bonds, Ser 2008B (Tax-Exempt), (GTD by U.S. Bank N.A.),

      

0.430%, 4-7-16 (I)

     1,300        1,300   

MS Business Fin Corp., Gulf Opp Zone Indl Dev Rev Bonds (Chevron USA, Inc. Proj), Ser 2007D (GTD by Chevron Corp.),

      

0.370%,
4-1-16 (I)

     5,000        5,000   
SHORT-TERM
SECURITIES
(Continued)		   Principal     Value  

Municipal Obligations (Continued)

  

Tuscaloosa Cnty Indl Dev Auth, Gulf Opp Zone Bonds (Hunt Refining Proj), Ser 2011I (GTD by Bank of Nova Scotia),

      

0.410%, 4-7-16 (I)

   $ 2,000      $ 2,000   
   

 

 

  
      17,900   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 7.0%

           $ 95,483   

(Cost: $95,479)

  

 

TOTAL INVESTMENT SECURITIES – 98.6%

           $ 1,343,179   

(Cost: $1,301,401)

  

 

CASH AND OTHER ASSETS, NET OF LIABILITIES – 1.4%

   

     18,414   
 

NET ASSETS – 100.0%

           $ 1,361,593   
 

Notes to Schedule of Investments

 

(A) No dividends were paid during the preceding 12 months.

 

(B) Deemed to be an affiliate due to the Fund owning at least 5% of the voting securities.

 

(C) Payment-in-kind bonds.

 

(D) Purchased on a when-issued basis with settlement subsequent to March 31, 2016.

 

(E) Non-income producing as the issuer has either missed its most recent interest payment or declared bankruptcy.

 

(F) Zero coupon bond.

 

(G) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016.

 

(H) Rate shown is the yield to maturity at March 31, 2016.

 

(I) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ —       $ 1,250       $ —   

Corporate Debt Securities

     —         3,355         —   

Municipal Bonds

     —         1,243,091         —   

Short-Term Securities

     —         95,483         —   

Total

   $ —       $ 1,343,179       $ —   

During the year ended March 31, 2016, securities totaling $1,250 were transferred from Level 3 to Level 2 due to increased availability of observable market data due to increased market activity or information for these securities. Transfers out of Level 3 represent the values as of the beginning of the reporting period. There were no transfers between Level 1 and 2 during the year.

The following acronyms are used throughout this schedule:

AMBAC = American Municipal Bond Assurance Corp.

AGM = Assured Guaranty Municipal

GTD = Guaranteed

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   179

Table of Contents

MANAGEMENT DISCUSSION

Ivy Small Cap Growth Fund

(UNAUDITED)

 

 

 

LOGO

Timothy J. Miller

Below, Timothy Miller, CFA, portfolio manager of the Ivy Small Cap Growth Fund, discusses positioning, performance and results for the fiscal year ended March 31, 2016. He has managed the Fund since 2010 and has 37 years of investment experience.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy Small Cap Growth Fund (Class A shares at net asset value)

      –8.91%   

Ivy Small Cap Growth Fund (Class A shares including sales charges)

      –14.14%   

Benchmark(s) and/or Lipper Category

         

Russell 2000 Growth Index

      –11.84%   

(generally reflects the performance of small-company growth stocks)

         

Lipper Small-Cap Growth Funds Universe Average

      –12.11%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

 

Key drivers

 

 

The small-cap market proved to be disappointing for investors over the past fiscal year ending March 31, 2016. After holding a relatively flat pattern from the beginning of 2014 until the end of 2015, the Russell 2000 Growth Index, the Fund’s benchmark, fell sharply during the late December through early February time period. Issues affecting the stocks were numerous, led by domestic recession fears, collapsing oil prices, widening credit spreads, and the prospect of Federal Reserve (Fed) interest rate hikes. The result was a double-digit decline for the index. For the fiscal year, small-caps stocks underperformed both large- and mid-cap stocks. In addition, small-cap growth stocks slightly lagged small-cap value stocks during the period. All hope was not lost, however, as the index staged a nice rally from the February lows to the end of March. The plethora of fears proved to be overly pessimistic, and a rally in oil prices relieved some of the aforementioned concerns.

There were two noteworthy and unrelated trends that had an inordinate impact on the index and the Fund over the past fiscal year. The first was the end of the powerful, multi-year uptrend in the small-cap biotech and pharmaceutical stocks. This group makes up as much as 13% of the index and the stocks tend to trade as a group (with the exception of a periodic spike up or down for individual stocks based on a drug success or failure). The fundamental drivers of biotechs over the past few years have been many. A strong commercialization cycle of large revenue-generating drugs raised expectations for all pipelines. A promising innovation cycle was fueled by easy access to capital in a friendly initial public offering (IPO) market buoyed by low interest rates and high valuations. A supportive Food and Drug Administration (FDA) regulatory environment also eased the pathway for new drugs to market; and finally, mergers and acquisitions (M&As) available at big premiums were abundant. So the forces behind the multi-year move were legitimate, but expectations and valuations were also rising to levels that were not incorporating much risk. A little ‘tweet” from the Hilary Clinton campaign, and the scandal at Valeant Pharmaceuticals (not a Fund holding) raised the issue of pharmaceutical pricing, which proved to be a trend-buster and the subsequent carnage was significant. The biotech portion of the index was down for the year, with much of the decline occurring in the most recent quarter. The spillover effect on the rest of health care dragged the performance for the sector down for the fiscal year. The health care sector represents about 26% of the index so the impact was substantial.

The second major negative trend for small caps was the sharp correction in oil prices, an impact that goes well beyond the small sector weighting of energy in the index. Oil prices collapsed over the past fiscal year from a $60 per barrel range to the mid $20 per barrel range. The inflection point was somewhere in the $30 range, where virtually all production in the U.S. becomes uneconomic. The result of this downtrend was a sharp correction in drilling and economic activity in all of the oil-producing regions of the country. The unforeseen impact was on all of the peripheral industries supporting oil production, from transports to banks to machinery to lodging, retail and restaurants. High yield bond spreads in the energy sector widened dramatically and dragged general credit spreads wider. The admittedly small energy sector was down 47% for the year, but it pressured the industrials, materials and transport sectors as well. It seemed that the oil price “dividend” of cheaper gas for consumers was overwhelmed by the damage it inflicted on the rest of the U.S. economy. These two powerful forces were the primary drag on small-cap performance over the past 12 months.

Contributors and detractors

 

 

Over the past fiscal year, the Fund performed better than the benchmark, before sales charges. Conservative positioning in the two sectors previously mentioned were a significant contributor to performance compared to the benchmark. In the energy sector, the Fund nearly generated a gain for the year versus decline in the benchmark. The strategy employed was to focus on exploration and production (E&P) companies primarily in the lowest cost, most prolific basin, which is the Permian Basin of West Texas. In addition, the Fund emphasized companies with the best reserve positions, lowest debt and most efficient operations. Stocks such as Diamondback Energy, RSP Permian, and Parsley Energy generated positive returns for the Fund over the 12-month period. Timely trades in Bonanza Creek Energy (no longer a Fund holding) and Synergy Resources also generated gains. These gains were offset by relatively small losses from Matador Resources and Viper Energy Partners. The strategy going forward will be to maintain an overweight position in the sector focused on the higher quality E&P companies with an eye toward broadening out the positions and considering exposure to the oil service sector. At some point over the next year it should become clear that domestic oil production has contracted meaningfully,

 

180   ANNUAL REPORT   2016  

Table of Contents

 

 

inventories have begun to decline, and we believe the global supply/demand balance should shift more favorably for oil prices. A moderate improvement in oil prices would be a good recipe for many sectors of the economy and could similarly benefit the stock market.

The Fund’s performance in health care was benefited due to a combination of limited exposure to the biotech correction and absolute gains from DexCom, Inc. and a number of health care service stocks. The Fund’s biotech exposure is principally derived via a total return swap, which provides an index-like position in the index’s biotech and pharmaceutical stocks. The weighting of the swap in the Fund has ranged from zero to 3%, significantly below the benchmark, which resulted in a modest loss for the Fund versus the substantial decline in the index. On the health care services front, the Fund focused on the attractive surgery center industry and temporary help sector with stocks like Amsurg Corp., Surgical Care Affiliates and AMN Healthcare. All three of these stocks were up for the fiscal year. Similarly, DexCom is one of the top positions in the Fund, and it was also up for the fiscal year. The company’s extraordinary success with its continuous glucose monitoring systems for diabetics has led to consistent year-over-year revenue growth above 50% for the past three years. Advanced applications continue to broaden the market and penetration of the product in a multi-billion global opportunity. Gains from these stocks were offset by the broad health care correction, which pressured other medical device and technology stocks in the portfolio. The outlook for the sector appears to be a bit mixed; macro trends remain supportive of the sector, but regulatory trends have turned more negative and the momentum on new drug commercialization has slowed. M&A remains a potential positive for the sector but is a difficult situation to predict.

Two other significant contributors to the Fund’s outperformance, compared to the benchmark, were the technology and consumer discretionary sectors. In both cases, the strategy to focus on the higher quality, recurring revenue, service oriented business models proved successful. In the case of technology, this was accomplished with an emphasis on leading SAAS (software as a service) companies like Ultimate Software; tech services companies like Jack Henry & Associates and Manhattan Associates; and the initiation during the fiscal year of positions in the defense technology services industry with Booz Allen & Hamilton, CACI International, and defense electronics via Mercury Computer Systems. The defense sector has been under Federal budget pressure for the past four to five years but that trend is appearing to reverse in the budget cycle for the next few years, with particular growth in spending for cyber security and technology systems. Looking ahead we also expect to see renewed acceleration in global communication equipment spending, which will benefit a number of our component, semiconductor and contract manufacturing positions.

The consumer discretionary sector was quite erratic in spite of the strongly favorable macro trends, which included strong job growth, plunging oil prices and historic low interest rates. The Fund navigated through this confusion fortunately with more weight on the winners than the disappointments, which led to a positive attribution for the fiscal year. The largest contributor was ski resort owner/operator Vail Resorts. The stock never buckled during the market corrections as investors are appreciating the dominant position of the company and its amazingly stable financial model in spite of the weather variations that can affect visitation at its resorts. The company’s successful takeover of Park City Mountain Resort (not a holding) in Utah added another marquee property to its global diversification of resorts, which fuel the success of its season pass-driven business model. Other winners in this sector included Pool Corp., Dave & Buster’s Entertainment, Monro Muffler and Sonic Corp. These and others more than offset surprising weakness from a number of retailers including Zumiez (no longer a Fund holding), Kate Spade and Burlington Stores. The retail industry is facing secular challenges from e-commerce and consumer spending trends moving away from retail, so the Fund will attempt to follow the growth areas of this sector.

Outlook

 

 

The upcoming fiscal year appears to hold promise for better returns from the small-cap sector, but the tenuous global macro condition will keep the Fund more concentrated in the aforementioned domestic service sectors of technology, health care and consumer discretionary and staples. The Fund will attempt to opportunistically pursue out-of-favor growth opportunities in energy, industrials and financials.

Performance shown at NAV does not include the effects of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

Investing in small-cap stocks may carry more risk than investing in stocks of larger, more well-established companies. Prices of growth stocks may be more sensitive to changes in current or expected earning s than the prices of other stocks. Growth stocks may not perform as well as value stocks or the stock market in general. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the portfolio manager and are current only through the end of the period of the report as stated on the cover. The manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged, includes reinvested dividends and does not include fees. One cannot invest directly in an index, nor is an index representative of the Ivy Small Cap Growth Fund’s performance.

 

  2016   ANNUAL REPORT   181

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Small Cap Growth Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      97.2%   

Information Technology

      29.6%   

Consumer Discretionary

      21.7%   

Health Care

      15.6%   

Financials

      12.1%   

Industrials

      10.6%   

Energy

      5.1%   

Consumer Staples

      2.5%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      2.8%   

Lipper Rankings

 

 

 

Category: Lipper Small-Cap Growth Funds

    Rank      Percentile

1 Year

    139/554      26

3 Year

    217/492      45

5 Year

    205/436      47

10 Year

    48/313      16

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

 

 

Top 10 Equity Holdings

 

 

 

Company    Sector      Industry

Ultimate Software Group, Inc. (The)

   

Information Technology

     

Application Software

Vail Resorts, Inc.

   

Consumer Discretionary

     

Leisure Facilities

AMN Healthcare Services, Inc.

   

Health Care

     

Health Care Services

Watsco, Inc.

   

Industrials

     

Trading Companies & Distributors

SVB Financial Group

   

Financials

     

Regional Banks

Monro Muffler Brake, Inc.

   

Consumer Discretionary

     

Automotive Retail

Jack Henry & Associates, Inc.

   

Information Technology

     

Data Processing & Outsourced Services

Booz Allen Hamilton Holding Corp.

   

Information Technology

     

IT Consulting & Other Services

Pool Corp.

   

Consumer Discretionary

     

Distributors

DexCom, Inc.

   

Health Care

     

Health Care Equipment

See your advisor or www.ivyfunds.com for more information on the Fund’s most recently published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

182   ANNUAL REPORT   2016  

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Small Cap Growth Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1)The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)   Class A(3)     Class B(4)     Class C     Class E     Class I     Class R     Class R6     Class Y  

1-year period ended 3-31-16

     -14.14%        -12.74%        -9.48%        -14.17%        -8.59%        -9.10%        -8.46%        -8.80%   

5-year period ended 3-31-16

     5.50%        5.61%        6.07%        5.41%        7.17%        6.54%        —           6.92%   

10-year period ended 3-31-16

     6.18%        5.96%        6.13%        —           —           6.69%        —           7.04%   

Since Inception of Class through 3-31-16(5)

     —           —           —           6.65%        8.14%        —           3.04%        —      

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) 4-2-07 for Class E shares, 4-2-07 for Class I shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

  2016   ANNUAL REPORT   183

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Small Cap Growth Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Consumer Discretionary

  

 

Apparel, Accessories & Luxury Goods – 2.2%

  

Kate Spade & Co. (A)

     281      $ 7,174   

Oxford Industries, Inc.

     207        13,943   
   

 

 

  
      21,117   
   

 

 

  
 

Automotive Retail – 2.5%

  

Monro Muffler Brake, Inc.

     326        23,328   
   

 

 

  
 

Broadcasting – 0.3%

  

Townsquare Media, Inc. (A)

     289        3,244   
   

 

 

  
 

Casinos & Gaming – 0.0%

  

Penn National Gaming, Inc. (A)

     10        159   
   

 

 

  
 

Distributors – 3.9%

  

Core-Mark Holding Co., Inc.

     193        15,733   

Pool Corp.

     235        20,593   
   

 

 

  
      36,326   
   

 

 

  
 

General Merchandise Stores – 1.7%

  

Burlington Stores, Inc. (A)

     123        6,901   

Ollie’s Bargain Outlet Holdings, Inc. (A)

     383        8,976   
   

 

 

  
      15,877   
   

 

 

  
 

Internet Retail – 1.4%

  

Travelport Worldwide Ltd.

     942        12,861   
   

 

 

  
 

Leisure Facilities – 3.6%

  

Vail Resorts, Inc.

     255        34,100   
   

 

 

  
 

Restaurants – 6.1%

  

Dave & Buster’s Entertainment, Inc. (A)

     443        17,162   

Fiesta Restaurant Group, Inc. (A)

     405        13,269   

Sonic Corp. (B)

     323        11,339   

Texas Roadhouse, Inc., Class A

     371        16,160   
   

 

 

  
      57,930   
   

 

 

  
 

Total Consumer
Discretionary – 21.7%

   

     204,942   

Consumer Staples

  

 

Packaged Foods & Meats – 2.5%

  

Lance, Inc. (B)

     558        17,575   

TreeHouse Foods, Inc. (A)

     68        5,908   
   

 

 

  
      23,483   
   

 

 

  
 

Total Consumer Staples – 2.5%

  

     23,483   

Energy

  

 

Oil & Gas Exploration & Production – 5.1%

  

Diamondback Energy, Inc. (A)

     177        13,669   

Matador Resources Co. (A)

     416        7,884   

Parsley Energy, Inc.,
Class A (A)

     232        5,236   

RSP Permian, Inc. (A)

     375        10,887   
COMMON STOCKS
(Continued)		   Shares     Value  

Oil & Gas Exploration & Production (Continued)

  

Synergy Resources Corp. (A)

     509      $ 3,957   

Viper Energy Partners L.P.

     378        6,170   
   

 

 

  
      47,803   
   

 

 

  
 

Total Energy – 5.1%

  

     47,803   

Financials

  

 

Asset Management & Custody Banks – 1.8%

  

Janus Capital Group, Inc.

     421        6,157   

WisdomTree Investment, Inc.

     979        11,184   
   

 

 

  
      17,341   
   

 

 

  
 

Real Estate Services – 1.5%

  

RE/MAX Holdings, Inc., Class A

     399        13,682   
   

 

 

  
 

Regional Banks – 8.8%

  

Bank of the Ozarks, Inc.

     433        18,191   

Cathay General Bancorp

     545        15,443   

Home BancShares, Inc.

     340        13,924   

PrivateBancorp, Inc.

     312        12,047   

SVB Financial Group (A)

     230        23,457   
   

 

 

  
      83,062   
   

 

 

  
 

Total Financials – 12.1%

  

     114,085   

Health Care

  

 

Health Care Equipment – 3.2%

  

DexCom, Inc. (A)

     296        20,074   

Nevro Corp. (A)

     180        10,121   
   

 

 

  
      30,195   
   

 

 

  
 

Health Care Facilities – 3.9%

  

Acadia Healthcare Co., Inc. (A)

     90        4,977   

AmSurg Corp. (A)

     227        16,919   

Surgery Partners, Inc. (A)

     196        2,604   

Surgical Care Affiliates, Inc. (A)

     266        12,296   
   

 

 

  
      36,796   
   

 

 

  
 

Health Care Services – 5.0%

  

AMN Healthcare Services, Inc.(A)

     831        27,923   

Ensign Group, Inc. (The)

     448        10,141   

ExamWorks Group, Inc. (A)

     322        9,513   
   

 

 

  
      47,577   
   

 

 

  
 

Health Care Supplies – 1.2%

  

LDR Holding Corp. (A)

     439        11,185   
   

 

 

  
 

Health Care Technology – 0.9%

  

Medidata Solutions, Inc. (A)

     217        8,395   
   

 

 

  
 

Life Sciences Tools & Services – 1.1%

  

Cambrex Corp. (A)

     232        10,199   
   

 

 

  
 

Managed Health Care – 0.3%

  

HealthEquity, Inc. (A)

     122        3,012   
   

 

 

  
 

Total Health Care – 15.6%

  

     147,359   
COMMON STOCKS
(Continued)		   Shares     Value  

Industrials

  

 

Aerospace & Defense – 0.7%

  

HEICO Corp.

     110      $ 6,608   
   

 

 

  
 

Air Freight & Logistics – 1.0%

  

Hub Group, Inc. (A)

     226        9,198   
   

 

 

  
 

Building Products – 0.9%

  

Apogee Enterprises, Inc.

     193        8,491   
   

 

 

  
 

Diversified Support Services – 0.3%

  

Ritchie Bros. Auctioneers, Inc.

     121        3,288   
   

 

 

  
 

Human Resource & Employment
Services – 0.4%

   

Kforce, Inc.

     176        3,440   
   

 

 

  
 

Office Services & Supplies – 1.0%

  

HNI Corp.

     243        9,499   
   

 

 

  
 

Trading Companies & Distributors – 3.9%

  

Rush Enterprises, Inc. (A)

     539        9,835   

Watsco, Inc. (B)

     204        27,473   
   

 

 

  
      37,308   
   

 

 

  
 

Trucking – 2.4%

  

Covenant Transportation Group, Inc.,
Class A (A)

     445        10,765   

Knight Transportation, Inc.

     448        11,702   
   

 

 

  
      22,467   
   

 

 

  
 

Total Industrials – 10.6%

  

     100,299   

Information Technology

  

 

Application Software – 12.3%

  

Descartes Systems Group, Inc. (The) (A)(C)

     505        9,826   

HubSpot, Inc. (A)

     195        8,523   

Manhattan Associates,
Inc. (A)

     323        18,346   

Paycom Software, Inc. (A)

     411        14,621   

SS&C Technologies Holdings, Inc.

     75        4,738   

Tyler Technologies, Inc. (A)

     121        15,575   

Ultimate Software Group, Inc. (The) (A)(B)

     188        36,427   

Zendesk, Inc. (A)

     388        8,115   
   

 

 

  
      116,171   
   

 

 

  
 

Communications Equipment – 0.8%

  

Lumentum Holdings,
Inc. (A)

     279        7,514   
   

 

 

  
 

Data Processing & Outsourced
Services – 2.6%

   

Echo Global Logisitics, Inc. (A)

     101        2,754   

Jack Henry & Associates, Inc. (B)

     259        21,877   
   

 

 

  
      24,631   
   

 

 

  
 

 

184   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Small Cap Growth Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS
(Continued)		   Shares     Value  

Electronic Equipment & Instruments – 0.7%

  

FEI Co.

     80      $ 7,094   
   

 

 

  
 

Electronic Manufacturing Services – 3.7%

  

Fabrinet (A)

     329        10,631   

M/A-COM Technology Solutions Holdings, Inc. (A)

     314        13,737   

Mercury Computer Systems, Inc. (A)

     511        10,367   
   

 

 

  
      34,735   
   

 

 

  
 

IT Consulting & Other Services – 5.1%

  

Booz Allen Hamilton Holding Corp.

     696        21,081   

CACI International, Inc., Class A (A)

     123        13,168   

Science Applications International Corp.

     265        14,156   
   

 

 

  
      48,405   
   

 

 

  
 

Semiconductor Equipment – 0.5%

  

MaxLinear, Inc., Class A (A)

     242        4,477   
   

 

 

  
 

Semiconductors – 2.9%

  

Microsemi Corp. (A)

     221        8,455   

Monolithic Power Systems, Inc.

     131        8,318   
COMMON STOCKS
(Continued)		   Shares     Value  

Semiconductor Equipment (Continued)

  

Power Integrations, Inc. (B)

     217      $ 10,751   
   

 

 

  
      27,524   
   

 

 

  
 

Systems Software – 1.0%

  

Proofpoint, Inc. (A)

     175        9,406   
   

 

 

  
 

Total Information
Technology – 29.6%

   

     279,957   
 

TOTAL COMMON
STOCKS – 97.2%

           $ 917,928   

(Cost: $709,460)

      
 
SHORT-TERM
SECURITIES		   Principal         

Commercial Paper (D) – 2.6%

  

Bemis Co., Inc.,

      

0.480%, 4-19-16

   $ 4,000        3,999   

Danaher Corp.,

      

0.450%, 4-6-16

     4,000        4,000   

Hershey Co. (The),

      

0.300%, 4-12-16

     5,000        4,999   

John Deere Canada ULC (GTD by Deere & Co.),

      

0.320%, 4-12-16

     2,500        2,500   
SHORT-TERM
SECURITIES (Continued)		   Principal     Value  

Commercial Paper (D) (Continued)

  

Rockwell Automation, Inc.:

      

0.610%, 4-1-16

   $ 2,832      $ 2,832   

0.570%, 4-6-16

     4,000        4,000   

St. Jude Medical, Inc.,

      

0.480%, 4-19-16

     2,000        1,999   
   

 

 

  
      24,329   
   

 

 

  
 

Master Note – 0.2%

  

Toyota Motor Credit Corp.,

      

0.443%, 4-6-16 (E)

     2,027        2,027   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 2.8%

   

   $ 26,356   

(Cost: $26,356)

      
 

TOTAL INVESTMENT SECURITIES – 100.0%

   

   $ 944,284   

(Cost: $735,816)

      
 

CASH AND OTHER ASSETS, NET OF LIABILITIES – 0.0%

   

     25   
 

NET ASSETS – 100.0%

  

   $ 944,309   
 

 

Notes to Schedule of Investments

 

(A) No dividends were paid during the preceding 12 months.

 

(B) All or a portion of securities with an aggregate value of $2,337 are held in collateralized accounts for OTC derivatives collateral as governed by International Swaps and Derivatives Association, Inc. Master Agreements.

 

(C) Listed on an exchange outside the United States.

 

(D) Rate shown is the yield to maturity at March 31, 2016.

 

(E) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following total return swap agreements were outstanding at March 31, 2016:

 

Counterparty   Number of Shares   Underlying Security   Termination Date     Notional Amount     Financing Fee(1)(2)   Unrealized
Depreciation		  

JPMorgan Chase Bank N.A.

   243,972   Biotech Custom Index     09/05/2016      $ 21,311      1M LIBOR less 50 bps   $ (865 ) 

 

(1) The Fund pays the financing fee multiplied by the notional amount each month.

 

(2) At the termination date, a net cash flow is exchanged where the market-linked total return is equivalent to the return of the underlying security less a financing rate, if any. As the payer, a Fund would receive payments on any net positive total return, and would owe payments in the event of a negative total return.

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

      Level 1      Level 2      Level 3  

Assets

         

Investments in Securities

         

Common Stocks

    $ 917,928       $ —       $ —   

Short-Term Securities

      —         26,356         —   

Total

    $ 917,928       $ 26,356       $ —   

Liabilities

         

Total Return Swaps

    $ —       $ 865       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

The following acronyms are used throughout this schedule.:

GTD = Guarenteed

OTC = Over the Counter

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   185

Table of Contents

MANAGEMENT DISCUSSION

Ivy Small Cap Value Fund

(UNAUDITED)

 

 

 

LOGO

Kenneth G. Gau

Below, Kenneth G. Gau, portfolio manager of Ivy Small Cap Value Fund, discusses positioning, performance and results for the fiscal year ended March 31, 2016. He has managed the Fund since 2014 and has 21 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy Small Cap Value Fund (Class A shares at net asset value)

      –5.11%   

Ivy Small Cap Value Fund (Class A shares including sales charges)

      –10.59%   

Benchmark(s) and/or Lipper Category

         

Russell 2000 Value Index

      –7.72%   

(generally reflects the performance of small-company value style stocks)

         

Lipper Small-Cap Value Funds Universe Average

      –6.46%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

 

Key factors

 

 

After a pretty long uninterrupted run without a 10% correction in the broader market, the Russell 2000 Value Index, the Fund’s benchmark, finally succumbed in the third quarter of calendar year 2015. This situation proved to be too much of a deficit to recover in the fiscal 12-month period ended March 31, 2016 and the index finished down 7.72%. What led to the struggles during the fiscal year was a combination of concerns regarding decelerating global growth, uncertainty around movements in central bank policies, geopolitical concerns (Syria), and implications of the impending U.S. presidential election.

Within this tough environment, the Fund performed very well on a relative basis, exceeding the index return by over 400 basis points gross of sales charges. While losing in an absolute sense is never comforting, we believe it is important that we have exhibited that the Fund has performed well relative to its benchmark in both up and down markets during the past several years.

Contributors and detractors

 

 

As is often is the case, stock selection was the ultimate driver for relative outperformance versus the index during the fiscal period. Being that we run a more concentrated Fund (targeting 45-65 holdings), we had 10 stocks that contributed 50 basis points or greater to returns (representing six different sectors), and six stocks that detracted 50 basis points or greater (representing five different sectors). More importantly, when these greatest contributors and detractors were combined, the group netted roughly a positive 400 basis point contribution to the Fund’s relative annual return.

At the sector level, four sectors contributed greater than 50 basis points to performance while only one detracted greater than 50 basis points. The Fund’s four best sectors in terms of attribution were consumer staples, technology, industrials and energy, while the worst performing sector was consumer discretionary.

Outlook

 

 

Over the past fiscal year, two factors have played a major role in the more defensive posturing of the Fund. First, the continued strengthening of the U.S. dollar perpetuated a negative feedback loop that had a destabilizing effect on the market. The strong dollar pressured commodities, which pressured credit markets (high yield bonds have a considerable amount of commodity exposure), and pressured emerging markets (not only do many emerging market countries have exposure to U.S. dollar-denominated debt, but many are huge commodity exporters). Second, the precipitous fall in energy prices, while clearly benefiting the consumer, was more destabilizing to markets and economies than the consumer benefit.

Over the past few months these risk factors have somewhat subsided, which has made us rethink our allocations within the Fund. In the case of the strengthening U.S. dollar, it seems that the Federal Reserve (Fed) more clearly recognizes the damage caused by this factor and it has taken a more dovish route. While the Fed clearly can change directions, this appears to us as something that will stick around for some time as implications from troubles in emerging markets seems greater than getting behind on attacking inflationary pressures (which don’t seem to even exist at the moment). As far as oil is concerned, it finally seems like the supply correction brought upon by the massive price drop has led to some price stabilization (the U.S. dollar cooling off also helps). Since we believe we now have greater clarity on both of these issues and both appear to have directionally improved, we have become less defensive in our portfolio construction. Overall, we believe that these new dynamics should be positive for stocks in general and in particular for some of the market sectors that have been under tremendous pressure for a number of quarters.

Within the Fund, we have added some cyclicality (energy, materials and industrials, more specifically with focus on gaining great exposure to areas that would benefit from a flat to weakening U.S. dollar), and we took some profits in some defensive areas where we had been considerably overweight (predominantly consumer staples). In addition, due to the most recent communications from the Fed and recognizing that there are negative interest rates in numerous parts of the world, we more firmly believe that interest rates will be lower for longer in the U.S. and therefore have trimmed some bank exposure while adding to real estate investment trusts.

 

186   ANNUAL REPORT   2016  

Table of Contents

 

 

Independent of this tweak to our macro assessment, we remain committed to bottom-up analysis first and foremost. Focusing on identifying what we think are quality undervalued companies over time is designed to serve our clients’ best interests, and therefore continues to garner our greatest attention. We are confident in our process and are looking forward to see what the next fiscal year yields.

Performance shown at NAV does not include the effects of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is no guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

Investing in small-cap stocks may carry more risk than investing in stocks of larger, more established companies. Value stocks are stocks of companies that may have experienced adverse business or industry developments, or may be subject to special risks that have caused the stocks to be out of favor and, in the opinion of the Fund’s manager, undervalued. The value of a security believed by the Fund’s manager to be undervalued may never reach what the manager believes to be its full value, or such security’s value may decrease. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the Fund’s portfolio manager and are current only through the end of the period of the report as stated on the cover. The portfolio manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged, includes reinvested dividends and does not include fees. One cannot invest directly in an index, nor is an index representative of the Ivy Small Cap Value Fund.

 

  2016   ANNUAL REPORT   187

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Small Cap Value Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      97.5%   

Financials

      22.4%   

Industrials

      19.8%   

Information Technology

      15.1%   

Materials

      12.7%   

Consumer Discretionary

      8.1%   

Consumer Staples

      6.2%   

Utilities

      6.1%   

Energy

      5.0%   

Health Care

      2.1%   

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

      2.5%   

Lipper Rankings

 

 

 

Category: Lipper Small-Cap Value Funds    Rank    Percentile

1 Year

    101/309    33

3 Year

    125/263    48

5 Year

    152/227    67

10 Year

    68/145    47

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

 

 

Top 10 Equity Holdings

 

 

 

Company    Sector      Industry

Take-Two Interactive Software, Inc.

   

Information Technology

     

Home Entertainment Software

Monro Muffler Brake, Inc.

   

Consumer Discretionary

     

Automotive Retail

Webster Financial Corp.

   

Financials

     

Regional Banks

BankUnited, Inc.

   

Financials

     

Regional Banks

Great Plains Energy, Inc.

   

Utilities

     

Electric Utilities

Scotts Miracle-Gro Co. (The)

   

Materials

     

Fertilizers & Agricultural Chemicals

Smart & Final Stores, Inc.

   

Consumer Staples

     

Food Retail

Reinsurance Group of America, Inc.

   

Financials

     

Reinsurance

Woodward, Inc.

   

Industrials

     

Industrial Machinery

Beacon Roofing Supply, Inc.

   

Industrials

     

Trading Companies & Distributors

See your advisor or www.ivyfunds.com for more information on the Fund’s most recently published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

188   ANNUAL REPORT   2016  

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Small Cap Value Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)   Class A(3)     Class B(4)     Class C     Class E(5)     Class I     Class R     Class R6     Class Y  

1-year period ended 3-31-16

     -10.59%        -9.17%        -5.77%        -10.25%        -4.71%        -5.24%        -4.52%        -4.92%   

5-year period ended 3-31-16

     4.69%        4.74%        5.20%        5.10%        6.46%        —           —           6.18%   

10-year period ended 3-31-16

     4.91%        4.60%        4.75%        —           —           —           —           5.86%   

Since Inception of Class through 3-31-16(6)

     —           —           —           5.00%        5.87%        10.02%        1.96%        —      

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) Class E shares are not currently available for investment.

 

(6) 4-2-07 for Class E shares, 4-2-07 for Class I shares, 12-19-12 for Class R shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

  2016   ANNUAL REPORT   189

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Small Cap Value Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Consumer Discretionary

  

 

Automotive Retail – 4.4%

  

Monro Muffler Brake, Inc.

     155      $ 11,049   
   

 

 

  
 

Movies & Entertainment – 2.7%

  

AMC Entertainment Holdings, Inc., Class A

     138        3,874   

Carmike Cinemas, Inc. (A)

     92        2,757   
   

 

 

  
      6,631   
   

 

 

  
 

Restaurants – 1.0%

  

Cheesecake Factory, Inc. (The)

     47        2,480   
   

 

 

  
 

Total Consumer
Discretionary – 8.1%

   

     20,160   

Consumer Staples

  

 

Food Retail – 2.8%

  

Smart & Final Stores,
Inc. (A)

     425        6,886   
   

 

 

  
 

Packaged Foods & Meats – 3.4%

  

Pinnacle Foods, Inc.

     55        2,440   

TreeHouse Foods, Inc. (A)

     70        6,055   
   

 

 

  
      8,495   
   

 

 

  
 

Total Consumer Staples – 6.2%

  

     15,381   

Energy

  

 

Oil & Gas Equipment & Services – 1.0%

  

U.S. Silica Holdings, Inc.

     110        2,506   
   

 

 

  
 

Oil & Gas Exploration & Production – 4.0%

  

EnCana Corp.

     206        1,255   

Laredo Petroleum Holdings, Inc. (A)

     804        6,372   

Parsley Energy, Inc.,
Class A (A)

     51        1,161   

Whiting Petroleum
Corp. (A)

     133        1,064   
   

 

 

  
      9,852   
   

 

 

  
 

Total Energy – 5.0%

  

     12,358   

Financials

  

 

Hotel & Resort REITs – 0.9%

  

Pebblebrook Hotel Trust

     77        2,227   
   

 

 

  
 

Office REITs – 2.5%

  

Highwoods Properties, Inc.

     96        4,609   

Mack-Cali Realty Corp.

     71        1,668   
   

 

 

  
      6,277   
   

 

 

  
 

Property & Casualty Insurance – 1.3%

  

Argo Group International Holdings Ltd.

     57        3,279   
   

 

 

  
COMMON STOCKS
(Continued)		   Shares     Value  

Regional Banks – 10.0%

  

BankUnited, Inc.

     274      $ 9,426   

PrivateBancorp, Inc.

     38        1,451   

Synovus Financial Corp.

     64        1,847   

Webster Financial Corp.

     268        9,607   

Western Alliance Bancorporation (A)

     72        2,414   
   

 

 

  
      24,745   
   

 

 

  
 

Reinsurance – 4.1%

  

Endurance Specialty Holdings Ltd.

     53        3,476   

Reinsurance Group of America, Inc.

     70        6,709   
   

 

 

  
      10,185   
   

 

 

  
 

Retail REITs – 2.1%

  

Kite Realty Group Trust

     187        5,173   
   

 

 

  
 

Specialized REITs – 1.5%

  

Entertainment Properties Trust

     57        3,764   
   

 

 

  
 

Total Financials – 22.4%

  

     55,650   

Health Care

  

 

Health Care Facilities – 2.1%

  

LifePoint Health, Inc. (A)

     74        5,090   
   

 

 

  
 

Total Health Care – 2.1%

  

     5,090   

Industrials

  

 

Aerospace & Defense – 2.0%

  

Hexcel Corp.

     113        4,939   
   

 

 

  
 

Building Products – 2.1%

  

Continental Building Products, Inc. (A)

     282        5,235   
   

 

 

  
 

Commercial Printing – 1.3%

  

Deluxe Corp.

     53        3,318   
   

 

 

  
 

Construction Machinery & Heavy
Trucks – 1.5%

   

Manitowoc Co., Inc. (The)

     381        1,649   

Manitowoc Co., Inc.
(The) (A)

     137        2,019   
   

 

 

  
      3,668   
   

 

 

  
 

Diversified Support Services – 1.1%

  

G&K Services, Inc. (A)

     39        2,864   
   

 

 

  
COMMON STOCKS
(Continued)		   Shares     Value  

Heavy Electrical Equipment – 0.8%

  

Babcock & Wilcox Enterprises, Inc. (A)

     89      $ 1,903   
   

 

 

  
 

Industrial Machinery – 2.7%

  

Woodward, Inc.

     128        6,674   
   

 

 

  
 

Marine – 1.6%

  

Kirby Corp. (A)

     66        3,979   
   

 

 

  
 

Office Services & Supplies – 1.3%

  

Avery Dennison Corp.

     45        3,225   
   

 

 

  
 

Trading Companies & Distributors – 2.7%

  

Beacon Roofing Supply,
Inc. (A)

     162        6,648   
   

 

 

  
 

Trucking – 2.7%

  

Marten Transport Ltd.

     105        1,971   

Swift Transportation Co.(A)

     90        1,671   

YRC Worldwide, Inc. (A)

     331        3,081   
   

 

 

  
      6,723   
   

 

 

  
 

Total Industrials – 19.8%

  

     49,176   

Information Technology

  

 

Communications Equipment – 0.8%

  

Bookham, Inc. (A)

     350        1,889   
   

 

 

  
 

Data Processing & Outsourced
Services – 1.5%

   

Wright Express Corp. (A)

     45        3,777   
   

 

 

  
 

Home Entertainment Software – 4.6%

  

Take-Two Interactive Software, Inc. (A)

     306        11,531   
   

 

 

  
 

IT Consulting & Other Services – 3.2%

  

Computer Sciences Corp.

     88        3,026   

Science Applications International Corp.

     90        4,806   
   

 

 

  
      7,832   
   

 

 

  
 

Semiconductor Equipment – 1.5%

  

Teradyne, Inc.

     176        3,791   
   

 

 

  
 

Semiconductors – 2.8%

  

Cypress Semiconductor Corp.

     408        3,537   

Fairchild Semiconductor International, Inc. (A)

     175        3,494   
   

 

 

  
      7,031   
   

 

 

  
 

Technology Distributors – 0.7%

  

Ingram Micro, Inc.,
Class A

     48        1,734   
   

 

 

  
 

Total Information
Technology – 15.1%

   

     37,585   
 

 

190   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Small Cap Value Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS
(Continued)		   Shares     Value  

Materials

  

 

Aluminum – 2.4%

  

Kaiser Aluminum Corp.

     72      $ 6,045   
   

 

 

  
 

Commodity Chemicals – 2.5%

  

Axiall Corp.

     287        6,270   
   

 

 

  
 

Fertilizers & Agricultural Chemicals – 3.0%

  

Scotts Miracle-Gro Co. (The)

     101        7,321   
   

 

 

  
 

Gold – 1.7%

  

Kinross Gold Corp. (A)

     1,249        4,248   
   

 

 

  
 

Specialty Chemicals – 3.1%

  

Flotek Industries, Inc. (A)

     374        2,743   

H.B. Fuller Co.

     13        552   

PolyOne Corp.

     143        4,325   
   

 

 

  
      7,620   
   

 

 

  
 

Total Materials – 12.7%

  

     31,504   

Utilities

  

 

Electric Utilities – 4.3%

  

Great Plains Energy, Inc.

     289        9,323   

Portland General
Electric Co.

     31        1,240   
   

 

 

  
      10,563   
   

 

 

  
COMMON STOCKS
(Continued)		   Shares     Value  

Gas Utilities – 1.8%

  

Southwest Gas Corp.

     70      $ 4,594   
   

 

 

  
 

Total Utilities – 6.1%

  

     15,157   
 

TOTAL COMMON STOCKS – 97.5%

   

   $ 242,061   

(Cost: $214,955)

      
 
SHORT-TERM
SECURITIES		   Principal         

Commercial Paper(B) – 3.5%

  

NBCUniversal Enterprise, Inc.,

      

0.650%, 4-7-16

   $ 2,500        2,500   

St. Jude Medical, Inc.,

      

0.720%, 4-1-16

     2,134        2,134   

Wisconsin Gas LLC,

      

0.380%, 4-4-16

     4,000        4,000   
   

 

 

  
      8,634   
   

 

 

  
SHORT-TERM
SECURITIES
(Continued)		   Principal     Value  

Master Note – 0.1%

  

Toyota Motor Credit Corp.,

      

0.443%, 4-6-16 (C)

   $ 177      $ 177   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 3.6%

   

   $ 8,811   

(Cost: $8,811)

      
 

TOTAL INVESTMENT SECURITIES – 101.1%

   

   $ 250,872   

(Cost: $223,766)

      
 

LIABILITIES, NET OF CASH AND OTHER
ASSETS – (1.1)%

    

     (2,612 ) 
 

NET ASSETS – 100.0%

  

   $ 248,260   
 

 

Notes to Schedule of Investments

 

(A) No dividends were paid during the preceding 12 months.

 

(B) Rate shown is the yield to maturity at March 31, 2016.

 

(C) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  
       

Assets

        

Investments in Securities

        

Common Stocks

   $ 242,061       $ —       $ —   

Short-Term Securities

     —         8,811         —   

Total

   $ 242,061       $ 8,811       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

The following acronym is used throughout this schedule:

REIT = Real Estate Investment Trust

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   191

Table of Contents

MANAGEMENT DISCUSSION

Ivy Tax-Managed Equity Fund

(UNAUDITED)

 

 

 

LOGO

Bradley M. Klapmeyer

Below, Bradley M. Klapmeyer, CFA, portfolio manager of Ivy Tax-Managed Equity Fund, discusses positioning, performance and results for the fiscal year ended March 31, 2016. He has managed the Fund since 2014 and has 16 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy Tax-Managed Equity Fund (Class A shares at net asset value)

      –1.51%   

Ivy Tax-Managed Equity Fund (Class A shares including sales charges)

      –7.18%   

Benchmark(s) and/or Lipper Category

         

Russell 1000 Growth Index

      2.52%   

(generally reflects the performance of securities that represent the large-cap growth market)

         

Lipper Large-Cap Growth Funds Universe Average

      –1.43%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

 

Market conditions

 

 

Relative to prior years, the Russell 1000 Growth Index, the Fund’s benchmark, recorded a modest gain for the fiscal year ended March 31, 2016. However, a slight positive return does not fully explain what it was a very volatile year in equities. In addition, at several points during the period, the benchmark index was down nearly double digits, reflecting points of great stress and building fear. There were two material sell-offs during the fiscal year; both were driven by a combination of weakening commodity prices, slowing global economic growth, particularly fears related to decelerating growth in China, soft U.S. economic growth, and fears around Federal Reserve (“Fed”) policy mistakes. Notably, we believe many of these concerns still exist.

Although the Fed was a source of market fear from time to time, with concerns that interest rates would rise too quickly, it was ultimately the Fed’s policy decision, or withdrawal from raising rates, that worked to appease investors and drive a rebound in equities. We find this interplay between the Fed and reversals in equity performance discomforting.

We believe that the U.S. remains the bastion of hope (and growth) within an uncertain global macro environment. Investors continue to hold a more favorable view on the prospects for the U.S. economy and focus mainly on the positive indicators at work in the U.S. such as employment gains, a strong consumer base and low interest rates. However, these positive indicators should be balanced by manufacturing data that has been less favorable and small signals that the downshift in energy investments is rippling into the manufacturing economy.

Looking at the return of the index, factor performance shows that return on equity, dividend yield and dividend growth and free cash flow yield were key variables in driving performance during the fiscal year. This implies that the market was directing investments toward the perceived safe stocks with dividend and cash flow as the screen. Growth factors were out of favor with estimate revisions, beta, 5-year earnings per share growth and momentum characteristics all generating large negative returns.

Strategies employed, contributors and detractors

 

 

Performance for the Fund was underwhelming for the fiscal year as the Fund underperformed its benchmark. Despite the recent underperformance, the Fund’s philosophy has remained consistent — a process that seeks to identify structurally advantaged companies that can generate superior levels of profitability and growth over time. We believe that in many cases, short-term dislocations and volatility provided by macro uncertainty offer a favorable entry point for structurally advantaged businesses. The process tends to appreciate the near-term nuances but tends to stress the importance of getting the maturity value correct and taking advantage of periodic dislocations.

In terms of performance attribution, the Fund’s underperformance was largely driven by the health care sector, both in terms of an overweight position and unfavorable stock selection. Security selection in telecommunications and consumer staples were other factors that contributed to unfavorable relative performance.

Health care was by far the biggest negative contributor to the Fund’s relative performance during the measurement period. There have been several favorable tailwinds benefiting the health care sector over the past several years including exceptional innovation, strong commercial launches, a supportive Food and Drug Administration (“FDA”) and access to cheap funding. Many of these variables remained in place during the measurement period. We believe there was a significant change in terms of perceived risk as a result of the U.S. government’s enactment of regulations to curb drug price increases as well as its attempt to end inversions, a practice whereby companies look to domicile outside the U.S. in jurisdictions with lower tax rates. The introduction of these variables deflated the health care sector multiple fairly rapidly despite the reality that there were no material changes in near-term fundamentals.

In additional to macro health care pressures, there were also stock specific performance issues for the Fund. Shire Pharmaceuticals announced the acquisition of Baxalta, which became a debated deal. A request from PTC Therapeutics to the FDA for review of its Duchenne muscular dystrophy

 

192   ANNUAL REPORT   2016  

Table of Contents

 

 

drug was rejected. Aratana Therapeutics (no longer a Fund holding) announced delays to the timing of its commercialization efforts in the companion animal therapeutics space. Layered on top of these company-specific issues was general negative sentiment for health care sector, and these company-specific disappointments only compounded the underperformance.

The consumer discretionary and technology sectors provided positive attribution, although not material enough to overcome the underperformance in health care. In the consumer discretionary sector, a significant overweight in Amazon.com and a new position in Lululemon helped contribute positively to the Fund’s return. Amazon.com’s performance during the fiscal year was exceptional and driven by much needed improvements in margins and additional disclosures that illustrated the growth and margin potential of its cloud computing business. In technology, positive contribution was generated by an overweight position in growers, such as Adobe, Facebook and salesforce.com, and an underweight position in Apple, a non-grower.

Outlook and positioning

 

 

Many of the issues from the prior reporting period remain as we enter the next fiscal year, including global growth instability and the timing of the Fed’s move to a “less accommodative” fiscal policy. The latter issue has now evolved into concern over the “pace” at which the Fed will increase interest rates. Although we believe that the tone should generally remain positive regarding sustainable growth out of the U.S. economy, we believe growth will be in the 2.5%-3.0% range; however, an economy rarely perpetually stays at 2.5% growth, instead either moving into stronger growth territory or heading toward recessionary levels. We believe the direction of the U.S. economy will become a larger focal point in the coming fiscal period.

Global macro indicators remained weak during the fiscal period, although the latest rounds of weak data now include a notable deceleration in the growth rate in China and other emerging economies. As per the recent playbook, central banks around the world continue to ease monetary policy by creating liquidity and devaluing their currencies in an attempt to fuel economic growth. Thus far, the easing monetary policy in the U.S., and one could argue thus far in Europe and Japan, has been an exercise of “pushing on a string.” Furthermore, easing monetary policy to stimulate economies has created an environment in which countries are fighting for currency devaluation in order to import growth. We think the global set-up remains tenuous and complicated.

We noted in the past our belief that the U.S. was being viewed as a temporary bastion of growth, but the question remains whether U.S. economic growth is perpetually sustainable at 2.5% and whether a better global macro backdrop is necessary to kick start the next growth cycle. A possible explanation for the market’s sudden appetite change for risk exposure is that the U.S. economy continues to walk the line of slow growth, neither tipping toward strong growth nor recessionary territory, but investors fear they will miss either trade. With this view investors quickly flip from risk-on to risk-off without any real discernment of fundamentals. Instead investors focus on market characteristics or factors such as growth, value, beta and dividend yield when deciding the next course of action.

Although the first interest rate increase is in the rearview, the market now appears concerned over how quickly the Fed is going to move rates higher. The markets are concerned because low rates have provided liquidity, which in turn has supported asset prices and possibly the current modest growth in the U.S. economy. We believe that investors’ myopic focus on interest policy continues to validate how the market lacks conviction in sustainable U.S. economic growth and illustrates the fragility of global growth. Furthermore, market performance remains highly dependent on the Fed’s interest rate policy.

The Fund’s positioning for the coming fiscal year will focus more so on taking advantage of these sudden swings in risk appetite and more proactively adding exposure to long-term investments as factor divergences occur versus actual fundamentals changes. There will be no change in the Fund’s strategy of seeking to find the subset of companies with strong business models that we believe also have maturity values materially higher than current levels. This type of investment philosophy seeks longer holding periods and lower turnover. Within this approach, the Fund will attempt to minimize taxable gains and income to shareholders. Thank you for your continued confidence and support.

Performance shown at NAV does not include the effects of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment. Tax-management strategies may alter investment decisions and affect portfolio holdings, when compared to those of non-tax-managed mutual funds. Market conditions may limit the Fund’s ability to generate tax losses or to generate dividend income taxed at favorable Federal income tax rates. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the Fund’s portfolio manager and are current only through the end of the period of the report as stated on the cover. The manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged, includes reinvested dividends and does not include fees. One cannot invest directly in an index, nor is an index representative of the Ivy Tax-Managed Equity Fund’s performance.

 

  2016   ANNUAL REPORT   193

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Tax-Managed Equity Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      94.4%   

Information Technology

      29.1%   

Health Care

      21.2%   

Consumer Discretionary

      20.3%   

Industrials

      10.8%   

Consumer Staples

      7.9%   

Energy

      3.1%   

Telecommunication Services

      2.0%   

Cash and Other Assets (Net of Liabilities),
and Cash Equivalents+

      5.6%   

Lipper Rankings

 

 

 

Category: Lipper Large-Cap Growth
Funds		    Rank      Percentile

1 Year

    362/663      55

3 Year

    264/611      44

5 Year

    266/540      50

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

 

 

Top 10 Equity Holdings

 

 

 

Company    Sector      Industry

Amazon.com, Inc.

   

Consumer Discretionary

     

Internet Retail

Allergan plc

   

Health Care

     

Pharmaceuticals

Apple, Inc.

   

Information Technology

     

Technology Hardware, Storage & Peripherals

Alphabet, Inc., Class A

   

Information Technology

     

Internet Software & Services

Facebook, Inc., Class A

   

Information Technology

     

Internet Software & Services

salesforce.com, Inc.

   

Information Technology

     

Application Software

Shire Pharmaceuticals Group plc ADR

   

Health Care

     

Pharmaceuticals

Adobe Systems, Inc.

   

Information Technology

     

Application Software

J.B. Hunt Transport Services, Inc.

   

Industrials

     

Trucking

Visa, Inc., Class A

   

Information Technology

     

Data Processing & Outsourced Services

See your advisor or www.ivyfunds.com for more information on the Fund’s most recently published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

194   ANNUAL REPORT   2016  

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Tax-Managed Equity Fund

(UNAUDITED)

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class A(3)      Class B(4)      Class C      Class I(5)      Class Y(6)  

1-year period ended 3-31-16

      -7.18%         -6.09%         -2.30%         -1.32%         -1.50%   

5-year period ended 3-31-16

      9.25%         9.71%         9.78%         10.72%         10.60%   

10-year period ended 3-31-16

      —            —            —            7.63%         —      

Since Inception of Class through 3-31-16(7)

      12.11%         12.37%         12.32%         —            13.12%   

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) The Class Y shares of Waddell & Reed Advisors Tax-Managed Equity Fund were reorganized as the Class I shares of Ivy Tax-Managed Equity Fund on May 18, 2009. The performance shown for periods prior to this date is that of the Class Y shares of Waddell & Reed Advisors Tax-Managed Equity Fund. Performance has not been restated to reflect the estimated annual operating expenses of the Ivy Tax-Managed Equity Fund. If those expenses were reflected, performance shown would differ.

 

(6) The return shown for Class Y is hypothetical because there were no shares or assets for the period from July 28, 2009 through October 7, 2009. Class A data has been substituted for Class Y data during that period.

 

(7) 5-18-09 for Class A shares, 5-18-09 for Class B shares, 5-18-09 for Class C shares and 5-18-09 for Class Y shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

  2016   ANNUAL REPORT   195

Table of Contents

BEFORE – AND AFTER – TAX RETURNS

Ivy Tax-Managed Equity Fund

(UNAUDITED)

 

 

 

 

Before- and After-Tax Returns(1)     

1-year

period ended

3-31-16

       

5-year

period ended

3-31-16

       

10-year

period ended

3-31-16

       

Since inception of
Class through

3-31-16(2)

  

Class A(3)

  

Before Taxes

        -7.18%           9.25%           —              12.11%   

After Taxes on Distributions

        -7.57%           8.89%           —              11.84%   

After Taxes on Distributions and Sale of Fund Shares

        -3.71% (4)         7.30%           —              9.85%   

Class B(5)

  

Before Taxes

        -6.09%           9.71%           —              12.37%   

After Taxes on Distributions

        -6.45%           9.38%           —              12.13%   

After Taxes on Distributions and Sale of Fund Shares

        -3.13% (4)         7.69%           —              10.08%   

Class C

  

Before Taxes

        -2.30%           9.78%           —              12.32%   

After Taxes on Distributions

        -2.66%           9.45%           —              12.08%   

After Taxes on Distributions and Sale of Fund Shares

        -0.98% (4)         7.74%           —              10.04%   

Class I(6)

  

Before Taxes

        -1.32%           10.72%           7.63%           —      

After Taxes on Distributions

        -1.79%           10.34%           7.44%           —      

After Taxes on Distributions and Sale of Fund Shares

        -0.33% (4)         8.52%           6.20%           —      

Class Y(7)

  

Before Taxes

        -1.50%           10.60%           —              13.12%   

After Taxes on Distributions

        -1.92%           10.23%           —              12.85%   

After Taxes on Distributions and Sale of Fund Shares

        -0.48% (4)         8.41%           —              10.73%   

Russell 1000 Growth Index

        2.52%           12.38%           8.28%           16.27%   

 

(1) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I and Class Y shares are not subject to sales charges.

 

(2) 5-18-09 for Class A shares, 5-18-09 for Class B shares, 5-18-09 for Class C shares and 5-18-09 for Class Y shares (the date on which shares were first acquired by shareholders).

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) After-tax returns may be better than before-tax returns due to an assumed tax benefit from losses on a sale of the Fund’s shares at the end of the period.

 

(5) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(6) The Class Y shares of Waddell & Reed Advisors Tax-Managed Equity Fund were reorganized as the Class I shares of Ivy Tax-Managed Equity Fund on May 18, 2009. The performance shown for periods prior to this date is that of the Class Y shares of Waddell & Reed Advisors Tax-Managed Equity Fund. Performance has not been restated to reflect the estimated annual operating expenses of the Ivy Tax-Managed Equity Fund. If those expenses were reflected, performance shown would differ.

 

(7) The return shown for Class Y is hypothetical because there were no shares or assets for the period from July 28, 2009 through October 7, 2009. Class A data has been substituted for Class Y data during that period.

The table above shows average annual returns on a before-tax and after-tax basis. Returns Before Taxes shows the actual change in the value of the Fund shares over the periods shown, but does not reflect the impact of taxes on Fund distributions or the sale of Fund shares. The two after-tax returns take into account taxes that may be associated with owning Fund shares. Returns After Taxes on Distributions is the Fund’s actual performance, adjusted by the effect of taxes on distributions made by the Fund during the period shown. Returns After Taxes on Distributions and Sale of Fund Shares is further adjusted to reflect the tax impact on any change in the value of Fund shares as if they had been sold on the last day of the period.

After-tax returns are calculated using the historical highest individual Federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts, or to shares held by non-taxable entities.

 

196   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Tax-Managed Equity Fund (in thousands)

MARCH 31, 2016

 

 

 

 

COMMON STOCKS   Shares     Value  

Consumer Discretionary

  

 

Apparel Retail – 1.4%

  

Limited Brands, Inc.

     19      $ 1,637   
   

 

 

  
 

Apparel, Accessories & Luxury Goods – 1.8%

  

lululemon athletica, Inc. (A)

     33        2,206   
   

 

 

  
 

Cable & Satellite – 4.2%

  

Comcast Corp., Class A

     39        2,360   

Time Warner Cable, Inc.

     13        2,643   
   

 

 

  
      5,003   
   

 

 

  
 

Footwear – 1.4%

  

NIKE, Inc., Class B

     27        1,676   
   

 

 

  
 

Hotels, Resorts & Cruise Lines – 1.0%

  

Hilton Worldwide Holdings, Inc.

     53        1,185   
   

 

 

  
 

Internet Retail – 7.4%

  

Amazon.com, Inc. (A)

     9        5,388   

priceline.com, Inc. (A)

     1        1,873   

TripAdvisor, Inc. (A)

     25        1,652   
   

 

 

  
      8,913   
   

 

 

  
 

Leisure Products – 0.6%

  

Polaris Industries, Inc.

     7        665   
   

 

 

  
 

Restaurants – 2.5%

  

Panera Bread Co., Class A (A)

     14        2,960   
   

 

 

  
 

Total Consumer
Discretionary – 20.3%

   

     24,245   

Consumer Staples

  

 

Brewers – 1.1%

  

Anheuser-Busch InBev S.A. ADR

     11        1,355   
   

 

 

  
 

Food Retail – 1.1%

  

Casey’s General Stores, Inc.

     11        1,268   
   

 

 

  

Hypermarkets & Super Centers – 1.2%

  

Costco Wholesale Corp.

     9        1,371   
   

 

 

  
 

Packaged Foods & Meats – 2.5%

  

Blue Buffalo Pet Products, Inc. (A)

     65        1,665   

Mead Johnson Nutrition Co.

     15        1,297   
   

 

 

  
      2,962   
   

 

 

  
 

Personal Products – 1.1%

  

Estee Lauder Co., Inc. (The), Class A

     14        1,365   
   

 

 

  
COMMON STOCKS
(Continued)		   Shares     Value  

Tobacco – 0.9%

  

Philip Morris International, Inc.

     11      $ 1,077   
   

 

 

  
 

Total Consumer Staples – 7.9%

  

     9,398   

Energy

  

 

Oil & Gas Equipment & Services – 3.1%

  

Halliburton Co.

     64        2,298   

Schlumberger Ltd.

     19        1,417   
   

 

 

  
      3,715   
   

 

 

  
 

Total Energy – 3.1%

  

     3,715   

Health Care

  

 

Biotechnology – 7.5%

  

ACADIA Pharmaceuticals, Inc. (A)

     47        1,312   

Alexion Pharmaceuticals, Inc. (A)

     17        2,426   

Biogen, Inc. (A)

     4        1,082   

Gilead Sciences, Inc.

     16        1,454   

Incyte Corp. (A)

     19        1,387   

PTC Therapeutics, Inc. (A)

     32        204   

Vertex Pharmaceuticals, Inc. (A)

     14        1,091   
   

 

 

  
      8,956   
   

 

 

  
 

Health Care Equipment – 0.8%

  

DexCom, Inc. (A)

     14        958   
   

 

 

  
 

Health Care Facilities – 1.0%

  

HCA Holdings, Inc. (A)

     16        1,242   
   

 

 

  
 

Pharmaceuticals – 11.9%

  

Allergan plc (A)

     18        4,917   

Bristol-Myers Squibb Co.

     38        2,457   

Shire Pharmaceuticals Group plc ADR

     24        4,098   

Teva Pharmaceutical Industries Ltd. ADR

     52        2,784   
   

 

 

  
      14,256   
   

 

 

  
 

Total Health Care – 21.2%

  

     25,412   

Industrials

  

 

Aerospace & Defense – 2.5%

  

Boeing Co. (The)

     17        2,179   

Raytheon Co.

     7        815   
   

 

 

  
      2,994   
   

 

 

  
 

Railroads – 3.2%

  

Kansas City Southern

     20        1,679   

Union Pacific Corp.

     26        2,104   
   

 

 

  
      3,783   
   

 

 

  
COMMON STOCKS
(Continued)		   Shares     Value  

Research & Consulting Services – 2.4%

  

Verisk Analytics, Inc., Class A (A)

     36      $ 2,871   
   

 

 

  
 

Trucking – 2.7%

  

J.B. Hunt Transport Services, Inc.

     38        3,210   
   

 

 

  
 

Total Industrials – 10.8%

  

     12,858   

Information Technology

  

 

Application Software – 6.3%

  

Adobe Systems, Inc. (A)

     36        3,398   

salesforce.com, Inc. (A)

     56        4,111   
   

 

 

  
      7,509   
   

 

 

  
 

Data Processing & Outsourced
Services – 9.3%

   

Alliance Data Systems Corp. (A)

     14        3,036   

FleetCor Technologies, Inc. (A)

     15        2,245   

MasterCard, Inc., Class A

     29        2,766   

Visa, Inc., Class A

     41        3,122   
   

 

 

  
      11,169   
   

 

 

  
 

Internet Software & Services – 8.2%

  

Alphabet, Inc., Class A (A)

     6        4,227   

Alphabet, Inc., Class C (A)

     2        1,383   

Facebook, Inc., Class A (A)

     37        4,216   
   

 

 

  
      9,826   
   

 

 

  
 

IT Consulting & Other Services – 1.6%

  

Cognizant Technology Solutions Corp., Class A (A)

     30        1,859   
   

 

 

  
 

Technology Hardware, Storage &
Peripherals – 3.7%

   

Apple, Inc.

     41        4,472   
   

 

 

  
 

Total Information
Technology – 29.1%

   

     34,835   

Telecommunication Services

  

 

Wireless Telecommunication Service – 2.0%

  

SBA Communications Corp. (A)

     24        2,391   
   

 

 

  
 

Total Telecommunication Services – 2.0%

   

     2,391   
 

TOTAL COMMON STOCKS – 94.4%

           $ 112,854   

(Cost: $97,686)

  

 

 

  2016   ANNUAL REPORT   197

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Tax-Managed Equity Fund (in thousands)

MARCH 31, 2016

 

 

 

SHORT-TERM
SECURITIES		   Principal     Value  

Commercial Paper (B) – 2.5%

  

United Technologies Corp.,

      

0.470%, 4-13-16

   $ 3,000      $ 2,999   
   

 

 

  
 

Master Note – 2.8%

  

Toyota Motor Credit Corp.,

      

0.443%, 4-6-16 (C)

     3,332        3,332   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 5.3%

           $ 6,331   

(Cost: $6,331)

      
 

TOTAL INVESTMENT SECURITIES – 99.7%

   

   $ 119,185   

(Cost: $104,017)

      
 

CASH AND OTHER ASSETS, NET OF LIABILITIES – 0.3%

   

     387   
 

NET ASSETS – 100.0%

  

   $ 119,572   
 

 

Notes to Schedule of Investments

 

(A) No dividends were paid during the preceding 12 months.

