Market Sector Update

• Perhaps the best thing that can be said about the fourth quarter of 2018 is that it’s over. The S&P 500 Index, the Fund’s benchmark, declined 13.5% for the quarter, as elevated volatility throughout the period erased the gains experienced in the first three quarters of the year.
• This underperformance in the benchmark was led by the energy sector (down 24%) followed by information technology and industrials (both down nearly 17%) and consumer discretionary (down 16%). The solitary positive sector for the index was utilities, which was up 1.4% for the period.
• This decline occurred despite an infusion of U.S .tax cuts and fiscal stimulus that helped drive domestic economic growth and corporate earnings that expanded at the fastest pace since 2011. This healthy economic backdrop was not enough to offset headwinds of global trade, Washington dysfunction, an aggressive Federal Reserve and concerns over the decelerating rate of global growth, all of which conspired to weigh heavily on stocks during the quarter.

Portfolio Strategy

• The Fund had a negative return and slightly lagged its benchmark for the quarter.
• From an allocation standpoint, relative performance was helped most by a higher than average cash position during the downturn. The Fund also benefited from its underweight position in information technology and an overweight position in consumer staples, which fell less than others. In terms of stock selection, it was neutral for the quarter with solid performers in information technology, consumer discretionary and consumer staples being offset by weaker holdings in health care and industrials.
• Companies that had the biggest impact on performance in the quarter include Apple, Schlumberger, FedEx, Microsoft and Amazon. Three of these holdings – Apple, Schlumberger and FedEx – were affected by deteriorating near-term fundamentals, which caused revenue and earnings estimates to be revised downward. Each company has its own set of unique circumstances that were evaluated, and positions were adjusted accordingly based on our assessment of the revised long-term opportunity. Both Microsoft and Amazon remain fundamentally strong, but the overall market weakness created a headwind for the stocks during the quarter.
• In terms of positive contributors, the fourth quarter’s significant selloff had very few holdings performing well, so no holdings had a materially positive impact on the Fund’s performance.

Outlook

• As we look ahead, global economic growth is very likely to decelerate over the next 12 months but we expect it to remain positive. As we have previously highlighted, individual and corporate tax reform was a meaningful positive for the domestic economy which, along with lighter regulation and a generally more business-friendly political climate, was supportive for growth.
• However, the uncertainties around political, monetary and trade policies have been stubbornly persistent and are likely to linger for most of this year. While we believe domestic economic growth will continue, the lagged effects of tighter monetary policy and waning benefits from fiscal stimulus will be a headwind.
• Our efforts remain focused on researching individual companies. One early observation going into 2019 is valuations are attractive, and while valuations rarely act as a singular catalyst propelling stocks higher, it indicates some skepticism in current share prices.
• This elevated level of uncertainty has provided numerous opportunities in many high-quality growth companies and we are actively seeking to take advantage of these price dislocations to best position the Fund for the future.

The opinions expressed are those of the Fund’s manager and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through Dec. 31, 2018, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

The S&P 500 Index is composed of 500 selected common stocks chosen for market size, liquidity, and industry grouping, among other factors. It is not possible to invest directly in an index.

Top 10 equity holdings as a % of net assets as of 12/31/2018: Microsoft Corp. 6.1, Amazon.com, Inc. 3.8, Alphabet, Inc. 3.2, Walt Disney Co., 3.1, Visa, Inc. 2.6, Danaher Corp. 2.5, Boeing Co. 2.4, Take-Two Interactive 2.2, Five9 Inc. 2.2, Procter & Gamble Co. 2.2.

The Waddell & Reed Accumulative Fund merged into the Ivy Accumulative Fund on Feb. 26, 2018.

Barry M. Ogden, CFA, CPA, served as a portfolio manager on the Fund until Dec. 03, 2018.

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. These and other risks are more fully described in the Fund’s prospectus. 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 may be obtained at www.waddell.com or from a financial advisor. Read it carefully before investing.