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: | 811-05162 |
Exact name of registrant as specified in charter: | Delaware VIP® Trust |
Address of principal executive offices: | 2005 Market Street |
Philadelphia, PA 19103 | |
Name and address of agent for service: | David F. Connor, Esq. |
2005 Market Street | |
Philadelphia, PA 19103 | |
Registrant’s telephone number, including area code: | (800) 523-1918 |
Date of fiscal year end: | December 31 |
Date of reporting period: | June 30, 2016 |
Item 1. Reports to Stockholders
Table of Contents
Delaware VIP® Trust
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Delaware VIP Diversified Income Series
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Semiannual report
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June 30, 2016 |
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Table of Contents
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2 | ||||||||
3 | ||||||||
27 | ||||||||
29 | ||||||||
29 | ||||||||
30 | ||||||||
32 |
Neither Delaware Investments nor its affiliates referred to in this document are authorized deposit-taking institutions for the purpose of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited (MBL), a subsidiary of Macquarie Group Limited and an affiliate of Delaware Investments. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Series is governed by U.S. laws and regulations.
Unless otherwise noted, views expressed herein are current as of June 30, 2016, and subject to change for events occurring after such date.
The Series is not FDIC insured and is not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor and member of Macquarie Group. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries, including the Series’ distributor, Delaware Distributors, L.P. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
This material may be used in conjunction with the offering of shares in Delaware VIP® Diversified Income Series only if preceded or accompanied by the Series’ current prospectus or the summary prospectus.
© 2016 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
Table of Contents
Delaware VIP® Trust — Delaware VIP Diversified Income Series
Disclosure of Series expenses
For the six-month period from January 1, 2016 to June 30, 2016 (Unaudited)
As a shareholder of the Series, you incur ongoing costs, which may include management fees; distribution and/or service (12b-1) fees; and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series 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 entire six-month period from Jan. 1, 2016 to June 30, 2016.
Actual expenses
The first section of the table shown, “Actual Series return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, 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, an $8,600 account value divided by $1,000 = 8.6), 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 the period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% return,” provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ 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 Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Series, you do not incur any transaction costs, such as sales charges (loads), redemption fees or exchange fees, but shareholders of other funds may incur such costs. Also, the fees related to the variable annuity investment or the deferred sales charge that could apply have not been included. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The Series’ actual expenses shown in the table reflect fee waivers in effect for Service Class shares. The expenses shown in the table assume reinvestment of all dividends and distributions.
Expense analysis of an investment of $1,000
Expenses | ||||||||||||
Beginning | Ending | Paid During | ||||||||||
Account | Account | Annualized | Period | |||||||||
Value | Value | Expense | 1/1/16 to | |||||||||
1/1/16 | 6/30/16 | Ratio | 6/30/16* | |||||||||
Actual Series return† | ||||||||||||
Standard Class | $1,000.00 | $1,050.30 | 0.67% | $3.42 | ||||||||
Service Class | 1,000.00 | 1,049.00 | 0.92% | 4.69 | ||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||
Standard Class | $1,000.00 | $1,021.53 | 0.67% | $3.37 | ||||||||
Service Class | 1,000.00 | 1,020.29 | 0.92% | 4.62 |
* | “Expenses Paid During Period” are equal to the Series’ annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
† | Because actual returns reflect only the most recent six-month period, the returns shown may differ significantly from fiscal year returns. |
Diversified Income Series-1 |
Table of Contents
Delaware VIP® Trust — Delaware VIP Diversified Income Series
Security type / sector allocation
As of June 30, 2016 (Unaudited)
Sector designations may be different than the sector designations presented in other Series materials. The sector designations may represent the investment manager’s internal sector classifications, which may result in the sector designations for one series being different than another series’ sector designations.
Percentage of | |||||
Security type / sector | net assets | ||||
Agency Asset-Backed Securities | 0.01% | ||||
Agency Collateralized Mortgage Obligations | 2.83% | ||||
Agency Commercial Mortgage-Backed Securities | 1.38% | ||||
Agency Mortgage-Backed Securities | 24.89% | ||||
Collateralized Debt Obligations | 1.59% | ||||
Convertible Bonds | 1.50% | ||||
Corporate Bonds | 41.90% | ||||
Automotive | 0.11% | ||||
Banking | 7.14% | ||||
Basic Industry | 2.66% | ||||
Brokerage | 0.21% | ||||
Capital Goods | 1.09% | ||||
Communications | 5.02% | ||||
Consumer Cyclical | 3.21% | ||||
Consumer Non-Cyclical | 4.38% | ||||
Electric | 6.37% | ||||
Energy | 2.54% | ||||
Finance Companies | 0.73% | ||||
Healthcare | 0.82% | ||||
Insurance | 1.74% | ||||
Media | 1.04% | ||||
Natural Gas | 0.18% | ||||
Real Estate Investment Trusts | 1.15% | ||||
Services | 0.32% | ||||
Technology | 1.66% | ||||
Transportation | 1.27% | ||||
Utilities | 0.26% | ||||
Municipal Bonds | 0.72% | ||||
Non-Agency Asset-Backed Securities | 3.73% | ||||
Non-Agency Collateralized Mortgage Obligations | 1.09% | ||||
Non-Agency Commercial Mortgage-Backed Securities | 5.12% | ||||
Regional Bonds | 0.87% | ||||
Senior Secured Loans | 7.56% | ||||
Sovereign Bonds | 2.95% | ||||
Supranational Banks | 0.83% |
Percentage of | |||||
Security type / sector | net assets | ||||
U.S. Treasury Obligations | 1.32% | ||||
Common Stock | 0.00% | ||||
Convertible Preferred Stock | 0.26% | ||||
Exchange-Traded Fund | 0.05% | ||||
Preferred Stock | 0.50% | ||||
Option Purchased | 0.01% | ||||
Short-Term Investments | 11.51% | ||||
Total Value of Securities | 110.62% | ||||
Liabilities Net of Receivables and Other Assets | (10.62%) | ||||
Total Net Assets | 100.00% |
Diversified Income Series-2
Table of Contents
Delaware VIP® Trust — Delaware VIP Diversified Income Series
Schedule of investments
June 30, 2016 (Unaudited)
Principal | Value | |||||||
amount° | (U.S. $) | |||||||
Agency Asset-Backed Securities – 0.01% | ||||||||
Fannie Mae Grantor Trust | 241,420 | $ | 274,114 | |||||
Fannie Mae REMIC Trust | 1,222 | 1,193 | ||||||
|
| |||||||
Total Agency Asset-Backed Securities | 275,307 | |||||||
|
| |||||||
Agency Collateralized Mortgage Obligations – 2.83% | ||||||||
Fannie Mae Grantor Trust | ||||||||
Series 1999-T2 A1 7.50% 1/19/39 • | 476 | 548 | ||||||
Series 2002-T4 A3 7.50% 12/25/41 | 9,382 | 11,036 | ||||||
Series 2004-T1 1A2 6.50% 1/25/44 | 7,563 | 9,169 | ||||||
Fannie Mae REMIC Trust | ||||||||
Series 2002-W6 2A1 6.247% 6/25/42 • | 18,685 | 22,311 | ||||||
Series 2004-W11 1A2 6.50% 5/25/44 | 31,297 | 37,975 | ||||||
Fannie Mae REMICs | ||||||||
Series 1996-46 ZA 7.50% 11/25/26 | 29,579 | 33,586 | ||||||
Series 2001-50 BA 7.00% 10/25/41 | 44,946 | 52,740 | ||||||
Series 2002-90 A1 6.50% 6/25/42 | 7,381 | 8,717 | ||||||
Series 2002-90 A2 6.50% 11/25/42 | 20,563 | 23,442 | ||||||
Series 2003-26 AT 5.00% 11/25/32 | 116,551 | 117,378 | ||||||
Series 2003-38 MP 5.50% 5/25/23 | 344,979 | 377,618 | ||||||
Series 2005-70 PA 5.50% 8/25/35 | 183,410 | 209,485 | ||||||
Series 2005-110 MB 5.50% 9/25/35 | 72,112 | 77,033 | ||||||
Series 2008-15 SB 6.147% 8/25/36 •S | 369,169 | 81,003 | ||||||
Series 2009-94 AC 5.00% 11/25/39 | 818,153 | 904,543 | ||||||
Series 2010-41 PN 4.50% 4/25/40 | 1,675,000 | 1,843,970 | ||||||
Series 2010-43 HJ 5.50% 5/25/40 | 291,320 | 332,056 | ||||||
Series 2010-96 DC 4.00% 9/25/25 | 2,148,995 | 2,287,750 | ||||||
Series 2010-116 Z 4.00% 10/25/40 | 56,227 | 60,754 | ||||||
Series 2010-129 SM 5.547% 11/25/40 •S | 2,912,551 | 468,826 | ||||||
Series 2012-98 MI 3.00% 8/25/31 S | 3,963,830 | 374,934 | ||||||
Series 2012-122 SD 5.647% 11/25/42 •S | 4,140,035 | 956,958 | ||||||
Series 2013-31 MI 3.00% 4/25/33 S | 5,913,617 | 716,242 | ||||||
Series 2013-43 IX 4.00% 5/25/43 S | 11,155,737 | 2,352,629 | ||||||
Series 2013-44 DI 3.00% 5/25/33 S | 7,841,517 | 1,084,008 | ||||||
Series 2013-55 AI 3.00% 6/25/33 S | 4,567,719 | 557,848 | ||||||
Series 2014-36 ZE 3.00% 6/25/44 | 1,693,479 | 1,724,888 | ||||||
Series 2014-68 BS 5.697% 11/25/44 •S | 4,019,063 | 874,805 | ||||||
Series 2014-90 SA 5.697% 1/25/45 •S | 11,368,137 | 2,504,398 | ||||||
Series 2015-27 SA 5.997% 5/25/45 •S | 1,515,353 | 347,595 | ||||||
Series 2015-44 Z 3.00% 9/25/43 | 3,425,103 | 3,506,084 |
Principal | Value | |||||||
amount° | (U.S. $) | |||||||
Agency Collateralized Mortgage Obligations (continued) | ||||||||
Freddie Mac REMICs | ||||||||
Series 1730 Z 7.00% 5/15/24 | 22,846 | $ | 25,779 | |||||
Series 2326 ZQ 6.50% 6/15/31 | 21,995 | 25,259 | ||||||
Series 2557 WE 5.00% 1/15/18 | 146,134 | 149,416 | ||||||
Series 2809 DC 4.50% 6/15/19 | 105,269 | 107,787 | ||||||
Series 3123 HT 5.00% 3/15/26 | 40,500 | 44,379 | ||||||
Series 3656 PM 5.00% 4/15/40 | 1,582,138 | 1,766,548 | ||||||
Series 4065 DE 3.00% 6/15/32 | 350,000 | 376,321 | ||||||
Series 4109 AI 3.00% 7/15/31 S | 7,267,179 | 687,181 | ||||||
Series 4120 IK 3.00% 10/15/32 S | 6,081,149 | 735,717 | ||||||
Series 4146 IA 3.50% 12/15/32 S | 3,209,313 | 454,232 | ||||||
Series 4159 KS 5.708% 1/15/43 •S | 2,809,627 | 689,054 | ||||||
Series 4181 DI 2.50% 3/15/33 S | 1,820,620 | 195,562 | ||||||
Series 4184 GS 5.678% 3/15/43 •S | 3,075,829 | 752,546 | ||||||
Series 4185 LI 3.00% 3/15/33 S | 1,914,057 | 239,076 | ||||||
Series 4191 CI 3.00% 4/15/33 S | 808,964 | 99,015 | ||||||
Series 4342 CI 3.00% 11/15/33 S | 1,130,759 | 115,533 | ||||||
Series 4435 DY 3.00% 2/15/35 | 2,810,000 | 2,923,164 | ||||||
Series 4453 DI 3.50% 11/15/33 S | 1,498,712 | 172,012 | ||||||
Series 4592 WT 5.50% 6/15/46 | 6,480,000 | 7,218,655 | ||||||
Series 4594 SG 5.656% 6/15/46 •S | 7,693,000 | 2,096,343 | ||||||
Freddie Mac Strips | ||||||||
Series 267 S5 5.558% 8/15/42 •S | 3,861,711 | 897,032 | ||||||
Series 299 S1 5.558% 1/15/43 •S | 2,902,869 | 668,133 | ||||||
Series 326 S2 5.508% 3/15/44 •S | 1,917,888 | 445,560 | ||||||
Freddie Mac Structured Agency Credit Risk Debt Notes | ||||||||
Series 2014-DN4 M2 2.853% 10/25/24 • | 518,431 | 522,045 | ||||||
Series 2015-DNA3 M2 3.303% 4/25/28 • | 1,430,000 | 1,470,089 | ||||||
Series 2015-HQ2 M2 2.403% 5/25/25 • | 1,195,000 | 1,185,376 | ||||||
Series 2015-HQA1 M2 3.103% 3/25/28 • | 1,225,000 | 1,253,424 | ||||||
Series 2015-HQA2 M2 3.253% 5/25/28 • | 1,615,000 | 1,653,683 | ||||||
Series 2016-DNA1 M2 3.353% 7/25/28 • | 1,065,000 | 1,098,205 | ||||||
Series 2016-DNA3 M2 2.446% 12/25/28 • | 640,000 | 644,263 | ||||||
Series 2016-HQA2 M2 2.703% 11/25/28 • | 740,000 | 744,290 | ||||||
Freddie Mac Structured Pass Through Securities | ||||||||
Series T-54 2A 6.50% 2/25/43 ¿ | 12,446 | 15,134 | ||||||
Series T-58 2A 6.50% 9/25/43 ¿ | 4,836 | 5,766 | ||||||
GNMA | ||||||||
Series 2010-113 KE 4.50% 9/20/40 | 4,115,000 | 4,687,762 | ||||||
Series 2013-113 AZ 3.00% 8/20/43 | 3,318,058 | 3,395,026 |
Diversified Income Series-3
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal | Value | |||||||
amount° | (U.S. $) | |||||||
Agency Collateralized Mortgage Obligations (continued) | ||||||||
GNMA | ||||||||
Series 2015-133 AL 3.00% 5/20/45 | 3,715,000 | $ | 3,781,509 | |||||
|
| |||||||
Total Agency Collateralized Mortgage Obligations (cost $63,642,514) | 63,301,205 | |||||||
|
| |||||||
Agency Commercial Mortgage-Backed Securities – 1.38% | ||||||||
Freddie Mac Multifamily Structured Pass Through Certificates | ||||||||
Series K041 A2 3.171% 10/25/24 ¿ | 2,760,000 | 3,006,551 | ||||||
Series K722 A1 2.183% 5/25/22 ¿ | 1,510,000 | 1,540,167 | ||||||
FREMF Mortgage Trust | ||||||||
Series 2011-K10 B 144A 4.79% 11/25/49 #• | 685,000 | 744,843 | ||||||
Series 2011-K13 B 144A 4.767% 1/25/48 #• | 580,000 | 632,286 | ||||||
Series 2011-K14 B 144A 5.341% 2/25/47 #• | 820,000 | 917,872 | ||||||
Series 2011-K15 B 144A 5.116% 8/25/44 #• | 195,000 | 215,243 | ||||||
Series 2012-K18 B 144A 4.40% 1/25/45 #• | 1,020,000 | 1,105,182 | ||||||
Series 2012-K22 B 144A 3.811% 8/25/45 #• | 1,730,000 | 1,806,981 | ||||||
Series 2012-K22 C 144A 3.811% 8/25/45 #• | 1,310,000 | 1,301,189 | ||||||
Series 2012-K23 C 144A 3.782% 10/25/45 #• | 525,000 | 519,689 | ||||||
Series 2012-K708 B 144A 3.883% 2/25/45 #• | 1,795,000 | 1,854,690 | ||||||
Series 2012-K708 C 144A 3.883% 2/25/45 #• | 530,000 | 529,623 | ||||||
Series 2013-K25 C 144A 3.743% 11/25/45 #• | 1,480,000 | 1,400,418 | ||||||
Series 2013-K30 C 144A 3.668% 6/25/45 #• | 1,560,000 | 1,440,460 | ||||||
Series 2013-K31 C 144A 3.741% 7/25/46 #• | 2,482,000 | 2,353,321 | ||||||
Series 2013-K33 B 144A 3.618% 8/25/46 #• | 1,315,000 | 1,342,019 | ||||||
Series 2013-K35 C 144A 4.077% 8/25/23 #• | 350,000 | 341,837 | ||||||
Series 2013-K712 B 144A 3.484% 5/25/45 #• | 2,170,000 | 2,220,456 | ||||||
Series 2013-K713 B 144A 3.274% 4/25/46 #• | 1,255,000 | 1,275,473 | ||||||
Series 2013-K713 C 144A 3.274% 4/25/46 #• | 2,640,000 | 2,625,283 |
Principal | Value | |||||||
amount° | (U.S. $) | |||||||
Agency Commercial Mortgage-Backed Securities (continued) | ||||||||
FREMF Mortgage Trust | ||||||||
Series 2014-K716 C 144A 4.084% 8/25/47 #• | 3,715,000 | $ | 3,670,876 | |||||
|
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Total Agency Commercial Mortgage-Backed Securities (cost $30,798,535) | 30,844,459 | |||||||
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Agency Mortgage-Backed Securities – 24.89% | ||||||||
Fannie Mae ARM | ||||||||
2.413% 5/1/43 • | 1,060,069 | 1,093,828 | ||||||
2.446% 6/1/37 • | 4,021 | 4,273 | ||||||
2.553% 6/1/43 • | 368,590 | 381,229 | ||||||
2.593% 8/1/35 • | 20,180 | 21,321 | ||||||
2.90% 4/1/44 • | 599,981 | 625,829 | ||||||
2.913% 7/1/45 • | 638,792 | 663,664 | ||||||
2.966% 4/1/46 • | 100,084 | 104,553 | ||||||
3.212% 4/1/44 • | 1,150,300 | 1,205,161 | ||||||
3.237% 3/1/44 • | 1,499,002 | 1,579,896 | ||||||
3.276% 9/1/43 • | 911,115 | 958,497 | ||||||
6.10% 8/1/37 • | 53,862 | 53,835 | ||||||
Fannie Mae Relocation 30 yr | ||||||||
5.00% 11/1/33 | 867 | 946 | ||||||
5.00% 11/1/34 | 2,922 | 3,187 | ||||||
5.00% 4/1/35 | 4,747 | 5,119 | ||||||
5.00% 10/1/35 | 15,971 | 17,569 | ||||||
5.00% 1/1/36 | 14,503 | 15,912 | ||||||
5.00% 2/1/36 | 8,868 | 9,605 | ||||||
Fannie Mae S.F. 15 yr | ||||||||
2.50% 5/1/31 | 2,437,887 | 2,528,598 | ||||||
3.00% 11/1/26 | 3,565,047 | 3,765,308 | ||||||
3.00% 9/1/30 | 1,810,833 | 1,904,967 | ||||||
3.00% 12/1/30 | 2,179,668 | 2,299,399 | ||||||
3.00% 2/1/31 | 734,954 | 773,479 | ||||||
3.00% 3/1/31 | 2,289,750 | 2,406,282 | ||||||
3.50% 7/1/26 | 682,754 | 724,178 | ||||||
3.50% 12/1/28 | 303,596 | 324,657 | ||||||
4.00% 11/1/25 | 1,936,916 | 2,064,874 | ||||||
4.00% 12/1/26 | 730,719 | 778,825 | ||||||
4.00% 1/1/27 | 5,551,369 | 5,918,036 | ||||||
4.00% 5/1/27 | 1,665,630 | 1,775,630 | ||||||
4.00% 8/1/27 | 953,813 | 1,016,488 | ||||||
Fannie Mae S.F. 20 yr | ||||||||
3.00% 8/1/33 | 477,211 | 503,062 | ||||||
3.00% 1/1/36 | 4,565,655 | 4,791,549 | ||||||
3.00% 5/1/36 | 5,028,124 | 5,276,712 | ||||||
Fannie Mae S.F. 30 yr | ||||||||
4.00% 5/1/43 | 38,803 | 42,249 | ||||||
4.00% 8/1/43 | 415,068 | 449,689 | ||||||
4.00% 7/1/44 | 2,560,722 | 2,788,681 | ||||||
4.50% 7/1/36 | 346,216 | 379,174 | ||||||
4.50% 6/1/38 | 1,314,547 | 1,443,459 |
Diversified Income Series-4
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal | Value | |||||||
amount° | (U.S. $) | |||||||
Agency Mortgage-Backed Securities (continued) | ||||||||
Fannie Mae S.F. 30 yr | ||||||||
4.50% 4/1/39 | 1,373,110 | $ | 1,498,157 | |||||
4.50% 6/1/39 | 1,300,878 | 1,420,708 | ||||||
4.50% 9/1/39 | 340,513 | 372,471 | ||||||
4.50% 11/1/39 | 1,075,692 | 1,197,142 | ||||||
4.50% 1/1/40 | 16,118,214 | 17,827,278 | ||||||
4.50% 4/1/40 | 2,189,814 | 2,427,505 | ||||||
4.50% 6/1/40 | 1,181,120 | 1,311,958 | ||||||
4.50% 8/1/40 | 368,191 | 405,551 | ||||||
4.50% 9/1/40 | 1,735,177 | 1,902,262 | ||||||
4.50% 11/1/40 | 790,527 | 866,512 | ||||||
4.50% 2/1/41 | 4,534,949 | 4,966,096 | ||||||
4.50% 3/1/41 | 1,009,006 | 1,106,112 | ||||||
4.50% 4/1/41 | 2,079,824 | 2,274,776 | ||||||
4.50% 7/1/41 | 3,711,239 | 4,115,715 | ||||||
4.50% 8/1/41 | 695,207 | 775,167 | ||||||
4.50% 10/1/41 | 1,741,646 | 1,909,730 | ||||||
4.50% 12/1/41 | 2,865,828 | 3,140,386 | ||||||
4.50% 1/1/42 | 11,240,220 | 12,322,101 | ||||||
4.50% 4/1/42 | 325,315 | 356,441 | ||||||
4.50% 8/1/42 | 18,099,796 | 20,006,464 | ||||||
4.50% 9/1/42 | 12,767,510 | 13,973,064 | ||||||
4.50% 1/1/43 | 1,811,157 | 1,983,648 | ||||||
4.50% 9/1/43 | 1,494,233 | 1,636,736 | ||||||
4.50% 10/1/43 | 8,404,755 | 9,302,708 | ||||||
4.50% 11/1/43 | 1,426,184 | 1,557,510 | ||||||
4.50% 2/1/44 | 299,738 | 328,285 | ||||||
4.50% 4/1/44 | 3,207,988 | 3,499,333 | ||||||
4.50% 5/1/44 | 966,344 | 1,054,116 | ||||||
4.50% 6/1/44 | 8,158,056 | 8,928,391 | ||||||
4.50% 8/1/44 | 484,199 | 529,757 | ||||||
4.50% 10/1/44 | 7,027,994 | 7,699,145 | ||||||
4.50% 12/1/44 | 1,031,451 | 1,128,597 | ||||||
4.50% 1/1/45 | 9,858,732 | 10,770,299 | ||||||
4.50% 2/1/45 | 3,841,813 | 4,196,789 | ||||||
4.50% 3/1/46 | 1,854,771 | 2,046,915 | ||||||
5.00% 3/1/34 | 792,559 | 884,865 | ||||||
5.00% 2/1/35 | 308,289 | 344,110 | ||||||
5.00% 4/1/35 | 13,285 | 14,803 | ||||||
5.00% 10/1/35 | 857,813 | 954,877 | ||||||
5.00% 11/1/35 | 391,530 | 435,607 | ||||||
5.00% 2/1/37 | 31,526 | 35,164 | ||||||
5.00% 4/1/37 | 219,366 | 243,529 | ||||||
5.00% 8/1/37 | 631,266 | 703,466 | ||||||
5.00% 12/1/39 | 557,944 | 626,522 | ||||||
5.00% 1/1/40 | 123,041 | 138,486 | ||||||
5.00% 11/1/44 | 7,155,310 | 7,974,515 | ||||||
5.50% 12/1/32 | 45,013 | 51,053 | ||||||
5.50% 2/1/33 | 519,805 | 588,478 | ||||||
5.50% 6/1/33 | 355,376 | 403,007 | ||||||
5.50% 4/1/34 | 217,200 | 246,319 |
Principal | Value | |||||||
amount° | (U.S. $) | |||||||
Agency Mortgage-Backed Securities (continued) | ||||||||
Fannie Mae S.F. 30 yr | ||||||||
5.50% 7/1/34 | 65,203 | $ | 74,011 | |||||
5.50% 8/1/34 | 33,273 | 37,796 | ||||||
5.50% 9/1/34 | 792,762 | 900,280 | ||||||
5.50% 11/1/34 | 227,975 | 258,550 | ||||||
5.50% 12/1/34 | 245,657 | 279,085 | ||||||
5.50% 1/1/35 | 581,121 | 660,047 | ||||||
5.50% 3/1/35 | 130,822 | 148,425 | ||||||
5.50% 5/1/35 | 765,306 | 869,028 | ||||||
5.50% 6/1/35 | 151,593 | 170,156 | ||||||
5.50% 8/1/35 | 32,046 | 36,371 | ||||||
5.50% 11/1/35 | 126,584 | 143,795 | ||||||
5.50% 1/1/36 | 1,046,856 | 1,187,393 | ||||||
5.50% 4/1/36 | 1,205,549 | 1,362,314 | ||||||
5.50% 7/1/36 | 1,140,134 | 1,294,995 | ||||||
5.50% 9/1/36 | 2,650,719 | 3,005,822 | ||||||
5.50% 10/1/36 | 479,180 | 554,700 | ||||||
5.50% 11/1/36 | 193,560 | 218,027 | ||||||
5.50% 1/1/37 | 864,484 | 973,108 | ||||||
5.50% 2/1/37 | 13,465 | 15,168 | ||||||
5.50% 4/1/37 | 1,645,525 | 1,852,527 | ||||||
5.50% 8/1/37 | 1,193,005 | 1,353,282 | ||||||
5.50% 9/1/37 | 998,273 | 1,122,476 | ||||||
5.50% 1/1/38 | 88,494 | 101,481 | ||||||
5.50% 2/1/38 | 652,269 | 737,767 | ||||||
5.50% 3/1/38 | 434,467 | 493,553 | ||||||
5.50% 6/1/38 | 1,944,946 | 2,188,407 | ||||||
5.50% 7/1/38 | 339,579 | 382,107 | ||||||
5.50% 9/1/38 | 812,833 | 921,452 | ||||||
5.50% 12/1/38 | 838,851 | 970,843 | ||||||
5.50% 1/1/39 | 3,119,074 | 3,540,911 | ||||||
5.50% 2/1/39 | 2,921,040 | 3,311,201 | ||||||
5.50% 6/1/39 | 977,053 | 1,106,753 | ||||||
5.50% 10/1/39 | 1,976,908 | 2,225,248 | ||||||
5.50% 12/1/39 | 9,200 | 10,369 | ||||||
5.50% 3/1/40 | 3,618,867 | 4,109,882 | ||||||
5.50% 7/1/40 | 1,595,170 | 1,806,432 | ||||||
5.50% 3/1/41 | 5,893,904 | 6,684,718 | ||||||
5.50% 6/1/41 | 2,472,789 | 2,805,737 | ||||||
5.50% 9/1/41 | 10,230,125 | 11,542,585 | ||||||
6.00% 3/1/29 | 589 | 680 | ||||||
6.00% 6/1/30 | 2,194 | 2,529 | ||||||
6.00% 4/1/35 | 3,320 | 3,822 | ||||||
6.00% 1/1/36 | 2,299 | 2,628 | ||||||
6.00% 6/1/36 | 77,763 | 89,151 | ||||||
6.00% 9/1/36 | 804,648 | 928,396 | ||||||
6.00% 11/1/36 | 10,408 | 11,889 | ||||||
6.00% 12/1/36 | 234,284 | 269,245 | ||||||
6.00% 2/1/37 | 264,914 | 303,184 | ||||||
6.00% 3/1/37 | 293,009 | 335,711 | ||||||
6.00% 5/1/37 | 609,980 | 697,702 |
Diversified Income Series-5
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal | Value | |||||||
amount° | (U.S. $) | |||||||
