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    Quarterly Fund Commentary


    Ivy Dividend Opportunities Fund (prospectus)
    March 31, 2016


    Manager(s):
    Christopher J. Parker, CFA

    Market Sector Update

    • After declining significantly in the first few weeks of 2016, equity markets rallied substantially to end the quarter up slightly. The Russell 1000 Index (the Fund’s benchmark) and peer group finished the quarter in positive territory.
    • During the quarter, the market sold off as crude plummeted, fears grew that China would aggressively devalue the Yuan, Japan made a surprise move to negative interest rates, and the Federal Reserve (Fed) would move to hike interest rates in the face of concerns about global economic growth.
    • Crude and other commodities rallied strongly off an intra-quarter low, driven in part by less bad macro data and the announcement of stimulus from China. The Fed effectively communicated its sensitivity to financial markets as a critical variable in its thought process in addition to economic data – which helped satiate concerns that the Fed would tighten at a pace that would fuel strength in the dollar and stall a limp global recovery.
    • Health care was the worst performing sector as investors grappled with ongoing uncertainty fueled by political rhetoric, as well as the collateral impact of allegations of pricing, accounting and corporate control malfeasance at Valeant Pharmaceuticals.

    Portfolio Strategy*

    • The Fund underperformed its benchmark and peer group for the period ended March 31, 2016.
    • From a sector allocation perspective, overweight positions in financials and health care hurt performance, while underweights in telecom and utilities were also a drag.
    • From a stock selection perspective, the Fund benefited from favorable performance in materials, consumer discretionary, consumer staples and technology. Energy, industrials and financials were areas most adversely impacted by stock selection.
    • From an individual security standpoint, the greatest contributors to relative performance were positions in Corrections Corp of America, Applied Materials, Noble Energy, PPG Industries and Philip Morris International. &br;Teva Pharmaceuticals, Citigroup, Boeing, Energy Transfer Equity and Devon Energy were the greatest detractors to relative performance at an individual security level.

    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 hard time increasing due to slow growth and the reappearance of substantial monetary policy uncertainty.
    • 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 exploration and production companies, oil services, parts of the industrial complex and now financials as credit costs hit bank income statements. We anticipate a positive inflection in earnings as these headwinds subside later this year.
    • From a global growth perspective, we remain concerned 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.
    • Economic activity in Europe is creeping upward from a low level of growth as stimulus, time and improved confidence (off low levels) are having a positive effect. We think sustainability is still a crucial answered question.
    • 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.

    *Top 10 holdings (%) as of 03/31/2016: Pfizer, Inc. 4.7, Microsoft Corp. 4.1, Teva Pharmaceutical Industries Ltd. 3.9, JPMorgan Chase & Co. 3.5, Applied Materials Inc. 3.1, Philip Morris International 2.7, General Electric Co. 2.7, CVS Caremark Corp. 2.6, American International Group 2.5 and Medtronic Inc. 3.8.

    The opinions expressed in this commentary are those of the Fund’s manager and are current through March 31, 2016. 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 not a guarantee of future results.

    The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is not possible to invest directly in an index.

    Risk factors. 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. Dividend-paying investments may not experience the same price appreciation as non-dividend paying instruments. 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.

    IVY INVESTMENTSSM refers to the financial services offered by Ivy Distributors, Inc., a FINRA member broker dealer and the distributor of IVY FUNDS® mutual funds, and those financial services offered by its affiliates.

    Before investing, investors should consider carefully the investment objectives, risks, charges and expenses of a mutual fund. This and other important information is contained in the prospectus and summary prospectus, which can be obtained from a financial advisor or at www.ivyinvestments.com. Read it carefully before investing.

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