 

(B) Rate shown is the yield to maturity at March 31, 2016.

 

(C) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  
       

Assets

        

Investments in Securities

        

Common Stocks

   $ 112,854       $ —       $ —   

Short-Term Securities

     —         6,331         —   

Total

   $ 112,854       $ 6,331       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

The following acronym is used throughout this schedule:

ADR = American Depositary Receipts

 

See Accompanying Notes to Financial Statements.

 

198   ANNUAL REPORT   2016  

Table of Contents

MANAGEMENT DISCUSSION

Ivy Value Fund

(UNAUDITED)

 

 

 

LOGO

Matthew T. Norris

Below, Matthew T. Norris, CFA, portfolio manager of Ivy Value Fund, discusses positioning, performance and results for the fiscal year ended March 31, 2016. He has managed the Fund since inception and has 24 years of industry experience.

Fiscal Year Performance

 

 

 

For the 12 Months Ended March 31, 2016

         

Ivy Value Fund (Class A shares at net asset value)

      –4.60%   

Ivy Value Fund (Class A shares including sales charges)

      –10.09%   

Benchmark(s) and/or Lipper Category

         

Russell 1000 Value Index

      –1.54%   

(generally reflects the performance of large-company value style stocks)

         

Lipper Large-Cap Value Funds Universe Average

      –3.68%   

(generally reflects the performance of the universe of funds with similar investment objectives)

         

Please note that Fund returns include applicable fees and expenses while index returns do not include any such fees. The performance discussion below is at net asset value.

 

Key drivers

 

 

The U.S. economy continues its slow growth pattern. Corporate earnings are strong with many companies at historically high margins and equities have roughly tripled from their low in March 2009. The Federal Reserve (Fed) has employed many forms of loose monetary policy to stimulate this recovery, and now that approach is changing. The Fed raised interest rates in December 2015, and rates are expected to rise once or twice during 2016. This is not a response to fight inflation, which remains low, but rather a plan to “normalize” rates at some level higher than zero. Heightened volatility is anticipated around these interest rate increases, as the market debates the ultimate impact.

Contributors and detractors

 

 

The Fund underperformed the Russell 1000 Value Index, its benchmark, for the year ended March 31, 2016. It was a poor 12-month period for value, with the index down 1.54%, compared to growth stocks, as measured by the Russell 1000 Growth Index, which rose 2.52%. This is the second year in a row that this trend has occurred. Although the timing is unknown, we believe that the cycle will eventually turn and that value investing will once again have its day in the sun.

The Fund’s underperformance during the period was due to a select number of individual holdings underperforming. The two worst performing holdings were in technology, with Micron Technology, Inc. and Western Digital Corp., falling sharply. Some may recall last year’s annual letter, in which we highlighted Sandisk’s poor performance and our reasons for continuing to hold the stock. Sandisk was acquired during this past fiscal year. It added a healthy return to the portfolio and the holding was subsequently sold. We continue to hold Micron and Western Digital because we believe our investment thesis is sound and that there will be an eventual redemption for these stocks.

While the Fund performed well in consumer staples and consumer cyclicals, the energy and industrials sectors were an outsized drag on performance. Examples of positive performers held by the Fund included Philip Morris International, Inc., Ingredion, Inc., Time Warner Cable, Inc. and Molson Coors Brewing Co.

Outlook

 

 

Last fiscal year we stated that caution was in order when it came to rising interest rates, and we warned shareholders not to expect the returns we had enjoyed in the past. This concern unfortunately turned out to be correct, with the S&P Index rising 1.78%. We remain cautiously constructive on the equity markets, especially with individual names we find compelling. The Fed’s tightening cycle is not to be taken lightly, and must be watched and anticipated carefully. Higher interest rates are historically not supportive of higher equity prices.

On a macro level, we would like to see a supportive backdrop with continued gross domestic product growth and lower unemployment. One potential risk is the volatility in oil prices, which makes it difficult for companies to budget long term. The upside of lower oil prices is that consumer’s should have more to spend on other goods and services.

Historically, the Fund has had a strong long-term performance record, but it has been affected by short term periods of volatility. As a as a long-term investor, we typically view these bouts of volatility as opportunities and not threats. The Fund will continue to seek to purchase what we believe are high-quality companies whose stock prices are below what we believe to be fair value to sell those same names when they reach what we believe to be appropriate valuation levels. We believe a bottom-up, company-by-company analysis can produce solid returns over the long haul.

Performance shown at NAV does not include the effects of sales charges. If reflected, the performance shown would have been lower. Performance including sales charges reflects the maximum applicable front-end sales load.

Past performance is no guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment.

 

  2016   ANNUAL REPORT   199

Table of Contents

MANAGEMENT DISCUSSION

Ivy Value Fund

(UNAUDITED)

 

 

 

Value stocks are stocks of companies that may have experienced adverse business or industry developments, or may be subject to special risks that have caused the stocks to be out of favor and, in the opinion of the Fund’s manager, undervalued. The value of a security believed by the Fund’s manager to be undervalued may never reach what the manager believes to be its full value, or such security’s value may decrease. These and other risks are more fully described in the Fund’s prospectus.

The opinions expressed in this report are those of the Fund’s portfolio manager and are current only through the end of the period of the report as stated on the cover. The manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged, includes reinvested dividends and does not include fees. One cannot invest directly in an index, nor is an index representative of the Ivy Value Fund.

 

200   ANNUAL REPORT   2016  

Table of Contents

PORTFOLIO HIGHLIGHTS

Ivy Value Fund

ALL DATA IS AS OF MARCH 31, 2016 (UNAUDITED)

 

 

 

Asset Allocation

 

 

 

Stocks

      92.2%   

Financials

      31.6%   

Health Care

      15.1%   

Consumer Discretionary

      12.2%   

Information Technology

      11.2%   

Consumer Staples

      7.2%   

Energy

      6.0%   

Utilities

      5.6%   

Materials

      3.3%   

Cash and Other Assets (Net of Liabilities),
and Cash Equivalents+

      7.8%   

Lipper Rankings

 

 

 

Category: Lipper Large-Cap Value Funds    Rank      Percentile

1 Year

    322/506      64

3 Year

    346/450      77

5 Year

    310/408      76

10 Year

    123/296      42

Past performance is no guarantee of future results. Rankings are for Class A shares and are based on average annual total returns, but do not consider sales charges. Rankings for other share classes may vary.

 

 

Top 10 Equity Holdings

 

 

 

Company    Sector      Industry

Citigroup, Inc.

   

Financials

     

Other Diversified Financial Services

Microsoft Corp.

   

Information Technology

     

Systems Software

JPMorgan Chase & Co.

   

Financials

     

Other Diversified Financial Services

Capital One Financial Corp.

   

Financials

     

Consumer Finance

American International Group, Inc.

   

Financials

     

Multi-Line Insurance

MetLife, Inc.

   

Financials

     

Life & Health Insurance

Dow Chemical Co. (The)

   

Materials

     

Diversified Chemicals

Allstate Corp. (The)

   

Financials

     

Property & Casualty Insurance

Duke Energy Corp.

   

Utilities

     

Electric Utilities

Teva Pharmaceutical Industries Ltd. ADR

   

Health Care

     

Pharmaceuticals

See your advisor or www.ivyfunds.com for more information on the Fund’s most recently published Top 10 Equity Holdings.

 

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

  2016   ANNUAL REPORT   201

Table of Contents

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT

Ivy Value Fund

(UNAUDITED)

 

 

 

 

LOGO

Please note that the performance of the Fund’s other share classes will be greater or less than the performance shown above for Class A based on the differences in loads and fees paid by shareholders investing in the different classes.

 

(1) The value of the investment in the Fund is impacted by the sales load at the time of the investment and by the ongoing expenses of the Fund and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)   Class A(3)     Class B(4)     Class C     Class E(5)     Class I     Class R     Class R6     Class Y  

1-year period ended 3-31-16

     -10.09 %      -8.88 %      -5.25 %      -9.83 %      -4.28 %      -4.82 %      -4.12 %      -4.51 % 

5-year period ended 3-31-16

     6.27 %      6.31 %      6.79 %      6.57 %      7.95 %      —        —        7.68 % 

10-year period ended 3-31-16

     4.73 %      4.34 %      4.52 %      —        —        —        —        5.57 % 

Since Inception of Class through 3-31-16(6)

     —        —        —        4.08 %      4.88 %      10.03 %      -1.49 %      —   

 

(2) Data quoted is past performance and is based on deduction of the maximum applicable sales load for each of the periods. Current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyfunds.com for the Fund’s most recent month end performance. Class A and Class E shares carry a maximum front-end sales load of 5.75%. Class B and Class C shares carry a maximum contingent deferred sales charge (CDSC) of 5% and 1%, respectively (the Class C shares reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase). Class I, Class R, Class R6 and Class Y shares are not subject to sales charges.

 

(3) Class A shares carry a CDSC on shares purchased at net asset value for $1 million or more that are subsequently redeemed within 12 months of purchase.

 

(4) Class B shares are not currently available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) Class E shares are not currently available for investment.

 

(6) 4-2-07 for Class E shares, 4-2-07 for Class I shares, 12-19-12 for Class R shares and 7-31-14 for Class R6 shares (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

202   ANNUAL REPORT   2016  

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Value Fund (in thousands)

MARCH 31, 2016

 

 

 

COMMON STOCKS   Shares     Value  

Consumer Discretionary

  

 

Cable & Satellite – 5.3%

  

Comcast Corp., Class A

     136      $ 8,283   

Time Warner Cable, Inc.(A)

     32        6,527   
   

 

 

  
      14,810   
   

 

 

  
 

Casinos & Gaming – 2.4%

  

Las Vegas Sands, Inc.(A)

     132        6,827   
   

 

 

  
 

Department Stores – 2.6%

  

Macy’s, Inc.

     162        7,142   
   

 

 

  
 

Housewares & Specialties – 1.9%

  

Newell Rubbermaid, Inc.

     122        5,390   
   

 

 

  
 

Total Consumer
Discretionary – 12.2%

   

     34,169   

Consumer Staples

  

 

Agricultural Products – 2.6%

  

Ingredion, Inc.

     67        7,144   
   

 

 

  
 

Drug Retail – 2.6%

  

CVS Caremark Corp.

     71        7,334   
   

 

 

  
 

Tobacco – 2.0%

  

Philip Morris International, Inc.

     57        5,553   
   

 

 

  
 

Total Consumer Staples – 7.2%

  

     20,031   

Energy

  

 

Integrated Oil & Gas – 0.6%

  

Chevron Corp.

     17        1,612   
   

 

 

  
 

Oil & Gas Exploration & Production – 0.8%

  

Devon Energy Corp.

     79        2,154   
   

 

 

  
 

Oil & Gas Refining & Marketing – 3.1%

  

Marathon Petroleum Corp.(A)

     196        7,302   

NuStar Energy L.P.

     34        1,366   
   

 

 

  
      8,668   
   

 

 

  
 

Oil & Gas Storage & Transportation – 1.5%

  

VTTI Energy Partners L.P.

     232        4,299   
   

 

 

  
 

Total Energy – 6.0%

  

     16,733   

Financials

  

 

Asset Management & Custody Banks – 2.9%

  

State Street Corp.

     136        7,982   
   

 

 

  
 

Consumer Finance – 4.1%

  

Capital One Financial Corp.

     164        11,367   
   

 

 

  
 

Life & Health Insurance – 3.9%

  

MetLife, Inc.

     246        10,823   
   

 

 

  
COMMON STOCKS
(Continued)		   Shares     Value  

Mortgage REITs – 1.4%

  

American Capital Agency Corp.

     207      $ 3,858   
   

 

 

  
 

Multi-Line Insurance – 4.0%

  

American International Group, Inc.

     209        11,307   
   

 

 

  
 

Other Diversified Financial Services – 9.3%

  

Citigroup, Inc.(A)

     312        13,030   

JPMorgan Chase & Co.

     218        12,928   
   

 

 

  
      25,958   
   

 

 

  
 

Property & Casualty Insurance – 3.3%

  

Allstate Corp. (The)

     138        9,284   
   

 

 

  
 

Reinsurance – 2.7%

  

Reinsurance Group of America, Inc.(A)

     80        7,690   
   

 

 

  
 

Total Financials – 31.6%

  

     88,269   

Health Care

  

 

Biotechnology – 2.3%

  

Amgen, Inc.(A)

     44        6,552   
   

 

 

  
 

Health Care Facilities – 3.0%

  

HCA Holdings, Inc.(B)

     106        8,242   
   

 

 

  
 

Managed Health Care – 6.8%

  

Aetna, Inc.

     60        6,786   

Anthem, Inc.

     26        3,586   

Cigna Corp.

     40        5,476   

Humana, Inc.

     17        3,165   
   

 

 

  
      19,013   
   

 

 

  
 

Pharmaceuticals – 3.0%

  

Teva Pharmaceutical Industries Ltd. ADR

     157        8,374   
   

 

 

  
 

Total Health Care – 15.1%

  

     42,181   

Information Technology

  

 

Semiconductor Equipment – 2.8%

  

Lam Research Corp.

     95        7,855   
   

 

 

  
 

Semiconductors – 1.6%

  

Micron Technology, Inc.(B)

     427        4,474   
   

 

 

  
 

Systems Software – 4.6%

  

Microsoft Corp.

     235        12,951   
   

 

 

  
 

Technology Hardware, Storage & Peripherals – 2.2%

   

Western Digital Corp.

     129        6,099   
   

 

 

  
 

Total Information Technology – 11.2%

   

     31,379   
COMMON STOCKS
(Continued)		   Shares     Value  

Materials

  

 

Diversified Chemicals – 3.3%

  

Dow Chemical Co. (The)

     183      $ 9,323   
   

 

 

  
 

Total Materials – 3.3%

  

     9,323   

Utilities

  

 

Electric Utilities – 5.6%

  

Duke Energy Corp.

     114        9,222   

Exelon Corp.(A)

     174        6,250   
   

 

 

  
      15,472   
   

 

 

  
 

Total Utilities – 5.6%

  

     15,472   
 

TOTAL COMMON STOCKS – 92.2%

           $ 257,557   

(Cost: $238,300)

      
 
SHORT-TERM
SECURITIES		   Principal         
 

Commercial Paper(C) – 7.5%

  

BMW U.S. Capital LLC (GTD by BMW AG):

      

0.390%, 4-21-16

   $ 5,000        4,999   

0.390%, 4-22-16

     5,000        4,999   

Medtronic Global Holdings SCA,

      

0.570%, 4-5-16

     5,000        5,000   

Northern Illinois Gas Co.,

      

0.610%, 4-1-16

     3,000        3,000   

United Technologies Corp.,

      

0.470%, 4-13-16

     3,000        2,999   
   

 

 

  
      20,997   
   

 

 

  
 

Master Note – 1.1%

  

Toyota Motor Credit Corp.,

      

0.443%, 4-6-16 (D)

     3,157        3,157   
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 8.6%

           $ 24,154   

(Cost: $24,154)

      
 

TOTAL INVESTMENT SECURITIES – 100.8%

   

   $ 281,711   

(Cost: $262,454)

      
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (0.8)%

   

     (2,272 ) 
 

NET ASSETS – 100.0%

  

   $ 279,439   
 

 

  2016   ANNUAL REPORT   203

Table of Contents

SCHEDULE OF INVESTMENTS

Ivy Value Fund (in thousands)

MARCH 31, 2016

 

 

 

Notes to Schedule of Investments

 

(A) All or a portion of securities with an aggregate value of $29,937 are held in collateralized accounts to cover potential obligations with respect to outstanding written options.

 

(B) No dividends were paid during the preceding 12 months.

 

(C) Rate shown is the yield to maturity at March 31, 2016.

 

(D) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2016. Date shown represents the date that the variable rate resets.

The following written options were outstanding at March 31, 2016 (contracts and exercise prices unrounded):

 

Underlying Security   Counterparty, if OTC    Type    Number of
Contracts		      Expiration Month      Exercise Price      Premium
Received		      Value  

Amgen, Inc.

  

N/A

    Call      45         May 2016       $ 165.00       $ 8       $ (3 ) 

Exelon Corp.

  

N/A

    Call      810         April 2016         31.00         32         (397 ) 
 

N/A

    Call      810         July 2016         33.00         28         (279 ) 

Hess Corp.

  

N/A

    Put      198         April 2016         45.00         46         (3 ) 

Las Vegas Sands, Inc.

  

N/A

    Call      312         May 2016         48.00         165         (156 ) 
 

N/A

    Call      593         May 2016         49.00         318         (249 ) 

Reinsurance Group of America, Inc.

  

N/A

    Call      70         April 2016         90.00         24         (44 ) 

Time Warner Cable, Inc.

  

N/A

    Call      319         April 2016         195.00         318         (365 ) 

VTTI Energy Partners L.P.

  

N/A

    Put      196         April 2016         20.00         62         (25 ) 
                

 

 

  
                 $ 1,001       $ (1,521 ) 
                

 

 

  

The following table is a summary of the valuation of the Fund’s investments by the fair value hierarchy levels as of March 31, 2016. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  
       

Assets

        

Investments in Securities

        

Common Stocks

   $ 257,557       $ —       $ —   

Short-Term Securities

     —         24,154         —   

Total

   $ 257,557       $ 24,154       $ —   

Liabilities

        

Written Options

   $ 899       $ 622       $ —   

During the year ended March 31, 2016, there were no transfers between Level 1 and 2.

The following acronyms are used throughout this schedule:

ADR = American Depositary Receipts

GTD = Guaranteed

OTC = Over the Counter

REIT = Real Estate Investment Trust

 

See Accompanying Notes to Financial Statements.

 

204   ANNUAL REPORT   2016  

Table of Contents

STATEMENTS OF ASSETS AND LIABILITIES

Ivy Funds

AS OF MARCH 31, 2016

 

 

 

(In thousands, except per share amounts)   Ivy Bond
Fund		     Ivy Core
Equity
Fund		     Ivy
Cundill
Global
Value
Fund		     Ivy Dividend
Opportunities
Fund		     Ivy
Emerging
Markets
Equity
Fund(1) 		    Ivy European
Opportunities
Fund		     Ivy Global
Bond
Fund		  

ASSETS

  

Investments in unaffiliated securities at value+

   $ 796,525      $ 1,125,506      $ 216,642      $ 361,616      $ 483,641      $ 225,264      $ 179,304   

Investments at Value

     796,525        1,125,506        216,642        361,616        483,641        225,264        179,304   

Cash

     1        1        89        1        5,314        1        33   

Cash denominated in foreign currencies at value+

     —        —        — *      —        43,454        —        —   

Restricted cash

     —        —        —        —        6,211        —        —   

Investment securities sold receivable

     27,273        4,541        —        —        389        2,587        148   

Dividends and interest receivable

     5,139        1,458        1,226        718        1,817        791        2,213   

Capital shares sold receivable

     841        936        242        589        1,516        134        236   

Receivable from affiliates

     5        356        3        8        413        —        252   

Unrealized appreciation on forward foreign currency contracts

     —        —        54        —        1,323        158        16   

Variation margin receivable

     9        —        —        —        —        —        —   

Prepaid and other assets

     62        48        42        35        46        45        44   

Total Assets

     829,855        1,132,846        218,298        362,967        544,124        228,980        182,246   

LIABILITIES

              

Investment securities purchased payable

     57,883        —        —        —        4,959        4,295        —   

Capital shares redeemed payable

     1,575        2,598        435        738        938        486        263   

Distributions payable

     205        —        —        —        —        —        —   

Independent Trustees and Chief Compliance Officer fees payable

     66        96        102        26        65        64        8   

Distribution and service fees payable

     6        8        2        3        4        1        2   

Shareholder servicing payable

     161        211        91        97        184        75        57   

Investment management fee payable

     11        22        5        7        15        5        3   

Accounting services fee payable

     18        23        8        9        12        8        6   

Unrealized depreciation on forward foreign currency contracts

     —        —        1,725        —        926        131        —   

Variation margin payable

     125        —        —        —        —        —        —   

Written options at value+

     —        —        —        —        3,056        —        —   

Other liabilities

     65        6        6        3        63        6        2   

Total Liabilities

     60,115        2,964        2,374        883        10,222        5,071        341   

Total Net Assets

   $ 769,740      $ 1,129,882      $ 215,924      $ 362,084      $ 533,902      $ 223,909      $ 181,905   

NET ASSETS

              

Capital paid in (shares authorized – unlimited)

   $ 789,202      $ 1,025,285      $ 240,127      $ 299,477      $ 596,471      $ 349,812      $ 209,110   

Undistributed (distributions in excess of) net investment income

     —        (95 )      214        1,003        (427 )      12        662   

Accumulated net realized gain (loss)

     (27,581 )      (742 )      (13,874 )      2,527        (114,708 )      (134,249 )      (11,014 ) 

Net unrealized appreciation (depreciation)

     8,119        105,434        (10,543 )      59,077        52,566        8,334        (16,853 ) 

Total Net Assets

   $ 769,740      $ 1,129,882      $ 215,924      $ 362,084      $ 533,902      $ 223,909      $ 181,905   

CAPITAL SHARES OUTSTANDING:

              

Class A

     66,827        42,907        13,343        16,199        26,427        6,306        14,410   

Class B

     634        867        94        491        382        39        345   

Class C

     3,153        11,485        1,108        2,620        2,726        443        2,201   

Class E

     379        786        54        295        15        3        N/A   

Class I

     1,326        12,223        273        1,260        8,269        1,619        2,506   

Class R

     282        182        19        22        374        17        54   

Class R6

     157        10,600        65        35        530        58        48   

Class Y

     292        8,235        171        423        729        45        281   

NET ASSET VALUE PER SHARE:

              

Class A

     $10.54        $12.73        $14.33        $16.99        $13.59        $26.29        $9.17   

Class B

     $10.54        $10.85        $13.15        $16.68        $11.34        $24.31        $9.16   

Class C

     $10.54        $11.19        $13.50        $16.76        $11.84        $24.89        $9.16   

Class E

     $10.54        $12.67        $14.42        $16.94        $13.76        $26.46        N/A   

Class I

     $10.54        $14.05        $14.64        $17.07        $13.96        $26.50        $9.16   

Class R

     $10.54        $12.67        $14.32        $16.97        $13.53        $26.27        $9.15   

Class R6

     $10.54        $14.07        $14.68        $17.10        $14.01        $26.62        $9.17   

Class Y

     $10.54        $13.69        $14.53        $17.03        $13.84        $26.46        $9.17   

+COST

              

Investments in unaffiliated securities at cost

   $ 788,507      $ 1,020,072      $ 225,417      $ 302,539      $ 432,072      $ 216,950      $ 196,180   

Cash denominated in foreign currencies at cost

     —        —        —        —        44,420        —        —   

Written options premiums received at cost

     —        —        —        —        4,546        —        —   

 

* Not shown due to rounding.
(1) Consolidated Statement of Assets and Liabilities (See Note 6 in Notes to Financial Statements).

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   205

Table of Contents

STATEMENTS OF ASSETS AND LIABILITIES

Ivy Funds

AS OF MARCH 31, 2016

 

 

 

(In thousands, except per share amounts)    Ivy
Global
Equity
Income
Fund		     Ivy
Global
Growth
Fund		     Ivy Global
Income
Allocation
Fund		     Ivy High
Income
Fund		     Ivy
International
Core Equity
Fund		     Ivy Large
Cap
Growth
Fund		     Ivy
Limited-
Term Bond
Fund		  

ASSETS

  

Investments in unaffiliated securities at value+

    $ 290,211      $ 508,741      $ 748,533      $ 4,661,088      $ 4,538,169      $ 1,756,252      $ 1,804,042   

Investments in affiliated securities at value+

      —        —        —        16,887        —        —        —   

Investments at Value

      290,211        508,741        748,533        4,677,975        4,538,169        1,756,252        1,804,042   

Cash

      1        1        —        34,600        — *      1        — * 

Cash denominated in foreign currencies at value+

      2,892        — *      —        50        6,322        —        —   

Restricted cash

      —        —        —        4,380        71        —        —   

Investment securities sold receivable

      3,596        5        4,974        20,044        11,268        8,488        1,187   

Dividends and interest receivable

      1,445        878        7,001        97,011        18,503        1,005        13,500   

Capital shares sold receivable

      513        512        820        10,442        17,463        2,143        5,219   

Receivable from affiliates

      87        —        4        6        8        153        1   

Unrealized appreciation on forward foreign currency contracts

      198        —        166        —        —        —        —   

Unrealized appreciation on swap agreements

      —        —        —        102        —        —        —   

Prepaid and other assets

      31        44        57        90        78        53        149   

Total Assets

      298,974        510,181        761,555        4,844,700        4,591,882        1,768,095        1,824,098   

LIABILITIES

               

Investment securities purchased payable

      9,254        5,823        11,931        47,992        —        11,326        9,042   

Capital shares redeemed payable

      403        787        1,033        20,157        6,740        3,511        3,709   

Distributions payable

      —        —        —        3,798        —        —        381   

Independent Trustees and Chief Compliance Officer fees payable

      3        77        40        181        80        115        71   

Overdraft due to custodian

      —        —        34        —        —        —        —   

Distribution and service fees payable

      2        4        6        47        22        13        15   

Shareholder servicing payable

      82        149        210        1,118        867        364        288   

Investment management fee payable

      6        12        14        69        98        32        21   

Accounting services fee payable

      8        12        16        23        23        23        23   

Unrealized depreciation on forward foreign currency contracts

      277        —        254        72        1,876        —        —   

Written options at value+

      —        —        186        —        281        —        —   

Other liabilities

      6        7        7        23        137        7        49   

Total Liabilities

      10,041        6,871        13,731        73,480        10,124        15,391        13,599   

Total Net Assets

    $ 288,933      $ 503,310      $ 747,824      $ 4,771,220      $ 4,581,758      $ 1,752,704      $ 1,810,499   

NET ASSETS

               

Capital paid in (shares authorized — unlimited)

    $ 297,832      $ 465,277      $ 831,454      $ 6,056,095      $ 4,847,692      $ 1,295,748      $ 1,816,977   

Undistributed (distributions in excess of) net investment income

      927        (632 )      2,690        (7 )      14,595        (112 )      —   

Accumulated net realized loss

      (19,022 )      (5,348 )      (63,509 )      (513,790 )      (174,580 )      (23,986 )      (22,864 ) 

Net unrealized appreciation (depreciation)

      9,196        44,013        (22,811 )      (771,078 )      (105,949 )      481,054        16,386   

Total Net Assets

    $ 288,933      $ 503,310      $ 747,824      $ 4,771,220      $ 4,581,758      $ 1,752,704      $ 1,810,499   

CAPITAL SHARES OUTSTANDING:

               

Class A

      20,843        9,589        44,567        269,824        95,839        67,716        146,197   

Class B

      158        76        324        12,105        684        788        1,255   

Class C

      1,140        729        3,771        148,293        17,723        7,070        11,782   

Class E

      N/A        3        195        1,168        331        668        388   

Class I

      1,700        1,957        4,420        183,145        117,351        14,762        5,125   

Class R

      33        55        18        8,987        2,242        1,302        73   

Class R6

      87        66        131        7,954        17,963        372        216   

Class Y

      369        425        138        58,767        35,578        6,950        1,514   

NET ASSET VALUE PER SHARE:

               

Class A

      $11.88        $39.23        $13.96        $6.91        $15.97        $17.66        $10.87   

Class B

      $11.87        $34.07        $13.72        $6.91        $14.24        $14.22        $10.87   

Class C

      $11.87        $34.26        $13.80        $6.91        $14.27        $15.19        $10.87   

Class E

      N/A        $39.38        $13.97        $6.91        $16.08        $17.64        $10.87   

Class I

      $11.88        $39.81        $14.08        $6.91        $16.07        $18.41        $10.87   

Class R

      $11.88        $39.08        $13.96        $6.91        $15.97        $17.16        $10.87   

Class R6

      $11.89        $39.92        $14.09        $6.91        $16.11        $18.47        $10.87   

Class Y

      $11.87        $39.37        $14.02        $6.91        $16.08        $18.04        $10.87   

+COST

               

Investments in unaffiliated securities at cost

    $ 280,965      $ 464,689      $ 771,589      $ 5,418,938      $ 4,642,302      $ 1,275,198      $ 1,787,656   

Investments in affiliated securities at cost

      —        —        —        30,173        —        —        —   

Cash denominated in foreign currencies at cost

      2,842        —        —        50        6,221        —        —   

Written options premiums received at cost

      —        —        523        —        155        —        —   

 

*Not shown due to rounding.

 

See Accompanying Notes to Financial Statements.

 

206   ANNUAL REPORT   2016  

Table of Contents

STATEMENTS OF ASSETS AND LIABILITIES

Ivy Funds

AS OF MARCH 31, 2016

 

 

 

(In thousands, except per share amounts)   Ivy Managed
International
Opportunities
Fund		     Ivy Micro
Cap
Growth
Fund		     Ivy Mid
Cap
Growth
Fund		     Ivy Mid Cap
Income
Opportunities
Fund		     Ivy
Money
Market
Fund		     Ivy
Municipal
Bond
Fund		     Ivy
Municipal
High
Income
Fund		  

ASSETS

  

Investments in unaffiliated securities at value+

   $ 279      $ 151,684      $ 3,139,605      $ 118,883      $ 223,719      $ 231,485      $ 1,338,574   

Investments in affiliated securities at value+

     197,513        —        —        —        —        —        4,605   

Investments at Value

     197,792        151,684        3,139,605        118,883        223,719        231,485        1,343,179   

Cash

     1        1        —        1        1        1        1   

Investment securities sold receivable

     234        —        26,185        —        —        —        —   

Dividends and interest receivable

     — *      63        1,882        205        107        2,059        21,085   

Capital shares sold receivable

     95        135        2,897        1,007        275        1,081        2,621   

Receivable from affiliates

     — *      —        13        93        498        — *      7   

Prepaid and other assets

     44        37        61        21        37        34        51   

Total Assets

     198,166        151,920        3,170,643        120,210        224,637        234,660        1,366,944   

LIABILITIES

              

Investment securities purchased payable

     —        —        1,066        —        —        7,626        1,861   

Capital shares redeemed payable

     397        267        27,768        98        981        151        2,599   

Distributions payable

     —        —        —        —        1        55        635   

Independent Trustees and Chief Compliance Officer fees payable

     12        4        104        — *      23        12        27   

Overdraft due to custodian

     —        —        12,436        —        —        —        —   

Distribution and service fees payable

     1        1        17        1        1        2        9   

Shareholder servicing payable

     21        65        691        21        36        25        173   

Investment management fee payable

     — *      4        71        3        2        3        18   

Accounting services fee payable

     4        6        23        4        8        8        22   

Written options at value+

     —        —        9,166        —        —        —        —   

Other liabilities

     2        2        15        1        3        3        7   

Total Liabilities

     437        349        51,357        128        1,055        7,885        5,351   

Total Net Assets

   $ 197,729      $ 151,571      $ 3,119,286      $ 120,082      $ 223,582      $ 226,775      $ 1,361,593   

NET ASSETS

              

Capital paid in (shares authorized – unlimited)

   $ 208,679      $ 160,109      $ 2,870,798      $ 115,225      $ 223,590      $ 215,995      $ 1,331,432   

Undistributed (distributions in excess of) net investment income

     (152 )      (512 )      (11,178 )      (55 )      —        146        3,350   

Accumulated net realized loss

     (40,588 )      (9,568 )      (26,649 )      (4,440 )      (8 )      (3,149 )      (14,967 ) 

Net unrealized appreciation

     29,790        1,542        286,315        9,352        —        13,783        41,778   

Total Net Assets

   $ 197,729      $ 151,571      $ 3,119,286      $ 120,082      $ 223,582      $ 226,775      $ 1,361,593   

CAPITAL SHARES OUTSTANDING:

              

Class A

     19,938        7,148        41,492        8,706        166,203        15,131        73,746   

Class B

     163        80        1,178        N/A        6,339        202        2,601   

Class C

     505        384        15,805        416        44,353        2,565        44,843   

Class E

     44        N/A        387        201        6,695        N/A        N/A   

Class I

     129        559        70,670        735        N/A        736        132,693   

Class R

     56        32        3,794        201        N/A        N/A        N/A   

Class R6

     N/A        104        3,825        267        N/A        N/A        N/A   

Class Y

     77        52        23,931        461        N/A        69        3,933   

NET ASSET VALUE PER SHARE:

              

Class A

     $9.46        $18.14        $18.96        $10.93        $1.00        $12.13        $5.28   

Class B

     $9.25        $17.20        $15.76        N/A        $1.00        $12.13        $5.28   

Class C

     $9.28        $17.45        $16.69        $10.91        $1.00        $12.13        $5.28   

Class E

     $9.47        N/A        $18.54        $10.93        $1.00        N/A        N/A   

Class I

     $9.50        $18.53        $20.15        $10.94        N/A        $12.13        $5.28   

Class R

     $9.44        $18.08        $18.65        $10.92        N/A        N/A        N/A   

Class R6

     N/A        $18.61        $20.22        $10.94        N/A        N/A        N/A   

Class Y

     $9.46        $18.72        $19.69        $10.93        N/A        $12.13        $5.28   

+COST

              

Investments in unaffiliated securities at cost

   $ 279      $ 150,142      $ 2,853,106      $ 109,531      $ 223,719      $ 217,702      $ 1,297,359   

Investments in affiliated securities at cost

     167,723        —        —        —        —        —        4,042   

Written options premiums received at cost

     —        —        8,982        —        —        —        —   

 

*Not shown due to rounding.

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   207

Table of Contents

STATEMENTS OF ASSETS AND LIABILITIES

Ivy Funds

AS OF MARCH 31, 2016

 

 

 

(In thousands, except per share amounts)   Ivy Small
Cap
Growth
Fund		     Ivy Small
Cap Value
Fund		     Ivy Tax-
Managed
Equity
Fund		     Ivy Value
Fund		  

ASSETS

  

Investments in unaffiliated securities at value+

   $ 944,284      $ 250,872      $ 119,185      $ 281,711   

Investments at Value

     944,284        250,872        119,185        281,711   

Cash

     1        1        2        1   

Investment securities sold receivable

     3,604        7,414        —        149   

Dividends and interest receivable

     315        202        77        478   

Capital shares sold receivable

     852        180        370        660   

Receivable from affiliates

     9        —        — *      —   

Prepaid and other assets

     46        43        26        44   

Total Assets

     949,111        258,712        119,660        283,043   

LIABILITIES

        

Investment securities purchased payable

     1,987        9,922        —        1,134   

Capital shares redeemed payable

     1,505        387        59        827   

Independent Trustees and Chief Compliance Officer fees payable

     160        29        1        18   

Distribution and service fees payable

     9        2        1        2   

Shareholder servicing payable

     232        93        17        82   

Investment management fee payable

     22        6        2        5   

Accounting services fee payable

     19        8        6        10   

Unrealized depreciation on swap agreements

     865        —        —        —   

Written options at value+

     —        —        —        1,521   

Other liabilities

     3        5        2        5   

Total Liabilities

     4,802        10,452        88        3,604   

Total Net Assets

   $ 944,309      $ 248,260      $ 119,572      $ 279,439   

NET ASSETS

        

Capital paid in (shares authorized – unlimited)

   $ 734,241      $ 227,132      $ 104,981      $ 264,413   

Undistributed (distributions in excess of) net investment income

     (8,559 )      (29 )      (62 )      2,019   

Accumulated net realized gain (loss)

     11,025        (5,949 )      (515 )      (5,730 ) 

Net unrealized appreciation

     207,602        27,106        15,168        18,737   

Total Net Assets

   $ 944,309      $ 248,260      $ 119,572      $ 279,439   

CAPITAL SHARES OUTSTANDING:

        

Class A

     22,011        13,439        5,752        12,529   

Class B

     665        187        82        175   

Class C

     13,261        1,139        307        958   

Class E

     404        10        N/A        7   

Class I

     9,095        1,601        240        354   

Class R

     2,871        183        N/A        15   

Class R6

     1,223        237        N/A        94   

Class Y

     11,592        483        32        77   

NET ASSET VALUE PER SHARE:

        

Class A

     $14.81        $14.38        $18.68        $19.72   

Class B

     $11.57        $11.92        $18.03        $18.39   

Class C

     $12.50        $12.64        $17.98        $19.07   

Class E

     $14.70        $14.87        N/A        $19.81   

Class I

     $18.57        $15.42        $18.83        $19.81   

Class R

     $14.63        $14.33        N/A        $19.70   

Class R6

     $18.62        $15.52        N/A        $19.87   

Class Y

     $17.72        $15.03        $18.71        $19.77   

+COST

        

Investments in unaffiliated securities at cost

   $ 735,816      $ 223,766      $ 104,017      $ 262,454   

Written options premiums received at cost

     —        —        —        1,001   

 

*Not shown due to rounding.

 

See Accompanying Notes to Financial Statements.

 

208   ANNUAL REPORT   2016  

Table of Contents

STATEMENTS OF OPERATIONS

Ivy Funds

FOR THE YEAR ENDED MARCH 31, 2016

 

 

 

(In thousands)   Ivy Bond
Fund		     Ivy Core
Equity
Fund		     Ivy
Cundill
Global
Value
Fund		     Ivy Dividend
Opportunities
Fund		     Ivy
Emerging
Markets
Equity
Fund(1) 		    Ivy European
Opportunities
Fund		     Ivy Global
Bond
Fund		  

INVESTMENT INCOME

  

Dividends from unaffiliated securities

   $ 484      $ 15,036      $ 6,520      $ 8,546      $ 10,048      $ 5,195      $ 934   

Foreign dividend withholding tax

     —        (306 )      (502 )      (120 )      (1,160 )      (559 )      (22 ) 

Interest and amortization from unaffiliated securities

     24,579        77        458        98        204        7        9,425   

Foreign interest withholding tax

     —        —        —        —        (15 )      —        —   

Total Investment Income

     25,063        14,807        6,476        8,524        9,077        4,643        10,337   

EXPENSES

              

Investment management fee

     3,884        7,875        2,640        2,728        5,757        2,034        1,410   

Distribution and service fees:

              

Class A

     1,753        1,444        592        739        1,008        418        382   

Class B

     58        99        17        98        54        12        37   

Class C

     272        1,442        162        481        346        112        256   

Class E

     9        25        2        13        — *      — *      N/A   

Class R

     5        12        2        2        14        2        2   

Class Y

     7        294        6        21        32        6        9   

Shareholder servicing:

              

Class A

     1,322        1,046        883        643        1,374        573        438   

Class B

     21        33        13        23        34        8        15   

Class C

     51        228        36        67        91        28        43   

Class E

     18        42        7        27        — *      — *      N/A   

Class I

     14        330        7        34        197        64        62   

Class R

     3        6        1        1        7        1        1   

Class R6

     — *      6        — *      — *      1        — *      — * 

Class Y

     4        179        4        13        21        4        6   

Registration fees

     149        146        104        113        143        105        97   

Custodian fees

     27        20        36        13        135        32        13   

Independent Trustees and Chief Compliance Officer fees

     20        31        3        11        16        4        7   

Accounting services fee

     198        275        99        132        167        97        92   

Professional fees

     34        21        23        15        33        22        32   

Other

     61        76        53        42        93        49        34   

Total Expenses

     7,910        13,630        4,690        5,216        9,523        3,571        2,936   

Less:

              

Expenses in excess of limit

     (9 )      (657 )      (392 )      (15 )      (680 )      —        (580 ) 

Total Net Expenses

     7,901        12,973        4,298        5,201        8,843        3,571        2,356   

Net Investment Income

     17,162        1,834        2,178        3,323        234        1,072        7,981   

REALIZED AND UNREALIZED GAIN (LOSS)

              

Net realized gain (loss) on:

              

Investments in unaffiliated securities

     (5,800 )      51,498        (3,729 )      13,548        (50,586 )      (10,560 )      (8,482 ) 

Futures contracts

     (1,339 )      —        —        —        646        —        (254 ) 

Written options

     —        —        —        109        (3,409 )      —        —   

Swap agreements

     —        —        —        —        1,049        —        —   

Forward foreign currency contracts

     —        —        1,070        —        1,498        (3,219 )      19   

Foreign currency exchange transactions

     —        —        (227 )      (9 )      (1,852 )      (37 )      (142 ) 

Net change in unrealized appreciation (depreciation) on:

              

Investments in unaffiliated securities

     (8,820 )      (105,917 )      (30,665 )      (36,231 )      (52,708 )      (11,738 )      (3,618 ) 

Futures contracts

     468        —        —        —        —        —        (166 ) 

Written options

     —        —        —        (57 )      1,041        —        —   

Swap agreements

     —        —        —        —        49        —        —   

Forward foreign currency contracts

     —        —        (3,231 )      —        397        (446 )      (49 ) 

Foreign currency exchange transactions

     —        —        73        —        (1,063 )      59        16   

Net Realized and Unrealized Loss

     (15,491 )      (54,419 )      (36,709 )      (22,640 )      (104,938 )      (25,941 )      (12,676 ) 

Net Increase (Decrease) in Net Assets Resulting from Operations

   $ 1,671      $ (52,585 )    $ (34,531 )    $ (19,317 )    $ (104,704 )    $ (24,869 )    $ (4,695 ) 

 

* Not shown due to rounding.
(1) Consolidated Statement of Operations (See Note 6 in Notes to Financial Statements).

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   209

Table of Contents

STATEMENTS OF OPERATIONS

Ivy Funds

FOR THE YEAR ENDED MARCH 31, 2016

 

 

 

(In thousands)   Ivy
Global
Equity
Income
Fund		     Ivy
Global
Growth
Fund		     Ivy Global
Income
Allocation
Fund		     Ivy High
Income
Fund		     Ivy
International
Core Equity
Fund		     Ivy Large
Cap
Growth
Fund		     Ivy
Limited-
Term
Bond
Fund		  

INVESTMENT INCOME

  

Dividends from unaffiliated securities

   $ 14,284      $ 6,789      $ 23,248      $ 5,377      $ 113,115      $ 17,097      $ 312   

Foreign dividend withholding tax

     (1,155 )      (478 )      (1,143 )      —        (11,528 )      (148 )      —   

Interest and amortization from unaffiliated securities

     12        83        18,954        556,827        447        192        38,215   

Foreign interest withholding tax

     —        — *      —        —        (1 )      —        —   

Total Investment Income

     13,141        6,394        41,059        562,204        102,033        17,141        38,527   

EXPENSES

              

Investment management fee

     2,052        4,364        5,367        33,861        33,184        11,668        7,534   

Distribution and service fees:

              

Class A

     626        933        1,612        6,201        3,791        2,876        3,793   

Class B

     19        31        47        1,093        118        113        125   

Class C

     140        249        513        13,439        2,317        977        1,206   

Class E

     N/A        — *      7        23        13        26        9   

Class R

     2        8        1        309        142        116        4   

Class Y

     11        30        5        1,395        1,382        318        45   

Shareholder servicing:

              

Class A

     765        1,145        1,666        4,169        3,448        2,245        2,335   

Class B

     3        18        18        162        43        38        28   

Class C

     18        68        64        1,484        355        137        157   

Class E

     N/A        — *      16        46        32        40        11   

Class I

     32        123        91        3,045        2,631        464        78   

Class R

     1        4        1        156        71        59        2   

Class R6

     — *      — *      — *      3        16        1        — * 

Class Y

     7        20        3        905        955        192        29   

Registration fees

     100        126        144        338        306        158        216   

Custodian fees

     33        37        47        54        496        28        27   

Independent Trustees and Chief Compliance Officer fees

     9        13        23        196        123        49        51   

Accounting services fee

     102        148        213        275        275        275        275   

Professional fees

     19        22        28        170        49        25        26   

Other

     43        89        80        413        248        119        110   

Total Expenses

     3,982        7,428        9,946        67,737        49,995        19,924        16,061   

Less:

              

Expenses in excess of limit

     (152 )      —        (8 )      (37 )      (13 )      (250 )      (3 ) 

Total Net Expenses

     3,830        7,428        9,938        67,700        49,982        19,674        16,058   

Net Investment Income (Loss)

     9,311        (1,034 )      31,121        494,504        52,051        (2,533 )      22,469   

REALIZED AND UNREALIZED GAIN (LOSS)

              

Net realized gain (loss) on:

              

Investments in unaffiliated securities

     (13,984 )      3,670        (51,986 )      (496,058 )      (119,773 )      78,209        (982 ) 

Written options

     —        —        527        —        —        —        —   

Swap agreements

     —        —        —        (3,094 )      —        —        —   

Forward foreign currency contracts

     (3,692 )      (4,267 )      (502 )      (1,003 )      (6,504 )      —        —   

Foreign currency exchange transactions

     (97 )      (137 )      54        19        (2,182 )      —        —   

Net change in unrealized appreciation (depreciation) on:

              

Investments in unaffiliated securities

     (7,071 )      (30,290 )      (27,343 )      (535,118 )      (384,409 )      (113,833 )      (5,603 ) 

Investments in affiliated securities

     —        —        —        (9,016 )      —        —        —   

Written options

     —        —        95        —        (126 )      —        —   

Swap agreements

     —        —        —        102        —        —        —   

Forward foreign currency contracts

     (598 )      (317 )      (344 )      (1,005 )      2,893        —        —   

Foreign currency exchange transactions

     54        37        99        99        474        —        —   

Net Realized and Unrealized Loss

     (25,388 )      (31,304 )      (79,400 )      (1,045,074 )      (509,627 )      (35,624 )      (6,585 ) 

Net Increase (Decrease) in Net Assets Resulting from Operations

   $ (16,077 )    $ (32,338 )    $ (48,279 )    $ (550,570 )    $ (457,576 )    $ (38,157 )    $ 15,884   

 

*Not shown due to rounding.

 

See Accompanying Notes to Financial Statements.

 

210   ANNUAL REPORT   2016  

Table of Contents

STATEMENTS OF OPERATIONS

Ivy Funds

FOR THE YEAR ENDED MARCH 31, 2016

 

 

 

(In thousands)   Ivy Managed
International
Opportunities
Fund		     Ivy Micro
Cap
Growth
Fund		     Ivy Mid
Cap
Growth
Fund		     Ivy Mid Cap
Income
Opportunities
Fund		     Ivy
Money
Market
Fund		     Ivy
Municipal
Bond
Fund		     Ivy
Municipal
High
Income
Fund		  

INVESTMENT INCOME

  

Dividends from unaffiliated securities

   $ —      $ 503      $ 42,383      $ 2,241      $ —      $ 16      $ —   

Dividends from affiliated securities

     2,566        —        —        —        —        —        —   

Foreign dividend withholding tax

     —        —        (138 )      —        —        —        —   

Interest and amortization from unaffiliated securities

     1        33        112        5        597        6,353        66,672   

Interest and amortization from affiliated securities

     —        —        —        —        —        —        304   

Total Investment Income

     2,567        536        42,357        2,246        597        6,369        66,976   

EXPENSES

              

Investment management fee

     110        1,882        34,562        683        684        1,002        6,605   

Distribution and service fees:

              

Class A

     523        418        2,284        146        —        390        935   

Class B

     20        18        211        N/A        54        21        141   

Class C

     53        90        3,118        33        394        256        2,333   

Class E

     1        N/A        18        5        —        N/A        N/A   

Class R

     3        3        411        11        N/A        N/A        N/A   

Class Y

     3        4        1,489        10        N/A        2        48   

Shareholder servicing:

              

Class A

     151        596        1,889        148        183        166        325   

Class B

     6        9        45        N/A        9        2        13   

Class C

     6        31        544        4        37        25        134   

Class E

     — *      N/A        40        — *      12        N/A        N/A   

Class I

     — *      27        3,803        12        N/A        10        1,061   

Class R

     — *      2        216        5        N/A        N/A        N/A   

Class R6

     N/A        — *      6        — *      N/A        N/A        N/A   

Class Y

     — *      2        934        7        N/A        1        31   

Registration fees

     90        100        197        73        82        85        146   

Offering cost

     —        —        —        85        —        —        —   

Custodian fees

     6        12        70        6        15        8        20   

Independent Trustees and Chief Compliance Officer fees

     6        6        139        2        5        5        40   

Accounting services fee

     53        84        275        50        76        77        264   

Professional fees

     10        16        44        15        12        4        —   

Other

     33        36        306        15        23        21        45   

Total Expenses

     1,074        3,336        50,601        1,310        1,586        2,075        12,141   

Less:

              

Expenses in excess of limit

     (2 )      —        (17 )      (223 )      (1,027 )      — *      (214 ) 

Total Net Expenses

     1,072        3,336        50,584        1,087        559        2,075        11,927   

Net Investment Income (Loss)

     1,495        (2,800 )      (8,227 )      1,159        38        4,294        55,049   

REALIZED AND UNREALIZED GAIN (LOSS)

              

Net realized gain (loss) on:

              

Investments in unaffiliated securities

     —        1,232        205,923        (4,648 )      26        (681 )      (2,455 ) 

Investments in affiliated securities

     17,488        —        —        —        —        —        —   

Distributions of realized capital gains from affiliated securities

     1,155        —        —        —        —        —        —   

Futures contracts

     —        —        —        —        —        —        780   

Written options

     —        —        (3,716 )      —        —        —        —   

Foreign currency exchange transactions

     —        —        (13 )      —        —        —        —   

Net change in unrealized appreciation (depreciation) on:

              

Investments in unaffiliated securities

     —        (48,177 )      (737,259 )      5,563        —        1,813        (5,728 ) 

Investments in affiliated securities

     (41,815 )      —        —        —        —        —        (27 ) 

Written options

     —        —        (193 )      —        —        —        —   

Net Realized and Unrealized Gain (Loss)

     (23,172 )      (46,945 )      (535,258 )      915        26        1,132        (7,430 ) 

Net Increase (Decrease) in Net Assets Resulting from Operations

   $ (21,677 )    $ (49,745 )    $ (543,485 )    $ 2,074      $ 64      $ 5,426      $ 47,619   

 

* Not shown due to rounding.

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   211

Table of Contents

STATEMENTS OF OPERATIONS

Ivy Funds

FOR THE YEAR ENDED MARCH 31, 2016

 

 

 

(In thousands)   Ivy Small
Cap
Growth
Fund		     Ivy Small
Cap Value
Fund		     Ivy Tax-
Managed
Equity
Fund		     Ivy Value
Fund		  

INVESTMENT INCOME

  

Dividends from unaffiliated securities

   $ 6,466      $ 2,951      $ 827      $ 5,780   

Foreign dividend withholding tax

     —        (2 )      (13 )      (54 ) 

Interest and amortization from unaffiliated securities

     182        31        22        49   

Total Investment Income

     6,648        2,980        836        5,775   

EXPENSES

        

Investment management fee

     8,919        2,284        630        2,123   

Distribution and service fees:

        

Class A

     888        527        216        666   

Class B

     92        26        14        37   

Class C

     1,863        159        39        199   

Class E

     15        — *      N/A        — * 

Class R

     222        11        N/A        2   

Class Y

     584        18        2        5   

Shareholder servicing:

        

Class A

     993        736        115        660   

Class B

     38        14        1        17   

Class C

     301        42        7        33   

Class E

     34        — *      N/A        — * 

Class I

     309        42        7        15   

Class R

     114        6        N/A        1   

Class R6

     3        — *      N/A        — * 

Class Y

     362        12        1        3   

Registration fees

     131        106        84        122   

Custodian fees

     24        17        8        11   

Independent Trustees and Chief Compliance Officer fees

     26        7        3        9   

Accounting services fee

     264        101        55        106   

Professional fees

     25        20        12        20   

Other

     82        40        16        43   

Total Expenses

     15,289        4,168        1,210        4,072   

Less:

        

Expenses in excess of limit

     (14 )      —        — *      —   

Total Net Expenses

     15,275        4,168        1,210        4,072   

Net Investment Income (Loss)

     (8,627 )      (1,188 )      (374 )      1,703   

REALIZED AND UNREALIZED GAIN (LOSS)

        

Net realized gain (loss) on:

        

Investments in unaffiliated securities

     93,749        6,136        192        16,874   

Written options

     318        —        —        (37 ) 

Swap agreements

     (13,241 )      —        —        —   

Foreign currency exchange transactions

     1        —        —        —   

Net change in unrealized appreciation (depreciation) on:

        

Investments in unaffiliated securities

     (172,842 )      (20,917 )      (2,963 )      (31,014 ) 

Written options

     —        —        —        (372 ) 

Swap agreements

     (846 )      —        —        —   

Foreign currency exchange transactions

     — *      —        —        —   

Net Realized and Unrealized Loss

     (92,861 )      (14,781 )      (2,771 )      (14,549 ) 

Net Decrease in Net Assets Resulting from Operations

   $ (101,488 )    $ (15,969 )    $ (3,145 )    $ (12,846 ) 

 

* Not shown due to rounding.

 

See Accompanying Notes to Financial Statements.

 

212   ANNUAL REPORT   2016  

Table of Contents

STATEMENTS OF CHANGES IN NET ASSETS

Ivy Funds

 

 

 

    Ivy Bond Fund        Ivy Core Equity Fund        Ivy Cundill Global Value Fund  
(In thousands)   Year ended
3-31-16		      Year ended
3-31-15		        Year ended
3-31-16		      Year ended
3-31-15		        Year ended
3-31-16		      Year ended
3-31-15		  

INCREASE (DECREASE) IN NET ASSETS

                     

Operations:

                     

Net investment income

   $ 17,162       $ 14,566         $ 1,834       $ 1,104         $ 2,178       $ 741   

Net realized gain (loss) on investments

     (7,139 )       9,440           51,498         79,672           (2,886 )       5,055   

Net change in unrealized appreciation (depreciation)

     (8,352 )       11,876           (105,917 )       16,279           (33,823 )       (36,070 ) 

Net Increase (Decrease) in Net Assets Resulting from Operations

     1,671         35,882           (52,585 )       97,055           (34,531 )       (30,274 ) 

Distributions to Shareholders From:

                     

Net investment income:

                     

Class A

     (17,219 )       (15,481 )         (163 )       —           (1,796 )       —   

Class B

     (87 )       (99 )         —         —           —         —   

Class C

     (460 )       (381 )         —         —           (46 )       —   

Class E

     (89 )       (85 )         —         —           (7 )       —   

Class I

     (243 )       (158 )         (255 )       (385 )         (88 )       —   

Class R

     (19 )       (6 )         —         —           (2 )       —   

Class R6

     (44 )       (23 )         (68 )       (3 )         (19 )       —   

Class Y

     (68 )       (64 )         (141 )       (153 )         (34 )       —   

Net realized gains:

                     

Class A

     —         —           (39,800 )       (43,397 )         —         —   

Class B

     —         —           (718 )       (818 )         —         —   

Class C

     —         —           (10,219 )       (11,940 )         —         —   

Class E

     —         —           (698 )       (617 )         —         —   

Class I

     —         —           (13,556 )       (16,394 )         —         —   

Class R

     —         —           (179 )       (171 )         —         —   

Class R6

     —         —           (2,897 )       (250 )         —         —   

Class Y

     —         —           (7,899 )       (6,537 )         —         —   

Total Distributions to Shareholders

     (18,229 )       (16,297 )         (76,593 )       (80,665 )         (1,992 )       —   

Capital Share Transactions

     42,640         123,728           121,596         237,462           (66,063 )       (23,159 ) 

Net Increase (Decrease) in Net Assets

     26,082         143,313           (7,582 )       253,852           (102,586 )       (53,433 ) 

Net Assets, Beginning of Period

     743,658         600,345           1,137,464         883,612           318,510         371,943   

Net Assets, End of Period

   $ 769,740       $ 743,658         $ 1,129,882       $ 1,137,464         $ 215,924       $ 318,510   

Undistributed (distributions in excess of) net investment income

   $ —       $ (3 )       $ (95 )     $ 460         $ 214       $ 255   

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   213

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STATEMENTS OF CHANGES IN NET ASSETS

Ivy Funds

 

 

 

    Ivy Dividend Opportunities
Fund		        Ivy Emerging Markets
Equity Fund(1)		        Ivy European Opportunities
Fund		  
(In thousands)   Year ended
3-31-16		      Year ended
3-31-15		        Year ended
3-31-16		      Year ended
3-31-15		        Year ended
3-31-16		      Year ended
3-31-15		  

INCREASE (DECREASE) IN NET ASSETS

                     

Operations:

                     

Net investment income

   $ 3,323       $ 4,007         $ 234       $ 1,416         $ 1,072       $ 1,165   

Net realized gain (loss) on investments

     13,648         50,524           (52,654 )       62,061           (13,816 )       17,073   

Net change in unrealized depreciation

     (36,288 )       (23,024 )         (52,284 )       (15,073 )         (12,125 )       (19,686 ) 

Net Increase (Decrease) in Net Assets Resulting from Operations

     (19,317 )       31,507           (104,704 )       48,404           (24,869 )       (1,448 ) 

Distributions to Shareholders From:

                     

Net investment income:

                     

Class A

     (2,130 )       (3,298 )         (3,403 )       (3,355 )         (610 )       (2,516 ) 

Class B

     (4 )       (40 )         (28 )       —           —         (6 ) 

Class C

     (53 )       (217 )         (209 )       (39 )         —         (98 ) 

Class E

     (36 )       (45 )         (2 )       (2 )         — *       (2 ) 

Class I

     (214 )       (299 )         (1,158 )       (1,308 )         (316 )       (583 ) 

Class R

     (2 )       (3 )         (26 )       (5 )         (1 )       (5 ) 

Class R6

     (5 )       (5 )         (65 )       (58 )         (15 )       (39 ) 

Class Y

     (64 )       (120 )         (92 )       (83 )         (6 )       (28 ) 

Net realized gains:

                     

Class A

     (23,525 )       (30,956 )         —         —           —         —   

Class B

     (789 )       (1,236 )         —         —           —         —   

Class C

     (3,849 )       (5,197 )         —         —           —         —   

Class E

     (423 )       (485 )         —         —           —         —   

Class I

     (1,839 )       (2,212 )         —         —           —         —   

Class R

     (28 )       (34 )         —         —           —         —   

Class R6

     (41 )       (45 )         —         —           —         —   

Class Y

     (630 )       (1,041 )         —         —           —         —   

Total Distributions to Shareholders

     (33,632 )       (45,233 )         (4,983 )       (4,850 )         (948 )       (3,277 ) 

Capital Share Transactions

     (11,066 )       54,998           31,640         (171,945 )         57,146         (13,059 ) 

Net Increase (Decrease) in Net Assets

     (64,015 )       41,272           (78,047 )       (128,391 )         31,329         (17,784 ) 

Net Assets, Beginning of Period

     426,099         384,827           611,949         740,340           192,580         210,364   

Net Assets, End of Period

   $ 362,084       $ 426,099         $ 533,902       $ 611,949         $ 223,909       $ 192,580   

Undistributed (distributions in excess of) net investment income

   $ 1,003       $ 993         $ (427 )     $ 4,951         $ 12       $ (75 ) 

 

* Not shown due to rounding.
(1) Consolidated Statements of Changes in Net Assets (See Note 6 in Notes to Financial Statements).

 

See Accompanying Notes to Financial Statements.

 

214   ANNUAL REPORT   2016  

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STATEMENTS OF CHANGES IN NET ASSETS

Ivy Funds

 

 

 

    Ivy Global Bond Fund        Ivy Global Equity
Income Fund		        Ivy Global Growth Fund  
(In thousands)   Year ended
3-31-16		      Year ended
3-31-15		        Year ended
3-31-16		      Year ended
3-31-15		        Year ended
3-31-16		      Year ended
3-31-15		  

INCREASE (DECREASE) IN NET ASSETS

                     

Operations:

                     

Net investment income (loss)

   $ 7,981       $ 10,092         $ 9,311       $ 7,443         $ (1,034 )     $ 2,330   

Net realized gain (loss) on investments

     (8,859 )       (1,081 )         (17,773 )       10,642           (734 )       20,452   

Net change in unrealized appreciation (depreciation)

     (3,817 )       (14,484 )         (7,615 )       (3,207 )         (30,570 )       3,262   

Net Increase (Decrease) in Net Assets Resulting from Operations

     (4,695 )       (5,473 )         (16,077 )       14,878           (32,338 )       26,044   

Distributions to Shareholders From:

                     

Net investment income:

                     

Class A

     (4,424 )       (6,182 )         (7,745 )       (7,083 )         (376 )       (250 ) 

Class B

     (77 )       (142 )         (46 )       (54 )         —         —   

Class C

     (547 )       (849 )         (345 )       (243 )         —         —   

Class E

     N/A         N/A           N/A         N/A           — *       — * 

Class I

     (1,248 )       (2,215 )         (721 )       (755 )         (174 )       (226 ) 

Class R

     (12 )       (12 )         (8 )       (9 )         —         —   

Class R6

     (11 )       (6 )         (43 )       (31 )         (6 )       (6 ) 

Class Y

     (104 )       (270 )         (146 )       (154 )         (17 )       (17 ) 

Net realized gains:

                     

Class A

     —         —           (7,224 )       (4,442 )         (8,348 )       (4,729 ) 

Class B

     —         —           (54 )       (37 )         (68 )       (54 ) 

Class C

     —         —           (411 )       (195 )         (601 )       (368 ) 

Class E

     N/A         N/A           N/A         N/A           (3 )       (1 ) 

Class I

     —         —           (585 )       (494 )         (1,780 )       (859 ) 

Class R

     —         —           (8 )       (6 )         (41 )       (13 ) 

Class R6

     —         —           (28 )       (27 )         (54 )       (31 ) 

Class Y

     —         —           (128 )       (90 )         (272 )       (155 ) 

Total Distributions to Shareholders

     (6,423 )       (9,676 )         (17,492 )       (13,620 )         (11,740 )       (6,709 ) 

Capital Share Transactions

     (77,614 )       (5,958 )         26,795         81,899           16,321         61,871   

Net Increase (Decrease) in Net Assets

     (88,732 )       (21,107 )         (6,774 )       83,157           (27,757 )       81,206   

Net Assets, Beginning of Period

     270,637         291,744           295,707         212,550           531,067         449,861   

Net Assets, End of Period

   $ 181,905       $ 270,637         $ 288,933       $ 295,707         $ 503,310       $ 531,067   

Undistributed (distributions in excess of) net investment income

   $ 662       $ 573         $ 927       $ 767         $ (632 )     $ 481   

 

* Not shown due to rounding.