Agency Mortgage-Backed Securities (continued) | ||||||||
Fannie Mae S.F. 30 yr | ||||||||
6.00% 6/1/37 | 48,862 | $ | 56,349 | |||||
6.00% 7/1/37 | 1,064,586 | 1,234,235 | ||||||
6.00% 8/1/37 | 344,292 | 394,530 | ||||||
6.00% 9/1/37 | 86,293 | 98,687 | ||||||
6.00% 11/1/37 | 24,342 | 27,813 | ||||||
6.00% 5/1/38 | 2,049,626 | 2,355,731 | ||||||
6.00% 8/1/38 | 157,472 | 179,820 | ||||||
6.00% 9/1/38 | 249,935 | 285,957 | ||||||
6.00% 10/1/38 | 112,407 | 128,778 | ||||||
6.00% 11/1/38 | 204,122 | 235,210 | ||||||
6.00% 1/1/39 | 385,516 | 441,724 | ||||||
6.00% 7/1/39 | 14,469 | 16,522 | ||||||
6.00% 9/1/39 | 3,138,635 | 3,591,533 | ||||||
6.00% 10/1/39 | 3,169,820 | 3,678,840 | ||||||
6.00% 3/1/40 | 347,349 | 397,661 | ||||||
6.00% 7/1/40 | 1,380,978 | 1,577,413 | ||||||
6.00% 9/1/40 | 302,477 | 346,443 | ||||||
6.00% 11/1/40 | 138,096 | 160,253 | ||||||
6.00% 5/1/41 | 4,243,156 | 4,858,196 | ||||||
6.00% 6/1/41 | 1,510,034 | 1,727,331 | ||||||
6.00% 7/1/41 | 7,083,682 | 8,123,996 | ||||||
6.50% 2/1/36 | 193,380 | 236,486 | ||||||
6.50% 3/1/37 | 292,382 | 360,895 | ||||||
7.50% 3/1/32 | 184 | 205 | ||||||
7.50% 4/1/32 | 819 | 967 | ||||||
Fannie Mae S.F. 30 yr TBA | ||||||||
3.00% 8/1/46 | 181,054,000 | 187,553,513 | ||||||
4.50% 8/1/46 | 10,845,000 | 11,831,161 | ||||||
Freddie Mac ARM | ||||||||
2.495% 1/1/44 • | 2,559,084 | 2,653,298 | ||||||
2.51% 8/1/37 • | 2,670 | 2,821 | ||||||
2.57% 2/1/37 • | 161,908 | 170,883 | ||||||
2.574% 10/1/37 • | 1,214 | 1,284 | ||||||
2.592% 12/1/33 • | 24,434 | 25,878 | ||||||
2.65% 10/1/37 • | 12,548 | 13,204 | ||||||
2.768% 10/1/45 • | 764,576 | 790,861 | ||||||
2.826% 9/1/45 • | 4,848,669 | 5,035,250 | ||||||
2.944% 10/1/45 • | 1,274,174 | 1,329,105 | ||||||
2.951% 11/1/44 • | 451,140 | 468,413 | ||||||
3.107% 3/1/46 • | 1,698,757 | 1,775,953 | ||||||
3.206% 6/1/37 • | 237,733 | 253,175 | ||||||
Freddie Mac Relocation 30 yr | 4,524 | 4,954 | ||||||
Freddie Mac S.F. 15 yr | 243,906 | 258,237 | ||||||
Freddie Mac S.F. 20 yr | 849,233 | 890,288 | ||||||
Freddie Mac S.F. 30 yr | ||||||||
4.50% 10/1/35 | 266,806 | 291,897 | ||||||
4.50% 4/1/39 | 211,191 | 233,819 | ||||||
4.50% 10/1/39 | 598,163 | 655,823 |
Principal | Value | |||||||
amount° | (U.S. $) | |||||||
Agency Mortgage-Backed Securities (continued) | ||||||||
Freddie Mac S.F. 30 yr | ||||||||
4.50% 5/1/40 | 3,885,540 | $ | 4,333,985 | |||||
4.50% 3/1/41 | 1,332,182 | 1,462,975 | ||||||
4.50% 4/1/41 | 2,914,415 | 3,200,829 | ||||||
4.50% 7/1/42 | 1,960,628 | 2,159,349 | ||||||
4.50% 8/1/44 | 2,845,943 | 3,140,766 | ||||||
4.50% 7/1/45 | 3,586,631 | 3,937,151 | ||||||
5.00% 3/1/34 | 11,688 | 13,192 | ||||||
5.00% 6/1/36 | 1,977,465 | 2,195,757 | ||||||
5.50% 3/1/34 | 99,727 | 112,519 | ||||||
5.50% 12/1/34 | 91,774 | 103,701 | ||||||
5.50% 6/1/36 | 55,583 | 62,559 | ||||||
5.50% 11/1/36 | 105,692 | 118,195 | ||||||
5.50% 12/1/36 | 25,940 | 29,124 | ||||||
5.50% 9/1/37 | 121,696 | 136,546 | ||||||
5.50% 4/1/38 | 436,836 | 490,989 | ||||||
5.50% 6/1/38 | 67,432 | 75,863 | ||||||
5.50% 7/1/38 | 438,900 | 493,849 | ||||||
5.50% 6/1/39 | 454,590 | 510,414 | ||||||
5.50% 3/1/40 | 301,793 | 338,228 | ||||||
5.50% 8/1/40 | 221,021 | 247,533 | ||||||
5.50% 1/1/41 | 299,293 | 336,345 | ||||||
5.50% 6/1/41 | 5,150,128 | 5,792,067 | ||||||
6.00% 2/1/36 | 464,314 | 533,117 | ||||||
6.00% 3/1/36 | 296,420 | 341,874 | ||||||
6.00% 1/1/38 | 119,015 | 135,852 | ||||||
6.00% 6/1/38 | 320,463 | 365,610 | ||||||
6.00% 8/1/38 | 524,848 | 608,827 | ||||||
6.00% 5/1/40 | 691,307 | 791,606 | ||||||
6.00% 7/1/40 | 1,536,997 | 1,760,566 | ||||||
6.50% 8/1/38 | 70,566 | 81,064 | ||||||
6.50% 4/1/39 | 489,884 | 562,769 | ||||||
GNMA I S.F. 30 yr 7.00% 12/15/34 | 134,265 | 163,647 | ||||||
GNMA II S.F. 30 yr | ||||||||
5.50% 5/20/37 | 591,677 | 660,057 | ||||||
5.50% 4/20/40 | 611,951 | 671,107 | ||||||
6.00% 2/20/39 | 947,938 | 1,080,258 | ||||||
6.00% 4/20/46 | 952,895 | 1,097,478 | ||||||
|
| |||||||
Total Agency Mortgage-Backed Securities (cost $549,850,094) | 556,185,245 | |||||||
|
| |||||||
Collateralized Debt Obligations – 1.59% | ||||||||
Avery Point III CLO | 2,200,000 | 2,178,381 | ||||||
Benefit Street Partners CLO IV | 5,900,000 | 5,862,977 |
Diversified Income Series-6
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal | Value | |||||||
amount° | (U.S. $) | |||||||
Collateralized Debt Obligations (continued) | ||||||||
BlueMountain CLO | ||||||||
Series 2014-3A A1 144A 2.108% 10/15/26 #• | 1,270,000 | $ | 1,268,091 | |||||
Series 2014-4A A1 144A 2.174% 11/30/26 #• | 3,800,000 | 3,781,730 | ||||||
Carlyle Global Market Strategies CLO | 2,750,000 | 2,736,739 | ||||||
Cedar Funding III CLO | 2,420,000 | 2,414,799 | ||||||
Cent CLO | ||||||||
Series 2013-20A A 144A 2.118% 1/25/26 #• | 667,000 | 661,470 | ||||||
Series 2014-21A A1B 144A 2.024% 7/27/26 #• | 2,200,000 | 2,164,173 | ||||||
Magnetite IX | 6,040,000 | 6,030,910 | ||||||
Neuberger Berman CLO XVII | 2,150,000 | 2,143,073 | ||||||
Neuberger Berman CLO XIX | 3,300,000 | 3,281,018 | ||||||
Shackleton CLO | 2,985,000 | 2,960,607 | ||||||
|
| |||||||
Total Collateralized Debt Obligations | 35,483,968 | |||||||
|
| |||||||
Convertible Bonds – 1.50% | ||||||||
Alaska Communications Systems Group 6.25% exercise price $10.28, maturity date 5/1/18 @ | 1,504,000 | 1,459,820 | ||||||
Atlas Air Worldwide Holdings 2.25% exercise price $74.05, maturity date 6/1/22 | 449,000 | 437,494 | ||||||
BGC Partners 4.50% exercise price $9.84, maturity date 7/15/16 | 885,000 | 888,319 | ||||||
BioMarin Pharmaceutical 1.50% exercise price $94.15, maturity date 10/15/20 | 485,000 | 563,206 | ||||||
Blackstone Mortgage Trust 5.25% exercise price $28.36, maturity date 12/1/18 | 1,497,000 | 1,592,434 | ||||||
Blucora 4.25% exercise price $21.66, maturity date 4/1/19 | 652,000 | 603,100 | ||||||
Brookdale Senior Living 2.75% exercise price $29.33, maturity date 6/15/18 | 1,076,000 | 1,055,153 |
Principal | Value | |||||||
amount° | (U.S. $) | |||||||
Convertible Bonds (continued) | ||||||||
Cardtronics 1.00% exercise price $52.35, maturity date 12/1/20 | 1,276,000 | $ | 1,285,570 | |||||
Cemex 3.72% exercise price $11.45, maturity date 3/15/20 | 874,000 | 818,829 | ||||||
Chart Industries 2.00% exercise price $69.03, maturity date 8/1/18 @ | 1,314,000 | 1,229,411 | ||||||
Ciena 144A 3.75% exercise price $20.17, maturity date 10/15/18 # | 632,000 | 740,625 | ||||||
Clearwire Communications 144A 8.25% exercise price $7.08, maturity date 12/1/40 # | 855,000 | 869,963 | ||||||
GAIN Capital Holdings 4.125% exercise price $12.00, maturity date 12/1/18 @ | 699,000 | 643,954 | ||||||
General Cable 4.50% exercise price $32.36, maturity date 11/15/29 @f | 1,272,000 | 733,785 | ||||||
HealthSouth 2.00% exercise price $37.59, maturity date 12/1/43 | 1,016,000 | 1,190,625 | ||||||
Helix Energy Solutions Group 3.25% exercise price $25.02, maturity date 3/15/32 | 925,000 | 824,406 | ||||||
Hologic 2.00% exercise price $31.18, maturity date 3/1/42 f | 611,000 | 785,135 | ||||||
Infinera 1.75% exercise price $12.58, maturity date 6/1/18 | 789,000 | 916,226 | ||||||
Intel 3.25% exercise price $21.18, maturity date 8/1/39 | 298,000 | 484,996 | ||||||
Jefferies Group 3.875% exercise price $44.19, maturity date 11/1/29 | 1,055,000 | 1,072,144 | ||||||
Knowles 144A 3.25% exercise price $18.43, maturity date 11/1/21 # | 234,000 | 239,558 | ||||||
Liberty Interactive 144A 1.00% exercise price $64.18, maturity date 9/30/43 # | 1,228,000 | 1,072,198 | ||||||
Meritor 4.00% exercise price $26.73, maturity date 2/15/27 f | 1,509,000 | 1,454,299 | ||||||
Microchip Technology 1.625% exercise price $65.56, maturity date 2/15/25 | 531,000 | 590,406 | ||||||
Micron Technology 3.00% exercise price $29.16, maturity date 11/15/43 | 698,000 | 536,588 | ||||||
New Mountain Finance 5.00% exercise price $15.93, maturity date 6/15/19 @ | 205,000 | 202,181 | ||||||
Novellus Systems 2.625% exercise price $34.11, maturity date 5/15/41 | 648,000 | 1,613,520 | ||||||
NuVasive 144A 2.25% exercise price $59.82, maturity date 3/15/21 # | 374,000 | 444,593 | ||||||
NXP Semiconductors 1.00% exercise price $102.84, maturity date 12/1/19 | 616,000 | 672,595 | ||||||
PROS Holdings 2.00% exercise price $33.79, maturity date 12/1/19 | 1,429,000 | 1,282,528 | ||||||
Spectrum Pharmaceuticals 2.75% exercise price $10.53, maturity date 12/15/18 @ | 1,089,000 | 1,010,728 |
Diversified Income Series-7
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal | Value | |||||||||||
amount° | (U.S. $) | |||||||||||
Convertible Bonds (continued) | ||||||||||||
Spirit Realty Capital 3.75% exercise price $13.10, maturity date 5/15/21 @ | 1,129,000 | $ | 1,264,486 | |||||||||
Synchronoss Technologies 0.75% exercise price $53.17, maturity date 8/15/19 | 1,062,000 | 1,056,026 | ||||||||||
Titan Machinery 3.75% exercise price $43.17, maturity date 5/1/19 @ | 218,000 | 177,670 | ||||||||||
TPG Specialty Lending 4.50% exercise price $25.83, maturity date 12/15/19 @ | 792,000 | 808,830 | ||||||||||
Vector Group 1.75% exercise price $24.64, maturity date 4/15/20 • | 1,020,000 | 1,136,025 | ||||||||||
Vector Group 2.50% exercise price $15.98, maturity date 1/15/19 • | 408,000 | 593,532 | ||||||||||
VEREIT 3.75% exercise price $14.99, maturity date 12/15/20 @ | 1,303,000 | 1,295,677 | ||||||||||
|
| |||||||||||
Total Convertible Bonds | 33,646,635 | |||||||||||
|
| |||||||||||
Corporate Bonds – 41.90% |
| |||||||||||
Automotive – 0.11% | ||||||||||||
American Axle & Manufacturing 6.25% 3/15/21 | 1,156,000 | 1,203,685 | ||||||||||
Lear 5.25% 1/15/25 | 1,175,000 | 1,238,156 | ||||||||||
|
| |||||||||||
2,441,841 | ||||||||||||
|
| |||||||||||
Banking – 7.14% | ||||||||||||
Banco Nacional de Costa Rica 144A 5.875% 4/25/21 # | 1,820,000 | 1,879,969 | ||||||||||
Bank Nederlandse Gemeenten | ||||||||||||
144A 1.625% 4/19/21 # | 2,932,000 | 2,977,091 | ||||||||||
5.25% 5/20/24 | AUD | 759,000 | 666,200 | |||||||||
Bank of America 4.45% 3/3/26 | 11,915,000 | 12,486,813 | ||||||||||
Bank of New York Mellon | ||||||||||||
2.15% 2/24/20 | 535,000 | 545,692 | ||||||||||
2.50% 4/15/21 | 4,330,000 | 4,489,807 | ||||||||||
2.80% 5/4/26 | 780,000 | 810,074 | ||||||||||
Barclays 4.375% 1/12/26 | 2,690,000 | 2,725,373 | ||||||||||
BB&T 2.05% 5/10/21 | 3,960,000 | 4,020,738 | ||||||||||
BBVA Bancomer 144A 7.25% 4/22/20 # | 765,000 | 847,237 | ||||||||||
Branch Banking & Trust 3.625% 9/16/25 | 365,000 | 393,398 | ||||||||||
Citizens Bank 2.55% 5/13/21 | 840,000 | 849,059 | ||||||||||
Citizens Financial Group 4.30% 12/3/25 | 2,050,000 | 2,161,883 | ||||||||||
Compass Bank 3.875% 4/10/25 | 2,280,000 | 2,191,956 | ||||||||||
Cooperatieve Rabobank | ||||||||||||
2.50% 9/4/20 | NOK | 5,290,000 | 664,095 | |||||||||
2.50% 1/19/21 | 1,190,000 | 1,220,552 | ||||||||||
Credit Suisse Group 144A 6.25% 12/29/49 #• | 2,270,000 | 2,146,374 | ||||||||||
Credit Suisse Group Funding Guernsey | ||||||||||||
144A 3.125% 12/10/20 # | 1,985,000 | 1,984,015 |
Principal | Value | |||||||||||
amount° | (U.S. $) | |||||||||||
Corporate Bonds (continued) | ||||||||||||
Banking (continued) | ||||||||||||
Credit Suisse Group Funding Guernsey | ||||||||||||
144A 3.80% 6/9/23 # | 3,205,000 | $ | 3,201,606 | |||||||||
144A 4.55% 4/17/26 # | 4,755,000 | 4,942,466 | ||||||||||
Export Credit Bank of Turkey 144A 5.375% 2/8/21 # | 1,895,000 | 1,985,031 | ||||||||||
Export-Import Bank of Korea | ||||||||||||
2.125% 2/11/21 | 1,455,000 | 1,469,957 | ||||||||||
144A 2.711% 12/5/19 # | CAD | 210,000 | 168,571 | |||||||||
144A 3.00% 5/22/18 # | NOK | 1,100,000 | 135,223 | |||||||||
Fifth Third Bancorp 2.875% 7/27/20 | 975,000 | 1,018,543 | ||||||||||
Fifth Third Bank | ||||||||||||
2.25% 6/14/21 | 1,530,000 | 1,554,934 | ||||||||||
3.85% 3/15/26 | 2,240,000 | 2,357,096 | ||||||||||
Goldman Sachs Group | ||||||||||||
3.295% 8/21/19 • | AUD | 550,000 | 408,869 | |||||||||
3.55% 2/12/21 | CAD | 400,000 | 326,784 | |||||||||
5.20% 12/17/19 | NZD | 612,000 | 457,245 | |||||||||
HSBC Holdings 6.875% 12/29/49 • | 1,250,000 | 1,246,875 | ||||||||||
ICICI Bank 144A 4.00% 3/18/26 # | 2,230,000 | 2,269,950 | ||||||||||
Industrial & Commercial Bank of China 2.635% 5/26/21 | 2,340,000 | 2,362,925 | ||||||||||
JPMorgan Chase | ||||||||||||
1.264% 1/28/19 • | 1,124,000 | 1,122,496 | ||||||||||
3.20% 6/15/26 | 2,145,000 | 2,207,441 | ||||||||||
3.50% 12/18/26 | GBP | 264,000 | 379,392 | |||||||||
4.25% 11/2/18 | NZD | 1,840,000 | 1,339,303 | |||||||||
4.25% 10/1/27 | 7,475,000 | 7,926,535 | ||||||||||
KeyBank | ||||||||||||
3.30% 6/1/25 | 940,000 | 992,263 | ||||||||||
3.40% 5/20/26 | 2,730,000 | 2,777,827 | ||||||||||
6.95% 2/1/28 | 4,255,000 | 5,516,105 | ||||||||||
KFW 1.50% 6/15/21 | 2,270,000 | 2,300,073 | ||||||||||
Lloyds Banking Group 3.10% 7/6/21 | 525,000 | 524,612 | ||||||||||
Morgan Stanley | ||||||||||||
1.488% 1/24/19 • | 1,126,000 | 1,124,563 | ||||||||||
2.50% 4/21/21 | 680,000 | 687,886 | ||||||||||
3.125% 8/5/21 | CAD | 972,000 | 782,423 | |||||||||
3.875% 1/27/26 | 3,715,000 | 3,951,701 | ||||||||||
3.95% 4/23/27 | 340,000 | 344,594 | ||||||||||
5.00% 9/30/21 | AUD | 1,087,000 | 878,515 | |||||||||
National City Bank 1.052% 6/7/17 • | 1,905,000 | 1,902,352 | ||||||||||
PNC Bank | ||||||||||||
1.85% 7/20/18 | 700,000 | 707,949 | ||||||||||
2.45% 11/5/20 | 250,000 | 257,025 | ||||||||||
2.60% 7/21/20 | 705,000 | 730,474 | ||||||||||
6.875% 4/1/18 | 5,710,000 | 6,236,211 | ||||||||||
RBC USA Holdco 5.25% 9/15/20 | 2,075,000 | 2,345,920 | ||||||||||
Santander UK Group Holdings | ||||||||||||
2.875% 10/16/20 | 1,000,000 | 994,274 | ||||||||||
3.125% 1/8/21 | 1,035,000 | 1,038,602 | ||||||||||
State Street | ||||||||||||
2.55% 8/18/20 | 2,245,000 | 2,331,024 |
Diversified Income Series-8
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal | Value | |||||||||||
amount° | (U.S. $) | |||||||||||
Corporate Bonds (continued) | ||||||||||||
Banking (continued) | ||||||||||||
State Street | ||||||||||||
3.10% 5/15/23 | 1,360,000 | $ | 1,408,241 | |||||||||
3.55% 8/18/25 | 2,510,000 | 2,732,750 | ||||||||||
SunTrust Bank 3.30% 5/15/26 | 1,245,000 | 1,257,743 | ||||||||||
SunTrust Banks | ||||||||||||
2.35% 11/1/18 | 685,000 | 696,050 | ||||||||||
2.90% 3/3/21 | 1,390,000 | 1,440,718 | ||||||||||
SVB Financial Group 3.50% 1/29/25 | 1,350,000 | 1,348,362 | ||||||||||
Swedbank 144A 2.65% 3/10/21 # | 2,585,000 | 2,674,769 | ||||||||||
Toronto-Dominion Bank | ||||||||||||
2.125% 4/7/21 | 1,755,000 | 1,787,236 | ||||||||||
2.50% 12/14/20 | 2,515,000 | 2,603,040 | ||||||||||
Turkiye Is Bankasi 144A 5.375% 10/6/21 # | 1,350,000 | 1,396,409 | ||||||||||
U.S. Bancorp | ||||||||||||
2.35% 1/29/21 | 2,295,000 | 2,370,531 | ||||||||||
3.10% 4/27/26 | 195,000 | 203,084 | ||||||||||
3.60% 9/11/24 | 2,640,000 | 2,846,746 | ||||||||||
UBS Group Funding Jersey | ||||||||||||
144A 3.00% 4/15/21 # | 965,000 | 985,342 | ||||||||||
144A 4.125% 9/24/25 # | 2,265,000 | 2,352,277 | ||||||||||
144A 4.125% 4/15/26 # | 2,675,000 | 2,785,665 | ||||||||||
USB Capital IX 3.50% 10/29/49 @• | 7,185,000 | 5,882,719 | ||||||||||
Wells Fargo | ||||||||||||
3.50% 9/12/29 | GBP | 654,000 | 946,978 | |||||||||
4.30% 7/22/27 | 720,000 | 778,439 | ||||||||||
4.40% 6/14/46 | 2,680,000 | 2,737,272 | ||||||||||
Woori Bank 144A 4.75% 4/30/24 # | 1,550,000 | 1,634,895 | ||||||||||
Zions Bancorporation 4.50% 6/13/23 | 2,150,000 | 2,281,913 | ||||||||||
|
| |||||||||||
159,517,140 | ||||||||||||
|
| |||||||||||
Basic Industry – 2.66% |
| |||||||||||
Ardagh Packaging Finance 144A 4.625% 5/15/23 # | 645,000 | 638,550 | ||||||||||
BHP Billiton Finance | ||||||||||||
3.00% 3/30/20 | AUD | 630,000 | 467,841 | |||||||||
3.25% 9/25/24 | GBP | 325,000 | 454,865 | |||||||||
BHP Billiton Finance USA 144A 6.25% 10/19/75 #• | 1,430,000 | 1,509,365 | ||||||||||
CF Industries 6.875% 5/1/18 | 3,830,000 | 4,163,038 | ||||||||||
Dow Chemical 8.55% 5/15/19 | 9,161,000 | 10,881,500 | ||||||||||
Eastman Chemical | ||||||||||||
3.80% 3/15/25 | 1,360,000 | 1,439,958 | ||||||||||
4.65% 10/15/44 | 5,225,000 | 5,365,239 | ||||||||||
Georgia-Pacific 8.00% 1/15/24 | 5,210,000 | 6,970,522 | ||||||||||
Gerdau Trade 144A 4.75% 4/15/23 # | 705,000 | 608,063 | ||||||||||
GTL Trade Finance 144A 5.893% 4/29/24 # | 565,000 | 500,985 | ||||||||||
International Paper 5.15% 5/15/46 | 2,305,000 | 2,496,287 | ||||||||||
INVISTA Finance 144A 4.25% 10/15/19 # | 2,465,000 | 2,415,700 | ||||||||||
Lundin Mining 144A 7.50% 11/1/20 # | 1,195,000 | 1,224,875 |
Principal | Value | |||||||||||
amount° | (U.S. $) | |||||||||||
Corporate Bonds (continued) | ||||||||||||
Basic Industry (continued) | ||||||||||||
Methanex 4.25% 12/1/24 | 1,515,000 | $ | 1,354,321 | |||||||||
MMC Norilsk Nickel | ||||||||||||
144A 5.55% 10/28/20 # | 962,000 | 1,022,623 | ||||||||||
144A 6.625% 10/14/22 # | 1,095,000 | 1,217,084 | ||||||||||
NOVA Chemicals 144A 5.00% 5/1/25 # | 3,039,000 | 3,016,208 | ||||||||||
OCP | ||||||||||||
144A 4.50% 10/22/25 # | 2,125,000 | 2,084,413 | ||||||||||
144A 6.875% 4/25/44 # | 640,000 | 677,411 | ||||||||||
PolyOne 5.25% 3/15/23 | 812,000 | 822,150 | ||||||||||
PPG Industries 2.30% 11/15/19 | 1,770,000 | 1,785,615 | ||||||||||
Rio Tinto Finance USA 3.75% 6/15/25 | 3,005,000 | 3,149,426 | ||||||||||
Southern Copper 5.875% 4/23/45 | 1,260,000 | 1,192,591 | ||||||||||
Suzano Trading 144A 5.875% 1/23/21 # | 1,505,000 | 1,574,606 | ||||||||||
Vale Overseas 5.875% 6/10/21 | 1,970,000 | 1,977,388 | ||||||||||
WR Grace 144A 5.125% 10/1/21 # | 345,000 | 355,350 | ||||||||||
|
| |||||||||||
59,365,974 | ||||||||||||
|
| |||||||||||
Brokerage – 0.21% | ||||||||||||
Affiliated Managers Group 3.50% 8/1/25 | 2,115,000 | 2,116,851 | ||||||||||
Jefferies Group | ||||||||||||
6.45% 6/8/27 | 893,000 | 993,960 | ||||||||||
6.50% 1/20/43 | 585,000 | 582,689 | ||||||||||
Lazard Group 6.85% 6/15/17 | 878,000 | 918,385 | ||||||||||
|
| |||||||||||
4,611,885 | ||||||||||||
|
| |||||||||||
Capital Goods – 1.09% | ||||||||||||
ANZ New Zealand International 144A 2.60% 9/23/19 # | 500,000 | 511,841 | ||||||||||
Ball | ||||||||||||
5.00% 3/15/22 | 430,000 | 458,595 | ||||||||||
5.25% 7/1/25 | 1,610,000 | 1,684,463 | ||||||||||
Cemex | ||||||||||||
144A 7.25% 1/15/21 # | 1,675,000 | 1,771,647 | ||||||||||
144A 7.75% 4/16/26 # | 735,000 | 772,926 | ||||||||||
Cia Brasileira de Aluminio 144A 6.75% 4/5/21 # | 1,525,000 | 1,586,000 | ||||||||||
Fortune Brands Home & Security 3.00% 6/15/20 | 1,310,000 | 1,354,460 | ||||||||||
General Electric 144A 3.80% 6/18/19 # | 1,555,000 | 1,671,070 | ||||||||||
General Electric Capital | ||||||||||||
2.10% 12/11/19 | 795,000 | 820,576 | ||||||||||
5.55% 5/4/20 | 1,295,000 | 1,493,974 | ||||||||||
6.00% 8/7/19 | 2,675,000 | 3,065,587 | ||||||||||
Lockheed Martin 3.55% 1/15/26 | 1,610,000 | 1,752,343 | ||||||||||
Masco 3.50% 4/1/21 | 2,785,000 | 2,855,461 | ||||||||||
Owens-Brockway Glass Container 144A 5.875% 8/15/23 # | 1,450,000 | 1,525,828 | ||||||||||
Union Andina de Cementos 144A 5.875% 10/30/21 # | 1,845,000 | 1,874,520 | ||||||||||
Waste Management 2.40% 5/15/23 | 1,160,000 | 1,178,548 | ||||||||||
|
| |||||||||||
24,377,839 | ||||||||||||
|
|
Diversified Income Series-9
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal | Value | |||||||||||
amount° | (U.S. $) | |||||||||||
Corporate Bonds (continued) | ||||||||||||
Communications – 5.02% |
| |||||||||||
21st Century Fox America 4.95% 10/15/45 | 3,090,000 | $ | 3,532,621 | |||||||||
Altice U.S. Finance I | ||||||||||||
144A 5.375% 7/15/23 # | 1,275,000 | 1,270,219 | ||||||||||
144A 5.50% 5/15/26 # | 1,200,000 | 1,203,000 | ||||||||||
America Movil 5.00% 3/30/20 | 1,630,000 | 1,809,184 | ||||||||||
American Tower | ||||||||||||
2.80% 6/1/20 | 815,000 | 834,765 | ||||||||||
4.00% 6/1/25 | 3,010,000 | 3,206,905 | ||||||||||
4.40% 2/15/26 | 205,000 | 222,998 | ||||||||||
American Tower Trust I 144A 3.07% 3/15/23 # | 2,430,000 | 2,500,762 | ||||||||||
AT&T | ||||||||||||
3.60% 2/17/23 | 1,855,000 | 1,937,878 | ||||||||||
4.125% 2/17/26 | 3,765,000 | 4,052,386 | ||||||||||
5.65% 2/15/47 | 3,860,000 | 4,437,580 | ||||||||||
Bell Canada 3.35% 3/22/23 | CAD | 773,000 | 633,167 | |||||||||
CC Holdings GS V 3.849% 4/15/23 | 1,710,000 | 1,826,726 | ||||||||||
CenturyLink 5.80% 3/15/22 | 3,230,000 | 3,148,249 | ||||||||||
Charter Communications Operating 144A 4.908% 7/23/25 # | 7,145,000 | 7,825,711 | ||||||||||
Colombia Telecomunicaciones 144A 5.375% 9/27/22 # | 1,600,000 | 1,516,000 | ||||||||||
Columbus International 144A 7.375% 3/30/21 # | 1,395,000 | 1,478,351 | ||||||||||
Comcast 3.15% 3/1/26 | 9,600,000 | 10,230,643 | ||||||||||
Crown Castle International 5.25% 1/15/23 | 2,190,000 | 2,465,524 | ||||||||||
Crown Castle Towers 144A 4.883% 8/15/20 # | 9,630,000 | 10,509,048 | ||||||||||
Deutsche Telekom International Finance 6.50% 4/8/22 | GBP | 416,000 | 700,939 | |||||||||
Digicel 144A 6.00% 4/15/21 # | 480,000 | 413,856 | ||||||||||
Digicel Group 144A 8.25% 9/30/20 # | 2,005,000 | 1,684,200 | ||||||||||
Equinix 5.375% 4/1/23 | 2,331,000 | 2,418,413 | ||||||||||
