Waddell & Reed

Quarterly Fund Commentary

Ivy Global Natural Resources Fund (prospectus)
March 31, 2014

David P. Ginther, CPA

Market Sector Update

  • U.S. equities marked the fifth anniversary of their bull market during the quarter with broad market indexes again at or near record highs. Global equities in general also gained during the quarter.
  • Stocks again reacted positively to continued accommodative Federal Reserve (Fed) monetary policy as well as slow but steady U.S. economic growth and low inflation. The U.S. economy was slowed in part by severe winter weather. Moderate improvements in consumer spending and business investment along with productivity gains still contributed to the recovery.
  • The Fed in March dropped the link between lower interest rates and a 6.5% unemployment rate, saying it instead would consider multiple factors to determine when rates should rise. It again reduced the pace of its bondbuying program and economic stimulus, lowering it to $55 billion per month.
  • Protests in Ukraine led to a leadership change. Russia then annexed Crimea via a referendum vote. The U.S. and European Union responded with economic sanctions on Russia. Stock markets reacted with increased volatility, but soon settled. Commodities markets largely did not react to the turmoil.


Portfolio Strategy

  • The Fund posted a positive return for the quarter (before the effect of sales charges), outperforming its benchmark index.
  • The Fund continued to hold a dominant weighting in the energy sector, totaling 66% of assets. Holdings in that sector were the key contributors to performance for the quarter. The materials sector made up the secondlargest weighting at 21% of the Fund. Holdings in that sector in major chemicals companies also contributed to performance.
  • We kept a primary focus on the oil industry because we still think there are long-term opportunities, especially in oil and gas producers with exposure to shale basins. U.S. energy production from shale continues to increase. Holdings included companies in equipment & services, construction & engineering and drilling.
  • Natural gas prices in general moved higher in the quarter because of the severe winter and inventory levels, not an intrinsic change in supply/demand factors. Overall, we continued to seek energy companies that are gaining the benefit of past capital expenditures over those with new costs for investment and exploration.



  • Commodities prices in general remain weak globally as supplies broadly increased without a significant increase in demand. We think this will continue until there is stronger global economic growth.
  • We think major commodities companies will continue to focus on managing costs and capital expenditures. We also think low feedstock costs, based on increased energy supplies, will continue to provide benefits to U.S. chemical and fertilizer companies and other energyintensive businesses.
  • We believe there will be modest improvement in the global economy in 2014. Emerging markets have not significantly increased their demand for commodities, given their slow economic activity, and inflation remains low in many. However, global energy demand has become a bit stronger than expected, led by emerging markets. We think any economic improvement in developed countries will provide needed support to growth rates in emerging markets.
  • We continue to use our top-down, fundamental research process in seeking companies that may benefit from any improvement in economic activity and the growth in demand that may result.


The opinions expressed in this commentary are those of the Fund’s manager and are current through March 31, 2014. The manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed. Past performance is no guarantee of future results.

David P. Ginther, CPA, of Ivy Investment Management Company was named portfolio manager on July 2, 2013. From Jan. 2, 1997, to July 1, 2013, the Fund was subadvised by Mackenzie Financial Corp. and managed by Frederick Sturm.

Risk Factors. 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. Investing in companies involved in one specif ed sector may be more risky and volatile i than an investment with greater diversification. 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. 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. Investing in physical commodities, such as gold, exposes the Fund to other risk considerations such as potentially severe price fluctuations over short periods of time. Not all funds or fund classes may be offered at all broker/dealers. These and other risks are more fully described in the prospectus.

Investors should consider the investment objectives, risks, charges and expenses of a fund carefully before investing. For a prospectus, or if available a summary 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.

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