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   215

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STATEMENTS OF CHANGES IN NET ASSETS

Ivy Funds

 

 

 

    Ivy Global Income
Allocation Fund		        Ivy High Income Fund        Ivy International Core
Equity Fund		  
(In thousands)   Year ended
3-31-16		      Year ended
3-31-15		        Year ended
3-31-16		      Year ended
3-31-15		        Year ended
3-31-16		      Year ended
3-31-15		  

INCREASE (DECREASE) IN NET ASSETS

                     

Operations:

                     

Net investment income

   $ 31,121       $ 27,048         $ 494,504       $ 660,107         $ 52,051       $ 27,916   

Net realized gain (loss) on investments

     (51,907 )       29,559           (500,136 )       87,488           (128,459 )       143,145   

Net change in unrealized depreciation

     (27,493 )       (39,782 )         (544,938 )       (691,739 )         (381,168 )       (30,720 ) 

Net Increase (Decrease) in Net Assets Resulting from Operations

     (48,279 )       16,825           (550,570 )       55,856           (457,576 )       140,341   

Distributions to Shareholders From:

                     

Net investment income:

                     

Class A

     (26,075 )       (22,360 )         (188,245 )       (237,844 )         (12,752 )       (14,825 ) 

Class B

     (151 )       (185 )         (7,499 )       (8,954 )         (16 )       (70 ) 

Class C

     (1,918 )       (1,440 )         (92,678 )       (110,961 )         (757 )       (953 ) 

Class E

     (108 )       (103 )         (667 )       (647 )         (34 )       (49 ) 

Class I

     (2,715 )       (2,455 )         (149,446 )       (232,534 )         (21,428 )       (15,770 ) 

Class R

     (10 )       (10 )         (4,527 )       (3,068 )         (176 )       (124 ) 

Class R6

     (80 )       (50 )         (2,547 )       (323 )         (2,546 )       (75 ) 

Class Y

     (87 )       (200 )         (42,233 )       (65,747 )         (4,810 )       (3,248 ) 

Net realized gains:

                     

Class A

     —         —           —         (54,388 )         —         (113,327 ) 

Class B

     —         —           —         (2,437 )         —         (1,380 ) 

Class C

     —         —           —         (30,222 )         —         (14,341 ) 

Class E

     —         —           —         (173 )         —         (442 ) 

Class I

     —         —           —         (48,424 )         —         (94,330 ) 

Class R

     —         —           —         (908 )         —         (1,210 ) 

Class R6

     —         —           —         (62 )         —         (500 ) 

Class Y

     —         —           —         (14,849 )         —         (23,237 ) 

Total Distributions to Shareholders

     (31,144 )       (26,803 )         (487,842 )       (811,541 )         (42,519 )       (283,881 ) 

Capital Share Transactions

     62,853         197,484           (2,205,352 )       (2,708,175 )         1,599,773         1,503,559   

Net Increase (Decrease) in Net Assets

     (16,570 )       187,506           (3,243,764 )       (3,463,860 )         1,099,678         1,360,019   

Net Assets, Beginning of Period

     764,394         576,888           8,014,984         11,478,844           3,482,080         2,122,061   

Net Assets, End of Period

   $ 747,824       $ 764,394         $ 4,771,220       $ 8,014,984         $ 4,581,758       $ 3,482,080   

Undistributed (distributions in excess of) net investment income

   $ 2,690       $ 4,119         $ (7 )     $ (177 )       $ 14,595       $ (10,383 ) 

 

* Not shown due to rounding.

 

See Accompanying Notes to Financial Statements.

 

216   ANNUAL REPORT   2016  

Table of Contents

STATEMENTS OF CHANGES IN NET ASSETS

Ivy Funds

 

 

 

    Ivy Large Cap Growth Fund        Ivy Limited-Term Bond Fund        Ivy Managed
International
Opportunities Fund		  
(In thousands)   Year ended
3-31-16		      Year ended
3-31-15		        Year ended
3-31-16		      Year ended
3-31-15		        Year ended
3-31-16		      Year ended
3-31-15		  

INCREASE (DECREASE) IN NET ASSETS

                     

Operations:

                     

Net investment income (loss)

   $ (2,533 )     $ (3,163 )       $ 22,469       $ 22,335         $ 1,495       $ 3,369   

Net realized gain (loss) on investments

     78,209         129,243           (982 )       (7,519 )         18,643         6,888   

Net change in unrealized appreciation (depreciation)

     (113,833 )       120,609           (5,603 )       11,669           (41,815 )       2,248   

Net Increase (Decrease) in Net Assets Resulting from Operations

     (38,157 )       246,689           15,884         26,485           (21,677 )       12,505   

Distributions to Shareholders From:

                     

Net investment income:

                     

Class A

     —         —           (21,276 )       (21,105 )         (1,447 )       (3,196 ) 

Class B

     —         —           (73 )       (89 )         (1 )       (24 ) 

Class C

     —         —           (817 )       (809 )         (7 )       (52 ) 

Class E

     —         —           (49 )       (47 )         (3 )       (7 ) 

Class I

     —         —           (812 )       (809 )         (16 )       (20 ) 

Class R

     —         —           (8 )       (5 )         (3 )       (7 ) 

Class R6

     —         —           (49 )       (43 )         N/A         N/A   

Class Y

     —         —           (253 )       (338 )         (7 )       (26 ) 

Net realized gains:

                     

Class A

     (73,821 )       (70,570 )         —         —           —         —   

Class B

     (843 )       (925 )         —         —           —         —   

Class C

     (7,208 )       (6,725 )         —         —           —         —   

Class E

     (682 )       (578 )         —         —           —         —   

Class I

     (17,371 )       (19,854 )         —         —           —         —   

Class R

     (1,438 )       (2,067 )         —         —           —         —   

Class R6

     (404 )       (314 )         —         —           N/A         N/A   

Class Y

     (7,606 )       (9,260 )         —         —           —         —   

Total Distributions to Shareholders

     (109,373 )       (110,293 )         (23,337 )       (23,245 )         (1,484 )       (3,332 ) 

Capital Share Transactions

     209,856         88,029           110,560         30,070           (18,143 )       (36,714 ) 

Net Increase (Decrease) in Net Assets

     62,326         224,425           103,107         33,310           (41,304 )       (27,541 ) 

Net Assets, Beginning of Period

     1,690,378         1,465,953           1,707,392         1,674,082           239,033         266,574   

Net Assets, End of Period

   $ 1,752,704       $ 1,690,378         $ 1,810,499       $ 1,707,392         $ 197,729       $ 239,033   

Distributions in excess of net investment income

   $ (112 )     $ (1,393 )       $ —       $ —         $ (152 )     $ (166 ) 

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   217

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STATEMENTS OF CHANGES IN NET ASSETS

Ivy Funds

 

 

 

    Ivy Micro Cap Growth Fund        Ivy Mid Cap Growth Fund        Ivy Mid Cap Income
Opportunities Fund		  
(In thousands)   Year ended
3-31-16		      Year ended
3-31-15		        Year ended
3-31-16		      Year ended
3-31-15		        Year ended
3-31-16		      Period from
10-1-14
(commencement
of operations) to
3-31-15		  

INCREASE (DECREASE) IN NET ASSETS

                     

Operations:

                     

Net investment income (loss)

   $ (2,800 )     $ (3,563 )       $ (8,227 )     $ (18,967 )       $ 1,159       $ 414   

Net realized gain (loss) on investments

     1,232         (3,144 )         202,194         336,868           (4,648 )       51   

Net change in unrealized appreciation (depreciation)

     (48,177 )       (5,322 )         (737,452 )       195,497           5,563         3,789   

Net Increase (Decrease) in Net Assets Resulting from Operations

     (49,745 )       (12,029 )         (543,485 )       513,398           2,074         4,254   

Distributions to Shareholders From:

                     

Net investment income:

                     

Class A

     —         —           —         —           (873 )       (137 ) 

Class B

     —         —           —         —           N/A         N/A   

Class C

     —         —           —         —           (29 )       (5 ) 

Class E

     N/A         N/A           —         —           (32 )       (11 ) 

Class I

     —         —           —         —           (124 )       (50 ) 

Class R

     —         —           —         —           (23 )       (7 ) 

Class R6

     —         —           —         —           (44 )       (15 ) 

Class Y

     —         —           —         —           (60 )       (16 ) 

Net realized gains:

                     

Class A

     (6,478 )       (11,149 )         (85,052 )       (96,250 )         (106 )       (7 ) 

Class B

     (74 )       (107 )         (2,156 )       (2,584 )         N/A         N/A   

Class C

     (366 )       (547 )         (30,590 )       (33,651 )         (5 )       (1 ) 

Class E

     N/A         N/A           (706 )       (660 )         (3 )       — * 

Class I

     (531 )       (1,214 )         (201,843 )       (263,600 )         (10 )       (2 ) 

Class R

     (28 )       (39 )         (7,350 )       (9,167 )         (3 )       — * 

Class R6

     (99 )       (147 )         (5,460 )       (377 )         (4 )       (1 ) 

Class Y

     (52 )       (151 )         (53,369 )       (68,339 )         (6 )       (1 ) 

Total Distributions to Shareholders

     (7,628 )       (13,354 )         (386,526 )       (474,628 )         (1,322 )       (253 ) 

Capital Share Transactions

     (27,623 )       (4,586 )         (1,111,799 )       342,769           53,645         61,684   

Net Increase (Decrease) in Net Assets

     (84,996 )       (29,969 )         (2,041,810 )       381,539           54,397         65,685   

Net Assets, Beginning of Period

     236,567         266,536           5,161,096         4,779,557           65,685         —   

Net Assets, End of Period

   $ 151,571       $ 236,567         $ 3,119,286       $ 5,161,096         $ 120,082       $ 65,685   

Undistributed (distributions in excess of) net investment income

   $ (512 )     $ (836 )       $ (11,178 )     $ (2,964 )       $ (55 )     $ 175   

 

*Not shown due to rounding.

 

See Accompanying Notes to Financial Statements.

 

218   ANNUAL REPORT   2016  

Table of Contents

STATEMENTS OF CHANGES IN NET ASSETS

Ivy Funds

 

 

 

    Ivy Money Market Fund        Ivy Municipal Bond Fund        Ivy Municipal High Income Fund  
(In thousands)   Year ended
3-31-16		      Year ended
3-31-15		        Year ended
3-31-16		      Year ended
3-31-15		        Year ended
3-31-16		      Year ended
3-31-15		  

INCREASE (DECREASE) IN NET ASSETS

                     

Operations:

                     

Net investment income

   $ 38       $ 35         $ 4,294       $ 3,934         $ 55,049       $ 55,977   

Net realized gain (loss) on investments

     26         2           (681 )       (1,710 )         (1,675 )       (671 ) 

Net change in unrealized appreciation (depreciation)

     —         —           1,813         5,815           (5,755 )       67,300   

Net Increase in Net Assets Resulting from Operations

     64         37           5,426         8,039           47,619         122,606   

Distributions to Shareholders From:

                     

Net investment income:

                     

Class A

     (28 )       (25 )         (3,635 )       (3,340 )         (15,406 )       (16,273 ) 

Class B

     (1 )       (1 )         (34 )       (44 )         (473 )       (539 ) 

Class C

     (8 )       (8 )         (405 )       (405 )         (7,920 )       (8,385 ) 

Class E

     (1 )       (1 )         N/A         N/A           N/A         N/A   

Class I

     N/A         N/A           (168 )       (88 )         (29,645 )       (29,085 ) 

Class Y

     N/A         N/A           (17 )       (16 )         (791 )       (941 ) 

Net realized gains:

                     

Class A

     —         —           —         —           —         —   

Class B

     —         —           —         —           —         —   

Class C

     —         —           —         —           —         —   

Class E

     —         —           N/A         N/A           N/A         N/A   

Class I

     N/A         N/A           —         —           —         —   

Class Y

     N/A         N/A           —         —           —         —   

Total Distributions to Shareholders

     (38 )       (35 )         (4,259 )       (3,893 )         (54,235 )       (55,223 ) 

Capital Share Transactions

     62,924         (23,125 )         45,434         36,930           14,013         89,149   

Net Increase (Decrease) in Net Assets

     62,950         (23,123 )         46,601         41,076           7,397         156,532   

Net Assets, Beginning of Period

     160,632         183,755           180,174         139,098           1,354,196         1,197,664   

Net Assets, End of Period

   $ 223,582       $ 160,632         $ 226,775       $ 180,174         $ 1,361,593       $ 1,354,196   

Undistributed net investment income

   $ —       $ —         $ 146       $ 111         $ 3,350       $ 2,536   

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   219

Table of Contents

STATEMENTS OF CHANGES IN NET ASSETS

Ivy Funds

 

 

 

    Ivy Small Cap Growth Fund        Ivy Small Cap Value Fund        Ivy Tax-Managed
Equity Fund		  
(In thousands)   Year ended
3-31-16		      Year ended
3-31-15		        Year ended
3-31-16		      Year ended
3-31-15		        Year ended
3-31-16		      Year ended
3-31-15		  

INCREASE (DECREASE) IN NET ASSETS

                     

Operations:

                     

Net investment loss

   $ (8,627 )     $ (9,199 )       $ (1,188 )     $ (593 )       $ (374 )     $ (100 ) 

Net realized gain on investments

     80,827         80,622           6,136         39,504           192         2,720   

Net change in unrealized appreciation (depreciation)

     (173,688 )       10,673           (20,917 )       (22,143 )         (2,963 )       6,595   

Net Increase (Decrease) in Net Assets Resulting from Operations

     (101,488 )       82,096           (15,969 )       16,768           (3,145 )       9,215   

Distributions to Shareholders From:

                     

Net investment income:

                     

Class A

     —         —           —         —           —         —   

Class B

     —         —           —         —           —         —   

Class C

     —         —           —         —           —         —   

Class E

     —         —           —         —           N/A         N/A   

Class I

     (80 )       —           —         —           —         —   

Class R

     —         —           —         —           N/A         N/A   

Class R6

     (6 )       —           —         —           N/A         N/A   

Class Y

     —         —           —         —           —         —   

Net realized gains:

                     

Class A

     (46,569 )       (22,816 )         (26,283 )       (22,769 )         (1,904 )       (1,288 ) 

Class B

     (1,469 )       (820 )         (377 )       (355 )         (20 )       (31 ) 

Class C

     (27,685 )       (14,455 )         (2,245 )       (1,865 )         (73 )       (53 ) 

Class E

     (815 )       (338 )         (18 )       (14 )         N/A         N/A   

Class I

     (20,605 )       (11,560 )         (3,254 )       (3,369 )         (84 )       (46 ) 

Class R

     (5,989 )       (2,725 )         (318 )       (191 )         N/A         N/A   

Class R6

     (2,365 )       (1,117 )         (426 )       (308 )         N/A         N/A   

Class Y

     (25,481 )       (13,860 )         (980 )       (638 )         (14 )       (19 ) 

Total Distributions to Shareholders

     (131,064 )       (67,691 )         (33,901 )       (29,509 )         (2,095 )       (1,437 ) 

Capital Share Transactions

     25,570         (75,929 )         (6,886 )       13,297           45,598         26,771   

Net Increase (Decrease) in Net Assets

     (206,982 )       (61,524 )         (56,756 )       556           40,358         34,549   

Net Assets, Beginning of Period

     1,151,291         1,212,815           305,016         304,460           79,214         44,665   

Net Assets, End of Period

   $ 944,309       $ 1,151,291         $ 248,260       $ 305,016         $ 119,572       $ 79,214   

Undistributed (distributions in excess of) net investment income

   $ (8,559 )     $ (84 )       $ (29 )     $ 2,622         $ (62 )     $ —   

 

See Accompanying Notes to Financial Statements.

 

220   ANNUAL REPORT   2016  

Table of Contents

STATEMENTS OF CHANGES IN NET ASSETS

Ivy Funds

 

 

 

     Ivy Value Fund  
(In thousands)    Year ended
3-31-16		     Year ended
3-31-15		  

INCREASE (DECREASE) IN NET ASSETS

     

Operations:

     

Net investment income

    $ 1,703      $ 1,420   

Net realized gain on investments

      16,837        27,309   

Net change in unrealized depreciation

      (31,386 )      (13,125 ) 

Net Increase (Decrease) in Net Assets Resulting from Operations

      (12,846 )      15,604   

Distributions to Shareholders From:

     

Net investment income:

     

Class A

      (311 )      (647 ) 

Class B

      —        —   

Class C

      —        —   

Class E

      — *      (1 ) 

Class I

      (19 )      (107 ) 

Class R

      — *      — * 

Class R6

      (5 )      (2 ) 

Class Y

      (2 )      (25 ) 

Net realized gains:

     

Class A

      (29,495 )      (20,381 ) 

Class B

      (409 )      (343 ) 

Class C

      (2,225 )      (1,447 ) 

Class E

      (18 )      (11 ) 

Class I

      (986 )      (1,679 ) 

Class R

      (39 )      (25 ) 

Class R6

      (201 )      (37 ) 

Class Y

      (194 )      (642 ) 

Total Distributions to Shareholders

      (33,904 )      (25,347 ) 

Capital Share Transactions

      (14,299 )      74,526   

Net Increase (Decrease) in Net Assets

      (61,049 )      64,783   

Net Assets, Beginning of Period

      340,488        275,705   

Net Assets, End of Period

    $ 279,439      $ 340,488   

Undistributed net investment income

    $ 2,019      $ 4,403   

 

*Not shown due to rounding.

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   221

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY BOND FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income(1) 		     Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		    

Distributions

From Net
Investment
Income

     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

  

Year ended 3-31-2016

    $ 10.78       $ 0.24       $ (0.22 )    $ 0.02      $ (0.26 )    $ —      $ (0.26 ) 

Year ended 3-31-2015

      10.46         0.23         0.35        0.58        (0.26 )      —        (0.26 ) 

Year ended 3-31-2014

      10.71         0.24         (0.19 )      0.05        (0.30 )      —        (0.30 ) 

Year ended 3-31-2013

      10.44         0.26         0.39        0.65        (0.31 )      (0.07 )      (0.38 ) 

Year ended 3-31-2012

      10.10         0.17         0.51        0.68        (0.34 )      —        (0.34 ) 

Class B Shares(4)

  

Year ended 3-31-2016

      10.78         0.14         (0.22 )      (0.08 )      (0.16 )      —        (0.16 ) 

Year ended 3-31-2015

      10.46         0.13         0.35        0.48        (0.16 )      —        (0.16 ) 

Year ended 3-31-2014

      10.71         0.15         (0.20 )      (0.05 )      (0.20 )      —        (0.20 ) 

Year ended 3-31-2013

      10.44         0.15         0.40        0.55        (0.21 )      (0.07 )      (0.28 ) 

Year ended 3-31-2012

      10.10         0.06         0.51        0.57        (0.23 )      —        (0.23 ) 

Class C Shares

  

Year ended 3-31-2016

      10.78         0.16         (0.22 )      (0.06 )      (0.18 )      —        (0.18 ) 

Year ended 3-31-2015

      10.46         0.15         0.35        0.50        (0.18 )      —        (0.18 ) 

Year ended 3-31-2014

      10.71         0.17         (0.21 )      (0.04 )      (0.21 )      —        (0.21 ) 

Year ended 3-31-2013

      10.44         0.18         0.40        0.58        (0.24 )      (0.07 )      (0.31 ) 

Year ended 3-31-2012

      10.10         0.09         0.51        0.60        (0.26 )      —        (0.26 ) 

Class E Shares

  

Year ended 3-31-2016

      10.78         0.24         (0.23 )      0.01        (0.25 )      —        (0.25 ) 

Year ended 3-31-2015

      10.46         0.22         0.35        0.57        (0.25 )      —        (0.25 ) 

Year ended 3-31-2014

      10.71         0.24         (0.20 )      0.04        (0.29 )      —        (0.29 ) 

Year ended 3-31-2013

      10.44         0.25         0.40        0.65        (0.31 )      (0.07 )      (0.38 ) 

Year ended 3-31-2012

      10.10         0.17         0.51        0.68        (0.34 )      —        (0.34 ) 

Class I Shares

  

Year ended 3-31-2016

      10.78         0.27         (0.22 )      0.05        (0.29 )      —        (0.29 ) 

Year ended 3-31-2015

      10.46         0.26         0.35        0.61        (0.29 )      —        (0.29 ) 

Year ended 3-31-2014

      10.71         0.28         (0.20 )      0.08        (0.33 )      —        (0.33 ) 

Year ended 3-31-2013

      10.44         0.29         0.40        0.69        (0.35 )      (0.07 )      (0.42 ) 

Year ended 3-31-2012

      10.10         0.20         0.51        0.71        (0.37 )      —        (0.37 ) 

Class R Shares

  

Year ended 3-31-2016

      10.78         0.19         (0.21 )      (0.02 )      (0.22 )      —        (0.22 ) 

Year ended 3-31-2015

      10.46         0.20         0.35        0.55        (0.23 )      —        (0.23 ) 

Year ended 3-31-2014

      10.71         0.21         (0.19 )      0.02        (0.27 )      —        (0.27 ) 

Year ended 3-31-2013(5)

      10.69         0.02         0.08        0.10        (0.08 )      —        (0.08 ) 

Class R6 Shares

  

Year ended 3-31-2016

      10.78         0.29         (0.23 )      0.06        (0.30 )      —        (0.30 ) 

Year ended 3-31-2015(7)

      10.58         0.18         0.22        0.40        (0.20 )      —        (0.20 ) 

Class Y Shares

  

Year ended 3-31-2016

      10.78         0.25         (0.23 )      0.02        (0.26 )      —        (0.26 ) 

Year ended 3-31-2015

      10.46         0.23         0.35        0.58        (0.26 )      —        (0.26 ) 

Year ended 3-31-2014

      10.71         0.25         (0.20 )      0.05        (0.30 )      —        (0.30 ) 

Year ended 3-31-2013

      10.44         0.26         0.40        0.66        (0.32 )      (0.07 )      (0.39 ) 

Year ended 3-31-2012

      10.10         0.18         0.51        0.69        (0.35 )      —        (0.35 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) For the period from December 19, 2012 (commencement of operations of the class) through March 31, 2013.

 

(6) Annualized.

 

(7) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(8) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2013.

 

(9) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

222   ANNUAL REPORT   2016  

Table of Contents

 

 

 

     

Net Asset
Value,

End of Period

      Total
Return(2)		     Net Assets,
End of Period
(in millions)		     Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		    

Ratio of Net
Investment
Income to
Average Net
Assets
Including
Expense
Waiver

     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 10.54         0.21 %    $ 704        1.02 %      2.32 %      — %      — %      213 % 

Year ended 3-31-2015

      10.78         5.58        695        1.02        2.17        —       —       182   

Year ended 3-31-2014

      10.46         0.48        561        1.04        2.35        —       —       202   

Year ended 3-31-2013

      10.71         6.33        554        1.06        2.42        —       —       269   

Year ended 3-31-2012

      10.44         6.83        437        1.11        1.68        —       —       309   

Class B Shares(4)

  

Year ended 3-31-2016

      10.54         -0.73        7        1.96        1.37        —       —       213   

Year ended 3-31-2015

      10.78         4.56        6        2.00        1.19        —       —       182   

Year ended 3-31-2014

      10.46         -0.45        7        1.98        1.45        —       —       202   

Year ended 3-31-2013

      10.71         5.28        11        2.05        1.41        —       —       269   

Year ended 3-31-2012

      10.44         5.68        10        2.19        0.61        —       —       309   

Class C Shares

  

Year ended 3-31-2016

      10.54         -0.55        33        1.78        1.56        —       —       213   

Year ended 3-31-2015

      10.78         4.76        28        1.80        1.38        —       —       182   

Year ended 3-31-2014

      10.46         -0.31        21        1.82        1.61        —       —       202   

Year ended 3-31-2013

      10.71         5.55        39        1.79        1.67        —       —       269   

Year ended 3-31-2012

      10.44         6.03        40        1.84        0.92        —       —       309   

Class E Shares

  

Year ended 3-31-2016

      10.54         0.15        4        1.08        2.26        1.32        2.02        213   

Year ended 3-31-2015

      10.78         5.45        4        1.14        2.05        1.35        1.84        182   

Year ended 3-31-2014

      10.46         0.38        4        1.14        2.26        1.35        2.05        202   

Year ended 3-31-2013

      10.71         6.25        5        1.14        2.33        1.35        2.12        269   

Year ended 3-31-2012

      10.44         6.79        4        1.14        1.66        1.42        1.38        309   

Class I Shares

  

Year ended 3-31-2016

      10.54         0.49        14        0.74        2.58        —       —       213   

Year ended 3-31-2015

      10.78         5.90        7        0.74        2.44        —       —       182   

Year ended 3-31-2014

      10.46         0.77        4        0.76        2.65        —       —       202   

Year ended 3-31-2013

      10.71         6.67        6        0.76        2.68        —       —       269   

Year ended 3-31-2012

      10.44         7.19        4        0.77        1.96        —       —       309   

Class R Shares

  

Year ended 3-31-2016

      10.54         -0.11        3        1.34        1.89        —       —       213   

Year ended 3-31-2015

      10.78         5.27        — *      1.32        1.87        —       —       182   

Year ended 3-31-2014

      10.46         0.18        — *      1.35        2.04        —       —       202   

Year ended 3-31-2013(5)

      10.71         0.96        — *      1.30 (6)      0.82 (6)      —       —       269 (8) 

Class R6 Shares

  

Year ended 3-31-2016

      10.54         0.64        2        0.59        2.75        —       —       213   

Year ended 3-31-2015(7)

      10.78         3.81        1        0.58 (6)      2.54 (6)      —       —       182 (9) 

Class Y Shares

  

Year ended 3-31-2016

      10.54         0.26        3        0.98        2.35        —       —       213   

Year ended 3-31-2015

      10.78         5.62        3        0.99        2.20        —       —       182   

Year ended 3-31-2014

      10.46         0.51        3        1.00        2.42        —       —       202   

Year ended 3-31-2013

      10.71         6.39        5        1.00        2.49        —       —       269   

Year ended 3-31-2012

      10.44         6.91        8        1.03        1.78        —       —       309   

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   223

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY CORE EQUITY FUND

 

     

Net Asset
Value,
Beginning of
Period

      Net
Investment
Income
(Loss)(1) 		    Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		    

Distributions

From Net
Investment
Income

     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

  

Year ended 3-31-2016

    $ 14.29       $ 0.02      $ (0.60 )    $ (0.58 )    $ — *    $ (0.98 )    $ (0.98 ) 

Year ended 3-31-2015

      14.04         0.02        1.33        1.35        —        (1.10 )      (1.10 ) 

Year ended 3-31-2014

      12.15         0.05        2.67        2.72        (0.04 )      (0.79 )      (0.83 ) 

Year ended 3-31-2013

      10.91         0.04        1.33        1.37        (0.05 )      (0.08 )      (0.13 ) 

Year ended 3-31-2012

      10.68         0.02        0.58        0.60        —        (0.37 )      (0.37 ) 

Class B Shares(4)

  

Year ended 3-31-2016

      12.36         (0.09 )      (0.52 )      (0.61 )      —        (0.90 )      (0.90 ) 

Year ended 3-31-2015

      12.32         (0.10 )      1.16        1.06        —        (1.02 )      (1.02 ) 

Year ended 3-31-2014

      10.78         (0.07 )      2.36        2.29        —        (0.75 )      (0.75 ) 

Year ended 3-31-2013

      9.75         (0.07 )      1.18        1.11        —        (0.08 )      (0.08 ) 

Year ended 3-31-2012

      9.59         (0.08 )      0.52        0.44        —        (0.28 )      (0.28 ) 

Class C Shares

  

Year ended 3-31-2016

      12.71         (0.07 )      (0.54 )      (0.61 )      —        (0.91 )      (0.91 ) 

Year ended 3-31-2015

      12.63         (0.08 )      1.19        1.11        —        (1.03 )      (1.03 ) 

Year ended 3-31-2014

      11.03         (0.05 )      2.41        2.36        —        (0.76 )      (0.76 ) 

Year ended 3-31-2013

      9.95         (0.04 )      1.20        1.16        —        (0.08 )      (0.08 ) 

Year ended 3-31-2012

      9.77         (0.06 )      0.55        0.49        —        (0.31 )      (0.31 ) 

Class E Shares

  

Year ended 3-31-2016

      14.23         0.00 *      (0.60 )      (0.60 )      —        (0.96 )      (0.96 ) 

Year ended 3-31-2015

      14.00         (0.01 )      1.32        1.31        —        (1.08 )      (1.08 ) 

Year ended 3-31-2014

      12.12         0.02        2.67        2.69        (0.02 )      (0.79 )      (0.81 ) 

Year ended 3-31-2013

      10.89         0.03        1.32        1.35        (0.04 )      (0.08 )      (0.12 ) 

Year ended 3-31-2012

      10.67         0.01        0.59        0.60        —        (0.38 )      (0.38 ) 

Class I Shares

  

Year ended 3-31-2016

      15.67         0.07        (0.66 )      (0.59 )      (0.02 )      (1.01 )      (1.03 ) 

Year ended 3-31-2015

      15.29         0.07        1.45        1.52        (0.03 )      (1.11 )      (1.14 ) 

Year ended 3-31-2014

      13.15         0.09        2.91        3.00        (0.07 )      (0.79 )      (0.86 ) 

Year ended 3-31-2013

      11.78         0.08        1.44        1.52        (0.07 )      (0.08 )      (0.15 ) 

Year ended 3-31-2012

      11.50         0.05        0.64        0.69        —        (0.41 )      (0.41 ) 

Class R Shares

  

Year ended 3-31-2016

      14.23         (0.02 )      (0.60 )      (0.62 )      —        (0.94 )      (0.94 ) 

Year ended 3-31-2015

      14.01         (0.03 )      1.31        1.28        —        (1.06 )      (1.06 ) 

Year ended 3-31-2014

      12.13         0.01        2.67        2.68        (0.01 )      (0.79 )      (0.80 ) 

Year ended 3-31-2013(5)

      11.15         0.00        0.98        0.98        —        —        —   

Class R6 Shares

  

Year ended 3-31-2016

      15.69         0.09        (0.67 )      (0.58 )      (0.02 )      (1.02 )      (1.04 ) 

Year ended 3-31-2015(7)

      15.69         0.06        1.06        1.12        (0.01 )      (1.11 )      (1.12 ) 

Class Y Shares

  

Year ended 3-31-2016

      15.29         0.07        (0.64 )      (0.57 )      (0.02 )      (1.01 )      (1.03 ) 

Year ended 3-31-2015

      14.94         0.07        1.42        1.49        (0.03 )      (1.11 )      (1.14 ) 

Year ended 3-31-2014

      12.87         0.09        2.84        2.93        (0.07 )      (0.79 )      (0.86 ) 

Year ended 3-31-2013

      11.54         0.06        1.40        1.46        (0.05 )      (0.08 )      (0.13 ) 

Year ended 3-31-2012

      11.27         0.03        0.63        0.66        —        (0.39 )      (0.39 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) For the period from December 19, 2012 (commencement of operations of the class) through March 31, 2013.

 

(6) Annualized.

 

(7) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(8) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2013.

 

(9) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

224   ANNUAL REPORT   2016  

Table of Contents

 

 

 

     

Net Asset
Value,

End of Period

      Total
Return(2)		     Net Assets,
End of Period
(in millions)		     Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		     Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets
Including
Expense
Waiver		     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 12.73         -4.22 %    $ 546        1.15 %      0.15 %      1.18 %      0.12 %      62 % 

Year ended 3-31-2015

      14.29         9.86        611        1.15        0.13        1.17        0.11        65   

Year ended 3-31-2014

      14.04         22.76        499        1.15        0.35        1.20        0.30        61   

Year ended 3-31-2013

      12.15         12.66        320        1.23        0.35        1.26        0.32        60   

Year ended 3-31-2012

      10.91         6.16        196        1.30        0.15        —       —       65   

Class B Shares(4)

  

Year ended 3-31-2016

      10.85         -5.18        9        2.09        -0.79        —       —       62   

Year ended 3-31-2015

      12.36         8.80        11        2.08        -0.79        —       —       65   

Year ended 3-31-2014

      12.32         21.62        11        2.12        -0.62        —       —       61   

Year ended 3-31-2013

      10.78         11.49        10        2.24        -0.68        —       —       60   

Year ended 3-31-2012

      9.75         5.05        5        2.36        -0.89        —       —       65   

Class C Shares

  

Year ended 3-31-2016

      11.19         -5.00        129        1.91        -0.61        —       —       62   

Year ended 3-31-2015

      12.71         9.04        160        1.90        -0.62        —       —       65   

Year ended 3-31-2014

      12.63         21.79        144        1.94        -0.44        —       —       61   

Year ended 3-31-2013

      11.03         11.76        115        2.02        -0.43        —       —       60   

Year ended 3-31-2012

      9.95         5.46        99        2.08        -0.61        —       —       65   

Class E Shares

  

Year ended 3-31-2016

      12.67         -4.39        10        1.29        0.02        1.43        -0.12        62   

Year ended 3-31-2015

      14.23         9.60        10        1.35        -0.06        1.43        -0.14        65   

Year ended 3-31-2014

      14.00         22.57        7        1.35        0.15        1.51        -0.01        61   

Year ended 3-31-2013

      12.12         12.53        4        1.35        0.25        1.61        -0.01        60   

Year ended 3-31-2012

      10.89         6.13        3        1.35        0.10        1.72        -0.27        65   

Class I Shares

  

Year ended 3-31-2016

      14.05         -3.93        172        0.84        0.46        0.90        0.40        62   

Year ended 3-31-2015

      15.67         10.14        234        0.84        0.45        0.90        0.39        65   

Year ended 3-31-2014

      15.29         23.18        153        0.84        0.63        0.91        0.56        61   

Year ended 3-31-2013

      13.15         13.08        60        0.91        0.69        0.93        0.67        60   

Year ended 3-31-2012

      11.78         6.57        28        0.94        0.47        —       —       65   

Class R Shares

  

Year ended 3-31-2016

      12.67         -4.53        2        1.50        -0.18        —       —       62   

Year ended 3-31-2015

      14.23         9.40        2        1.50        -0.22        —       —       65   

Year ended 3-31-2014

      14.01         22.41        2        1.50        0.04        —       —       61   

Year ended 3-31-2013(5)

      12.13         8.79        — *      1.50 (6)      -0.13 (6)      —       —       60 (8) 

Class R6 Shares

  

Year ended 3-31-2016

      14.07         -3.84        149        0.75        0.63        —       —       62   

Year ended 3-31-2015(7)

      15.69         7.39        4        0.75 (6)      0.60 (6)      —       —       65 (9) 

Class Y Shares

  

Year ended 3-31-2016

      13.69         -3.91        113        0.84        0.46        1.15        0.15        62   

Year ended 3-31-2015

      15.29         10.18        105        0.84        0.45        1.15        0.14        65   

Year ended 3-31-2014

      14.94         23.14        68        0.84        0.64        1.16        0.32        61   

Year ended 3-31-2013

      12.87         12.82        27        1.09        0.48        1.18        0.40        60   

Year ended 3-31-2012

      11.54         6.35        18        1.20        0.27        —       —       65   

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   225

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY CUNDILL GLOBAL VALUE FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income
(Loss)(1) 		    Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		    

Distributions

From Net
Investment
Income

     Distributions
From Net
Realized
Gains		      Total
Distributions		  

Class A Shares

  

Year ended 3-31-2016

    $ 16.52       $ 0.13      $ (2.19 )    $ (2.06 )    $ (0.13 )    $ —       $ (0.13 ) 

Year ended 3-31-2015

      17.96         0.04        (1.48 )      (1.44 )      —        —         —   

Year ended 3-31-2014

      14.68         (0.03 )      3.32        3.29        (0.01 )      —         (0.01 ) 

Year ended 3-31-2013

      13.44         0.01        1.23        1.24        —        —         —   

Year ended 3-31-2012

      14.00         0.02        (0.57 )      (0.55 )      (0.01 )      —         (0.01 ) 

Class B Shares(4)

  

Year ended 3-31-2016

      15.20         (0.04 )      (2.01 )      (2.05 )      —        —         —   

Year ended 3-31-2015

      16.72         (0.15 )      (1.37 )      (1.52 )      —        —         —   

Year ended 3-31-2014

      13.81         (0.19 )      3.10        2.91        —        —         —   

Year ended 3-31-2013

      12.78         (0.11 )      1.14        1.03        —        —         —   

Year ended 3-31-2012

      13.43         (0.09 )      (0.56 )      (0.65 )      —        —         —   

Class C Shares

  

Year ended 3-31-2016

      15.56         0.04        (2.06 )      (2.02 )      (0.04 )      —         (0.04 ) 

Year ended 3-31-2015

      17.03         (0.07 )      (1.40 )      (1.47 )      —        —         —   

Year ended 3-31-2014

      13.99         (0.12 )      3.16        3.04        —        —         —   

Year ended 3-31-2013

      12.88         (0.05 )      1.16        1.11        —        —         —   

Year ended 3-31-2012

      13.48         (0.05 )      (0.55 )      (0.60 )      —        —         —   

Class E Shares

  

Year ended 3-31-2016

      16.60         0.15        (2.20 )      (2.05 )      (0.13 )      —         (0.13 ) 

Year ended 3-31-2015

      18.05         0.04        (1.49 )      (1.45 )      —        —         —   

Year ended 3-31-2014

      14.78         (0.03 )      3.34        3.31        (0.04 )      —         (0.04 ) 

Year ended 3-31-2013

      13.49         0.04        1.25        1.29        —        —         —   

Year ended 3-31-2012

      14.04         0.05        (0.57 )      (0.52 )      (0.03 )      —         (0.03 ) 

Class I Shares

  

Year ended 3-31-2016

      16.94         0.21        (2.25 )      (2.04 )      (0.26 )      —         (0.26 ) 

Year ended 3-31-2015

      18.33         0.12        (1.51 )      (1.39 )      —        —         —   

Year ended 3-31-2014

      14.98         0.05        3.39        3.44        (0.09 )      —         (0.09 ) 

Year ended 3-31-2013

      13.64         0.09        1.25        1.34        —        —         —   

Year ended 3-31-2012

      14.23         0.10        (0.59 )      (0.49 )      (0.10 )      —         (0.10 ) 

Class R Shares

  

Year ended 3-31-2016

      16.47         0.11        (2.17 )      (2.06 )      (0.09 )      —         (0.09 ) 

Year ended 3-31-2015

      17.94         0.02        (1.49 )      (1.47 )      —        —         —   

Year ended 3-31-2014

      14.68         (0.05 )      3.32        3.27        (0.01 )      —         (0.01 ) 

Year ended 3-31-2013(5)

      13.62         (0.01 )      1.07        1.06        —        —         —   

Class R6 Shares

  

Year ended 3-31-2016

      16.95         0.24        (2.25 )      (2.01 )      (0.26 )      —         (0.26 ) 

Year ended 3-31-2015(7)

      18.57         0.08        (1.70 )      (1.62 )      —        —         —   

Class Y Shares

  

Year ended 3-31-2016

      16.77         0.17        (2.23 )      (2.06 )      (0.18 )      —         (0.18 ) 

Year ended 3-31-2015

      18.20         0.07        (1.50 )      (1.43 )      —        —         —   

Year ended 3-31-2014

      14.86         (0.01 )      3.39        3.38        (0.04 )      —         (0.04 ) 

Year ended 3-31-2013

      13.56         0.09        1.21        1.30        —        —         —   

Year ended 3-31-2012

      14.15         0.11        (0.59 )      (0.48 )      (0.11 )      —         (0.11 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) For the period from December 19, 2012 (commencement of operations of the class) through March 31, 2013.

 

(6) Annualized.

 

(7) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(8) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2013.

 

(9) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

226   ANNUAL REPORT   2016  

Table of Contents

 

 

 

     

Net Asset
Value,

End of Period

      Total
Return(2)		     Net Assets,
End of Period
(in millions)		     Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		         
Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets
Including
Expense
Waiver		     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 14.33         -12.51 %    $ 192        1.60 %      0.86 %      1.75 %      0.71 %      18 % 

Year ended 3-31-2015

      16.52         -8.02        288        1.56        0.24        1.70        0.10        28   

Year ended 3-31-2014

      17.96         22.41        332        1.61        -0.20        1.75        -0.34        47   

Year ended 3-31-2013

      14.68         9.23        196        1.86        0.05        1.91        —       26   

Year ended 3-31-2012

      13.44         -3.93        200        1.86        0.16        —       —       38   

Class B Shares(4)

  

Year ended 3-31-2016

      13.15         -13.49        1        2.77        -0.30        2.92        -0.45        18   

Year ended 3-31-2015

      15.20         -9.09        2        2.73        -0.91        2.87        -1.05        28   

Year ended 3-31-2014

      16.72         21.07        4        2.72        -1.23        2.86        -1.37        47   

Year ended 3-31-2013

      13.81         8.06        6        2.94        -0.92        2.99        -0.97        26   

Year ended 3-31-2012

      12.78         -4.84        10        2.81        -0.76        —       —       38   

Class C Shares

  

Year ended 3-31-2016

      13.50         -12.98        15        2.20        0.25        2.35        0.10        18   

Year ended 3-31-2015

      15.56         -8.63        19        2.19        -0.39        2.33        -0.53        28   

Year ended 3-31-2014

      17.03         21.73        24        2.22        -0.78        2.36        -0.92        47   

Year ended 3-31-2013

      13.99         8.62        21        2.39        -0.44        2.44        -0.49        26   

Year ended 3-31-2012

      12.88         -4.45        26        2.42        -0.39        —       —       38   

Class E Shares

  

Year ended 3-31-2016

      14.42         -12.39        1        1.50        0.96        2.13        0.33        18   

Year ended 3-31-2015

      16.60         -8.03        1        1.59        0.21        2.00        -0.20        28   

Year ended 3-31-2014

      18.05         22.43        1        1.59        -0.17        2.08        -0.65        47   

Year ended 3-31-2013

      14.78         9.56        1        1.59        0.28        2.35        -0.48        26   

Year ended 3-31-2012

      13.49         -3.66        1        1.59        0.42        2.36        -0.35        38   

Class I Shares

  

Year ended 3-31-2016

      14.64         -12.11        4        1.14        1.32        1.29        1.17        18   

Year ended 3-31-2015

      16.94         -7.58        5        1.12        0.64        1.26        0.50        28   

Year ended 3-31-2014

      18.33         22.98        7        1.14        0.27        1.28        0.13        47   

Year ended 3-31-2013

      14.98         9.82        4        1.24        0.70        1.29        0.65        26   

Year ended 3-31-2012

      13.64         -3.32        5        1.27        0.75        —       —       38   

Class R Shares

  

Year ended 3-31-2016

      14.32         -12.53        — *      1.73        0.73        1.88        0.58        18   

Year ended 3-31-2015

      16.47         -8.19        — *      1.72        0.09        1.86        -0.05        28   

Year ended 3-31-2014

      17.94         22.30        — *      1.72        -0.28        1.86        -0.42        47   

Year ended 3-31-2013(5)

      14.68         7.78        — *      1.66 (6)      -0.37 (6)      1.71 (6)      -0.42 (6)      26 (8) 

Class R6 Shares

  

Year ended 3-31-2016

      14.68         -11.92        1        0.98        1.48        1.13        1.33        18   

Year ended 3-31-2015(7)

      16.95         -8.72        1        0.95 (6)      0.72 (6)      1.09 (6)      0.58 (6)      28 (9) 

Class Y Shares

  

Year ended 3-31-2016

      14.53         -12.32        2        1.40        1.13        1.55        0.98        18   

Year ended 3-31-2015

      16.77         -7.86        3        1.38        0.41        1.52        0.27        28   

Year ended 3-31-2014

      18.20         22.76        4        1.35        -0.04        1.49        -0.18        47   

Year ended 3-31-2013

      14.86         9.59        4        1.47        0.74        1.63        0.58        26   

Year ended 3-31-2012

      13.56         -3.24        13        1.20        0.85        1.54        0.51        38   

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   227

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY DIVIDEND OPPORTUNITIES FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income(1) 		     Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		    

Distributions

From Net
Investment
Income

     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

  

Year ended 3-31-2016

    $ 19.55       $ 0.17       $ (1.04 )    $ (0.87 )    $ (0.14 )    $ (1.55 )    $ (1.69 ) 

Year ended 3-31-2015

      20.27         0.22         1.39        1.61        (0.22 )      (2.11 )      (2.33 ) 

Year ended 3-31-2014

      17.20         0.19         3.33        3.52        (0.16 )      (0.29 )      (0.45 ) 

Year ended 3-31-2013

      15.70         0.23         1.48        1.71        (0.21 )      —        (0.21 ) 

Year ended 3-31-2012

      16.14         0.18         (0.44 )      (0.26 )      (0.18 )      —        (0.18 ) 

Class B Shares(4)

  

Year ended 3-31-2016

      19.22         0.03         (1.02 )      (0.99 )      (0.01 )      (1.54 )      (1.55 ) 

Year ended 3-31-2015

      19.97         0.06         1.37        1.43        (0.07 )      (2.11 )      (2.18 ) 

Year ended 3-31-2014

      16.99         0.05         3.27        3.32        (0.05 )      (0.29 )      (0.34 ) 

Year ended 3-31-2013

      15.54         0.09         1.48        1.57        (0.12 )      —        (0.12 ) 

Year ended 3-31-2012

      15.98         0.04         (0.43 )      (0.39 )      (0.05 )      —        (0.05 ) 

Class C Shares

  

Year ended 3-31-2016

      19.31         0.05         (1.03 )      (0.98 )      (0.02 )      (1.55 )      (1.57 ) 

Year ended 3-31-2015

      20.05         0.08         1.38        1.46        (0.09 )      (2.11 )      (2.20 ) 

Year ended 3-31-2014

      17.05         0.07         3.29        3.36        (0.07 )      (0.29 )      (0.36 ) 

Year ended 3-31-2013

      15.59         0.11         1.49        1.60        (0.14 )      —        (0.14 ) 

Year ended 3-31-2012

      16.03         0.07         (0.43 )      (0.36 )      (0.08 )      —        (0.08 ) 

Class E Shares

  

Year ended 3-31-2016

      19.48         0.17         (1.03 )      (0.86 )      (0.13 )      (1.55 )      (1.68 ) 

Year ended 3-31-2015

      20.21         0.19         1.39        1.58        (0.20 )      (2.11 )      (2.31 ) 

Year ended 3-31-2014

      17.16         0.17         3.32        3.49        (0.15 )      (0.29 )      (0.44 ) 

Year ended 3-31-2013

      15.66         0.21         1.49        1.70        (0.20 )      —        (0.20 ) 

Year ended 3-31-2012

      16.10         0.17         (0.44 )      (0.27 )      (0.17 )      —        (0.17 ) 

Class I Shares

  

Year ended 3-31-2016

      19.61         0.23         (1.04 )      (0.81 )      (0.18 )      (1.55 )      (1.73 ) 

Year ended 3-31-2015

      20.33         0.28         1.40        1.68        (0.29 )      (2.11 )      (2.40 ) 

Year ended 3-31-2014

      17.25         0.26         3.33        3.59        (0.22 )      (0.29 )      (0.51 ) 

Year ended 3-31-2013

      15.73         0.28         1.49        1.77        (0.25 )      —        (0.25 ) 

Year ended 3-31-2012

      16.17         0.24         (0.45 )      (0.21 )      (0.23 )      —        (0.23 ) 

Class R Shares

  

Year ended 3-31-2016

      19.53         0.12         (1.03 )      (0.91 )      (0.10 )      (1.55 )      (1.65 ) 

Year ended 3-31-2015

      20.25         0.16         1.40        1.56        (0.17 )      (2.11 )      (2.28 ) 

Year ended 3-31-2014

      17.19         0.14         3.33        3.47        (0.12 )      (0.29 )      (0.41 ) 

Year ended 3-31-2013(5)

      15.79         0.01         1.39        1.40        —        —        —   

Class R6 Shares

  

Year ended 3-31-2016

      19.64         0.25         (1.03 )      (0.78 )      (0.21 )      (1.55 )      (1.76 ) 

Year ended 3-31-2015(7)

      20.64         0.20         1.15        1.35        (0.24 )      (2.11 )      (2.35 ) 

Class Y Shares

  

Year ended 3-31-2016

      19.58         0.19         (1.04 )      (0.85 )      (0.15 )      (1.55 )      (1.70 ) 

Year ended 3-31-2015

      20.30         0.23         1.40        1.63        (0.24 )      (2.11 )      (2.35 ) 

Year ended 3-31-2014

      17.23         0.21         3.33        3.54        (0.18 )      (0.29 )      (0.47 ) 

Year ended 3-31-2013

      15.72         0.24         1.50        1.74        (0.23 )      —        (0.23 ) 

Year ended 3-31-2012

      16.16         0.19         (0.44 )      (0.25 )      (0.19 )      —        (0.19 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) For the period from December 19, 2012 (commencement of operations of the class) through March 31, 2013.

 

(6) Annualized.

 

(7) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(8) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2013.

 

(9) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

228   ANNUAL REPORT   2016  

Table of Contents

 

 

 

     

Net Asset
Value,

End of Period

      Total
Return(2)		     Net Assets,
End of Period
(in millions)		     Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		    

Ratio of Net
Investment
Income to
Average Net
Assets
Including
Expense
Waiver

     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 16.99         -4.65 %    $ 275        1.25 %      0.94 %      — %      — %      45 % 

Year ended 3-31-2015

      19.55         8.19        322        1.24        1.07        —       —       48   

Year ended 3-31-2014

      20.27         20.70        291        1.27        1.03        —       —       43   

Year ended 3-31-2013

      17.20         11.06        246        1.28        1.43        —       —       45   

Year ended 3-31-2012

      15.70         -1.54        261        1.29        1.21        —       —       37   

Class B Shares(4)

  

Year ended 3-31-2016

      16.68         -5.32        8        2.03        0.17        —       —       45   

Year ended 3-31-2015

      19.22         7.33        12        2.01        0.30        —       —       48   

Year ended 3-31-2014

      19.97         19.70        13        2.05        0.25        —       —       43   

Year ended 3-31-2013

      16.99         10.10        11        2.13        0.60        —       —       45   

Year ended 3-31-2012

      15.54         -2.35        15        2.18        0.30        —       —       37   

Class C Shares

  

Year ended 3-31-2016

      16.76         -5.26        44        1.93        0.27        —       —       45   

Year ended 3-31-2015

      19.31         7.46        54        1.91        0.40        —       —       48   

Year ended 3-31-2014

      20.05         19.85        47        1.93        0.37        —       —       43   

Year ended 3-31-2013

      17.05         10.32        39        1.97        0.73        —       —       45   

Year ended 3-31-2012

      15.59         -2.23        43        2.00        0.48        —       —       37   

Class E Shares

  

Year ended 3-31-2016

      16.94         -4.59        5        1.28        0.91        1.56        0.63        45   

Year ended 3-31-2015

      19.48         8.01        5        1.37        0.94        1.58        0.73        48   

Year ended 3-31-2014

      20.21         20.52        4        1.37        0.93        1.66        0.64        43   

Year ended 3-31-2013

      17.16         11.00        4        1.36        1.31        1.80        0.87        45   

Year ended 3-31-2012

      15.66         -1.61        3        1.37        1.14        1.92        0.59        37   

Class I Shares

  

Year ended 3-31-2016

      17.07         -4.27        22        0.94        1.25        —       —       45   

Year ended 3-31-2015

      19.61         8.50        23        0.93        1.38        —       —       48   

Year ended 3-31-2014

      20.33         21.06        19        0.94        1.36        —       —       43   

Year ended 3-31-2013

      17.25         11.45        15        0.93        1.74        —       —       45   

Year ended 3-31-2012

      15.73         -1.18        14        0.94        1.60        —       —       37   

Class R Shares

  

Year ended 3-31-2016

      16.97         -4.87        — *      1.53        0.66        —       —       45   

Year ended 3-31-2015

      19.53         7.90        — *      1.52        0.80        —       —       48   

Year ended 3-31-2014

      20.25         20.29        — *      1.54        0.76        —       —       43   

Year ended 3-31-2013(5)

      17.19         8.93        — *      1.51 (6)      0.23 (6)      —       —       45 (8) 

Class R6 Shares

  

Year ended 3-31-2016

      17.10         -4.16        1        0.79        1.39        —       —       45   

Year ended 3-31-2015(7)

      19.64         6.76        — *      0.79 (6)      1.46 (6)      —       —       48 (9) 

Class Y Shares

  

Year ended 3-31-2016

      17.03         -4.53        7        1.19        1.01        —       —       45   

Year ended 3-31-2015

      19.58         8.25        10        1.18        1.13        —       —       48   

Year ended 3-31-2014

      20.30         20.74        11        1.19        1.11        —       —       43   

Year ended 3-31-2013

      17.23         11.19        12        1.18        1.51        —       —       45   

Year ended 3-31-2012

      15.72         -1.43        15        1.19        1.27        —       —       37   

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   229

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY EMERGING MARKETS EQUITY FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income
(Loss)(1) 		    Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		    

Distributions

From Net
Investment
Income

     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

  

Year ended 3-31-2016

    $ 16.04       $ 0.00 *    $ (2.33 )    $ (2.33 )    $ (0.12 )    $ —      $ (0.12 ) 

Year ended 3-31-2015

      15.04         0.04        1.08        1.12        (0.12 )      —        (0.12 ) 

Year ended 3-31-2014

      13.88         0.02        1.22        1.24        (0.08 )      —        (0.08 ) 

Year ended 3-31-2013

      13.98         0.03        (0.03 )      0.00        (0.10 )      —        (0.10 ) 

Year ended 3-31-2012

      16.94         0.01        (2.39 )      (2.38 )      (0.06 )      (0.52 )      (0.58 ) 

Class B Shares(4)

  

Year ended 3-31-2016

      13.48         (0.12 )      (1.95 )      (2.07 )      (0.07 )      —        (0.07 ) 

Year ended 3-31-2015

      12.66         (0.10 )      0.92        0.82        —        —        —   

Year ended 3-31-2014

      11.78         (0.12 )      1.00        0.88        —        —        —   

Year ended 3-31-2013

      11.92         (0.10 )      (0.04 )      (0.14 )      — *      —        — * 

Year ended 3-31-2012

      14.64         (0.13 )      (2.07 )      (2.20 )      —        (0.52 )      (0.52 ) 

Class C Shares

  

Year ended 3-31-2016

      14.05         (0.11 )      (2.03 )      (2.14 )      (0.07 )      —        (0.07 ) 

Year ended 3-31-2015

      13.20         (0.09 )      0.95        0.86        (0.01 )      —        (0.01 ) 

Year ended 3-31-2014

      12.23         (0.07 )      1.06        0.99        (0.02 )      —        (0.02 ) 

Year ended 3-31-2013

      12.36         (0.06 )      (0.03 )      (0.09 )      (0.04 )      —        (0.04 ) 

Year ended 3-31-2012

      15.10         (0.08 )      (2.14 )      (2.22 )      —        (0.52 )      (0.52 ) 

Class E Shares(5)

  

Year ended 3-31-2016

      16.23         0.03        (2.37 )      (2.34 )      (0.13 )      —        (0.13 ) 

Year ended 3-31-2015

      15.23         0.05        1.10        1.15        (0.15 )      —        (0.15 ) 

Year ended 3-31-2014

      14.04         0.06        1.25        1.31        (0.12 )      —        (0.12 ) 

Year ended 3-31-2013

      14.12         0.09        (0.03 )      0.06        (0.14 )      —        (0.14 ) 

Year ended 3-31-2012

      17.15         0.06        (2.41 )      (2.35 )      (0.16 )      (0.52 )      (0.68 ) 

Class I Shares

  

Year ended 3-31-2016

      16.45         0.05        (2.40 )      (2.35 )      (0.14 )      —        (0.14 ) 

Year ended 3-31-2015

      15.43         0.08        1.11        1.19        (0.17 )      —        (0.17 ) 

Year ended 3-31-2014

      14.23         0.09        1.26        1.35        (0.15 )      —        (0.15 ) 

Year ended 3-31-2013

      14.30         0.10        (0.02 )      0.08        (0.15 )      —        (0.15 ) 

Year ended 3-31-2012

      17.39         0.08        (2.46 )      (2.38 )      (0.19 )      (0.52 )      (0.71 ) 

Class R Shares

  

Year ended 3-31-2016

      16.01         (0.05 )      (2.32 )      (2.37 )      (0.11 )      —        (0.11 ) 

Year ended 3-31-2015

      15.02         (0.02 )      1.09        1.07        (0.08 )      —        (0.08 ) 

Year ended 3-31-2014

      13.87         (0.01 )      1.23        1.22        (0.07 )      —        (0.07 ) 

Year ended 3-31-2013(6)

      14.07         (0.04 )      (0.16 )      (0.20 )      —        —        —   

Class R6 Shares

  

Year ended 3-31-2016

      16.50         0.06        (2.41 )      (2.35 )      (0.14 )      —        (0.14 ) 

Year ended 3-31-2015(8)

      16.41         (0.03 )      0.26        0.23        (0.14 )      —        (0.14 ) 

Class Y Shares

  

Year ended 3-31-2016

      16.33         0.05        (2.42 )      (2.37 )      (0.12 )      —        (0.12 ) 

Year ended 3-31-2015

      15.33         0.03        1.10        1.13        (0.13 )      —        (0.13 ) 

Year ended 3-31-2014

      14.13         0.05        1.26        1.31        (0.11 )      —        (0.11 ) 

Year ended 3-31-2013

      14.22         0.09        (0.05 )      0.04        (0.13 )      —        (0.13 ) 

Year ended 3-31-2012

      17.25         0.05        (2.44 )      (2.39 )      (0.12 )      (0.52 )      (0.64 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) Class share is closed to investment.

 

(6) For the period from December 19, 2012 (commencement of operations of the class) through March 31, 2013.

 

(7) Annualized.

 

(8) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(9) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2013.

 

(10) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

230   ANNUAL REPORT   2016  

Table of Contents

 

 

 

     

Net Asset
Value,

End of Period

      Total
Return(2)		     Net Assets,
End of Period
(in millions)		     Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		     Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets
Including
Expense
Waiver		     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 13.59         -14.49 %    $ 360        1.50 %      0.02 %      1.67 %      -0.15 %      98 % 

Year ended 3-31-2015

      16.04         7.48        436        1.50        0.23        1.67        0.06        103   

Year ended 3-31-2014

      15.04         8.95        536        1.73        0.17        —       —       138   

Year ended 3-31-2013

      13.88         -0.02        491        1.74        0.25        —       —       142   

Year ended 3-31-2012

      13.98         -13.71        504        1.75        0.04        —       —       97   

Class B Shares(4)

  

Year ended 3-31-2016

      11.34         -15.38        4        2.50        -0.99        2.72        -1.21        98   

Year ended 3-31-2015

      13.48         6.48        7        2.50        -0.75        2.71        -0.96        103   

Year ended 3-31-2014

      12.66         7.47        9        3.00        -1.04        —       —       138   

Year ended 3-31-2013

      11.78         -1.13        8        2.94        -0.88        —       —       142   

Year ended 3-31-2012

      11.92         -14.69        10        2.88        -1.03        —       —       97   

Class C Shares

  

Year ended 3-31-2016

      11.84         -15.20        32        2.35        -0.83        —       —       98   

Year ended 3-31-2015

      14.05         6.56        35        2.40        -0.66        —       —       103   

Year ended 3-31-2014

      13.20         8.06        44        2.47        -0.59        —       —       138   

Year ended 3-31-2013

      12.23         -0.77        16        2.53        -0.48        —       —       142   

Year ended 3-31-2012

      12.36         -14.37        20        2.51        -0.63        —       —       97   

Class E Shares(5)

  

Year ended 3-31-2016

      13.76         -14.40        — *      1.35        0.17        —       —       98   

Year ended 3-31-2015

      16.23         7.63        — *      1.34        0.34        —       —       103   

Year ended 3-31-2014

      15.23         9.35        — *      1.35        0.44        —       —       138   

Year ended 3-31-2013

      14.04         0.40        — *      1.34        0.64        —       —       142   

Year ended 3-31-2012

      14.12         -13.32        — *      1.37        0.41        —       —       97   

Class I Shares

  

Year ended 3-31-2016

      13.96         -14.30        116        1.22        0.35        —       —       98   

Year ended 3-31-2015

      16.45         7.78        117        1.23        0.49        —       —       103   

Year ended 3-31-2014

      15.43         9.52        139        1.22        0.62        —       —       138   

Year ended 3-31-2013

      14.23         0.55        147        1.22        0.69        —       —       142   

Year ended 3-31-2012

      14.30         -13.28        138        1.25        0.52        —       —       97   

Class R Shares

  

Year ended 3-31-2016

      13.53         -14.82        5        1.85        -0.37        —       —       98   

Year ended 3-31-2015

      16.01         7.13        1        1.83        -0.16        —       —       103   

Year ended 3-31-2014

      15.02         8.75        1        1.83        -0.05        —       —       138   

Year ended 3-31-2013(6)

      13.87         -1.35        — *      1.80 (7)      -1.09 (7)      —       —       142 (9) 

Class R6 Shares

  

Year ended 3-31-2016

      14.01         -14.20        7        1.09        0.43        —       —       98   

Year ended 3-31-2015(8)

      16.50         1.47        6        1.08 (7)      -0.30 (7)      —       —       103 (10) 

Class Y Shares

  

Year ended 3-31-2016

      13.84         -14.48        10        1.47        0.33        —       —       98   

Year ended 3-31-2015

      16.33         7.41        10        1.50        0.20        1.53        0.17        103   

Year ended 3-31-2014

      15.33         9.19        11        1.47        0.34        —       —       138   

Year ended 3-31-2013

      14.13         0.31        5        1.47        0.63        —       —       142   

Year ended 3-31-2012

      14.22         -13.48        6        1.50        0.30        —       —       97   

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   231

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY EUROPEAN OPPORTUNITIES FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income
(Loss)(1) 		    Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		    

Distributions

From Net
Investment
Income

     Distributions
From Net
Realized
Gains		      Total
Distributions		  

Class A Shares

  

Year ended 3-31-2016

    $ 29.19       $ 0.13      $ (2.93 )    $ (2.80 )    $ (0.10 )    $ —       $ (0.10 ) 

Year ended 3-31-2015

      29.76         0.17        (0.24 )      (0.07 )      (0.50 )      —         (0.50 ) 

Year ended 3-31-2014

      24.70         0.32        4.82        5.14        (0.08 )      —         (0.08 ) 

Year ended 3-31-2013

      22.89         0.07        1.83        1.90        (0.09 )      —         (0.09 ) 

Year ended 3-31-2012

      24.61         0.07        (1.72 )      (1.65 )      (0.07 )      —         (0.07 ) 

Class B Shares(3)

  

Year ended 3-31-2016

      27.21         (0.13 )      (2.77 )      (2.90 )      —        —         —   

Year ended 3-31-2015

      27.66         (0.14 )      (0.22 )      (0.36 )      (0.09 )      —         (0.09 ) 

Year ended 3-31-2014

      23.16         0.01        4.49        4.50        —        —         —   

Year ended 3-31-2013

      21.62         (0.15 )      1.69        1.54        —        —         —   

Year ended 3-31-2012

      23.40         (0.13 )      (1.65 )      (1.78 )      —        —         —   

Class C Shares

  

Year ended 3-31-2016

      27.73         (0.06 )      (2.78 )      (2.84 )      —        —         —   

Year ended 3-31-2015

      28.25         (0.02 )      (0.21 )      (0.23 )      (0.29 )      —         (0.29 ) 

Year ended 3-31-2014

      23.53         0.16        4.56        4.72        —        —         —   

Year ended 3-31-2013

      21.86         (0.06 )      1.73        1.67        —        —         —   

Year ended 3-31-2012

      23.58         (0.06 )      (1.66 )      (1.72 )      —        —         —   

Class E Shares(4)

  

Year ended 3-31-2016

      29.36         0.24        (2.98 )      (2.74 )      (0.16 )      —         (0.16 ) 

Year ended 3-31-2015

      29.93         0.27        (0.21 )      0.06        (0.63 )      —         (0.63 ) 

Year ended 3-31-2014

      24.84         0.44        4.85        5.29        (0.20 )      —         (0.20 ) 

Year ended 3-31-2013

      23.02         0.18        1.84        2.02        (0.20 )      —         (0.20 ) 

Year ended 3-31-2012

      24.76         0.18        (1.74 )      (1.56 )      (0.18 )      —         (0.18 ) 

Class I Shares

  

Year ended 3-31-2016

      29.39         0.20        (2.90 )      (2.70 )      (0.19 )      —         (0.19 ) 

Year ended 3-31-2015

      29.97         0.32        (0.24 )      0.08        (0.66 )      —         (0.66 ) 

Year ended 3-31-2014

      24.87         0.48        4.85        5.33        (0.23 )      —         (0.23 ) 

Year ended 3-31-2013

      23.04         0.26        1.81        2.07        (0.24 )      —         (0.24 ) 

Year ended 3-31-2012

      24.82         0.21        (1.75 )      (1.54 )      (0.24 )      —         (0.24 ) 

Class R Shares

  

Year ended 3-31-2016

      29.18         0.08        (2.93 )      (2.85 )      (0.06 )      —         (0.06 ) 

Year ended 3-31-2015

      29.75         0.12        (0.21 )      (0.09 )      (0.48 )      —         (0.48 ) 

Year ended 3-31-2014

      24.70         0.31        4.82        5.13        (0.08 )      —         (0.08 ) 

Year ended 3-31-2013(5)

      24.16         0.00        0.54        0.54        —        —         —   

Class R6 Shares

  

Year ended 3-31-2016

      29.51         0.31        (2.98 )      (2.67 )      (0.22 )      —         (0.22 ) 

Year ended 3-31-2015(7)

      29.18         0.05        0.85        0.90        (0.57 )      —         (0.57 ) 

Class Y Shares

  

Year ended 3-31-2016

      29.38         0.16        (2.95 )      (2.79 )      (0.13 )      —         (0.13 ) 

Year ended 3-31-2015

      29.95         0.17        (0.16 )      0.01        (0.58 )      —         (0.58 ) 

Year ended 3-31-2014

      24.86         0.44        4.81        5.25        (0.16 )      —         (0.16 ) 

Year ended 3-31-2013

      23.04         0.15        1.85        2.00        (0.18 )      —         (0.18 ) 

Year ended 3-31-2012

      24.75         0.17        (1.75 )      (1.58 )      (0.13 )      —         (0.13 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(4) Class share is closed to investment.