Frontier Communications 8.875% 9/15/20 | 1,865,000 | 1,997,881 | ||||||||||
Grupo Televisa 6.125% 1/31/46 | 1,200,000 | 1,331,124 | ||||||||||
GTH Finance 144A 7.25% 4/26/23 # | 1,080,000 | 1,128,600 | ||||||||||
GTP Acquisition Partners I 144A 2.35% 6/15/20 # | 1,095,000 | 1,094,025 | ||||||||||
Level 3 Financing 5.375% 5/1/25 | 2,839,000 | 2,828,354 | ||||||||||
Millicom International Cellular | ||||||||||||
144A 6.00% 3/15/25 # | 590,000 | 577,463 | ||||||||||
144A 6.625% 10/15/21 # | 1,760,000 | 1,813,592 | ||||||||||
Myriad International Holdings 144A 5.50% 7/21/25 # | 1,590,000 | 1,656,780 | ||||||||||
Omnicom Group 3.60% 4/15/26 | 430,000 | 453,804 | ||||||||||
Ooredoo International Finance 144A 3.75% 6/22/26 # | 1,335,000 | 1,353,356 |
Principal | Value | |||||||||||
amount° | (U.S. $) | |||||||||||
Corporate Bonds (continued) | ||||||||||||
Communications (continued) | ||||||||||||
SBA Tower Trust | ||||||||||||
144A 2.24% 4/16/18 # | 1,800,000 | $ | 1,805,769 | |||||||||
144A 2.898% 10/15/19 # | 1,300,000 | 1,318,051 | ||||||||||
Sky 144A 3.75% 9/16/24 # | 7,825,000 | 8,144,072 | ||||||||||
Sprint Communications | ||||||||||||
144A 7.00% 3/1/20 # | 605,000 | 636,454 | ||||||||||
144A 9.00% 11/15/18 # | 1,795,000 | 1,918,406 | ||||||||||
Time Warner 2.95% 7/15/26 | 720,000 | 726,965 | ||||||||||
T-Mobile USA 6.125% 1/15/22 | 1,359,000 | 1,430,348 | ||||||||||
UPCB Finance IV 144A 5.375% 1/15/25 # | 1,198,000 | 1,192,010 | ||||||||||
Verizon Communications | ||||||||||||
3.25% 2/17/26 | EUR | 971,000 | 1,286,980 | |||||||||
4.862% 8/21/46 | 2,817,000 | 3,091,866 | ||||||||||
Vimpel Communications 144A 7.748% 2/2/21 # | 1,118,000 | 1,239,243 | ||||||||||
Virgin Media Secured Finance 144A 5.25% 1/15/26 # | 2,805,000 | 2,727,863 | ||||||||||
WPP Finance 2010 5.625% 11/15/43 | 780,000 | 899,419 | ||||||||||
Zayo Group 6.00% 4/1/23 | 1,715,000 | 1,749,300 | ||||||||||
|
| |||||||||||
112,260,850 | ||||||||||||
|
| |||||||||||
Consumer Cyclical – 3.21% |
| |||||||||||
Aramark Services | ||||||||||||
144A 4.75% 6/1/26 # | 2,690,000 | 2,642,925 | ||||||||||
144A 5.125% 1/15/24 # | 2,310,000 | 2,361,975 | ||||||||||
BMW U.S. Capital | ||||||||||||
144A 2.00% 4/11/21 # | 3,030,000 | 3,071,384 | ||||||||||
144A 2.80% 4/11/26 # | 3,260,000 | 3,348,101 | ||||||||||
Cencosud 144A 5.15% 2/12/25 # | 2,085,000 | 2,144,391 | ||||||||||
CVS Health | ||||||||||||
2.125% 6/1/21 | 725,000 | 734,753 | ||||||||||
3.875% 7/20/25 | 1,625,000 | 1,790,820 | ||||||||||
Daimler 2.75% 12/10/18 | NOK | 5,560,000 | 688,958 | |||||||||
Ford Motor Credit | ||||||||||||
3.096% 5/4/23 | 2,145,000 | 2,178,295 | ||||||||||
3.336% 3/18/21 | 340,000 | 353,006 | ||||||||||
General Motors 6.75% 4/1/46 | 290,000 | 345,196 | ||||||||||
General Motors Financial | ||||||||||||
3.45% 4/10/22 | 2,805,000 | 2,806,655 | ||||||||||
3.70% 5/9/23 | 1,805,000 | 1,817,043 | ||||||||||
4.375% 9/25/21 | 870,000 | 919,138 | ||||||||||
5.25% 3/1/26 | 1,045,000 | 1,138,129 | ||||||||||
Goodyear Tire & Rubber 5.00% 5/31/26 | 1,565,000 | 1,598,256 | ||||||||||
Hanesbrands 144A 4.875% 5/15/26 # | 2,515,000 | 2,536,629 | ||||||||||
Home Depot 3.00% 4/1/26 | 1,120,000 | 1,191,783 | ||||||||||
Hyundai Capital America | ||||||||||||
144A 2.125% 10/2/17 # | 1,570,000 | 1,580,260 | ||||||||||
144A 2.55% 2/6/19 # | 685,000 | 696,742 | ||||||||||
144A 3.00% 3/18/21 # | 965,000 | 1,000,678 | ||||||||||
JD.com 3.125% 4/29/21 | 1,105,000 | 1,086,195 |
Diversified Income Series-10
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal | Value | |||||||||||
amount° | (U.S. $) | |||||||||||
Corporate Bonds (continued) |
| |||||||||||
Consumer Cyclical (continued) |
| |||||||||||
KFC Holding | ||||||||||||
144A 5.00% 6/1/24 # | 788,000 | $ | 803,760 | |||||||||
144A 5.25% 6/1/26 # | 736,000 | 756,240 | ||||||||||
L Brands 6.75% 7/1/36 | 1,345,000 | 1,350,878 | ||||||||||
Lowe’s | ||||||||||||
2.50% 4/15/26 | 2,340,000 | 2,386,323 | ||||||||||
3.70% 4/15/46 | 3,605,000 | 3,716,607 | ||||||||||
Marriott International 3.125% 6/15/26 | 2,565,000 | 2,601,574 | ||||||||||
MGM Resorts International 6.00% 3/15/23 | 2,830,000 | 2,992,725 | ||||||||||
Nemak 144A 5.50% 2/28/23 # | 1,560,000 | 1,622,400 | ||||||||||
O’Reilly Automotive 3.55% 3/15/26 | 1,110,000 | 1,166,153 | ||||||||||
Priceline Group 3.60% 6/1/26 | 2,000,000 | 2,069,806 | ||||||||||
Sally Holdings 5.75% 6/1/22 | 47,000 | 48,939 | ||||||||||
Starbucks 2.45% 6/15/26 | 1,320,000 | 1,342,229 | ||||||||||
Starwood Hotels & Resorts Worldwide | ||||||||||||
3.75% 3/15/25 @ | 2,230,000 | 2,325,973 | ||||||||||
4.50% 10/1/34 @ | 410,000 | 419,550 | ||||||||||
Target 3.625% 4/15/46 | 1,295,000 | 1,326,176 | ||||||||||
Tempur Sealy International 144A 5.50% 6/15/26 # | 800,000 | 788,000 | ||||||||||
Toyota Credit Canada 2.05% 5/20/20 | CAD | 400,000 | 314,795 | |||||||||
Toyota Finance Australia | ||||||||||||
2.25% 8/31/16 | NOK | 1,230,000 | 147,168 | |||||||||
3.04% 12/20/16 | NZD | 2,070,000 | 1,475,030 | |||||||||
Toyota Motor Credit 2.80% 7/13/22 | 755,000 | 794,721 | ||||||||||
Walgreens Boots Alliance | ||||||||||||
3.10% 6/1/23 | 4,480,000 | 4,569,860 | ||||||||||
3.45% 6/1/26 | 2,005,000 | 2,062,429 | ||||||||||
4.80% 11/18/44 | 645,000 | 696,630 | ||||||||||
|
| |||||||||||
71,809,278 | ||||||||||||
|
| |||||||||||
Consumer Non-Cyclical – 4.38% |
| |||||||||||
AbbVie | ||||||||||||
3.20% 5/14/26 | 1,655,000 | 1,679,933 | ||||||||||
4.30% 5/14/36 | 1,345,000 | 1,376,339 | ||||||||||
4.45% 5/14/46 | 2,000,000 | 2,036,420 | ||||||||||
Amgen 4.00% 9/13/29 | GBP | 341,000 | 516,689 | |||||||||
Anheuser-Busch InBev Finance 3.65% 2/1/26 | 13,150,000 | 14,114,829 | ||||||||||
Arcor SAIC 144A 6.00% 7/6/23 # | 1,240,000 | 1,251,625 | ||||||||||
AstraZeneca 3.375% 11/16/25 | 3,125,000 | 3,280,025 | ||||||||||
Becton Dickinson 6.375% 8/1/19 | 3,600,000 | 4,103,190 | ||||||||||
Biogen | ||||||||||||
4.05% 9/15/25 | 875,000 | 943,671 | ||||||||||
5.20% 9/15/45 | 1,980,000 | 2,235,321 | ||||||||||
Celgene | ||||||||||||
3.25% 8/15/22 | 1,575,000 | 1,628,985 | ||||||||||
3.875% 8/15/25 | 840,000 | 897,684 | ||||||||||
5.00% 8/15/45 | 1,280,000 | 1,415,295 | ||||||||||
Cosan Luxembourg 144A 7.00% 1/20/27 # | 1,560,000 | 1,557,348 |
Principal | Value | |||||||||||
amount° | (U.S. $) | |||||||||||
Corporate Bonds (continued) | ||||||||||||
Consumer Non-Cyclical (continued) | ||||||||||||
ENA Norte Trust 144A 4.95% 4/25/23 # | 1,225,607 | $ | 1,253,184 | |||||||||
JB y Cia 144A 3.75% 5/13/25 # | 3,285,000 | 3,412,612 | ||||||||||
JBS Investments 144A 7.75% 10/28/20 # | 525,000 | 556,500 | ||||||||||
JBS USA 144A 5.75% 6/15/25 # | 430,000 | 406,350 | ||||||||||
Kraft Heinz Foods | ||||||||||||
144A 3.00% 6/1/26 # | 4,005,000 | 4,046,179 | ||||||||||
144A 4.375% 6/1/46 # | 470,000 | 499,133 | ||||||||||
Mallinckrodt International Finance 144A 5.50% 4/15/25 # | 2,137,000 | 1,917,145 | ||||||||||
Marfrig Holdings Europe 144A 8.00% 6/8/23 # | 955,000 | 976,965 | ||||||||||
Medicines 144A 2.75% 7/15/23 # | 425,000 | 409,594 | ||||||||||
Molson Coors Brewing | ||||||||||||
2.10% 7/15/21 | 605,000 | 607,548 | ||||||||||
3.00% 7/15/26 | 1,690,000 | 1,691,967 | ||||||||||
4.20% 7/15/46 | 1,110,000 | 1,119,458 | ||||||||||
Mylan | ||||||||||||
144A 3.15% 6/15/21 # | 590,000 | 599,136 | ||||||||||
144A 3.95% 6/15/26 # | 5,810,000 | 5,891,677 | ||||||||||
New York & Presbyterian Hospital 4.063% 8/1/56 | 1,630,000 | 1,760,809 | ||||||||||
Pernod Ricard | ||||||||||||
144A 3.25% 6/8/26 # | 2,745,000 | 2,815,277 | ||||||||||
144A 4.45% 1/15/22 # | 1,480,000 | 1,632,680 | ||||||||||
Perrigo 4.00% 11/15/23 | 2,870,000 | 2,961,536 | ||||||||||
Perrigo Finance Unlimited 3.50% 12/15/21 | 815,000 | 839,752 | ||||||||||
Prestige Brands 144A 5.375% 12/15/21 # | 652,000 | 665,040 | ||||||||||
Reynolds American | ||||||||||||
4.00% 6/12/22 | 2,615,000 | 2,845,721 | ||||||||||
4.45% 6/12/25 | 5,000,000 | 5,609,895 | ||||||||||
Sigma Alimentos 144A 4.125% 5/2/26 # | 1,125,000 | 1,139,063 | ||||||||||
Sysco 3.30% 7/15/26 | 6,480,000 | 6,736,867 | ||||||||||
Thermo Fisher Scientific 3.00% 4/15/23 | 4,530,000 | 4,631,463 | ||||||||||
Zimmer Biomet Holdings | ||||||||||||
3.375% 11/30/21 | 1,715,000 | 1,789,393 | ||||||||||
4.625% 11/30/19 | 3,645,000 | 3,966,092 | ||||||||||
|
| |||||||||||
97,818,390 | ||||||||||||
|
| |||||||||||
Electric – 6.37% | ||||||||||||
AES 5.50% 4/15/25 | 3,197,000 | 3,220,977 | ||||||||||
AES Gener | ||||||||||||
144A 5.00% 7/14/25 # | 1,035,000 | 1,067,560 | ||||||||||
144A 5.25% 8/15/21 # | 645,000 | 687,913 | ||||||||||
144A 8.375% 12/18/73 #@• | 920,000 | 977,500 | ||||||||||
Alabama Power 4.30% 1/2/46 | 6,815,000 | 7,666,705 | ||||||||||
Ameren 3.65% 2/15/26 | 2,090,000 | 2,258,092 | ||||||||||
Ameren Illinois 9.75% 11/15/18 | 5,900,000 | 7,004,858 | ||||||||||
American Transmission Systems 144A 5.25% 1/15/22 # | 5,410,000 | 6,135,394 |
Diversified Income Series-11
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal | Value | |||||||
amount° | (U.S. $) | |||||||
Corporate Bonds (continued) | ||||||||
Electric (continued) | ||||||||
Appalachian Power | ||||||||
3.40% 6/1/25 | 200,000 | $ | 212,644 | |||||
4.45% 6/1/45 | 1,360,000 | 1,479,888 | ||||||
Berkshire Hathaway Energy 3.75% 11/15/23 | 3,405,000 | 3,726,609 | ||||||
Black Hills 3.95% 1/15/26 | 715,000 | 760,166 | ||||||
Cleveland Electric Illuminating 5.50% 8/15/24 | 365,000 | 432,360 | ||||||
CMS Energy 6.25% 2/1/20 | 2,210,000 | 2,546,176 | ||||||
ComEd Financing III 6.35% 3/15/33 @ | 2,055,000 | 2,231,206 | ||||||
Commonwealth Edison 4.35% 11/15/45 | 2,205,000 | 2,511,735 | ||||||
Consumers Energy 4.10% 11/15/45 | 640,000 | 722,113 | ||||||
Dominion Resources 3.90% 10/1/25 | 1,105,000 | 1,185,977 | ||||||
DTE Energy 3.30% 6/15/22 | 2,180,000 | 2,300,591 | ||||||
Duke Energy | ||||||||
3.75% 4/15/24 | 750,000 | 806,666 | ||||||
4.80% 12/15/45 | 1,615,000 | 1,877,591 | ||||||
Duke Energy Carolinas 3.875% 3/15/46 | 1,160,000 | 1,249,332 | ||||||
Duke Energy Ohio 3.70% 6/15/46 | 75,000 | 76,655 | ||||||
Electricite de France 144A 5.25% 12/29/49 #• | 3,230,000 | 3,112,589 | ||||||
Emera 6.75% 6/15/76 • | 3,545,000 | 3,601,288 | ||||||
Emera U.S. Finance 144A 4.75% 6/15/46 # | 1,105,000 | 1,125,953 | ||||||
Enel 144A 8.75% 9/24/73 #• | 3,057,000 | 3,488,801 | ||||||
Enel Finance International 144A 6.00% 10/7/39 # | 1,275,000 | 1,511,753 | ||||||
Entergy 4.00% 7/15/22 | 1,820,000 | 1,955,574 | ||||||
Entergy Arkansas 3.50% 4/1/26 | 55,000 | 60,353 | ||||||
Entergy Louisiana | ||||||||
4.05% 9/1/23 | 4,045,000 | 4,510,571 | ||||||
4.95% 1/15/45 | 545,000 | 572,318 | ||||||
Entergy Mississippi 2.85% 6/1/28 | 1,835,000 | 1,866,806 | ||||||
Exelon 3.95% 6/15/25 | 2,445,000 | 2,618,707 | ||||||
Great Plains Energy 4.85% 6/1/21 | 1,195,000 | 1,314,445 | ||||||
Indiana Michigan Power | ||||||||
3.20% 3/15/23 | 1,455,000 | 1,519,682 | ||||||
4.55% 3/15/46 | 590,000 | 658,465 | ||||||
IPALCO Enterprises 5.00% 5/1/18 | 1,365,000 | 1,433,250 | ||||||
ITC Holdings | ||||||||
3.25% 6/30/26 | 1,140,000 | 1,143,284 | ||||||
3.65% 6/15/24 | 1,365,000 | 1,423,051 | ||||||
Kansas City Power & Light 3.65% 8/15/25 | 3,445,000 | 3,652,141 | ||||||
LG&E & KU Energy 4.375% 10/1/21 | 3,765,000 | 4,159,534 | ||||||
Louisville Gas & Electric 4.375% 10/1/45 | 630,000 | 725,333 | ||||||
Metropolitan Edison 144A 4.00% 4/15/25 # | 2,270,000 | 2,378,417 | ||||||
MidAmerican Energy 4.25% 5/1/46 | 2,920,000 | 3,311,233 |
Principal | Value | |||||||
amount° | (U.S. $) | |||||||
Corporate Bonds (continued) | ||||||||
Electric (continued) | ||||||||
National Rural Utilities Cooperative Finance | ||||||||
2.30% 11/1/20 | 590,000 | $ | 608,951 | |||||
2.70% 2/15/23 | 2,530,000 | 2,634,289 | ||||||
4.75% 4/30/43 • | 2,840,000 | 2,790,300 | ||||||
5.25% 4/20/46 • | 980,000 | 1,005,275 | ||||||
NextEra Energy Capital Holdings | ||||||||
2.40% 9/15/19 | 3,380,000 | 3,453,373 | ||||||
3.625% 6/15/23 | 1,320,000 | 1,393,404 | ||||||
NV Energy 6.25% 11/15/20 | 2,380,000 | 2,820,467 | ||||||
Pennsylvania Electric 5.20% 4/1/20 | 3,235,000 | 3,424,157 | ||||||
Perusahaan Listrik Negara 144A 5.50% 11/22/21 # | 2,560,000 | 2,791,731 | ||||||
Public Service of Oklahoma 5.15% 12/1/19 | 3,700,000 | 4,120,516 | ||||||
Puget Energy 6.00% 9/1/21 | 1,080,000 | 1,258,357 | ||||||
SCANA 4.125% 2/1/22 | 2,300,000 | 2,392,444 | ||||||
South Carolina Electric & Gas 4.10% 6/15/46 | 1,310,000 | 1,389,754 | ||||||
Southern | ||||||||
3.25% 7/1/26 | 3,415,000 | 3,554,643 | ||||||
4.40% 7/1/46 | 3,215,000 | 3,470,544 | ||||||
Trans-Allegheny Interstate Line 144A 3.85% 6/1/25 # | 2,055,000 | 2,201,170 | ||||||
WEC Energy Group 3.55% 6/15/25 | 850,000 | 913,796 | ||||||
Wisconsin Electric Power 4.30% 12/15/45 | 1,280,000 | 1,463,123 | ||||||
Xcel Energy 3.30% 6/1/25 | 3,240,000 | 3,423,630 | ||||||
|
| |||||||
142,392,180 | ||||||||
|
| |||||||
Energy – 2.54% | ||||||||
AmeriGas Finance 7.00% 5/20/22 | 1,118,000 | 1,185,773 | ||||||
Chevron 2.954% 5/16/26 | 2,410,000 | 2,493,745 | ||||||
CNOOC Finance 2015 Australia 2.625% 5/5/20 | 1,530,000 | 1,546,908 | ||||||
ConocoPhillips 4.95% 3/15/26 | 1,730,000 | 1,965,444 | ||||||
Dominion Gas Holdings 4.60% 12/15/44 | 3,030,000 | 3,166,259 | ||||||
Ecopetrol | ||||||||
5.875% 9/18/23 | 1,805,000 | 1,863,663 | ||||||
5.875% 5/28/45 | 1,055,000 | 922,070 | ||||||
Energy Transfer Partners | ||||||||
4.75% 1/15/26 | 925,000 | 953,053 | ||||||
9.70% 3/15/19 | 2,189,000 | 2,479,846 | ||||||
EnLink Midstream Partners 2.70% 4/1/19 | 1,260,000 | 1,225,424 | ||||||
Enterprise Products Operating | ||||||||
3.95% 2/15/27 | 2,500,000 | 2,657,225 | ||||||
7.034% 1/15/68 • | 465,000 | 490,107 | ||||||
KazMunayGas National 144A 6.375% 4/9/21 # | 530,000 | 581,675 | ||||||
Murphy Oil USA 6.00% 8/15/23 | 1,485,000 | 1,544,400 |
Diversified Income Series-12
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal | Value | |||||||
amount° | (U.S. $) | |||||||
Corporate Bonds (continued) | ||||||||
Energy (continued) | ||||||||
Noble Energy 5.05% 11/15/44 | 1,790,000 | $ | 1,809,321 | |||||
Pertamina Persero | ||||||||
144A 5.25% 5/23/21 # | 1,640,000 | 1,762,173 | ||||||
144A 5.625% 5/20/43 # | 1,060,000 | 1,032,116 | ||||||
Petrobras Global Finance | ||||||||
4.875% 3/17/20 | 830,000 | 780,200 | ||||||
6.25% 3/17/24 | 410,000 | 364,900 | ||||||
7.875% 3/15/19 | 1,145,000 | 1,185,075 | ||||||
8.375% 5/23/21 | 1,170,000 | 1,210,365 | ||||||
8.75% 5/23/26 | 215,000 | 216,613 | ||||||
Petroleos Mexicanos | ||||||||
144A 6.375% 2/4/21 # | 370,000 | 403,226 | ||||||
6.625% 6/15/35 | 1,470,000 | 1,522,920 | ||||||
144A 6.875% 8/4/26 # | 530,000 | 593,865 | ||||||
Petronas Global Sukuk 144A 2.707% 3/18/20 # | 1,885,000 | 1,909,699 | ||||||
Plains All American Pipeline 8.75% 5/1/19 | 3,490,000 | 3,991,984 | ||||||
Regency Energy Partners | ||||||||
5.50% 4/15/23 | 623,000 | 629,133 | ||||||
5.875% 3/1/22 | 2,705,000 | 2,896,736 | ||||||
Shell International Finance | ||||||||
2.875% 5/10/26 | 915,000 | 930,815 | ||||||
4.00% 5/10/46 | 1,330,000 | 1,360,038 | ||||||
Williams Partners 7.25% 2/1/17 | 2,815,000 | 2,899,610 | ||||||
Woodside Finance | ||||||||
144A 3.65% 3/5/25 # | 1,105,000 | 1,081,364 | ||||||
144A 8.75% 3/1/19 # | 3,220,000 | 3,711,742 | ||||||
YPF | ||||||||
144A 8.50% 3/23/21 # | 605,000 | 647,350 | ||||||
144A 8.75% 4/4/24 # | 1,105,000 | 1,190,638 | ||||||
144A 31.354% 7/7/20 #• | 1,510,000 | 1,510,000 | ||||||
|
| |||||||
56,715,475 | ||||||||
|
| |||||||
Finance Companies – 0.73% |
| |||||||
AerCap Ireland Capital | ||||||||
3.95% 2/1/22 | 1,250,000 | 1,253,125 | ||||||
4.625% 7/1/22 | 1,525,000 | 1,567,441 | ||||||
Aviation Capital Group | ||||||||
144A 2.875% 9/17/18 # | 155,000 | 153,644 | ||||||
144A 4.875% 10/1/25 # | 1,085,000 | 1,066,273 | ||||||
144A 6.75% 4/6/21 # | 1,885,000 | 2,132,406 | ||||||
Corp Financiera de Desarrollo 144A 4.75% 7/15/25 # | 1,705,000 | 1,823,924 | ||||||
General Electric 4.25% 1/17/18 | NZD 420,000 | 304,476 | ||||||
Lazard Group 3.75% 2/13/25 | 1,495,000 | 1,488,865 | ||||||
Nasdaq 3.85% 6/30/26 | 565,000 | 575,211 | ||||||
Peachtree Corners Funding Trust 144A 3.976% 2/15/25 # | 2,405,000 | 2,415,596 | ||||||
SUAM Finance 144A 4.875% 4/17/24 # | 1,710,000 | 1,778,400 |
Principal | Value | |||||||||||
amount° | (U.S. $) | |||||||||||
Corporate Bonds (continued) | ||||||||||||
Finance Companies (continued) | ||||||||||||
Temasek Financial I 144A 2.375% 1/23/23 # | 1,615,000 | $ | 1,672,013 | |||||||||
|
| |||||||||||
16,231,374 | ||||||||||||
|
| |||||||||||
Healthcare – 0.82% | ||||||||||||
Aetna 3.20% 6/15/26 | 2,850,000 | 2,938,247 | ||||||||||
DaVita HealthCare Partners 5.00% 5/1/25 | 5,061,000 | 5,029,369 | ||||||||||
HCA | ||||||||||||
5.25% 6/15/26 | 1,255,000 | 1,305,984 | ||||||||||
5.375% 2/1/25 | 3,615,000 | 3,714,413 | ||||||||||
HealthSouth | ||||||||||||
5.125% 3/15/23 | 595,000 | 586,075 | ||||||||||
5.75% 11/1/24 | 455,000 | 459,095 | ||||||||||
5.75% 9/15/25 | 485,000 | 482,575 | ||||||||||
LifePoint Health 144A 5.375% 5/1/24 # | 2,230,000 | 2,241,150 | ||||||||||
Tenet Healthcare 4.50% 4/1/21 | 1,005,000 | 1,017,563 | ||||||||||
Universal Health Services 144A 5.00% 6/1/26 # | 485,000 | 487,425 | ||||||||||
|
| |||||||||||
18,261,896 | ||||||||||||
|
| |||||||||||
Insurance – 1.74% | ||||||||||||
Berkshire Hathaway | ||||||||||||
2.75% 3/15/23 | 1,365,000 | 1,411,623 | ||||||||||
3.125% 3/15/26 | 2,105,000 | 2,209,896 | ||||||||||
Berkshire Hathaway Finance 2.90% 10/15/20 | 2,260,000 | 2,400,988 | ||||||||||
Five Corners Funding Trust 144A 4.419% 11/15/23 # | 1,110,000 | 1,199,841 | ||||||||||
Highmark 144A 6.125% 5/15/41 #@ | 525,000 | 531,205 | ||||||||||
MetLife | ||||||||||||
3.60% 4/10/24 | 2,525,000 | 2,665,718 | ||||||||||
6.40% 12/15/36 | 110,000 | 117,702 | ||||||||||
6.817% 8/15/18 | 225,000 | 251,277 | ||||||||||
MetLife Capital Trust X 144A 9.25% 4/8/38 # | 3,120,000 | 4,289,417 | ||||||||||
Principal Life Global Funding II 144A 3.00% 4/18/26 # | 1,700,000 | 1,736,081 | ||||||||||
Prudential Financial | ||||||||||||
4.50% 11/15/20 | 795,000 | 878,229 | ||||||||||
5.375% 5/15/45 • | 1,730,000 | 1,747,300 | ||||||||||
5.625% 6/15/43 • | 1,765,000 | 1,842,784 | ||||||||||
TIAA Asset Management Finance | ||||||||||||
144A 2.95% 11/1/19 # | 1,885,000 | 1,932,628 | ||||||||||
144A 4.125% 11/1/24 # | 8,145,000 | 8,571,366 | ||||||||||
USI 144A 7.75% 1/15/21 # | 268,000 | 266,325 | ||||||||||
Voya Financial 5.65% 5/15/53 • | 1,715,000 | 1,618,531 | ||||||||||
XLIT | ||||||||||||
4.45% 3/31/25 | 2,240,000 | 2,264,508 | ||||||||||
5.50% 3/31/45 | 2,045,000 | 2,027,286 | ||||||||||
6.50% 12/29/49 • | 1,410,000 | 983,475 | ||||||||||
|
| |||||||||||
38,946,180 | ||||||||||||
|
|
Diversified Income Series-13
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal | Value | |||||||
amount° | (U.S. $) | |||||||
Corporate Bonds (continued) | ||||||||
Media – 1.04% | ||||||||
Cablevision 144A 6.50% 6/15/21 # | 1,980,000 | $ | 2,024,550 | |||||
CCO Holdings | ||||||||
144A 5.125% 5/1/23 # | 1,150,000 | 1,159,344 | ||||||
144A 5.50% 5/1/26 # | 1,025,000 | 1,042,937 | ||||||
CSC Holdings 5.25% 6/1/24 | 4,217,000 | 3,848,013 | ||||||
DISH DBS 5.00% 3/15/23 | 889,000 | 811,213 | ||||||
Gray Television 7.50% 10/1/20 | 1,697,000 | 1,777,607 | ||||||
Nielsen Finance 144A 5.00% 4/15/22 # | 940,000 | 962,325 | ||||||
Numericable-SFR 144A 6.00% 5/15/22 # | 1,840,000 | 1,796,300 | ||||||
Sinclair Television Group 144A 5.625% 8/1/24 # | 1,940,000 | 1,990,925 | ||||||
Sirius XM Radio | ||||||||
144A 5.375% 4/15/25 # | 3,756,000 | 3,748,958 | ||||||
144A 5.375% 7/15/26 # | 75,000 | 74,625 | ||||||
Tribune Media 5.875% 7/15/22 | 1,347,000 | 1,347,000 | ||||||
VTR Finance 144A 6.875% 1/15/24 # | 2,775,000 | 2,773,557 | ||||||
|
| |||||||
23,357,354 | ||||||||
|
| |||||||
Natural Gas – 0.18% | ||||||||
AGL Capital 3.25% 6/15/26 | 1,565,000 | 1,602,879 | ||||||
NiSource Finance 6.125% 3/1/22 | 2,120,000 | 2,525,823 | ||||||
|
| |||||||
4,128,702 | ||||||||
|
| |||||||
Real Estate Investment Trusts – 1.15% | ||||||||
Alexandria Real Estate Equities 3.95% 1/15/27 | 750,000 | 774,683 | ||||||
AvalonBay Communities 2.95% 5/11/26 | 3,185,000 | 3,204,276 | ||||||
Corporate Office Properties | ||||||||
3.60% 5/15/23 | 1,750,000 | 1,703,786 | ||||||
5.25% 2/15/24 | 1,755,000 | 1,876,772 | ||||||
DDR | ||||||||
7.50% 4/1/17 | 1,075,000 | 1,120,840 | ||||||
7.875% 9/1/20 | 1,015,000 | 1,226,869 | ||||||
Education Realty Operating Partnership 4.60% 12/1/24 | 2,190,000 | 2,251,859 | ||||||
Hospitality Properties Trust 4.50% 3/15/25 | 2,025,000 | 2,039,199 | ||||||
Host Hotels & Resorts | ||||||||
3.75% 10/15/23 | 710,000 | 716,276 | ||||||
4.50% 2/1/26 | 1,680,000 | 1,774,794 | ||||||
Kimco Realty 3.40% 11/1/22 | 415,000 | 435,605 | ||||||
PLA Administradora Industrial 144A 5.25% 11/10/22 # | 1,590,000 | 1,615,837 | ||||||
Regency Centers 5.875% 6/15/17 | 431,000 | 448,072 | ||||||
Simon Property Group 2.50% 7/15/21 | 790,000 | 814,463 | ||||||
Sovran Acquisition | 1,620,000 | 1,638,018 | ||||||