 

(5) For the period from December 19, 2012 (commencement of operations of the class) through March 31, 2013.

 

(6) Annualized.

 

(7) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(8) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2013.

 

(9) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

232   ANNUAL REPORT   2016  

Table of Contents

 

 

 

     

Net Asset
Value,

End of Period

      Total
Return(2)		     Net Assets,
End of Period
(in millions)		     Ratio of
Expenses to
Average Net
Assets		     Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 26.29         -9.62 %    $ 166        1.64 %      0.46 %      91 % 

Year ended 3-31-2015

      29.19         -0.13        150        1.70        0.57        172   

Year ended 3-31-2014

      29.76         20.83        163        1.76        1.17        116   

Year ended 3-31-2013

      24.70         8.31        162        1.81        0.32        71   

Year ended 3-31-2012

      22.89         -6.67        167        1.84        0.33        49   

Class B Shares(3)

  

Year ended 3-31-2016

      24.31         -10.66        1        2.73        -0.50        91   

Year ended 3-31-2015

      27.21         -1.27        2        2.90        -0.50        172   

Year ended 3-31-2014

      27.66         19.43        2        2.91        0.04        116   

Year ended 3-31-2013

      23.16         7.12        3        2.89        -0.68        71   

Year ended 3-31-2012

      21.62         -7.61        5        2.84        -0.63        49   

Class C Shares

  

Year ended 3-31-2016

      24.89         -10.24        11        2.29        -0.22        91   

Year ended 3-31-2015

      27.73         -0.75        10        2.35        -0.06        172   

Year ended 3-31-2014

      28.25         20.06        11        2.37        0.61        116   

Year ended 3-31-2013

      23.53         7.64        9        2.43        -0.26        71   

Year ended 3-31-2012

      21.86         -7.29        11        2.47        -0.26        49   

Class E Shares(4)

  

Year ended 3-31-2016

      26.46         -9.37        — *      1.31        0.84        91   

Year ended 3-31-2015

      29.36         0.30        — *      1.31        0.92        172   

Year ended 3-31-2014

      29.93         21.34        — *      1.33        1.62        116   

Year ended 3-31-2013

      24.84         8.83        — *      1.31        0.79        71   

Year ended 3-31-2012

      23.02         -6.18        — *      1.32        0.80        49   

Class I Shares

  

Year ended 3-31-2016

      26.50         -9.24        43        1.18        0.72        91   

Year ended 3-31-2015

      29.39         0.38        27        1.21        1.09        172   

Year ended 3-31-2014

      29.97         21.50        31        1.19        1.76        116   

Year ended 3-31-2013

      24.87         8.96        37        1.18        1.13        71   

Year ended 3-31-2012

      23.04         -6.06        53        1.19        0.94        49   

Class R Shares

  

Year ended 3-31-2016

      26.27         -9.77        — *      1.79        0.28        91   

Year ended 3-31-2015

      29.18         -0.21        — *      1.81        0.42        172   

Year ended 3-31-2014

      29.75         20.73        — *      1.79        1.15        116   

Year ended 3-31-2013(5)

      24.70         2.28        — *      1.74 (6)      0.02 (6)      71 (8) 

Class R6 Shares

  

Year ended 3-31-2016

      26.62         -9.11        2        1.04        1.07        91   

Year ended 3-31-2015(7)

      29.51         3.20        2        1.08 (6)      0.26 (6)      172 (9) 

Class Y Shares

  

Year ended 3-31-2016

      26.46         -9.52        1        1.47        0.57        91   

Year ended 3-31-2015

      29.38         0.15        2        1.47        0.58        172   

Year ended 3-31-2014

      29.95         21.17        3        1.46        1.57        116   

Year ended 3-31-2013

      24.86         8.71        1        1.42        0.66        71   

Year ended 3-31-2012

      23.04         -6.30        2        1.45        0.75        49   

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   233

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY GLOBAL BOND FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income(1) 		     Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		    

Distributions

From Net
Investment
Income

     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

  

Year ended 3-31-2016

    $ 9.59       $ 0.34       $ (0.49 )    $ (0.15 )    $ (0.27 )    $ —      $ (0.27 ) 

Year ended 3-31-2015

      10.06         0.34         (0.49 )      (0.15 )      (0.32 )      —        (0.32 ) 

Year ended 3-31-2014

      10.26         0.35         (0.19 )      0.16        (0.34 )      (0.02 )      (0.36 ) 

Year ended 3-31-2013

      10.20         0.40         0.11        0.51        (0.42 )      (0.03 )      (0.45 ) 

Year ended 3-31-2012

      10.35         0.39         (0.11 )      0.28        (0.39 )      (0.04 )      (0.43 ) 

Class B Shares(4)

  

Year ended 3-31-2016

      9.58         0.27         (0.49 )      (0.22 )      (0.20 )      —        (0.20 ) 

Year ended 3-31-2015

      10.06         0.26         (0.49 )      (0.23 )      (0.25 )      —        (0.25 ) 

Year ended 3-31-2014

      10.25         0.27         (0.18 )      0.09        (0.26 )      (0.02 )      (0.28 ) 

Year ended 3-31-2013

      10.19         0.32         0.11        0.43        (0.34 )      (0.03 )      (0.37 ) 

Year ended 3-31-2012

      10.35         0.31         (0.12 )      0.19        (0.31 )      (0.04 )      (0.35 ) 

Class C Shares

  

Year ended 3-31-2016

      9.59         0.27         (0.50 )      (0.23 )      (0.20 )      —        (0.20 ) 

Year ended 3-31-2015

      10.06         0.26         (0.48 )      (0.22 )      (0.25 )      —        (0.25 ) 

Year ended 3-31-2014

      10.25         0.27         (0.18 )      0.09        (0.26 )      (0.02 )      (0.28 ) 

Year ended 3-31-2013

      10.19         0.32         0.11        0.43        (0.34 )      (0.03 )      (0.37 ) 

Year ended 3-31-2012

      10.35         0.31         (0.12 )      0.19        (0.31 )      (0.04 )      (0.35 ) 

Class I Shares

  

Year ended 3-31-2016

      9.59         0.36         (0.49 )      (0.13 )      (0.30 )      —        (0.30 ) 

Year ended 3-31-2015

      10.06         0.36         (0.48 )      (0.12 )      (0.35 )      —        (0.35 ) 

Year ended 3-31-2014

      10.25         0.37         (0.18 )      0.19        (0.36 )      (0.02 )      (0.38 ) 

Year ended 3-31-2013

      10.19         0.42         0.11        0.53        (0.44 )      (0.03 )      (0.47 ) 

Year ended 3-31-2012

      10.35         0.41         (0.11 )      0.30        (0.42 )      (0.04 )      (0.46 ) 

Class R Shares

  

Year ended 3-31-2016

      9.57         0.29         (0.48 )      (0.19 )      (0.23 )      —        (0.23 ) 

Year ended 3-31-2015

      10.05         0.29         (0.49 )      (0.20 )      (0.28 )      —        (0.28 ) 

Year ended 3-31-2014

      10.24         0.29         (0.18 )      0.11        (0.28 )      (0.02 )      (0.30 ) 

Year ended 3-31-2013(5)

      10.17         0.09         0.04        0.13        (0.06 )      —        (0.06 ) 

Class R6 Shares

  

Year ended 3-31-2016

      9.59         0.36         (0.48 )      (0.12 )      (0.30 )      —        (0.30 ) 

Year ended 3-31-2015(7)

      10.15         0.24         (0.56 )      (0.32 )      (0.24 )      —        (0.24 ) 

Class Y Shares

  

Year ended 3-31-2016

      9.59         0.34         (0.49 )      (0.15 )      (0.27 )      —        (0.27 ) 

Year ended 3-31-2015

      10.07         0.34         (0.50 )      (0.16 )      (0.32 )      —        (0.32 ) 

Year ended 3-31-2014

      10.26         0.34         (0.18 )      0.16        (0.33 )      (0.02 )      (0.35 ) 

Year ended 3-31-2013

      10.20         0.40         0.11        0.51        (0.42 )      (0.03 )      (0.45 ) 

Year ended 3-31-2012

      10.36         0.39         (0.12 )      0.27        (0.39 )      (0.04 )      (0.43 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) For the period from December 19, 2012 (commencement of operations of the class) through March 31, 2013.

 

(6) Annualized.

 

(7) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(8) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2013.

 

(9) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

234   ANNUAL REPORT   2016  

Table of Contents

 

 

 

     

Net Asset
Value,

End of Period

      Total
Return(2)		     Net Assets,
End of Period
(in millions)		     Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		    

Ratio of Net
Investment
Income to
Average Net
Assets
Including
Expense
Waiver

     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 9.17         -1.54 %    $ 133        0.99 %      3.60 %      1.29 %      3.30 %      14 % 

Year ended 3-31-2015

      9.59         -1.54        177        0.99        3.39        1.22        3.16        26   

Year ended 3-31-2014

      10.06         1.65        187        0.99        3.43        1.25        3.17        21   

Year ended 3-31-2013

      10.26         5.12        174        0.99        3.92        1.24        3.67        26   

Year ended 3-31-2012

      10.20         2.74        158        0.99        3.81        1.25        3.55        26   

Class B Shares(4)

  

Year ended 3-31-2016

      9.16         -2.29        3        1.74        2.84        2.16        2.42        14   

Year ended 3-31-2015

      9.58         -2.36        5        1.74        2.64        2.10        2.28        26   

Year ended 3-31-2014

      10.06         0.90        6        1.74        2.67        2.10        2.31        21   

Year ended 3-31-2013

      10.25         4.34        7        1.74        3.17        2.15        2.76        26   

Year ended 3-31-2012

      10.19         1.96        6        1.74        3.05        2.26        2.53        26   

Class C Shares

  

Year ended 3-31-2016

      9.16         -2.39        20        1.74        2.85        1.91        2.68        14   

Year ended 3-31-2015

      9.59         -2.26        31        1.74        2.64        1.87        2.51        26   

Year ended 3-31-2014

      10.06         0.90        33        1.74        2.67        1.88        2.53        21   

Year ended 3-31-2013

      10.25         4.34        44        1.74        3.18        1.90        3.02        26   

Year ended 3-31-2012

      10.19         1.96        41        1.74        3.06        1.93        2.87        26   

Class I Shares

  

Year ended 3-31-2016

      9.16         -1.39        23        0.74        3.85        0.90        3.69        14   

Year ended 3-31-2015

      9.59         -1.29        53        0.74        3.65        0.87        3.52        26   

Year ended 3-31-2014

      10.06         1.91        58        0.74        3.67        0.89        3.52        21   

Year ended 3-31-2013

      10.25         5.39        59        0.74        4.13        0.89        3.97        26   

Year ended 3-31-2012

      10.19         3.00        28        0.74        4.07        0.91        3.90        26   

Class R Shares

  

Year ended 3-31-2016

      9.15         -2.02        — *      1.49        3.11        1.49        3.11        14   

Year ended 3-31-2015

      9.57         -2.10        — *      1.46        2.90        —       —       26   

Year ended 3-31-2014

      10.05         1.14        — *      1.48        2.93        —       —       21   

Year ended 3-31-2013(5)

      10.24         1.30        — *      1.45 (6)      3.10 (6)      —       —       26 (8) 

Class R6 Shares

  

Year ended 3-31-2016

      9.17         -1.30        — *      0.76        3.84        0.76        3.84        14   

Year ended 3-31-2015(7)

      9.59         -3.23        — *      0.70 (6)      3.62 (6)      —       —       26 (9) 

Class Y Shares

  

Year ended 3-31-2016

      9.17         -1.54        3        0.99        3.58        1.16        3.41        14   

Year ended 3-31-2015

      9.59         -1.63        5        0.99        3.40        1.12        3.27        26   

Year ended 3-31-2014

      10.07         1.65        8        0.99        3.42        1.13        3.28        21   

Year ended 3-31-2013

      10.26         5.12        5        0.99        3.94        1.14        3.78        26   

Year ended 3-31-2012

      10.20         2.74        7        0.99        3.78        1.16        3.61        26   

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   235

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY GLOBAL EQUITY INCOME FUND

 

     

Net Asset
Value,
Beginning of
Period

      Net
Investment
Income(1) 		     Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		    

Distributions

From Net
Investment
Income

     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

  

Year ended 3-31-2016

    $ 13.32       $ 0.40       $ (1.09 )    $ (0.69 )    $ (0.39 )    $ (0.36 )    $ (0.75 ) 

Year ended 3-31-2015

      13.27         0.39         0.36        0.75        (0.44 )      (0.26 )      (0.70 ) 

Year ended 3-31-2014

      11.82         0.57         1.44        2.01        (0.46 )      (0.10 )      (0.56 ) 

Year ended 3-31-2013(4)

      10.00         0.35         1.84        2.19        (0.28 )      (0.09 )      (0.37 ) 

Class B Shares(6)

  

Year ended 3-31-2016

      13.31         0.32         (1.09 )      (0.77 )      (0.31 )      (0.36 )      (0.67 ) 

Year ended 3-31-2015

      13.27         0.32         0.34        0.66        (0.36 )      (0.26 )      (0.62 ) 

Year ended 3-31-2014

      11.81         0.47         1.46        1.93        (0.37 )      (0.10 )      (0.47 ) 

Year ended 3-31-2013(4)

      10.00         0.27         1.85        2.12        (0.22 )      (0.09 )      (0.31 ) 

Class C Shares

  

Year ended 3-31-2016

      13.31         0.31         (1.08 )      (0.77 )      (0.31 )      (0.36 )      (0.67 ) 

Year ended 3-31-2015

      13.27         0.30         0.36        0.66        (0.36 )      (0.26 )      (0.62 ) 

Year ended 3-31-2014

      11.81         0.50         1.44        1.94        (0.38 )      (0.10 )      (0.48 ) 

Year ended 3-31-2013(4)

      10.00         0.27         1.85        2.12        (0.22 )      (0.09 )      (0.31 ) 

Class I Shares

  

Year ended 3-31-2016

      13.33         0.45         (1.10 )      (0.65 )      (0.44 )      (0.36 )      (0.80 ) 

Year ended 3-31-2015

      13.28         0.43         0.37        0.80        (0.49 )      (0.26 )      (0.75 ) 

Year ended 3-31-2014

      11.82         0.61         1.46        2.07        (0.51 )      (0.10 )      (0.61 ) 

Year ended 3-31-2013(4)

      10.00         0.37         1.85        2.22        (0.31 )      (0.09 )      (0.40 ) 

Class R Shares

  

Year ended 3-31-2016

      13.32         0.37         (1.09 )      (0.72 )      (0.36 )      (0.36 )      (0.72 ) 

Year ended 3-31-2015

      13.28         0.36         0.35        0.71        (0.41 )      (0.26 )      (0.67 ) 

Year ended 3-31-2014

      11.82         0.52         1.46        1.98        (0.42 )      (0.10 )      (0.52 ) 

Year ended 3-31-2013(7)

      11.28         0.11         0.46        0.57        (0.03 )      —        (0.03 ) 

Class R6 Shares

  

Year ended 3-31-2016

      13.33         0.47         (1.09 )      (0.62 )      (0.46 )      (0.36 )      (0.82 ) 

Year ended 3-31-2015(8)

      13.37         0.25         0.27        0.52        (0.30 )      (0.26 )      (0.56 ) 

Class Y Shares

  

Year ended 3-31-2016

      13.32         0.42         (1.10 )      (0.68 )      (0.41 )      (0.36 )      (0.77 ) 

Year ended 3-31-2015

      13.28         0.41         0.35        0.76        (0.46 )      (0.26 )      (0.72 ) 

Year ended 3-31-2014

      11.82         0.58         1.46        2.04        (0.48 )      (0.10 )      (0.58 ) 

Year ended 3-31-2013(4)

      10.00         0.34         1.86        2.20        (0.29 )      (0.09 )      (0.38 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) For the period from June 4, 2012 (commencement of operations of the class) through March 31, 2013.

 

(5) Annualized.

 

(6) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(7) For the period from December 19, 2012 (commencement of operations of the class) through March 31, 2013.

 

(8) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(9) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2013.

 

(10) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

236   ANNUAL REPORT   2016  

Table of Contents

 

 

 

     

Net Asset
Value,

End of Period

      Total
Return(2)		     Net Assets,
End of Period
(in millions)		     Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		     Ratio of Net
Investment
Income to
Average Net
Assets
Including
Expense
Waiver		     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 11.88         -5.22 %    $ 248        1.30 %      3.19 %      1.36 %      3.13 %      73 % 

Year ended 3-31-2015

      13.32         5.84        253        1.30        2.94        1.38        2.86        137   

Year ended 3-31-2014

      13.27         17.46        184        1.30        4.51        1.48        4.33        98   

Year ended 3-31-2013(4)

      11.82         22.15        59        1.29 (5)      3.82 (5)      1.68 (5)      3.43 (5)      73   

Class B Shares(6)

  

Year ended 3-31-2016

      11.87         -5.84        2        1.94        2.56        —       —       73   

Year ended 3-31-2015

      13.31         5.08        2        1.98        2.40        —       —       137   

Year ended 3-31-2014

      13.27         16.68        2        2.04        3.73        2.05        3.72        98   

Year ended 3-31-2013(4)

      11.81         22.41        1        2.01 (5)      2.89 (5)      2.21 (5)      2.69 (5)      73   

Class C Shares

  

Year ended 3-31-2016

      11.87         -5.83        14        1.93        2.51        —       —       73   

Year ended 3-31-2015

      13.31         5.10        13        1.95        2.28        —       —       137   

Year ended 3-31-2014

      13.27         16.75        8        1.99        3.91        2.04        3.86        98   

Year ended 3-31-2013(4)

      11.81         21.46        4        1.95 (5)      2.95 (5)      2.15 (5)      2.75 (5)      73   

Class I Shares

  

Year ended 3-31-2016

      11.88         -4.96        20        0.94        3.57        0.95        3.56        73   

Year ended 3-31-2015

      13.33         6.22        22        0.94        3.21        0.98        3.17        137   

Year ended 3-31-2014

      13.28         17.97        15        0.94        4.86        1.06        4.74        98   

Year ended 3-31-2013(4)

      11.82         22.47        12        0.94 (5)      3.95 (5)      1.29 (5)      3.60 (5)      73   

Class R Shares

  

Year ended 3-31-2016

      11.88         -5.46        — *      1.56        2.96        —       —       73   

Year ended 3-31-2015

      13.32         5.47        — *      1.58        2.75        —       —       137   

Year ended 3-31-2014

      13.28         17.11        — *      1.65        4.11        1.66        4.10        98   

Year ended 3-31-2013(7)

      11.82         5.05        — *      1.67 (5)      3.36 (5)      1.87 (5)      3.16 (5)      73 (9) 

Class R6 Shares

  

Year ended 3-31-2016

      11.89         -4.74        1        0.81        3.73        —       —       73   

Year ended 3-31-2015(8)

      13.33         4.05        1        0.83 (5)      2.94 (5)      —       —       137 (10) 

Class Y Shares

  

Year ended 3-31-2016

      11.87         -5.15        4        1.19        3.32        1.22        3.29        73   

Year ended 3-31-2015

      13.32         5.88        5        1.19        3.11        1.23        3.07        137   

Year ended 3-31-2014

      13.28         17.68        4        1.19        4.60        1.31        4.48        98   

Year ended 3-31-2013(4)

      11.82         22.25        4        1.18 (5)      3.70 (5)      1.54 (5)      3.34 (5)      73   

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   237

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY GLOBAL GROWTH FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income
(Loss)(1) 		    Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		    

Distributions

From Net
Investment
Income

     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

  

Year ended 3-31-2016

    $ 42.75       $ (0.09 )    $ (2.49 )    $ (2.58 )    $ (0.04 )    $ (0.90 )    $ (0.94 ) 

Year ended 3-31-2015

      41.15         0.19        1.95        2.14        (0.03 )      (0.51 )      (0.54 ) 

Year ended 3-31-2014

      35.50         0.19        5.92        6.11        (0.46 )      —        (0.46 ) 

Year ended 3-31-2013

      33.45         0.27        2.07        2.34        (0.29 )      —        (0.29 ) 

Year ended 3-31-2012

      33.23         0.26        (0.04 )      0.22        —        —        —   

Class B Shares(4)

  

Year ended 3-31-2016

      37.61         (0.44 )      (2.20 )      (2.64 )      —        (0.90 )      (0.90 ) 

Year ended 3-31-2015

      36.59         (0.15 )      1.68        1.53        —        (0.51 )      (0.51 ) 

Year ended 3-31-2014

      31.63         (0.16 )      5.25        5.09        (0.13 )      —        (0.13 ) 

Year ended 3-31-2013

      29.88         (0.05 )      1.84        1.79        (0.04 )      —        (0.04 ) 

Year ended 3-31-2012

      29.99         (0.04 )      (0.07 )      (0.11 )      —        —        —   

Class C Shares

  

Year ended 3-31-2016

      37.68         (0.34 )      (2.18 )      (2.52 )      —        (0.90 )      (0.90 ) 

Year ended 3-31-2015

      36.57         (0.09 )      1.71        1.62        —        (0.51 )      (0.51 ) 

Year ended 3-31-2014

      31.61         (0.08 )      5.22        5.14        (0.18 )      —        (0.18 ) 

Year ended 3-31-2013

      29.85         (0.02 )      1.83        1.81        (0.05 )      —        (0.05 ) 

Year ended 3-31-2012

      29.93         (0.02 )      (0.06 )      (0.08 )      —        —        —   

Class E Shares(5)

  

Year ended 3-31-2016

      42.83         0.02        (2.50 )      (2.48 )      (0.07 )      (0.90 )      (0.97 ) 

Year ended 3-31-2015

      41.19         0.31        1.94        2.25        (0.10 )      (0.51 )      (0.61 ) 

Year ended 3-31-2014

      35.53         0.32        5.89        6.21        (0.55 )      —        (0.55 ) 

Year ended 3-31-2013

      33.52         0.35        2.07        2.42        (0.41 )      —        (0.41 ) 

Year ended 3-31-2012

      33.22         0.33        (0.03 )      0.30        —        —        —   

Class I Shares

  

Year ended 3-31-2016

      43.24         0.05        (2.49 )      (2.44 )      (0.09 )      (0.90 )      (0.99 ) 

Year ended 3-31-2015

      41.57         0.35        1.96        2.31        (0.13 )      (0.51 )      (0.64 ) 

Year ended 3-31-2014

      35.85         0.40        5.92        6.32        (0.60 )      —        (0.60 ) 

Year ended 3-31-2013

      33.84         0.33        2.16        2.49        (0.48 )      —        (0.48 ) 

Year ended 3-31-2012

      33.50         0.37        (0.03 )      0.34        —        —        —   

Class R Shares

  

Year ended 3-31-2016

      42.64         (0.20 )      (2.46 )      (2.66 )      —        (0.90 )      (0.90 ) 

Year ended 3-31-2015

      41.11         0.01        2.03        2.04        —        (0.51 )      (0.51 ) 

Year ended 3-31-2014

      35.48         0.13        5.88        6.01        (0.38 )      —        (0.38 ) 

Year ended 3-31-2013(6)

      34.77         0.01        0.70        0.71        —        —        —   

Class R6 Shares

  

Year ended 3-31-2016

      43.32         0.13        (2.52 )      (2.39 )      (0.11 )      (0.90 )      (1.01 ) 

Year ended 3-31-2015(8)

      42.56         0.15        1.22        1.37        (0.10 )      (0.51 )      (0.61 ) 

Class Y Shares

  

Year ended 3-31-2016

      42.86         (0.05 )      (2.49 )      (2.54 )      (0.05 )      (0.90 )      (0.95 ) 

Year ended 3-31-2015

      41.23         0.24        1.96        2.20        (0.06 )      (0.51 )      (0.57 ) 

Year ended 3-31-2014

      35.57         0.30        5.87        6.17        (0.51 )      —        (0.51 ) 

Year ended 3-31-2013

      33.54         0.27        2.10        2.37        (0.34 )      —        (0.34 ) 

Year ended 3-31-2012

      33.28         0.29        (0.03 )      0.26        —        —        —   

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) Class share is closed to investment.

 

(6) For the period from December 19, 2012 (commencement of operations of the class) through March 31, 2013.

 

(7) Annualized.

 

(8) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(9) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2013.

 

(10) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

238   ANNUAL REPORT   2016  

Table of Contents

 

 

 

     

Net Asset
Value,

End of Period

      Total
Return(2)		     Net Assets,
End of Period
(in millions)		     Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		    

Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets
Including
Expense
Waiver

     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 39.23         -6.12 %    $ 375        1.47 %      -0.22 %      — %      — %      51 % 

Year ended 3-31-2015

      42.75         5.26        409        1.45        0.47        —       —       61   

Year ended 3-31-2014

      41.15         17.26        340        1.49        0.50        —       —       46   

Year ended 3-31-2013

      35.50         7.04        198        1.48        0.80        —       —       40   

Year ended 3-31-2012

      33.45         0.66        151        1.52        0.81        —       —       49   

Class B Shares(4)

  

Year ended 3-31-2016

      34.07         -7.12        3        2.52        -1.22        —       —       51   

Year ended 3-31-2015

      37.61         4.25        4        2.43        -0.40        —       —       61   

Year ended 3-31-2014

      36.59         16.13        5        2.47        -0.46        —       —       46   

Year ended 3-31-2013

      31.63         5.95        4        2.47        -0.16        —       —       40   

Year ended 3-31-2012

      29.88         -0.34        3        2.55        -0.16        —       —       49   

Class C Shares

  

Year ended 3-31-2016

      34.26         -6.79        25        2.22        -0.96        —       —       51   

Year ended 3-31-2015

      37.68         4.51        26        2.21        -0.25        —       —       61   

Year ended 3-31-2014

      36.57         16.30        28        2.31        -0.23        —       —       46   

Year ended 3-31-2013

      31.61         6.03        24        2.39        -0.07        —       —       40   

Year ended 3-31-2012

      29.85         -0.24        25        2.46        -0.09        —       —       49   

Class E Shares(5)

  

Year ended 3-31-2016

      39.38         -5.87        — *      1.20        0.05        —       —       51   

Year ended 3-31-2015

      42.83         5.55        — *      1.21        0.74        —       —       61   

Year ended 3-31-2014

      41.19         17.58        — *      1.22        0.84        —       —       46   

Year ended 3-31-2013

      35.53         7.27        — *      1.25        1.04        —       —       40   

Year ended 3-31-2012

      33.52         0.90        — *      1.29        1.04        —       —       49   

Class I Shares

  

Year ended 3-31-2016

      39.81         -5.73        78        1.09        0.13        —       —       51   

Year ended 3-31-2015

      43.24         5.66        77        1.09        0.84        —       —       61   

Year ended 3-31-2014

      41.57         17.73        66        1.11        1.02        —       —       46   

Year ended 3-31-2013

      35.85         7.38        48        1.13        0.96        —       —       40   

Year ended 3-31-2012

      33.84         1.05        24        1.17        1.14        —       —       49   

Class R Shares

  

Year ended 3-31-2016

      39.08         -6.32        2        1.68        -0.50        —       —       51   

Year ended 3-31-2015

      42.64         5.03        1        1.69        0.02        —       —       61   

Year ended 3-31-2014

      41.11         17.01        — *      1.70        0.33        —       —       46   

Year ended 3-31-2013(6)

      35.48         2.04        — *      1.70 (7)      0.15 (7)      —       —       40 (9) 

Class R6 Shares

  

Year ended 3-31-2016

      39.92         -5.61        3        0.94        0.31        —       —       51   

Year ended 3-31-2015(8)

      43.32         3.31        3        0.95 (7)      0.55 (7)      —       —       61 (10) 

Class Y Shares

  

Year ended 3-31-2016

      39.37         -6.00        17        1.36        -0.13        —       —       51   

Year ended 3-31-2015

      42.86         5.40        11        1.35        0.57        —       —       61   

Year ended 3-31-2014

      41.23         17.38        11        1.38        0.79        —       —       46   

Year ended 3-31-2013

      35.57         7.14        13        1.39        0.81        —       —       40   

Year ended 3-31-2012

      33.54         0.78        11        1.40        0.93        1.42        0.91        49   

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   239

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY GLOBAL INCOME ALLOCATION FUND

 

     

Net Asset
Value,
Beginning of
Period

      Net
Investment
Income(1) 		     Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		     Distributions
From Net
Investment
Income		     Distributions
From Net
Realized
Gains		      Total
Distributions		  

Class A Shares

  

Year ended 3-31-2016

    $ 15.42       $ 0.59       $ (1.46 )    $ (0.87 )    $ (0.59 )    $ —       $ (0.59 ) 

Year ended 3-31-2015

      15.58         0.62         (0.18 )      0.44        (0.60 )      —         (0.60 ) 

Year ended 3-31-2014

      14.79         0.68         0.70        1.38        (0.59 )      —         (0.59 ) 

Year ended 3-31-2013

      14.52         0.62         0.33        0.95        (0.68 )      —         (0.68 ) 

Year ended 3-31-2012

      15.19         0.57         (0.57 )      0.00        (0.67 )      —         (0.67 ) 

Class B Shares(4)

  

Year ended 3-31-2016

      15.15         0.46         (1.43 )      (0.97 )      (0.46 )      —         (0.46 ) 

Year ended 3-31-2015

      15.32         0.48         (0.18 )      0.30        (0.47 )      —         (0.47 ) 

Year ended 3-31-2014

      14.55         0.52         0.70        1.22        (0.45 )      —         (0.45 ) 

Year ended 3-31-2013

      14.29         0.48         0.32        0.80        (0.54 )      —         (0.54 ) 

Year ended 3-31-2012

      14.93         0.43         (0.57 )      (0.14 )      (0.50 )      —         (0.50 ) 

Class C Shares

  

Year ended 3-31-2016

      15.24         0.49         (1.43 )      (0.94 )      (0.50 )      —         (0.50 ) 

Year ended 3-31-2015

      15.41         0.51         (0.18 )      0.33        (0.50 )      —         (0.50 ) 

Year ended 3-31-2014

      14.64         0.57         0.70        1.27        (0.50 )      —         (0.50 ) 

Year ended 3-31-2013

      14.38         0.52         0.32        0.84        (0.58 )      —         (0.58 ) 

Year ended 3-31-2012

      15.02         0.49         (0.58 )      (0.09 )      (0.55 )      —         (0.55 ) 

Class E Shares

  

Year ended 3-31-2016

      15.42         0.58         (1.45 )      (0.87 )      (0.58 )      —         (0.58 ) 

Year ended 3-31-2015

      15.58         0.62         (0.19 )      0.43        (0.59 )      —         (0.59 ) 

Year ended 3-31-2014

      14.79         0.68         0.70        1.38        (0.59 )      —         (0.59 ) 

Year ended 3-31-2013

      14.52         0.62         0.33        0.95        (0.68 )      —         (0.68 ) 

Year ended 3-31-2012

      15.20         0.59         (0.58 )      0.01        (0.69 )      —         (0.69 ) 

Class I Shares

  

Year ended 3-31-2016

      15.54         0.64         (1.46 )      (0.82 )      (0.64 )      —         (0.64 ) 

Year ended 3-31-2015

      15.70         0.67         (0.17 )      0.50        (0.66 )      —         (0.66 ) 

Year ended 3-31-2014

      14.90         0.74         0.71        1.45        (0.65 )      —         (0.65 ) 

Year ended 3-31-2013

      14.62         0.70         0.32        1.02        (0.74 )      —         (0.74 ) 

Year ended 3-31-2012

      15.31         0.64         (0.58 )      0.06        (0.75 )      —         (0.75 ) 

Class R Shares

  

Year ended 3-31-2016

      15.41         0.56         (1.46 )      (0.90 )      (0.55 )      —         (0.55 ) 

Year ended 3-31-2015

      15.57         0.59         (0.18 )      0.41        (0.57 )      —         (0.57 ) 

Year ended 3-31-2014

      14.79         0.64         0.70        1.34        (0.56 )      —         (0.56 ) 

Year ended 3-31-2013(5)

      14.37         0.15         0.32        0.47        (0.05 )      —         (0.05 ) 

Class R6 Shares

  

Year ended 3-31-2016

      15.55         0.67         (1.47 )      (0.80 )      (0.66 )      —         (0.66 ) 

Year ended 3-31-2015(7)

      15.95         0.45         (0.40 )      0.05        (0.45 )      —         (0.45 ) 

Class Y Shares

  

Year ended 3-31-2016

      15.48         0.63         (1.49 )      (0.86 )      (0.60 )      —         (0.60 ) 

Year ended 3-31-2015

      15.64         0.67         (0.21 )      0.46        (0.62 )      —         (0.62 ) 

Year ended 3-31-2014

      14.85         0.71         0.70        1.41        (0.62 )      —         (0.62 ) 

Year ended 3-31-2013

      14.57         0.62         0.36        0.98        (0.70 )      —         (0.70 ) 

Year ended 3-31-2012

      15.25         0.59         (0.57 )      0.02        (0.70 )      —         (0.70 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) For the period from December 19, 2012 (commencement of operations of the class) through March 31, 2013.

 

(6) Annualized.

 

(7) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(8) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2013.

 

(9) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

240   ANNUAL REPORT   2016  

Table of Contents

 

 

 

     

Net Asset
Value,

End of Period

      Total
Return(2)		     Net Assets,
End of Period
(in millions)		     Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		    

Ratio of Net
Investment
Income to
Average Net
Assets
Including
Expense
Waiver

     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 13.96         -5.74 %    $ 623        1.28 %      4.09 %      — %      — %      53 % 

Year ended 3-31-2015

      15.42         2.87        653        1.29        4.00        —       —       69   

Year ended 3-31-2014

      15.58         9.60        494        1.35        4.52        1.35        4.52        92   

Year ended 3-31-2013

      14.79         6.84        308        1.35        4.38        1.51        4.22        109   

Year ended 3-31-2012

      14.52         0.23        228        1.44        3.94        —       —       61   

Class B Shares(4)

  

Year ended 3-31-2016

      13.72         -6.51        4        2.17        3.24        —       —       53   

Year ended 3-31-2015

      15.15         1.95        5        2.18        3.12        —       —       69   

Year ended 3-31-2014

      15.32         8.53        6        2.27        3.54        —       —       92   

Year ended 3-31-2013

      14.55         5.90        7        2.31        3.48        2.54        3.25        109   

Year ended 3-31-2012

      14.29         -0.75        7        2.41        3.05        —       —       61   

Class C Shares

  

Year ended 3-31-2016

      13.80         -6.26        52        1.90        3.45        —       —       53   

Year ended 3-31-2015

      15.24         2.18        50        1.91        3.34        —       —       69   

Year ended 3-31-2014

      15.41         8.86        28        1.99        3.82        1.99        3.82        92   

Year ended 3-31-2013

      14.64         6.13        25        2.02        3.70        2.12        3.60        109   

Year ended 3-31-2012

      14.38         -0.41        19        2.10        3.41        —       —       61   

Class E Shares

  

Year ended 3-31-2016

      13.97         -5.73        3        1.33        4.03        1.60        3.76        53   

Year ended 3-31-2015

      15.42         2.82        3        1.33        3.97        1.61        3.69        69   

Year ended 3-31-2014

      15.58         9.56        3        1.33        4.51        1.70        4.14        92   

Year ended 3-31-2013

      14.79         6.94        2        1.33        4.42        2.03        3.72        109   

Year ended 3-31-2012

      14.52         0.30        2        1.33        4.07        1.90        3.50        61   

Class I Shares

  

Year ended 3-31-2016

      14.08         -5.35        62        0.92        4.39        —       —       53   

Year ended 3-31-2015

      15.54         3.22        48        0.92        4.28        —       —       69   

Year ended 3-31-2014

      15.70         10.07        39        0.93        4.90        0.94        4.89        92   

Year ended 3-31-2013

      14.90         7.33        30        0.91        4.98        1.03        4.86        109   

Year ended 3-31-2012

      14.62         0.67        43        0.99        4.39        —       —       61   

Class R Shares

  

Year ended 3-31-2016

      13.96         -5.90        — *      1.52        3.87        —       —       53   

Year ended 3-31-2015

      15.41         2.64        — *      1.51        3.80        —       —       69   

Year ended 3-31-2014

      15.57         9.32        — *      1.55        4.28        —       —       92   

Year ended 3-31-2013(5)

      14.79         3.30        — *      1.52 (6)      3.73 (6)      1.53 (6)      3.72 (6)      109 (8) 

Class R6 Shares

  

Year ended 3-31-2016

      14.09         -5.21        2        0.78        4.58        —       —       53   

Year ended 3-31-2015(7)

      15.55         0.36        2        0.78 (6)      4.40 (6)      —       —       69 (9) 

Class Y Shares

  

Year ended 3-31-2016

      14.02         -5.61        2        1.17        4.28        1.18        4.27        53   

Year ended 3-31-2015

      15.48         2.97        3        1.17        4.29        1.18        4.28        69   

Year ended 3-31-2014

      15.64         9.77        7        1.17        4.68        1.19        4.66        92   

Year ended 3-31-2013

      14.85         7.08        5        1.17        4.40        1.29        4.28        109   

Year ended 3-31-2012

      14.57         0.38        4        1.26        4.12        —       —       61   

 

See Accompanying Notes to Financial Statements.

 

  2016   ANNUAL REPORT   241

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY HIGH INCOME FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income(1) 		     Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		     Distributions
From Net
Investment
Income		     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

                 

Year ended 3-31-2016

    $ 8.09       $ 0.58       $ (1.19 )    $ (0.61 )    $ (0.57 )    $ —      $ (0.57 ) 

Year ended 3-31-2015

      8.75         0.57         (0.52 )      0.05        (0.57 )      (0.14 )      (0.71 ) 

Year ended 3-31-2014

      8.72         0.58         0.18        0.76        (0.60 )      (0.13 )      (0.73 ) 

Year ended 3-31-2013

      8.30         0.63         0.52        1.15        (0.63 )      (0.10 )      (0.73 ) 

Year ended 3-31-2012

      8.46         0.64         0.02        0.66        (0.65 )      (0.17 )      (0.82 ) 

Class B Shares(4)

                 

Year ended 3-31-2016

      8.09         0.53         (1.19 )      (0.66 )      (0.52 )      —        (0.52 ) 

Year ended 3-31-2015

      8.75         0.51         (0.52 )      (0.01 )      (0.51 )      (0.14 )      (0.65 ) 

Year ended 3-31-2014

      8.72         0.52         0.17        0.69        (0.53 )      (0.13 )      (0.66 ) 

Year ended 3-31-2013

      8.30         0.57         0.52        1.09        (0.57 )      (0.10 )      (0.67 ) 

Year ended 3-31-2012

      8.46         0.58         0.02        0.60        (0.59 )      (0.17 )      (0.76 ) 

Class C Shares

                 

Year ended 3-31-2016

      8.09         0.53         (1.19 )      (0.66 )      (0.52 )      —        (0.52 ) 

Year ended 3-31-2015

      8.75         0.51         (0.52 )      (0.01 )      (0.51 )      (0.14 )      (0.65 ) 

Year ended 3-31-2014

      8.72         0.52         0.18        0.70        (0.54 )      (0.13 )      (0.67 ) 

Year ended 3-31-2013

      8.30         0.57         0.52        1.09        (0.57 )      (0.10 )      (0.67 ) 

Year ended 3-31-2012

      8.46         0.58         0.03        0.61        (0.60 )      (0.17 )      (0.77 ) 

Class E Shares

                 

Year ended 3-31-2016

      8.09         0.56         (1.19 )      (0.63 )      (0.55 )      —        (0.55 ) 

Year ended 3-31-2015

      8.75         0.54         (0.51 )      0.03        (0.55 )      (0.14 )      (0.69 ) 

Year ended 3-31-2014

      8.72         0.55         0.17        0.72        (0.56 )      (0.13 )      (0.69 ) 

Year ended 3-31-2013

      8.30         0.59         0.52        1.11        (0.59 )      (0.10 )      (0.69 ) 

Year ended 3-31-2012

      8.46         0.62         0.01        0.63        (0.62 )      (0.17 )      (0.79 ) 

Class I Shares

                 

Year ended 3-31-2016

      8.09         0.60         (1.19 )      (0.59 )      (0.59 )      —        (0.59 ) 

Year ended 3-31-2015

      8.75         0.59         (0.52 )      0.07        (0.59 )      (0.14 )      (0.73 ) 

Year ended 3-31-2014

      8.72         0.60         0.18        0.78        (0.62 )      (0.13 )      (0.75 ) 

Year ended 3-31-2013

      8.30         0.65         0.52        1.17        (0.65 )      (0.10 )      (0.75 ) 

Year ended 3-31-2012

      8.46         0.66         0.03        0.69        (0.68 )      (0.17 )      (0.85 ) 

Class R Shares

                 

Year ended 3-31-2016

      8.09         0.55         (1.19 )      (0.64 )      (0.54 )      —        (0.54 ) 

Year ended 3-31-2015

      8.75         0.54         (0.52 )      0.02        (0.54 )      (0.14 )      (0.68 ) 

Year ended 3-31-2014

      8.72         0.52         0.21        0.73        (0.57 )      (0.13 )      (0.70 ) 

Year ended 3-31-2013(5)

      8.54         0.16         0.17        0.33        (0.15 )      —        (0.15 ) 

Class R6 Shares

                 

Year ended 3-31-2016

      8.09         0.60         (1.18 )      (0.58 )      (0.60 )      —        (0.60 ) 

Year ended 3-31-2015(7)

      8.63         0.40         (0.40 )      0.00 *      (0.40 )      (0.14 )      (0.54 ) 

Class Y Shares

                 

Year ended 3-31-2016

      8.09         0.58         (1.19 )      (0.61 )      (0.57 )      —        (0.57 ) 

Year ended 3-31-2015

      8.75         0.57         (0.52 )      0.05        (0.57 )      (0.14 )      (0.71 ) 

Year ended 3-31-2014

      8.72         0.58         0.18        0.76        (0.60 )      (0.13 )      (0.73 ) 

Year ended 3-31-2013

      8.30         0.63         0.52        1.15        (0.63 )      (0.10 )      (0.73 ) 

Year ended 3-31-2012

      8.46         0.64         0.03        0.67        (0.66 )      (0.17 )      (0.83 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) For the period from December 19, 2012 (commencement of operations of the class) through March 31, 2013.

 

(6) Annualized.

 

(7) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(8) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2013.

 

(9) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

242   ANNUAL REPORT   2016  

Table of Contents

 

 

 

      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		    

Ratio of

Expenses to
Average Net
Assets
Including
Expense
Waiver

     Ratio of Net
Investment
Income to
Average Net
Assets
Including
Expense
Waiver		     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

                  

Year ended 3-31-2016

    $ 6.91         -7.75 %    $ 1,865        0.96 %      7.71 %      — %      — %      29 % 

Year ended 3-31-2015

      8.09         0.62       2,920        0.94       6.70       —       —       44  

Year ended 3-31-2014

      8.75         9.09       4,151        0.93       6.68       —       —       75  

Year ended 3-31-2013

      8.72         14.50       3,080        0.93       7.42       —       —       68  

Year ended 3-31-2012

      8.30         8.47       1,847        1.00       7.87       —       —       80  

Class B Shares(4)

                  

Year ended 3-31-2016

      6.91         -8.43       84        1.70       6.98       —       —       29  

Year ended 3-31-2015

      8.09         -0.13       133        1.67       5.98       —       —       44  

Year ended 3-31-2014

      8.75         8.28       165        1.68       5.96       —       —       75  

Year ended 3-31-2013

      8.72         13.64       152        1.69       6.65       —       —       68  

Year ended 3-31-2012

      8.30         7.63       90        1.79       7.10       —       —       80  

Class C Shares

                  

Year ended 3-31-2016

      6.91         -8.40       1,025        1.66       7.02       —       —       29  

Year ended 3-31-2015

      8.09         -0.07       1,618        1.64       6.02       —       —       44  

Year ended 3-31-2014

      8.75         8.32       1,919        1.64       5.98       —       —       75  

Year ended 3-31-2013

      8.72         13.71       1,501        1.64       6.70       —       —       68  

Year ended 3-31-2012

      8.30         7.73       850        1.70       7.16       —       —       80  

Class E Shares

                  

Year ended 3-31-2016

      6.91         -8.01       8        1.23       7.47       1.30       7.40       29  

Year ended 3-31-2015

      8.09         0.30       10        1.26       6.42       —       —       44  

Year ended 3-31-2014

      8.75         8.69       10        1.27       6.34       —       —       75  

Year ended 3-31-2013

      8.72         13.96       8        1.36       6.99       1.38       6.97       68  

Year ended 3-31-2012

      8.30         8.08       5        1.36       7.55       1.45       7.47       80  

Class I Shares

                  

Year ended 3-31-2016

      6.91         -7.52       1,266        0.70       7.94       —       —       29  

Year ended 3-31-2015

      8.09         0.88       2,523        0.69       6.91       —       —       44  

Year ended 3-31-2014

      8.75         9.36       4,075        0.69       6.90       —       —       75  

Year ended 3-31-2013

      8.72         14.77       2,513        0.70       7.64       —       —       68  

Year ended 3-31-2012

      8.30         8.78       1,255        0.73       8.07       —       —       80  

Class R Shares

                  

Year ended 3-31-2016

      6.91         -8.07       62        1.30       7.44       —       —       29  

Year ended 3-31-2015

      8.09         0.31       58        1.29       6.45       —       —       44  

Year ended 3-31-2014

      8.75         8.71       30        1.28       6.00       —       —       75  

Year ended 3-31-2013(5)

      8.72         3.94       — *      1.27 (6)      6.61 (6)      —       —       68 (8)

Class R6 Shares

                  

Year ended 3-31-2016

      6.91         -7.35       55        0.56       8.36       —       —       29  

Year ended 3-31-2015(7)

      8.09         0.13       13        0.54 (6)      7.47 (6)      —       —       44 (9)

Class Y Shares

                  

Year ended 3-31-2016

      6.91         -7.76       406        0.95       7.69       0.95       7.69       29  

Year ended 3-31-2015

      8.09         0.64       740        0.94       6.69       0.95       6.68       44  

Year ended 3-31-2014

      8.75         9.09       1,129        0.93       6.67       0.94       6.66       75  

Year ended 3-31-2013

      8.72         14.50       835        0.93       7.41       0.95       7.39       68  

Year ended 3-31-2012

      8.30         8.51       464        0.99       7.84       —       —       80  

 

See Accompanying Notes to Financial Statements

 

  2016   ANNUAL REPORT   243

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY INTERNATIONAL CORE EQUITY FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income(1) 		     Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		     Distributions
From Net
Investment
Income		     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

                 

Year ended 3-31-2016

    $ 17.88       $ 0.20       $ (1.97 )    $ (1.77 )    $ (0.14 )    $ —      $ (0.14 ) 

Year ended 3-31-2015

      19.04         0.19         0.67        0.86        (0.23 )      (1.79 )      (2.02 ) 

Year ended 3-31-2014

      15.98         0.18         3.24        3.42        (0.35 )      (0.01 )      (0.36 ) 

Year ended 3-31-2013

      15.26         0.21         0.73        0.94        (0.22 )      —        (0.22 ) 

Year ended 3-31-2012

      17.14         0.27         (1.66 )      (1.39 )      (0.27 )      (0.22 )      (0.49 ) 

Class B Shares(4)

                 

Year ended 3-31-2016

      15.97         0.05         (1.76 )      (1.71 )      (0.02 )      —        (0.02 ) 

Year ended 3-31-2015

      17.23         0.03         0.59        0.62        (0.09 )      (1.79 )      (1.88 ) 

Year ended 3-31-2014

      14.49         0.04         2.93        2.97        (0.22 )      (0.01 )      (0.23 ) 

Year ended 3-31-2013

      13.86         0.07         0.66        0.73        (0.10 )      —        (0.10 ) 

Year ended 3-31-2012

      15.64         0.14         (1.53 )      (1.39 )      (0.17 )      (0.22 )      (0.39 ) 

Class C Shares

                 

Year ended 3-31-2016

      16.00         0.06         (1.75 )      (1.69 )      (0.04 )      —        (0.04 ) 

Year ended 3-31-2015

      17.25         0.05         0.61        0.66        (0.12 )      (1.79 )      (1.91 ) 

Year ended 3-31-2014

      14.51         0.07         2.93        3.00        (0.25 )      (0.01 )      (0.26 ) 

Year ended 3-31-2013

      13.88         0.11         0.65        0.76        (0.13 )      —        (0.13 ) 

Year ended 3-31-2012

      15.65         0.17         (1.53 )      (1.36 )      (0.19 )      (0.22 )      (0.41 ) 

Class E Shares

                 

Year ended 3-31-2016

      17.99         0.17         (1.97 )      (1.80 )      (0.11 )      —        (0.11 ) 

Year ended 3-31-2015

      19.14         0.16         0.68        0.84        (0.20 )      (1.79 )      (1.99 ) 

Year ended 3-31-2014

      16.07         0.16         3.25        3.41        (0.33 )      (0.01 )      (0.34 ) 

Year ended 3-31-2013

      15.33         0.20         0.75        0.95        (0.21 )      —        (0.21 ) 

Year ended 3-31-2012

      17.21         0.27         (1.67 )      (1.40 )      (0.26 )      (0.22 )      (0.48 ) 

Class I Shares

                 

Year ended 3-31-2016

      17.99         0.24         (1.97 )      (1.73 )      (0.19 )      —        (0.19 ) 

Year ended 3-31-2015

      19.15         0.25         0.68        0.93        (0.30 )      (1.79 )      (2.09 ) 

Year ended 3-31-2014

      16.07         0.25         3.25        3.50        (0.41 )      (0.01 )      (0.42 ) 

Year ended 3-31-2013

      15.33         0.27         0.75        1.02        (0.28 )      —        (0.28 ) 

Year ended 3-31-2012

      17.22         0.32         (1.66 )      (1.34 )      (0.33 )      (0.22 )      (0.55 ) 

Class R Shares

                 

Year ended 3-31-2016

      17.87         0.13         (1.94 )      (1.81 )      (0.09 )      —        (0.09 ) 

Year ended 3-31-2015

      19.03         0.10         0.71        0.81        (0.18 )      (1.79 )      (1.97 ) 

Year ended 3-31-2014

      15.98         0.11         3.26        3.37        (0.31 )      (0.01 )      (0.32 ) 

Year ended 3-31-2013(5)

      15.40         0.04         0.54        0.58        —        —        —   

Class R6 Shares

                 

Year ended 3-31-2016

      18.04         0.23         (1.94 )      (1.71 )      (0.22 )      —        (0.22 ) 

Year ended 3-31-2015(7)

      20.09         0.13         (0.12 )      0.01        (0.27 )      (1.79 )      (2.06 ) 

Class Y Shares

                 

Year ended 3-31-2016

      18.00         0.21         (1.98 )      (1.77 )      (0.15 )      —        (0.15 ) 

Year ended 3-31-2015

      19.16         0.18         0.70        0.88        (0.25 )      (1.79 )      (2.04 ) 

Year ended 3-31-2014

      16.08         0.21         3.25        3.46        (0.37 )      (0.01 )      (0.38 ) 

Year ended 3-31-2013

      15.35         0.24         0.73        0.97        (0.24 )      —        (0.24 ) 

Year ended 3-31-2012

      17.23         0.29         (1.66 )      (1.37 )      (0.29 )      (0.22 )      (0.51 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) For the period from December 19, 2012 (commencement of operations of the class) through March 31, 2013.

 

(6) Annualized.

 

(7) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(8) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2013.

 

(9) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

244   ANNUAL REPORT   2016  

Table of Contents

 

 

 

      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		     Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		     Ratio of Net
Investment
Income to
Average Net
Assets
Including
Expense
Waiver		     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income to
Average  Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

                  

Year ended 3-31-2016

    $ 15.97         -9.95 %    $ 1,532        1.31 %      1.15 %      — %      — %      62 % 

Year ended 3-31-2015

      17.88         4.98       1,383        1.35       0.99       —       —       87  

Year ended 3-31-2014

      19.04         21.42       1,028        1.40       1.01       —       —       87  

Year ended 3-31-2013

      15.98         6.30       694        1.46       1.43       —       —       81  

Year ended 3-31-2012

      15.26         -7.86       717        1.49       1.75       —       —       88  

Class B Shares(4)

                  

Year ended 3-31-2016

      14.24         -10.70       10        2.20       0.31       —       —       62  

Year ended 3-31-2015

      15.97         4.02       13        2.20       0.17       —       —       87  

Year ended 3-31-2014

      17.23         20.47       13        2.22       0.26       —       —       87  

Year ended 3-31-2013

      14.49         5.37       12        2.35       0.56       —       —       81  

Year ended 3-31-2012

      13.86         -8.68       15        2.36       1.02       —       —       88  

Class C Shares

                  

Year ended 3-31-2016

      14.27         -10.54       253        1.98       0.40       —       —       62  

Year ended 3-31-2015

      16.00         4.25       168        2.02       0.32       —       —       87  

Year ended 3-31-2014

      17.25         20.64       117        2.07       0.40       —       —       87  

Year ended 3-31-2013

      14.51         5.61       98        2.10       0.81       —       —       81  

Year ended 3-31-2012

      13.88         -8.45       113        2.13       1.18       —       —       88  

Class E Shares

                  

Year ended 3-31-2016

      16.08         -10.05       5        1.45       1.01       1.69       0.77       62  

Year ended 3-31-2015

      17.99         4.82       5        1.53       0.84       1.74       0.63       87  

Year ended 3-31-2014

      19.14         21.32       4        1.53       0.90       1.85       0.58       87  

Year ended 3-31-2013

      16.07         6.27       3        1.52       1.36       2.05       0.83       81  

Year ended 3-31-2012

      15.33         -7.88       3        1.53       1.74       2.09       1.18       88  

Class I Shares

                  

Year ended 3-31-2016

      16.07         -9.63       1,885        0.98       1.44       —       —       62  

Year ended 3-31-2015

      17.99         5.32       1,347        1.02       1.30       —       —       87  

Year ended 3-31-2014

      19.15         21.93       802        1.04       1.39       —       —       87  

Year ended 3-31-2013

      16.07         6.75       572        1.05       1.80       —       —       81  

Year ended 3-31-2012

      15.33         -7.47       505        1.07       2.07       —       —       88  

Class R Shares

                  

Year ended 3-31-2016

      15.97         -10.15       36        1.58       0.80       —       —       62  

Year ended 3-31-2015

      17.87         4.70       19        1.61       0.54       —       —       87  

Year ended 3-31-2014

      19.03         21.19       5        1.64       0.61       —       —       87  

Year ended 3-31-2013(5)

      15.98         3.77       — *      1.62 (6)      0.96 (6)      —       —       81 (8)

Class R6 Shares

                  

Year ended 3-31-2016

      16.11         -9.52       289        0.83       1.40       —       —       62  

Year ended 3-31-2015(7)

      18.04         0.48       21        0.86 (6)      1.10 (6)      —       —       87 (9)

Class Y Shares

                  

Year ended 3-31-2016

      16.08         -9.88       572        1.25       1.24       —       —       62  

Year ended 3-31-2015

      18.00         5.04       526        1.27       0.95       —       —       87  

Year ended 3-31-2014

      19.16         21.63       153        1.29       1.20       —       —       87  

Year ended 3-31-2013

      16.08         6.42       148        1.31       1.62       —       —       81  

Year ended 3-31-2012

      15.35         -7.67       165        1.33       1.88       —       —       88  

 

See Accompanying Notes to Financial Statements

 

  2016   ANNUAL REPORT   245

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY LARGE CAP GROWTH FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income
(Loss)(1) 		    Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		     Distributions
From Net
Investment
Income		     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

                

Year ended 3-31-2016

    $ 19.19       $ (0.03 )    $ (0.32 )    $ (0.35 )    $ —      $ (1.18 )    $ (1.18 ) 

Year ended 3-31-2015

      17.59         (0.04 )      3.03        2.99        —        (1.39 )      (1.39 ) 

Year ended 3-31-2014

      15.87         0.01        3.75        3.76        —        (2.04 )      (2.04 ) 

Year ended 3-31-2013

      15.14         0.03        0.73        0.76        (0.03 )      —        (0.03 ) 

Year ended 3-31-2012

      13.61         (0.01 )      1.54        1.53        —        —        —   

Class B Shares(4)

                

Year ended 3-31-2016

      15.82         (0.16 )      (0.26 )      (0.42 )      —        (1.18 )      (1.18 ) 

Year ended 3-31-2015

      14.84         (0.16 )      2.53        2.37        —        (1.39 )      (1.39 ) 

Year ended 3-31-2014

      13.73         (0.12 )      3.21        3.09        —        (1.98 )      (1.98 ) 

Year ended 3-31-2013

      13.20         (0.10 )      0.63        0.53        —        —        —   

Year ended 3-31-2012

      11.99         (0.13 )      1.34        1.21        —        —        —   

Class C Shares

                

Year ended 3-31-2016

      16.78         (0.14 )      (0.27 )      (0.41 )      —        (1.18 )      (1.18 ) 

Year ended 3-31-2015

      15.64         (0.15 )      2.68        2.53        —        (1.39 )      (1.39 ) 

Year ended 3-31-2014

      14.36         (0.11 )      3.37        3.26        —        (1.98 )      (1.98 ) 

Year ended 3-31-2013

      13.78         (0.08 )      0.66        0.58        —        —        —   

Year ended 3-31-2012

      12.49         (0.11 )      1.40        1.29        —        —        —   

Class E Shares

                

Year ended 3-31-2016

      19.17         (0.03 )      (0.32 )      (0.35 )      —        (1.18 )      (1.18 ) 

Year ended 3-31-2015

      17.57         (0.04 )      3.03        2.99        —        (1.39 )      (1.39 ) 

Year ended 3-31-2014

      15.86         0.01        3.74        3.75        —        (2.04 )      (2.04 ) 

Year ended 3-31-2013

      15.13         0.03        0.73        0.76        (0.03 )      —        (0.03 ) 

Year ended 3-31-2012

      13.60         (0.01 )      1.54        1.53        —        —        —   

Class I Shares

                

Year ended 3-31-2016

      19.90         0.02        (0.33 )      (0.31 )      —        (1.18 )      (1.18 ) 

Year ended 3-31-2015

      18.15         0.01        3.13        3.14        —        (1.39 )      (1.39 ) 

Year ended 3-31-2014

      16.31         0.06        3.85        3.91        (0.03 )      (2.04 )      (2.07 ) 

Year ended 3-31-2013

      15.54         0.07        0.76        0.83        (0.06 )      —        (0.06 ) 

Year ended 3-31-2012

      13.93         0.02        1.59        1.61        —        —        —   

Class R Shares

                

Year ended 3-31-2016

      18.74         (0.09 )      (0.31 )      (0.40 )      —        (1.18 )      (1.18 ) 

Year ended 3-31-2015

      17.25         (0.09 )      2.97        2.88        —        (1.39 )      (1.39 ) 

Year ended 3-31-2014

      15.62         (0.04 )      3.67        3.63        —        (2.00 )      (2.00 ) 

Year ended 3-31-2013

      14.92         (0.02 )      0.72        0.70        —        —        —   

Year ended 3-31-2012

      13.46         (0.05 )      1.51        1.46        —        —        —   

Class R6 Shares

                

Year ended 3-31-2016

      19.93         0.05        (0.33 )      (0.28 )      —        (1.18 )      (1.18 ) 

Year ended 3-31-2015(5)

      18.91         0.02        2.39        2.41        —        (1.39 )      (1.39 ) 

Class Y Shares

                

Year ended 3-31-2016

      19.57         (0.01 )      (0.34 )      (0.35 )      —        (1.18 )      (1.18 ) 

Year ended 3-31-2015

      17.89         (0.02 )      3.09        3.07        —        (1.39 )      (1.39 ) 

Year ended 3-31-2014

      16.11         0.03        3.80        3.83        (0.01 )      (2.04 )      (2.05 ) 

Year ended 3-31-2013

      15.36         0.05        0.74        0.79        (0.04 )      —        (0.04 ) 

Year ended 3-31-2012

      13.80         0.01        1.55        1.56        —        —        —   

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(6) Annualized.