Trust F/1401 144A 5.25% 1/30/26 # | 1,470,000 | 1,503,075 | ||||||
UDR 4.00% 10/1/25 | 710,000 | 771,020 | ||||||
WP Carey 4.60% 4/1/24 | 1,680,000 | 1,726,422 | ||||||
|
| |||||||
25,641,866 | ||||||||
|
| |||||||
Services – 0.32% | ||||||||
AECOM 5.875% 10/15/24 | 1,314,000 | 1,353,420 |
Principal | Value | |||||||
amount° | (U.S. $) | |||||||
Corporate Bonds (continued) | ||||||||
Services (continued) | ||||||||
GEO Group | ||||||||
5.125% 4/1/23 | 770,000 | $ | 754,600 | |||||
5.875% 10/15/24 | 750,000 | 763,125 | ||||||
United Rentals North America | ||||||||
4.625% 7/15/23 | 110,000 | 111,375 | ||||||
5.50% 7/15/25 | 3,445,000 | 3,406,244 | ||||||
5.75% 11/15/24 | 73,000 | 73,913 | ||||||
5.875% 9/15/26 | 795,000 | 793,013 | ||||||
|
| |||||||
7,255,690 | ||||||||
|
| |||||||
Technology – 1.66% | ||||||||
CDK Global 4.50% 10/15/24 | 1,660,000 | 1,651,755 | ||||||
Diamond 1 Finance 144A 6.02% 6/15/26 # | 1,390,000 | 1,451,717 | ||||||
Fidelity National Information Services 5.00% 10/15/25 | 3,195,000 | 3,633,747 | ||||||
First Data | ||||||||
144A 5.00% 1/15/24 # | 465,000 | 467,906 | ||||||
144A 5.75% 1/15/24 # | 4,065,000 | 4,049,756 | ||||||
144A 7.00% 12/1/23 # | 1,000,000 | 1,016,250 | ||||||
FLIR Systems 3.125% 6/15/21 | 1,015,000 | 1,043,338 | ||||||
Fortive | ||||||||
144A 2.35% 6/15/21 # | 605,000 | 614,577 | ||||||
144A 3.15% 6/15/26 # | 1,950,000 | 2,011,006 | ||||||
Intel 2.60% 5/19/26 | 1,575,000 | 1,607,382 | ||||||
Jabil Circuit 7.75% 7/15/16 | 330,000 | 330,351 | ||||||
NXP 144A 4.625% 6/1/23 # | 1,830,000 | 1,866,600 | ||||||
ON Semiconductor | 636,000 | 571,605 | ||||||
Oracle | ||||||||
1.90% 9/15/21 | 720,000 | 723,170 | ||||||
2.40% 9/15/23 | 8,335,000 | 8,372,741 | ||||||
4.00% 7/15/46 | 2,895,000 | 2,926,330 | ||||||
Samsung Electronics America 144A 1.75% 4/10/17 # | 3,005,000 | 3,013,315 | ||||||
Tencent Holdings 144A 3.375% 5/2/19 # | 1,130,000 | 1,172,966 | ||||||
Verint Systems 1.50% 6/1/21 | 743,000 | 680,309 | ||||||
|
| |||||||
37,204,821 | ||||||||
|
| |||||||
Transportation – 1.27% | ||||||||
Air Canada 2015-1 Class A Pass Through Trust 144A 3.60% 3/15/27 #¿ | 1,294,444 | 1,317,097 | ||||||
American Airlines 2014-1 Class A Pass Through Trust 3.70% 10/1/26 ¿ | 1,027,566 | 1,068,668 | ||||||
American Airlines 2015-1 Class A Pass Through Trust 3.375% 5/1/27 ¿ | 668,155 | 673,133 | ||||||
American Airlines 2015-2 Class AA Pass Through Trust 3.60% 9/22/27 ¿ | 475,000 | 499,937 | ||||||
American Airlines 2016-1 Class AA Pass Through Trust 3.575% 1/15/28 ¿ | 745,000 | 788,560 |
Diversified Income Series-14
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
Corporate Bonds (continued) | ||||||||
Transportation (continued) | ||||||||
Autoridad del Canal de Panama 144A 4.95% 7/29/35 # | 1,620,000 | $ | 1,757,700 | |||||
Burlington Northern Santa Fe | ||||||||
4.15% 4/1/45 | 1,625,000 | 1,774,211 | ||||||
4.70% 9/1/45 | 1,785,000 | 2,104,347 | ||||||
ERAC USA Finance 144A 3.30% 12/1/26 # | 3,830,000 | 3,924,413 | ||||||
FedEx 4.75% 11/15/45 | 790,000 | 883,998 | ||||||
Norfolk Southern 2.90% 6/15/26 | 2,080,000 | 2,144,682 | ||||||
Penske Truck Leasing | ||||||||
144A 3.30% 4/1/21 # | 1,815,000 | 1,867,778 | ||||||
144A 3.375% 2/1/22 # | 3,565,000 | 3,640,033 | ||||||
United Airlines 2014-1 Class A Pass Through Trust 4.00% 4/11/26 ¿ | 796,606 | 841,001 | ||||||
United Airlines 2014-2 Class A Pass Through Trust 3.75% 9/3/26 ¿ | 1,383,537 | 1,464,820 | ||||||
United Airlines 2016-1 Class AA Pass Through Trust 3.10% 7/7/28 ¿ | 1,110,000 | 1,130,813 | ||||||
United Parcel Service 5.125% 4/1/19 | 2,180,000 | 2,414,954 | ||||||
|
| |||||||
28,296,145 | ||||||||
|
| |||||||
Utilities – 0.26% | ||||||||
AES Andres 144A 7.95% 5/11/26 # | 1,200,000 | 1,252,500 | ||||||
American Water Capital 3.40% 3/1/25 | 1,700,000 | 1,845,313 | ||||||
Calpine | ||||||||
5.375% 1/15/23 | 747,000 | 732,060 | ||||||
5.50% 2/1/24 | 1,998,000 | 1,938,060 | ||||||
|
| |||||||
5,767,933 | ||||||||
|
| |||||||
Total Corporate Bonds | 936,402,813 | |||||||
|
| |||||||
Municipal Bonds �� 0.72% | ||||||||
Bay Area Toll Authority | 2,115,000 | 3,334,805 | ||||||
Dallas, Texas Area Rapid Transit | 1,760,000 | 2,177,155 | ||||||
New Jersey Turnpike Authority | 1,735,000 | 2,081,566 | ||||||
(Taxable Build America Bonds) | ||||||||
7.102% 1/1/41 | 1,160,000 | 1,768,014 | ||||||
Series F 7.414% 1/1/40 | 555,000 | 870,706 | ||||||
New York City, New York | ||||||||
Series C 5.00% 8/1/26 | 810,000 | 1,052,798 | ||||||
Series C 5.00% 8/1/27 | 450,000 | 580,347 | ||||||
Oregon State Taxable Pension 5.892% 6/1/27 | 5,000 | 6,638 | ||||||
South Carolina Public Service Authority | 680,000 | 776,723 | ||||||
State Various Purposes California | 1,685,000 | 2,673,253 |
Principal amount° | Value (U.S. $) | |||||||
Municipal Bonds (continued) | ||||||||
Texas Water Development Board | 580,000 | $ | 717,431 | |||||
|
| |||||||
Total Municipal Bonds | 16,039,436 | |||||||
|
| |||||||
Non-Agency Asset-Backed Securities – 3.73% | ||||||||
AEP Texas Central Transition Funding II | 857,772 | 883,190 | ||||||
Ally Master Owner Trust | ||||||||
Series 2012-5 A 1.54% 9/15/19 | 3,165,000 | 3,174,940 | ||||||
Series 2014-4 A2 1.43% 6/17/19 | 3,450,000 | 3,458,124 | ||||||
American Express Credit Account Master Trust | 960,000 | 960,698 | ||||||
American Express Credit Account Secured Note Trust | 6,750,000 | 6,753,372 | ||||||
Avis Budget Rental Car Funding AESOP | ||||||||
Series 2013-1A A 144A 1.92% 9/20/19 # | 1,850,000 | 1,854,550 | ||||||
Series 2014-1A A 144A 2.46% 7/20/20 # | 2,005,000 | 2,033,320 | ||||||
Bank of America Credit Card Trust | ||||||||
Series 2014-A3 A 0.732% 1/15/20 • | 1,745,000 | 1,747,598 | ||||||
Series 2015-A1 A 0.772% 6/15/20 • | 6,740,000 | 6,747,781 | ||||||
California Republic Auto Receivables Trust | 150,018 | 150,130 | ||||||
Capital One Multi-Asset Execution Trust | ||||||||
Series 2007-A5 A5 0.482% 7/15/20 • | 2,900,000 | 2,890,859 | ||||||
Series 2016-A1 A1 0.90% 2/15/22 • | 3,000,000 | 3,005,178 | ||||||
Chase Issuance Trust | ||||||||
Series 2014-A5 A5 0.812% 4/15/21 • | 2,355,000 | 2,351,788 | ||||||
Series 2016-A1 A 0.852% 5/17/21 • | 1,900,000 | 1,900,546 | ||||||
Chesapeake Funding | 1,432 | 1,432 | ||||||
CIT Equipment Collateral | 339,912 | 339,576 | ||||||
Citibank Credit Card Issuance Trust | ||||||||
Series 2007-A8 A8 5.65% 9/20/19 | 1,630,000 | 1,723,213 | ||||||
Series 2014-A6 A6 2.15% 7/15/21 | 2,860,000 | 2,940,965 | ||||||
Series 2014-A9 A9 0.701% 11/23/18 • | 1,575,000 | 1,575,383 | ||||||
CNH Equipment Trust | 1,000,000 | 998,737 | ||||||
Discover Card Execution Note Trust | ||||||||
Series 2013-A1 A1 0.742% 8/17/20 • | 1,010,000 | 1,011,133 | ||||||
Series 2014-A1 A1 0.872% 7/15/21 • | 1,560,000 | 1,563,584 |
Diversified Income Series-15
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
Non-Agency Asset-Backed Securities (continued) | ||||||||
Discover Card Execution Note Trust | 2,060,000 | $ | 2,081,451 | |||||
FirstKey Lending Trust | 1,104,583 | 1,112,080 | ||||||
Ford Credit Auto Lease Trust | 1,665,000 | 1,666,705 | ||||||
Ford Credit Auto Owner Trust | 2,250,000 | 2,261,824 | ||||||
Golden Credit Card Trust | ||||||||
Series 2014-2A A 144A 0.892% 3/15/21 #• | 1,195,000 | 1,188,028 | ||||||
Series 2015-2A A 144A 2.02% 4/15/22 # | 1,485,000 | 1,501,895 | ||||||
GreatAmerica Leasing Receivables Funding | 305,000 | 304,571 | ||||||
HOA Funding | 2,943,250 | 2,604,188 | ||||||
Honda Auto Receivables Owner Trust | 525,000 | 527,211 | ||||||
Hyundai Auto Lease Securitization Trust | 3,400,000 | 3,408,521 | ||||||
Mercedes-Benz Auto Lease Trust | 1,315,000 | 1,314,510 | ||||||
Mercedes-Benz Master Owner Trust | 1,665,000 | 1,667,488 | ||||||
Morgan Stanley ABS Capital I Trust | 1,419,040 | 1,412,792 | ||||||
New Century Home Equity Loan Trust | 753,192 | 747,189 | ||||||
Nissan Auto Lease Trust | 1,520,979 | 1,523,134 | ||||||
Penarth Master Issuer | 885,000 | 881,719 | ||||||
PFS Financing | 750,000 | 742,743 | ||||||
Porsche Innovative Lease Owner Trust | 1,740,000 | 1,741,828 |
Principal amount° | Value (U.S. $) | |||||||
Non-Agency Asset-Backed Securities (continued) | ||||||||
Synchrony Credit Card Master Note Trust | ||||||||
Series 2012-6 A 1.36% 8/17/20 | 1,865,000 | $ | 1,869,723 | |||||
Series 2015-2 A 1.60% 4/15/21 | 1,730,000 | 1,737,007 | ||||||
Volkswagen Credit Auto Master Trust | 5,050,000 | 5,019,773 | ||||||
|
| |||||||
Total Non-Agency Asset-Backed Securities | 83,380,477 | |||||||
|
| |||||||
Non-Agency Collateralized Mortgage Obligations – 1.09% | ||||||||
American Home Mortgage Investment Trust | 70,026 | 69,696 | ||||||
Bank of America Alternative Loan Trust | ||||||||
Series 2005-1 2A1 5.50% 2/25/20 | 87,272 | 87,596 | ||||||
Series 2005-6 7A1 5.50% 7/25/20 | 72,579 | 71,015 | ||||||
Citicorp Mortgage Securities Trust | 114,666 | 115,317 | ||||||
Citicorp Residential Mortgage Trust | 1,800,000 | 1,782,118 | ||||||
JPMorgan Mortgage Trust | ||||||||
Series 2014-2 B1 144A 3.426% 6/25/29 #• | 877,602 | 878,760 | ||||||
Series 2014-2 B2 144A 3.426% 6/25/29 #• | 328,036 | 319,802 | ||||||
Series 2014-IVR6 2A4 144A 2.50% 7/25/44 #• | 1,050,000 | 1,060,082 | ||||||
Series 2015-1 B1 144A 2.663% 12/25/44 #• | 1,439,371 | 1,422,385 | ||||||
Series 2015-4 B1 144A 3.634% 6/25/45 #• | 1,127,031 | 1,097,156 | ||||||
Series 2015-4 B2 144A 3.634% 6/25/45 #• | 808,522 | 771,067 | ||||||
Series 2015-5 B2 144A 2.901% 5/25/45 #• | 1,111,303 | 1,040,341 | ||||||
Series 2015-6 B1 144A 3.645% 10/25/45 #• | 786,292 | 802,561 | ||||||
Series 2015-6 B2 144A 3.645% 10/25/45 #• | 761,721 | 762,865 | ||||||
JPMorgan Trust | 1,197,003 | 1,161,911 | ||||||
New Residential Mortgage Loan Trust | 1,738,223 | 1,819,601 |
Diversified Income Series-16
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
Non-Agency Collateralized Mortgage Obligations (continued) | ||||||||
Sequoia Mortgage Trust | ||||||||
Series 2013-11 B1 144A 3.668% 9/25/43 #• | 1,046,420 | $ | 1,040,437 | |||||
Series 2014-2 A4 144A 3.50% 7/25/44 #• | 1,192,976 | 1,226,529 | ||||||
Series 2015-1 B2 144A 3.887% 1/25/45 #• | 871,409 | 876,827 | ||||||
Towd Point Mortgage Trust | ||||||||
Series 2015-5 A1B 144A 2.75% 5/25/55 #• | 1,664,432 | 1,685,094 | ||||||
Series 2015-6 A1B 144A 2.75% 4/25/55 #• | 1,697,940 | 1,720,160 | ||||||
Series 2016-1 A1B 144A 2.75% 2/25/55 #• | 1,206,619 | 1,222,550 | ||||||
Series 2016-2 A1 144A 3.00% 8/25/55 #• | 1,031,764 | 1,053,739 | ||||||
Washington Mutual Mortgage Pass Through Certificates | 67,567 | 30,675 | ||||||
Wells Fargo Mortgage-Backed Securities Trust | ||||||||
Series 2006-2 3A1 5.75% 3/25/36 | 326,581 | 331,087 | ||||||
Series 2006-3 A11 5.50% 3/25/36 | 344,168 | 349,485 | ||||||
Series 2006-AR5 2A1 3.156% 4/25/36 • | 302,181 | 282,398 | ||||||
WinWater Mortgage Loan Trust | 1,170,428 | 1,217,482 | ||||||
|
| |||||||
Total Non-Agency Collateralized Mortgage Obligations | 24,298,736 | |||||||
|
| |||||||
Non-Agency Commercial Mortgage-Backed Securities – 5.12% | ||||||||
Banc of America Commercial Mortgage Trust | 1,330,000 | 1,385,834 | ||||||
Bear Stearns Commercial Mortgage Securities Trust | 1,152,400 | 1,190,587 | ||||||
Citigroup Commercial Mortgage Trust | ||||||||
Series 2007-C6 AM 5.901% 12/10/49 • | 1,230,000 | 1,234,381 | ||||||
Series 2014-GC25 A4 3.635% 10/10/47 | 2,275,000 | 2,471,026 | ||||||
Series 2015-GC27 A5 3.137% 2/10/48 | 5,210,000 | 5,467,361 | ||||||
Series 2016-P3 A4 3.329% 4/15/49 | 1,745,000 | 1,862,262 |
Principal amount° | Value (U.S. $) | |||||||
Non-Agency Commercial Mortgage-Backed Securities (continued) | ||||||||
COMM Mortgage Trust | ||||||||
Series 2013-CR6 AM 144A 3.147% 3/10/46 # | 1,765,000 | $ | 1,839,272 | |||||
Series 2014-CR16 A4 4.051% 4/10/47 | 1,770,000 | 1,983,473 | ||||||
Series 2014-CR19 A5 3.796% 8/10/47 | 2,850,000 | 3,136,287 | ||||||
Series 2014-CR20 A4 3.59% 11/10/47 | 980,000 | 1,065,735 | ||||||
Series 2014-CR20 AM 3.938% 11/10/47 | 7,775,000 | 8,466,420 | ||||||
Series 2015-3BP A 144A 3.178% 2/10/35 # | 3,960,000 | 4,171,173 | ||||||
Series 2015-CR23 A4 3.497% 5/10/48 | 3,450,000 | 3,711,756 | ||||||
Commercial Mortgage Trust | 1,345,000 | 1,367,509 | ||||||
DB-JPM | 2,105,000 | 2,241,641 | ||||||
DB-UBS Mortgage Trust | ||||||||
Series 2011-LC1A A3 144A 5.002% 11/10/46 # | 1,910,000 | 2,139,633 | ||||||
Series 2011-LC1A C 144A 5.883% 11/10/46 #• | 2,000,000 | 2,269,363 | ||||||
GRACE Mortgage Trust | 5,605,000 | 5,983,683 | ||||||
GS Mortgage Securities Trust | ||||||||
Series 2010-C1 C 144A 5.635% 8/10/43 #• | 1,010,000 | 1,103,187 | ||||||
Series 2014-GC24 A5 3.931% 9/10/47 | 2,970,000 | 3,291,508 | ||||||
Series 2015-GC32 A4 3.764% 7/10/48 | 1,240,000 | 1,365,402 | ||||||
Hilton USA Trust | ||||||||
Series 2013-HLT AFX 144A 2.662% 11/5/30 # | 825,000 | 828,523 | ||||||
Series 2013-HLT BFX 144A 3.367% 11/5/30 # | 5,930,000 | 5,959,056 | ||||||
Houston Galleria Mall Trust | 2,655,000 | 2,757,934 | ||||||
JPM-BB Commercial Mortgage Securities Trust | 4,160,000 | 4,569,003 | ||||||
JPM-DB Commercial Mortgage Securities Trust | 3,385,000 | 3,559,194 |
Diversified Income Series-17
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
Non-Agency Commercial Mortgage-Backed Securities (continued) | ||||||||
JPMorgan Chase Commercial Mortgage Securities Trust | ||||||||
Series 2005-CB11 E 5.675% 8/12/37 • | 600,000 | $ | 651,163 | |||||
Series 2005-LDP5 D 5.718% 12/15/44 • | 1,110,000 | 1,106,304 | ||||||
Series 2006-LDP8 AM 5.44% 5/15/45 | 4,004,000 | 4,005,916 | ||||||
Series 2011-C5 C 144A 5.494% 8/15/46 #• | 1,100,000 | 1,196,032 | ||||||
Series 2013-LC11 B 3.499% 4/15/46 | 1,565,000 | 1,622,165 | ||||||
Series 2015-JP1 A5 3.914% 1/15/49 | 1,590,000 | 1,773,981 | ||||||
LB-UBS Commercial Mortgage Trust | ||||||||
Series 2004-C1 A4 4.568% 1/15/31 | 61,545 | 61,667 | ||||||
Series 2006-C6 AJ 5.452% 9/15/39 • | 2,390,000 | 2,380,051 | ||||||
Series 2006-C6 AM 5.413% 9/15/39 | 1,590,000 | 1,595,535 | ||||||
Morgan Stanley BAML Trust | ||||||||
Series 2014-C17 A5 3.741% 8/15/47 | 1,640,000 | 1,797,245 | ||||||
Series 2015-C23 A4 3.719% 7/15/50 | 4,090,000 | 4,488,490 | ||||||
Series 2015-C26 A5 3.531% 10/15/48 | 2,390,000 | 2,585,016 | ||||||
Series 2016-C29 A4 3.325% 5/15/49 | 1,620,000 | 1,724,095 | ||||||
Morgan Stanley Capital I Trust | ||||||||
Series 2005-HQ7 C 5.298% 11/14/42 • | 125,929 | 125,762 | ||||||
Series 2006-HQ10 B 5.448% 11/12/41 • | 2,910,000 | 2,735,501 | ||||||
Series 2006-TOP21 B 144A 5.31% 10/12/52 #• | 800,000 | 798,465 | ||||||
TimberStar Trust I | 1,900,000 | 1,908,913 | ||||||
Wells Fargo Commercial Mortgage Trust | ||||||||
Series 2012-LC5 A3 2.918% 10/15/45 | 1,255,000 | 1,319,732 | ||||||
Series 2014-LC18 A5 3.405% 12/15/47 | 570,000 | 609,940 | ||||||
Series 2015-NXS3 A4 3.617% 9/15/57 | 3,120,000 | 3,388,407 | ||||||
WF-RBS Commercial Mortgage Trust | 3,060,000 | 3,207,336 | ||||||
|
| |||||||
Total Non-Agency Commercial Mortgage-Backed Securities | 114,502,919 | |||||||
|
| |||||||
Regional Bonds – 0.87% D | ||||||||
Argentina – 0.14% | ||||||||
City of Buenos Aires Argentina 144A 7.50% 6/1/27 # | 2,300,000 | 2,403,500 |
Principal amount° | Value (U.S. $) | |||||||||||
Regional Bonds D (continued) | ||||||||||||
Argentina (continued) | ||||||||||||
Provincia de Buenos Aires 144A 5.75% 6/15/19 # | 640,000 | $ | 649,091 | |||||||||
|
| |||||||||||
3,052,591 | ||||||||||||
|
| |||||||||||
Australia – 0.15% | ||||||||||||
New South Wales Treasury 4.00% 5/20/26 | AUD | 1,593,500 | 1,376,541 | |||||||||
Queensland Treasury | ||||||||||||
144A 3.25% 7/21/26 # | AUD | 1,228,000 | 977,417 | |||||||||
144A 3.25% 7/21/28 # | AUD | 1,291,000 | 1,020,624 | |||||||||
|
| |||||||||||
3,374,582 | ||||||||||||
|
| |||||||||||
Canada – 0.43% | ||||||||||||
Province of British Columbia 2.25% 6/2/26 | 3,290,000 | 3,377,254 | ||||||||||
Province of Manitoba 2.125% 6/22/26 | 2,455,000 | 2,443,768 | ||||||||||
Province of Ontario Canada 3.45% 6/2/45 | CAD | 1,488,000 | 1,311,967 | |||||||||
Province of Quebec Canada | ||||||||||||
2.50% 4/20/26 | 2,175,000 | 2,240,889 | ||||||||||
6.00% 10/1/29 | CAD | 224,000 | 243,831 | |||||||||
|
| |||||||||||
9,617,709 | ||||||||||||
|
| |||||||||||
Japan – 0.15% | ||||||||||||
Japan Finance Organization for Municipalities 144A 2.125% 4/13/21 # | 3,326,000 | 3,383,324 | ||||||||||
|
| |||||||||||
3,383,324 | ||||||||||||
|
| |||||||||||
Total Regional Bonds | 19,428,206 | |||||||||||
|
| |||||||||||
Senior Secured Loans – 7.56% « | ||||||||||||
Accudyne Industries Borrower 1st Lien 4.00% 12/13/19 | 1,060,000 | 956,650 | ||||||||||
Air Medical Group Holdings Tranche B 1st Lien 4.25% 4/28/22 | 3,468,706 | 3,398,465 | ||||||||||
Albertson’s Tranche B4 1st Lien 5.50% 8/25/21 | 2,110,995 | 2,111,655 | ||||||||||
Amaya Holdings 1st Lien 5.00% 8/1/21 | 2,513,811 | 2,443,633 | ||||||||||
American Airlines Tranche B1 1st Lien 3.50% 5/23/19 | 648,969 | 648,158 | ||||||||||
Americold Realty Trust Tranche B 1st Lien 5.75% 12/1/22 | 435,000 | 436,349 | ||||||||||
Applied Systems 2nd Lien 7.50% 1/23/22 @ | 2,493,751 | 2,485,440 | ||||||||||
Ardagh Holdings USA Tranche B 1st Lien 4.00% 12/17/19 | 1,320,000 | 1,320,619 | ||||||||||
ATI Holdings Acquisition 1st Lien 5.50% 5/10/23 | 1,095,000 | 1,098,765 | ||||||||||
Avago Technologies Cayman Finance Tranche B 1st Lien 4.25% 2/1/23 | 3,645,863 | 3,650,168 | ||||||||||
BJ’s Wholesale Club 2nd Lien 8.50% 3/31/20 | 1,851,140 | 1,803,320 | ||||||||||
Blue Ribbon 1st Lien 5.00% 11/13/21 | 2,695,712 | 2,695,712 |
Diversified Income Series-18
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
Senior Secured Loans « (continued) | ||||||||
Builders FirstSource Tranche B 1st Lien 6.00% 7/31/22 | 3,548,429 | $ | 3,554,195 | |||||
BWAY Holding Tranche B 1st Lien 5.50% 8/14/20 | 1,185,000 | 1,181,297 | ||||||
Caesars Growth Properties Holdings Tranche B 1st Lien 6.25% 5/8/21 | 1,921,661 | 1,811,166 | ||||||
Calpine Tranche B 1st Lien 4.00% 1/15/23 | 437,800 | 435,611 | ||||||
Change Healthcare Holdings 1st Lien 3.75% 11/2/18 | 981,680 | 982,601 | ||||||
Charter Communications Operating Tranche H 1st Lien 3.25% 8/24/21 | 328,178 | 327,485 | ||||||
Charter Communications Operating Tranche I 1st Lien 3.50% 1/24/23 | 984,533 | 986,115 | ||||||
CityCenter Holdings Tranche B 1st Lien 4.25% 10/16/20 | 1,063,133 | 1,065,016 | ||||||
Community Health Systems Tranche G 1st Lien 3.75% 12/31/19 | 916,602 | 893,328 | ||||||
Community Health Systems Tranche H 1st Lien 4.00% 1/27/21 | 2,326,600 | 2,271,343 | ||||||
DAE Aviation Holdings 1st Lien 5.25% 7/7/22 | 1,615,456 | 1,621,514 | ||||||
DaVita HealthCare Partners Tranche B 1st Lien 3.50% 6/24/21 | 2,058,000 | 2,064,645 | ||||||
Dell International Tranche B 1st Lien 4.00% 6/2/23 | 2,200,000 | 2,195,417 | ||||||
Dynegy Tranche B 1st Lien 5.00% 6/27/23 | 1,220,000 | 1,204,445 | ||||||
ExamWorks Group 1st Lien 4.75% 6/17/23 | 1,520,000 | 1,520,000 | ||||||
First Data Tranche B 1st Lien | ||||||||
4.202% 7/10/22 | 1,115,000 | 1,106,173 | ||||||
4.452% 3/24/21 | 3,174,569 | 3,169,410 | ||||||
First Eagle Holdings 1st Lien 4.75% 12/31/22 | 1,263,650 | 1,243,643 | ||||||
Flying Fortress Tranche B 1st Lien 3.50% 4/30/20 | 282,500 | 282,500 | ||||||
FMG Resources August 2006 Pty 1st Lien 4.25% 6/30/19 | 2,661,302 | 2,553,187 | ||||||
Frank Russell Tranche B 1st Lien 6.75% 5/12/23 | 3,080,000 | 2,906,750 | ||||||
Gardner Denver 1st Lien 4.25% 7/30/20 | 2,129,915 | 1,961,520 | ||||||
Gates Global 1st Lien 4.25% 7/6/21 | 2,210,048 | 2,106,452 | ||||||
GCP Applied Technologies Tranche B 1st Lien 5.25% 2/3/22 | 877,800 | 881,367 | ||||||
Green Energy Partners Tranche B 1st Lien 6.50% 11/13/21 | 1,001,000 | 993,493 | ||||||
HCA Tranche B6 1st Lien 3.71% 3/18/23 | 405,983 | 407,981 | ||||||
Hilton Worldwide Finance 1st Lien 3.50% 10/25/20 | 3,286,968 | 3,293,131 |
Principal amount° | Value (U.S. $) | |||||||
Senior Secured Loans « (continued) | ||||||||
Houghton International 1st Lien 4.25% 12/20/19 | 399,629 | $ | 398,630 | |||||
Hyperion Insurance Group Tranche B 1st Lien 5.50% 4/30/22 | 1,752,813 | 1,660,790 | ||||||
IASIS Healthcare Tranche B 1st Lien 4.50% 5/3/18 | 1,482,700 | 1,481,155 | ||||||
Immucor Tranche 1st Lien 5.00% 8/17/18 | 782,972 | 737,299 | ||||||
Ineos U.S. Finance Tranche B 1st Lien | ||||||||
3.75% 12/15/20 | 2,200,559 | 2,147,378 | ||||||
4.25% 3/31/22 | 508,559 | 501,567 | ||||||
J.C. Penney 1st Lien 5.25% 5/22/18 | 4,139,558 | 4,141,714 | ||||||
Keurig Green Mountain Tranche B 1st Lien 5.25% 3/3/23 | 1,992,733 | 1,998,130 | ||||||
KIK Custom Products 1st Lien 6.00% 8/26/22 @ | 2,781,102 | 2,750,974 | ||||||
Kinetic Concepts Tranche E1 1st Lien 5.00% 5/4/18 | 543,056 | 541,747 | ||||||
Kraton Polymers Tranche B 1st Lien 6.00% 1/6/22 | 1,780,000 | 1,756,193 | ||||||
Landry’s Tranche B 1st Lien 4.00% 4/24/18 | 1,138,874 | 1,139,871 | ||||||
Level 3 Financing 1st Lien 4.00% 1/15/20 | 570,000 | 570,570 | ||||||
LTS Buyer 2nd Lien 8.00% 4/1/21 | 1,509,825 | 1,502,276 | ||||||
Marina District Finance Tranche B 1st Lien 6.50% 8/15/18 | 1,532,502 | 1,535,057 | ||||||