 

(7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

246   ANNUAL REPORT   2016  

Table of Contents

 

 

 

      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		      Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		     Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets
Including
Expense
Waiver		     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 17.66         -2.08 %    $ 1,197         1.15 %      -0.15 %      1.16 %      -0.16 %      38 % 

Year ended 3-31-2015

      19.19         17.45       1,093         1.15       -0.20       1.17       -0.22       36  

Year ended 3-31-2014

      17.59         24.21       1,090         1.15       0.07       1.19       0.03       50  

Year ended 3-31-2013

      15.87         5.03       994         1.15       0.22       1.22       0.15       73  

Year ended 3-31-2012

      15.14         11.24       995         1.15       -0.06       1.22       -0.13       57  

Class B Shares(4)

                   

Year ended 3-31-2016

      14.22         -2.98       11         2.07       -1.07       —       —       38  

Year ended 3-31-2015

      15.82         16.49       12         2.01       -1.06       —       —       36  

Year ended 3-31-2014

      14.84         23.08       11         2.06       -0.84       —       —       50  

Year ended 3-31-2013

      13.73         4.02       11         2.15       -0.78       2.18       -0.81       73  

Year ended 3-31-2012

      13.20         10.09       15         2.18       -1.10       2.22       -1.14       57  

Class C Shares

                   

Year ended 3-31-2016

      15.19         -2.74       107         1.86       -0.85       —       —       38  

Year ended 3-31-2015

      16.78         16.67       94         1.86       -0.92       —       —       36  

Year ended 3-31-2014

      15.64         23.17       78         1.90       -0.68       —       —       50  

Year ended 3-31-2013

      14.36         4.28       71         1.93       -0.57       —       —       73  

Year ended 3-31-2012

      13.78         10.33       81         1.95       -0.86       —       —       57  

Class E Shares

                   

Year ended 3-31-2016

      17.64         -2.08       12         1.15       -0.14       1.35       -0.34       38  

Year ended 3-31-2015

      19.17         17.47       9         1.15       -0.21       1.39       -0.45       36  

Year ended 3-31-2014

      17.57         24.16       7         1.15       0.06       1.46       -0.25       50  

Year ended 3-31-2013

      15.86         5.03       6         1.15       0.21       1.59       -0.24       73  

Year ended 3-31-2012

      15.13         11.25       5         1.15       -0.06       1.62       -0.53       57  

Class I Shares

                   

Year ended 3-31-2016

      18.41         -1.79       272         0.88       0.11       —       —       38  

Year ended 3-31-2015

      19.90         17.75       318         0.88       0.04       —       —       36  

Year ended 3-31-2014

      18.15         24.52       118         0.88       0.34       0.88       0.34       50  

Year ended 3-31-2013

      16.31         5.36       142         0.88       0.45       0.89       0.45       73  

Year ended 3-31-2012

      15.54         11.56       242         0.89       0.18       —       —       57  

Class R Shares

                   

Year ended 3-31-2016

      17.16         -2.39       22         1.47       -0.48       —       —       38  

Year ended 3-31-2015

      18.74         17.16       26         1.47       -0.52       —       —       36  

Year ended 3-31-2014

      17.25         23.75       31         1.47       -0.26       —       —       50  

Year ended 3-31-2013

      15.62         4.69       28         1.48       -0.11       —       —       73  

Year ended 3-31-2012

      14.92         10.85       24         1.48       -0.39       —       —       57  

Class R6 Shares

                   

Year ended 3-31-2016

      18.47         -1.64       7         0.73       0.28       —       —       38  

Year ended 3-31-2015(5)

      19.93         13.18       6         0.72 (6)      0.17 (6)      —       —       36 (7)

Class Y Shares

                   

Year ended 3-31-2016

      18.04         -2.03       125         1.06       -0.07       1.11       -0.12       38  

Year ended 3-31-2015

      19.57         17.62       132         1.06       -0.11       1.12       -0.17       36  

Year ended 3-31-2014

      17.89         24.30       131         1.06       0.16       1.13       0.09       50  

Year ended 3-31-2013

      16.11         5.09       126         1.06       0.31       1.13       0.23       73  

Year ended 3-31-2012

      15.36         11.38       121         1.06       0.04       1.14       -0.04       57  

 

See Accompanying Notes to Financial Statements

 

  2016   ANNUAL REPORT   247

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY LIMITED-TERM BOND FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income(1) 		     Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		     Distributions
From Net
Investment
Income		     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

                 

Year ended 3-31-2016

    $ 10.92       $ 0.15       $ (0.05 )    $ 0.10      $ (0.15 )    $ —      $ (0.15 ) 

Year ended 3-31-2015

      10.90         0.15         0.02        0.17        (0.15 )      —        (0.15 ) 

Year ended 3-31-2014

      11.20         0.14         (0.23 )      (0.09 )      (0.15 )      (0.06 )      (0.21 ) 

Year ended 3-31-2013

      11.16         0.17         0.08        0.25        (0.18 )      (0.03 )      (0.21 ) 

Year ended 3-31-2012

      11.04         0.20         0.20        0.40        (0.23 )      (0.05 )      (0.28 ) 

Class B Shares(4)

                 

Year ended 3-31-2016

      10.92         0.06         (0.05 )      0.01        (0.06 )      —        (0.06 ) 

Year ended 3-31-2015

      10.90         0.06         0.02        0.08        (0.06 )      —        (0.06 ) 

Year ended 3-31-2014

      11.20         0.05         (0.23 )      (0.18 )      (0.06 )      (0.06 )      (0.12 ) 

Year ended 3-31-2013

      11.16         0.07         0.09        0.16        (0.09 )      (0.03 )      (0.12 ) 

Year ended 3-31-2012

      11.04         0.11         0.20        0.31        (0.14 )      (0.05 )      (0.19 ) 

Class C Shares

                 

Year ended 3-31-2016

      10.92         0.07         (0.05 )      0.02        (0.07 )      —        (0.07 ) 

Year ended 3-31-2015

      10.90         0.07         0.02        0.09        (0.07 )      —        (0.07 ) 

Year ended 3-31-2014

      11.20         0.06         (0.23 )      (0.17 )      (0.07 )      (0.06 )      (0.13 ) 

Year ended 3-31-2013

      11.16         0.08         0.09        0.17        (0.10 )      (0.03 )      (0.13 ) 

Year ended 3-31-2012

      11.04         0.12         0.20        0.32        (0.15 )      (0.05 )      (0.20 ) 

Class E Shares

                 

Year ended 3-31-2016

      10.92         0.13         (0.04 )      0.09        (0.14 )      —        (0.14 ) 

Year ended 3-31-2015

      10.90         0.13         0.03        0.16        (0.14 )      —        (0.14 ) 

Year ended 3-31-2014

      11.20         0.13         (0.23 )      (0.10 )      (0.14 )      (0.06 )      (0.20 ) 

Year ended 3-31-2013

      11.16         0.15         0.09        0.24        (0.17 )      (0.03 )      (0.20 ) 

Year ended 3-31-2012

      11.04         0.19         0.20        0.39        (0.22 )      (0.05 )      (0.27 ) 

Class I Shares

                 

Year ended 3-31-2016

      10.92         0.17         (0.04 )      0.13        (0.18 )      —        (0.18 ) 

Year ended 3-31-2015

      10.90         0.17         0.03        0.20        (0.18 )      —        (0.18 ) 

Year ended 3-31-2014

      11.20         0.17         (0.23 )      (0.06 )      (0.18 )      (0.06 )      (0.24 ) 

Year ended 3-31-2013

      11.16         0.19         0.09        0.28        (0.21 )      (0.03 )      (0.24 ) 

Year ended 3-31-2012

      11.04         0.23         0.20        0.43        (0.26 )      (0.05 )      (0.31 ) 

Class R Shares

                 

Year ended 3-31-2016

      10.92         0.11         (0.05 )      0.06        (0.11 )      —        (0.11 ) 

Year ended 3-31-2015

      10.90         0.11         0.03        0.14        (0.12 )      —        (0.12 ) 

Year ended 3-31-2014

      11.20         0.11         (0.23 )      (0.12 )      (0.12 )      (0.06 )      (0.18 ) 

Year ended 3-31-2013(5)

      11.19         0.02         0.02        0.04        (0.03 )      —        (0.03 ) 

Class R6 Shares

                 

Year ended 3-31-2016

      10.92         0.19         (0.05 )      0.14        (0.19 )      —        (0.19 ) 

Year ended 3-31-2015(7)

      10.91         0.13         0.01        0.14        (0.13 )      —        (0.13 ) 

Class Y Shares

                 

Year ended 3-31-2016

      10.92         0.15         (0.05 )      0.10        (0.15 )      —        (0.15 ) 

Year ended 3-31-2015

      10.90         0.15         0.02        0.17        (0.15 )      —        (0.15 ) 

Year ended 3-31-2014

      11.20         0.14         (0.23 )      (0.09 )      (0.15 )      (0.06 )      (0.21 ) 

Year ended 3-31-2013

      11.16         0.17         0.08        0.25        (0.18 )      (0.03 )      (0.21 ) 

Year ended 3-31-2012

      11.04         0.21         0.19        0.40        (0.23 )      (0.05 )      (0.28 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) For the period from December 19, 2012 (commencement of operations of the class) through March 31, 2013.

 

(6) Annualized.

 

(7) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(8) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2013.

 

(9) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

248   ANNUAL REPORT   2016  

Table of Contents

 

 

 

      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		     Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		     Ratio of Net
Investment
Income to
Average Net
Assets
Including
Expense
Waiver		     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 10.87         0.95 %    $ 1,589        0.88 %      1.36 %      — %      — %      46 % 

Year ended 3-31-2015

      10.92         1.60       1,504        0.88       1.36       —       —       39  

Year ended 3-31-2014

      10.90         -0.74       1,446        0.89       1.31       —       —       39  

Year ended 3-31-2013

      11.20         2.29       1,211        0.88       1.48       —       —       55  

Year ended 3-31-2012

      11.16         3.66       1,046        0.90       1.84       —       —       40  

Class B Shares(4)

  

Year ended 3-31-2016

      10.87         0.12       14        1.71       0.54       —       —       46  

Year ended 3-31-2015

      10.92         0.75       13        1.72       0.52       —       —       39  

Year ended 3-31-2014

      10.90         -1.59       19        1.76       0.44       —       —       39  

Year ended 3-31-2013

      11.20         1.45       25        1.71       0.66       —       —       55  

Year ended 3-31-2012

      11.16         2.80       26        1.74       1.00       —       —       40  

Class C Shares

  

Year ended 3-31-2016

      10.87         0.22       128        1.61       0.63       —       —       46  

Year ended 3-31-2015

      10.92         0.83       117        1.64       0.60       —       —       39  

Year ended 3-31-2014

      10.90         -1.47       131        1.63       0.56       —       —       39  

Year ended 3-31-2013

      11.20         1.54       218        1.61       0.76       —       —       55  

Year ended 3-31-2012

      11.16         2.89       242        1.65       1.10       —       —       40  

Class E Shares

  

Year ended 3-31-2016

      10.87         0.83       4        1.00       1.24       1.03       1.21       46  

Year ended 3-31-2015

      10.92         1.48       4        1.00       1.24       1.03       1.21       39  

Year ended 3-31-2014

      10.90         -0.85       3        1.00       1.20       1.02       1.18       39  

Year ended 3-31-2013

      11.20         2.17       4        1.00       1.35       —       —       55  

Year ended 3-31-2012

      11.16         3.58       3        1.00       1.72       1.09       1.63       40  

Class I Shares

  

Year ended 3-31-2016

      10.87         1.20       56        0.64       1.60       —       —       46  

Year ended 3-31-2015

      10.92         1.86       44        0.63       1.60       —       —       39  

Year ended 3-31-2014

      10.90         -0.50       49        0.64       1.54       —       —       39  

Year ended 3-31-2013

      11.20         2.54       117        0.64       1.72       —       —       55  

Year ended 3-31-2012

      11.16         3.92       102        0.66       2.07       —       —       40  

Class R Shares

  

Year ended 3-31-2016

      10.87         0.59       1        1.24       0.98       —       —       46  

Year ended 3-31-2015

      10.92         1.24       1        1.23       1.00       —       —       39  

Year ended 3-31-2014

      10.90         -1.08       — *      1.24       0.96       —       —       39  

Year ended 3-31-2013(5)

      11.20         0.41       — *      1.21 (6)      0.59 (6)      —       —       55 (8)

Class R6 Shares

  

Year ended 3-31-2016

      10.87         1.35       2        0.49       1.76       —       —       46  

Year ended 3-31-2015(7)

      10.92         1.31       3        0.48 (6)      1.75 (6)      —       —       39 (9)

Class Y Shares

  

Year ended 3-31-2016

      10.87         0.95       16        0.88       1.35       0.89       1.34       46  

Year ended 3-31-2015

      10.92         1.59       21        0.88       1.35       0.89       1.34       39  

Year ended 3-31-2014

      10.90         -0.74       26        0.89       1.30       0.90       1.29       39  

Year ended 3-31-2013

      11.20         2.29       58        0.88       1.48       0.89       1.47       55  

Year ended 3-31-2012

      11.16         3.66       51        0.90       1.85       0.92       1.84       40  

 

See Accompanying Notes to Financial Statements

 

  2016   ANNUAL REPORT   249

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY MANAGED INTERNATIONAL OPPORTUNITIES FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income
(Loss)(1) 		    Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		     Distributions
From Net
Investment
Income		     Distributions
From Net
Realized
Gains		      Total
Distributions		  

Class A Shares

                 

Year ended 3-31-2016

    $ 10.52       $ 0.07      $ (1.06 )    $ (0.99 )    $ (0.07 )    $ —       $ (0.07 ) 

Year ended 3-31-2015

      10.15         0.14        0.37        0.51        (0.14 )      —         (0.14 ) 

Year ended 3-31-2014

      8.98         0.11        1.17        1.28        (0.11 )      —         (0.11 ) 

Year ended 3-31-2013

      8.70         0.11        0.29        0.40        (0.12 )      —         (0.12 ) 

Year ended 3-31-2012

      9.56         0.14        (0.86 )      (0.72 )      (0.14 )      —         (0.14 ) 

Class B Shares(5)

                 

Year ended 3-31-2016

      10.33         (0.02 )      (1.06 )      (1.08 )      — *      —         — * 

Year ended 3-31-2015

      9.99         0.06        0.36        0.42        (0.08 )      —         (0.08 ) 

Year ended 3-31-2014

      8.85         0.03        1.17        1.20        (0.06 )      —         (0.06 ) 

Year ended 3-31-2013

      8.59         0.04        0.29        0.33        (0.07 )      —         (0.07 ) 

Year ended 3-31-2012

      9.48         0.06        (0.87 )      (0.81 )      (0.08 )      —         (0.08 ) 

Class C Shares

                 

Year ended 3-31-2016

      10.36         0.00 *      (1.07 )      (1.07 )      (0.01 )      —         (0.01 ) 

Year ended 3-31-2015

      10.02         0.07        0.36        0.43        (0.09 )      —         (0.09 ) 

Year ended 3-31-2014

      8.87         0.04        1.17        1.21        (0.06 )      —         (0.06 ) 

Year ended 3-31-2013

      8.61         0.04        0.29        0.33        (0.07 )      —         (0.07 ) 

Year ended 3-31-2012

      9.49         0.07        (0.86 )      (0.79 )      (0.09 )      —         (0.09 ) 

Class E Shares(6)

                 

Year ended 3-31-2016

      10.53         0.08        (1.06 )      (0.98 )      (0.08 )      —         (0.08 ) 

Year ended 3-31-2015

      10.16         0.15        0.37        0.52        (0.15 )      —         (0.15 ) 

Year ended 3-31-2014

      8.99         0.12        1.17        1.29        (0.12 )      —         (0.12 ) 

Year ended 3-31-2013

      8.70         0.12        0.30        0.42        (0.13 )      —         (0.13 ) 

Year ended 3-31-2012

      9.57         0.15        (0.88 )      (0.73 )      (0.14 )      —         (0.14 ) 

Class I Shares

                 

Year ended 3-31-2016

      10.54         0.13        (1.08 )      (0.95 )      (0.09 )      —         (0.09 ) 

Year ended 3-31-2015

      10.17         0.19        0.35        0.54        (0.17 )      —         (0.17 ) 

Year ended 3-31-2014

      9.01         0.14        1.15        1.29        (0.13 )      —         (0.13 ) 

Year ended 3-31-2013

      8.73         0.13        0.30        0.43        (0.15 )      —         (0.15 ) 

Year ended 3-31-2012

      9.58         0.16        (0.85 )      (0.69 )      (0.16 )      —         (0.16 ) 

Class R Shares

                 

Year ended 3-31-2016

      10.50         0.06        (1.06 )      (1.00 )      (0.06 )      —         (0.06 ) 

Year ended 3-31-2015

      10.13         0.13        0.37        0.50        (0.13 )      —         (0.13 ) 

Year ended 3-31-2014

      8.97         0.10        1.16        1.26        (0.10 )      —         (0.10 ) 

Year ended 3-31-2013(7)

      8.88         (0.01 )      0.10        0.09        —        —         —   

Class Y Shares

                 

Year ended 3-31-2016

      10.51         0.07        (1.04 )      (0.97 )      (0.08 )      —         (0.08 ) 

Year ended 3-31-2015

      10.14         0.17        0.35        0.52        (0.15 )      —         (0.15 ) 

Year ended 3-31-2014

      8.97         0.13        1.16        1.29        (0.12 )      —         (0.12 ) 

Year ended 3-31-2013

      8.69         0.12        0.29        0.41        (0.13 )      —         (0.13 ) 

Year ended 3-31-2012

      9.55         0.16        (0.88 )      (0.72 )      (0.14 )      —         (0.14 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Does not include expenses of underlying Ivy Funds in which the Fund invests.

 

(4) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(5) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(6) Class share is closed to investment.

 

(7) For the period from December 19, 2012 (commencement of operations of the class) through March 31, 2013.

 

(8) Annualized.

 

(9) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2013.

 

250   ANNUAL REPORT   2016  

Table of Contents

 

 

 

      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		     Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver(3)		     Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets
Including
Expense
Waiver(3)		     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)(4)		     Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets
Excluding
Expense
Waiver(3)(4)		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 9.46         -9.41 %    $ 188        0.46 %      0.71 %      — %      — %      37 % 

Year ended 3-31-2015

      10.52         5.17       228        0.48       1.36       —       —       4  

Year ended 3-31-2014

      10.15         14.33       254        0.49       1.16       —       —       21  

Year ended 3-31-2013

      8.98         4.65       183        0.49       1.32       —       —       21  

Year ended 3-31-2012

      8.70         -7.42       185        0.50       1.58       —       —       8  

Class B Shares(5)

                  

Year ended 3-31-2016

      9.25         -10.42       2        1.40       -0.24       1.48       -0.32       37  

Year ended 3-31-2015

      10.33         4.28       2        1.36       0.60       —       —       4  

Year ended 3-31-2014

      9.99         13.53       3        1.39       0.28       —       —       21  

Year ended 3-31-2013

      8.85         3.83       2        1.40       0.44       —       —       21  

Year ended 3-31-2012

      8.59         -8.42       3        1.39       0.66       —       —       8  

Class C Shares

                  

Year ended 3-31-2016

      9.28         -10.30       5        1.27       -0.04       —       —       37  

Year ended 3-31-2015

      10.36         4.32       5        1.29       0.73       —       —       4  

Year ended 3-31-2014

      10.02         13.57       6        1.26       0.43       —       —       21  

Year ended 3-31-2013

      8.87         4.01       5        1.29       0.53       —       —       21  

Year ended 3-31-2012

      8.61         -8.25       5        1.30       0.79       —       —       8  

Class E Shares(6)

                  

Year ended 3-31-2016

      9.47         -9.36       — *      0.39       0.79       —       —       37  

Year ended 3-31-2015

      10.53         5.25       — *      0.39       1.49       —       —       4  

Year ended 3-31-2014

      10.16         14.38       — *      0.40       1.24       —       —       21  

Year ended 3-31-2013

      8.99         4.86       — *      0.39       1.44       —       —       21  

Year ended 3-31-2012

      8.70         -7.45       — *      0.40       1.66       —       —       8  

Class I Shares

                  

Year ended 3-31-2016

      9.50         -9.00       1        0.16       1.28       —       —       37  

Year ended 3-31-2015

      10.54         5.41       1        0.16       1.82       0.18       1.80       4  

Year ended 3-31-2014

      10.17         14.41       1        0.16       1.47       —       —       21  

Year ended 3-31-2013

      9.01         4.97       1        0.16       1.46       —       —       21  

Year ended 3-31-2012

      8.73         -7.04       1        0.15       1.89       —       —       8  

Class R Shares

                  

Year ended 3-31-2016

      9.44         -9.55       1        0.64       0.55       —       —       37  

Year ended 3-31-2015

      10.50         5.07       1        0.63       1.26       —       —       4  

Year ended 3-31-2014

      10.13         14.12       1        0.63       1.01       —       —       21  

Year ended 3-31-2013(7)

      8.97         1.01       — *      0.72 (8)      -0.55 (8)      —       —       21 (9) 

Class Y Shares

                  

Year ended 3-31-2016

      9.46         -9.28       1        0.38       0.68       0.40       0.66       37  

Year ended 3-31-2015

      10.51         5.26       2        0.38       1.63       0.47       1.54       4  

Year ended 3-31-2014

      10.14         14.42       2        0.40       1.33       —       —       21  

Year ended 3-31-2013

      8.97         4.77       1        0.38       1.42       —       —       21  

Year ended 3-31-2012

      8.69         -7.42       1        0.46       1.85       —       —       8  

 

See Accompanying Notes to Financial Statements

 

  2016   ANNUAL REPORT   251

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY MICRO CAP GROWTH FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Loss(1) 		    Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		     Distributions
From Net
Investment
Income		      Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

                 

Year ended 3-31-2016

    $ 24.73       $ (0.32 )    $ (5.37 )    $ (5.69 )    $ —       $ (0.90 )    $ (0.90 ) 

Year ended 3-31-2015

      27.31         (0.36 )      (0.82 )      (1.18 )      —         (1.40 )      (1.40 ) 

Year ended 3-31-2014

      20.45         (0.36 )      8.65        8.29        —         (1.43 )      (1.43 ) 

Year ended 3-31-2013

      19.27         (0.25 )      1.43        1.18        —         —        —   

Year ended 3-31-2012

      19.63         (0.29 )      1.27        0.98        —         (1.34 )      (1.34 ) 

Class B Shares(3)

                 

Year ended 3-31-2016

      23.70         (0.49 )      (5.11 )      (5.60 )      —         (0.90 )      (0.90 ) 

Year ended 3-31-2015

      26.23         (0.56 )      (0.79 )      (1.35 )      —         (1.18 )      (1.18 ) 

Year ended 3-31-2014

      19.86         (0.57 )      8.36        7.79        —         (1.42 )      (1.42 ) 

Year ended 3-31-2013

      18.93         (0.44 )      1.37        0.93        —         —        —   

Year ended 3-31-2012

      19.27         (0.49 )      1.26        0.77        —         (1.11 )      (1.11 ) 

Class C Shares

                 

Year ended 3-31-2016

      24.00         (0.47 )      (5.18 )      (5.65 )      —         (0.90 )      (0.90 ) 

Year ended 3-31-2015

      26.56         (0.53 )      (0.80 )      (1.33 )      —         (1.23 )      (1.23 ) 

Year ended 3-31-2014

      20.05         (0.52 )      8.45        7.93        —         (1.42 )      (1.42 ) 

Year ended 3-31-2013

      19.04         (0.38 )      1.39        1.01        —         —        —   

Year ended 3-31-2012

      19.42         (0.43 )      1.25        0.82        —         (1.20 )      (1.20 ) 

Class I Shares

                 

Year ended 3-31-2016

      25.12         (0.22 )      (5.47 )      (5.69 )      —         (0.90 )      (0.90 ) 

Year ended 3-31-2015

      27.65         (0.27 )      (0.83 )      (1.10 )      —         (1.43 )      (1.43 ) 

Year ended 3-31-2014

      20.65         (0.26 )      8.75        8.49        —         (1.49 )      (1.49 ) 

Year ended 3-31-2013

      19.37         (0.17 )      1.45        1.28        —         —        —   

Year ended 3-31-2012

      19.73         (0.21 )      1.26        1.05        —         (1.41 )      (1.41 ) 

Class R Shares

                 

Year ended 3-31-2016

      24.69         (0.35 )      (5.36 )      (5.71 )      —         (0.90 )      (0.90 ) 

Year ended 3-31-2015

      27.27         (0.41 )      (0.81 )      (1.22 )      —         (1.36 )      (1.36 ) 

Year ended 3-31-2014

      20.45         (0.40 )      8.64        8.24        —         (1.42 )      (1.42 ) 

Year ended 3-31-2013(4)

      17.77         (0.10 )      2.78        2.68        —         —        —   

Class R6 Shares

                 

Year ended 3-31-2016

      25.19         (0.19 )      (5.49 )      (5.68 )      —         (0.90 )      (0.90 ) 

Year ended 3-31-2015(6)

      23.73         (0.15 )      3.01        2.86        —         (1.40 )      (1.40 ) 

Class Y Shares

                 

Year ended 3-31-2016

      25.44         (0.28 )      (5.54 )      (5.82 )      —         (0.90 )      (0.90 ) 

Year ended 3-31-2015

      28.02         (0.33 )      (0.84 )      (1.17 )      —         (1.41 )      (1.41 ) 

Year ended 3-31-2014

      20.51         (0.33 )      9.29        8.96        —         (1.45 )      (1.45 ) 

Year ended 3-31-2013

      19.29         (0.22 )      1.44        1.22        —         —        —   

Year ended 3-31-2012

      19.64         (0.26 )      1.28        1.02        —         (1.37 )      (1.37 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(4) For the period from December 19, 2012 (commencement of operations of the class) through March 31, 2013.

 

(5) Annualized.

 

(6) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2013.

 

(8) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

252   ANNUAL REPORT   2016  

Table of Contents

 

 

 

      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		     Ratio of
Expenses to
Average Net
Assets 		    Ratio of Net
Investment
Loss to
Average Net
Assets 		    Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 18.14         -23.51 %    $ 130        1.69 %      -1.42 %      84 % 

Year ended 3-31-2015

      24.73         -3.91       199        1.64       -1.50       47  

Year ended 3-31-2014

      27.31         41.32       213        1.64       -1.45       67  

Year ended 3-31-2013

      20.45         6.12       80        1.78       -1.36       51  

Year ended 3-31-2012

      19.27         6.56       72        1.78       -1.63       78  

Class B Shares(3)

              

Year ended 3-31-2016

      17.20         -24.16       1        2.57       -2.29       84  

Year ended 3-31-2015

      23.70         -4.80       2        2.54       -2.40       47  

Year ended 3-31-2014

      26.23         39.96       3        2.59       -2.40       67  

Year ended 3-31-2013

      19.86         4.97       2        2.90       -2.48       51  

Year ended 3-31-2012

      18.93         5.28       1        2.99       -2.84       78  

Class C Shares

              

Year ended 3-31-2016

      17.45         -24.06       7        2.42       -2.15       84  

Year ended 3-31-2015

      24.00         -4.63       10        2.39       -2.25       47  

Year ended 3-31-2014

      26.56         40.28       14        2.35       -2.15       67  

Year ended 3-31-2013

      20.05         5.36       5        2.55       -2.14       51  

Year ended 3-31-2012

      19.04         5.65       4        2.62       -2.47       78  

Class I Shares

              

Year ended 3-31-2016

      18.53         -23.14       10        1.25       -0.96       84  

Year ended 3-31-2015

      25.12         -3.56       21        1.24       -1.09       47  

Year ended 3-31-2014

      27.65         41.90       34        1.23       -1.01       67  

Year ended 3-31-2013

      20.65         6.66       4        1.31       -0.93       51  

Year ended 3-31-2012

      19.37         7.00       3        1.34       -1.19       78  

Class R Shares

              

Year ended 3-31-2016

      18.08         -23.63       1        1.84       -1.58       84  

Year ended 3-31-2015

      24.69         -4.08       1        1.83       -1.69       47  

Year ended 3-31-2014

      27.27         41.09       — *      1.84       -1.66       67  

Year ended 3-31-2013(4)

      20.45         15.08       — *      1.89 (5)      -1.84 (5)      51 (7) 

Class R6 Shares

              

Year ended 3-31-2016

      18.61         -23.03       2        1.08       -0.84       84  

Year ended 3-31-2015(6)

      25.19         12.53       2        1.08 (5)      -0.94 (5)      47 (8) 

Class Y Shares

              

Year ended 3-31-2016

      18.72         -23.36       1        1.50       -1.21       84  

Year ended 3-31-2015

      25.44         -3.77       2        1.49       -1.34       47  

Year ended 3-31-2014

      28.02         44.49       3        1.50       -1.30       67  

Year ended 3-31-2013

      20.51         6.32       1        1.60       -1.21       51  

Year ended 3-31-2012

      19.29         6.79       1        1.59       -1.45       78  

 

See Accompanying Notes to Financial Statements

 

  2016   ANNUAL REPORT   253

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY MID CAP GROWTH FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income
(Loss)(1) 		    Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		     Distributions
From Net
Investment
Income		      Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

                 

Year ended 3-31-2016

    $ 23.43       $ (0.06 )    $ (2.33 )    $ (2.39 )    $ —       $ (2.08 )    $ (2.08 ) 

Year ended 3-31-2015

      23.45         (0.12 )      2.49        2.37        —         (2.39 )      (2.39 ) 

Year ended 3-31-2014

      20.22         (0.14 )      4.17        4.03        —         (0.80 )      (0.80 ) 

Year ended 3-31-2013

      18.62         (0.09 )      1.80        1.71        —         (0.11 )      (0.11 ) 

Year ended 3-31-2012

      18.36         (0.12 )      0.85        0.73        —         (0.47 )      (0.47 ) 

Class B Shares(4)

                 

Year ended 3-31-2016

      19.84         (0.19 )      (1.96 )      (2.15 )      —         (1.93 )      (1.93 ) 

Year ended 3-31-2015

      20.30         (0.25 )      2.13        1.88        —         (2.34 )      (2.34 ) 

Year ended 3-31-2014

      17.66         (0.27 )      3.61        3.34        —         (0.70 )      (0.70 ) 

Year ended 3-31-2013

      16.42         (0.23 )      1.58        1.35        —         (0.11 )      (0.11 ) 

Year ended 3-31-2012

      16.40         (0.25 )      0.74        0.49        —         (0.47 )      (0.47 ) 

Class C Shares

                 

Year ended 3-31-2016

      20.88         (0.19 )      (2.07 )      (2.26 )      —         (1.93 )      (1.93 ) 

Year ended 3-31-2015

      21.24         (0.26 )      2.25        1.99        —         (2.35 )      (2.35 ) 

Year ended 3-31-2014

      18.44         (0.26 )      3.77        3.51        —         (0.71 )      (0.71 ) 

Year ended 3-31-2013

      17.11         (0.21 )      1.65        1.44        —         (0.11 )      (0.11 ) 

Year ended 3-31-2012

      17.04         (0.23 )      0.77        0.54        —         (0.47 )      (0.47 ) 

Class E Shares

                 

Year ended 3-31-2016

      22.92         (0.08 )      (2.29 )      (2.37 )      —         (2.01 )      (2.01 ) 

Year ended 3-31-2015

      23.02         (0.19 )      2.46        2.27        —         (2.37 )      (2.37 ) 

Year ended 3-31-2014

      19.90         (0.20 )      4.09        3.89        —         (0.77 )      (0.77 ) 

Year ended 3-31-2013

      18.37         (0.14 )      1.78        1.64        —         (0.11 )      (0.11 ) 

Year ended 3-31-2012

      18.17         (0.15 )      0.82        0.67        —         (0.47 )      (0.47 ) 

Class I Shares

                 

Year ended 3-31-2016

      24.77         0.00 *      (2.46 )      (2.46 )      —         (2.16 )      (2.16 ) 

Year ended 3-31-2015

      24.60         (0.05 )      2.63        2.58        —         (2.41 )      (2.41 ) 

Year ended 3-31-2014

      21.17         (0.07 )      4.36        4.29        —         (0.86 )      (0.86 ) 

Year ended 3-31-2013

      19.43         (0.04 )      1.89        1.85        —         (0.11 )      (0.11 ) 

Year ended 3-31-2012

      19.07         (0.07 )      0.90        0.83        —         (0.47 )      (0.47 ) 

Class R Shares

                 

Year ended 3-31-2016

      23.08         (0.13 )      (2.29 )      (2.42 )      —         (2.01 )      (2.01 ) 

Year ended 3-31-2015

      23.18         (0.18 )      2.45        2.27        —         (2.37 )      (2.37 ) 

Year ended 3-31-2014

      20.02         (0.19 )      4.12        3.93        —         (0.77 )      (0.77 ) 

Year ended 3-31-2013

      18.49         (0.15 )      1.79        1.64        —         (0.11 )      (0.11 ) 

Year ended 3-31-2012

      18.27         (0.16 )      0.85        0.69        —         (0.47 )      (0.47 ) 

Class R6 Shares

                 

Year ended 3-31-2016

      24.81         0.05        (2.48 )      (2.43 )      —         (2.16 )      (2.16 ) 

Year ended 3-31-2015(5)

      24.38         (0.02 )      2.84        2.82        —         (2.39 )      (2.39 ) 

Class Y Shares

                 

Year ended 3-31-2016

      24.26         (0.06 )      (2.41 )      (2.47 )      —         (2.10 )      (2.10 ) 

Year ended 3-31-2015

      24.18         (0.11 )      2.58        2.47        —         (2.39 )      (2.39 ) 

Year ended 3-31-2014

      20.83         (0.12 )      4.30        4.18        —         (0.83 )      (0.83 ) 

Year ended 3-31-2013

      19.17         (0.09 )      1.86        1.77        —         (0.11 )      (0.11 ) 

Year ended 3-31-2012

      18.86         (0.10 )      0.88        0.78        —         (0.47 )      (0.47 ) 

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(6) Annualized.

 

(7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

254   ANNUAL REPORT   2016  

Table of Contents

 

 

 

      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		      Ratio of
Expenses to
Average  Net
Assets
Including
Expense
Waiver		     Ratio of Net
Investment
Income
(Loss) to
Average  Net
Assets
Including
Expense
Waiver		     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Loss to
Average  Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 18.96         -10.27 %    $ 787         1.29 %      -0.30 %      — %      — %      38 % 

Year ended 3-31-2015

      23.43         10.73       1,025         1.28       -0.50       1.29       -0.51       35  

Year ended 3-31-2014

      23.45         20.09       1,558         1.34       -0.63       —       —       43  

Year ended 3-31-2013

      20.22         9.28       1,160         1.31       -0.52       —       —       32  

Year ended 3-31-2012

      18.62         4.29       636         1.40       -0.69       —       —       29  

Class B Shares(4)

                   

Year ended 3-31-2016

      15.76         -10.95       19         2.05       -1.06       —       —       38  

Year ended 3-31-2015

      19.84         9.94       24         2.05       -1.26       —       —       35  

Year ended 3-31-2014

      20.30         19.14       26         2.10       -1.39       —       —       43  

Year ended 3-31-2013

      17.66         8.27       21         2.21       -1.42       —       —       32  

Year ended 3-31-2012

      16.42         3.33       17         2.35       -1.63       —       —       29  

Class C Shares

                   

Year ended 3-31-2016

      16.69         -10.92       264         2.01       -1.02       —       —       38  

Year ended 3-31-2015

      20.88         10.00       343         2.01       -1.22       —       —       35  

Year ended 3-31-2014

      21.24         19.25       295         2.01       -1.31       —       —       43  

Year ended 3-31-2013

      18.44         8.46       183         2.07       -1.28       —       —       32  

Year ended 3-31-2012

      17.11         3.50       135         2.14       -1.44       —       —       29  

Class E Shares

                   

Year ended 3-31-2016

      18.54         -10.41       7         1.41       -0.41       1.63       -0.63       38  

Year ended 3-31-2015

      22.92         10.46       7         1.60       -0.82       1.63       -0.85       35  

Year ended 3-31-2014

      23.02         19.75       6         1.60       -0.90       1.71       -1.01       43  

Year ended 3-31-2013

      19.90         8.97       4         1.60       -0.81       1.90       -1.11       32  

Year ended 3-31-2012

      18.37         4.00       3         1.60       -0.88       1.97       -1.25       29  

Class I Shares

                   

Year ended 3-31-2016

      20.15         -10.00       1,423         1.00       -0.01       —       —       38  

Year ended 3-31-2015

      24.77         11.09       2,933         0.99       -0.19       —       —       35  

Year ended 3-31-2014

      24.60         20.52       2,098         0.99       -0.28       —       —       43  

Year ended 3-31-2013

      21.17         9.57       1,316         1.02       -0.24       —       —       32  

Year ended 3-31-2012

      19.43         4.65       788         1.05       -0.38       —       —       29  

Class R Shares

                   

Year ended 3-31-2016

      18.65         -10.55       71         1.60       -0.61       —       —       38  

Year ended 3-31-2015

      23.08         10.40       96         1.59       -0.80       —       —       35  

Year ended 3-31-2014

      23.18         19.83       103         1.59       -0.89       —       —       43  

Year ended 3-31-2013

      20.02         8.92       77         1.62       -0.82       —       —       32  

Year ended 3-31-2012

      18.49         4.09       50         1.63       -0.93       —       —       29  

Class R6 Shares

                   

Year ended 3-31-2016

      20.22         -9.85       77         0.85       0.24       —       —       38  

Year ended 3-31-2015(5)

      24.81         12.18       27         0.84 (6)      -0.15 (6)      —       —       35 (7)

Class Y Shares

                   

Year ended 3-31-2016

      19.69         -10.26       471         1.24       -0.25       —       —       38  

Year ended 3-31-2015

      24.26         10.82       706         1.23       -0.44       —       —       35  

Year ended 3-31-2014

      24.18         20.21       694         1.23       -0.53       —       —       43  

Year ended 3-31-2013

      20.83         9.33       521         1.27       -0.48       —       —       32  

Year ended 3-31-2012

      19.17         4.44       439         1.25       -0.55       1.30       -0.60       29  

 

See Accompanying Notes to Financial Statements

 

  2016   ANNUAL REPORT   255

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY MID CAP INCOME OPPORTUNITIES FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income(1) 		     Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		     Distributions
From Net
Investment
Income		     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

                 

Year ended 3-31-2016

    $ 11.10       $ 0.15       $ (0.15 )    $ 0.00 *    $ (0.15 )    $ (0.02 )    $ (0.17 ) 

Year ended 3-31-2015(4)

      10.00         0.10         1.05        1.15        (0.05 )      — *      (0.05 ) 

Class C Shares

                 

Year ended 3-31-2016

      11.10         0.08         (0.16 )      (0.08 )      (0.09 )      (0.02 )      (0.11 ) 

Year ended 3-31-2015(4)

      10.00         0.05         1.07        1.12        (0.02 )      — *      (0.02 ) 

Class E Shares

                 

Year ended 3-31-2016

      11.11         0.16         (0.16 )      0.00 *      (0.16 )      (0.02 )      (0.18 ) 

Year ended 3-31-2015(4)

      10.00         0.09         1.07        1.16        (0.05 )      — *      (0.05 ) 

Class I Shares

                 

Year ended 3-31-2016

      11.11         0.19         (0.16 )      0.03        (0.18 )      (0.02 )      (0.20 ) 

Year ended 3-31-2015(4)

      10.00         0.10         1.08        1.18        (0.07 )      — *      (0.07 ) 

Class R Shares

                 

Year ended 3-31-2016

      11.10         0.11         (0.16 )      (0.05 )      (0.11 )      (0.02 )      (0.13 ) 

Year ended 3-31-2015(4)

      10.00         0.06         1.07        1.13        (0.03 )      — *      (0.03 ) 

Class R6 Shares

                 

Year ended 3-31-2016

      11.11         0.19         (0.16 )      0.03        (0.18 )      (0.02 )      (0.20 ) 

Year ended 3-31-2015(4)

      10.00         0.10         1.08        1.18        (0.07 )      — *      (0.07 ) 

Class Y Shares

                 

Year ended 3-31-2016

      11.11         0.16         (0.17 )      (0.01 )      (0.15 )      (0.02 )      (0.17 ) 

Year ended 3-31-2015(4)

      10.00         0.09         1.07        1.16        (0.05 )      — *      (0.05 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) For the period from October 1, 2014 (commencement of operations of the class) through March 31, 2015.

 

(5) Annualized.

 

(6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

(7) Ratio of expenses to average net assets excluding offering cost was 1.31%.

 

(8) Ratio of expenses to average net assets excluding offering cost was 2.03%.

 

(9) Ratio of expenses to average net assets excluding offering cost was 1.26%.

 

(10) Ratio of expenses to average net assets excluding offering cost was 1.01%.

 

(11) Ratio of expenses to average net assets excluding offering cost was 1.76%.

 

(12) Ratio of expenses to average net assets excluding offering cost was 1.01%.

 

(13) Ratio of expenses to average net assets excluding offering cost was 1.31%.

 

(14) Ratio of expenses to average net assets excluding offering cost was 1.16%.

 

(15) Ratio of expenses to average net assets excluding offering cost was 1.88%.

 

(16) Ratio of expenses to average net assets excluding offering cost was 1.11%.

 

(17) Ratio of expenses to average net assets excluding offering cost was 0.86%.

 

(18) Ratio of expenses to average net assets excluding offering cost was 1.61%.

 

(19) Ratio of expenses to average net assets excluding offering cost was 0.86%.

 

(20) Ratio of expenses to average net assets excluding offering cost was 1.16%.

 

256   ANNUAL REPORT   2016  

Table of Contents

 

 

 

      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		      Ratio of
Expenses to
Average  Net
Assets
Including
Expense
Waiver		     Ratio of Net
Investment
Income to
Average  Net
Assets
Including
Expense
Waiver		     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income to
Average  Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 10.93         0.06 %    $ 95         1.35 %(7)      1.44 %      1.66 %      1.13 %      26 % 

Year ended 3-31-2015(4)

      11.10         11.56       43         1.35 (5)(14)      1.83 (5)      1.60 (5)      1.58 (5)      10 (6)

Class C Shares

                   

Year ended 3-31-2016

      10.91         -0.70       5         2.07 (8)      0.72       2.28       0.51       26  

Year ended 3-31-2015(4)

      11.10         11.26       3         2.07 (5)(15)      0.98 (5)      2.22 (5)      0.83 (5)      10 (6)

Class E Shares

                   

Year ended 3-31-2016

      10.93         0.01       2         1.30 (9)      1.50       1.41       1.39       26  

Year ended 3-31-2015(4)

      11.11         11.68       2         1.30 (5)(16)      1.70 (5)      1.42 (5)      1.58 (5)      10 (6)

Class I Shares

                   

Year ended 3-31-2016

      10.94         0.28       8         1.05 (10)      1.76       1.30       1.51       26  

Year ended 3-31-2015(4)

      11.11         11.81       9         1.05 (5)(17)      1.97 (5)      1.32 (5)      1.70 (5)      10 (6)

Class R Shares

                   

Year ended 3-31-2016

      10.92         -0.41       2         1.80 (11)      1.00       1.91       0.89       26  

Year ended 3-31-2015(4)

      11.10         11.38       2         1.80 (5)(18)      1.20 (5)      1.92 (5)      1.08 (5)      10 (6)

Class R6 Shares

                   

Year ended 3-31-2016

      10.94         0.28       3         1.05 (12)      1.75       1.16       1.64       26  

Year ended 3-31-2015(4)

      11.11         11.81       3         1.05 (5)(19)      1.97 (5)      1.18 (5)      1.84 (5)      10 (6)

Class Y Shares

                   

Year ended 3-31-2016

      10.93         -0.03       5         1.35 (13)      1.46       1.58       1.23       26  

Year ended 3-31-2015(4)

      11.11         11.66       4         1.35 (5)(20)      1.73 (5)      1.57 (5)      1.51 (5)      10 (6)

 

See Accompanying Notes to Financial Statements

 

  2016   ANNUAL REPORT   257

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY MONEY MARKET FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income(1) 		     Net Realized
and Unrealized
Gain on
Investments		      Total from
Investment
Operations		      Distributions
From Net
Investment
Income		     Distributions
From Net
Realized
Gains		      Total
Distributions		  

Class A Shares

                    

Year ended 3-31-2016

    $ 1.00       $ 0.00       $ 0.00       $ 0.00       $ — *    $ —       $ — * 

Year ended 3-31-2015

      1.00         0.00         0.00         0.00         — *      —         — * 

Year ended 3-31-2014

      1.00         0.00         0.00         0.00         — *      —         — * 

Year ended 3-31-2013

      1.00         0.00         0.00         0.00         — *      —         — * 

Year ended 3-31-2012

      1.00         0.00         0.00         0.00         — *      —         — * 

Class B Shares(4)

                    

Year ended 3-31-2016

      1.00         0.00         0.00         0.00         — *      —         — * 

Year ended 3-31-2015

      1.00         0.00         0.00         0.00         — *      —         — * 

Year ended 3-31-2014

      1.00         0.00         0.00         0.00         — *      —         — * 

Year ended 3-31-2013

      1.00         0.00         0.00         0.00         — *      —         — * 

Year ended 3-31-2012

      1.00         0.00         0.00         0.00         — *      —         — * 

Class C Shares(4)

                    

Year ended 3-31-2016

      1.00         0.00         0.00         0.00         — *      —         — * 

Year ended 3-31-2015

      1.00         0.00         0.00         0.00         — *      —         — * 

Year ended 3-31-2014

      1.00         0.00         0.00         0.00         — *      —         — * 

Year ended 3-31-2013

      1.00         0.00         0.00         0.00         — *      —         — * 

Year ended 3-31-2012

      1.00         0.00         0.00         0.00         — *      —         — * 

Class E Shares

                    

Year ended 3-31-2016

      1.00         0.00         0.00         0.00         — *      —         — * 

Year ended 3-31-2015

      1.00         0.00         0.00         0.00         — *      —         — * 

Year ended 3-31-2014

      1.00         0.00         0.00         0.00         — *      —         — * 

Year ended 3-31-2013

      1.00         0.00         0.00         0.00         — *      —         — * 

Year ended 3-31-2012

      1.00         0.00         0.00         0.00         — *      —         — * 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

258   ANNUAL REPORT   2016  

Table of Contents

 

 

 

      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		      Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		     Ratio of Net
Investment
Income to
Average Net
Assets
Including
Expense
Waiver		     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Loss to
Average Net
Assets
Excluding
Expense
Waiver(3)		  

Class A Shares

  

Year ended 3-31-2016

    $ 1.00         0.02 %    $ 167         0.30 %      0.02 %      0.61 %      -0.29 % 

Year ended 3-31-2015

      1.00         0.02       119         0.17       0.02       0.68       -0.49  

Year ended 3-31-2014

      1.00         0.02       137         0.20       0.02       0.69       -0.47  

Year ended 3-31-2013

      1.00         0.02       128         0.31       0.02       0.67       -0.34  

Year ended 3-31-2012

      1.00         0.02       171         0.28       0.02       0.66       -0.36  

Class B Shares(4)

                 

Year ended 3-31-2016

      1.00         0.02       6         0.30       0.02       1.65       -1.33  

Year ended 3-31-2015

      1.00         0.02       4         0.17       0.02       1.73       -1.54  

Year ended 3-31-2014

      1.00         0.02       7         0.20       0.02       1.74       -1.52  

Year ended 3-31-2013

      1.00         0.02       8         0.31       0.02       1.70       -1.37  

Year ended 3-31-2012

      1.00         0.02       8         0.28       0.02       1.73       -1.43  

Class C Shares(4)

                 

Year ended 3-31-2016

      1.00         0.02       44         0.30       0.02       1.57       -1.25  

Year ended 3-31-2015

      1.00         0.02       32         0.17       0.02       1.62       -1.43  

Year ended 3-31-2014

      1.00         0.02       34         0.20       0.02       1.63       -1.41  

Year ended 3-31-2013

      1.00         0.02       35         0.31       0.02       1.65       -1.32  

Year ended 3-31-2012

      1.00         0.02       41         0.28       0.02       1.64       -1.34  

Class E Shares

                 

Year ended 3-31-2016

      1.00         0.02       7         0.29       0.02       0.68       -0.37  

Year ended 3-31-2015

      1.00         0.02       6         0.17       0.02       0.74       -0.55  

Year ended 3-31-2014

      1.00         0.02       6         0.20       0.02       0.73       -0.51  

Year ended 3-31-2013

      1.00         0.02       5         0.31       0.02       0.75       -0.42  

Year ended 3-31-2012

      1.00         0.02       4         0.28       0.02       0.78       -0.48  

 

See Accompanying Notes to Financial Statements

 

  2016   ANNUAL REPORT   259

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY MUNICIPAL BOND FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income(1) 		     Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		     Distributions
From Net
Investment
Income		     Distributions
From Net
Realized
Gains		      Total
Distributions		  

Class A Shares

                  

Year ended 3-31-2016

    $ 12.07       $ 0.28       $ 0.06      $ 0.34      $ (0.28 )    $ —       $ (0.28 ) 

Year ended 3-31-2015

      11.74         0.31         0.33        0.64        (0.31 )      —         (0.31 ) 

Year ended 3-31-2014

      12.19         0.34         (0.45 )      (0.11 )      (0.34 )      —         (0.34 ) 

Year ended 3-31-2013

      11.88         0.34         0.31        0.65        (0.34 )      —         (0.34 ) 

Year ended 3-31-2012

      10.95         0.42         0.93        1.35        (0.42 )      —         (0.42 ) 

Class B Shares(4)

                  

Year ended 3-31-2016

      12.07         0.19         0.06        0.25        (0.19 )      —         (0.19 ) 

Year ended 3-31-2015

      11.74         0.22         0.33        0.55        (0.22 )      —         (0.22 ) 

Year ended 3-31-2014

      12.19         0.25         (0.45 )      (0.20 )      (0.25 )      —         (0.25 ) 

Year ended 3-31-2013

      11.88         0.25         0.31        0.56        (0.25 )      —         (0.25 ) 

Year ended 3-31-2012

      10.95         0.33         0.93        1.26        (0.33 )      —         (0.33 ) 

Class C Shares

                  

Year ended 3-31-2016

      12.07         0.19         0.06        0.25        (0.19 )      —         (0.19 ) 

Year ended 3-31-2015

      11.74         0.22         0.33        0.55        (0.22 )      —         (0.22 ) 

Year ended 3-31-2014

      12.19         0.25         (0.45 )      (0.20 )      (0.25 )      —         (0.25 ) 

Year ended 3-31-2013

      11.88         0.25         0.31        0.56        (0.25 )      —         (0.25 ) 

Year ended 3-31-2012

      10.95         0.33         0.93        1.26        (0.33 )      —         (0.33 ) 

Class I Shares

                  

Year ended 3-31-2016

      12.07         0.31         0.05        0.36        (0.30 )      —         (0.30 ) 

Year ended 3-31-2015

      11.74         0.33         0.34        0.67        (0.34 )      —         (0.34 ) 

Year ended 3-31-2014

      12.19         0.36         (0.45 )      (0.09 )      (0.36 )      —         (0.36 ) 

Year ended 3-31-2013

      11.88         0.36         0.31        0.67        (0.36 )      —         (0.36 ) 

Year ended 3-31-2012

      10.95         0.44         0.93        1.37        (0.44 )      —         (0.44 ) 

Class Y Shares

                  

Year ended 3-31-2016

      12.07         0.28         0.06        0.34        (0.28 )      —         (0.28 ) 

Year ended 3-31-2015

      11.74         0.31         0.33        0.64        (0.31 )      —         (0.31 ) 

Year ended 3-31-2014

      12.19         0.34         (0.45 )      (0.11 )      (0.34 )      —         (0.34 ) 

Year ended 3-31-2013

      11.88         0.34         0.31        0.65        (0.34 )      —         (0.34 ) 

Year ended 3-31-2012

      10.95         0.42         0.93        1.35        (0.42 )      —         (0.42 ) 

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

260   ANNUAL REPORT   2016  

Table of Contents

 

 

 

      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		      Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		     Ratio of Net
Investment
Income to
Average  Net
Assets
Including
Expense
Waiver		    

Ratio of

Expenses to
Average  Net
Assets
Excluding
Expense
Waiver(3)

     Ratio of Net
Investment
Income to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 12.13         2.87 %    $ 184         0.99 %      2.35 %      — %      — %      4 % 

Year ended 3-31-2015

      12.07         5.51       148         1.01       2.60       —       —       8  

Year ended 3-31-2014

      11.74         -0.86       113         1.02       2.90       —       —       7  

Year ended 3-31-2013

      12.19         5.50       133         1.01       2.77       —       —       6  

Year ended 3-31-2012

      11.88         12.49       97         1.06       3.60       —       —       4  

Class B Shares(4)

                   

Year ended 3-31-2016

      12.13         2.11       2         1.73       1.62       —       —       4  

Year ended 3-31-2015

      12.07         4.71       2         1.77       1.87       —       —       8  

Year ended 3-31-2014

      11.74         -1.63       2         1.79       2.12       —       —       7  

Year ended 3-31-2013

      12.19         4.72       4         1.75       2.04       —       —       6  

Year ended 3-31-2012

      11.88         11.67       3         1.81       2.83       —       —       4  

Class C Shares

                   

Year ended 3-31-2016

      12.13         2.12       31         1.73       1.61       —       —       4  

Year ended 3-31-2015

      12.07         4.72       24         1.76       1.86       —       —       8  

Year ended 3-31-2014

      11.74         -1.62       21         1.78       2.12       —       —       7  

Year ended 3-31-2013

      12.19         4.71       31         1.76       2.03       —       —       6  

Year ended 3-31-2012

      11.88         11.65       28         1.82       2.85       —       —       4  

Class I Shares

                   

Year ended 3-31-2016

      12.13         3.09       9         0.78       2.55       —       —       4  

Year ended 3-31-2015

      12.07         5.73       5         0.80       2.75       —       —       8  

Year ended 3-31-2014

      11.74         -0.65       2         0.81       3.11       —       —       7  

Year ended 3-31-2013

      12.19         5.72       2         0.80       2.94       —       —       6  

Year ended 3-31-2012

      11.88         12.75       1         0.85       3.79       —       —       4  

Class Y Shares

                   

Year ended 3-31-2016

      12.13         2.87       1         0.99       2.35       1.03       2.31       4  

Year ended 3-31-2015

      12.07         5.52       1         1.01       2.60       1.05       2.56       8  

Year ended 3-31-2014

      11.74         -0.87       1         1.02       2.89       1.06       2.85       7  

Year ended 3-31-2013

      12.19         5.49       1         1.01       2.78       1.06       2.73       6  

Year ended 3-31-2012

      11.88         12.51       1         1.06       3.63       1.11       3.58       4  

 

See Accompanying Notes to Financial Statements

 

  2016   ANNUAL REPORT   261

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY MUNICIPAL HIGH INCOME FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income(1) 		     Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		     Distributions
From Net
Investment
Income		     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

                 

Year ended 3-31-2016

    $ 5.31       $ 0.22       $ (0.03 )    $ 0.19      $ (0.22 )    $ —      $ (0.22 ) 

Year ended 3-31-2015

      5.03         0.23         0.28        0.51        (0.23 )      —        (0.23 ) 

Year ended 3-31-2014

      5.47         0.24         (0.42 )      (0.18 )      (0.24 )      (0.02 )      (0.26 ) 

Year ended 3-31-2013

      5.23         0.21         0.24        0.45        (0.21 )      —        (0.21 ) 

Year ended 3-31-2012

      4.75         0.25         0.48        0.73        (0.25 )      —        (0.25 ) 

Class B Shares(4)

                 

Year ended 3-31-2016

      5.31         0.18         (0.03 )      0.15        (0.18 )      —        (0.18 ) 

Year ended 3-31-2015

      5.03         0.19         0.28        0.47        (0.19 )      —        (0.19 ) 

Year ended 3-31-2014

      5.47         0.20         (0.42 )      (0.22 )      (0.20 )      (0.02 )      (0.22 ) 

Year ended 3-31-2013

      5.23         0.17         0.24        0.41        (0.17 )      —        (0.17 ) 

Year ended 3-31-2012

      4.75         0.20         0.49        0.69        (0.21 )      —        (0.21 ) 

Class C Shares

                 

Year ended 3-31-2016

      5.31         0.18         (0.03 )      0.15        (0.18 )      —        (0.18 ) 

Year ended 3-31-2015

      5.03         0.19         0.28        0.47        (0.19 )      —        (0.19 ) 

Year ended 3-31-2014

      5.47         0.20         (0.42 )      (0.22 )      (0.20 )      (0.02 )      (0.22 ) 

Year ended 3-31-2013

      5.23         0.17         0.24        0.41        (0.17 )      —        (0.17 ) 

Year ended 3-31-2012

      4.75         0.21         0.48        0.69        (0.21 )      —        (0.21 ) 

Class I Shares

                 

Year ended 3-31-2016

      5.31         0.23         (0.03 )      0.20        (0.23 )      —        (0.23 ) 

Year ended 3-31-2015

      5.03         0.24         0.28        0.52        (0.24 )      —        (0.24 ) 

Year ended 3-31-2014

      5.47         0.24         (0.42 )      (0.18 )      (0.24 )      (0.02 )      (0.26 ) 

Year ended 3-31-2013

      5.23         0.22         0.24        0.46        (0.22 )      —        (0.22 ) 

Year ended 3-31-2012

      4.75         0.25         0.48        0.73        (0.25 )      —        (0.25 ) 

Class Y Shares

                 

Year ended 3-31-2016

      5.31         0.22         (0.03 )      0.19        (0.22 )      —        (0.22 ) 

Year ended 3-31-2015

      5.03         0.23         0.28        0.51        (0.23 )      —        (0.23 ) 

Year ended 3-31-2014

      5.47         0.24         (0.42 )      (0.18 )      (0.24 )      (0.02 )      (0.26 ) 

Year ended 3-31-2013

      5.23         0.21         0.24        0.45        (0.21 )      —        (0.21 ) 

Year ended 3-31-2012

      4.75         0.24         0.49        0.73        (0.25 )      —        (0.25 ) 

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

262   ANNUAL REPORT   2016  

Table of Contents

 

 

 

      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		      Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		     Ratio of Net
Investment
Income to
Average Net
Assets
Including
Expense
Waiver		     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 5.28         3.61 %    $ 389         0.86 %      4.19 %      0.88 %      4.17 %      4 % 

Year ended 3-31-2015

      5.31         10.29       377         0.85       4.46       0.87       4.44       9  

Year ended 3-31-2014

      5.03         -3.32       366         0.86       4.58       0.87       4.57       21  

Year ended 3-31-2013

      5.47         8.71       545         0.84       3.91       0.85       3.90       9  

Year ended 3-31-2012

      5.23         15.62       384         0.87       4.88       0.90       4.85       4  

Class B Shares(4)

                   

Year ended 3-31-2016

      5.28         2.84       14         1.62       3.43       1.64        3.41       4  

Year ended 3-31-2015

      5.31         9.44       15         1.62       3.69       1.64       3.67       9  

Year ended 3-31-2014

      5.03         -4.07       15         1.64       3.82       1.65       3.81       21  

Year ended 3-31-2013

      5.47         7.86       19         1.62       3.12       1.63       3.11       9  

Year ended 3-31-2012

      5.23         14.70       12         1.67       4.07       1.70       4.04       4  

Class C Shares

                   

Year ended 3-31-2016

      5.28         2.87       237         1.58       3.47       1.60       3.45       4  

Year ended 3-31-2015

      5.31         9.50       238         1.58       3.72       1.60       3.70       9  

Year ended 3-31-2014

      5.03         -4.04       216         1.60       3.84       1.61       3.83       21  

Year ended 3-31-2013

      5.47         7.92       323         1.57       3.17       1.59       3.15       9  

Year ended 3-31-2012

      5.23         14.77       198         1.62       4.12       1.65       4.09       4  

Class I Shares

                   

Year ended 3-31-2016

      5.28         3.80       701         0.67       4.38       0.69       4.36       4  

Year ended 3-31-2015

      5.31         10.50       703         0.68       4.62       0.70       4.60       9  

Year ended 3-31-2014

      5.03         -3.16       586         0.69       4.76       0.70       4.75       21  

Year ended 3-31-2013

      5.47         8.88       749         0.68       4.06       0.69       4.05       9  

Year ended 3-31-2012

      5.23         15.82       416         0.70       5.04       0.74       5.00       4  

Class Y Shares

                   

Year ended 3-31-2016

      5.28         3.60       21         0.86       4.19       0.95       4.10       4  

Year ended 3-31-2015

      5.31         10.35       21         0.85       4.39       0.95       4.29       9  

Year ended 3-31-2014

      5.03         -3.32       15         0.85       4.52       0.95       4.42       21  

Year ended 3-31-2013

      5.47         8.71       34         0.84       3.92       0.94       3.82       9  

Year ended 3-31-2012

      5.23         15.65       26         0.87       4.83       0.99       4.71       4  

 

See Accompanying Notes to Financial Statements

 

  2016   ANNUAL REPORT   263

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY SMALL CAP GROWTH FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Loss(1) 		    Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		     Distributions
From Net
Investment
Income		     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

                

Year ended 3-31-2016

    $ 18.71       $ (0.14 )    $ (1.43 )    $ (1.57 )    $ —      $ (2.33 )    $ (2.33 ) 

Year ended 3-31-2015

      18.51         (0.14 )      1.52        1.38        —        (1.18 )      (1.18 ) 

Year ended 3-31-2014

      16.33         (0.19 )      4.04        3.85        —        (1.67 )      (1.67 ) 

Year ended 3-31-2013

      14.51         (0.14 )      2.35        2.21        —        (0.39 )      (0.39 ) 

Year ended 3-31-2012

      15.39         (0.17 )      (0.21 )      (0.38 )      —        (0.50 )      (0.50 ) 

Class B Shares(4)

                

Year ended 3-31-2016

      15.28         (0.23 )      (1.15 )      (1.38 )      —        (2.33 )      (2.33 ) 

Year ended 3-31-2015

      15.47         (0.25 )      1.24        0.99        —        (1.18 )      (1.18 ) 

Year ended 3-31-2014

      13.95         (0.30 )      3.42        3.12        —        (1.60 )      (1.60 ) 

Year ended 3-31-2013

      12.57         (0.25 )      2.02        1.77        —        (0.39 )      (0.39 ) 

Year ended 3-31-2012

      13.56         (0.28 )      (0.21 )      (0.49 )      —        (0.50 )      (0.50 ) 

Class C Shares

                

Year ended 3-31-2016

      16.27         (0.21 )      (1.23 )      (1.44 )      —        (2.33 )      (2.33 ) 

Year ended 3-31-2015

      16.35         (0.23 )      1.33        1.10        —        (1.18 )      (1.18 ) 

Year ended 3-31-2014

      14.63         (0.28 )      3.60        3.32        —        (1.60 )      (1.60 ) 

Year ended 3-31-2013

      13.12         (0.21 )      2.11        1.90        —        (0.39 )      (0.39 ) 

Year ended 3-31-2012

      14.07         (0.24 )      (0.21 )      (0.45 )      —        (0.50 )      (0.50 ) 

Class E Shares

                

Year ended 3-31-2016

      18.60         (0.14 )      (1.43 )      (1.57 )      —        (2.33 )      (2.33 ) 

Year ended 3-31-2015

      18.43         (0.16 )      1.51        1.35        —        (1.18 )      (1.18 ) 

Year ended 3-31-2014

      16.27         (0.22 )      4.03        3.81        —        (1.65 )      (1.65 ) 

Year ended 3-31-2013

      14.47         (0.15 )      2.34        2.19        —        (0.39 )      (0.39 ) 

Year ended 3-31-2012

      15.36         (0.18 )      (0.21 )      (0.39 )      —        (0.50 )      (0.50 ) 

Class I Shares

                

Year ended 3-31-2016

      22.77         (0.09 )      (1.77 )      (1.86 )      (0.01 )      (2.33 )      (2.34 ) 

Year ended 3-31-2015

      22.19         (0.09 )      1.85        1.76        —        (1.18 )      (1.18 ) 

Year ended 3-31-2014

      19.26         (0.15 )      4.80        4.65        —        (1.72 )      (1.72 ) 

Year ended 3-31-2013

      16.98         (0.09 )      2.76        2.67        —        (0.39 )      (0.39 ) 

Year ended 3-31-2012

      17.83         (0.13 )      (0.22 )      (0.35 )      —        (0.50 )      (0.50 ) 

Class R Shares

                

Year ended 3-31-2016

      18.55         (0.17 )      (1.42 )      (1.59 )      —        (2.33 )      (2.33 ) 

Year ended 3-31-2015

      18.41         (0.18 )      1.50        1.32        —        (1.18 )      (1.18 ) 

Year ended 3-31-2014

      16.26         (0.23 )      4.02        3.79        —        (1.64 )      (1.64 ) 

Year ended 3-31-2013

      14.48         (0.17 )      2.34        2.17        —        (0.39 )      (0.39 ) 

Year ended 3-31-2012

      15.38         (0.19 )      (0.21 )      (0.40 )      —        (0.50 )      (0.50 ) 

Class R6 Shares

                

Year ended 3-31-2016

      22.79         (0.06 )      (1.77 )      (1.83 )      (0.01 )      (2.33 )      (2.34 ) 

Year ended 3-31-2015(5)

      20.97         (0.02 )      3.02        3.00        —        (1.18 )      (1.18 ) 

Class Y Shares

                

Year ended 3-31-2016

      21.88         (0.13 )      (1.70 )      (1.83 )      —        (2.33 )      (2.33 ) 

Year ended 3-31-2015

      21.42         (0.14 )      1.78        1.64        —        (1.18 )      (1.18 ) 

Year ended 3-31-2014

      18.66         (0.20 )      4.64        4.44        —        (1.68 )      (1.68 ) 

Year ended 3-31-2013

      16.50         (0.13 )      2.68        2.55        —        (0.39 )      (0.39 ) 

Year ended 3-31-2012

      17.38         (0.16 )      (0.22 )      (0.38 )      —        (0.50 )      (0.50 ) 

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(5) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(6) Annualized.

 

(7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

264   ANNUAL REPORT   2016  

Table of Contents

 

 

 

      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		      Ratio of
Expenses to
Average Net
Assets
Including
Expense
Waiver		     Ratio of Net
Investment
Loss to
Average Net
Assets
Including
Expense
Waiver		     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Loss to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 14.81         -8.91 %    $ 325         1.44 %      -0.80 %      — %      — %      43 % 

Year ended 3-31-2015

      18.71         8.03       384         1.43       -0.80       —       —       43  

Year ended 3-31-2014

      18.51         24.27       406         1.43       -1.07       —       —       45  

Year ended 3-31-2013

      16.33         15.70       281         1.49       -0.97       —       —       38  

Year ended 3-31-2012

      14.51         -1.98       241         1.50       -1.21       —       —       65  

Class B Shares(4)

                   

Year ended 3-31-2016

      11.57         -9.71       8         2.32       -1.69       —       —       43  

Year ended 3-31-2015

      15.28         7.07       11         2.31       -1.69       —       —       43  

Year ended 3-31-2014

      15.47         23.14       13         2.34       -1.99       —       —       45  

Year ended 3-31-2013

      13.95         14.61       11         2.49       -1.96       —       —       38  

Year ended 3-31-2012

      12.57         -3.07       10         2.57       -2.27       —       —       65  

Class C Shares

                   

Year ended 3-31-2016

      12.50         -9.48       166         2.07       -1.43       —       —       43  

Year ended 3-31-2015

      16.27         7.36       207         2.07       -1.44       —       —       43  

Year ended 3-31-2014

      16.35         23.43       225         2.08       -1.73       —       —       45  

Year ended 3-31-2013

      14.63         15.00       189         2.13       -1.61       —       —       38  

Year ended 3-31-2012

      13.12         -2.67       181         2.17       -1.87       —       —       65  

Class E Shares

                   

Year ended 3-31-2016

      14.70         -8.96       6         1.49       -0.86       1.73       -1.10       43  

Year ended 3-31-2015

      18.60         7.90       6         1.56       -0.92       1.79       -1.15       43  

Year ended 3-31-2014

      18.43         24.13       5         1.56       -1.21       1.87       -1.52       45  

Year ended 3-31-2013

      16.27         15.61       3         1.56       -1.03       2.06       -1.53       38  

Year ended 3-31-2012

      14.47         -2.05       3         1.56       -1.27       2.08       -1.79       65  

Class I Shares

                   

Year ended 3-31-2016

      18.57         -8.59       169         1.06       -0.43       —       —       43  

Year ended 3-31-2015

      22.77         8.42       214         1.06       -0.43       —       —       43  

Year ended 3-31-2014

      22.19         24.78       246         1.06       -0.71       —       —       45  

Year ended 3-31-2013

      19.26         16.13       176         1.07       -0.54       —       —       38  

Year ended 3-31-2012

      16.98         -1.54       119         1.07       -0.79       —       —       65  

Class R Shares

                   

Year ended 3-31-2016

      14.63         -9.10       42         1.66       -1.03       —       —       43  

Year ended 3-31-2015

      18.55         7.74       45         1.66       -1.02       —       —       43  

Year ended 3-31-2014

      18.41         23.99       42         1.66       -1.30       —       —       45  

Year ended 3-31-2013

      16.26         15.45       22         1.67       -1.15       —       —       38  

Year ended 3-31-2012

      14.48         -2.11       17         1.66       -1.37       —       —       65  

Class R6 Shares

                   

Year ended 3-31-2016

      18.62         -8.46       23         0.91       -0.28       —       —       43   

Year ended 3-31-2015(5)

      22.79         14.83       22         0.90 (6)      -0.12 (6)      —       —       43 (7)

Class Y Shares

                   

Year ended 3-31-2016

      17.72         -8.80       205         1.31       -0.67       —       —       43  

Year ended 3-31-2015

      21.88         8.16       262         1.30       -0.68       —       —       43  

Year ended 3-31-2014

      21.42         24.45       276         1.30       -0.95       —       —       45  

Year ended 3-31-2013

      18.66         15.87       220         1.31       -0.79       —       —       38  

Year ended 3-31-2012

      16.50         -1.75       207         1.32       -1.03       —       —       65  

 

See Accompanying Notes to Financial Statements

 

  2016   ANNUAL REPORT   265

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY SMALL CAP VALUE FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income
(Loss)(1) 		    Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		     Distributions
From Net
Investment
Income		     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

                

Year ended 3-31-2016

    $ 17.47       $ (0.07 )    $ (0.87 )    $ (0.94 )    $ —      $ (2.15 )    $ (2.15 ) 

Year ended 3-31-2015

      18.32         (0.04 )      0.99        0.95        —        (1.80 )      (1.80 ) 

Year ended 3-31-2014

      17.23         (0.11 )      3.55        3.44        (0.07 )      (2.28 )      (2.35 ) 

Year ended 3-31-2013

      14.96         0.02        2.82        2.84        —        (0.57 )      (0.57 ) 

Year ended 3-31-2012

      18.12         0.00        (1.69 )      (1.69 )      (0.01 )      (1.46 )      (1.47 ) 

Class B Shares(3)

                

Year ended 3-31-2016

      15.01         (0.19 )      (0.75 )      (0.94 )      —        (2.15 )      (2.15 ) 

Year ended 3-31-2015

      16.10         (0.18 )      0.84        0.66        —        (1.75 )      (1.75 ) 

Year ended 3-31-2014

      15.39         (0.25 )      3.14        2.89        (0.02 )      (2.16 )      (2.18 ) 

Year ended 3-31-2013

      13.48         (0.13 )      2.50        2.37        —        (0.46 )      (0.46 ) 

Year ended 3-31-2012

      16.66         (0.15 )      (1.57 )      (1.72 )      —        (1.46 )      (1.46 ) 

Class C Shares

                

Year ended 3-31-2016

      15.74         (0.16 )      (0.79 )      (0.95 )      —        (2.15 )      (2.15 ) 

Year ended 3-31-2015

      16.76         (0.14 )      0.89        0.75        —        (1.77 )      (1.77 ) 

Year ended 3-31-2014

      15.94         (0.21 )      3.26        3.05        (0.04 )      (2.19 )      (2.23 ) 

Year ended 3-31-2013

      13.92         (0.08 )      2.60        2.52        —        (0.50 )      (0.50 ) 

Year ended 3-31-2012

      17.09         (0.10 )      (1.61 )      (1.71 )      —        (1.46 )      (1.46 ) 

Class E Shares(4)

                

Year ended 3-31-2016

      17.93         (0.02 )      (0.89 )      (0.91 )      —        (2.15 )      (2.15 ) 

Year ended 3-31-2015

      18.76         0.03        1.01        1.04        —        (1.87 )      (1.87 ) 

Year ended 3-31-2014

      17.59         (0.04 )      3.63        3.59        (0.09 )      (2.33 )      (2.42 ) 

Year ended 3-31-2013

      15.25         0.10        2.85        2.95        —        (0.61 )      (0.61 ) 

Year ended 3-31-2012

      18.43         0.07        (1.71 )      (1.64 )      (0.08 )      (1.46 )      (1.54 ) 

Class I Shares

                

Year ended 3-31-2016

      18.49         0.00 *      (0.92 )      (0.92 )      —        (2.15 )      (2.15 ) 

Year ended 3-31-2015

      19.29         0.05        1.04        1.09        —        (1.89 )      (1.89 ) 

Year ended 3-31-2014

      18.03         (0.02 )      3.72        3.70        (0.10 )      (2.34 )      (2.44 ) 

Year ended 3-31-2013

      15.61         0.11        2.94        3.05        —        (0.63 )      (0.63 ) 

Year ended 3-31-2012

      18.83         0.07        (1.73 )      (1.66 )      (0.10 )      (1.46 )      (1.56 ) 

Class R Shares

                

Year ended 3-31-2016

      17.44         (0.10 )      (0.86 )      (0.96 )      —        (2.15 )      (2.15 ) 

Year ended 3-31-2015

      18.31         (0.06 )      0.98        0.92        —        (1.79 )      (1.79 ) 

Year ended 3-31-2014

      17.23         (0.13 )      3.54        3.41        (0.07 )      (2.26 )      (2.33 ) 

Year ended 3-31-2013(5)

      15.24         (0.02 )      2.01        1.99        —        —        —   

Class R6 Shares

                

Year ended 3-31-2016

      18.56         0.02        (0.91 )      (0.89 )      —        (2.15 )      (2.15 ) 

Year ended 3-31-2015(7)

      18.96         0.08        1.36        1.44        —        (1.84 )      (1.84 ) 

Class Y Shares

                

Year ended 3-31-2016

      18.12         (0.05 )      (0.89 )      (0.94 )      —        (2.15 )      (2.15 ) 

Year ended 3-31-2015

      18.94         (0.02 )      1.04        1.02        —        (1.84 )      (1.84 ) 

Year ended 3-31-2014

      17.74         (0.07 )      3.66        3.59        (0.08 )      (2.31 )      (2.39 ) 

Year ended 3-31-2013

      15.38         0.01        2.95        2.96        —        (0.60 )      (0.60 ) 

Year ended 3-31-2012

      18.58         0.04        (1.72 )      (1.68 )      (0.06 )      (1.46 )      (1.52 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(4) Class share is closed to investment.

 

(5) For the period from December 19, 2012 (commencement of operations of the class) through March 31, 2013.

 

(6) Annualized.

 

(7) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(8) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2013.

 

(9) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

266   ANNUAL REPORT   2016  

Table of Contents

 

 

 

      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		     Ratio of
Expenses to
Average Net
Assets 		    Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets 		    Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 14.38         -5.11 %    $ 193        1.56 %      -0.45 %      135 % 

Year ended 3-31-2015

      17.47         5.74       240        1.54       -0.20       106  

Year ended 3-31-2014

      18.32         21.10       244        1.57       -0.62       61  

Year ended 3-31-2013

      17.23         19.49       226        1.66       0.15       52  

Year ended 3-31-2012

      14.96         -8.06       209        1.67       —       50  

Class B Shares(3)

              

Year ended 3-31-2016

      11.92         -5.99       2        2.51       -1.39       135  

Year ended 3-31-2015

      15.01         4.68       3        2.50       -1.17       106  

Year ended 3-31-2014

      16.10         19.87       4        2.58       -1.63       61  

Year ended 3-31-2013

      15.39         18.22       4        2.78       -0.97       52  

Year ended 3-31-2012

      13.48         -9.09       4        2.78       -1.09       50  

Class C Shares

              

Year ended 3-31-2016

      12.64         -5.77       14        2.23       -1.11       135  

Year ended 3-31-2015

      15.74         5.02       18        2.21       -0.89       106  

Year ended 3-31-2014

      16.76         20.24       19        2.25       -1.30       61  

Year ended 3-31-2013

      15.94         18.74       16        2.35       -0.54       52  

Year ended 3-31-2012

      13.92         -8.80       16        2.40       -0.72       50  

Class E Shares(4)

              

Year ended 3-31-2016

      14.87         -4.80       — *      1.22       -0.12       135  

Year ended 3-31-2015

      17.93         6.08       — *      1.21       0.14       106  

Year ended 3-31-2014

      18.76         21.56       — *      1.21       -0.26       61  

Year ended 3-31-2013

      17.59         20.03       — *      1.22       0.61       52  

Year ended 3-31-2012

      15.25         -7.68       — *      1.23       0.44       50  

Class I Shares

              

Year ended 3-31-2016

      15.42         -4.71       25        1.12       0.00       135  

Year ended 3-31-2015

      18.49         6.20       29        1.10       0.26       106  

Year ended 3-31-2014

      19.29         21.67       26        1.10       -0.15       61  

Year ended 3-31-2013

      18.03         20.17       19        1.11       0.72       52  

Year ended 3-31-2012

      15.61         -7.59       16        1.11       0.48       50  

Class R Shares

              

Year ended 3-31-2016

      14.33         -5.24       3        1.72       -0.66       135  

Year ended 3-31-2015

      17.44         5.57       2        1.70       -0.32       106  

Year ended 3-31-2014

      18.31         20.91       1        1.70       -0.78       61  

Year ended 3-31-2013(5)

      17.23         13.06       — *      1.68 (6)      -0.44 (6)      52 (8)

Class R6 Shares

              

Year ended 3-31-2016

      15.52         -4.52       4        0.96       0.13       135   

Year ended 3-31-2015(7)

      18.56         8.17       3        0.96 (6)      0.70 (6)      106 (9)

Class Y Shares

              

Year ended 3-31-2016

      15.03         -4.92       7        1.37       -0.30       135  

Year ended 3-31-2015

      18.12         5.93       10        1.36       -0.09       106  

Year ended 3-31-2014

      18.94         21.35       10        1.33       -0.39       61  

Year ended 3-31-2013

      17.74         19.85       7        1.41       0.05       52  

Year ended 3-31-2012

      15.38         -7.87       22        1.39       0.28       50  

 

See Accompanying Notes to Financial Statements

 

  2016   ANNUAL REPORT   267

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY TAX-MANAGED EQUITY FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income
(Loss)(1) 		    Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		     Distributions
From Net
Investment
Income		     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

                

Year ended 3-31-2016

    $ 19.31       $ (0.07 )    $ (0.20 )    $ (0.27 )    $ —      $ (0.36 )    $ (0.36 ) 

Year ended 3-31-2015

      16.84         (0.02 )      2.86        2.84        —        (0.37 )      (0.37 ) 

Year ended 3-31-2014

      14.13         (0.05 )      3.23        3.18        —        (0.47 )      (0.47 ) 

Year ended 3-31-2013

      13.15         0.05        0.99        1.04        (0.06 )      —        (0.06 ) 

Year ended 3-31-2012

      12.15         (0.03 )      1.03        1.00        —        —        —   

Class B Shares(4)

                

Year ended 3-31-2016

      18.73         (0.20 )      (0.21 )      (0.41 )      —        (0.29 )      (0.29 ) 

Year ended 3-31-2015

      16.45         (0.14 )      2.79        2.65        —        (0.37 )      (0.37 ) 

Year ended 3-31-2014

      13.87         (0.14 )      3.15        3.01        —        (0.43 )      (0.43 ) 

Year ended 3-31-2013

      12.92         (0.03 )      0.99        0.96        (0.01 )      —        (0.01 ) 

Year ended 3-31-2012

      12.01         (0.10 )      1.01        0.91        —        —        —   

Class C Shares

                

Year ended 3-31-2016

      18.69         (0.21 )      (0.21 )      (0.42 )      —        (0.29 )      (0.29 ) 

Year ended 3-31-2015

      16.42         (0.15 )      2.79        2.64        —        (0.37 )      (0.37 ) 

Year ended 3-31-2014

      13.85         (0.15 )      3.15        3.00        —        (0.43 )      (0.43 ) 

Year ended 3-31-2013

      12.91         (0.03 )      0.97        0.94        —        —        —   

Year ended 3-31-2012

      12.01         (0.11 )      1.01        0.90        —        —        —   

Class I Shares

                

Year ended 3-31-2016

      19.47         (0.03 )      (0.21 )      (0.24 )      —        (0.40 )      (0.40 ) 

Year ended 3-31-2015

      16.93         0.02        2.89        2.91        —        (0.37 )      (0.37 ) 

Year ended 3-31-2014

      14.20         0.00        3.23        3.23        —        (0.50 )      (0.50 ) 

Year ended 3-31-2013

      13.27         0.09        0.92        1.01        (0.08 )      —        (0.08 ) 

Year ended 3-31-2012

      12.22         0.00        1.05        1.05        —        —        —   

Class Y Shares

                

Year ended 3-31-2016

      19.34         (0.07 )      (0.20 )      (0.27 )      —        (0.36 )      (0.36 ) 

Year ended 3-31-2015

      16.86         (0.03 )      2.88        2.85        —        (0.37 )      (0.37 ) 

Year ended 3-31-2014

      14.15         (0.04 )      3.23        3.19        —        (0.48 )      (0.48 ) 

Year ended 3-31-2013

      13.16         0.05        1.00        1.05        (0.06 )      —        (0.06 ) 

Year ended 3-31-2012

      12.15         (0.02 )      1.03        1.01        —        —        —   

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

268   ANNUAL REPORT   2016  

Table of Contents

 

 

 

      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		      Ratio of
Expenses to
Average  Net
Assets
Including
Expense
Waiver		     Ratio of Net
Investment
Income
(Loss) to
Average
Net Assets
Including
Expense
Waiver		     Ratio of
Expenses to
Average Net
Assets
Excluding
Expense
Waiver(3)		     Ratio of Net
Investment
Income
(Loss) to
Average  Net
Assets
Excluding
Expense
Waiver(3)		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 18.68         -1.51 %    $ 107         1.22 %      -0.35 %      — %      — %      21 % 

Year ended 3-31-2015

      19.31         17.00       71         1.29       -0.13       —       —       36  

Year ended 3-31-2014

      16.84         22.65       40         1.43       -0.30       —       —       32  

Year ended 3-31-2013

      14.13         7.91       24         1.14       0.34       1.63       -0.15       26  

Year ended 3-31-2012

      13.15         8.23       15         1.32       -0.27       1.97       -0.92       26  

Class B Shares(4)

                   

Year ended 3-31-2016

      18.03         -2.24       1         1.92       -1.06       —       —       21  

Year ended 3-31-2015

      18.73         16.25       1         1.95       -0.82       —       —       36  

Year ended 3-31-2014

      16.45         21.80       1         2.06       -0.92       —       —       32  

Year ended 3-31-2013

      13.87         7.41       1         1.69       -0.22       2.19       -0.72       26  

Year ended 3-31-2012

      12.92         7.58       1         1.90       -0.85       2.55       -1.50       26  

Class C Shares

                   

Year ended 3-31-2016

      17.98         -2.30       6         2.01       -1.13       —       —       21  

Year ended 3-31-2015

      18.69         16.21       2         2.01       -0.86       —       —       36  

Year ended 3-31-2014

      16.42         21.76       2         2.09       -0.96       —       —       32  

Year ended 3-31-2013

      13.85         7.28       1         1.76       -0.24       2.26       -0.74       26  

Year ended 3-31-2012

      12.91         7.49       1         1.97       -0.92       2.62       -1.57       26  

Class I Shares

                   

Year ended 3-31-2016

      18.83         -1.32       5         0.99       -0.14       —       —       21  

Year ended 3-31-2015

      19.47         17.33       4         1.04       0.10       —       —       36  

Year ended 3-31-2014

      16.93         22.91       1         1.15       -0.02       —       —       32  

Year ended 3-31-2013

      14.20         7.70       1         0.80       0.68       1.30       0.18       26  

Year ended 3-31-2012

      13.27         8.59       1         1.02       0.03       1.67       -0.62       26  

Class Y Shares

                   

Year ended 3-31-2016

      18.71         -1.50       1         1.22       -0.38       1.24       -0.40       21  

Year ended 3-31-2015

      19.34         17.04       1         1.29       -0.16       —       —       36  

Year ended 3-31-2014

      16.86         22.56       1         1.41       -0.27       —       —       32  

Year ended 3-31-2013

      14.15         8.12       1         1.02       0.39       1.51       -0.10       26  

Year ended 3-31-2012

      13.16         8.31       1         1.25       -0.17       1.90       -0.82       26  

 

See Accompanying Notes to Financial Statements

 

  2016   ANNUAL REPORT   269

Table of Contents

FINANCIAL HIGHLIGHTS

Ivy Funds

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

 

 

IVY VALUE FUND

 

      Net Asset
Value,
Beginning of
Period		      Net
Investment
Income
(Loss)(1) 		    Net Realized
and Unrealized
Gain (Loss) on
Investments		     Total from
Investment
Operations		     Distributions
From Net
Investment
Income		     Distributions
From Net
Realized
Gains		     Total
Distributions		  

Class A Shares

                

Year ended 3-31-2016

    $ 23.40       $ 0.14      $ (1.14 )    $ (1.00 )    $ (0.03 )    $ (2.65 )    $ (2.68 ) 

Year ended 3-31-2015

      23.82         0.12        1.25        1.37        (0.06 )      (1.73 )      (1.79 ) 

Year ended 3-31-2014

      20.30         0.07        4.42        4.49        (0.04 )      (0.93 )      (0.97 ) 

Year ended 3-31-2013

      17.57         0.15        2.73        2.88        (0.15 )      — *      (0.15 ) 

Year ended 3-31-2012

      17.93         0.13        (0.19 )      (0.06 )      (0.12 )      (0.18 )      (0.30 ) 

Class B Shares(3)

                

Year ended 3-31-2016

      22.04         (0.08 )      (1.06 )      (1.14 )      —        (2.51 )      (2.51 ) 

Year ended 3-31-2015

      22.53         (0.10 )      1.19        1.09        —        (1.58 )      (1.58 ) 

Year ended 3-31-2014

      19.28         (0.12 )      4.19        4.07        —        (0.82 )      (0.82 ) 

Year ended 3-31-2013

      16.72         (0.03 )      2.59        2.56        —        — *      — * 

Year ended 3-31-2012

      17.15         (0.07 )      (0.18 )      (0.25 )      —        (0.18 )      (0.18 ) 

Class C Shares

                

Year ended 3-31-2016

      22.73         (0.01 )      (1.11 )      (1.12 )      —        (2.54 )      (2.54 ) 

Year ended 3-31-2015

      23.18         (0.05 )      1.22        1.17        —        (1.62 )      (1.62 ) 

Year ended 3-31-2014

      19.80         (0.09 )      4.31        4.22        —        (0.84 )      (0.84 ) 

Year ended 3-31-2013

      17.16         0.02        2.67        2.69        (0.05 )      — *      (0.05 ) 

Year ended 3-31-2012

      17.53         0.00        (0.17 )      (0.17 )      (0.02 )      (0.18 )      (0.20 ) 

Class E Shares(4)

                

Year ended 3-31-2016

      23.49         0.19        (1.14 )      (0.95 )      (0.04 )      (2.69 )      (2.73 ) 

Year ended 3-31-2015

      23.90         0.17        1.27        1.44        (0.10 )      (1.75 )      (1.85 ) 

Year ended 3-31-2014

      20.36         0.11        4.44        4.55        (0.09 )      (0.92 )      (1.01 ) 

Year ended 3-31-2013

      17.61         0.20        2.74        2.94        (0.19 )      — *      (0.19 ) 

Year ended 3-31-2012

      18.03         0.18        (0.19 )      (0.01 )      (0.23 )      (0.18 )      (0.41 ) 

Class I Shares

                

Year ended 3-31-2016

      23.50         0.20        (1.13 )      (0.93 )      (0.05 )      (2.71 )      (2.76 ) 

Year ended 3-31-2015

      23.90         0.19        1.28        1.47        (0.11 )      (1.76 )      (1.87 ) 

Year ended 3-31-2014

      20.36         0.14        4.44        4.58        (0.11 )      (0.93 )      (1.04 ) 

Year ended 3-31-2013

      17.61         0.22        2.74        2.96        (0.21 )      — *      (0.21 ) 

Year ended 3-31-2012

      18.05         0.21        (0.20 )      0.01        (0.27 )      (0.18 )      (0.45 ) 

Class R Shares

                

Year ended 3-31-2016

      23.37         0.08        (1.13 )      (1.05 )      (0.01 )      (2.61 )      (2.62 ) 

Year ended 3-31-2015

      23.79         0.05        1.26        1.31        (0.01 )      (1.72 )      (1.73 ) 

Year ended 3-31-2014

      20.28         0.01        4.41        4.42        (0.01 )      (0.90 )      (0.91 ) 

Year ended 3-31-2013(5)

      18.17         0.04        2.07        2.11        —        —        —   

Class R6 Shares

                

Year ended 3-31-2016

      23.56         0.25        (1.15 )      (0.90 )      (0.06 )      (2.73 )      (2.79 ) 

Year ended 3-31-2015(7)

      24.96         0.18        0.25        0.43        (0.10 )      (1.73 )      (1.83 ) 

Class Y Shares

                

Year ended 3-31-2016

      23.45         0.15        (1.13 )      (0.98 )      (0.03 )      (2.67 )      (2.70 ) 

Year ended 3-31-2015

      23.86         0.14        1.26        1.40        (0.07 )      (1.74 )      (1.81 ) 

Year ended 3-31-2014

      20.33         0.09        4.43        4.52        (0.06 )      (0.93 )      (0.99 ) 

Year ended 3-31-2013

      17.59         0.17        2.75        2.92        (0.18 )      — *      (0.18 ) 

Year ended 3-31-2012

      17.99         0.14        (0.17 )      (0.03 )      (0.19 )      (0.18 )      (0.37 ) 

 

* Not shown due to rounding.

 

(1) Based on average weekly shares outstanding.

 

(2) Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3) These class shares are not available for direct investment. However, they are available for dividend reinvestment and exchange of the same class shares of another Ivy Fund or Waddell & Reed Advisors Fund.

 

(4) Class share is closed to investment.

 

(5) For the period from December 19, 2012 (commencement of operations of the class) through March 31, 2013.

 

(6) Annualized.

 

(7) For the period from July 31, 2014 (commencement of operations of the class) through March 31, 2015.

 

(8) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2013.

 

(9) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2015.

 

270   ANNUAL REPORT   2016  

Table of Contents

 

 

 

      Net Asset
Value,
End of Period		      Total
Return(2)		     Net Assets,
End of Period
(in millions)		     Ratio of
Expenses to
Average Net
Assets		     Ratio of Net
Investment
Income
(Loss) to
Average Net
Assets		     Portfolio
Turnover
Rate		  

Class A Shares

  

Year ended 3-31-2016

    $ 19.72         -4.60 %    $ 247        1.30 %      0.61 %      55 % 

Year ended 3-31-2015

      23.40         5.71       295        1.27       0.48       82  

Year ended 3-31-2014

      23.82         22.44       248        1.31       0.30       58  

Year ended 3-31-2013

      20.30         16.59       156        1.43       0.82       57  

Year ended 3-31-2012

      17.57         -0.13       106        1.53       0.77       54  

Class B Shares(3)

              

Year ended 3-31-2016

      18.39         -5.54       3        2.27       -0.38       55  

Year ended 3-31-2015

      22.04         4.80       4        2.18       -0.43       82  

Year ended 3-31-2014

      22.53         21.35       6        2.17       -0.57       58  

Year ended 3-31-2013

      19.28         15.40       5        2.43       -0.16       57  

Year ended 3-31-2012

      16.72         -1.34       3        2.78       -0.47       54  

Class C Shares

              

Year ended 3-31-2016

      19.07         -5.25       18        1.98       -0.06       55  

Year ended 3-31-2015

      22.73         5.00       22        1.97       -0.22       82  

Year ended 3-31-2014

      23.18         21.64       14        2.01       -0.41       58  

Year ended 3-31-2013

      19.80         15.77       9        2.13       0.12       57  

Year ended 3-31-2012

      17.16         -0.85       8        2.25       0.02       54  

Class E Shares(4)

              

Year ended 3-31-2016

      19.81         -4.34       — *      1.06       0.86       55  

Year ended 3-31-2015

      23.49         5.98       — *      1.05       0.70       82  

Year ended 3-31-2014

      23.90         22.73       — *      1.09       0.51       58  

Year ended 3-31-2013

      20.36         16.93       — *      1.14       1.11       57  

Year ended 3-31-2012

      17.61         0.26       — *      1.18       1.08       54  

Class I Shares

              

Year ended 3-31-2016

      19.81         -4.28       7        0.97       0.90       55  

Year ended 3-31-2015

      23.50         6.13       15        0.94       0.79       82  

Year ended 3-31-2014

      23.90         22.85       5        0.99       0.63       58  

Year ended 3-31-2013

      20.36         17.03       4        1.02       1.21       57  

Year ended 3-31-2012

      17.61         0.38       3        1.06       1.25       54  

Class R Shares

              

Year ended 3-31-2016

      19.70         -4.82       — *      1.56       0.36       55  

Year ended 3-31-2015

      23.37         5.45       — *      1.54       0.21       82  

Year ended 3-31-2014

      23.79         22.13       1        1.57       0.03       58  

Year ended 3-31-2013(5)

      20.28         11.61       — *      1.55 (6)      0.73 (6)      57 (8) 

Class R6 Shares

              

Year ended 3-31-2016

      19.87         -4.12       2        0.81       1.14       55   

Year ended 3-31-2015(7)

      23.56         1.72       1        0.79 (6)      1.11 (6)      82 (9)

Class Y Shares

              

Year ended 3-31-2016

      19.77         -4.51       2        1.22       0.65       55  

Year ended 3-31-2015

      23.45         5.84       3        1.20       0.58       82  

Year ended 3-31-2014

      23.86         22.56       2        1.22       0.40       58  

Year ended 3-31-2013

      20.33         16.78       2        1.27       0.97       57  

Year ended 3-31-2012

      17.59         0.09       2        1.31       0.86       54  

 

See Accompanying Notes to Financial Statements

 

  2016   ANNUAL REPORT   271

Table of Contents

NOTES TO FINANCIAL STATEMENTS

Ivy Funds

MARCH 31, 2016

 

 

 

1.   ORGANIZATION

Ivy Funds, a Delaware statutory trust (the “Trust”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. Ivy Bond Fund, Ivy Core Equity Fund, Ivy Cundill Global Value Fund, Ivy Dividend Opportunities Fund, Ivy Emerging Markets Equity Fund, Ivy European Opportunities Fund, Ivy Global Bond Fund, Ivy Global Equity Income Fund, Ivy Global Growth Fund, Ivy Global Income Allocation Fund, Ivy High Income Fund, Ivy International Core Equity Fund, Ivy Large Cap Growth Fund, Ivy Limited-Term Bond Fund, Ivy Managed International Opportunities Fund, Ivy Micro Cap Growth Fund, Ivy Mid Cap Growth Fund, Ivy Mid Cap Income Opportunities Fund, Ivy Money Market Fund, Ivy Municipal Bond Fund, Ivy Municipal High Income Fund, Ivy Small Cap Growth Fund, Ivy Small Cap Value Fund, Ivy Tax-Managed Equity Fund and Ivy Value Fund (each, a “Fund”) are 25 series of the Trust and are the only series of the Trust included in these financial statements. The investment objective(s), policies and risk factors of each Fund are described more fully in the Funds’ Prospectus and Statement of Additional Information (“SAI”). Each Fund’s investment manager is Ivy Investment Management Company (“IICO” or the “Manager”).

Each Fund offers Class A and Class C shares. Each fund (excluding Ivy Mid Cap Income Opportunities Fund) offers Class B shares. The Funds’ Class B shares are not available for purchase by new and existing investors. Class B shares will continue to be available for dividend reinvestment and exchanges from Class B shares of another fund within Ivy Funds. Class C shares are not available for direct investment in the Ivy Money Market Fund. Class C shares of Ivy Money Market Fund will continue to be available for dividend reinvestment and exchanges from Class C shares of another fund within Ivy Funds. Certain Funds may also offer Class E, Class I, Class R, Class R6 and/or Class Y shares. Class E shares are closed for all investments in the Ivy Emerging Markets Equity Fund, Ivy European Opportunities Fund, Ivy Global Growth Fund, Ivy Managed International Opportunities Fund, Ivy Small Cap Value Fund and Ivy Value Fund. Class A and Class E shares are sold at their offering price, which is normally net asset value (“NAV”) plus a front-end sales charge. For Class A shares, a 1% contingent deferred sales charge (“CDSC”) is only imposed on shares purchased at NAV for $1 million or more that are subsequently redeemed within 12 months of purchase. Class B and Class C shares are sold without a front-end sales charge, but may be subject to a CDSC. Class I, Class R, Class R6 and Class Y shares are sold without either a front-end sales charge or a CDSC. All classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Net investment income, net assets and NAV per share may differ due to each class having its own expenses, such as transfer agent and shareholder servicing fees, directly attributable to that class. Class A, B, C, E, R and Y have a distribution and service plan. Class I shares and Class R6 shares are not included in the plan. Class B shares will automatically convert to Class A shares 96 months after the date of purchase.

 

2.   SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by each Fund.

Security Transactions and Related Investment Income. Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses are calculated on the identified cost basis. Interest income is recorded on the accrual basis and includes paydown gain (loss) and accretion of discounts and amortization of premiums. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is informed of the ex-dividend date. All or a portion of the distributions received from a real estate investment trust or publicly traded partnership may be designated as a reduction of cost of the related investment and/or realized gain. 

Foreign Currency Translation. Each Fund’s accounting records are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars daily, using foreign exchange rates obtained from an independent pricing service authorized by the Board of Trustees of the Trust (the “Board”). 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. Each Fund combines fluctuations from currency exchange rates and fluctuations in value when computing net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments. Foreign exchange rates are typically valued as of the close of the New York Stock Exchange (“NYSE”), normally 4:00 P.M. Eastern time, on each day the NYSE is open for trading. 

Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.

Income Taxes. It is the policy of each Fund 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, each Fund intends to pay distributions as required to avoid imposition of excise tax. Accordingly, no provision has been made for Federal income taxes. The Funds file income tax returns in U.S. federal and applicable state jurisdictions. The Funds’ tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax returns. Management of the Trust periodically reviews all tax positions to assess that it is more likely than not that the position would be sustained upon examination by the relevant tax authority based on the technical merits of each position. As of the date of these financial statements, management believes that no liability for unrecognized tax positions is required.

Dividends and Distributions to Shareholders. 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 (“U.S. GAAP”). If the total dividends and distributions made in any tax year exceeds net investment income and accumulated realized capital gains, a portion of the total distribution may be treated as a tax return of capital.

 

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Segregation and Collateralization. In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”), the Dodd Frank Wall Street Reform and Consumer Protection Act, or the interpretive rules and regulations of the U.S. Commodities Futures Trading Commission require that a Fund either deliver collateral or segregate assets in connection with certain investments (e.g., dollar rolls, financial futures contracts, foreign currency exchange contracts, options written, securities with extended settlement periods and swaps), the Fund will segregate collateral or designate on its books and records cash or other liquid securities having a value at least equal to the amount that is required to be physically segregated for the benefit of the counterparty. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, each party has requirements to deliver/deposit cash or securities as collateral for certain investments. Certain countries require that cash reserves be held while investing in companies incorporated in that country. These cash reserves and cash collateral that has been pledged to cover obligations of the Funds under derivative contracts, if any, will be reported separately on the Statement of Assets and Liabilities as “Restricted cash.” Securities collateral pledged for the same purpose, if any, is noted on the Schedule of Investments.

Concentration of Market and Credit Risk. In the normal course of business, the Funds invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Funds may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Funds; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Funds may be exposed to counterparty credit risk, or the risk that an entity with which the Funds have unsettled or open transactions may fail to or be unable to perform on its commitments. The Funds manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Funds’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded on the Funds’ Statement of Assets and Liabilities, less any collateral held by the Funds.

Certain Funds may hold high-yield and/or non-investment-grade bonds, which may be subject to a greater degree of credit risk. Credit risk relates to the ability of the issuer to meet interest or principal payments or both as they become due. The Funds may acquire securities in default and are not obligated to dispose of securities whose issuers subsequently default.

Certain Funds may enter into financial instrument transactions (such as swaps, futures, options and other derivatives) that may have off-balance sheet market risk. Off-balance sheet market risk exists when the maximum potential loss on a particular financial instrument is greater than the value of such financial instrument, as reflected on the Statement of Assets and Liabilities.

If a Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in financial derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad.

Inflation-Indexed Bonds. Certain Funds may invest in inflation-indexed bonds. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted to the rate of inflation. The interest rate on these bonds is generally fixed at issuance at a rate lower than typical bonds. Over the life of an inflation-indexed bond, however, interest will be paid based on a principal value, which is adjusted for inflation. Any increase or decrease in the principal amount of an inflation-indexed bond will be included as interest income on the Statement of Operations, even though investors do not receive their principal until maturity.

Interest Only Obligations. These securities entitle the owner to receive only the interest portion from a bond, Treasury note or pool of mortgages. These securities are generally created by a third party separating a bond or pool of mortgages into distinct interest-only and principal-only securities. As the principal (par) amount of a bond or pool of mortgages is paid down, the amount of interest income earned by the owner will decline as well. 

Loans. Certain Funds may invest in loans, the interest rates of which float or adjust periodically based upon a specified adjustment schedule, benchmark indicator, or prevailing interest rates, the debtor of which may be a domestic or foreign corporation, partnership or other entity (“Borrower”). Loans generally pay interest at rates which are periodically redetermined by reference to a base lending rate plus a premium. These base lending rates generally include prime rates of one or more major U.S. banks, London Interbank Offered Rate (“LIBOR”) rates or certificates of deposit rates. Loans often require prepayments from excess cash flow or permit the Borrower to repay at its election. The degree to which Borrowers repay cannot be predicted with accuracy. As a result, the actual maturity may be substantially less than the stated maturities. Loans are exempt from registration under the Securities Act of 1933, as amended, may contain certain restrictions on resale, and cannot be sold publicly. A Fund’s investments in loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties.

When a Fund purchases assignments, it acquires all the rights and obligations under the loan agreement of the assigning lender. Assignments may, however, be arranged through private negotiations between potential assignees and potential assignors, and the rights and obligations acquired by the purchaser of an assignment may differ from, and be more limited than those held by the assigning lender. When a Fund purchases a participation of a loan interest, the Fund typically enters into a contractual agreement with the lender or other third party selling the participation. A participation interest in loans includes the right to receive payments of principal, interest and any fees to which it is entitled from the lender and only upon receipt by the lender of payments from the Borrower, but not from the Borrower directly. When investing in a participation interest, if a Borrower is unable to meet its obligations under a loan agreement, a Fund generally has no right to enforce compliance with the terms of the loan agreement. As a result,

 

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the Fund assumes the credit risk of the Borrower, the selling participant, and any other persons that are interpositioned between the Fund and the Borrower. If the lead lender in a typical lending syndicate becomes insolvent, enters Federal Deposit Insurance Corporation (“FDIC”) receivership or, if not FDIC insured, enters into bankruptcy, the Fund may incur certain costs and delays in receiving payment or may suffer a loss of principal and/or interest.

Payment In-Kind Securities. Certain Funds may invest in payment in-kind securities (“PIKs”). PIKs give the issuer the option at each interest payment date of making interest payments in either cash or additional debt securities. Those additional debt securities usually have the same terms, including maturity dates and interest rates, and associated risks as the original bonds. The daily market quotations of the original bonds may include the accrued interest (referred to as a dirty price) and require a pro-rata adjustment from the unrealized appreciation or depreciation on investments to interest receivable on the Statement of Assets and Liabilities.

Securities on a When-Issued or Delayed Delivery Basis. Certain Funds may purchase securities on a “when-issued” basis, and may purchase or sell securities on a “delayed delivery” basis. “When-issued” or “delayed delivery” refers to securities whose terms and indenture are available and for which a market exists, but which are not available for immediate delivery. Delivery and payment for securities that have been purchased by a Fund on a when-issued basis normally take place within six months and possibly as long as two years or more after the trade date. During this period, such securities do not earn interest, are subject to market fluctuation and may increase or decrease in value prior to their delivery. The purchase of securities on a when-issued basis may increase the volatility of a Fund’s NAV to the extent the Fund executes such transactions while remaining substantially fully invested. When a Fund engages in when-issued or delayed delivery transactions, it relies on the buyer or seller, as the case may be, to complete the transaction. Their failure to do so may cause the Fund to lose the opportunity to obtain or dispose of the security at a price and yield IICO, or the Fund’s investment subadviser, as applicable, consider advantageous. The Fund maintains internally designated assets with a value equal to or greater than the amount of its purchase commitments. The Fund may also sell securities that it purchased on a when-issued or delayed delivery basis prior to settlement of the original purchase.

Custodian Fees. “Custodian fees” on the Statement of Operations may include interest expense incurred by a Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. A Fund pays interest to its custodian on such cash overdrafts, to the extent they are not offset by positive cash balances maintained by that Fund. The “Earnings credit” line item, if shown, represents earnings on cash balances maintained by that Fund during the period. Such interest expense and other custodian fees may be paid with these earnings. 

Independent Trustees and Chief Compliance Officer Fees. Fees paid to the Independent Trustees can be paid in cash or deferred to a later date, at the election of the Trustee according to the Deferred Fee Agreement entered into between the Trust and the Trustee(s). Each Fund records its portion of the deferred fees as a liability on the Statement of Assets and Liabilities. All fees paid in cash plus any appreciation (depreciation) in the underlying deferred plan are shown on the Statement of Operations. Additionally, fees paid to the Chief Compliance Officer of the Funds are shown on the Statement of Operations. 

Indemnifications. The Trust’s organizational documents provide current and former Trustees and Officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Trust. In the normal course of business, the Trust may also enter into contracts that provide general indemnification. The Trust’s maximum exposure under these arrangements is unknown and is dependent on future claims that may be made against the Trust. The risk of material loss from such claims is considered remote.

Basis of Preparation. Each Fund is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 (“ASC 946”). The accompanying financial statements were prepared in accordance with U.S. GAAP, including but not limited to ASC 946. U.S. GAAP requires the use of estimates made by management. Management believes that estimates and valuations are appropriate; however, actual results may differ from those estimates, and the valuations reflected in the accompanying financial statements may differ from the value ultimately realized upon sale or maturity.

New Rule Issuance. In July 2014, the SEC issued Final Rule Release No. 33-9616, Money Market Fund Reform; Amendments to Form PF, which amends the rules governing money market funds. The final amendments impose different implementation dates for the changes that certain money market funds will need to make. Management is currently evaluating the implication of these amendments and their impact of the Final Rule to the Funds’ financial statements and related disclosures. 

Subsequent Events. Management has performed a review for subsequent events through the date this report was issued.

 

3.   INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Each Fund’s investments are reported at fair value. Fair value is defined as the price that each Fund would receive upon selling an asset or would pay upon satisfying a liability in an orderly transaction between market participants at the measurement date. Each Fund calculates the NAV of its shares as of the close of the NYSE, normally 4:00 P.M. Eastern time, on each day the NYSE is open for trading.

For purposes of calculating the NAV, the portfolio securities and other assets are valued on each business day using pricing and valuation methods as adopted by the Board. Where market quotes are readily available, fair value is generally determined on the basis of last reported sales prices, or if no sales are reported, based on quotes obtained from a quotation reporting system, established market makers, or pricing services.

Prices for fixed-income securities are typically based on quotes that are obtained from an independent pricing service authorized by the Board. To determine values of fixed-income securities, the independent pricing service utilizes such factors as current quotations by broker/dealers, coupon,

 

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maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Securities that cannot be valued by the independent pricing service may be valued using quotes obtained from dealers that make markets in the securities.

Investments in Ivy Money Market Fund are valued on the basis of amortized cost (which approximates value), whereby a portfolio security is valued at its cost initially, and thereafter valued to reflect a constant amortization to maturity of any discount or premium. Short-term securities with maturities of 60 days or less held in all Funds (with the exception of Ivy Money Market Fund) are valued based on quotes that are obtained from an independent pricing service authorized by the Board as described in the preceding paragraph above.

Because many foreign markets close before the NYSE, events may occur between the close of the foreign market and the close of the NYSE that could have a material impact on the valuation of foreign securities. Waddell & Reed Services Company (“WRSCO”), pursuant to procedures adopted by the Board, evaluates the impact of these events and may adjust the valuation of foreign securities to reflect the fair value as of the close of the NYSE. In addition, all securities for which values are not readily available or are deemed unreliable are appraised at fair value as determined in good faith under the supervision of the Board.

Where market quotes are not readily available, portfolio securities or assets are valued at fair value, as determined in good faith by the Board or Valuation Committee pursuant to procedures approved by the Board.

Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information or broker quotes), including where events occur after the close of the relevant market, but prior to the NYSE close, that materially affect the values of a Fund’s securities or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the securities trade do not open for trading for the entire day and no other market prices are available.

The Board has delegated to WRSCO the responsibility for monitoring significant events that may materially affect the values of a Fund’s securities or assets and for determining whether the value of the applicable securities or assets should be re-evaluated in light of such significant events. The Board has established a Valuation Committee to administer and oversee the valuation process, including the use of third party pricing vendors.

The Board has adopted methods for valuing securities and other assets in circumstances where market quotes are not readily available. For instances in which daily market quotes are not readily available, investments may be valued, pursuant to procedures established by the Board, with reference to other securities or indices. In the event that the security or asset cannot be valued pursuant to one of the valuation methods established by the Board, the value of the security or asset will be determined in good faith by the Valuation Committee in accordance with the procedures adopted by the Board.

When a Fund uses these fair valuation methods applied by WRSCO that use significant unobservable inputs to determine its NAV, securities will be priced by a method that the Board or persons acting at their direction believe accurately reflects fair value and are categorized as Level 3 of the fair value hierarchy. These methods may require subjective determinations about the value of a security. The prices used by a Fund may differ from the value that will ultimately be realized at the time the securities are sold.

WRSCO is responsible for monitoring the implementation of the pricing and valuation policies through a series of activities to provide reasonable comfort of the accuracy of prices including: 1) periodic vendor due diligence meetings to review methodologies, new developments, and process at vendors, 2) daily and monthly multi-source pricing comparisons reviewed and submitted to the Valuation Committee, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by management and the Valuation Committee.

Accounting standards establish a framework for measuring fair value and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the factors that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

An individual investment’s fair value measurement is assigned a level based upon the observability of the inputs which are significant to the overall valuation.

The three-tier hierarchy of inputs is summarized as follows:

 

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Level 1 – Observable input such as quoted prices, available in active markets, for identical assets or liabilities.

 

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Level 2 – Significant other observable inputs, which may include, but are not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market corroborated inputs.

 

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Level 3 – Significant unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available, which may include assumptions made by the Board or persons acting at their direction that are used in determining the fair value of investments.

 

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A description of the valuation techniques applied to the Funds’ major classes of assets and liabilities measured at fair value on a recurring basis follows:

Asset-Backed Securities and Mortgage-Backed Securities. The fair value of asset-backed securities and mortgage-backed securities are estimated using recently executed transactions and based on models that consider the estimated cash flows of each debt tranche of the issuer, establish a benchmark yield, and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche including, but not limited to, the prepayment speed assumptions and attributes of the collateral. To the extent the inputs are observable and timely, the values would be categorized in Level 2 of the fair value hierarchy, and otherwise they would be categorized as Level 3.

Bullion. The fair value of bullion is at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded and are categorized in Level 1 of the fair value hierarchy.

Corporate Bonds. The fair value of corporate bonds, as obtained from an independent pricing service, is estimated using various techniques, which consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, fundamental data relating to the issuer, and credit default swap spreads adjusted for any basis difference between cash and derivative instruments. While most corporate bonds are categorized in Level 2 of the fair value hierarchy, in instances where lower relative weight is placed on transaction prices, quotations, or similar observable inputs, they are categorized in Level 3 of the fair value hierarchy.

Derivative Instruments. Forward foreign currency contracts are valued based upon the closing prices of the forward currency rates determined at the close of the NYSE provided by an independent pricing service. Swaps derive their value from underlying asset prices, indices, reference rates and other inputs or a combination of these factors. Swaps are valued by an independent pricing service unless the price is unavailable, in which case they are valued at the price provided by a dealer in that security. Futures contracts traded on an exchange are generally valued at the settlement price. Listed options are ordinarily valued at the mean of the last bid and ask price provided by an independent pricing service unless the price is unavailable, in which case they are valued at a quotation obtained from a broker-dealer. Over-the-counter (“OTC”) options are ordinarily valued at the mean of the last bid and ask price provided by an independent pricing service for a comparable listed option unless such a price is unavailable, in which case they are valued at a quotation obtained from a broker-dealer. If no comparable listed option exists from which to obtain a price from an independent pricing service and a quotation cannot be obtained from a broker-dealer, the OTC option will be valued using a model reasonably designed to provide a current market price.

Listed derivatives that are actively traded are valued based on quoted prices from the exchange and are categorized in Level 1 of the fair value hierarchy. OTC derivative contracts include forward foreign currency contracts, swap agreements, and option contracts related to interest rates, foreign currencies, credit standing of reference entities, equity prices, or commodity prices. Depending on the product and the terms of the transaction, the fair value of the OTC derivative products are modeled taking into account the counterparties’ creditworthiness and using a series of techniques, including simulation models. Many pricing models do not entail material subjectivity because the methodologies employed do not necessitate significant judgments and the pricing inputs are observed from actively quoted markets, as is the case with interest rate swap and option contracts. OTC derivative products valued using pricing models with significant observable inputs are categorized within Level 2 of the fair value hierarchy.

Equity Securities. Equity securities traded on U.S. or foreign securities exchanges or included in a national market system are valued at the official closing price at the close of each business day unless otherwise stated below. OTC equity securities and listed securities for which no price is readily available are valued at the average of the last bid and asked prices.

Mutual funds, including investment funds, typically are valued at the NAV reported as of the valuation date.

Securities that are stated at the last reported sales price or closing price on the day of valuation taken from the primary exchange where the security is principally traded and to the extent these securities are actively traded and valuation adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy.

Foreign securities, for which the primary trading market closes at the same time or after the NYSE, are valued based on quotations from the primary market in which they are traded and categorized in Level 1. Because many foreign securities markets and exchanges close prior to the close of the NYSE, closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after that close. Certain foreign securities may be fair valued using a pricing service that considers the correlation of the trading patterns of the foreign security to the intra-day trading in the U.S. markets for investments such as American Depositary Receipts, financial futures, exchange-traded funds, and the movement of certain indices of securities based on a statistical analysis of their historical relationship; such valuations generally are categorized in Level 2.

Preferred stock, repurchase agreements, and other equities traded on inactive markets or valued by reference to similar instruments are also generally categorized in Level 2.

Loans. Loans are valued using a price or composite price from one or more brokers or dealers as obtained from an independent pricing service. The fair value of loans is estimated using recently executed transactions, market price quotations, credit/market events, and cross-asset pricing. Inputs are generally observable market inputs obtained from independent sources. Loans are generally categorized in Level 2 of the fair value hierarchy, unless key inputs are unobservable in which case they would be categorized as Level 3.

Municipal Bonds. Municipal bonds are fair valued based on pricing models used by and obtained from an independent pricing service that take into account, among other factors, information received from market makers and broker-dealers, current trades, bid-wants lists, offerings, market

 

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movements, the callability of the bond, state of issuance, benchmark yield curves, and bond insurance. To the extent that these inputs are observable and timely, the fair values of municipal bonds would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.

Restricted Securities. Restricted securities that are deemed to be both Rule 144A securities and illiquid, as well as restricted securities held in non-public entities, are included in Level 3 of the fair value hierarchy to the extent that significant inputs to valuation are unobservable, because they trade infrequently, and, therefore, the inputs are unobservable. Restricted securities that are valued at a discount to similar publicly traded securities may be categorized as Level 2 of the fair value hierarchy to the extent that the discount is considered to be insignificant to the fair value measurement in its entirety; otherwise they may be categorized as Level 3.

U.S. Government and Agency Securities. U.S. government and agency securities are normally valued using a model that incorporates market observable data such as reported sales of similar securities, broker quotes, yields, bids, offers, quoted market prices, and reference data. Accordingly, U.S. government and agency securities are normally categorized in Level 1 or 2 of the fair value hierarchy depending on the liquidity and transparency of the market.

Transfers from Level 2 to Level 3 occurred primarily due to the lack of observable market data due to decreased market activity or information for these securities. Transfers from Level 3 to Level 2 occurred primarily due to the increased availability of observable market data due to increased market activity or information. Transfers between levels represent the values as of the beginning of the reporting period.

For fair valuations using unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances for reported fair values that presents changes attributable to total realized and unrealized gains or losses, purchases and sales, and transfers in or out of the Level 3 category during the period. In accordance with the requirements of U.S. GAAP, a fair value hierarchy and Level 3 reconciliation, if any, have been included in the Notes to the Schedule of Investments for each respective Fund.

Net realized gain (loss) and net unrealized appreciation (depreciation), shown on the reconciliation of Level 3 investments if applicable, are included on the Statement of Operations in net realized gain (loss) on investments in unaffiliated and/or affiliated securities and in net change in unrealized appreciation (depreciation) on investments in unaffiliated and/or affiliated securities, respectively. Additionally, the net change in unrealized appreciation (depreciation) for all Level 3 investments still held as of March 31, 2016, if applicable, is included on the Statement of Operations in net change in unrealized appreciation (depreciation) on investments in unaffiliated and/or affiliated securities.

 

4.   DERIVATIVE INSTRUMENTS ($ amounts in thousands unless indicated otherwise)

The following disclosures contain information on why and how the Funds use derivative instruments, the associated risks of investing in derivative instruments, and how derivative instruments affect the Funds’ financial positions and results of operations when presented by primary underlying risk exposure.

Forward Foreign Currency Contracts. Certain Funds may enter into forward foreign currency contracts (“forward contracts”) for the purchase or sale of a foreign currency at a negotiated rate at a future date. Forward contracts are reported on a schedule following the Schedule of Investments. Forward contracts will be valued daily based upon the closing prices of the forward currency rates provided by an independent pricing service determined at the close of the NYSE as provided by a bank, dealer or independent pricing service. The resulting unrealized appreciation and depreciation is reported on the Statement of Assets and Liabilities as a receivable or payable and on the Statement of Operations within the change in unrealized appreciation (depreciation). At contract close, the difference between the original cost of the contract and the value at the close date is recorded as a realized gain (loss) on the Statement of Operations.

Risks to a Fund related to the use of such contracts include both market and credit risk. Market risk is the risk that the value of the forward contract will depreciate due to unfavorable changes in the exchange rates. Credit risk arises from the possibility that the counterparty will default. If the counterparty defaults, a Fund’s maximum loss will consist of the aggregate unrealized gain on appreciated contracts that is not collateralized.

Ivy Cundill Global Value Fund, Ivy Emerging Markets Equity Fund, Ivy European Opportunities Fund, Ivy Global Bond Fund, Ivy Global Equity Income Fund, Ivy Global Growth Fund, Ivy Global Income Allocation Fund, Ivy High Income Fund and Ivy International Core Equity Fund enter into forward foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to, or hedge exposure away from foreign currencies (foreign currency exchange rate risk).

Futures Contracts. Certain Funds may engage in buying and selling futures contracts. Upon entering into a futures contract, the Fund is required to deposit, in a segregated account, an amount 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 Fund each day, dependent on the daily fluctuations in the value of the underlying debt security or index.

Futures contracts are reported on a schedule following the Schedule of Investments. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are identified on the Schedule of Investments. Cash held by the broker to cover initial margin requirements on open futures contracts and the receivable and/or payable for the daily mark to market for the variation margin are noted on the Statement of Assets and Liabilities. The net change in unrealized appreciation (depreciation) is reported on the Statement of Operations. Realized gains (losses) are reported on the Statement of Operations at the closing or expiration of futures contracts.

Risks of entering into futures contracts include the possibility of loss of securities or cash held as collateral, that there may be an illiquid market where the Fund is unable to close the contract or enter into an offsetting position and, if used for hedging purposes, the risk that the price of the contract will correlate imperfectly with the prices of the Fund’s securities.

 

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Ivy Bond Fund, Ivy Emerging Markets Equity Fund, Ivy Global Bond Fund and Ivy Municipal High Income Fund invest in long and/or short positions in futures contracts to gain exposure to, or economically hedge against, changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Option Contracts. Options purchased by a Fund are accounted for in the same manner as portfolio securities. The cost of instruments acquired through the exercise of call options is increased by the premium paid to purchase the call. The proceeds from instruments sold through the exercise of put options are decreased by the premium paid to purchase the put.

When a 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 value of the option written. When an option expires on its stipulated expiration date or a 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 written call option is exercised, the premium is added to the proceeds from the sale of the underlying instrument in determining whether a Fund has realized a gain or loss. For each Fund, when a written put is exercised, the cost basis of the instruments purchased by a Fund is reduced by the amount of the premium received.

Investments in options, whether purchased or written, involve certain risks. Writing put options and purchasing call options may increase a Fund’s exposure to the underlying instrument. With written options, there may be times when a Fund will be required to purchase or sell instruments to meet its obligation under the option contract where the required action is not beneficial to the Fund, due to unfavorable movement of the market price of the underlying instrument. Additionally, to the extent a Fund enters into OTC option transactions with counterparties, the Fund will be exposed to the risk that counterparties to these OTC transactions will be unable to meet their obligations under the terms of the transaction.

Ivy Dividend Opportunities Fund, Ivy Emerging Markets Equity Fund, Ivy Global Income Allocation Fund, Ivy International Core Equity Fund, Ivy Mid Cap Growth Fund, Ivy Small Cap Growth Fund and Ivy Value Fund may purchase and write call and put options to increase or decrease hedging exposure to underlying instruments (which may include credit risk, equity risk, foreign currency exchange rate risk, event risk and/or interest rate risk), increase exposure to various equity markets or certain sectors, gain exposure to or facilitate trading in certain securities and/or, in the case of options written, to generate returns from options premiums.

Swap Agreements. Certain Funds may invest in swap agreements. Swaps are marked to market daily and changes in value are recorded as unrealized appreciation (depreciation) on the Statement of Operations. Payments received or made by the Fund are recorded as realized gain or loss on the Statement of Operations. Any upfront premiums paid are recorded as assets and any upfront fees received are recorded as liabilities and are shown as swap premiums paid and swap premiums received, respectively, if any, on the Statement of Assets and Liabilities and amortized over the term of the swap. A liquidation payment received or made at the termination or maturity of the swap is recorded as realized gain or loss on the Statement of Operations.

Total return swaps involve a commitment to pay or receive periodic interest payments in exchange for a market-linked return based on a security or a basket of securities representing a variety of securities or a particular index. To the extent the total return of the security, index or other financial measure underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty.

Ivy Emerging Markets Equity Fund, Ivy High Income Fund and Ivy Small Cap Growth Fund enter into total return swaps to hedge exposure to a security or market.

The creditworthiness of the counterparty with which a Fund enters into a swap agreement is monitored by IICO. If a firm’s creditworthiness declines, the value of the agreement would likely decline, potentially resulting in losses. If a default occurs by the counterparty to such a transaction, the Fund will have contractual remedies pursuant to the agreement related to the transaction. The maximum loss a Fund may incur consists of the aggregate unrealized gain on appreciated contracts that is not collateralized.