Mauser Holding Sarl 2nd Lien 8.75% 7/31/22 | 233,000 | 218,438 | ||||||
MGM Growth Properties Operating Partnership Tranche B 1st Lien 4.00% 4/7/23 | 2,219,438 | 2,226,719 | ||||||
Micron Technology Tranche B 1st Lien 6.64% 4/26/22 | 435,000 | 438,308 | ||||||
Microsemi Tranche B 1st Lien 5.25% 1/15/23 | 815,012 | 814,587 | ||||||
Mohegan Tribal Gaming Authority Tranche B 1st Lien 5.50% 6/15/18 | 3,987,430 | 3,969,985 | ||||||
MPH Acquisition Holdings Tranche B 1st Lien 5.00% 5/25/23 | 1,885,000 | 1,892,742 | ||||||
NBTY Tranche B 1st Lien 5.00% 5/5/23 | 3,150,000 | 3,137,205 | ||||||
Neiman Marcus Group 1st Lien 4.25% 10/25/20 | 435,000 | 391,840 | ||||||
Neptune Finco Tranche B 1st Lien 5.00% 10/9/22 | 1,230,000 | 1,234,920 | ||||||
Numericable U.S. 1st Lien 4.75% 2/10/23 | 480,000 | 479,700 | ||||||
Numericable U.S. Tranche B 1st Lien 5.00% 1/31/24 | 2,825,000 | 2,823,234 | ||||||
NXP Tranche B1 1st Lien 3.75% 12/7/20 | 1,263,686 | 1,267,832 |
Diversified Income Series-19
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
Senior Secured Loans « (continued) | ||||||||
ON Semiconductor Tranche B 1st Lien 5.25% 3/31/23 | 1,410,000 | $ | 1,419,819 | |||||
Panda Hummel Tranche B1 1st Lien 7.00% 10/27/22 | 540,000 | 519,750 | ||||||
Panda Liberty Tranche B 1st Lien 7.50% 8/21/20 | 1,977,000 | 1,932,518 | ||||||
Petco Animal Supplies Tranche B1 1st Lien 5.00% 1/26/23 | 2,204,475 | 2,198,964 | ||||||
PQ 1st Lien 5.75% 11/4/22 | 3,377,000 | 3,384,740 | ||||||
Prime Security Services Borrower 1st Lien | ||||||||
4.75% 5/2/22 | 1,827,000 | 1,837,277 | ||||||
5.00% 7/1/21 | 1,158,876 | 1,164,091 | ||||||
Prime Security Services Borrower 2nd Lien 9.75% 7/1/22 | 3,170,000 | 3,206,984 | ||||||
Prospect Medical Holdings Tranche B 1st Lien 7.00% 6/30/22 | 2,170,000 | 2,146,944 | ||||||
Republic of Angola (Unsecured) 7.045% 12/16/23 @ | 4,110,938 | 3,740,953 | ||||||
Reynolds Group Holdings Tranche B 1st Lien 4.50% 12/1/18 | 1,270,091 | 1,271,823 | ||||||
Sable International Finance Tranche B1 1st Lien 5.50% 12/2/22 | 2,105,000 | 2,109,934 | ||||||
Sable International Finance Tranche B2 1st Lien 5.83% 12/2/22 | 1,720,000 | 1,724,032 | ||||||
SAM Finance Lux Sarl Tranche B 1st Lien 4.50% 12/17/20 | 2,990,329 | 2,980,984 | ||||||
Scientific Games International 1st Lien 6.00% 10/18/20 | 643,350 | 636,448 | ||||||
Sinclair Television Group Tranche B1 1st Lien 3.50% 7/31/21 | 204,044 | 203,789 | ||||||
Solera Tranche B 1st Lien 5.75% 3/3/23 | 2,264,325 | 2,268,369 | ||||||
Spectrum Brands 1st Lien 3.50% 6/23/22 | 836,808 | 838,311 | ||||||
Stardust Finance Holdings 2nd Lien 10.50% 3/13/23 | 545,000 | 534,100 | ||||||
Stardust Finance Holdings Tranche B 1st Lien 6.50% 3/13/22 @ | 1,885,696 | 1,843,268 | ||||||
Station Casinos Tranche B 1st Lien 3.75% 6/8/23 | 560,000 | 558,075 | ||||||
Summit Materials Tranche B 1st Lien 4.00% 7/17/22 | 1,084,050 | 1,083,400 | ||||||
Telenet Financing USD Tranche B 1st Lien 4.25% 6/30/24 | 450,000 | 448,125 | ||||||
T-Mobile USA Tranche B 1st Lien 3.50% 11/9/22 | 4,092,236 | 4,110,459 | ||||||
TransDigm Delayed Draw Tranche F 1st Lien 3.75% 6/9/23 | 784,690 | 776,598 | ||||||
TransDigm Tranche E 1st Lien 3.75% 5/14/22 | 396,004 | 391,648 |
Principal amount° | Value (U.S. $) | |||||||||
Senior Secured Loans « (continued) | ||||||||||
TransDigm Tranche F 1st Lien 3.75% 6/9/23 | 871,878 | $ | 862,887 | |||||||
Tribune Media Tranche B 1st Lien 3.75% 12/27/20 | 1,084,050 | 1,084,041 | ||||||||
Univar USA Tranche B 1st Lien 4.25% 7/1/22 | 348,368 | 344,797 | ||||||||
Univision Communications 1st Lien 4.00% 3/1/20 | 483,422 | 481,048 | ||||||||
Univision Communications Tranche C4 1st Lien 4.00% 3/1/20 | 2,759,165 | 2,745,615 | ||||||||
USAGM HoldCo 1st Lien 5.50% 7/28/22 | 2,177,881 | 2,160,639 | ||||||||
USAGM HoldCo Tranche DD 1st Lien 5.50% 7/28/22 | 432,119 | 429,148 | ||||||||
USI 1st Lien 4.25% 12/27/19 | 2,058,808 | 2,041,566 | ||||||||
Valeant Pharmaceuticals International 1st Lien 4.75% 12/11/19 | 1,725,820 | 1,680,517 | ||||||||
Valeant Pharmaceuticals International Tranche A3 1st Lien 3.72% 10/20/18 | 955,806 | 936,690 | ||||||||
Western Digital Tranche B 1st Lien 6.25% 3/30/23 | 1,085,000 | 1,091,103 | ||||||||
WideOpen West Finance Tranche B 1st Lien 4.50% 4/1/19 | 2,109,659 | 2,107,022 | ||||||||
Windstream Services Tranche B6 1st Lien 5.75% 3/29/21 | 757,103 | 757,418 | ||||||||
Zekelman Industries Tranche B 1st Lien 6.00% 6/14/21 | 1,105,000 | 1,105,000 | ||||||||
|
| |||||||||
Total Senior Secured Loans | 168,986,474 | |||||||||
|
| |||||||||
Sovereign Bonds – 2.95% D | ||||||||||
Argentina – 0.08% | ||||||||||
Argentine Republic Government International Bond 144A 7.125% 7/6/36 # | 1,790,000 | 1,790,000 | ||||||||
|
| |||||||||
1,790,000 | ||||||||||
|
| |||||||||
Australia – 0.04% | ||||||||||
Australia Government Bond 3.75% 4/21/37 | AUD | 900,000 | 798,007 | |||||||
|
| |||||||||
798,007 | ||||||||||
|
| |||||||||
Brazil – 0.20% | ||||||||||
Brazil Notas do Tesouro Nacional Series F | ||||||||||
10.00% 1/1/17 | BRL | 3,882,000 | 1,187,044 | |||||||
10.00% 1/1/23 | BRL | 4,306,000 | 1,223,867 | |||||||
Brazilian Government International Bond 4.875% 1/22/21 | 1,920,000 | 2,027,520 | ||||||||
|
| |||||||||
4,438,431 | ||||||||||
|
|
Diversified Income Series-20
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||||||
Sovereign Bonds D (continued) | ||||||||||||
Canada – 0.02% | ||||||||||||
Canadian Government Bond 2.75% 12/1/48 | CAD | 496,000 | $ | 481,841 | ||||||||
|
| |||||||||||
481,841 | ||||||||||||
|
| |||||||||||
Colombia – 0.09% | ||||||||||||
Colombia Government International Bond | ||||||||||||
4.50% 1/28/26 | 750,000 | 801,563 | ||||||||||
5.00% 6/15/45 | 1,131,000 | 1,179,067 | ||||||||||
|
| |||||||||||
1,980,630 | ||||||||||||
|
| |||||||||||
Croatia – 0.08% | ||||||||||||
Croatia Government International Bond 144A 6.375% 3/24/21 # | 1,545,000 | 1,689,110 | ||||||||||
|
| |||||||||||
1,689,110 | ||||||||||||
|
| |||||||||||
Dominican Republic – 0.08% | ||||||||||||
Dominican Republic International Bond 144A 6.875% 1/29/26 # | 1,595,000 | 1,764,070 | ||||||||||
|
| |||||||||||
1,764,070 | ||||||||||||
|
| |||||||||||
Germany – 0.05% | ||||||||||||
FMS Wertmanagement 1.375% 6/8/21 | 1,090,000 | 1,097,776 | ||||||||||
|
| |||||||||||
1,097,776 | ||||||||||||
|
| |||||||||||
Guatemala – 0.07% | ||||||||||||
Guatemala Government Bond 144A 4.50% 5/3/26 # | 1,600,000 | 1,630,000 | ||||||||||
|
| |||||||||||
1,630,000 | ||||||||||||
|
| |||||||||||
Hungary – 0.12% | ||||||||||||
Hungary Government International Bond 5.75% 11/22/23 | 2,360,000 | 2,690,695 | ||||||||||
|
| |||||||||||
2,690,695 | ||||||||||||
|
| |||||||||||
Indonesia – 0.24% | ||||||||||||
Indonesia Government International Bond | ||||||||||||
144A 4.875% 5/5/21 # | 1,170,000 | 1,273,238 | ||||||||||
144A 5.125% 1/15/45 # | 600,000 | 638,813 | ||||||||||
Indonesia Treasury Bond 8.375% 9/15/26 | IDR | 42,100,000,000 | 3,380,166 | |||||||||
|
| |||||||||||
5,292,217 | ||||||||||||
|
| |||||||||||
Jamaica – 0.06% | ||||||||||||
Jamaica Government International Bond 6.75% 4/28/28 | 1,300,000 | 1,368,250 | ||||||||||
|
| |||||||||||
1,368,250 | ||||||||||||
|
| |||||||||||
Kazakhstan – 0.09% | ||||||||||||
Kazakhstan Government International Bond 144A 5.125% 7/21/25 # | 1,815,000 | 1,993,995 | ||||||||||
|
| |||||||||||
1,993,995 | ||||||||||||
|
| |||||||||||
Mexico – 0.41% | ||||||||||||
Mexican Bonos 5.75% 3/5/26 | MXN | 148,204,900 | 8,054,299 | |||||||||
Mexico Government International Bond 3.60% 1/30/25 | 531,000 | 556,223 |
Principal amount° | Value (U.S. $) | |||||||||||
Sovereign Bonds D (continued) | ||||||||||||
Mexico (continued) | ||||||||||||
Mexico Government International Bond 4.60% 1/23/46 | 600,000 | $ | 635,250 | |||||||||
|
| |||||||||||
9,245,772 | ||||||||||||
|
| |||||||||||
Mongolia – 0.04% | ||||||||||||
Mongolia Government International Bond | ||||||||||||
144A 5.125% 12/5/22 # | 475,000 | 391,593 | ||||||||||
144A 10.875% 4/6/21 # | 525,000 | 553,700 | ||||||||||
|
| |||||||||||
945,293 | ||||||||||||
|
| |||||||||||
New Zealand – 0.01% | ||||||||||||
New Zealand Government Bond 4.50% 4/15/27 | NZD | 206,000 | 177,043 | |||||||||
|
| |||||||||||
177,043 | ||||||||||||
|
| |||||||||||
Paraguay – 0.08% | ||||||||||||
Paraguay Government International Bond 144A 5.00% 4/15/26 # | 1,700,000 | 1,797,750 | ||||||||||
|
| |||||||||||
1,797,750 | ||||||||||||
|
| |||||||||||
Philippines – 0.05% | ||||||||||||
Philippine Government International Bond 6.25% 1/14/36 | PHP | 42,000,000 | 1,007,927 | |||||||||
|
| |||||||||||
1,007,927 | ||||||||||||
|
| |||||||||||
Poland – 0.23% | ||||||||||||
Poland Government Bond | ||||||||||||
2.50% 7/25/26 | PLN | 17,759,000 | 4,351,777 | |||||||||
3.25% 7/25/25 | PLN | 3,319,000 | 870,466 | |||||||||
|
| |||||||||||
5,222,243 | ||||||||||||
|
| |||||||||||
Portugal – 0.03% | ||||||||||||
Portugal Government International Bond 144A 5.125% 10/15/24 # | 600,000 | 605,826 | ||||||||||
|
| |||||||||||
605,826 | ||||||||||||
|
| |||||||||||
Qatar – 0.10% | ||||||||||||
Qatar Government International Bond | ||||||||||||
144A 3.25% 6/2/26 # | 1,415,000 | 1,446,307 | ||||||||||
144A 4.625% 6/2/46 # | 785,000 | 856,897 | ||||||||||
|
| |||||||||||
2,303,204 | ||||||||||||
|
| |||||||||||
Republic of Korea – 0.13% | ||||||||||||
Inflation Linked Korea Treasury Bond 1.125% 6/10/23 | KRW | 3,310,180,060 | 2,935,032 | |||||||||
|
| |||||||||||
2,935,032 | ||||||||||||
|
| |||||||||||
Russia – 0.09% | ||||||||||||
Russian Foreign Bond - Eurobond 7.85% 3/10/18 | RUB | 130,000,000 | 1,988,537 | |||||||||
|
| |||||||||||
1,988,537 | ||||||||||||
|
| |||||||||||
Senegal – 0.07% | ||||||||||||
Senegal Government International Bond 144A 6.25% 7/30/24 # | 1,740,000 | 1,666,050 | ||||||||||
|
| |||||||||||
1,666,050 | ||||||||||||
|
|
Diversified Income Series-21 |
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
Sovereign Bonds D (continued) | ||||||||
Serbia – 0.08% | ||||||||
Serbia International Bond 144A 4.875% 2/25/20 # | 1,635,000 | $ | 1,689,086 | |||||
|
| |||||||
1,689,086 | ||||||||
|
| |||||||
South Africa – 0.05% | ||||||||
South Africa Government Bond 8.00% 1/31/30 | ZAR | 19,500,000 | 1,201,910 | |||||
|
| |||||||
1,201,910 | ||||||||
|
| |||||||
Sri Lanka – 0.08% | ||||||||
Sri Lanka Government International Bond 144A 6.125% 6/3/25 # | 2,020,000 | 1,897,067 | ||||||
|
| |||||||
1,897,067 | ||||||||
|
| |||||||
Ukraine – 0.10% | ||||||||
Ukraine Government International Bond 144A 7.75% 9/1/19 # | 2,200,000 | 2,178,000 | ||||||
|
| |||||||
2,178,000 | ||||||||
|
| |||||||
United Kingdom – 0.08% | ||||||||
United Kingdom Gilt | ||||||||
3.25% 1/22/44 | GBP | 668,600 | 1,188,499 | |||||
3.50% 1/22/45 | GBP | 340,300 | 631,316 | |||||
|
| |||||||
1,819,815 | ||||||||
|
| |||||||
Uruguay – 0.10% | ||||||||
Uruguay Government International Bond 4.375% 10/27/27 | 2,049,000 | 2,171,940 | ||||||
|
| |||||||
2,171,940 | ||||||||
|
| |||||||
Total Sovereign Bonds | 65,867,517 | |||||||
|
| |||||||
Supranational Banks – 0.83% | ||||||||
Asian Development Bank 0.50% 3/24/20 @ | AUD | 1,279,000 | 889,324 | |||||
Banque Ouest Africaine de Developpement 144A 5.50% 5/6/21 # | 825,000 | 860,063 | ||||||
European Bank for Reconstruction & Development 7.375% 4/15/19 | IDR | 20,190,000,000 | 1,511,060 | |||||
Inter-American Development Bank 6.00% 9/5/17 | INR | 152,200,000 | 2,233,548 | |||||
International Bank for Reconstruction & Development | ||||||||
0.516% 4/17/19 @• | 1,507,000 | 1,503,142 | ||||||
2.50% 11/25/24 | 1,507,000 | 1,609,958 | ||||||
3.50% 1/22/21 | NZD | 9,841,000 | 7,229,181 | |||||
3.75% 2/10/20 | NZD | 1,200,000 | 888,337 | |||||
4.625% 10/6/21 | NZD | 1,119,000 | 869,040 | |||||
International Finance | ||||||||
3.00% 5/6/21 | NZD | 790,000 | 569,331 | |||||
3.625% 5/20/20 | NZD | 472,000 | 348,268 | |||||
|
| |||||||
Total Supranational Banks | 18,511,252 | |||||||
|
|
Principal amount° | Value (U.S. $) | |||||||
U.S. Treasury Obligations – 1.32% | ||||||||
U.S. Treasury Bond 2.50% 5/15/46 | 750,000 | $ | 781,582 | |||||
U.S. Treasury Notes | ||||||||
1.125% 6/30/21 | 24,760,000 | 24,890,559 | ||||||
1.625% 5/15/26 | 1,605,000 | 1,624,687 | ||||||
2.25% 11/15/25 ¥ | 2,020,000 | 2,155,166 | ||||||
|
| |||||||
Total U.S. Treasury Obligations | 29,451,994 | |||||||
|
| |||||||
Number of shares | ||||||||
Common Stock – 0.00% | ||||||||
Adelphia Recovery Trust @=† | 1 | 0 | ||||||
Century Communications @=† | 2,500,000 | 0 | ||||||
|
| |||||||
Total Common Stock | 0 | |||||||
|
| |||||||
Convertible Preferred Stock – 0.26% | ||||||||
Bank of America 7.25% exercise price $50.00, expiration date 12/31/49 | 483 | 577,185 | ||||||
Crown Castle International 4.50% exercise price $85.77, expiration date 11/1/16 | 7,350 | 890,122 | ||||||
Exelon 6.50% exercise price $43.75, expiration date 6/1/17 | 14,850 | 732,699 | ||||||
Halcon Resources 5.75% exercise price $30.78, expiration date 12/31/49 @ | 611 | 27,801 | ||||||
Huntington Bancshares 8.50% exercise price $11.95, expiration date 12/31/49 @ | 714 | 1,006,740 | ||||||
Maiden Holdings 7.25% exercise price $15.11, expiration date 9/15/16 | 18,421 | 874,998 | ||||||
T-Mobile U.S. 5.50% exercise price $31.02, expiration date 12/15/17 | 8,644 | 636,112 | ||||||
Wells Fargo 7.50% exercise price $156.71, expiration date 12/31/49 | 813 | 1,056,250 | ||||||
|
| |||||||
Total Convertible Preferred Stock | 5,801,907 | |||||||
|
| |||||||
Exchange-Traded Fund – 0.05% | ||||||||
iShares iBoxx $ High Yield Corporate Bond ETF | 13,200 | 1,117,908 | ||||||
|
| |||||||
Total Exchange-Traded Fund | 1,117,908 | |||||||
|
| |||||||
Preferred Stock – 0.50% | ||||||||
General Electric 5.00% • | 4,996,000 | 5,307,001 | ||||||
Integrys Energy Group 6.00% @• | 84,450 | 2,285,428 | ||||||
PNC Preferred Funding Trust II 144A 1.875% #• | 3,700,000 | 3,265,250 |
Diversified Income Series-22
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Number of shares | Value (U.S. $) | |||||||
Preferred Stock (continued) | ||||||||
USB Realty 144A 1.775% #@• | 300,000 | $ | 240,375 | |||||
|
| |||||||
Total Preferred Stock | 11,098,054 | |||||||
|
| |||||||
Number of Contracts | ||||||||
Option Purchased – 0.01% | ||||||||
Futures Call Option – 0.01% | ||||||||
U.S. Treasury 10 yr Notes exercise price $135, expiration date 7/22/16 (AFI) | 1,150 | 143,750 | ||||||
|
| |||||||
Total Option Purchased | 143,750 | |||||||
|
| |||||||
Principal amount° | ||||||||
Short-Term Investments – 11.51% | ||||||||
Discount Notes – 10.21% ≠ | ||||||||
Federal Home Loan Bank | ||||||||
0.27% 8/5/16 | 44,966,631 | 44,956,154 | ||||||
0.316% 7/13/16 | 73,604,920 | 73,601,019 | ||||||
0.325% 8/3/16 | 17,961,531 | 17,957,580 | ||||||
0.334% 7/12/16 | 15,366,894 | 15,366,141 | ||||||
0.334% 7/21/16 | 21,342,908 | 21,341,009 | ||||||
0.339% 7/22/16 | 13,018,484 | 13,017,273 | ||||||
0.349% 7/25/16 | 9,166,790 | 9,165,809 | ||||||
0.379% 7/18/16 | 8,052,986 | 8,052,374 | ||||||
0.39% 9/21/16 | 4,266,917 | 4,264,293 | ||||||
0.39% 9/23/16 | 5,204,827 | 5,201,548 | ||||||
0.45% 8/15/16 | 15,363,386 | 15,358,777 | ||||||
|
| |||||||
228,281,977 | ||||||||
|
|
Principal amount° | Value (U.S. $) | |||||||
Short-Term Investments (continued) | ||||||||
Repurchase Agreements – 1.30% | ||||||||
Bank of America Merrill Lynch | 10,249,778 | $ | 10,249,778 | |||||
Bank of Montreal | 17,082,964 | 17,082,964 | ||||||
BNP Paribas | 1,701,258 | 1,701,258 | ||||||
|
| |||||||
29,034,000 | ||||||||
|
| |||||||
Total Short-Term Investments | 257,315,977 | |||||||
|
|
Total Value of Securities – 110.62% | $ | 2,472,084,239 | ||
|
|
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At June 30, 2016, the aggregate value of Rule 144A securities was $469,390,190, which represents 21.00% of the Series’ net assets. See Note 9 in “Notes to financial statements.” | |
@ | Illiquid security. At June 30, 2016, the aggregate value of illiquid securities was $37,968,140, which represents 1.70% of the Series’ net assets. See Note 9 in “Notes to financial statements.” | |
¿ | Pass Through Agreement. Security represents the contractual right to receive a proportionate amount of underlying payments due to the counterparty pursuant to various agreements related to the rescheduling of obligations and the exchange of certain notes. | |
= | Security is being fair valued in accordance with the Series’ fair valuation policy. At June 30, 2016, the aggregate value of fair valued securities was $0, which represents 0.00% of the Series’ net assets. See Note 1 in “Notes to financial statements.” | |
≠ | The rate shown is the effective yield at the time of purchase. | |
° | Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency. | |
† | Non-income-producing security. | |
• | Variable rate security. The rate shown is the rate as of June 30, 2016. Interest rates reset periodically. | |
¥ | Fully or partially pledged as collateral for futures contracts. | |
D | Securities have been classified by country of origin. | |
S | Interest only security. An interest only security is the interest only portion of a fixed income security, which is separated and sold individually from the principal portion of the security. | |
« | Senior secured loans generally pay interest at rates which are periodically redetermined by reference to a base lending rate plus a premium. These base lending rates are generally: (i) the prime rate offered by one or more U.S. banks, (ii) the lending rate offered by one or more European banks such as the London Interbank Offered Rate (LIBOR), and (iii) the certificate of deposit rate. Senior secured loans may be subject to restrictions on resale. Stated rate in effect at June 30, 2016. |
Diversified Income Series-23
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
f | Step coupon bond. Coupon increases or decreases periodically based on a predetermined schedule. Stated rate in effect at June 30, 2016. |
The following foreign currency exchange contracts, futures contracts, and swap contracts were outstanding at June 30, 2016:1
Foreign Currency Exchange Contracts
Counterparty | Contracts to Receive (Deliver) | In Exchange For | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||
|
|
|
|
|
|
| ||||||||||
BAML | AUD | (6,505,798) | USD | 4,815,396 | 7/29/16 | $ (31,284) | ||||||||||
BAML | CAD | (5,392,187) | USD | 4,220,749 | 7/29/16 | 46,567 | ||||||||||
BAML | EUR | 3,732,679 | USD | (4,225,841) | 7/29/16 | (78,959) | ||||||||||
BAML | JPY | (182,167,923) | USD | 1,714,747 | 7/29/16 | (50,939) | ||||||||||
BAML | NZD | (9,630,576) | USD | 6,804,291 | 7/29/16 | (61,334) | ||||||||||
BB | COP | (4,294,967,296) | USD | (3,327,323) | 7/29/16 | 50,942 | ||||||||||
BB | EUR | (238,673) | USD | 264,471 | 7/29/16 | (687) | ||||||||||
BB | IDR | (2,147,483,648) | USD | (1,205,653) | 7/29/16 | 13,379 | ||||||||||
BNP | AUD | (2,477,456) | USD | 1,830,984 | 7/29/16 | (14,668) | ||||||||||
BNP | INR | 78,396,297 | USD | (1,161,237) | 7/29/16 | (6,268) | ||||||||||
BNP | NOK | (6,515,577) | USD | 790,213 | 7/29/16 | 11,681 | ||||||||||
BNYM | BRL | 3,817,928 | USD | (1,171,251) | 7/5/16 | 15,502 | ||||||||||
HSBC | GBP | (2,806,345) | USD | 3,873,421 | 7/29/16 | 136,504 | ||||||||||
JPMC | KRW | (2,147,483,648) | USD | 2,688,036 | 7/29/16 | (38,137) | ||||||||||
JPMC | PLN | (2,687,620) | USD | 690,895 | 7/29/16 | 10,188 | ||||||||||
JPMC | SEK | 2,366,400 | USD | (287,484) | 7/29/16 | (7,432) | ||||||||||
TD | EUR | (2,426,230) | USD | 2,685,472 | 7/29/16 | (9,987) | ||||||||||
TD | JPY | 178,236,099 | USD | (1,679,695) | 7/29/16 | 47,882 | ||||||||||
TD | NZD | (5,673,818) | USD | 4,004,949 | 7/29/16 | (39,908) | ||||||||||
$ (6,958) |
Futures Contracts
Contracts to Buy (Sell) | Notional Cost (Proceeds) | Notional Value | Expiration Date | Unrealized Appreciation (Depreciation) | ||||||||||||
|
|
|
|
|
|
| ||||||||||
(203) |
E-mini S&P 500® Index | $ (20,656,750) | $ (21,215,530) | 9/19/16 | $ (558,780) | |||||||||||
(6) | U.S. Treasury 10 yr Notes | (790,952) | (797,906) | 9/22/16 | (6,954) | |||||||||||
681 | U.S. Treasury Long Bonds | 113,881,650 | 117,366,094 | 9/22/16 | 3,484,444 | |||||||||||
$ 92,433,948 | $2,918,710 |
Swap Contracts
CDS Contracts2
Counterparty | Swap Referenced Obligation | Notional Value3 | Annual Protection Payments | Termination Date | Upfront Payment | Unrealized Appreciation (Depreciation)4 | ||||||||||||||
Protection Sold: | ||||||||||||||||||||
HSBC | CDX.EM.255 | 5,620,000 | 1.00% | 6/20/21 | $(491,897) | $67,486 |
The use of foreign currency exchange contracts, futures contracts, and swap contracts involves elements of market risk and risks in excess of the amounts disclosed in these financial statements. The notional values and foreign currency exchange contracts presented above represent the Series’ total exposure in such contracts, whereas only the net unrealized appreciation (depreciation) is reflected in the Series’ net assets.
1See Note 6 in “Notes to financial statements.”
2A CDS contract is a risk-transfer instrument through which one party (purchaser of protection) transfers to another party (seller of protection) the financial risk of a credit event (as defined in the CDS agreement), as it relates to a particular reference security or basket of securities (such as an index). Periodic payments (receipts) on such contracts are accrued daily and recorded as unrealized losses (gains) on swap contracts. Upon payment (receipt), such amounts are recorded as realized losses (gains) on swap contracts. Upfront payments made or received in connection with CDS contracts are amortized over the expected life of the CDS contracts as unrealized losses (gains) on swap contracts. The
Diversified Income Series-24
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
change in value of CDS contracts is recorded daily as unrealized appreciation or depreciation. A realized gain or loss is recorded upon a credit event (as defined in the CDS agreement) or the maturity or termination of the agreement.
3Notional value shown is stated in U.S. Dollars unless noted that the swap is denominated in another currency.
4Unrealized appreciation (depreciation) does not include periodic interest payments (receipt) on swap contracts accrued daily in the amount of $1,586.
5Markit’s CDX.EM Index is composed of fourteen sovereign issuers from the following regions: Latin America, Middle East, Eastern Europe, Africa and Asia.
Summary of abbreviations:
ABS – Asset-Backed Security
AFI – Advantage Futures
ARM – Adjustable Rate Mortgage
AUD – Australian Dollar
BAML – Bank of America Merrill Lynch
BB – Barclays Bank
BNP – BNP Paribas
BNYM – Bank of New York Mellon
BRL – Brazilian Real
CAD – Canadian Dollar
CDS – Credit Default Swap
CDX.EM – Credit Default Swap Index Emerging Markets
CLO – Collateralized Loan Obligation
COP – Colombian Peso
DB – Deutsche Bank
ETF – Exchange Traded Fund
EUR – European Monetary Unit
GBP – British Pound Sterling
GNMA – Government National Mortgage Association
GS – Goldman Sachs
HSBC – Hong Kong Shanghai Bank
IDR – Indonesian Rupiah
INR – Indian Rupee
JPMBB – JPMorgan Barclays Bank
JPMC – JPMorgan Chase Bank
JPMDB – JPMorgan Deutsche Bank
JPY – Japanese Yen
KRW – South Korean Won
LB – Lehman Brothers
MXN – Mexican Peso
NOK – Norwegian Krone
NZD – New Zealand Dollar
PHP – Philippine Peso
PLN – Polish Zloty
RBS – Royal Bank of Scotland
REMIC – Real Estate Mortgage Investment Conduit
RUB – Russian Ruble
SEK – Swedish Krona
S.F. – Single Family
TBA – To be announced
TD – Toronto Dominion Bank
UBS – Union Bank of Switzerland
Diversified Income Series-25
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Summary of abbreviations (continued):
USD – U.S. Dollar
yr – Year
WF – Wells Fargo
ZAR – South African Rand
See accompanying notes, which are an integral part of the financial statements.
Diversified Income Series-26
Table of Contents
Delaware VIP® Trust—Delaware VIP Diversified Income Series | ||
Statement of assets and liabilities | June 30, 2016 (Unaudited) |
Assets: | ||||
Investments, at value1 | $ | 2,214,624,512 | ||
Short-term investments, at value2 | 257,315,977 | |||
Options purchased, at value3 | 143,750 | |||
Foreign currencies, at value4 | 2,777,657 | |||
Cash | 2,017,823 | |||
Cash collateral due from brokers | 360,000 | |||
Receivable for securities sold | 372,482,455 | |||
Dividends and interest receivable | 14,339,327 | |||
Unrealized appreciation on foreign currency exchange contracts | 332,645 | |||
Unrealized appreciation on credit default swap contracts | 67,486 | |||
Receivable for series shares sold | 31,834 | |||
Swap payments receivable | 1,940 | |||
Other assets5 | 1,305,392 | |||
|
| |||
Total assets | 2,865,800,798 | |||
|
| |||
Liabilities: | ||||
Payable for securities purchased | 620,074,423 | |||
Bonds proceeds payable5 | 4,351,308 | |||
Cash collateral due to brokers | 2,364,000 | |||
Investment management fees payable | 1,064,792 | |||
Payable for series shares redeemed | 723,384 | |||
Variation margin due to broker on futures contracts | 683,948 | |||
Other accrued expenses | 583,015 | |||
Upfront payments received on credit default swap contracts | 491,897 | |||
Distribution fees payable to affiliates | 386,893 | |||
Unrealized depreciation on foreign currency exchange contracts | 339,603 | |||
Audit and tax fees payable to affiliates | 23,639 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 13,681 | |||
Accounting and administration expenses payable to affiliates | 8,625 | |||
Trustees’ fees and expenses payable to affiliates | 6,710 | |||
Legal fees payable to affiliates | 4,031 | |||
Reports and statements to shareholders expenses payable to affiliates | 923 | |||
Other liabilities | 5,207 | |||
|
| |||
Total liabilities | 631,126,079 | |||
|
| |||
Total Net Assets | $ | 2,234,674,719 | ||
|
|
Diversified Income Series-27
Table of Contents
Delaware VIP® Trust—Delaware VIP Diversified Income Series
Statement of assets and liabilities (continued)
Net Assets Consist of: | ||||
Paid-in capital | $ | 2,205,867,812 | ||
Undistributed net investment income | 23,587,432 | |||
Accumulated net realized loss on investments | (38,800,165 | ) | ||
Net unrealized appreciation of investments | 41,183,173 | |||
Net unrealized depreciation of foreign currencies | (14,078 | ) | ||
Net unrealized depreciation of foreign currency exchange contracts | (6,958 | ) | ||
Net unrealized appreciation of futures contracts | 2,918,710 | |||
Net unrealized depreciation of options purchased | (130,279 | ) | ||
Net unrealized appreciation of swap contracts | 69,072 | |||
|
| |||
Total Net Assets | $ | 2,234,674,719 | ||
|
| |||
Net Asset Value: | ||||
Standard Class: | ||||
Net assets | $ | 336,328,599 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 32,217,049 | |||
Net asset value per share | $ | 10.44 | ||
Service Class: | ||||
Net assets | $ | 1,898,346,120 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 182,873,136 | |||
Net asset value per share | $ | 10.38 | ||
| ||||
1Investments, at cost | $ | 2,173,455,601 | ||
2Short-term investments, at cost | 257,296,508 | |||
3Options purchased, at cost | 274,029 | |||
4Foreign currencies, at cost | 2,778,388 | |||
5See Note 11 in “Notes to financial statements.” |
See accompanying notes, which are an integral part of the financial statements.
Diversified Income Series-28
Table of Contents
Delaware VIP Diversified Income Series
Statement of operations
Six months ended June 30, 2016 (Unaudited)
Investment Income: | ||||
Interest | $ | 34,342,458 | ||
Dividends | 249,397 | |||
Foreign tax withheld | (2,443 | ) | ||
|
| |||
34,589,412 | ||||
|
| |||
Expenses: | ||||
Management fees | 6,325,155 | |||
Distribution expenses – Service Class | 2,747,329 | |||
Accounting and administration expenses | 353,404 | |||
Reports and statements to shareholders expenses | 203,052 | |||
Dividend disbursing and transfer agent fees and expenses | 91,907 | |||
Legal fees | 69,231 | |||
Custodian fees | 67,206 | |||
Trustees’ fees and expenses | 55,825 | |||
Audit and tax | 24,596 | |||
Registration fees | 397 | |||
Other | 59,916 | |||
|
| |||
|
9,998,018 |
| ||
Less waived distribution expenses – Service Class | (457,888 | ) | ||
Less expense paid indirectly | (1 | ) | ||
|
| |||
Total operating expenses | 9,540,129 | |||
|
| |||
Net Investment Income | 25,049,283 | |||
|
| |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments1 | 8,753,863 | |||
Foreign currencies | (699,283 | ) | ||
Foreign currency exchange contracts | (1,272,985 | ) | ||
Futures contracts | 210,984 | |||
Options purchased | 473,757 | |||
Options written | (576,072 | ) | ||
Swap contracts | 2,673,502 | |||
|
| |||
Net realized gain | 9,563,766 | |||
|
| |||
Net change in unrealized appreciation (depreciation) of: | ||||
Investments2 | 65,952,004 | |||
Foreign currencies | 9,997 | |||
Foreign currency exchange contracts | 173,999 | |||
Futures contracts | 4,134,941 | |||
Options purchased | (130,279 | ) | ||
Swap contracts | (206,343 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) | 69,934,319 | |||
|
| |||
Net Realized and Unrealized Gain | 79,498,085 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 104,547,368 | ||
|
|
1Includes $6,149 capital gains taxes paid.
2Includes $5,207 capital gains taxes accrued.
Delaware VIP Diversified Income Series
Statements of changes in net assets
Six months ended 6/30/16 (Unaudited) | Year ended 12/31/15 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 25,049,283 | $ | 72,128,322 | ||||
Net realized gain (loss) | 9,563,766 | (46,184,143 | ) | |||||
Net change in unrealized appreciation (depreciation) | 69,934,319 | (56,329,941 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 104,547,368 | (30,385,762 | ) | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Standard Class | (11,261,327 | ) | (14,156,454 | ) | ||||
Service Class | (58,403,940 | ) | (52,370,637 | ) | ||||
Net realized gain: | ||||||||
Standard Class | — | (5,195,029 | ) | |||||
Service Class | — | (20,948,255 | ) | |||||
|
|
|
| |||||
|
(69,665,267 |
) | (92,670,375 | ) | ||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Standard Class | 7,806,287 | 23,335,358 | ||||||
Service Class | 60,502,907 | 161,193,132 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 11,261,327 | 14,864,954 | ||||||
Service Class | 58,403,940 | 73,318,892 | ||||||
|
|
|
| |||||
137,974,461 | 272,712,336 | |||||||
|
|
|
| |||||
Cost of shares redeemed: | ||||||||
Standard Class | (26,899,664 | ) | (149,390,421 | ) | ||||
Service Class | (81,693,666 | ) | (123,233,742 | ) | ||||
|
|
|
| |||||
(108,593,330 | ) | (272,624,163 | ) | |||||
|
|
|
| |||||
Increase in net assets derived from capital share transactions | 29,381,131 | 88,173 | ||||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | 64,263,232 | (122,967,964 | ) | |||||
Net Assets: | ||||||||
Beginning of period | 2,170,411,487 | 2,293,379,451 | ||||||
|
|
|
| |||||
End of period | $ | 2,234,674,719 | $ | 2,170,411,487 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 23,587,432 | $ | 68,203,416 | ||||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
Diversified Income Series-29
Table of Contents
Delaware VIP® Trust — Delaware VIP Diversified Income Series
Financial highlights
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP Diversified Income Series Standard Class | ||||||||||||||||||||||||||||||||||||||||
Six months | ||||||||||||||||||||||||||||||||||||||||
ended | ||||||||||||||||||||||||||||||||||||||||
6/30/161 | Year ended | |||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||
(Unaudited) | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | 12/31/11 | |||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.290 | $ | 10.840 | $ | 10.530 | $ | 11.070 | $ | 11.020 | $ | 11.280 | ||||||||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.130 | 0.349 | 0.333 | 0.331 | 0.376 | 0.426 | ||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.380 | (0.452 | ) | 0.221 | (0.460 | ) | 0.384 | 0.256 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Total from investment operations | 0.510 | (0.103 | ) | 0.554 | (0.129 | ) | 0.760 | 0.682 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||||||||||||||||||
Net investment income | (0.360 | ) | (0.327 | ) | (0.244 | ) | (0.260 | ) | (0.359 | ) | (0.475 | ) | ||||||||||||||||||||||||||||
Net realized gain | — | (0.120 | ) | — | (0.151 | ) | (0.351 | ) | (0.467 | ) | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Total dividends and distributions | (0.360 | ) | (0.447 | ) | (0.244 | ) | (0.411 | ) | (0.710 | ) | (0.942 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Net asset value, end of period | $ | 10.440 | $ | 10.290 | $ | 10.840 | $ | 10.530 | $ | 11.070 | $ | 11.020 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Total return3 | 5.03% | (1.08% | ) | 5.32% | (1.26% | ) | 7.20% | 6.39% | ||||||||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 336,329 | $ | 339,023 | $ | 473,569 | $ | 489,953 | $ | 531,992 | $ | 517,362 | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 0.67% | 0.67% | 0.67% | 0.67% | 0.68% | 0.68% | ||||||||||||||||||||||||||||||||||
Ratio of net investment income to average net assets | 2.53% | 3.29% | 3.09% | 3.10% | 3.43% | 3.87% | ||||||||||||||||||||||||||||||||||
Portfolio turnover | 163% | 250% | 252% | 260% | 216% | 233% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return does not include fees, charges, or expenses imposed by the variable annuity and life insurance contracts for which Delaware VIP Trust serves as an underlying investment vehicle. |
See accompanying notes, which are an integral part of the financial statements.
Diversified Income Series-30
Table of Contents
Delaware VIP® Diversified Income Series
Financial highlights (continued)
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP Diversified Income Series Service Class | ||||||||||||||||||||||||||||||
Six months ended 6/30/161 | Year ended | |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
(Unaudited) | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | 12/31/11 | |||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.220 | $ | 10.770 | $ | 10.470 | $ | 11.000 | $ | 10.960 | $ | 11.220 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||
Net investment income2 | 0.117 | 0.321 | 0.305 | 0.303 | 0.347 | 0.396 | ||||||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.377 | (0.451 | ) | 0.212 | (0.449 | ) | 0.376 | 0.258 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total from investment operations | 0.494 | (0.130 | ) | 0.517 | (0.146 | ) | 0.723 | 0.654 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||||||||
Net investment income | (0.334 | ) | (0.300 | ) | (0.217 | ) | (0.233 | ) | (0.332 | ) | (0.447 | ) | ||||||||||||||||||
Net realized gain | — | (0.120 | ) | — | (0.151 | ) | (0.351 | ) | (0.467 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total dividends and distributions | (0.334 | ) | (0.420 | ) | (0.217 | ) | (0.384 | ) | (0.683 | ) | (0.914 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net asset value, end of period | $ | 10.380 | $ | 10.220 | $ | 10.770 | $ | 10.470 | $ | 11.000 | $ | 10.960 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total return3 | 4.90% | (1.34% | ) | 4.98% | (1.42% | ) | 6.87% | 6.15% | ||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 1,898,346 | $ | 1,831,388 | $ | 1,819,811 | $ | 1,536,240 | $ | 1,519,853 | $ | 1,299,943 | ||||||||||||||||||
Ratio of expenses to average net assets | 0.92% | 0.92% | 0.92% | 0.92% | 0.93% | 0.93% | ||||||||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 0.97% | 0.97% | 0.97% | 0.97% | 0.98% | 0.98% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets | 2.28% | 3.04% | 2.84% | 2.85% | 3.18% | 3.62% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 2.23% | 2.99% | 2.79% | 2.80% | 3.13% | 3.57% | ||||||||||||||||||||||||
Portfolio turnover | 163% | 250% | 252% | 260% | 216% | 233% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects a waiver by the distributor. Performance would have been lower had the waiver not been in effect. Total investment return does not include fees, charges, or expenses imposed by the variable annuity and life insurance contracts for which Delaware VIP Trust serves as an underlying investment vehicle. |
See accompanying notes, which are an integral part of the financial statements.
Diversified Income Series-31
Table of Contents
Delaware VIP® Trust — Delaware VIP Diversified Income Series
Notes to financial statements
June 30, 2016 (Unaudited)
Delaware VIP Trust (Trust) is organized as a Delaware statutory trust and offers 10 series: Delaware VIP Diversified Income Series, Delaware VIP Emerging Markets Series, Delaware VIP High Yield Series, Delaware VIP International Value Equity Series, Delaware VIP Limited-Term Diversified Income Series, Delaware VIP REIT Series, Delaware VIP Small Cap Value Series, Delaware VIP Smid Cap Growth Series, Delaware VIP U.S. Growth Series, and Delaware VIP Value Series. These financial statements and the related notes pertain to Delaware VIP Diversified Income Series (Series). The Trust is an open-end investment company. The Series is considered diversified under the Investment Company Act of 1940 (1940 Act), as amended, and offers Standard Class and Service Class shares. The Standard Class shares do not carry a 12b-1 fee and the Service Class shares carry a 12b-1 fee. The shares of the Series are sold only to separate accounts of life insurance companies.
The investment objective of the Series is to seek maximum long-term total return consistent with reasonable risk.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistently followed by the Series.
Security Valuation—Equity securities and exchange-traded funds (ETFs), except those traded on the Nasdaq Stock Market LLC (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange on the valuation date. Equity securities and ETFs traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If, on a particular day, an equity security or ETF does not trade, the mean between the bid and ask prices will be used, which approximates fair value. U.S. government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Securities listed on a foreign exchange are normally valued at the last quoted sales price on the valuation date. Other debt securities, credit default swap (CDS) contracts, and interest rate swap contracts are valued based upon valuations provided by an independent pricing service or broker/counterparty and reviewed by management. To the extent current market prices are not available, the pricing service may take into account developments related to the specific security, as well as transactions in comparable securities. Valuations for fixed income securities utilize matrix systems, which reflect such factors as security prices, yields, maturities, and ratings, and are supplemented by dealer and exchange quotations. For asset-backed securities, collateralized mortgage obligations, commercial mortgage securities, and U.S. government agency mortgage securities, pricing vendors utilize matrix pricing which considers prepayment speed, attributes of the collateral, yield or price of bonds of comparable quality, coupon, maturity, and type as well as broker/dealer-supplied prices. Swap prices are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades, and values of the underlying reference instruments. Foreign currency exchange contracts and foreign cross currency exchange contracts are valued at the mean between the bid and ask prices, which approximates fair value. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available. Futures contracts and options on futures contracts are valued at the daily quoted settlement prices. Exchange-traded options are valued at the last reported sale price or, if no sales are reported, at the mean between the last reported bid and ask prices, which approximates fair value. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Trust’s Board of Trustees (Board). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security.
Federal and Foreign Income Taxes—No provision for federal income taxes has been made as the Series intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Series evaluates tax positions taken or expected to be taken in the course of preparing the Series’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Series’ tax positions taken for all open federal income tax years (Dec. 31, 2012–Dec. 31, 2015), and has concluded that no provision for federal income tax is required in the Series’ financial statements. In regard to foreign taxes only, the Series has open tax years in certain foreign countries in which it invests that may date back to the inception of the Series.
Class Accounting—Investment income, common expenses, and realized and unrealized gain (loss) on investments are allocated to the classes of the Series on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class.
Repurchase Agreements—The Series may purchase certain U.S. government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Series’ custodian or a third-party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on June 30, 2016 and matured on the next business day.
To Be Announced Trades (TBA)—The Series may contract to purchase or sell securities for a fixed price at a transaction date beyond the customary settlement period (examples: when issued, delayed delivery, forward commitment, or TBA transactions) consistent with the Series’ ability to manage its investment portfolio and meet redemption requests. These transactions involve a commitment by the Series to purchase or sell securities for a predetermined price or yield with payment and delivery taking place more than three days in the future, or after a period longer than the customary settlement period for that type of security. No interest will be earned by the Series on such purchases until the securities are delivered or the transaction is completed; however, the market value may change prior to delivery. At June 30, 2016, the Series received $2,364,000 cash collateral for TBA transactions as of June 30, 2016, which is shown as “Cash collateral due to brokers” on the “Statement of assets and liabilities.”
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Notes to financial statements (continued)
1. Significant Accounting Policies (continued)
Foreign Currency Transactions—Transactions denominated in foreign currencies are recorded at the prevailing exchange rates on the valuation date in accordance with the Series’ prospectus. The value of all assets and liabilities denominated in foreign currencies is translated daily into U.S. dollars at the exchange rate of such currencies against the U.S. dollar. Transaction gains or losses resulting from changes in exchange rates during the reporting period or upon settlement of the foreign currency transaction are reported in operations for the current period. The Series generally bifurcates that portion of realized gains and losses on investments in debt securities which is due to changes in foreign exchange rates from that which is due to changes in market prices of debt securities. That portion of gains (losses), which is due to changes to foreign exchange rates, is included on the “Statement of operations” under “Net realized gain (loss) on foreign currencies.” The Series reports certain foreign currency related transactions as components of realized gains (losses) for financial reporting purposes, whereas such components are treated as ordinary income (loss) for federal income tax purposes.
Use of Estimates—The Series is an investment company, whose financial statements are prepared in conformity with U.S. GAAP. Therefore, the Series follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other—Expenses directly attributable to the Series are charged directly to the Series. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated among such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Discounts and premiums on debt securities are accreted or amortized to interest income, respectively, over the lives of the respective securities using the effective interest method. Realized gains (losses) on paydowns of asset- and mortgage-backed securities are classified as interest income. Withholding taxes and reclaims on foreign interest have been recorded in accordance with the Series’ understanding of the applicable country’s tax rules and rates. The Series may pay foreign capital gain taxes on certain foreign securities held, which are reported as components of realized losses for financial reporting purposes, whereas such components are treated as ordinary loss for federal income tax purposes. The Series declares and pays dividends from net investment income and distributions from net realized gain on investments, if any, following the close of the fiscal year. The Series may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
The Series may receive earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. There were no such earnings credits for the six months ended June 30, 2016.
The Series receives earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than one dollar, the expense paid under this arrangement is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expense offset shown under “Less expense paid indirectly.” For the six months ended June 30, 2016, the Series earned $1 under this agreement.
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Series pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.65% on the first $500 million of average daily net assets of the Series, 0.60% on the next $500 million, 0.55% on the next $1.5 billion, and 0.50% on average daily net assets in excess of $2.5 billion.
Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Series. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the Delaware Investments Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DIFSC under the service agreement described above are allocated among all funds in the Delaware Investments Family of Funds on a relative net asset value (NAV) basis. For the six months ended June 30, 2016, the Series was charged $51,480 for these services. This amount is included on the “Statement of operations” under “Accounting and administration expenses.”
DIFSC is also the transfer agent and dividend disbursing agent of the Series. For these services, DIFSC’s fees are calculated at the annual rate of 0.0075% of the Series’ average daily net assets. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the six months ended June 30, 2016, the Series was charged $81,166 for these services. Pursuant to a sub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Series. Sub-transfer agency fees are paid by the Series and are also included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.”
Pursuant to a distribution agreement and distribution plan, the Series pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee of 0.30% of the average daily net assets of the Service Class shares. DDLP has contracted to waive distribution and service fee from Jan. 1, 2016 through June 31, 2016* in order to limit distribution and service fee of the Service Class shares to 0.25% of average daily net assets. Standard Class shares pay no distribution and service expenses.
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Notes to financial statements (continued)
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates (continued)
As provided in the investment management agreement, the Series bears a portion of the cost of resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Series. For the six months ended June 30, 2016, the Series was charged $24,141 for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees. This amount is included on the “Statement of operations” under “Legal fees.”
Trustees’ fees include expenses accrued by the Series for each Trustee’s retainer and meeting fees. Certain officers of DMC, DIFSC, and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Series.
*The contractual waiver period is from April 30, 2015 through May 1, 2017.
3. Investments
For the six months ended June 30, 2016, the Series made purchases and sales of investment securities other than short-term investments as follows:
Purchases other than U.S. government securities | $ | 2,624,968,803 | ||
Purchases of U.S. government securities | 915,423,222 | |||
Sales other than U.S. government securities | 2,284,654,926 | |||
Sales of U.S. government securities | 1,187,536,616 |
At June 30, 2016, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At June 30, 2016, the cost and unrealized appreciation (depreciation) of investments for federal income tax purposes were as follows:
Cost of Investments | Aggregate Unrealized Appreciation of Investments | Aggregate Unrealized Depreciation of Investments | Net Unrealized Appreciation of Investments | |||||||||||||
$2,430,752,109 | $57,771,183 | $(16,582,803) | $41,188,380 | |||||||||||||
On Dec. 22, 2010, the Regulated Investment Company Modernization Act of 2010 (Act) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes were generally effective for taxable years beginning after the date of enactment. Under the Act, the Series is permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.
Losses incurred that will be carried forward under the Act are as follows:
Loss carryforward character | ||||||||
Short-term | Long-term | Total | ||||||
$30,429,008 | $ | 15,390,832 | $ | 45,819,840 |
U.S. GAAP defines fair value as the price that the Series would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established 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 assumptions that market participants would use in pricing the asset or liability based on the best information available under the circumstances. The Series’ investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized below.
Level 1 – | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) | |
Level 2 – | Other observable inputs, including, but 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. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) | |
Level 3 – | Significant unobservable inputs, including the Series’ own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities) |
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Notes to financial statements (continued)
3. Investments (continued)
Level 3 investments are valued using significant unobservable inputs. The Series may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
The following table summarizes the valuation of the Series’ investments by fair value hierarchy levels as of June 30, 2016:
Securities | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Agency, Asset- & Mortgage-Backed Securities1 | $ | — | $ | 869,151,838 | $ | 3,636,510 | $ | 872,788,348 | ||||||||
Collateralized Debt Obligations | — | 35,483,968 | — | 35,483,968 | ||||||||||||
Corporate Debt | — | 970,049,448 | — | 970,049,448 | ||||||||||||
Foreign Debt | — | 103,806,975 | — | 103,806,975 | ||||||||||||
Municipal Bonds | — | 16,039,436 | — | 16,039,436 | ||||||||||||
Senior Secured Loans1 | — | 159,586,269 | 9,400,205 | 168,986,474 | ||||||||||||
Common Stock | — | — | — | — | ||||||||||||
Convertible Preferred Stock1 | 5,774,106 | 27,801 | — | 5,801,907 | ||||||||||||
Exchange-Traded Fund | 1,117,908 | — | — | 1,117,908 | ||||||||||||
Preferred Stock | — | 11,098,054 | — | 11,098,054 | ||||||||||||
Option Purchased | 143,750 | — | — | 143,750 | ||||||||||||
U.S. Treasury Obligations | — | 29,451,994 | — | 29,451,994 | ||||||||||||
Short-Term Investments | — | 257,315,977 | — | 257,315,977 | ||||||||||||
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Total Value of Securities | $ | 7,035,764 | $ | 2,452,011,760 | $ | 13,036,715 | $ | 2,472,084,239 | ||||||||
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Foreign Currency Exchange Contracts | $ | — | $ | (6,958 | ) | $ | — | $ | (6,958 | ) | ||||||
Futures Contracts | 2,918,710 | — | — | 2,918,710 | ||||||||||||
Swap Contracts | — | 67,486 | — | 67,486 |
The securities that have been valued at zero on the “Schedule of investments” are considered to be Level 3 investments in this table.
1Security type is valued across multiple levels. Level 1 investments represent exchange-traded investments, Level 2 investments represent investments with observable inputs or matrix-priced investments, and Level 3 investments represent investments without observable inputs. The amounts attributed to Level 1 investments, Level 2 investments, and Level 3 investments represent the following percentages of the total market value of these security types:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||
Agency, Asset- & Mortgage-Backed Securities | — | 99.58% | 0.42% | 100.00% | ||||||||||||||||
Senior Secured Loans | — | 94.44% | 5.56% | 100.00% | ||||||||||||||||
Convertible Preferred Stock | 99.52% | 0.48% | — | 100.00% |
During the six months ended June 30, 2016, there were no transfers between Level 1 investments, Level 2 investments, or Level 3 investments that had a significant impact to the Series. The Series’ policy is to recognize transfers between levels at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when the Series has a significant amount of Level 3 investments at the beginning, interim, or end of period in relation to the Series’ net assets. Management has determined not to provide additional disclosure on Level 3 inputs since the Level 3 investments are not considered significant to the Series’ net assets at the end of the period.
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Notes to financial statements (continued)
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 6/30/16 | Year ended 12/31/15 | |||||||
Shares sold: | ||||||||
Standard Class | 753,472 | 2,178,028 | ||||||
Service Class | 5,876,676 | 15,136,868 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 1,101,891 | 1,398,396 | ||||||
Service Class | 5,742,767 | 6,929,952 | ||||||
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13,474,806 | 25,643,244 | |||||||
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Shares redeemed: | ||||||||
Standard Class | (2,582,604 | ) | (14,303,180 | ) | ||||
Service Class | (7,909,844 | ) | (11,808,731 | ) | ||||
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(10,492,448 | ) | (26,111,911 | ) | |||||
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Net increase (decrease) | 2,982,358 | (468,667 | ) | |||||
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5. Line of Credit
The Series, along with certain other funds in the Delaware Investments® Family of Funds (Participants), is a participant in a $155,000,000 revolving line of credit intended to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants are charged an annual commitment fee of 0.10%, which is allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants are permitted to borrow up to a maximum of one-third of their net assets under the agreement. Each Participant is individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit available under the agreement expires on Nov. 7, 2016.