Collateral and rights of offset. A Fund may mitigate credit risk with respect to OTC derivative counterparties through credit support annexes (“CSA”) included with an International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreement which is the standard contract governing most derivative transactions between the Fund and each of its counterparties. The CSA allows the Fund and its counterparty to offset certain derivative financial instruments’ payables and/or receivables against each other and/or with collateral, which is generally held by the Fund’s custodian. The amount of collateral moved to/from applicable counterparties is based upon minimum transfer amounts specified in the CSA. To the extent amounts due to the Fund from its counterparties are not fully collateralized contractually or otherwise, the Fund bears the risk of loss from counterparty non-performance. See Note 2 “Segregation and Collateralization” for additional information with respect to collateral practices. 

 

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Offsetting of Assets and Liabilities. The following tables present financial instruments that are either (1) offset or (2) subject to an enforceable master netting arrangement or similar agreement as of March 31, 2016:

Assets

       Gross Amounts Not Offset on the
Statement of Assets and Liabilities		  
Fund    Gross
Amounts of
Recognized
Assets		      Gross Amounts
Offset on the
Statement of
Assets and
Liabilities		      Net Amounts
of Assets
Presented on
the Statement
of Assets and
Liabilities		      Financial
Instruments and
Derivatives
Available for
Offset		     Non-Cash
Collateral
Received		     Cash
Collateral
Received		     Net
Amount
Receivable		  

Ivy Cundill Global Value Fund

                  

Unrealized appreciation on forward foreign currency contracts

    $ 54       $ —       $ 54       $ (54 )    $ —      $ —      $ —   

Ivy Emerging Markets Equity Fund

                  

Investments in unaffiliated securities at value*

    $ 3,257       $ —       $ 3,257       $ (1,006 )    $ (2,085 )    $ —      $ 166   

Unrealized appreciation on forward foreign currency contracts

      1,323         —         1,323         —        (115 )      (750 )      458   

Total

    $ 4,580       $ —       $ 4,580       $ (1,006 )    $ (2,200 )    $ (750 )    $ 624   

Ivy European Opportunities Fund

                  

Unrealized appreciation on forward foreign currency contracts

    $ 158       $ —       $ 158       $ —      $ (27 )    $ —      $ 131   

Ivy Global Bond Fund

                  

Unrealized appreciation on forward foreign currency contracts

    $ 16       $ —       $ 16       $ —      $ —      $ —      $ 16   

Ivy Global Equity Income Fund

                  

Unrealized appreciation on forward foreign currency contracts

    $ 198       $ —       $ 198       $ —      $ (34 )    $ —      $ 164   

Ivy Global Income Allocation Fund

                  

Investments in unaffiliated securities at value*

    $ 1,226       $ —       $ 1,226       $ (186 )    $ (798 )    $ —      $ 242   

Unrealized appreciation on forward foreign currency contracts

      166         —         166         (166 )      —        —        —   

Total

    $ 1,392       $ —       $ 1,392       $ (352 )    $ (798 )    $ —      $ 242   

Ivy High Income Fund

                  

Unrealized appreciation on forward foreign currency contracts(1)

    $ 1,077       $ —       $ 1,077       $ (382 )    $ —      $ (510 )    $ 185   

Unrealized appreciation on swap agreements

      102         —         102         —        —        —        102   

Total

    $ 1,179       $ —       $ 1,179       $ (382 )    $ —      $ (510 )    $ 287   

Ivy Mid Cap Growth Fund

                  

Investments in unaffiliated securities at value*

    $ 180       $ —       $ 180       $ —      $ —      $ (131 )    $ 49   

 

* Purchased options are reported as investments in unaffiliated securities on the Statement of Assets and Liabilities.

 

(1) Amounts include forward contracts that have an offset to an open and close contract, but have not settled. These amounts are included on the Statement of Assets and Liabilities line item for Investment securities sold receivable.

 

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Liabilities

                          Gross Amounts Not Offset on the
Statement of Assets and Liabilities		  
Fund    Gross
Amounts of
Recognized
Liabilities		      Gross Amounts
Offset on the
Statement of
Assets and
Liabilities		      Net Amounts
of Liabilities
Presented on
the Statement
of Assets and
Liabilities		      Financial
Instruments and
Derivatives
Available for
Offset		     Non-Cash
Collateral
Pledged		     Cash
Collateral
Pledged		     Net
Amount
Payable		  

Ivy Cundill Global Value Fund

              

Unrealized depreciation on forward foreign currency contracts

    $ 1,725       $ —       $ 1,725       $ (54 )    $ (1,614 )    $ —      $ 57   

Ivy Emerging Markets Equity Fund

              

Written Options at value

    $ 3,056       $ —       $ 3,056       $ (1,006 )    $ —      $ (2,000 )    $ 50   

Unrealized depreciation on forward foreign currency contracts

      926         —         926         —        —        (710 )      216   

Total

    $ 3,982       $ —       $ 3,982       $ (1,006 )    $ —      $ (2,710 )    $ 266   

Ivy European Opportunities Fund

              

Unrealized depreciation on forward foreign currency contracts

    $ 131       $ —       $ 131       $ —      $ —      $ —      $ 131   

Ivy Global Equity Income Fund

              

Unrealized depreciation on forward foreign currency contracts

    $ 277       $ —       $ 277       $ —      $ —      $ —      $ 277   

Ivy Global Income Allocation Fund

              

Written Options at value

    $ 186       $ —       $ 186       $ (186 )    $ —      $ —      $ —   

Unrealized depreciation on forward foreign currency contracts

      254         —         254         (166 )      —        —        88   

Total

    $ 440       $ —       $ 440       $ (352 )    $ —      $ —      $ 88   

Ivy High Income Fund

              

Unrealized depreciation on forward foreign currency contracts(1)

    $ 4,870       $ —       $ 4,870       $ (382 )    $ —      $ (4,380 )    $ 108   

Ivy International Core Equity Fund

              

Written Options at value

    $ 281       $ —       $ 281       $ —      $ (281 )    $ —      $ —   

Unrealized depreciation on forward foreign currency contracts

      1,876         —         1,876         —        (404 )      —        1,472   

Total

    $ 2,157       $ —       $ 2,157       $ —      $ (685 )    $ —      $ 1,472   

Ivy Mid Cap Growth Fund

              

Written Options at value

    $ 9,166       $ —       $ 9,166       $ —      $ (9,166 )    $ —      $ —   

Ivy Small Cap Growth Fund

              

Unrealized depreciation on swap agreements

    $ 865       $ —       $ 865       $ —      $ (865 )    $ —      $ —   

 

(1) Amounts include forward contracts that have an offset to an open and close contract, but have not settled. These amounts are included on the Statement of Assets and Liabilities line item for Investment securities purchased payable.

 

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Additional Disclosure Related to Derivative Instruments

Fair values of derivative instruments as of March 31, 2016:

 

       

Assets

    

Liabilities

  
Fund   Type of Risk
Exposure		   Statement of Assets & Liabilities Location   Value     Statement of Assets & Liabilities Location   Value  
Ivy Bond Fund   Interest rate   Unrealized appreciation on futures contracts*   $ 101            —   
Ivy Cundill Global Value Fund   Foreign currency   Unrealized appreciation on forward foreign currency contracts     54      Unrealized depreciation on forward foreign currency contracts   $ 1,725   
Ivy Emerging Markets Equity Fund   Equity   Investments in unaffiliated securities at value**     3,257      Written options at value     3,056   
    Foreign currency   Unrealized appreciation on forward foreign currency contracts     1,323      Unrealized depreciation on forward foreign currency contracts     926   
Ivy European Opportunities Fund   Foreign currency   Unrealized appreciation on forward foreign currency contracts     158      Unrealized depreciation on forward foreign currency contracts     131   
Ivy Global Bond Fund   Foreign currency   Unrealized appreciation on forward foreign currency contracts     16            —   
Ivy Global Equity Income Fund   Foreign currency   Unrealized appreciation on forward foreign currency contracts     198      Unrealized depreciation on forward foreign currency contracts     277   
Ivy Global Income Allocation Fund   Equity   Investments in unaffiliated securities at value**     1,226      Written options at value     186   
    Foreign currency   Unrealized appreciation on forward foreign currency contracts     166      Unrealized depreciation on forward foreign currency contracts     254   
Ivy High Income Fund   Equity   Unrealized appreciation on swap agreements     102          —   
    Foreign currency         —      Unrealized depreciation on forward foreign currency contracts     72   

Ivy International

Core Equity Fund

   Equity       —      Written options at value     281   
    Foreign currency         —      Unrealized depreciation on forward foreign currency contracts     1,876   
Ivy Mid Cap Growth Fund   Equity   Investments in unaffiliated securities at value**     234      Written options at value     9,166   
Ivy Small Cap Growth Fund   Equity         —      Unrealized depreciation on swap agreements     865   
Ivy Value Fund   Equity         —      Written options at value     1,521   

 

* The value presented includes cumulative gain (loss) on open futures contracts; however, the value reflected on the accompanying Statement of Assets and Liabilities is only the unsettled variation margin receivable (payable) as of year ended March 31, 2016.

 

** Purchased options are reported as investments in unaffiliated securities and are reflected on the accompanying Schedule of Investments.

 

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Amount of realized gain (loss) on derivatives recognized on the Statement of Operations for the year ended March 31, 2016:

 

          Net realized gain (loss) on:        
Fund    Type of Risk
Exposure		    Investments in
unaffiliated
securities*		     Swap
agreements		     Futures
contracts		     Written
options		     Forward
foreign
currency
contracts		     Total  

Ivy Bond Fund

    Interest rate    $ —      $ —      $ (1,339 )    $ —      $ —      $ (1,339 ) 

Ivy Cundill Global Value Fund

    Foreign currency      —        —        —        —        1,070        1,070   

Ivy Dividend Opportunities Fund

    Equity      —        —        —        109        —        109   
Ivy Emerging Markets Equity Fund    Equity      303        1,049        646        (3,409 )      —        (1,411)   
     Foreign currency      —        —        —        —        1,498        1,498   

Ivy European Opportunities Fund

    Foreign currency      —        —        —        —        (3,219 )      (3,219 ) 
Ivy Global Bond Fund    Foreign currency      —        —        —        —        19        19   
     Interest rate      —        —        (254 )      —        —        (254 ) 

Ivy Global Equity Income Fund

    Foreign currency      —        —        —        —        (3,692 )      (3,692 ) 

Ivy Global Growth Fund

    Foreign currency      —        —        —        —        (4,267 )      (4,267 ) 
Ivy Global Income Allocation Fund    Equity      889        —        —        527        —        1,416   
     Foreign currency      —        —        —        —        (502 )      (502 ) 
Ivy High Income Fund    Equity      —        (3,094 )      —        —        —        (3,094)   
     Foreign currency      —        —        —        —        (1,003 )      (1,003 ) 

Ivy International Core Equity Fund

    Foreign currency      —        —        —        —        (6,504 )      (6,504 ) 

Ivy Mid Cap Growth Fund

    Equity      9,318        —        —        (3,716 )      —        (5,602 ) 

Ivy Municipal High Income Fund

    Interest rate      —        —        780        —        —        780   

Ivy Small Cap Growth Fund

    Equity      (173 )      (13,241 )      —        318        —        (13,096 ) 

Ivy Value Fund

    Equity      (12 )      —        —        (37 )      —        (49 ) 

 

* Purchased options are reported as investments in unaffiliated securities and are reflected on the accompanying Schedule of Investments.

Change in unrealized appreciation (depreciation) on derivatives recognized on the Statement of Operations for the year ended March 31, 2016:

 

          Net change in unrealized appreciation (depreciation) on:        
Fund    Type of Risk
Exposure		    Investments in
unaffiliated
securities*		     Swap
agreements		     Futures
contracts		     Written
options		     Forward
foreign
currency
contracts		     Total  

Ivy Bond Fund

    Interest rate    $ —      $ —      $ 468      $ —      $ —      $ 468   

Ivy Cundill Global Value Fund

    Foreign currency      —        —        —        —        (3,231 )      (3,231 ) 

Ivy Dividend Opportunities Fund

    Equity      —        —        —        (57 )      —        (57 ) 
Ivy Emerging Markets Equity Fund    Equity      1,098        49        —        1,041        —        2,188   
     Foreign currency      —        —        —        —        397        397   

Ivy European Opportunities Fund

    Foreign currency      —        —        —        —        (446 )      (446 ) 
Ivy Global Bond Fund    Foreign currency      —        —        —        —        (49 )      (49)   
     Interest rate      —        —        (166 )      —        —        (166 ) 

Ivy Global Equity Income Fund

    Foreign currency      —        —        —        —        (598 )      (598 ) 

Ivy Global Growth Fund

    Foreign currency      —        —        —        —        (317 )      (317 ) 
Ivy Global Income Allocation Fund    Equity      490        —        —        95        —        585   
     Foreign currency      —        —        —        —        (344 )      (344 ) 
Ivy High Income Fund    Equity      —        102        —        —        —        102   
     Foreign currency      —        —        —        —        (1,005 )      (1,005 ) 
Ivy International Core Equity Fund    Equity      —        —        —        (126 )      —        (126)   
     Foreign currency      —        —        —        —        2,893        2,893   

Ivy Mid Cap Growth Fund

    Equity      (6,276 )      —        —        (193 )      —        (6,469 ) 

Ivy Small Cap Growth Fund

    Equity      —        (846 )      —        —        —        (846 ) 

Ivy Value Fund

    Equity      —        —        —        (372 )      —        (372 ) 

 

* Purchased options are reported as investments in unaffiliated securities and are reflected on the accompanying Schedule of Investments.

 

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During the year ended March 31, 2016, the average derivative volume was as follows:

 

Fund    Forward foreign
currency  contracts(1)		      Long  futures
contracts(1)		      Short  futures
contracts(1)		      Swap
agreements(2)		      Purchased
options(1)		      Written
options(1)		  

Ivy Bond Fund

    $ —       $ 1,610       $ 31,480       $ —       $ —       $ —   

Ivy Cundill Global Value Fund

      602         —         —         —         —         —   

Ivy Dividend Opportunities Fund

      —         —         —         —         —         4   

Ivy Emerging Markets Equity Fund

      2         —         —         2,259         1,173         3,408   

Ivy European Opportunities Fund

      187         —         —         —         —         —   

Ivy Global Bond Fund

      5         1,935         —         —         —         —   

Ivy Global Equity Income Fund.

      302         —         —         —         —         —   

Ivy Global Growth Fund

      210         —         —         —         —         —   

Ivy Global Income Allocation Fund

      363         —         —         —         253         95   

Ivy High Income Fund

      194         —         —         12,860         —         —   

Ivy International Core Equity Fund

      2,574         —         —         —         —         22   

Ivy Mid Cap Growth Fund

      —         —         —         —         1,470         6,936   

Ivy Municipal High Income Fund

      —         —         3,934         —         —         —   

Ivy Small Cap Growth Fund

      —         —         —         22,504         —         —   

Ivy Value Fund

      —         —         —         —         —         425   

 

(1) Average value outstanding during the period.

 

(2) Average notional amount outstanding during the period.

5. WRITTEN OPTION ACTIVITY ($ amounts in thousands)

Transactions in written options were as follows:

 

Fund    Outstanding
at 3-31-15		      Options
written		      Options
closed		     Options
exercised		     Options
expired		     Outstanding
at 3-31-16		  

Ivy Dividend Opportunities Fund

  

Number of Contracts

      792         —         —        —        (792 )      N/A   

Premium Received

    $ 109       $ —       $ —      $ —      $ (109 )      N/A   

Ivy Emerging Markets Equity Fund

               

Number of Contracts

      17,484         207,344         (123,150 )      (20,000 )      (47,641 )      34,037   

Premium Received

    $ 1,784       $ 21,173       $ (13,356 )    $ (180 )    $ (4,875 )    $ 4,546   

Ivy Global Income Allocation Fund

               

Number of Contracts

      7,640         4,900         (2,820 )      —        (4,820 )      4,900   

Premium Received

    $ 592       $ 523       $ (214 )    $ —      $ (378 )    $ 523   

Ivy International Core Equity Fund

               

Number of Contracts

      N/A         876,000         —        —        —        876,000   

Premium Received

      N/A       $ 155       $ —      $ —      $ —      $ 155   

Ivy Mid Cap Growth Fund

               

Number of Contracts

      11,279         81,643         (61,909 )      (9,900 )      (18,020 )      3,093   

Premium Received

    $ 2,039       $ 64,527       $ (53,688 )    $ (893 )    $ (3,003 )    $ 8,982   

Ivy Small Cap Growth Fund

               

Number of Contracts

      N/A         4,806         (4,806 )      —        —        N/A   

Premium Received

      N/A       $ 490       $ (490 )    $ —      $ —        N/A   

Ivy Value Fund

               

Number of Contracts

      9,709         19,053         (6,643 )      (2,432 )      (16,334 )      3,353   

Premium Received

    $ 277       $ 2,864       $ (759 )    $ (337 )    $ (1,044 )    $ 1,001   

 

6.   BASIS FOR CONSOLIDATION OF THE IVY EMERGING MARKETS EQUITY FUND

Ivy EME, Ltd. (the “Subsidiary”), a Cayman Islands exempted company, was incorporated as a wholly owned subsidiary acting as an investment vehicle for the Ivy Emerging Markets Equity Fund (referred to as “the Fund” in this subsection). The Subsidiary acts as an investment vehicle for the Fund, in order to effect certain investments for the Fund consistent with the Fund’s investment objectives and policies as specified in its prospectus and SAI. The Fund’s investment portfolio has been consolidated and includes the portfolio holdings of the Fund and its Subsidiary. The consolidated financial statements include the accounts of the Fund and its Subsidiary. All inter-company transactions and balances have been eliminated. A subscription agreement was entered into between the Fund and its Subsidiary comprising the entire issued share capital of the Subsidiary with the intent that the Fund will remain the sole shareholder and retain all rights. Under the Articles of Association, shares issued by the Subsidiary confer upon a shareholder the right to receive notice of, to attend and to vote at general meetings of the Subsidiary and shall confer upon the shareholder rights in a winding-up or repayment of capital and the right to participate in the profits or assets of the Subsidiary.

 

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See the table below for details regarding the structure, incorporation and relationship as of March 31, 2016 of the Subsidiary to the Fund (amounts in thousands).

 

Subsidiary    Date of
Incorporation		      Subscription
Agreement		      Fund Net
Assets		      Subsidiary
Net Assets		     

Percentage
of Fund

Net Assets

  

Ivy EME, Ltd.

      1-31-13         4-10-13       $ 533,902       $ 354         0.07 % 

 

7.   INVESTMENT MANAGEMENT AND PAYMENTS TO AFFILIATED PERSONS
    ($ amounts in thousands unless indicated otherwise)

Management Fees. IICO, a wholly owned subsidiary of Waddell & Reed Financial, Inc. (“WDR”), serves as each Fund’s investment manager. The management fee is accrued daily by each Fund at the following annual rates as a percentage of average daily net assets:

 

Fund (M - Millions)   $0 to
$250M		     $250 to
$500M		     $500 to
$1,000M		     $1,000 to
$1,500M		     $1,500 to
$2,000M		     $2,000 to
$3,000M		     $3,000 to
$5,000M		     $5,000 to
$6,000M		     $6,000 to
$10,000M		     $10,000 to
$15,000M		     $15,000 to
$20,000M		     Over
$20,000M		  

Ivy Bond Fund

     0.525 %      0.525 %      0.500 %      0.450 %      0.400 %      0.400 %      0.400 %      0.395 %      0.395 %      0.390 %      0.390 %      0.390 % 

Ivy Core Equity Fund

     0.700        0.700        0.700        0.650        0.650        0.600        0.550        0.525        0.500        0.490        0.490        0.490   

Ivy Cundill Global Value Fund

     1.000        1.000        0.850        0.830        0.830        0.800        0.760        0.730        0.730        0.700        0.700        0.700   

Ivy Dividend Opportunities Fund

     0.700        0.700        0.700        0.650        0.650        0.600        0.550        0.540        0.540        0.530        0.530        0.530   

Ivy Emerging Markets Equity Fund

     1.000        1.000        0.850        0.830        0.830        0.800        0.760        0.755        0.755        0.750        0.750        0.750   

Ivy European Opportunities Fund

     0.900        0.850        0.750        0.750        0.750        0.740        0.740        0.720        0.720        0.710        0.710        0.710   

Ivy Global Bond Fund

     0.625        0.625        0.600        0.550        0.500        0.500        0.500        0.490        0.490        0.480        0.480        0.480   

Ivy Global Equity Income Fund

     0.700        0.700        0.700        0.650        0.650        0.600        0.550        0.545        0.545        0.540        0.540        0.540   

Ivy Global Growth Fund

     0.850        0.850        0.850        0.830        0.830        0.800        0.700        0.695        0.695        0.690        0.690        0.690   

Ivy Global Income Allocation Fund

     0.700        0.700        0.700        0.650        0.650        0.600        0.550        0.545        0.545        0.540        0.540        0.540   

Ivy High Income Fund

     0.625        0.625        0.600        0.550        0.500        0.500        0.500        0.500        0.500        0.490        0.490        0.480   

Ivy International Core Equity Fund

     0.850        0.850        0.850        0.830        0.830        0.800        0.700        0.690        0.690        0.680        0.680        0.680   

Ivy Large Cap Growth Fund

     0.700        0.700        0.700        0.650        0.650        0.600        0.550        0.545        0.545        0.540        0.540        0.540   

Ivy Limited-Term Bond Fund

     0.500        0.500        0.450        0.400        0.350        0.350        0.350        0.340        0.340        0.330        0.330        0.330   

Ivy Managed International Opportunities Fund

     0.050        0.050        0.050        0.050        0.050        0.050        0.050        0.050        0.050        0.050        0.050        0.050   

Ivy Micro Cap Growth Fund

     0.950        0.950        0.950        0.930        0.930        0.900        0.860        0.830        0.830        0.800        0.800        0.800   

Ivy Mid Cap Growth Fund

     0.850        0.850        0.850        0.830        0.830        0.800        0.760        0.730        0.730        0.700        0.670        0.670   

Ivy Mid Cap Income Opportunities Fund

     0.850        0.850        0.850        0.830        0.830        0.800        0.760        0.730        0.730        0.700        0.670        0.670   

Ivy Money Market Fund

     0.350        0.350        0.350        0.300        0.300        0.300        0.300        0.300        0.300        0.300        0.300        0.300   

Ivy Municipal Bond Fund

     0.525        0.525        0.500        0.450        0.400        0.400        0.400        0.395        0.395        0.390        0.385        0.385   

Ivy Municipal High Income Fund

     0.525        0.525        0.500        0.450        0.400        0.400        0.400        0.395        0.395        0.390        0.385        0.385   

Ivy Small Cap Growth Fund

     0.850        0.850        0.850        0.830        0.830        0.800        0.760        0.730        0.730        0.720        0.720        0.720   

Ivy Small Cap Value Fund

     0.850        0.850        0.850        0.830        0.830        0.800        0.760        0.730        0.730        0.720        0.720        0.720   

Ivy Tax-Managed Equity Fund

     0.650        0.650        0.650        0.600        0.600        0.550        0.500        0.495        0.495        0.490        0.490        0.490   

Ivy Value Fund

     0.700        0.700        0.700        0.650        0.650        0.600        0.550        0.545        0.545        0.540        0.540        0.540   

For the period from May 18, 2009 to September 30, 2016, IICO voluntarily agreed to reduce the management fee paid to 0.485%, on an annual basis, of net assets for any day that Ivy Municipal High Income Fund’s net assets are below $500 million.

For Funds managed solely by IICO, IICO has voluntarily agreed to waive a Fund’s management fee on any day that the Fund’s net assets are less than $25 million, subject to IICO’s right to change or modify this waiver. See Expense Reimbursements and/or Waivers below for amounts waived during the year ended March 31, 2016.

 

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IICO has entered into Subadvisory Agreements with the following entities on behalf of certain Funds:

Under an agreement between IICO and Mackenzie Financial Corporation (“Mackenzie”), Mackenzie serves as subadviser to Ivy Cundill Global Value Fund. Under an agreement between IICO and Advantus Capital Management, Inc. (“Advantus”), Advantus serves as subadviser to Ivy Bond Fund. Each subadviser makes investment decisions in accordance with the Fund’s investment objectives, policies and restrictions under the supervision of IICO and the oversight of the Board. IICO pays all applicable costs of the subadvisers.

Accounting Services Fees. The Trust has an Accounting and Administrative Services Agreement with WRSCO, doing business as WI Services Company (“WISC”), an indirect subsidiary of WDR. Under the agreement, WISC acts as the agent in providing bookkeeping and accounting services and assistance to the Trust, including maintenance of Fund records, pricing of Fund shares and preparation of certain shareholder reports. For these services, each Fund, other than Ivy Managed International Opportunities Fund, pays WISC a monthly fee of one-twelfth of the annual fee based on the average net asset levels shown in the following table:

 

(M - Millions)    $0 to
$10M		      $10 to
$25M		      $25 to
$50M		      $50 to
$100M		      $100 to
$200M		      $200 to
$350M		      $350 to
$550M		      $550 to
$750M		      $750 to
$1,000M		      Over
$1,000M		  

Annual Fee Rate

    $ 0.00       $ 11.50       $ 23.10       $ 35.50       $ 48.40       $ 63.20       $ 82.50       $ 96.30       $ 121.60       $ 148.50   

In addition, for each class of shares in excess of one, each Fund pays WISC a monthly per-class fee equal to 2.5% of the monthly accounting services base fee.

Under the Accounting and Administrative Services Agreement for the Ivy Managed International Opportunities Fund, the Fund pays WISC a monthly fee of one-twelfth of the annual fee shown in the following table:

 

(M - Millions)    $0 to
$10M		      $10 to
$25M		      $25 to
$50M		      $50 to
$100M		      $100 to
$200M		      $200 to
$350M		      $350 to
$550M		      $550 to
$750M		      $750 to
$1,000M		      Over
$1,000M		  

Annual Fee Rate

    $ 0.000       $ 5.748       $ 11.550       $ 17.748       $ 24.198       $ 31.602       $ 41.250       $ 48.150       $ 60.798       $ 74.250   

In addition, for each class of shares in excess of one, the Ivy Managed International Opportunities Fund pays WISC a monthly per-class fee equal to 1.25% of the monthly accounting services base fee.

Each Fund also pays WISC a monthly administrative fee at the annual rate of 0.01%, or one basis point, for the first $1 billion of net assets with no fee charged for net assets in excess of $1 billion. This fee is voluntarily waived by WISC until a Fund’s net assets are at least $10 million and is included in “Accounting services fee” on the Statement of Operations.

Shareholder Servicing. General. Under the Shareholder Servicing Agreement between the Trust and WISC, with respect to Class A, Class B, Class C and Class E shares, for each shareholder account that was in existence at any time during the prior month, each Fund pays a monthly fee that ranges from $1.5042 to $1.6958 per account; however, WISC has agreed to reduce that fee if the number of total shareholder accounts within the Complex (Waddell & Reed Advisors Funds, InvestEd Portfolios and Ivy Funds) reaches certain levels. Ivy Money Market Fund pays 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. Ivy Limited-Term Bond Fund Class A, which also has check writing privileges, pays $0.75 for each shareholder check processed in the prior month. Effective June 6, 2011 for Class R shares, each Fund pays a monthly fee equal to one-twelfth of 0.25 of 1% of the average daily net assets of the class for the preceding month. Prior to June 6, 2011 the fee was 0.20 of 1%. For Class I and Class Y shares, each Fund pays a monthly fee equal to one-twelfth of 0.15 of 1% of the average daily net assets of the class for the preceding month. For Class R6 shares, each Fund pays WISC a monthly fee equal to one-twelfth of 0.01 of 1% of the average daily net assets of the class for the preceding month. Each Fund also reimburses WISC for certain out-of-pocket costs for all classes.

Networked accounts. For certain networked accounts (that is, those accounts whose Fund shares are purchased through certain financial intermediaries), WISC has agreed to reduce its per account fees charged to the Funds to $0.50 per month per shareholder account. Additional fees may be paid by the Funds to those intermediaries. The Fund will reimburse WISC for such costs if the annual rate of the third-party per account charges for a Fund are less than or equal to $12.00 per account or an annual fee of 0.14 of 1% that is based on average daily net assets.

Broker accounts. Certain broker-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 WISC if the individual accounts that comprise the omnibus account were opened by their beneficial owners directly. Each Fund may pay such broker-dealers a per account fee for each open account within the omnibus account (up to $18.00 per account), or a fixed rate fee (up to an annual fee of 0.20 of 1% that is based on average daily net assets), based on the average daily NAV of the omnibus account (or a combination thereof).

Distribution and Service Plan. Class A and Class E Shares. Under a Distribution and Service Plan adopted by the Trust pursuant to Rule 12b–1 under the 1940 Act (the “Distribution and Service Plan”), each Fund, other than Ivy Money Market Fund, may pay a distribution and/or service fee to Ivy Funds Distributors, Inc. (“IFDI”) for Class A and Class E shares in an amount not to exceed 0.25% of the Fund’s average annual net assets. The fee is to be paid to compensate IFDI for amounts it expends in connection with the distribution of the Class A and Class E shares and/or provision of personal services to Fund shareholders and/or maintenance of shareholder accounts of that class.

Class B and Class C Shares. Under the Distribution and Service Plan, each Fund may pay IFDI a service fee not to exceed 0.25% and a distribution fee not to exceed 0.75% of the Fund’s average annual net assets for Class B and Class C shares to compensate IFDI for its services in connection with the distribution of shares of that class and/or provision of personal services to Class B or Class C shareholders and/or maintenance of shareholder accounts of that class.

 

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Class R Shares. Under the Distribution and Service Plan, each Fund may pay IFDI a fee of up to 0.50%, on an annual basis, of the average daily net assets of the Fund’s Class R shares to compensate IFDI for, either directly or through third parties, distributing the Class R shares of that Fund, providing personal services to Class R shareholders and/or maintaining Class R shareholder accounts.

Class Y Shares. Under the Distribution and Service Plan, each 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 services to Class Y shareholders and/or maintaining Class Y shareholder accounts.

Sales Charges. As principal underwriter for the Trust’s shares, IFDI receives sales commissions (which are not an expense of the Trust) for sales of Class A and Class E shares. A CDSC may be assessed against a shareholder’s redemption amount of Class B, Class C or certain Class A and Class E shares and is paid to IFDI. During the year ended March 31, 2016, IFDI received the following amounts in sales commissions and CDSCs:

 

    

Gross Sales

Commissions

 

      CDSC     

Commissions

Paid(1)

 

  
         Class A     Class B     Class C     Class E     

Ivy Bond Fund

    $ 280       $ 4      $ 9      $ 3      $ —       $ 239   

Ivy Core Equity Fund

      379         2        7        9        —         324   

Ivy Cundill Global Value Fund

      74         — *      1        — *      —         71   

Ivy Dividend Opportunities Fund

      135         — *      22        4        —         110   

Ivy Emerging Markets Equity Fund

      261         1        11        6        —         330   

Ivy European Opportunities Fund

      110         6        — *      4        —         116   

Ivy Global Bond Fund

      41         10        11        2        N/A         46   

Ivy Global Equity Income Fund

      120         1        — *      1        N/A         126   

Ivy Global Growth Fund

      112         — *      6        1        —         113   

Ivy Global Income Allocation Fund

      258         3        4        6        —         232   

Ivy High Income Fund

      1,288         24        257        176        —         1,864   

Ivy International Core Equity Fund

      801         2        10        51        —         1,707   

Ivy Large Cap Growth Fund

      841         4        12        11        —         831   

Ivy Limited-Term Bond Fund

      1,072         43        37        18        —         1,072   

Ivy Managed International Opportunities Fund

      95         — *      2        — *      —         81   

Ivy Micro Cap Growth Fund

      140         — *      2        2        N/A         126   

Ivy Mid Cap Growth Fund

      372         4        35        29        —         587   

Ivy Mid Cap Income Opportunities Fund

      75         — *      N/A        1        —         73   

Ivy Money Market Fund

      —         12        13        15        —         —   

Ivy Municipal Bond Fund

      56         1        5        3        N/A         62   

Ivy Municipal High Income Fund

      183         8        23        20        N/A         303   

Ivy Small Cap Growth Fund

      237         1        7        5        —         262   

Ivy Small Cap Value Fund

      89         1        2        2        —         90   

Ivy Tax-Managed Equity Fund

      84         3        9        1        N/A         96   

Ivy Value Fund

      70         17        8        2        —         57   

 

* Not shown due to rounding.

 

(1) IFDI reallowed/paid this portion of the sales charge to financial advisors and selling broker-dealers.

Expense Reimbursements and/or Waivers. Fund and class expense limitations and related waivers/reimbursements for the year ended March 31, 2016 were as follows:

 

Fund Name    Share
Class
Name		    Type of
Expense
Limit		    Commencement
Date		    End Date    Expense
Limit		    Amount of
Expense Waiver/
Reimbursement		    Expense Reduced

Ivy Bond Fund

    Class E    Contractual    1-31-2011    7-31-2016    1.05%(1)      $ 9     

12b-1 Fees and/or Shareholder

Servicing

     Class Y    Contractual    8-1-2011    7-31-2016    Not to exceed Class A      $ —      N/A

Ivy Core Equity Fund

    Class A    Contractual    1-11-2013    7-31-2016    1.15%      $ 158     

12b-1 Fees and/or Shareholder

Servicing

   Class E    Contractual    8-1-2008    7-31-2016    1.25%(1)      $ 14     

12b-1 Fees and/or Shareholder

Servicing

   Class I    Contractual    1-11-2013    7-31-2016    0.84%      $ 127     

Shareholder

Servicing

   Class Y    Contractual    1-11-2013    7-31-2016    0.84%      $ 358     

12b-1 Fees and/or Shareholder

Servicing

     Class Y    Contractual    8-1-2011    7-31-2016   

Not to exceed

Class A

      $ —      N/A

 

286   ANNUAL REPORT   2016  

Table of Contents

 

 

Fund Name   Share Class
Name		   Type of
Expense
Limit		   Commencement
Date		   End Date   Expense Limit   Amount of
Expense Waiver/
Reimbursement		   Expense Reduced

Ivy Cundill Global Value Fund

   All Classes   Contractual   12-3-2012   7-31-2016   N/A     $ 369 (2)   Investment Management Fee
  All Classes   Voluntary   N/A   N/A   Reduction of Investment Management Fee     $ 19 (3)   Investment Management Fee
  Class E   Contractual   8-1-2008   7-31-2016   1.45%(1)     $ 4    

12b-1 Fees and/or Shareholder

Servicing

    Class Y   Contractual   8-1-2011   7-31-2016   Not to exceed Class A     $ —     N/A

Ivy Dividend Opportunities Fund

   Class E   Contractual   8-1-2008   7-31-2016   1.23%(1)     $ 15     12b-1 Fees and/or Shareholder Servicing
    Class Y   Contractual   8-1-2011   7-31-2016   Not to exceed Class A     $ —     N/A

Ivy Emerging Markets Equity Fund

   Class A   Contractual   3-17-2014   7-31-2016   1.50%     $ 668    

12b-1 Fees and/or Shareholder

Servicing

  Class B   Contractual   3-17-2014   7-31-2016   2.50%     $ 12    

12b-1 Fees and/or Shareholder

Servicing

    Class Y   Contractual   3-17-2014   7-31-2016   Not to exceed Class A     $ —     N/A

Ivy European Opportunities Fund

   Class Y   Contractual   8-1-2011   7-31-2016   Not to exceed Class A     $—       N/A

Ivy Global Bond Fund

   All Classes   Contractual   6-2-2008   7-31-2016   N/A     $ 2 (4)   Investment Management Fee
  Class A   Contractual   6-2-2008   7-31-2016   0.99%     $ 450    

12b-1 Fees and/or Shareholder

Servicing

  Class B   Contractual   6-2-2008   7-31-2016   1.74%     $ 15    

12b-1 Fees and/or Shareholder

Servicing

  Class C   Contractual   6-2-2008   7-31-2016   1.74%     $ 44    

12b-1 Fees and/or Shareholder

Servicing

  Class I   Contractual   6-2-2008   7-31-2016   0.74%     $ 63    

Shareholder

Servicing

  Class Y   Contractual   6-2-2008   7-31-2016   0.99%     $ 6    

12b-1 Fees and/or Shareholder

Servicing

    Class Y   Contractual   8-1-2011   7-31-2016   Not to exceed Class A     $ —     N/A

Ivy Global Equity Income Fund

   Class A   Contractual   6-4-2012   7-31-2016   1.30%     $ 150    

12b-1 Fees and/or Shareholder

Servicing

  Class I   Contractual   6-4-2012   7-31-2016   0.94%     $ 1    

Shareholder

Servicing

  Class Y   Contractual   6-4-2012   7-31-2016   1.19%     $ 1    

12b-1 Fees and/or Shareholder

Servicing

    Class Y   Contractual   6-4-2012   7-31-2016   Not to exceed Class A     $ —     N/A

Ivy Global Growth Fund

   Class Y   Contractual   8-1-2011   7-31-2016   Not to exceed Class A     $ —     N/A

 

  2016   ANNUAL REPORT   287

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Fund Name   Share Class
Name		   Type of
Expense
Limit		   Commencement
Date		   End Date   Expense Limit   Amount of
Expense Waiver/
Reimbursement		   Expense Reduced

Ivy Global Income Allocation Fund

   Class E   Contractual   6-4-2012   7-31-2016   1.33%     $ 8     12b-1 Fees and/or Shareholder Servicing
  Class Y   Contractual   6-4-2012   7-31-2016   1.17%     $ — *   12b-1 Fees and/or Shareholder Servicing
    Class Y   Contractual   8-1-2011   7-31-2016   Not to exceed Class A     $ —     N/A

Ivy High Income Fund

   Class E   Contractual   8-1-2008   7-31-2016   1.20%(1)     $ 6     12b-1 Fees and/or Shareholder Servicing
    Class Y   Contractual   8-1-2011   7-31-2016   Not to exceed Class A     $ 31     12b-1 Fees and/or Shareholder Servicing

Ivy International Core Equity Fund

   Class E   Contractual   8-1-2008   7-31-2016   1.40%(1)     $ 13     12b-1 Fees and/or Shareholder Servicing
    Class Y   Contractual   8-1-2011   7-31-2016   Not to exceed Class A     $ —     N/A

Ivy Large Cap Growth Fund

   Class A   Contractual   6-1-2006   7-31-2016   1.15%     $ 158     12b-1 Fees and/or Shareholder Servicing
  Class E   Contractual   8-1-2008   7-31-2016   1.15%     $ 21    

12b-1 Fees and/or Shareholder

Servicing

  Class I   Contractual   6-13-2011   7-31-2016   0.88%     $ —     N/A
  Class Y   Contractual   6-1-2006   7-31-2016   1.06%     $ 71     12b-1 Fees and/or Shareholder Servicing
    Class Y   Contractual   8-1-2011   7-31-2016   Not to exceed Class A     $ —     N/A

Ivy Limited-Term Bond Fund

   Class E   Contractual   8-1-2010   7-31-2016   1.00%     $ 1     12b-1 Fees and/or Shareholder Servicing
    Class Y   Contractual   8-1-2011   7-31-2016   Not to exceed Class A     $ 2     12b-1 Fees and/or Shareholder Servicing

Ivy Managed International Opportunities Fund

   Class A   Contractual   3-17-2014   7-31-2016   0.49%     $ —     N/A
  Class B   Contractual   3-17-2014   7-31-2016   1.40%     $ 2     12b-1 Fees and/or Shareholder Servicing
  Class C   Contractual   3-17-2014   7-31-2016   1.29%     $ —     N/A
  Class E   Contractual   3-17-2014   7-31-2016   0.39%     $ —     N/A
  Class I   Contractual   3-17-2014   7-31-2016   0.16%     $ —     N/A
  Class R   Contractual   3-17-2014   7-31-2016   0.72%     $ —     N/A
  Class Y   Contractual   3-17-2014   7-31-2016   0.38%     $ — *  

12b-1 Fees and/or Shareholder

Servicing

    Class Y   Contractual   3-17-2014   7-31-2016   Not to exceed Class A     $ —     N/A

Ivy Micro Cap Growth Fund

   Class Y   Contractual   8-1-2011   7-31-2016   Not to exceed Class A     $ —     N/A

Ivy Mid Cap Growth Fund

   Class A   Contractual   8-1-2014   7-31-2016   1.31%     $ —     N/A
  Class E   Contractual   8-1-2008   7-31-2016   1.30%(1)     $ 17    

12b-1 Fees and/or Shareholder

Servicing

    Class Y   Contractual   8-1-2011   7-31-2016   Not to exceed     $ —     N/A

 

288   ANNUAL REPORT   2016  

Table of Contents

 

 

Fund Name   Share Class
Name		   Type of
Expense
Limit		   Commencement
Date		   End Date   Expense Limit   Amount of
Expense Waiver/
Reimbursement		   Expense Reduced

Ivy Mid Cap Income Opportunities Fund

   All Classes   Contractual   10-1-2014   7-31-2016   N/A     $ 80 (4)   Investment Management Fee
  Class A   Contractual   10-1-2014   7-31-2016   1.35%     $ 122    

12b-1 Fees and/or

Shareholder

Servicing

  Class C   Contractual   10-1-2014   7-31-2016   2.07%     $ 4     12b-1 Fees and/or Shareholder Servicing
  Class E   Contractual   10-1-2014   7-31-2016   1.30%     $ — *   12b-1 Fees and/or Shareholder Servicing
  Class I   Contractual   10-1-2014   7-31-2016   1.05%     $ 12     Shareholder Servicing
  Class R   Contractual   10-1-2014   7-31-2016   1.80%     $   *   12b-1 Fees and/or Shareholder Servicing
  Class R6   Contractual   10-1-2014   7-31-2016   1.05%     $   *   Shareholder Servicing
  Class Y   Contractual   10-1-2014   7-31-2016   1.35%     $ 5     12b-1 Fees and/or Shareholder Servicing
    Class Y   Contractual   10-1-2014   7-31-2016   Not to exceed Class A     $ —     N/A

Ivy Money Market Fund

   Class A   Voluntary   N/A   N/A   To maintain minimum yield(5)     $ 432     12b-1 Fees and/or Shareholder Servicing
  Class B   Voluntary   N/A   N/A   To maintain minimum yield(5)     $ 73     12b-1 Fees and/or Shareholder Servicing
  Class C   Voluntary   N/A   N/A   To maintain minimum yield(5)     $ 499     12b-1 Fees and/or Shareholder Servicing
    Class E   Voluntary   N/A   N/A   To maintain minimum yield(5)     $ 23     12b-1 Fees and/or Shareholder Servicing

Ivy Municipal Bond Fund

   Class Y   Contractual   8-1-2011   7-31-2016   Not to exceed Class A     $ — *   12b-1 Fees and/or Shareholder Servicing

Ivy Municipal High Income Fund

   All Classes   Voluntary   N/A   N/A   Reduction of Investment Management Fee     $ 200     Investment Management Fee
    Class Y   Contractual   8-1-2011   7-31-2016   Not to exceed Class A     $ 14     12b-1 Fees and/or Shareholder Servicing

Ivy Small Cap Growth Fund

   Class E   Contractual   8-1-2008   7-31-2016   1.45%(1)     $ 14     12b-1 Fees and/or Shareholder Servicing
    Class Y   Contractual   8-1-2011   7-31-2016   Not to exceed Class A     $ —     N/A

Ivy Small Cap Value Fund

   Class Y   Contractual   8-1-2011   7-31-2016   Not to exceed Class A     $ —     N/A

Ivy Tax-Managed Equity Fund

   Class Y   Contractual   8-1-2011   7-31-2016   Not to exceed Class A     $ — *   12b-1 Fees and/or Shareholder Servicing

Ivy Value Fund

   Class Y   Contractual   8-1-2011   7-31-2016   Not to exceed Class A     $ —     N/A

 

* Not shown due to rounding.

 

(1) Reflects the lower contractual expense limit which went into effect 8-1-2015.

 

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(2) The Fund’s management fee is being reduced by 0.14% of average daily net assets.

 

(3) The Fund’s management fee is being reduced by 0.02% of average daily net assets.

 

(4) Due to Class A, Class B, Class C, Class E, Class I, Class R, Class R6, and/or Class Y contractual expense limits, investment management fees were waived for all share classes.

 

(5) Minimum yield was 0.02% throughout the period of this report.

Any amounts due to the Funds as a reimbursement but not paid as of March 31, 2016 are shown as a receivable from affiliates on the Statement of Assets and Liabilities.

 

8.   RELATED PARTY TRANSACTIONS

Certain Funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board. The procedures have been designed to ensure that any purchase or sale of securities by the Funds from or to another fund or portfolio that are, or could be, considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the Act. Further, as defined under the procedures, each transaction is effected at the current market price. During the year ended March 31, 2016, the Funds below engaged in purchases and sales of securities pursuant to Rule 17a-7 of the Act (amounts in thousands):

 

Fund    Purchases      Sales  

Ivy European Opportunities Fund

    $ 261       $ —   

Ivy Global Income Allocation Fund

      5,000         —   

Ivy High Income Fund

      —         256,587   

Ivy International Core Equity Fund

      23,092         215   

Ivy Municipal Bond Fund

      2,067         —   

 

9.   INTERFUND LENDING PROGRAM

Pursuant to an exemptive order issued by the SEC (“Order”), the Trust and the Advisors Fund Complex (Waddell & Reed Advisors Funds, Ivy Funds Variable Insurance Portfolios and InvestEd Portfolios; referred to with the Funds for purposes of this section as Funds) have the ability to lend money to, and borrow money from, each other pursuant to a master interfund lending agreement (“Interfund Lending Program”). Under the Interfund Lending Program, the Funds may lend or borrow money for temporary purposes directly to or from one another (each an “Interfund Loan”), subject to meeting the conditions of the Order. The interest rate to be charged on an Interfund Loan is the average of the overnight repurchase agreement rate and the short-term bank loan rate. The Funds made no Interfund Loans under the Interfund Lending Program during the year ended March 31, 2016.

 

10.   AFFILIATED COMPANY TRANSACTIONS (All amounts in thousands)

A summary of the transactions in affiliated companies during the year ended March 31, 2016 follows:

 

Fund    3-31-15
Share
Balance		      Purchases
at cost		      Sales at
Cost		      Realized
Gain/(Loss)(1)		     Distributions
Received		      3-31-16
Share
Balance		      3-31-16
Value		  

Ivy High Income Fund

                    

Maritime Finance Co. Ltd(2)

      1,750       $ —       $ —       $ —      $ —         1,750       $ 16,887   

Ivy Municipal High Income Fund

                    

1155 Island Avenue LLC(2)

      6,578       $ —       $ —       $ —      $ —         6,578       $ 1,250   
     

3-31-15

Principal
Balance

                             Interest
Received		      3-31-16
Principal
Balance		          

1155 Island Avenue LLC, 10.000%, 12-11-24

    $ —       $ 395       $ —       $ —      $ 8       $ 395       $ 395   

1155 Island Avenue LLC, 10.000%, 12-11-24

      2,960         —         —         —        296         2,960         2,960   
           

 

 

    

 

 

        

 

 

  
            $ —      $ 304          $ 4,605   
           

 

 

    

 

 

        

 

 

  
      3-31-15
Share
Balance		      Purchases
at cost		      Sales at
Cost		      Realized
Gain/(Loss)(1)		     Distributions
Received		      3-31-16
Share
Balance		      3-31-16
Value		  

Ivy Managed International Opportunities Fund

                    

Ivy Emerging Markets Equity Fund, Class I

      5,869       $ 1,320       $ 54,940       $ 19,218      $ 196         1,397       $ 19,499   

Ivy European Opportunities Fund, Class I

      761         24,302         4,444         (177 )      275         1,435         38,032   

Ivy Global Growth Fund, Class I

      1,114         16,038         8,905         709        113         1,276         50,815   

Ivy Global Income Allocation Fund, Class I

      1,507         14,212         3,800         (267 )      1,264         2,201         30,990   

Ivy International Core Equity Fund, Class I

      2,682         24,589         7,810         (840 )      718         3,620         58,177   
           

 

 

    

 

 

        

 

 

  
            $ 18,643      $ 2,566          $ 197,513   
           

 

 

    

 

 

        

 

 

  

 

(1) Included in Realized Gain/Loss, if applicable, are distributions from the capital gains from the underlying securities.

 

(2) No dividends were paid during the preceding 12 months.

 

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11.   INVESTMENT SECURITIES TRANSACTIONS ($ amounts in thousands)

The cost of purchases and the proceeds from maturities and sales of investment securities (excluding short-term securities) for the year ended March 31, 2016, were as follows:

 

     Purchases      Sales  
      U.S. Government      Other Issuers      U.S. Government      Other Issuers  

Ivy Bond Fund

    $ 1,277,350       $ 345,595       $ 1,219,806       $ 333,205   

Ivy Core Equity Fund

      —         729,167         —         687,122   

Ivy Cundill Global Value Fund

      —         45,062         —         75,035   

Ivy Dividend Opportunities Fund

      —         160,164         —         199,745   

Ivy Emerging Markets Equity Fund

      —         511,487         —         553,172   

Ivy European Opportunities Fund

      —         258,158         —         200,423   

Ivy Global Bond Fund

      1,852         28,668         43,109         66,782   

Ivy Global Equity Income Fund

      —         235,878         —         210,711   

Ivy Global Growth Fund

      —         247,416         —         270,676   

Ivy Global Income Allocation Fund

      24,309         440,003         —         386,549   

Ivy High Income Fund

      —         1,747,043         —         4,046,349   

Ivy International Core Equity Fund

      —         4,014,090         —         2,496,119   

Ivy Large Cap Growth Fund

      —         757,476         —         638,224   

Ivy Limited-Term Bond Fund

      408,805         441,638         88,374         626,036   

Ivy Managed International Opportunities Fund

      —         80,461         —         97,387   

Ivy Micro Cap Growth Fund

      —         157,388         —         197,357   

Ivy Mid Cap Growth Fund

      —         1,618,713         —         2,993,653   

Ivy Mid Cap Income Opportunities Fund

      —         70,438         —         20,828   

Ivy Money Market Fund

      —         —         —         —   

Ivy Municipal Bond Fund

      —         36,137         —         6,723   

Ivy Municipal High Income Fund

      —         111,401         —         45,948   

Ivy Small Cap Growth Fund

      —         422,676         —         544,640   

Ivy Small Cap Value Fund

      —         349,377         —         389,990   

Ivy Tax-Managed Equity Fund

      —         59,941         —         18,855   

Ivy Value Fund

      —         157,795         —         219,105   

 

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12.   CAPITAL SHARE TRANSACTIONS (All amounts in thousands)

The Trust has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class of each Fund. Transactions in shares of beneficial interest were as follows:

 

     Ivy Bond Fund     Ivy Core Equity Fund  
     Year ended
3-31-16		     Year ended
3-31-15		     Year ended
3-31-16		     Year ended
3-31-15		  
      Shares     Value     Shares     Value     Shares     Value     Shares     Value  

Shares issued from sale of shares:

                 

Class A

      23,299      $ 245,091        28,922      $ 307,839        11,640      $ 156,225        18,511      $ 266,897   

Class B

      281        2,936        175        1,860        137        1,546        208        2,579   

Class C

      1,574        16,461        1,539        16,374        1,662        19,826        3,240        41,788   

Class E

      93        969        69        734        202        2,753        204        2,936   

Class I

      1,085        11,345        624        6,644        3,045        46,161        12,325        197,611   

Class R

      265        2,758        8        86        64        866        62        916   

Class R6

      42        439        158        1,680        11,043        161,909        293        4,717   

Class Y

      240        2,508        256        2,730        3,556        53,138        3,244        49,873   

Shares issued in reinvestment of distributions to shareholders:

                 

Class A

      1,591        16,732        1,372        14,619        2,966        38,712        3,019        41,836   

Class B

      7        75        8        87        57        637        63        759   

Class C

      35        371        29        312        798        9,173        850        10,497   

Class E

      8        88        8        85        54        698        45        617   

Class I

      18        184        11        113        784        11,279        885        13,448   

Class R

      1        12        — *      — *      8        106        7        103   

Class R6

      4        36        2        18        206        2,965        15        235   

Class Y

      6        64        6        63        434        6,089        348        5,153   

Shares redeemed:

                 

Class A

      (22,504 )      (236,276 )      (19,535 )      (208,063 )      (14,467 )      (195,349 )      (14,341 )      (208,572 ) 

Class B

      (222 )      (2,331 )      (261 )      (2,777 )      (220 )      (2,543 )      (236 )      (2,958 ) 

Class C

      (1,019 )      (10,729 )      (1,036 )      (11,033 )      (3,585 )      (42,806 )      (2,840 )      (36,535 ) 

Class E

      (73 )      (769 )      (67 )      (716 )      (147 )      (1,988 )      (62 )      (903 ) 

Class I

      (456 )      (4,796 )      (367 )      (3,909 )      (6,558 )      (96,316 )      (8,295 )      (132,888 ) 

Class R

      (16 )      (163 )      — *      — *      (49 )      (644 )      (31 )      (445 ) 

Class R6

      (20 )      (212 )      (28 )      (296 )      (910 )      (12,997 )      (48 )      (743 ) 

Class Y

      (205 )      (2,153 )      (256 )      (2,722 )      (2,612 )      (37,844 )      (1,274 )      (19,459 ) 

Net increase

      4,034      $ 42,640        11,637      $ 123,728        8,108      $ 121,596        16,192      $ 237,462   

 

*Not shown due to rounding.

 

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     Ivy Cundill Global Value Fund     Ivy Dividend Opportunities Fund  
     Year ended
3-31-16		     Year ended
3-31-15		     Year ended
3-31-16		     Year ended
3-31-15		  
      Shares     Value     Shares     Value     Shares     Value     Shares     Value  

Shares issued from sale of shares:

                 

Class A

      1,882      $ 29,068        4,533      $ 79,789        3,370      $ 61,029        4,757      $ 97,124   

Class B

      4        52        7        109        42        741        59        1,186   

Class C

      255        3,443        216        3,523        471        8,150        725        14,494   

Class E

      8        128        20        364        41        745        54        1,093   

Class I

      179        2,806        379        6,891        263        4,757        1,797        38,196   

Class R

      1        11        — *      8        6        104        —        —   

Class R6

      5        77        118        2,213        18        315        25        515   

Class Y

      97        1,529        35        618        72        1,321        75        1,521   

Shares issued in reinvestment of distributions to shareholders:

                 

Class A

      120        1,767        —        —        1,419        24,638        1,727        33,227   

Class B

      —        —        —        —        37        630        54        1,024   

Class C

      3        43        —        —        190        3,257        237        4,495   

Class E

      — *      7        —        —        27        459        28        530   

Class I

      4        56        —        —        62        1,083        61        1,179   

Class R

      — *      — *      —        —        —        —        —        —   

Class R6

      1        19        —        —        2        25        1        21   

Class Y

      2        33        —        —        36        633        56        1,088   

Shares redeemed:

                 

Class A

      (6,051 )      (94,160 )      (5,568 )      (96,602 )      (5,019 )      (91,393 )      (4,410 )      (90,071 ) 

Class B

      (59 )      (832 )      (111 )      (1,809 )      (198 )      (3,524 )      (132 )      (2,618 ) 

Class C

      (352 )      (5,040 )      (421 )      (6,849 )      (862 )      (15,431 )      (461 )      (9,220 ) 

Class E

      (18 )      (285 )      (20 )      (363 )      (49 )      (879 )      (26 )      (533 ) 

Class I

      (193 )      (3,013 )      (475 )      (8,447 )      (223 )      (4,037 )      (1,640 )      (34,928 ) 

Class R

      (1 )      (17 )      —        —        — *      (1 )      —        —   

Class R6

      (21 )      (312 )      (39 )      (667 )      (7 )      (130 )      (3 )      (54 ) 

Class Y

      (91 )      (1,443 )      (112 )      (1,937 )      (192 )      (3,558 )      (161 )      (3,271 ) 

Net increase (decrease)

      (4,225 )    $ (66,063 )      (1,438 )    $ (23,159 )      (494 )    $ (11,066 )      2,823      $ 54,998   

 

*Not shown due to rounding.

 

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     Ivy Emerging Markets Equity Fund     Ivy European Opportunities Fund  
     Year ended
3-31-16		     Year ended
3-31-15		     Year ended
3-31-16		     Year ended
3-31-15		  
      Shares     Value     Shares     Value     Shares     Value     Shares     Value  

Shares issued from sale of shares:

                 

Class A

      8,831      $ 131,784        5,032      $ 78,482        2,619      $ 74,855        1,289      $ 37,351   

Class B

      50        595        13        166        8        222        7        177   

Class C

      1,045        13,754        224        3,064        227        6,249        71        1,937   

Class E

      —        —        —        —        —        —        —        —   

Class I

      12,674        195,097        818        13,262        1,086        31,972        169        4,986   

Class R

      351        4,898        14        216        6        179        — *      4   

Class R6

      293        4,234        451        7,576        17        485        78        2,295   

Class Y

      1,450        23,215        124        2,011        99        3,011        418        12,041   

Shares issued in reinvestment of distributions to shareholders:

                 

Class A

      248        3,341        217        3,297        21        600        89        2,467   

Class B

      2        26        —        —        —        —        — *      5   

Class C

      16        189        3        35        —        —        3        76   

Class E

      — *      1        — *      1        — *      — *      — *      2   

Class I

      75        1,033        81        1,259        11        311        21        570   

Class R

      — *      4        — *      1        — *      — *      —        —   

Class R6

      5        65        3        56        1        15        1        34   

Class Y

      5        71        5        81        — *      5        1        27   

Shares redeemed:

                 

Class A

      (9,794 )      (139,261 )      (13,724 )      (213,816 )      (1,469 )      (41,023 )      (1,747 )      (50,218 ) 

Class B

      (158 )      (1,893 )      (262 )      (3,414 )      (23 )      (627 )      (38 )      (1,016 ) 

Class C

      (822 )      (10,141 )      (1,072 )      (14,622 )      (128 )      (3,392 )      (106 )      (2,887 ) 

Class E

      —        —        —        —        —        —        —        —   

Class I

      (11,619 )      (174,048 )      (2,780 )      (44,731 )      (405 )      (11,483 )      (282 )      (8,220 ) 

Class R

      (42 )      (548 )      (3 )      (46 )      (1 )      (17 )      —        —   

Class R6

      (155 )      (2,203 )      (67 )      (1,065 )      (21 )      (557 )      (18 )      (522 ) 

Class Y

      (1,337 )      (18,573 )      (238 )      (3,758 )      (128 )      (3,659 )      (433 )      (12,168 ) 

Net increase (decrease)

      1,118      $ 31,640        (11,161 )    $ (171,945 )      1,920      $ 57,146        (477 )    $ (13,059 ) 
     Ivy Global Bond Fund     Ivy Global Equity Income Fund  
     Year ended
3-31-16		     Year ended
3-31-15		     Year ended
3-31-16		     Year ended
3-31-15		  
      Shares     Value     Shares     Value     Shares     Value     Shares     Value  

Shares issued from sale of shares:

                 

Class A

      5,031      $ 46,635        6,962      $ 69,534        6,756      $ 84,231        8,630      $ 114,528   

Class B

      38        348        89        898        28        342        138        1,879   

Class C

      401        3,728        1,115        11,202        488        6,120        1,108        14,959   

Class I

      860        8,063        2,612        26,274        192        2,330        2,872        39,292   

Class R

      9        82        23        224        10        122        — *      2   

Class R6

      22        204        32        319        32        400        116        1,558   

Class Y

      98        927        353        3,535        36        441        662        9,104   

Shares issued in reinvestment of distributions to shareholders:

                 

Class A

      437        4,066        569        5,640        1,215        14,810        865        11,307   

Class B

      7        61        12        114        3        30        2        22   

Class C

      43        396        65        648        35        420        16        204   

Class I

      96        895        155        1,534        14        172        20        258   

Class R

      1        5        — *      5        — *      — *      — *      — * 

Class R6

      1        4        — *      1        6        70        4        49   

Class Y

      11        102        24        243        2        28        1        18   

Shares redeemed:

                 

Class A

      (9,393 )      (87,177 )      (7,768 )      (76,932 )      (6,131 )      (75,975 )      (4,338 )      (57,955 ) 

Class B

      (197 )      (1,858 )      (181 )      (1,779 )      (14 )      (168 )      (137 )      (1,871 ) 

Class C

      (1,441 )      (13,365 )      (1,294 )      (12,766 )      (343 )      (4,103 )      (728 )      (9,939 ) 

Class I

      (4,027 )      (37,203 )      (2,932 )      (28,856 )      (137 )      (1,672 )      (2,380 )      (32,434 ) 

Class R

      (6 )      (56 )      (6 )      (59 )      — *      (2 )      — *      (1 ) 

Class R6

      (4 )      (33 )      (2 )      (21 )      (47 )      (582 )      (24 )      (305 ) 

Class Y

      (368 )      (3,438 )      (591 )      (5,716 )      (18 )      (219 )      (638 )      (8,776 ) 

Net increase (decrease)

      (8,381 )    $ (77,614 )      (763 )    $ (5,958 )      2,127      $ 26,795        6,189      $ 81,899   

 

*Not shown due to rounding.

 

294   ANNUAL REPORT   2016  

Table of Contents

 

 

 

     Ivy Global Growth Fund     Ivy Global Income Allocation Fund  
     Year ended
3-31-16		     Year ended
3-31-15		     Year ended
3-31-16		     Year ended
3-31-15		  
      Shares     Value     Shares     Value     Shares     Value     Shares     Value  

Shares issued from sale of shares:

                 

Class A

      2,437      $ 99,367        3,159      $ 131,190        13,167      $ 191,276        17,412      $ 270,113   

Class B

      18        637        28        1,044        57        780        39        596   

Class C

      172        6,157        118        4,366        2,488        35,063        3,007        45,764   

Class E

      —        —        3        128        41        598        30        461   

Class I

      891        37,653        662        27,895        3,168        46,828        3,490        55,050   

Class R

      43        1,729        31        1,309        — *      4        — *      8   

Class R6

      13        541        66        2,804        26        378        124        1,979   

Class Y

      334        13,390        239        10,043        69        982        79        1,233   

Shares issued in reinvestment of distributions to shareholders:

                 

Class A

      207        8,411        118        4,771        1,768        25,448        1,416        21,836   

Class B

      2        62        1        50        9        133        10        160   

Class C

      15        515        9        327        108        1,527        77        1,170   

Class E

      — *      3        — *      2        7        108        7        103   

Class I

      45        1,859        25        1,035        157        2,254        137        2,128   

Class R

      1        32        — *      7        —        —        —        —   

Class R6

      1        60        1        33        5        70        3        43   

Class Y

      4        160        4        148        5        68        11        182   

Shares redeemed:

                 

Class A

      (2,616 )      (107,243 )      (1,970 )      (82,044 )      (12,751 )      (181,779 )      (8,082 )      (124,566 ) 

Class B

      (48 )      (1,722 )      (58 )      (2,158 )      (102 )      (1,445 )      (113 )      (1,719 ) 

Class C

      (159 )      (5,736 )      (184 )      (6,833 )      (2,116 )      (29,195 )      (1,633 )      (24,314 ) 

Class E

      —        —        (3 )      (128 )      (31 )      (438 )      (24 )      (365 ) 

Class I

      (764 )      (31,579 )      (483 )      (20,301 )      (1,986 )      (28,001 )      (3,053 )      (46,649 ) 

Class R

      (12 )      (474 )      (21 )      (868 )      — *      — *      —        —   

Class R6

      (8 )      (319 )      (8 )      (335 )      (14 )      (206 )      (12 )      (191 ) 

Class Y

      (172 )      (7,182 )      (257 )      (10,614 )      (111 )      (1,600 )      (365 )      (5,538 ) 

Net increase

      404      $ 16,321        1,480      $ 61,871        3,964      $ 62,853        12,560      $ 197,484   

 

*Not shown due to rounding.