The Series had no amount outstanding as of June 30, 2016 or at any time during the period then ended.
6. Derivatives
U.S. GAAP requires disclosures that enable investors to understand: (1) how and why an entity uses derivatives; (2) how they are accounted for; and (3) how they affect an entity’s results of operations and financial position.
Foreign Currency Exchange Contracts – The Series may enter into foreign currency exchange contracts and foreign cross currency exchange contracts as a way of managing foreign exchange rate risk. The Series may enter into these contracts to fix the U.S. dollar value of a security that it has agreed to buy or sell for the period between the date the trade was entered into and the date the security is delivered and paid for. The Series may also use these contracts to hedge the U.S. dollar value of securities it already owns that are denominated in foreign currencies. In addition, The Series may enter into these contracts to facilitate or expedite the settlement of portfolio transactions. The change in value is recorded as an unrealized gain or loss. When the contract is closed, a realized gain or loss is recorded equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
The use of foreign currency exchange contracts and foreign cross currency exchange contracts does not eliminate fluctuations in the underlying prices of the securities, but does establish a rate of exchange that can be achieved in the future. Although foreign currency exchange contracts and foreign cross currency exchange contracts limit the risk of loss due to an unfavorable change in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency change favorably. In addition, the Series could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. The Series’ maximum risk of loss from counterparty credit risk is the value of its currency exchanged with the counterparty. The risk is generally mitigated by having a netting arrangement between the Series and the counterparty and by the posting of collateral by the counterparty to the Series to cover the Series’ exposure to the counterparty.
During the six months ended June 30, 2016, the Series entered into foreign currency exchange contracts to hedge the U.S. dollar value of securities it already owned that were denominated in foreign currencies.
Futures Contracts – A futures contract is an agreement in which the writer (or seller) of the contract agrees to deliver to the buyer an amount of cash or securities equal to a specific dollar amount times the difference between the value of a specific security or index at the close of the last trading day of the contract and the price at which the agreement is made. The Series may use futures contracts in the normal course of pursuing its investment objective. The Series may invest in futures contracts to hedge its existing portfolio securities against fluctuations in value caused by changes in interest rates or market conditions. Upon entering into a futures contract, the Series deposits cash or pledges U.S. government
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Notes to financial statements (continued)
6. Derivatives (continued)
securities to a broker, equal to the minimum “initial margin” requirements of the exchange on which the contract is traded. Subsequent payments are received from the broker or paid to the broker each day, based on the daily fluctuation in the market value of the contract. These receipts or payments are known as “variation margin” and are recorded daily by the Series as unrealized gains or losses until the contracts are closed. When the contracts are closed, the Series records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Risks of entering into futures contracts include potential imperfect correlation between the futures contracts and the underlying securities and the possibility of an illiquid secondary market for these instruments. When investing in futures, there is reduced counterparty credit risk to the Series because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default. At June 30, 2016, the Series posted securities, comprised of U.S. treasury obligations with a value of $3,574,161 as margin for open futures contracts, which is presented on the “Schedule of investments.”
During the six months ended June 30, 2016, the Series used futures contracts to hedge the Series’ existing portfolio securities against fluctuations in value caused by changes in interest rates or market conditions.
Options Contracts – During the six months ended June 30, 2016, the Series entered into options contracts in the normal course of pursuing its investment objective. The Series may buy or write options contracts for any number of reasons, including without limitation: to manage the Series’ exposure to changes in securities prices caused by interest rates or market conditions and foreign currencies; as an efficient means of adjusting the Series’ overall exposure to certain markets; to protect the value of portfolio securities; and as a cash management tool. The Series may buy or write call or put options on securities, futures, swaps, swaptions, financial indices, and foreign currencies. When the Series buys an option, a premium is paid and an asset is recorded and adjusted on a daily basis to reflect the current market value of the option purchased. When the Series writes an option, a premium is received and a liability is recorded and adjusted on a daily basis to reflect the current market value of the option written. Premiums received from writing options that expire unexercised are treated by the Series on the expiration date as realized gains. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is treated as realized gain or loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether the Series has a realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Series. The Series, as writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option. When writing options, the Series is subject to minimal counterparty risk because the counterparty is only obligated to pay premiums and does not bear the market risk of an unfavorable market change.
Call Options | Number of | Premiums | ||||||||
Options outstanding at Dec. 31, 2015 | — | $ | — | |||||||
Options purchased | 2,567,849 | 156,728 | ||||||||
Options expired | (2,567,000 | ) | (24,072 | ) | ||||||
Options exercised | (849 | ) | (132,656 | ) | ||||||
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Options outstanding at June 30, 2016 | — | $ | — | |||||||
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Put Options | Number of | Premiums | ||||||||
Options outstanding at Dec. 31, 2015 | — | $ | — | |||||||
Options written | 2,567,000 | 62,423 | ||||||||
Options expired | (2,567,000 | ) | (62,423 | ) | ||||||
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Options outstanding at June 30, 2016 | — | $ | — | |||||||
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During the six months ended June 30, 2016, the Series used options contracts to manage the Series’ exposure to changes in securities prices caused by interest rates or market conditions.
Swap Contracts – The Series may enter into interest rate swap contracts and CDS contracts in the normal course of pursuing its investment objective. The Series may invest in interest swaps to manage the Series’ sensitivity to interest rates or to hedge against changes in interest rates. The Series may enter into CDS contracts in order to hedge against a credit event, to enhance total return or to gain exposure to certain securities or markets. The Series will not be permitted to enter into any swap transactions unless, at the time of entering into such transactions, the unsecured long-term debt of the actual counterparty, combined with any credit enhancements, is rated at least BBB-by Standard & Poor’s Financial Services LLC. (S&P) or Baa3 by Moody’s Investors Service, Inc. (Moody’s) or is determined to be of equivalent credit quality by DMC.
Interest Rate Swaps. An interest rate swap contract is an exchange of interest rates between counterparties. In one instance, an interest rate swap involves payments received by the Series from another party based on a variable or floating interest rate, in return for making payments based on a fixed interest rate. An interest rate swap can also work in reverse with the Series receiving payments based on a fixed interest rate and making payments based on a variable or floating interest rate. Interest rate swaps may be used to adjust the Series’ sensitivity to interest rates or to hedge against changes in interest rates. Periodic payments on such contracts are accrued daily and recorded as unrealized appreciation (depreciation) on swap contracts. Upon periodic payment (receipt) or termination of the contract, such amounts are recorded as realized gains or losses on swap contracts. The Series’
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Notes to financial statements (continued)
6. Derivatives (continued)
maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from/paid to the counterparty over the interest rate swap contract’s remaining life, to the extent that the amount is positive. This risk is mitigated by (1) for bilateral swap contracts, having a netting arrangement between the Series and the counterparty and by the posting of collateral by the counterparty to the Series to cover the Series’ exposure to the counterparty and (2) for cleared swaps, trading these instruments through a central counterparty.
During the six months ended June 30, 2016, the Series entered into interest rate swap contracts to manage the Series’ sensitivity to interest rate or to hedge against changes in interest rates.
Credit Default Swaps. A CDS contract is a risk-transfer instrument through which one party (purchaser of protection) transfers to another party (seller of protection) the financial risk of a credit event (as defined in the CDS agreement), as it relates to a particular reference security or basket of securities (such as an index). In exchange for the protection offered by the seller of protection, the purchaser of protection agrees to pay the seller of protection a periodic amount at a stated rate that is applied to the notional amount of the CDS contract. In addition, an upfront payment may be made or received by the Series in connection with an unwinding or assignment of a CDS contract. Upon the occurrence of a credit event, the seller of protection would pay the par (or other agreed-upon) value of the reference security (or basket of securities) to the counterparty. Credit events generally include, among others, bankruptcy, failure to pay, and obligation default.
During the six months ended June 30, 2016, the Series entered into CDS contracts as a purchaser of protection and seller of protection, as a hedge against credit events. Periodic payments (receipts) on such contracts are accrued daily and recorded as unrealized losses (gains) on swap contracts. Upon payment (receipt), such amounts are recorded as realized losses (gains) on swap contracts. Upfront payments made or received in connection with CDS contracts are amortized over the expected life of the CDS contracts as unrealized losses (gains) on swap contracts. The change in value of CDS contracts is recorded daily as unrealized appreciation or depreciation. A realized gain or loss is recorded upon a credit event (as defined in the CDS agreement) or the maturity or termination of the agreement. Initial margin and variation margin is posted to central counterparties for central cleared CDS basket trades, as determined by the applicable central counterparty.
As disclosed in the footnotes to the Schedule of Investments, at June 30, 2016, the notional value of the protection sold was $5,620,000, which reflects the maximum potential amount the Series would have been required to make as a seller of credit protection if a credit event had occurred. In addition to serving as the source of the current value of the securities, the quoted market prices and resulting market values for credit default swap agreements on securities and credit indices serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative if the swap agreement has been closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity’s credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the terms of the agreement. At June 30, 2016, net unrealized appreciation of the protection sold was $67,486
CDS contracts may involve greater risks than if the Series had invested in the reference obligation directly. CDS contracts are subject to generalaparket risk, liquidity risk, counterparty risk, and credit risk. The Series’ maximum risk of loss from counterparty credit risk, either as the seller of protection or the buyer of protection, is the fair value of the contract. This risk is mitigated by (1) for bilateral swap contracts, having a netting arrangement between the Series and the counterparty and by the posting of collateral by the counterparty to the Series to cover the Series’ exposure to the counterparty, and (2) for cleared swaps, trading these instruments through a central counterparty.
During the six months ended June 30, 2016, the Series used CDS contracts to hedge against credit events.
Swaps Generally. The value of open swaps may differ from that which would be realized in the event the Series terminated its position in the contract on a given day. Risks of entering into these contracts include the potential inability of the counterparty to meet the terms of the contracts. This type of risk is generally limited to the amount of favorable movement in the value of the underlying security, instrument, or basket of instruments, if any, at the day of default. Risks also arise from potential losses from adverse market movements and such losses could exceed the unrealized amounts shown on the “Schedule of investments.”
At June 30, 2016, The Series posted $360,000 as cash collateral for certain open derivatives, which is presented as “Cash collateral due from brokers” on the “Statement of assets and liabilities.”
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Notes to financial statements (continued)
6. Derivatives (continued)
Fair values of derivative instruments as of June 30, 2016 were as follows:
Asset Derivatives Fair Value | ||||||||||||||
Statement of Assets and Liabilities Location | Currency | Equity | Interest | Credit | Total | |||||||||
Unrealized appreciation on foreign currency exchange contracts | $332,645 | $ — | $ — | $ — | $ 332,645 | |||||||||
Variation margin due to broker on futures contracts* | — | — | 3,484,444 | — | 3,484,444 | |||||||||
Unrealized appreciation on credit default swap contracts | — | — | — | 67,486 | 67,486 | |||||||||
Options purchased, at value | — | 143,750 | — | — | 143,750 | |||||||||
Total | $332,645 | $143,750 | $3,484,444 | $67,486 | $4,028,325 | |||||||||
Liability Derivatives Fair Value | ||||||||||||||
Statement of Assets and Liabilities Location | Currency | Equity | Interest Rate | Total | ||||||||||
Unrealized depreciation on foreign currency exchange contracts | $339,603 | $ — | $ — | $339,603 | ||||||||||
Variation margin due to broker on futures contracts* | — | 558,780 | 6,954 | 565,734 | ||||||||||
Total | $339,603 | $558,780 | $6,954 | $905,337 |
*Includes cumulative appreciation (depreciation) of futures contracts from the date the contracts were opened through June 30, 2016. Only current day variation margin is reported on the “Statement of assets and liabilities.”
The effect of derivative instruments on the “Statement of operations” for the six months ended June 30, 2016 was as follows:
Net Realized Gain (Loss) on: |
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Foreign Currency Exchange Contracts | Futures Contracts | Options Purchased | Options Written | Swap Contracts | Total | |||||||||||||||||||||||||
Currency contracts | $ | (1,272,985 | ) | $ | — | $ | — | $ | 86,495 | $ | — | $ | (1,186,490 | ) | ||||||||||||||||
Equity contracts | — | 2,869 | — | — | — | 2,869 | ||||||||||||||||||||||||
Interest rate contracts | — | 208,115 | 473,757 | (662,567 | ) | 3,653,981 | 3,673,286 | |||||||||||||||||||||||
Credit contracts | — | — | — | — | (980,479 | ) | (980,479 | ) | ||||||||||||||||||||||
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Total | $ | (1,272,985 | ) | $ | 210,984 | $ | 473,757 | $ | (576,072 | ) | $ | 2,673,502 | $ | 1,509,186 | ||||||||||||||||
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Net Change in Unrealized Appreciation (Depreciation) of: | ||||||||||||||||||||||||||||||
Foreign Currency Exchange Contracts | Futures | Options | Swaps | Total | ||||||||||||||||||||||||||
Currency contracts | $ | 173,999 | $ | — | $ | — | $ | — | $ | 173,999 | ||||||||||||||||||||
Equity contracts | — | (374,728 | ) | — | — | (374,728 | ) | |||||||||||||||||||||||
Interest rate contracts | — | 4,509,669 | (130,279 | ) | — | 4,379,390 | ||||||||||||||||||||||||
Credit contracts | — | — | — | (206,343 | ) | (206,343 | ) | |||||||||||||||||||||||
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Total | $ | 173,999 | $ | 4,134,941 | $ | (130,279 | ) | $ | (206,343 | ) | $ | 3,972,318 | ||||||||||||||||||
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Diversified Income Series-39
Table of Contents
Delaware VIP® Diversified Income Series
Notes to financial statements (continued)
6. Derivatives (continued)
Derivatives Generally. The table below summarizes the average balance of derivative holdings by the Series during the six months ended June 30, 2016:
Long Derivatives Volume | Short Derivatives Volume | |||||||
Foreign currency exchange contracts (average cost) | USD | 33,833,816 | USD | 52,133,916 | ||||
Futures contracts (average notional value) | 89,488 | 5,936 | ||||||
Options contracts (average notional value) | — | — | ||||||
Swap contracts (average notional value)* | 30,640,077 | 3,911,000 | ||||||
EUR | 6,328,160 | — | ||||||
Interest rate swap contracts (average notional value)** | USD | 35,466,720 | — |
* Long represents buying protection and short represents selling protection.
**Long represents receiving fixed interest payments and short represents paying fixed interest payments.
7. Offsetting
In December 2011, the Financial Accounting Standards Board (FASB) issued guidance that expanded disclosure requirements on the offsetting of certain assets and liabilities. The disclosures are required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset on the “Statement of assets and liabilities” and require an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarified which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting is limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing.
In order to better define its contractual rights and to secure rights that will help the Series mitigate its counterparty risk, the Series entered into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement) or a similar agreement with certain of its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Series and a counterparty that governs certain over-the-counter (OTC) derivatives and foreign exchange contracts and typically contains, among other things, collateral posting items and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Series may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default (close-out), including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency, or other events.
For financial reporting purposes, the Series does not offset derivative assets and derivative liabilities that are subject to netting arrangements on the “Statement of assets and liabilities.”
At June 30, 2016, the Series had the following assets and liabilities subject to offsetting provisions:
Offsetting of Financial Assets and Liabilities and Derivative Assets and Liabilities
Counterparty | Gross Value of | Gross Value of | Net Position | |||||||||
Bank of America Merrill Lynch | $ 46,567 | $(222,516) | $(175,949) | |||||||||
Barclays Bank | 64,321 | (687) | 63,634 | |||||||||
BNP Paribas | 11,681 | (20,936) | (9,255) | |||||||||
BNY Mellon | 15,502 | — | 15,502 | |||||||||
Hong Kong Shanghai Bank | 203,990 | — | 203,990 | |||||||||
JPMorgan Chase Bank | 10,188 | (45,569) | (35,381) | |||||||||
Toronto Dominion Bank | 47,882 | (49,895) | (2,013) | |||||||||
Total | $400,131 | $(339,603) | $ 60,528 |
Diversified Income Series-40
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Delaware VIP® Diversified Income Series
Notes to financial statements (continued)
7. Offsetting (continued)
Fair Value of Non-Cash | Cash Collateral | Fair Value of Non-Cash | Cash Collateral | |||||||||||||||||||||||||||
Counterparty | Net Position | Collateral Received | Received | Collateral Pledged | Pledged | Net Exposure(a) | ||||||||||||||||||||||||
Bank of America Merrill Lynch | $ | (175,949 | ) | $ | — | $ | — | $ | — | $ | — | $ | (175,949 | ) | ||||||||||||||||
Barclays Bank | 63,634 | — | — | — | — | 63,634 | ||||||||||||||||||||||||
BNP Paribas | (9,255 | ) | — | — | — | — | (9,255 | ) | ||||||||||||||||||||||
BNY Mellon | 15,502 | — | — | — | — | 15,502 | ||||||||||||||||||||||||
Hong Kong Shanghai Bank | 203,990 | — | — | — | — | 203,990 | ||||||||||||||||||||||||
JPMorgan Chase Bank | (35,381 | ) | — | — | — | — | (35,381 | ) | ||||||||||||||||||||||
Toronto Dominion Bank | (2,013 | ) | — | — | — | — | (2,013 | ) | ||||||||||||||||||||||
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Total | $ | 60,528 | $ | — | $ | — | $ | — | $ | — | $ | 60,528 | ||||||||||||||||||
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Master Repurchase Agreements
Repurchase | Fair Value of Non-Cash | Cash Collateral | Net Collateral | ||||||||||||||||||||||
Counterparty | Agreements | Collateral Received | Received | Received | Net Exposure(a) | ||||||||||||||||||||
Bank of America Merrill Lynch | $ | 10,249,778 | $ | (10,249,778 | ) | $ | — | $ | (10,249,778 | ) | $ | — | |||||||||||||
Bank of Montreal | 17,082,964 | (17,082,964 | ) | — | (17,082,964 | ) | — | ||||||||||||||||||
BNP Paribas | 1,701,258 | (1,701,258 | ) | — | (1,701,258 | ) | — | ||||||||||||||||||
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Total | $ | 29,034,000 | $ | (29,034,000 | ) | $ | — | $ | (29,034,000 | ) | $ | — | |||||||||||||
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(a)Net exposure represents the receivable (payable) that would be due from (to) the counterparty in an event of default.
8. Securities Lending
The Series, along with other funds in the Delaware Investments® Family of Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (1) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (2) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral by the end of the following business day which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial collateral requirement, upon the request of the borrower, BNY Mellon must return enough collateral to the borrower by the end of the following business day, to reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security on any particular day may be more or less than the value of the security on loan.
Prior to Dec. 29, 2015, cash collateral received was generally invested in the Delaware Investments Collateral Fund No. 1 (Collective Trust), a pooled account established by BNY Mellon for the use of funds managed by DMC that participate in BNY Mellon’s securities lending program. The Collective Trust sought to maintain a NAV per unit of $1.00.
On Dec. 29, 2015, the assets in the Collective Trust were transferred to a series of individual separate accounts, each corresponding to a Series. The investment guidelines permit each separate account to hold certain securities that would be considered eligible securities for a money market fund. Cash collateral received is generally invested in government securities; certain obligations issued by government sponsored enterprises; repurchase agreements collateralized by U.S. Treasury securities; obligations issued by the central government of any Organization for Economic Cooperation and Development (OECD) country or its agencies, instrumentalities or establishments; obligations of supranational organizations; commercial paper, notes, bonds, and other debt obligations; certificates of deposit, time deposits, and other bank obligations; and asset-backed securities.
In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Series or, at the discretion of the lending agent, replace the loaned securities. The Series continues to record dividends or interest, as applicable, on the securities loaned and are subject to changes in value of the securities loaned that may occur during the term of the loan. The Series has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Series receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Series, the security lending agent, and the borrower. The Series records security lending income net of allocations to the security lending agent and the borrower.
Diversified Income Series-41
Table of Contents
Delaware VIP® Diversified Income Series
Notes to financial statements (continued)
8. Securities Lending (continued)
The Series may incur investment losses as a result of investing securities lending collateral. This could occur if an investment in the collateral investment account defaulted or became impaired. Under those circumstances, the value of a Series’ cash collateral account may be less than the amount the Series would be required to return to the borrowers of the securities and the Series would be required to make up for this shortfall.
During the six months ended June 30, 2016, the Series had no securities out on loan.
9. Credit and Market Risk
Some countries in which the Series may invest require governmental approval for the repatriation of investment income, capital, or the proceeds of sales of securities by foreign investors. In addition, if there is deterioration in a country’s balance of payments or for other reasons, a country may impose temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially smaller, less liquid, and more volatile than the major securities markets in the United States. Consequently, acquisition and disposition of securities by the Series may be inhibited. In addition, a significant portion of the aggregate market value of securities listed on the major securities exchanges in emerging markets is held by a smaller number of investors. This may limit the number of shares available for acquisition or disposition by the Series.
The Series invests in bank loans and other securities that may subject it to direct indebtedness risk, the risk that the Series will not receive payment of principal, interest, and other amounts due in connection with these investments and will depend primarily on the financial condition of the borrower. Loans that are fully secured offer the Series more protection than unsecured loans in the event of nonpayment of scheduled interest or principal, although there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower’s obligation, or that the collateral can be liquidated. Some loans or claims may be in default at the time of purchase. Certain of the loans and the other direct indebtedness acquired by the Series may involve revolving credit facilities or other standby financing commitments that obligate the Series to pay additional cash on a certain date or on demand. These commitments may require the Series to increase its investment in a company at a time when the Series might not otherwise decide to do so (including at a time when the company’s financial condition makes it unlikely that such amounts will be repaid). To the extent that the Series is committed to advance additional funds, it will at all times hold and maintain cash or other high grade debt obligations in an amount sufficient to meet such commitments.
As the Series may be required to rely upon another lending institution to collect and pass on to the Series amounts payable with respect to the loan and to enforce the Series’ rights under the loan and other direct indebtedness, an insolvency, bankruptcy, or reorganization of the lending institution may delay or prevent the Series from receiving such amounts. The highly leveraged nature of many loans may make them especially vulnerable to adverse changes in economic or market conditions. Investments in such loans and other direct indebtedness may involve additional risk to the Series.
The Series invests in fixed income securities whose value is derived from an underlying pool of mortgages or consumer loans. The value of these securities is sensitive to changes in economic conditions, including delinquencies and/or defaults, and may be adversely affected by shifts in the market’s perception of the issuers and changes in interest rates. Investors receive principal and interest payments as the underlying mortgages or consumer loans are paid back. Some of these securities are collateralized mortgage obligations (CMOs). CMOs are debt securities issued by U.S. government agencies or by financial institutions and other mortgage lenders, which are collateralized by a pool of mortgages held under an indenture. Prepayment of mortgages may shorten the stated maturity of the obligations and can result in a loss of premium, if any has been paid. Certain of these securities may be stripped (securities which provide only the principal or interest feature of the underlying security). The yield to maturity on an interest-only CMO is extremely sensitive not only to changes in prevailing interest rates, but also to the rate of principal payments (including prepayments) on the related underlying mortgage assets. A rapid rate of principal payments may have a material adverse effect on the Series’ yield to maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the Series may fail to fully recoup its initial investment in these securities even if the securities are rated in the highest rating categories.
The Series invests a portion of its assets in high yield fixed income securities, which are securities rated lower than BBB- by S&P and lower than Baa3 by Moody’s, or similarly rated by another nationally recognized statistical rating organization. Investments in these higher yielding securities are generally accompanied by a greater degree of credit risk than higher rated securities. Additionally, lower rated securities may be more susceptible to adverse economic and competitive industry conditions than investment grade securities.
The Series invests in certain obligations that may have liquidity protection to ensure that the receipt of payments due on the underlying security is timely. Such protection may be provided through guarantees, insurance policies, or letters of credit obtained by the issuer or sponsor through third parties, through various means of structuring the transaction or through a combination of such approaches. The Series will not pay any additional fees for such credit support, although the existence of credit support may increase the price of the security.
The Series may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A promulgated under of the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Series from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Board has delegated to DMC, the day-to-day functions of determining whether individual securities are liquid for purposes of the Series’ limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Series’ 15% limit on investments in illiquid securities. Rule 144A and illiquid securities have
Diversified Income Series-42
Table of Contents
Delaware VIP® Diversified Income Series
Notes to financial statements
9. Credit and Market Risk (continued)
been identified on the “Schedule of investments.” When monitoring compliance with the Series’ illiquid limit, certain holdings that are common to multiple clients of the investment manager may be aggregated and considered illiquid in the aggregate solely for monitoring purposes. For purposes of determining illiquidity for financial reporting purposes, only the holdings of this Series will be considered.
10. Contractual Obligations
The Series enters into contracts in the normal course of business that contain a variety of indemnifications. The Series’ maximum exposure under these arrangements is unknown. However, the Series has not had prior claims or losses pursuant to these contracts. Management has reviewed the Series’ existing contracts and expects the risk of loss to be remote.
11. General Motors Term Loan Litigation
The Series received notice of a litigation proceeding related to a General Motors Corporation (G.M.) term loan participation previously held by the Series in 2009. We believe the matter subject to the litigation notice will likely lead to a recovery from the Series of certain amounts received by the Series because a U.S. Court of Appeals has ruled that the Series and similarly situated investors were unsecured creditors rather than secured lenders of G.M. as a result of an erroneous Uniform Commercial Code filing made by a third party. The Series received the full principal on the loans in 2009 after the G.M. bankruptcy. However, based upon the court ruling the estate is seeking to recover such amounts arguing that, as unsecured creditors, the Series should not have received payment in full. Based upon currently available information related to the litigation and the Series’ potential exposure, the Series recorded a liability of $4,351,308 and an asset of $1,305,392 based on the expected recoveries to unsecured creditors as of June 30, 2016 that resulted in a net decrease in the Series’ NAV to reflect this likely recovery.
12. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to June 30, 2016 that would require recognition or disclosure in the Series’ financial statements.
The Series files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q. The Series’ Forms N-Q, as well as a description of the policies and procedures that the Series uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the Commission’s website at sec.gov. In addition, a description of the policies and procedures that the Series uses to determine how to vote proxies (if any) relating to portfolio securities and the Schedule of Investments included in the Series’ most recent Form N-Q are available without charge on the Delaware Investments® Funds’ website at delawareinvestments.com/vip/literature. The Series’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330.
Information (if any) regarding how the Series voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Delaware Investments Funds’ website at delawareinvestments.com/proxy; and (ii) on the Commission’s website at sec.gov.
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SA-VIPDIVINC 21181 (8/16) (17290) | Diversified Income Series-43 |
Table of Contents
Delaware VIP® Trust
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Delaware VIP Emerging Markets Series
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Semiannual report
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June 30, 2016 |
Table of Contents
Neither Delaware Investments nor its affiliates referred to in this document are authorized deposit-taking institutions for the purpose of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited (MBL), a subsidiary of Macquarie Group Limited and an affiliate of Delaware Investments. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Series is governed by U.S. laws and regulations.
Unless otherwise noted, views expressed herein are current as of June 30, 2016, and subject to change for events occurring after such date.
The Series is not FDIC insured and is not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor and member of Macquarie Group. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries, including the Series’ distributor, Delaware Distributors, L.P. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
This material may be used in conjunction with the offering of shares in Delaware VIP® Emerging Markets Series only if preceded or accompanied by the Series’ current prospectus or the summary prospectus.
© 2016 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
Table of Contents
Delaware VIP® Trust — Delaware VIP Emerging Markets Series
Disclosure of Series expenses
For the six-month period from January 1, 2016 to June 30, 2016 (Unaudited)
As a shareholder of the Series, you incur ongoing costs, which may include management fees; distribution and/or service (12b-1) fees; and other Series expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Series 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 entire six-month period from Jan. 1, 2016 to June 30, 2016.
Actual expenses
The first section of the table shown, “Actual Series Return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, 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, an $8,600 account value divided by $1,000 = 8.6), 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 the period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% Return,” provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ 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 Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Series, you do not incur any transaction costs, such as sales charges (loads), redemption fees or exchange fees, but shareholders of other funds may incur such costs. Also, the fees related to the variable annuity investment or the deferred sales charge that could apply have not been included. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The Series’ actual expenses shown in the table reflect fee waivers in effect for Service Class shares. The expenses shown in the table assume reinvestment of all dividends and distributions.
Expense analysis of an investment of $1,000
Beginning Account Value 1/1/16 | Ending Account Value 6/30/16 | Annualized Expense Ratio | Expenses Paid During Period 1/1/16 to 6/30/16* | |||||
Actual Series return† | ||||||||
Standard Class | $1,000.00 | $1,064.40 | 1.38% | $7.08 | ||||
Service Class | 1,000.00 | 1,063.70 | 1.63% | 8.36 | ||||
Hypothetical 5% return (5% return before expenses) | ||||||||
Standard Class | $1,000.00 | $1,018.00 | 1.38% | $6.92 | ||||
Service Class | 1,000.00 | 1,016.76 | 1.63% | 8.17 |
* | “Expenses Paid During Period” are equal to the Series’ annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
† | Because actual returns reflect only the most recent six-month period, the returns shown may differ significantly from fiscal year returns. |
Emerging Markets Series-1 |
Table of Contents
Delaware VIP® Trust — Delaware VIP Emerging Markets Series
Security type / country and sector allocations
As of June 30, 2016 (Unaudited)
Sector designations may be different than the sector designations presented in other Series materials. The sector designations may represent the investment manager’s internal sector classifications.