 

  2016   ANNUAL REPORT   295

Table of Contents

 

 

 

     Ivy High Income Fund     Ivy International Core Equity Fund  
     Year ended
3-31-16		     Year ended
3-31-15		     Year ended
3-31-16		     Year ended
3-31-15		  
      Shares     Value     Shares     Value     Shares     Value     Shares     Value  

Shares issued from sale of shares:

                 

Class A

      78,014      $ 586,497        119,706      $ 1,020,573        40,471      $ 696,382        31,768      $ 594,509   

Class B

      445        3,270        512        4,338        157        2,413        206        3,601   

Class C

      24,085        181,242        49,207        419,101        10,221        159,550        4,549        75,594   

Class E

      228        1,704        246        2,081        98        1,695        59        1,125   

Class I

      97,027        721,563        244,300        2,083,688        76,156        1,300,207        40,214        745,987   

Class R

      2,923        22,122        4,369        37,218        1,464        25,019        787        14,630   

Class R6

      7,573        55,816        1,744        14,314        17,878        307,722        1,246        22,559   

Class Y

      25,565        191,403        53,561        453,614        17,363        293,941        24,856        443,115   

Shares issued in reinvestment of distributions to shareholders:

                 

Class A

      22,497        168,026        31,348        262,970        739        12,239        7,185        123,144   

Class B

      769        5,736        1,058        8,843        1        15        86        1,314   

Class C

      9,665        72,161        13,254        110,843        42        630        807        12,400   

Class E

      89        658        98        821        2        34        29        491   

Class I

      15,391        115,649        24,864        208,715        1,035        17,216        5,379        92,632   

Class R

      574        4,247        460        3,820        8        130        67        1,152   

Class R6

      345        2,473        44        362        143        2,391        32        549   

Class Y

      4,317        32,379        7,759        65,171        259        4,320        1,352        23,330   

Shares redeemed:

                 

Class A

      (191,909 )      (1,411,639 )      (264,430 )      (2,248,615 )      (22,721 )      (381,922 )      (15,561 )      (292,844 ) 

Class B

      (5,530 )      (40,731 )      (3,968 )      (33,430 )      (290 )      (4,357 )      (229 )      (3,868 ) 

Class C

      (85,521 )      (632,034 )      (81,869 )      (686,963 )      (3,016 )      (44,667 )      (1,663 )      (27,663 ) 

Class E

      (368 )      (2,717 )      (256 )      (2,140 )      (46 )      (775 )      (38 )      (717 ) 

Class I

      (241,309 )      (1,787,156 )      (423,122 )      (3,591,356 )      (34,754 )      (574,949 )      (12,568 )      (233,911 ) 

Class R

      (1,679 )      (12,357 )      (1,096 )      (9,133 )      (287 )      (4,714 )      (47 )      (895 ) 

Class R6

      (1,589 )      (11,717 )      (164 )      (1,339 )      (1,222 )      (20,416 )      (114 )      (2,055 ) 

Class Y

      (62,673 )      (471,947 )      (98,822 )      (831,671 )      (11,273 )      (192,331 )      (4,990 )      (90,620 ) 

Net increase (decrease)

      (301,071 )    $ (2,205,352 )      (321,196 )    $ (2,708,175 )      92,428      $ 1,599,773        83,412      $ 1,503,559   

 

296   ANNUAL REPORT   2016  

Table of Contents

 

 

 

     Ivy Large Cap Growth Fund     Ivy Limited-Term Bond Fund  
     Year ended
3-31-16		     Year ended
3-31-15		     Year ended
3-31-16		     Year ended
3-31-15		  
      Shares     Value     Shares     Value     Shares     Value     Shares     Value  

Shares issued from sale of shares:

                 

Class A

      22,690      $ 422,491        16,050      $ 298,906        60,281      $ 651,914        59,088      $ 644,415   

Class B

      316        4,670        191        3,008        492        5,300        138        1,505   

Class C

      2,566        41,121        1,210        19,851        6,384        69,015        6,422        69,944   

Class E

      216        4,018        104        1,963        165        1,788        133        1,458   

Class I

      2,620        50,301        11,595        226,691        4,230        45,749        3,975        43,361   

Class R

      397        7,152        363        6,649        45        486        49        532   

Class R6

      117        2,226        316        6,224        86        930        394        4,298   

Class Y

      1,282        23,505        1,328        24,969        488        5,279        472        5,155   

Shares issued in reinvestment of distributions to shareholders:

                 

Class A

      3,824        70,292        3,719        67,420        1,895        20,500        1,887        20,589   

Class B

      52        764        51        757        6        63        7        76   

Class C

      343        5,435        317        5,029        63        683        61        671   

Class E

      37        682        32        578        4        48        4        46   

Class I

      839        16,061        977        18,356        57        619        54        587   

Class R

      73        1,300        108        1,917        — *      4        — *      2   

Class R6

      21        404        17        314        4        44        4        40   

Class Y

      389        7,300        480        8,871        21        224        28        301   

Shares redeemed:

                 

Class A

      (15,764 )      (290,567 )      (24,762 )      (462,971 )      (53,618 )      (580,153 )      (55,917 )      (609,852 ) 

Class B

      (369 )      (5,561 )      (225 )      (3,443 )      (475 )      (5,141 )      (621 )      (6,780 ) 

Class C

      (1,413 )      (22,339 )      (962 )      (15,620 )      (5,395 )      (58,403 )      (7,803 )      (85,095 ) 

Class E

      (68 )      (1,253 )      (69 )      (1,289 )      (124 )      (1,341 )      (87 )      (945 ) 

Class I

      (4,658 )      (89,023 )      (3,101 )      (59,927 )      (3,190 )      (34,508 )      (4,494 )      (49,001 ) 

Class R

      (551 )      (10,130 )      (863 )      (15,749 )      (18 )      (200 )      (27 )      (291 ) 

Class R6

      (71 )      (1,336 )      (28 )      (560 )      (180 )      (1,950 )      (92 )      (1,001 ) 

Class Y

      (1,474 )      (27,657 )      (2,363 )      (43,915 )      (960 )      (10,390 )      (912 )      (9,945 ) 

Net increase

      11,414      $ 209,856        4,485      $ 88,029        10,261      $ 110,560        2,763      $ 30,070   

 

*Not shown due to rounding.

 

  2016   ANNUAL REPORT   297

Table of Contents

 

 

 

     Ivy Managed International Opportunities Fund     Ivy Micro Cap Growth Fund  
     Year ended
3-31-16		      Year ended
3-31-15		     Year ended
3-31-16		     Year ended
3-31-15		  
      Shares      Value      Shares      Value     Shares     Value     Shares     Value  

Shares issued from sale of shares:

                    

Class A

      3,639       $ 36,592         3,832       $ 39,487        1,695      $ 37,277        2,910      $ 70,596   

Class B

      15         156         8         85        11        228        5        126   

Class C

      109         1,109         103         1,039        85        1,882        163        3,859   

Class E

      —         —         —         —        N/A        N/A        N/A        N/A   

Class I

      106         1,063         53         557        236        5,407        965        23,963   

Class R

      — *       2         —         —        6        128        15        358   

Class R6

      N/A         N/A         N/A         N/A        46        1,032        132        3,233   

Class Y

      67         722         53         546        13        317        94        2,346   

Shares issued in reinvestment of distributions to shareholders:

                    

Class A

      148         1,431         325         3,168        305        6,384        481        11,007   

Class B

      — *       1         2         20        4        72        5        106   

Class C

      1         7         5         46        18        359        24        533   

Class E

      — *       3         1         6        N/A        N/A        N/A        N/A   

Class I

      1         14         1         12        25        528        52        1,204   

Class R

      —         —         —         —        — *      9        1        11   

Class R6

      N/A         N/A         N/A         N/A        5        99        6        132   

Class Y

      1         6         2         19        2        44        5        118   

Shares redeemed:

                    

Class A

      (5,441 )       (54,517 )       (7,531 )       (77,740 )      (2,857 )      (63,357 )      (3,148 )      (75,721 ) 

Class B

      (82 )       (800 )       (114 )       (1,150 )      (26 )      (521 )      (48 )      (1,112 ) 

Class C

      (122 )       (1,172 )       (212 )       (2,143 )      (157 )      (3,299 )      (274 )      (6,402 ) 

Class E

      —         —         —         —        N/A        N/A        N/A        N/A   

Class I

      (114 )       (1,138 )       (18 )       (184 )      (531 )      (12,299 )      (1,419 )      (34,905 ) 

Class R

      —         —         —         —        (3 )      (62 )      (2 )      (38 ) 

Class R6

      N/A         N/A         N/A         N/A        (41 )      (857 )      (44 )      (1,067 ) 

Class Y

      (155 )       (1,622 )       (47 )       (482 )      (43 )      (994 )      (118 )      (2,933 ) 

Net decrease

      (1,827 )     $ (18,143 )       (3,537 )     $ (36,714 )      (1,207 )    $ (27,623 )      (195 )    $ (4,586 ) 

 

*Not shown due to rounding.

 

298   ANNUAL REPORT   2016  

Table of Contents

 

 

 

     Ivy Mid Cap Growth Fund     Ivy Mid Cap Income Opportunities Fund  
     Year ended
3-31-16		     Year ended
3-31-15		     Year ended
3-31-16		     Period from
10-1-14 to 3-31-15		  
      Shares     Value     Shares     Value     Shares     Value     Shares     Value  

Shares issued from sale of shares:

                 

Class A

      10,174      $ 216,107        12,057      $ 281,178        6,690      $ 70,300        4,902      $ 52,192   

Class B

      121        2,107        63        1,235        N/A        N/A        N/A        N/A   

Class C

      3,205        60,931        4,089        85,160        207        2,157        492        5,131   

Class E

      75        1,556        66        1,505        —        —        401        4,160   

Class I

      25,264        563,891        53,994        1,339,577        119        1,283        1,426        14,833   

Class R

      1,173        24,509        1,275        29,268        —        —        401        4,158   

Class R6

      4,973        105,259        1,116        26,909        38        408        448        4,671   

Class Y

      6,442        141,675        8,826        211,673        148        1,505        681        7,101   

Shares issued in reinvestment of distributions to shareholders:

                 

Class A

      4,329        82,637        4,198        92,771        82        845        9        102   

Class B

      129        2,046        130        2,433        N/A        N/A        N/A        N/A   

Class C

      1,552        26,145        1,411        27,840        1        12        — *      1   

Class E

      38        705        31        660        —        —        —        —   

Class I

      9,144        185,349        10,285        240,061        1        10        1        8   

Class R

      321        6,036        350        7,626        —        —        —        —   

Class R6

      253        5,136        16        377        1        9        — *      2   

Class Y

      2,116        41,960        2,407        55,055        2        16        — *      1   

Shares redeemed:

                 

Class A

      (16,775 )      (344,854 )      (38,938 )      (925,023 )      (1,911 )      (19,748 )      (1,067 )      (11,534 ) 

Class B

      (282 )      (4,824 )      (253 )      (5,061 )      N/A        N/A        N/A        N/A   

Class C

      (5,373 )      (96,246 )      (2,952 )      (61,840 )      (71 )      (732 )      (212 )      (2,283 ) 

Class E

      (57 )      (1,121 )      (31 )      (702 )      —        —        (200 )      (2,152 ) 

Class I

      (82,134 )      (1,749,180 )      (31,181 )      (761,362 )      (155 )      (1,615 )      (657 )      (7,070 ) 

Class R

      (1,860 )      (38,728 )      (1,895 )      (43,749 )      —        —        (200 )      (2,150 ) 

Class R6

      (2,486 )      (49,938 )      (47 )      (1,164 )      (10 )      (107 )      (210 )      (2,257 ) 

Class Y

      (13,715 )      (292,957 )      (10,850 )      (261,658 )      (70 )      (698 )      (300 )      (3,230 ) 

Net increase (decrease)

      (53,373 )    $ (1,111,799 )      14,167      $ 342,769        5,072      $ 53,645        5,915      $ 61,684   

 

     Ivy Money Market Fund     Ivy Municipal Bond Fund  
     Year ended
3-31-16		     Year ended
3-31-15		     Year ended
3-31-16		     Year ended
3-31-15		  
      Shares     Value     Shares     Value     Shares     Value     Shares     Value  

Shares issued from sale of shares:

                 

Class A

      200,299      $ 200,299        139,621      $ 139,621        6,586      $ 79,089        5,297      $ 63,416   

Class B

      6,630        6,630        3,443        3,443        67        803        31        375   

Class C

      74,816        74,816        73,295        73,295        1,044        12,558        629        7,532   

Class E

      4,778        4,778        2,639        2,639        N/A        N/A        N/A        N/A   

Class I

      N/A        N/A        N/A        N/A        401        4,822        300        3,592   

Class Y

      N/A        N/A        N/A        N/A        17        202        11        125   

Shares issued in reinvestment of distributions to shareholders:

                 

Class A

      27        27        25        25        271        3,249        251        3,003   

Class B

      1        1        1        1        2        24        2        30   

Class C

      7        7        6        6        28        333        27        328   

Class E

      1        1        1        1        N/A        N/A        N/A        N/A   

Class I

      N/A        N/A        N/A        N/A        11        128        5        65   

Class Y

      N/A        N/A        N/A        N/A        — *      7        — *      5   

Shares redeemed:

                 

Class A

      (152,973 )      (152,973 )      (158,165 )      (158,165 )      (3,982 )      (47,689 )      (2,949 )      (35,284 ) 

Class B

      (4,587 )      (4,587 )      (6,070 )      (6,070 )      (56 )      (665 )      (54 )      (650 ) 

Class C

      (62,687 )      (62,687 )      (75,175 )      (75,175 )      (506 )      (6,075 )      (420 )      (5,031 ) 

Class E

      (3,388 )      (3,388 )      (2,746 )      (2,746 )      N/A        N/A        N/A        N/A   

Class I

      N/A        N/A        N/A        N/A        (109 )      (1,304 )      (46 )      (553 ) 

Class Y

      N/A        N/A        N/A        N/A        (4 )      (48 )      (2 )      (23 ) 

Net increase (decrease)

      62,924      $ 62,924        (23,125 )    $ (23,125 )      3,770      $ 45,434        3,082      $ 36,930   

 

*Not shown due to rounding.

 

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     Ivy Municipal High Income Fund     Ivy Small Cap Growth Fund  
     Year ended
3-31-16		     Year ended
3-31-15		     Year ended
3-31-16		     Year ended
3-31-15		  
      Shares     Value     Shares     Value     Shares     Value     Shares     Value  

Shares issued from sale of shares:

                 

Class A

      25,667      $ 135,057        28,375      $ 148,417        5,298      $ 89,117        5,445      $ 96,695   

Class B

      199        1,048        262        1,372        43        591        23        345   

Class C

      8,691        45,804        10,798        56,371        969        14,100        952        14,864   

Class E

      N/A        N/A        N/A        N/A        73        1,236        75        1,327   

Class I

      33,698        177,247        53,531        278,745        2,453        50,180        2,888        61,921   

Class R

      N/A        N/A        N/A        N/A        856        14,412        836        14,750   

Class R6

      N/A        N/A        N/A        N/A        358        7,264        1,022        22,433   

Class Y

      1,496        7,875        6,269        32,806        2,420        47,994        2,182        45,257   

Shares issued in reinvestment of distributions to shareholders:

                 

Class A

      2,451        12,890        2,647        13,822        2,951        45,529        1,299        22,322   

Class B

      49        256        56        292        115        1,393        56        788   

Class C

      1,011        5,318        1,084        5,660        1,939        25,307        886        13,258   

Class E

      N/A        N/A        N/A        N/A        53        815        20        338   

Class I

      3,803        19,997        3,791        19,813        872        16,860        465        9,703   

Class R

      N/A        N/A        N/A        N/A        339        5,161        133        2,275   

Class R6

      N/A        N/A        N/A        N/A        122        2,371        53        1,117   

Class Y

      135        708        153        801        1,312        24,207        653        13,108   

Shares redeemed:

                 

Class A

      (25,405 )      (133,482 )      (32,839 )      (171,072 )      (6,796 )      (112,319 )      (8,112 )      (144,617 ) 

Class B

      (408 )      (2,144 )      (446 )      (2,336 )      (197 )      (2,566 )      (189 )      (2,766 ) 

Class C

      (9,790 )      (51,467 )      (10,029 )      (52,204 )      (2,358 )      (33,616 )      (2,910 )      (45,486 ) 

Class E

      N/A        N/A        N/A        N/A        (46 )      (731 )      (36 )      (638 ) 

Class I

      (37,399 )      (196,480 )      (41,358 )      (214,997 )      (3,613 )      (72,765 )      (5,078 )      (109,634 ) 

Class R

      N/A        N/A        N/A        N/A        (760 )      (12,435 )      (821 )      (14,390 ) 

Class R6

      N/A        N/A        N/A        N/A        (210 )      (4,275 )      (123 )      (2,669 ) 

Class Y

      (1,642 )      (8,614 )      (5,371 )      (28,341 )      (4,142 )      (82,260 )      (3,696 )      (76,230 ) 

Net increase (decrease)

      2,556      $ 14,013        16,923      $ 89,149        2,051      $ 25,570        (3,977 )    $ (75,929 ) 

 

300   ANNUAL REPORT   2016  

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     Ivy Small Cap Value Fund     Ivy Tax-Managed Equity Fund  
     Year ended
3-31-16		     Year ended
3-31-15		     Year ended
3-31-16		     Year ended
3-31-15		  
      Shares     Value     Shares     Value     Shares     Value     Shares     Value  

Shares issued from sale of shares:

                 

Class A

      1,815      $ 28,296        2,980      $ 53,172        3,510      $ 68,310        2,003      $ 36,831   

Class B

      9        109        13        206        25        478        32        575   

Class C

      196        2,695        220        3,538        214        3,999        79        1,403   

Class E

      —        —        7        144        N/A        N/A        N/A        N/A   

Class I

      283        4,756        995        19,120        211        4,081        119        2,254   

Class R

      89        1,395        73        1,303        N/A        N/A        N/A        N/A   

Class R6

      58        951        196        3,803        N/A        N/A        N/A        N/A   

Class Y

      256        4,274        284        5,104        6        124        13        233   

Shares issued in reinvestment of distributions to shareholders:

                 

Class A

      1,826        25,741        1,347        22,316        94        1,840        67        1,230   

Class B

      31        361        24        342        — *      5        — *      5   

Class C

      163        2,028        108        1,610        4        69        2        35   

Class E

      1        18        1        14        N/A        N/A        N/A        N/A   

Class I

      185        2,797        170        2,973        4        73        1        21   

Class R

      20        280        9        147        N/A        N/A        N/A        N/A   

Class R6

      28        426        16        284        N/A        N/A        N/A        N/A   

Class Y

      55        807        30        517        — *      7        1        11   

Shares redeemed:

                 

Class A

      (3,934 )      (61,834 )      (3,932 )      (70,450 )      (1,522 )      (28,839 )      (775 )      (14,169 ) 

Class B

      (64 )      (834 )      (61 )      (944 )      (21 )      (392 )      (12 )      (214 ) 

Class C

      (372 )      (5,135 )      (337 )      (5,460 )      (44 )      (814 )      (51 )      (926 ) 

Class E

      —        —        (8 )      (144 )      N/A        N/A        N/A        N/A   

Class I

      (427 )      (6,960 )      (928 )      (17,208 )      (155 )      (2,960 )      (23 )      (418 ) 

Class R

      (37 )      (577 )      (35 )      (607 )      N/A        N/A        N/A        N/A   

Class R6

      (31 )      (503 )      (30 )      (542 )      N/A        N/A        N/A        N/A   

Class Y

      (354 )      (5,977 )      (318 )      (5,941 )      (20 )      (383 )      (5 )      (100 ) 

Net increase (decrease)

      (204 )    $ (6,886 )      824      $ 13,297        2,306      $ 45,598        1,451      $ 26,771   

 

*Not shown due to rounding.

 

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     Ivy Value Fund  
     Year ended
3-31-16		     Year ended
3-31-15		  
      Shares     Value     Shares     Value  

Shares issued from sale of shares:

         

Class A

      2,974      $ 64,213        5,707      $ 139,648   

Class B

      34        693        82        1,928   

Class C

      293        6,025        519        12,514   

Class E

      —        —        6        158   

Class I

      125        2,804        948        23,810   

Class R

      1        8        — *      12   

Class R6

      35        770        56        1,343   

Class Y

      23        495        326        8,229   

Shares issued in reinvestment of distributions to shareholders:

         

Class A

      1,436        29,148        877        20,627   

Class B

      19        364        14        309   

Class C

      100        1,969        59        1,343   

Class E

      1        18        1        11   

Class I

      43        871        67        1,589   

Class R

      — *      1        — *      —   

Class R6

      9        177        1        21   

Class Y

      3        67        24        575   

Shares redeemed:

         

Class A

      (4,471 )      (99,830 )      (4,413 )      (107,259 ) 

Class B

      (83 )      (1,747 )      (140 )      (3,203 ) 

Class C

      (410 )      (8,681 )      (226 )      (5,326 ) 

Class E

      —        —        (6 )      (158 ) 

Class I

      (437 )      (10,011 )      (610 )      (14,399 ) 

Class R

      — *      — *      — *      (4 ) 

Class R6

      (5 )      (102 )      (1 )      (29 ) 

Class Y

      (67 )      (1,551 )      (310 )      (7,213 ) 

Net increase (decrease)

      (377 )    $ (14,299 )      2,981      $ 74,526   

 

*Not shown due to rounding.

 

13.   COMMITMENTS ($ amounts in thousands)

Bridge loan commitments may obligate a Fund to furnish temporary financing to a borrower until permanent financing can be arranged. In connection with these commitments, the Fund earns a commitment fee, typically set as a percentage of the commitment amount. Such fee income is included in interest income on the Statement of Operations. As of March 31, 2016, there were no outstanding bridge loan commitments.

 

14.   FEDERAL INCOME TAX MATTERS ($ amounts in thousands)

For Federal income tax purposes, cost of investments owned at March 31, 2016 and the related unrealized appreciation (depreciation) were as follows:

 

Fund    Cost of
Investments		      Gross
Appreciation		      Gross
Depreciation		      Net
Unrealized
Appreciation
(Depreciation)		  

Ivy Bond Fund

    $ 789,130       $ 15,926       $ 8,531       $ 7,395   

Ivy Core Equity Fund

      1,027,955         146,674         49,123         97,551   

Ivy Cundill Global Value Fund

      228,584         39,267         51,209         (11,942 ) 

Ivy Dividend Opportunities Fund

      302,961         65,050         6,395         58,655   

Ivy Emerging Markets Equity Fund

      433,561         67,479         17,399         50,080   

Ivy European Opportunities Fund

      217,717         21,250         13,703         7,547   

Ivy Global Bond Fund

      196,215         4,821         21,732         (16,911 ) 

Ivy Global Equity Income Fund

      281,872         22,434         14,095         8,339   

Ivy Global Growth Fund

      464,690         64,048         19,997         44,051   

Ivy Global Income Allocation Fund

      771,767         34,096         57,330         (23,234 ) 

Ivy High Income Fund

      5,451,180         37,043         810,248         (773,205 ) 

Ivy International Core Equity Fund

      4,647,387         282,518         391,736         (109,218 ) 

Ivy Large Cap Growth Fund

      1,279,949         505,727         29,424         476,303   

Ivy Limited-Term Bond Fund

      1,788,075         20,364         4,397         15,967   

Ivy Managed International Opportunities Fund

      181,342         16,450         —         16,450   

Ivy Micro Cap Growth Fund

      150,224         18,955         17,495         1,460   

 

302   ANNUAL REPORT   2016  

Table of Contents

 

 

Fund    Cost of
Investments		      Gross
Appreciation		      Gross
Depreciation		      Net
Unrealized
Appreciation
(Depreciation)		  

Ivy Mid Cap Growth Fund

    $ 2,873,265       $ 587,446       $ 321,106       $ 266,340   

Ivy Mid Cap Income Opportunities Fund

      110,546         10,977         2,640         8,337   

Ivy Money Market Fund

      223,719         —         —         —   

Ivy Municipal Bond Fund

      217,556         14,034         105         13,929   

Ivy Municipal High Income Fund

      1,298,064         106,054         60,939         45,115   

Ivy Small Cap Growth Fund

      748,361         225,430         29,507         195,923   

Ivy Small Cap Value Fund

      227,884         26,832         3,844         22,988   

Ivy Tax-Managed Equity Fund

      104,213         19,846         4,874         14,972   

Ivy Value Fund

      265,247         35,721         19,257         16,464   

For Federal income tax purposes, the Funds’ distributed and undistributed earnings and profit for the year ended March 31, 2016 and the post-October and late-year ordinary activity were as follows:

 

Fund    Distributed
Ordinary
Income		      Undistributed
Ordinary
Income		      Distributed
Long-Term
Capital Gains		      Undistributed
Long-Term
Capital Gains		      Tax Return
of Capital		      Post-October
Capital
Losses
Deferred		      Late-Year
Ordinary
Losses
Deferred		  

Ivy Bond Fund

    $ 18,123       $ 269       $ —       $ —       $ —       $ —       $ —   

Ivy Core Equity Fund

      14,021         —         62,572         13,534         —         6,393         —   

Ivy Cundill Global Value Fund

      1,992         316         —         —         —         —         —   

Ivy Dividend Opportunities Fund

      3,493         1,029         30,139         2,949         —         —         —   

Ivy Emerging Markets Equity Fund

      4,983         —         —         —         —         —         363   

Ivy European Opportunities Fund

      948         103         —         —         —         —         —   

Ivy Global Bond Fund

      6,423         671         —         —         —         —         —   

Ivy Global Equity Income Fund

      9,054         954         8,438         —         —         —         —   

Ivy Global Growth Fund

      573         —         11,167         —         —         5,347         528   

Ivy Global Income Allocation Fund

      31,144         2,905         —         —         —         —         —   

Ivy High Income Fund

      487,204         4,073         —         —         —         —         —   

Ivy International Core Equity Fund

      42,519         14,862         —         —         —         —         —   

Ivy Large Cap Growth Fund

      —         —         109,373         786         —         —         —   

Ivy Limited-Term Bond Fund

      23,128         448         —         —         —         —         —   

Ivy Managed International Opportunities Fund

      1,484         —         —         —         —         —         140   

Ivy Micro Cap Growth Fund

      —         —         7,628         —         —         9,486         508   

Ivy Mid Cap Growth Fund

      47,509         —         339,017         —         —         11,675         7,226   

Ivy Mid Cap Income Opportunities Fund

      1,322         —         —         —         —         —         54   

Ivy Money Market Fund

      38         24         —         —         —         —         —   

Ivy Municipal Bond Fund

      4,224         66         —         —         —         —         —   

Ivy Municipal High Income Fund

      53,839         480         —         —         —         —         —   

Ivy Small Cap Growth Fund

      79         —         130,985         23,286         —         —         8,983   

Ivy Small Cap Value Fund

      —         —         33,901         —         —         1,830         —   

Ivy Tax-Managed Equity Fund

      350         —         1,745         —         —         316         61   

Ivy Value Fund

      5,446         2,035         28,458         —         —         2,936         —   

Internal Revenue Code regulations permit each Fund to elect to defer into its next fiscal year capital losses and certain specified ordinary items incurred between each November 1 and the end of its fiscal year. Each Fund is also permitted to defer into its next fiscal year certain ordinary losses that generated between each January 1 and the end of its fiscal year.

Accumulated capital losses represent net capital loss carryovers as of March 31, 2016 that may be available to offset future realized capital gains and thereby reduce future capital gains distributions. Under the Regulated Investment Company Modernization Act of 2010 (the “Modernization Act”), a Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Any losses incurred during those future taxable years will be required to be utilized prior to any losses incurred in pre-enactment taxable years which have only an eight year carryforward period. As a result of this ordering rule, pre-enactment capital loss carryovers may expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under the previous law. The Fund’s first fiscal year end subject to the Modernization Act was March 31, 2012. The following table

 

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Table of Contents

 

 

shows the expiration dates for capital loss carryovers from pre-enactment taxable years and the amounts of capital loss carryovers, if any, by each of the applicable Funds electing to be taxed as a regulated investment company during the year ended March 31, 2016:

 

     Pre-Enactment      Post-Enactment  
     Year of Expiration     

Short-Term Capital
Loss Carryover

     

Long-Term Capital
Loss Carryover

  
Fund    2017      2018      2019        

Ivy Bond Fund

    $ 18,939       $ —       $ —       $ 184       $ 7,733   

Ivy Core Equity Fund

      —         —         —         —         —   

Ivy Cundill Global Value Fund

      —         6,489         —         1,819         4,070   

Ivy Dividend Opportunities Fund

      —         —         —         —         —   

Ivy Emerging Markets Equity Fund

      —         606         —         112,894         —   

Ivy European Opportunities Fund

      —         115,739         —         13,346         4,370   

Ivy Global Bond Fund

      —         —         —         3,622         7,341   

Ivy Global Equity Income Fund

      —         —         —         14,916         3,278   

Ivy Global Growth Fund

      —         —         —         —         —   

Ivy Global Income Allocation Fund

      —         5,466         —         42,464         15,667   

Ivy High Income Fund

      —         —         —         52,939         458,854   

Ivy International Core Equity Fund

      —         —         —         166,514         4,858   

Ivy Large Cap Growth Fund

      20,021         —         —         —         —   

Ivy Limited-Term Bond Fund

      —         —         —         13,570         8,876   

Ivy Managed International Opportunities Fund

      10,327         6,481         10,440         —         —   

Ivy Micro Cap Growth Fund

      —         —         —         —         —   

Ivy Mid Cap Growth Fund

      —         —         —         —         —   

Ivy Mid Cap Income Opportunities Fund

      —         —         —         2,598         804   

Ivy Money Market Fund

      —         —         7         —         —   

Ivy Municipal Bond Fund

      101         84         146         185         2,633   

Ivy Municipal High Income Fund

      —         —         —         8,317         6,648   

Ivy Small Cap Growth Fund

      —         —         —         —         —   

Ivy Small Cap Value Fund

      —         —         —         —         —   

Ivy Tax-Managed Equity Fund

      —         —         —         —         —   

Ivy Value Fund

      —         —         —         —         —   

Ivy Mortgage Securities Fund was merged into Ivy Bond Fund as of January 24, 2011. At the time of the merger, Ivy Mortgage Securities Fund had capital loss carryovers available to offset future gains of the Ivy Bond Fund. These carryovers are limited to $14,641 for the period ending March 31, 2017 and $4,298 for the period ending from March 31, 2018 plus any unused limitations from prior years.

Ivy Asset Strategy New Opportunities Fund was merged into Ivy Emerging Markets Equity Fund as of March 17, 2014. At the time of the merger, Ivy Asset Strategy New Opportunities Fund had capital loss carryovers available to offset future gains of the Ivy Emerging Markets Equity Fund. These carryovers are annually limited to $7,827 plus any unused limitations from prior years.

Ivy Managed European/Pacific Fund was merged into Ivy Managed International Opportunities Fund as of March 17, 2014. At the time of the merger, Ivy Managed European/Pacific Fund had capital loss carryovers available to offset future gains of the Ivy Managed International Opportunities Fund. These carryovers are annually limited to $2,377 plus any unused limitations from prior years.

Net investment income dividends and capital gains distributions are determined in accordance with income tax regulations which may differ from U.S. GAAP. These differences are due to differing treatments for items such as deferral of wash sales, post-October losses, late-year ordinary losses, foreign currency transactions, net operating losses, income from passive foreign investment companies (PFICs), partnership transactions, and expiring capital loss carryovers. At March 31, 2016, the following reclassifications were made:

 

Fund    Undistributed Net
Investment Income		     Accumulated Net
Realized Gain (Loss)		     Paid-In Capital     Unrealized
Appreciation
(Depreciation)		  

Ivy Bond Fund

    $ 1,070      $ (1,052 )    $ (18 )    $ —   

Ivy Core Equity Fund

      (1,762 )      1,763        (1 )      —   

Ivy Cundill Global Value Fund

      (226 )      226        —        —   

Ivy Dividend Opportunities Fund

      (805 )      806        (1 )      —   

Ivy Emerging Markets Equity Fund

      (628 )      1,253        (625 )      —   

Ivy European Opportunities Fund

      (36 )      36        —        —   

Ivy Global Bond Fund

      (1,469 )      1,469        —        —   

Ivy Global Equity Income Fund

      (98 )      98        —        —   

Ivy Global Growth Fund

      494        (276 )      (218 )      —   

Ivy Global Income Allocation Fund

      (1,406 )      1,406        —        —   

Ivy High Income Fund

      (6,491 )      6,496        —        (5 ) 

Ivy International Core Equity Fund

      15,446        (15,446 )      —        —   

Ivy Large Cap Growth Fund

      3,814        —        (3,814 )      —   

Ivy Limited-Term Bond Fund

      868        (868 )      —        —   

 

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Fund    Undistributed Net
Investment Income		     Accumulated Net
Realized Gain (Loss)		     Paid-In Capital     Unrealized
Appreciation
(Depreciation)		  

Ivy Managed International Opportunities Fund

    $ 3      $ —      $ (3 )    $ —   

Ivy Micro Cap Growth Fund

      3,124        344        (3,468 )      —   

Ivy Mid Cap Growth Fund

      13        14        (27 )      —   

Ivy Mid Cap Income Opportunities Fund

      (204 )      271        (67 )      —   

Ivy Money Market Fund

      —        —        —        —   

Ivy Municipal Bond Fund

      —        34        (34 )      —   

Ivy Municipal High Income Fund

      —        (33 )      33        —   

Ivy Small Cap Growth Fund

      238        13,233        (13,470 )      (1 ) 

Ivy Small Cap Value Fund

      (1,463 )      2,258        (795 )      —   

Ivy Tax-Managed Equity Fund

      312        —        (312 )      —   

Ivy Value Fund

      (3,750 )      3,752        (2 )      —   

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ivy Funds

 

 

 

To the Shareholders and Board of Trustees of Ivy Funds:

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Ivy Bond Fund, Ivy Core Equity Fund, Ivy Cundill Global Value Fund, Ivy Dividend Opportunities Fund, Ivy Emerging Markets Equity Fund, Ivy European Opportunities Fund, Ivy Global Bond Fund, Ivy Global Equity Income Fund, Ivy Global Growth Fund, Ivy Global Income Allocation Fund, Ivy High Income Fund, Ivy International Core Equity Fund, Ivy Large Cap Growth Fund, Ivy Limited-Term Bond Fund, Ivy Managed International Opportunities Fund, Ivy Micro Cap Growth Fund, Ivy Mid Cap Growth Fund, Ivy Mid Cap Income Opportunities Fund, Ivy Money Market Fund, Ivy Municipal Bond Fund, Ivy Municipal High Income Fund, Ivy Small Cap Growth Fund, Ivy Small Cap Value Fund, Ivy Tax-Managed Equity Fund, and Ivy Value Fund, twenty-five of the thirty-three funds constituting Ivy Funds (the “Funds”), as of March 31, 2016, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended (as to the Ivy Mid Cap Income Opportunities Fund, for the year then ended and for the period from October 1, 2014 (commencement of operations) through March 31, 2015), and the financial highlights for each of the periods presented. 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.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2016, by correspondence with the custodian, transfer agent, agent banks, and brokers; when replies were not received from brokers, we performed other auditing procedures. 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 each of the Funds as of March 31, 2016, and the results of their operations, the changes in their net assets, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

 

LOGO

Kansas City, Missouri

May 23, 2016

 

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INCOME TAX INFORMATION

Ivy Funds

 

AMOUNTS NOT ROUNDED (UNAUDITED)

 

 

 

The Funds hereby designate the following amounts of dividends paid from net ordinary income as dividends qualifying for the 70% dividends received deduction for corporations or as qualified dividend income for individuals for the tax period ended March 31, 2016:

 

      Dividends
Received
Deduction for
Corporations		      Qualified
Dividend
Income for
Individuals		  

Ivy Bond Fund

    $ —       $ —   

Ivy Core Equity Fund

      9,415,954         11,684,201   

Ivy Cundill Global Value Fund

      2,210,510         2,558,946   

Ivy Dividend Opportunities Fund

      3,300,485         3,479,679   

Ivy Emerging Markets Equity Fund

      189,156         4,924,661   

Ivy European Opportunities Fund

      —         1,393,063   

Ivy Global Bond Fund

      197,072         693,608   

Ivy Global Equity Income Fund

      2,647,139         9,907,152   

Ivy Global Growth Fund

      1,054,056         1,440,966   

Ivy Global Income Allocation Fund

      7,090,200         21,211,247   

Ivy High Income Fund

      —         —   

Ivy International Core Equity Fund

      1,017,096         47,277,725   

Ivy Large Cap Growth Fund

      —         —   

Ivy Limited-Term Bond Fund

      —         —   

Ivy Managed International Opportunities Fund

      412,059         1,818,576   

Ivy Micro Cap Growth Fund

      —         —   

Ivy Mid Cap Growth Fund

      37,301,753         38,684,497   

Ivy Mid Cap Income Opportunities Fund

      1,322,358         1,322,358   

Ivy Money Market Fund

      —         —   

Ivy Municipal Bond Fund

      —         —   

Ivy Municipal High Income Fund

      —         —   

Ivy Small Cap Growth Fund

      —         —   

Ivy Small Cap Value Fund

      —         —   

Ivy Tax-Managed Equity Fund

      349,755         349,755   

Ivy Value Fund

      4,335,128         4,806,372   

Ivy Municipal Bond Fund and Ivy Municipal High Income Fund hereby designate $4,172,481 and $53,126,471, respectively, of the dividends declared from net investment income as exempt from federal income tax for the tax period ending March 31, 2016.

The Funds hereby designate the following amounts as distributions of long-term capital gains:

 

Ivy Bond Fund

    $ —   

Ivy Core Equity Fund

      62,571,543   

Ivy Cundill Global Value Fund

      —   

Ivy Dividend Opportunities Fund

      30,138,788   

Ivy Emerging Markets Equity Fund

      —   

Ivy European Opportunities Fund

      —   

Ivy Global Bond Fund

      —   

Ivy Global Equity Income Fund

      8,437,607   

Ivy Global Growth Fund

      11,167,141   

Ivy Global Income Allocation Fund

      —   

Ivy High Income Fund

      —   

Ivy International Core Equity Fund

      —   

Ivy Large Cap Growth Fund

      109,373,436   

Ivy Limited-Term Bond Fund

      —   

Ivy Managed International Opportunities Fund

      —   

Ivy Micro Cap Growth Fund

      7,628,407   

Ivy Mid Cap Growth Fund

      339,016,794   

Ivy Mid Cap Income Opportunities Fund

      —   

Ivy Money Market Fund

      —   

Ivy Municipal Bond Fund

      —   

Ivy Municipal High Income Fund

      —   

Ivy Small Cap Growth Fund

      130,985,205   

Ivy Small Cap Value Fund

      33,900,603   

Ivy Tax-Managed Equity Fund

      1,745,686   

Ivy Value Fund

      28,457,471   

Income from Ivy Municipal Bond Fund and Ivy Municipal High Income Fund may be subject to the alternative minimum tax. Shareholders are advised to consult with their tax advisors concerning the tax treatment of dividends and distributions from all the Funds.

 

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Internal Revenue Code regulations permit each qualifying Fund to elect to pass through a foreign tax credit to shareholders with respect to foreign taxes paid by the Fund. As of March 31, 2016, the Funds hereby designate the following as a foreign tax credit from the taxes paid on income derived from sources within foreign countries or possession of the United States:

 

      Foreign Tax
Credit		      Foreign Derived
Income		  

Ivy Cundill Global Value Fund

    $ 468,212       $ 5,130,828   

Ivy European Opportunities Fund

      359,323         5,021,416   

Ivy Global Equity Income Fund

      828,975         11,109,380   

Ivy Global Income Allocation Fund

      880,112         26,137,939   

Ivy International Core Equity Fund

      8,117,110         108,510,909   

Ivy Managed International Opportunities Fund

      332,433         2,389,976   

 

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BOARD OF TRUSTEES AND OFFICERS

Ivy Funds

 

 

 

The Trust is governed by the Board of Trustees (the “Board”). A majority of the Board members are not “interested persons” as defined in Section 2(a)(19) of the 1940 Act and therefore qualify as Disinterested Trustees. The Board elects the officers who are responsible for administering the Funds’ day-to-day operations. The Waddell & Reed Fund Complex (“Fund Complex”) is comprised of the Ivy Family of Funds, the Ivy High Income Opportunities Fund (a closed-end fund) (“IVH”) and the Advisors Fund Complex, which is comprised of each of the funds in the Waddell & Reed Advisors Funds (20 funds), Ivy Funds Variable Insurance Portfolios (29 funds) and InvestEd Portfolios (3 funds). Jarold W. Boettcher, Joseph Harroz, Jr., and Henry J. Herrmann also serve as trustees of each of the funds in the Advisors Fund Complex. Each member of the Board is also a member of the Board of Trustees of IVH.

Joseph Harroz, Jr. serves as Independent Chair of the Trust’s Board and of the Board of Trustees of IVH.

A Trustee serves until his or her successor is elected and qualified or until his or her earlier death, resignation or removal. The Board appoints officers and delegates to them the management of the day-to-day operations of each of the Funds, based on policies reviewed and approved by the Board, with general oversight by the Board.

The Statement of Additional Information (“SAI”) for the Trust includes additional information about the Trust’s Trustees. The SAI is available without charge, upon request by calling 1.800.777.6472. It is also available on the Ivy Funds website, www.ivyfunds.com.

Disinterested Trustees

The following table provides information regarding each Disinterested Trustee.

 

Name, Address and
Year of Birth		   Position Held With
the Trust		   Trustee Since   Principal Occupation(s)
During Past 5 Years		   Number of Funds
in Fund
Complex
Overseen		   Other Directorships Held
During Past 5 Years

Jarold W. Boettcher, CFA

6300 Lamar Avenue

Overland Park, KS 66202

1940

   Trustee   2008  

President of Boettcher Enterprises, Inc. (agriculture products and services) (1979 to present), Boettcher Supply, Inc. (electrical and plumbing supplies distributor) (1979 to present), Boettcher Aerial, Inc. (Aerial Ag Applicator) (1982 to present).

   90   Director, Guaranty State Bank & Trust Co. (financial services) (1981 to present); Director, Guaranty, Inc. (financial services) (1985 to present); Member, Kansas Board of Regents (2007 to 2011); Audit Committee Chairperson, Kansas Bioscience Authority (2009 to present); Member, Kansas Foundation for Medical Care (until 2011); Trustee, Advisors Fund Complex (52 portfolios overseen); Trustee, IVH.

James D. Gressett

6300 Lamar Avenue

Overland Park, KS 66202

1950

   Trustee   2008  

Chief Executive Officer (CEO) of CalPac Pizza LLC (2011 to present); CEO of CalPac Pizza II LLC (2012 to present); CEO of PacPizza LLC (Pizza Hut franchise) (1999 to present); Partner, Century Bridge Partners (real estate investments) (2007 to present); Manager, Premium Gold Foods (2006 to present).

   38   Trustee, IVH.

Joseph Harroz, Jr.

6300 Lamar Avenue

Overland Park, KS 66202

1967

  

Trustee

 

Independent Chairman

  

2008

 

2008

   Dean, College of Law, Vice President, University of Oklahoma (2010 to present); President of Graymark HealthCare (a NASDAQ listed company) (2008 to 2010); Adjunct Professor, University of Oklahoma Law School (1997 to 2010); Managing Member, Harroz Investments, LLC, (commercial enterprises) (1998 to present).   90   Director and Investor, Valliance Bank (2004 to present); Director, Foundation Healthcare, (formerly Graymark HealthCare) (2008 to present); Trustee, The Mewbourne Family Support Organization (2003 to present) (non-profit); Director/Trustee, Oklahoma Foundation for Excellence (non-profit) (2008 to present); Trustee/Chairman, Advisors Fund Complex (52 portfolios overseen); Trustee, IVH.

 

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Name, Address and
Year of Birth		   Position Held With
the Trust		   Trustee Since   Principal Occupation(s)
During Past 5 Years		   Number of Funds
in Fund
Complex
Overseen		   Other Directorships Held
During Past 5 Years

Glendon E. Johnson, Jr.

6300 Lamar Avenue

Overland Park, KS 66202

1951

   Trustee   2008   Of Counsel, Lee & Smith, PC (law firm) (1996 to present); Owner and Manager, Castle Valley Ranches, LLC (ranching) and Castle Valley Outdoors, LLC (outdoor recreation) (1995 to present); Formerly, Partner, Kelly, Drye & Warren LLP (law firm, emphasis on finance, securities, mergers and acquisitions law) (1989-1996); Partner, Lane & Edson PC (law firm) (1987-1989).   38   Director, Thomas Foundation for Cancer Research (2005 to present); Trustee, IVH.

Michael G. Smith

6300 Lamar Avenue

Overland Park, KS 66202

1944

   Trustee   2008   Retired; formerly, with Merrill Lynch as Managing Director of Global Investor Client Strategy (1996-1998), Head of Regional Institutional Sales (1995-1996) and of U.S. Central Region (1986-1995, 1999).   38   Director, Executive Board, Cox Business School, Southern Methodist University (1998 to present); Director, Northwestern Mutual Funds (2003 to present); Chairman, CTMG, Inc. (clinical testing) (2008 to present); Trustee, IVH.

Edward M. Tighe

6300 Lamar Avenue

Overland Park, KS 66202

1942

   Trustee   2008   Retired; formerly, CEO and Director of Asgard Holdings LLC (computer network and security services) (2002 to 2004); President, Citco Technology Management (1995-2000); CEO, Global Mutual Fund Services (1993-2000); Sr. Vice President, Templeton Global Investors (1988-1992).   38   Director, The Research Coast Principium Foundation, Inc. (non-profit) (2012 to 2015); Trustee, IVH.

Interested Trustees

Mr. Herrmann is “interested” by virtue of his current or former engagement as an officer of Waddell & Reed Financial, Inc. (“WDR”) or its wholly owned subsidiaries, including each Fund’s investment manager, IICO, each Fund’s principal underwriter, IFDI, and each Fund’s shareholder servicing and accounting services agent, Waddell & Reed Services Company, doing business as WI Services Company (“WISC”), as well as by virtue of his personal ownership in shares of WDR.

 

Name, Address and
Year of Birth		   Position(s) Held with
the Trust		   Trustee/Officer
Since		   Principal Occupation(s)
During Past 5 Years		   Number of Funds
in Fund
Complex
Overseen		   Other Directorships Held

Henry J. Herrmann

6300 Lamar Avenue

Overland Park, KS 66202

1942

  

President

 

Trustee

  

2008

 

2008

   Chairman, WDR (January 2010 to present); CEO, WDR (2005 to present); President, CEO and Chairman, IICO (2002 to present); President, CEO and Chairman, Waddell & Reed Investment Management Company (WRIMCO) (1993 to present); President and Trustee of each of the funds in the Fund Complex.   90   Director, WDR, IICO, WRIMCO, WISC, W&R Capital Management Group, Inc. and Waddell & Reed, Inc.; Director, Blue Cross Blue Shield of Kansas City (2007 to present); United Way of Greter Kansas City (2007 to 2012); Trustee, Advisors Fund Complex (52 portfolios overseen); Trustee, IVH.

 

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Officers

The Board has appointed officers who are responsible for the day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Herrmann, who is President, the Trust’s principal officers are:

 

Name, Address and
Year of Birth		   Position(s) Held with
the Trust and
Fund Complex		   Officer of
Trust Since		   Officer of Fund
Complex Since*		   Principal Occupation(s) During Past 5 Years

Joseph W. Kauten

6300 Lamar Avenue

Overland Park, KS 66202

1969

  

Vice President

 

Treasurer

 

Principal Accounting Officer

 

Principal Financial Officer

  

2008

 

2008

 

2008

 

2008

  

2006

 

2006

 

2006

 

2007

   Principal Financial Officer of each of the funds in the Fund Complex (2007 to present); Vice President, Treasurer and Principal Accounting Officer of each of the funds in the Fund Complex (2006 to present); Assistant Treasurer of each of the funds in the Fund Complex (2003 to 2006).

Scott J. Schneider

6300 Lamar Avenue

Overland Park, KS 66202

1968

  

Vice President

 

Chief Compliance Officer

  

2008

 

2008

  

2006

 

2004

   Chief Compliance Officer (2004 to present) and Vice President (2006 to present) of each of the funds in the Fund Complex.

Wendy J. Hills

6300 Lamar Avenue

Overland Park, KS 66202

1970

  

Vice President

 

General Counsel

 

Assistant Secretary

  

2014

 

2014

 

2014

  

2014

 

2014

 

2014

   Senior Vice President and General Counsel of WDR, Waddell & Reed, WRIMCO and WISC (2014 to present); Senior Vice President and General Counsel of IICO (2014 to present); Vice President, General Counsel and Assistant Secretary for each of the funds in the Fund Complex (2014 to present).

Philip A. Shipp

6300 Lamar Avenue

Overland Park, KS 66202

1969

   Assistant Secretary   2012   2012   Assistant Secretary of each of the funds in the Fund Complex (2012 to present).

* This is the date when the officer first became an officer of one or more of the funds that are the predecessors to current funds within Ivy Funds (each, a predecessor fund) (if applicable).

 

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ANNUAL PRIVACY NOTICE

Ivy Funds

 

 

 

The following privacy notice is issued by Ivy Funds (the “Funds”), Ivy Investment Management Company (“IICO”) and Ivy Funds Distributor, Inc. (“IFDI”).

Information Collected

We collect nonpublic personal information about you from your account application and other forms that you may deliver to us, and from your transactions with us and our affiliates. This is information that regulators consider necessary for the proper servicing of your account. In order to effect your transactions and service your account properly, we may disclose all of the information that we collect, as described above, to firms that assist us in servicing your account, such as our transfer agent.

Confidentiality of Information Collected

All records containing your nonpublic personal information are kept at our various service providers. These entities include IICO, IFDI and our transfer agent and administrative services provider. We require these affiliates, and any non-affiliated service providers, to protect the confidentiality of your information and to use the information only for the purposes for which disclosure to them is made. The Funds, IICO, IFDI and other service providers restrict access to nonpublic personal information about you to those employees who need to know that information to provide products and services to you and maintain physical, electronic, and procedural safeguards that comply with federal standards to maintain the security of your nonpublic personal information.

Disclosure of Information in Limited Circumstances

We do not disclose nonpublic personal information about present or former customers to nonaffiliated third parties, except as permitted or required by law. In connection with servicing your account, your nonpublic personal information may be shared among the entities named in this notice, their affiliates, and non-affiliates, including a transfer agent or other service companies. We will adhere to the policies and practices above for both current and former customers.

 

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PROXY VOTING INFORMATION

Ivy Funds

 

 

 

Proxy Voting Guidelines

A description of the policies and procedures Ivy Funds uses to determine how to vote proxies relating to portfolio securities is available (i) without charge, upon request, by calling 1.800.777.6472 and (ii) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.

Proxy Voting Records

Information regarding how the Trust voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on Form N-PX through the Ivy Funds’ website at www.ivyfunds.com and on the SEC’s website at www.sec.gov.

QUARTERLY PORTFOLIO SCHEDULE INFORMATION

Ivy Funds

Portfolio holdings can be found on the Trust’s website at www.ivyfunds.com. Alternatively, a complete schedule of portfolio holdings of each Fund for the first and third quarters of each fiscal year is filed with the SEC and can be found on the Trust’s Form N-Q. These holdings may be viewed in the following ways:

 

•  

On the SEC’s website at www.sec.gov.

 

•  

For review and copy at the SEC’s Public Reference Room in Washington, DC. Information on the operations of the Public Reference Room may be obtained by calling 1.800.SEC.0330.

TO ALL TRADITIONAL IRA PLANHOLDERS:

Ivy Funds

As required by law, we are hereby providing notice to you that income tax may be withheld automatically from any distribution or withdrawal from a traditional IRA. A Fund is generally required to withhold taxes unless you make a written election not to have taxes withheld. The election may be made on the distribution/withdrawal form provided by Waddell & Reed, Inc. which can be obtained from your Waddell & Reed representative or by submitting Internal Revenue Service Form W–4P. Once made, an election can be revoked by providing written notice to Waddell & Reed, Inc. 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.

HOUSEHOLDING NOTICE

Ivy Funds

If you currently receive one copy of the shareholder reports and prospectus for your household (even if more than one person in your household owns shares of the Trust) and you would prefer to receive separate shareholder reports and prospectuses for each account holder living at your address, you can do either of the following:

Fax your request to 800.532.2749.

Write to us at the address listed on the back cover.

Please list each account for which you would like to receive separate shareholder reports and prospectus mailings. We will resume sending separate documents within 30 days of receiving your request.

 

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The Ivy Funds Family

 

 

 

Domestic Equity Funds

Ivy Core Equity Fund

Ivy Dividend Opportunities Fund

Ivy Large Cap Growth Fund

Ivy Micro Cap Growth Fund

Ivy Mid Cap Growth Fund

Ivy Mid Cap Income Opportunities Fund

Ivy Small Cap Growth Fund

Ivy Small Cap Value Fund

Ivy Tax-Managed Equity Fund

Ivy Value Fund

Global/International Funds

Ivy Cundill Global Value Fund

Ivy Emerging Markets Equity Fund

Ivy Emerging Markets Local Currency Debt Fund

Ivy European Opportunities Fund

Ivy Global Equity Income Fund

Ivy Global Growth Fund

Ivy Global Income Allocation Fund

Ivy International Core Equity Fund

Ivy Managed International Opportunities Fund

 

Speciality Funds

Ivy Apollo Multi-Asset Income Fund

Ivy Asset Strategy Fund

Ivy Balanced Fund

Ivy Energy Fund

Ivy Global Natural Resources Fund

Ivy LaSalle Global Real Estate Fund1

1(formerly known as Ivy Global Real Estate Fund)

Ivy LaSalle Global Risk-Managed Real Estate Fund2

2(formerly known as Ivy Global Risk-Managed Real Estate Fund)

Ivy Real Estate Securities Fund

Ivy Science and Technology Fund

Fixed Income Funds

Ivy Apollo Strategic Income Fund

Ivy Bond Fund

Ivy Global Bond Fund

Ivy High Income Fund

Ivy Limited-Term Bond Fund

Ivy Money Market Fund

Ivy Municipal Bond Fund

Ivy Municipal High Income Fund

Ivy Targeted Return Bond Fund

 

 

1.800.777.6472

Visit us online at www.ivyfunds.com

The Ivy Funds are managed by Ivy Investment Management Company and distributed by its subsidiary, Ivy Funds Distributor, Inc.

Investors should consider the investment objectives, risks, charges and expenses of a fund carefully before investing. For a prospectus containing this and other information for the Ivy Funds, call your financial advisor or visit us online at www.ivyfunds.com. Please read the prospectus, or summary prospectus, carefully before investing.

 

  2016   ANNUAL REPORT   315

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ANN-IVYFUNDS (3-16)

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ITEM 2.     CODE OF ETHICS

 

(a) As of March 31, 2016, the Registrant has adopted a code of ethics (the “Code”), as defined in Item 2 of Form N-CSR, that applies to the Principal Executive Officer and Principal Financial Officer or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. A copy of this code of ethics is filed as an exhibit to this Form N-CSR.

 

(b) There have been no amendments, during the period covered by this report, to a provision of the Code that applies to the registrant’s Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer or Controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the Code.

 

(c) During the period covered by this report, the registrant did not grant any waivers, including an implicit waiver, from a provision of the Code that applies to the registrant’s Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer or Controller, or persons performing similar functions, regardless of whether those individuals were employed by the registrant or a third party, that related to one or more of the items set forth in paragraph (b) of this item’s instructions.

ITEM 3.     AUDIT COMMITTEE FINANCIAL EXPERT

The Board of Trustees of the Registrant has determined that each of Jarold W. Boettcher, James D. Gressett, and Edward M. Tighe is an audit committee financial expert, as defined in Item 3 of Form N-CSR, serving on its audit committee. Each of Mr. Boettcher, Mr. Gressett and Mr. Tighe is independent for purposes of Item 3 of Form N-CSR. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liability that are greater than the duties, obligations, and liability imposed on such person as a member of the audit committee and board of trustees in the absence of such designation or identification. The designation or identification of a person as an audit committee financial expert does not affect the duties, obligations, or liability of any other member of the audit committee or board of trustees.

 

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ITEM 4.     PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

(a) Audit Fees

 

  The aggregate fees billed for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for each of the last two fiscal years are as follows:
     

2015

    $526,700   

2016

    553,100   

 

(b) Audit-Related Fees

 

  The aggregate fees billed for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s annual financial statements and are not reported under paragraph (a) of this Item are as follows:
    

2015

    $0  

2016

    0  

 

  These fees are related to the review of Form N-1A.

 

(c) Tax Fees

 

  The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning are as follows:
     

2015

    $243,851   

2016

    209,106   

 

  These fees are related to the review of the registrant’s tax returns.

 

(d) All Other Fees

 

  The aggregate fees billed for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this item are as follows:

 

2015

    $ 41,397      

2016

      14,445      

 

  These fees are related to the review of internal control.

 

(e)      (1) Registrant’s audit committee considers with the principal accountants all audit services to be provided by the principal accountants and pre-approves all such audit services.

The audit committee shall pre-approve all non-audit services to be provided by the principal accountants to the registrant; provided that the pre-approval requirement does not apply to non-audit services that (i) were not identified as such at the time of the pre-approval and (ii) do not aggregate more than 5%

 

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of total fees paid to the principal accountants by the registrant during the fiscal year in which the services are provided, if the audit committee approves the provision of such non-audit services prior to the completion of the audit.

The audit committee shall pre-approve all non-audit services to be provided by the principal accountants to the investment adviser (not including any subadvisor whose role is primarily portfolio management and is subcontracted and overseen by the investment advisor) or any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant if the engagement relates directly to the operations or financial reporting of the registrant; provided that the pre-approval requirement does not apply to non-audit services that (i) were not identified as such at the time of the pre-approval and (ii) do not aggregate more than 5% of total fees paid to the principal accountants by the registrant for all services and by the registrant’s investment adviser for non-audit services if the engagement relates directly to the operations or financial reporting of the registrant during the fiscal year in which those services are provided, if the audit committee approves the provision of such non-audit services prior to the completion of the audit.

 

(e)      (2) None of the services described in each of paragraphs (b) through (d) of this Item were approved by the audit committee pursuant to the waiver provisions of paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

 

(f) Not applicable

 

(g) $285,248 and $223,551 are the aggregate non-audit fees billed in each of the last two fiscal years for services rendered by the principal accountant to the registrant. $98,810 and $87,690 are the aggregate non-audit fees billed in each of the last two fiscal years for services rendered by the principal accountant to the investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant.

 

(h) Not Applicable.

The following disclosure relates to the independence of Deloitte & Touche LLP (“Deloitte”) with respect to SEC Rule 2-01(c)(1)(ii)(A) of Regulation S-X (the “Loan Rule”). The Loan Rule prohibits accounting firms, such as Deloitte, from having certain financial relationships with their audit clients and affiliated entities. Specifically, the Loan Rule provides, in relevant part, that an accounting firm generally would not be independent if it receives a loan from a lender that is a “record or beneficial owner of more than ten percent of the audit client’s equity securities.” The Ivy Funds investment company complex (the “Funds”) has been notified by Deloitte that one of its lenders owns more than ten percent of at least one of the Funds. The Funds are providing this disclosure to explain the facts and circumstances as well as Deloitte’s conclusions concerning its independence and its objectivity and impartiality with respect to the audits of the Funds.

Deloitte has advised the Funds that, after evaluating the facts and circumstances related to the matter described above, it has concluded that its financial relationship described above did not, and will, not impair Deloitte’s application of objective and impartial judgment on any issues encompassed within its audits of the financial statements of the Funds. Deloitte has advised the Funds that this conclusion is based in part on the following considerations: (1) the lenders to Deloitte have no influence over the fund adviser to the Funds; (2) an investment in any such Fund is passive; (3) the debts are in good standing and no lender has the right to take action against Deloitte, as borrower, in connection with the financings; (4) the debt balances are immaterial to Deloitte and to each lender; and (5) the Deloitte audit engagement team has no involvement in Deloitte’s treasury function and Deloitte’s treasury function has no oversight of or ability to influence the Deloitte audit engagement team.

ITEM 5.     AUDIT COMMITTEE OF LISTED REGISTRANTS

Not applicable.

ITEM 6.     SCHEDULE OF INVESTMENTS.

 

(a) See Item 1 Shareholder Report.

 

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(b) Not Applicable.

ITEM 7.     DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END

MANAGEMENT INVESTMENT COMPANIES

Not applicable.

ITEM 8.     PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 9.     PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANIES AND AFFILIATED PURCHASERS

Not applicable.

ITEM 10.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s board of trustees.

ITEM 11.     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 (as defined in Rule 30a-3(d) under the Investment Company Act of 1940, as amended) that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

ITEM 12.     EXHIBITS.

 

(a)      (1) The Code described in Item 2 of this Form N-CSR.

Attached hereto as Exhibit 99.CODE.

 

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(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.

 

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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/ Wendy J. Hills
  Wendy J. Hills, Vice President and Secretary

Date: June 9, 2016

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: June 9, 2016

 

By       /s/ Joseph W. Kauten
  Joseph W. Kauten, Vice President and Principal Financial Officer

Date: June 9, 2016