Security type / country | Percentage of net assets | |
Common Stock by Country | 94.64% | |
Argentina | 4.36% | |
Bahrain | 0.07% | |
Brazil | 12.27% | |
Chile | 1.06% | |
China/Hong Kong | 23.36% | |
France | 1.69% | |
India | 5.51% | |
Indonesia | 0.27% | |
Malaysia | 1.27% | |
Mexico | 6.35% | |
Peru | 0.30% | |
Poland | 0.95% | |
Republic of Korea | 17.09% | |
Russia | 5.38% | |
South Africa | 2.92% | |
Taiwan | 8.37% | |
Thailand | 0.89% | |
Turkey | 0.96% | |
United Kingdom | 0.20% | |
United States | 1.37% | |
Exchange-Traded Fund | 1.52% | |
Preferred Stock by Country | 6.08% | |
Brazil | 1.47% | |
Republic of Korea | 2.57% | |
Russia | 2.04% | |
Participation Notes | 0.00% | |
Rights | 0.00% | |
Total Value of Securities | 102.24% | |
Liabilities Net of Receivables and Other Assets | (2.24%) | |
Total Net Assets | 100.00% |
Common stock, preferred stock, participation notes and rights by sector² | Percentage of net assets | |
Consumer Discretionary | 6.86% | |
Consumer Staples | 9.62% | |
Energy | 15.68% | |
Financials | 14.74% | |
Healthcare | 1.69% | |
Industrials | 3.10% | |
Information Technology | 30.83% | |
Materials | 5.36% | |
Telecommunication Services | 11.47% | |
Utilities | 1.37% | |
Total | 100.72% |
* To monitor compliance with the Series’ concentration guidelines, the Information Technology sector (as disclosed herein for financial reporting purposes) is divided into various sub-categories or “industries,” in this case, electronics, Internet, semiconductors, and software. As of June 30, 2016, such amounts, as a percentage of total net assets, were 0.96%, 16.35%, 12.08%, and 1.44%, respectively. The percentage in any such single industry will comply with the Series’ concentration policy even if the percentage in the “Information Technology sector” for financial reporting purposes may exceed 25%.
Emerging Markets Series-2
Table of Contents
Delaware VIP® Trust — Delaware VIP Emerging Markets Series
Schedule of investments
June 30, 2016 (Unaudited)
Number of shares | Value (U.S. $) | |||||||
Common Stock – 94.64% D | ||||||||
Argentina – 4.36% | ||||||||
Arcos Dorados Holdings Class A † | 449,841 | $ | 2,145,742 | |||||
Cresud ADR † | 326,450 | 4,612,739 | ||||||
Grupo Clarin Class B GDR 144A #@= | 209,100 | 4,367,848 | ||||||
IRSA Inversiones y Representaciones ADR @† | 430,000 | 7,228,300 | ||||||
Pampa Energia ADR † | 44,500 | 1,216,630 | ||||||
YPF ADR | 106,800 | 2,050,560 | ||||||
|
| |||||||
21,621,819 | ||||||||
|
| |||||||
Bahrain – 0.07% | ||||||||
Aluminum Bahrain GDR 144A #@ | 91,200 | 335,944 | ||||||
|
| |||||||
335,944 | ||||||||
|
| |||||||
Brazil – 12.27% | ||||||||
Aes Tiete Energia | 319,936 | 1,469,058 | ||||||
B2W Cia Digital † | 1,507,600 | 4,421,004 | ||||||
Banco Bradesco ADR | 660,000 | 5,154,600 | ||||||
Banco Santander Brasil ADR | 476,000 | 2,713,200 | ||||||
Braskem ADR | 78,499 | 930,213 | ||||||
BRF ADR | 341,500 | 4,757,095 | ||||||
Centrais Eletricas Brasileiras † | 711,800 | 2,814,139 | ||||||
Cia Brasileira de Distribuicao ADR | 395,790 | 5,758,745 | ||||||
Cia Hering | 514,500 | 2,373,654 | ||||||
Cyrela Brazil Realty Empreendimentos e Participacoes | 266,900 | 846,655 | ||||||
Fibria Celulose ADR | 450,000 | 3,042,000 | ||||||
Gerdau | 389,400 | 513,979 | ||||||
Gerdau ADR | 444,900 | 809,718 | ||||||
Hypermarcas | 553,000 | 4,002,506 | ||||||
Itau Unibanco Holding ADR | 665,500 | 6,282,320 | ||||||
JBS | 393,784 | 1,225,863 | ||||||
Petroleo Brasileiro ADR † | 488,906 | 3,500,567 | ||||||
Rumo Logistica Operadora Multimodal † | 166,548 | 255,087 | ||||||
Telefonica Brasil ADR | 350,000 | 4,760,000 | ||||||
TIM Participacoes ADR | 500,000 | 5,275,000 | ||||||
|
| |||||||
60,905,403 | ||||||||
|
| |||||||
Chile – 1.06% | ||||||||
Sociedad Quimica y Minera de Chile ADR | 212,100 | 5,243,112 | ||||||
|
| |||||||
5,243,112 | ||||||||
|
| |||||||
China/Hong Kong – 23.36% | ||||||||
Alibaba Group Holding ADR † | 70,000 | 5,567,100 | ||||||
Baidu ADR † | 130,000 | 21,469,500 | ||||||
Bank of China | 13,346,000 | 5,363,863 | ||||||
China Construction Bank | 7,118,000 | 4,745,130 | ||||||
China Mengniu Dairy | 1,448,000 | 2,533,149 | ||||||
China Mobile ADR | 200,000 | 11,580,000 | ||||||
China Petroleum & Chemical | 2,260,000 | 1,633,119 | ||||||
China Petroleum & Chemical ADR | 42,234 | 3,040,848 | ||||||
First Pacific | 3,185,195 | 2,312,432 | ||||||
Fosun International | 131,708 | 171,280 | ||||||
JD.com ADR † | 91,700 | 1,946,791 | ||||||
Kunlun Energy | 4,622,900 | 3,847,097 |
Number of shares | Value (U.S. $) | |||||||
Common Stock D (continued) | ||||||||
China/Hong Kong (continued) | ||||||||
PetroChina Class H | 3,000,000 | $ | 2,067,715 | |||||
PetroChina ADR | 40,000 | 2,716,800 | ||||||
Qunar Cayman Islands ADR † | 42,500 | 1,266,075 | ||||||
SINA † | 200,000 | 10,374,000 | ||||||
Sohu.com † | 450,000 | 17,037,000 | ||||||
Tencent Holdings | 412,500 | 9,462,615 | ||||||
Tianjin Development Holdings | 35,950 | 16,271 | ||||||
Tingyi Cayman Islands Holding | 1,706,000 | 1,619,956 | ||||||
TravelSky Technology | 3,700,441 | 7,153,773 | ||||||
|
| |||||||
115,924,514 | ||||||||
|
| |||||||
France – 1.69% | ||||||||
Sanofi ADR | 200,000 | 8,370,000 | ||||||
|
| |||||||
8,370,000 | ||||||||
|
| |||||||
India – 5.51% | ||||||||
Cairn India | 473,000 | 990,867 | ||||||
Indiabulls Real Estate GDR † | 44,628 | 61,542 | ||||||
Makemytrip † | 100,000 | 1,486,000 | ||||||
RattanIndia Infrastructure GDR =† | 131,652 | 7,315 | ||||||
Reliance Communications † | 1,194,362 | 905,333 | ||||||
Reliance Industries | 800,000 | 11,523,794 | ||||||
Reliance Industries GDR 144A # | 430,000 | 12,276,500 | ||||||
Sify Technologies ADR | 91,200 | 100,320 | ||||||
|
| |||||||
27,351,671 | ||||||||
|
| |||||||
Indonesia – 0.27% | ||||||||
Tambang Batubara Bukit Asam Persero | 2,241,097 | 1,318,405 | ||||||
|
| |||||||
1,318,405 | ||||||||
|
| |||||||
Malaysia – 1.27% | ||||||||
Hong Leong Bank | 1,549,790 | 5,083,643 | ||||||
UEM Sunrise | 4,748,132 | 1,218,828 | ||||||
|
| |||||||
6,302,471 | ||||||||
|
| |||||||
Mexico – 6.35% | ||||||||
America Movil Class L ADR | 210,742 | 2,583,697 | ||||||
Cemex ADR † | 486,720 | 3,003,062 | ||||||
Fomento Economico Mexicano ADR | 98,307 | 9,092,414 | ||||||
Grupo Financiero Banorte Class O | 754,700 | 4,217,970 | ||||||
Grupo Lala | 606,200 | 1,336,571 | ||||||
Grupo Televisa ADR | 432,500 | 11,262,300 | ||||||
|
| |||||||
31,496,014 | ||||||||
|
| |||||||
Peru – 0.30% | ||||||||
Cia de Minas Buenaventura ADR † | 125,440 | 1,499,008 | ||||||
|
| |||||||
1,499,008 | ||||||||
|
| |||||||
Poland – 0.95% | ||||||||
Jastrzebska Spolka Weglowa † | 26,987 | 117,961 | ||||||
Polski Koncern Naftowy Orlen | 261,369 | 4,591,073 | ||||||
|
| |||||||
4,709,034 | ||||||||
|
| |||||||
Republic of Korea – 17.09% | ||||||||
CJ | 45,695 | 8,067,670 | ||||||
Hite Jinro | 150,000 | 3,121,647 | ||||||
KB Financial Group ADR | 165,996 | 4,724,246 | ||||||
KCC | 3,272 | 1,088,319 |
Emerging Markets Series-3
Table of Contents
Delaware VIP® Emerging Markets Series
Schedule of investments (continued)
Number of shares | Value (U.S. $) | |||||||
Common Stock D (continued) | ||||||||
Republic of Korea (continued) | ||||||||
LG Display ADR | 188,309 | $ | 2,182,501 | |||||
LG Electronics | 62,908 | 2,962,759 | ||||||
LG Uplus | 500,000 | 4,748,835 | ||||||
Lotte Chilsung Beverage | 8 | 12,437 | ||||||
Lotte Confectionery | 29,040 | 4,928,871 | ||||||
Samsung Electronics | 19,654 | 24,476,134 | ||||||
Samsung Life Insurance | 71,180 | 6,229,002 | ||||||
Samsung SDI | 17,625 | 1,668,725 | ||||||
SK Communications † | 95,525 | 244,457 | ||||||
SK Hynix | 120,000 | 3,414,838 | ||||||
SK Telecom | 16,491 | 3,098,113 | ||||||
SK Telecom ADR | 660,000 | 13,807,200 | ||||||
|
| |||||||
84,775,754 | ||||||||
|
| |||||||
Russia – 5.38% | ||||||||
Chelyabinsk Zinc Plant GDR @† | 69,200 | 381,327 | ||||||
Enel OGK-5 GDR | 15,101 | 7,919 | ||||||
Etalon Group GDR 144A #= | 354,800 | 867,486 | ||||||
Gazprom ADR | 783,900 | 3,387,207 | ||||||
Lukoil (London International Exchange) ADR | 133,500 | 5,587,460 | ||||||
MegaFon GDR | 234,178 | 2,445,482 | ||||||
Mobile TeleSystems ADR | 154,402 | 1,278,449 | ||||||
Sberbank of Russia = | 3,308,402 | 6,881,052 | ||||||
Surgutneftegas ADR | 294,652 | 1,503,553 | ||||||
TPlus † | 25,634 | 214 | ||||||
Yandex Class A † | 200,000 | 4,370,000 | ||||||
|
| |||||||
26,710,149 | ||||||||
|
| |||||||
South Africa – 2.92% | ||||||||
ArcelorMittal South Africa † | 374,610 | 214,014 | ||||||
Impala Platinum Holdings † | 135,751 | 437,380 | ||||||
Sasol | 76,270 | 2,063,390 | ||||||
Sasol ADR | 65,127 | 1,766,244 | ||||||
Standard Bank Group | 287,970 | 2,508,055 | ||||||
Sun International | 168,124 | 982,169 | ||||||
Tongaat-Hulett | 182,915 | 1,457,433 | ||||||
Vodacom Group | 444,868 | 5,069,125 | ||||||
|
| |||||||
14,497,810 | ||||||||
|
| |||||||
Taiwan – 8.37% | ||||||||
Formosa Chemicals & Fibre | 2,128,998 | 5,375,115 | ||||||
Hon Hai Precision Industry | 1,005,188 | 2,589,651 | ||||||
MediaTek | 1,045,000 | 7,985,428 | ||||||
Mitac Holdings | 6,600,000 | 4,892,352 | ||||||
President Chain Store | 890,000 | 6,953,887 | ||||||
Taiwan Semiconductor Manufacturing | 2,375,864 | 11,973,635 | ||||||
United Microelectronics ADR | 889,700 | 1,770,503 | ||||||
|
| |||||||
41,540,571 | ||||||||
|
| |||||||
Thailand – 0.89% | ||||||||
Bangkok Bank-Foreign | 638,091 | 2,954,213 | ||||||
PTT Exploration & Production - Foreign | 617,051 | 1,457,462 | ||||||
|
| |||||||
4,411,675 | ||||||||
|
|
Number of shares | Value (U.S. $) | |||||||
Common Stock D (continued) | ||||||||
Turkey – 0.96% | ||||||||
Turkcell Iletisim Hizmetleri † | 368,462 | $ | 1,354,654 | |||||
Turkiye Sise ve Cam Fabrikalari | 2,739,052 | 3,386,669 | ||||||
|
| |||||||
4,741,323 | ||||||||
|
| |||||||
United Kingdom – 0.20% | ||||||||
Anglo American ADR † | 92,815 | 449,225 | ||||||
Griffin Mining @† | 1,642,873 | 560,985 | ||||||
|
| |||||||
1,010,210 | ||||||||
|
| |||||||
United States – 1.37% | ||||||||
Avon Products | 241,200 | 911,736 | ||||||
Yahoo † | 157,300 | 5,908,188 | ||||||
|
| |||||||
6,819,924 | ||||||||
|
| |||||||
Total Common Stock | 469,584,811 | |||||||
|
| |||||||
Exchange-Traded Fund – 1.52% |
| |||||||
iShares MSCI Turkey | 190,000 | 7,533,500 | ||||||
|
| |||||||
Total Exchange-Traded Fund |
| 7,533,500 | ||||||
|
| |||||||
Preferred Stock – 6.08% |
| |||||||
Brazil – 1.47% | ||||||||
Braskem Class A 6.86% | 288,768 | 1,707,995 | ||||||
Centrais Eletricas Brasileiras Class B † | 233,700 | 1,274,608 | ||||||
Petroleo Brasileiro Class A ADR † | 403,795 | 2,346,049 | ||||||
Vale Class A 2.66% | 489,400 | 1,976,004 | ||||||
|
| |||||||
7,304,656 | ||||||||
|
| |||||||
Republic of Korea – 2.57% |
| |||||||
CJ 1.42% @ | 28,030 | 2,423,659 | ||||||
Samsung Electronics 1.77% | 9,995 | 10,310,717 | ||||||
|
| |||||||
12,734,376 | ||||||||
|
| |||||||
Russia – 2.04% | ||||||||
AK Transneft =† | 3,887 | 10,120,773 | ||||||
|
| |||||||
10,120,773 | ||||||||
|
| |||||||
Total Preferred Stock | 30,159,805 | |||||||
|
| |||||||
Participation Notes – 0.00% |
| |||||||
Lehman Indian Oil | ||||||||
CW 12 LEPO 144A #=† | 100,339 | 0 | ||||||
Lehman Oil & Natural Gas | ||||||||
CW 12 LEPO =† | 146,971 | 0 | ||||||
|
| |||||||
Total Participation Notes |
| 0 | ||||||
|
|
Emerging Markets Series-4
Table of Contents
Delaware VIP® Emerging Markets Series
Schedule of investments (continued)
Number of Shares | Value (U.S. $) | |||||||
Rights – 0.00% | ||||||||
B2W Cia Digital exercise price BRL 10.00, expiration date 7/20/16 † | 264,224 | $ | 0 | |||||
|
| |||||||
Total Rights (cost $0) |
| 0 | ||||||
|
|
Total Value of Securities – 102.24% | $ | 507,278,116 | ||
|
|
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At June 30, 2016, the aggregate value of Rule 144A securities was $17,847,778, which represents 3.60% of the Series’ net assets. See Note 9 in “Notes to financial statements.” |
@ | Illiquid security. At June 30, 2016, the aggregate value of illiquid securities was $15,298,063, which represents 3.08% of the Series’ net assets. See Note 9 in “Notes to financial statements.” |
= | Security is being fair valued in accordance with the Series’ fair valuation policy. At June 30, 2016, the aggregate value of fair valued securities was $22,244,474, which represents 4.48% of the Series’ net assets. See Note 1 in “Notes to financial statements.” |
† | Non-income-producing security. |
D | Securities have been classified by country of origin. Aggregate classification by business sectors has been presented on page 2 in “Security type / country and sector allocations.” |
The following foreign currency exchange contract was outstanding at June 30, 2016:1
Foreign Currency Exchange Contract
Counterparty | Contracts to Receive (Deliver) | In Exchange For | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||
BNYM | BRL | 14,738 | USD | (4,558) | 7/1/16 | $28 |
The use of foreign currency exchange contracts involves elements of market risk and risks in excess of the amount disclosed in the financial statements. The foreign currency exchange contract presented above represents the Series’ total exposure in such contract, whereas only the net unrealized appreciation (depreciation) is reflected in the Series’ net assets.
1See Note 6 in “Notes to financial statements.”
Summary of Abbreviations:
ADR – American Depositary Receipt
BNYM – BNY Mellon
BRL – Brazilian Real
GDR – Global Depositary Receipt
LEPO – Low Exercise Price Option
USD – U.S. Dollar
See accompanying notes, which are an integral part of the financial statements.
Emerging Markets Series-5
Table of Contents
Delaware VIP® Trust — Delaware VIP Emerging Markets Series | ||
Statement of assets and liabilities | June 30, 2016 (Unaudited) |
Assets: | ||||
Investments, at value1 | $ | 507,278,116 | ||
Foreign currencies, at value2 | 6,278,009 | |||
Dividends and interest receivable | 1,691,460 | |||
Receivable for series shares sold | 19,978 | |||
Unrealized appreciation on foreign currency exchange contracts | 28 | |||
|
| |||
Total assets | 515,267,591 | |||
|
| |||
Liabilities: | ||||
Cash overdraft | 17,731,391 | |||
Payable for series shares redeemed | 219,362 | |||
Payable for securities purchased | 11,551 | |||
Investment management fees payable | 481,104 | |||
Other accrued expenses | 159,371 | |||
Distribution fees payable to affiliates | 61,831 | |||
Audit and tax fees payable | 17,748 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 2,971 | |||
Accounting and administration expenses payable to affiliates | 1,873 | |||
Trustees’ fees and expenses payable | 1,453 | |||
Legal fees payable to affiliates | 874 | |||
Reports and statements to shareholders payable to affiliates | 205 | |||
Capital gain tax payable | 414,699 | |||
|
| |||
Total liabilities | 19,104,433 | |||
|
| |||
Total Net Assets | $ | 496,163,158 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 585,783,645 | ||
Distribution in excess of net investment income | (2,463,104 | ) | ||
Accumulated net realized loss on investments | (5,010,678 | ) | ||
Net unrealized depreciation of investments | (81,781,062 | ) | ||
Net unrealized depreciation of foreign currencies | (365,671 | ) | ||
Net unrealized appreciation of foreign currency exchange contracts | 28 | |||
|
| |||
Total Net Assets | $ | 496,163,158 | ||
|
| |||
Standard Class: | ||||
Net assets | $ | 188,239,325 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 11,229,632 | |||
Net asset value per share | $ | 16.76 | ||
Service Class: | ||||
Net assets | $ | 307,923,833 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 18,405,888 | |||
Net asset value per share | $ | 16.73 | ||
| ||||
1Investments, at cost | $ | 589,059,178 | ||
2Foreign currencies, at cost | 6,225,924 |
See accompanying notes, which are an integral part of the financial statements.
Emerging Markets Series-6
Table of Contents
Delaware VIP Emerging Markets Series
Statement of operations
Six months ended June 30, 2016 (Unaudited)
Investment Income: | ||||
Dividends | $ | 5,386,231 | ||
Foreign tax withheld | (560,409 | ) | ||
|
| |||
4,825,822 | ||||
|
| |||
Expenses: | ||||
Management fees | 2,951,354 | |||
Distribution expenses - Service Class | 449,355 | |||
Custodian fees | 140,164 | |||
Accounting and administration expenses | 77,068 | |||
Reports and statements to shareholders | 39,458 | |||
Audit and tax | 23,950 | |||
Dividend disbursing and transfer agent fees and expenses | 20,321 | |||
Legal fees | 17,659 | |||
Trustees’ fees and expenses | 12,549 | |||
Registration fees | 377 | |||
Other | 10,735 | |||
|
| |||
3,742,990 | ||||
Less waived distribution expenses - Service Class | (74,726 | ) | ||
Less expenses waived | (29,507 | ) | ||
Less expense paid indirectly | (1 | ) | ||
|
| |||
Total operating expenses | 3,638,756 | |||
|
| |||
Net Investment Income | 1,187,066 | |||
|
| |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (4,107,177 | ) | ||
Foreign currencies | (28,093 | ) | ||
Foreign currency exchange contracts | 1,983 | |||
|
| |||
Net realized loss | (4,133,287 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) of: | ||||
Investments* | 33,459,520 | |||
Foreign currencies | 68,582 | |||
Foreign currency exchange contracts | (5,760 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) | 33,522,342 | |||
|
| |||
Net Realized and Unrealized Gain | 29,389,055 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 30,576,121 | ||
|
|
* Includes $294,296 increase in capital gains taxes.
Delaware VIP Emerging Markets Series
Statements of changes in net assets
Six months ended 6/30/16 (Unaudited) | Year ended 12/31/15 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 1,187,066 | $ | 2,798,248 | ||||
Net realized gain (loss) | (4,133,287 | ) | 10,873,179 | |||||
Net change in unrealized appreciation (depreciation) | 33,522,342 | (92,838,362 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 30,576,121 | (79,166,935 | ) | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Standard Class | (2,030,270 | ) | (1,532,363 | ) | ||||
Service Class | (2,640,795 | ) | (2,026,629 | ) | ||||
Net realized gain: | ||||||||
Standard Class | (4,039,055 | ) | (3,597,723 | ) | ||||
Service Class | (6,943,628 | ) | (7,093,200 | ) | ||||
|
|
|
| |||||
(15,653,748 | ) | (14,249,915 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Standard Class | 13,411,262 | 46,941,160 | ||||||
Service Class | 7,648,149 | 40,578,196 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 6,069,325 | 5,130,086 | ||||||
Service Class | 9,584,423 | 9,119,829 | ||||||
|
|
|
| |||||
36,713,159 | 101,769,271 | |||||||
|
|
|
| |||||
Cost of shares redeemed: | ||||||||
Standard Class | (8,621,322 | ) | (19,407,226 | ) | ||||
Service Class | (29,011,780 | ) | (41,453,614 | ) | ||||
|
|
|
| |||||
(37,633,102 | ) | (60,860,840 | ) | |||||
|
|
|
| |||||
Increase (decrease) in net assets derived from capital share transactions | (919,943 | ) | 40,908,431 | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | 14,002,430 | (52,508,419 | ) | |||||
Net Assets: | ||||||||
Beginning of period | 482,160,728 | 534,669,147 | ||||||
|
|
|
| |||||
End of period | $ | 496,163,158 | $ | 482,160,728 | ||||
|
|
|
| |||||
Undistributed (distributions in excess of) net investment income | $ | (2,463,104 | ) | $ | 1,020,895 | |||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
Emerging Markets Series-7
Table of Contents
Delaware VIP® Trust — Delaware VIP Emerging Markets Series
Financial highlights
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP Emerging Markets Series Standard Class | ||||||||||||||||||||||||||||||
Six months ended 6/30/161 (Unaudited) | 12/31/15 | 12/31/14 | Year ended 12/31/13 | 12/31/12 | 12/31/11 | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 16.270 | $ | 19.540 | $ | 21.470 | $ | 19.840 | $ | 17.510 | $ | 22.190 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||
Net investment income2 | 0.053 | 0.127 | 0.133 | 0.138 | 0.205 | 0.228 | ||||||||||||||||||||||||
Net realized and unrealized gain (loss) | 1.002 | (2.858 | ) | (1.849 | ) | 1.839 | 2.316 | (4.526 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total from investment operations | 1.055 | (2.731 | ) | (1.716 | ) | 1.977 | 2.521 | (4.298 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||||||||
Net investment income | (0.189 | ) | (0.161 | ) | (0.135 | ) | (0.347 | ) | (0.191 | ) | (0.382 | ) | ||||||||||||||||||
Net realized gain | (0.376 | ) | (0.378 | ) | (0.079 | ) | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total dividends and distributions | (0.565 | ) | (0.539 | ) | (0.214 | ) | (0.347 | ) | (0.191 | ) | (0.382 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net asset value, end of period | $ | 16.760 | $ | 16.270 | $ | 19.540 | $ | 21.470 | $ | 19.840 | $ | 17.510 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total return3 | 6.44% | (14.51% | ) | (8.06% | ) | 10.14% | 14.44% | (19.78% | ) | |||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 188,239 | $ | 172,098 | $ | 172,200 | $ | 175,134 | $ | 140,966 | $ | 160,142 | ||||||||||||||||||
Ratio of expenses to average net assets | 1.38% | 1.37% | 1.38% | 1.41% | 1.40% | 1.39% | ||||||||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 1.39% | 1.37% | 1.38% | 1.41% | 1.40% | 1.39% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets | 0.66% | 0.70% | 0.62% | 0.68% | 1.11% | 1.11% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 0.65% | 0.70% | 0.62% | 0.68% | 1.11% | 1.11% | ||||||||||||||||||||||||
Portfolio turnover | 3% | 6% | 5% | 16% | 22% | 16% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during some of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. Total investment return does not include fees, charges, or expenses imposed by the variable annuity and life insurance contracts for which Delaware VIP Trust serves as an underlying investment vehicle. |
See accompanying notes, which are an integral part of the financial statements.
Emerging Markets Series-8
Table of Contents
Delaware VIP® Emerging Markets Series
Financial highlights (continued)
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP Emerging Markets Series Service Class | ||||||||||||||||||||||||||||||
Six months ended 6/30/161 (Unaudited) | 12/31/15 | 12/31/14 | Year ended 12/31/13 | 12/31/12 | 12/31/11 | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 16.210 | $ | 19.480 | $ | 21.400 | $ | 19.780 | $ | 17.450 | $ | 22.130 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||
Net investment income2 | 0.033 | 0.081 | 0.079 | 0.087 | 0.158 | 0.174 | ||||||||||||||||||||||||
Net realized and unrealized gain (loss) | 1.006 | (2.865 | ) | (1.836 | ) | 1.834 | 2.312 | (4.520 | ) | |||||||||||||||||||||
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Total from investment operations | 1.039 | (2.784 | ) | (1.757 | ) | 1.921 | 2.470 | (4.346 | ) | |||||||||||||||||||||
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Less dividends and distributions from: | ||||||||||||||||||||||||||||||
Net investment income | (0.143 | ) | (0.108 | ) | (0.084 | ) | (0.301 | ) | (0.140 | ) | (0.334 | ) | ||||||||||||||||||
Net realized gain | (0.376 | ) | (0.378 | ) | (0.079 | ) | — | — | — | |||||||||||||||||||||
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Total dividends and distributions | (0.519 | ) | (0.486 | ) | (0.163 | ) | (0.301 | ) | (0.140 | ) | (0.334 | ) | ||||||||||||||||||
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Net asset value, end of period | $ | 16.730 | $ | 16.210 | $ | 19.480 | $ | 21.400 | $ | 19.780 | $ | 17.450 | ||||||||||||||||||
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Total return3 | 6.37% | (14.77% | ) | (8.26% | ) | 9.86% | 14.19% | (20.00% | ) | |||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 307,924 | $ | 310,063 | $ | 362,469 | $ | 406,571 | $ | 389,349 | $ | 345,392 | ||||||||||||||||||
Ratio of expenses to average net assets | 1.63% | 1.62% | 1.63% | 1.66% | 1.65% | 1.64% | ||||||||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 1.69% | 1.67% | 1.68% | 1.71% | 1.70% | 1.69% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets | 0.41% | 0.45% | 0.37% | 0.43% | 0.86% | 0.86% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 0.35% | 0.40% | 0.32% | 0.38% | 0.81% | 0.81% | ||||||||||||||||||||||||
Portfolio turnover | 3% | 6% | 5% | 16% | 22% | 16% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect. Total investment return does not include fees, charges, or expenses imposed by the variable annuity and life insurance contracts for which Delaware VIP Trust serves as an underlying investment vehicle. |
See accompanying notes, which are an integral part of the financial statements.
Emerging Markets Series-9
Table of Contents
Delaware VIP® Trust — Delaware VIP Emerging Markets Series
Notes to financial statements
June 30, 2016 (Unaudited)
Delaware VIP Trust (Trust) is organized as a Delaware statutory trust and offers 10 series: Delaware VIP Diversified Income Series, Delaware VIP Emerging Markets Series, Delaware VIP High Yield Series, Delaware VIP International Value Equity Series, Delaware VIP Limited-Term Diversified Income Series, Delaware VIP REIT Series, Delaware VIP Small Cap Value Series, Delaware VIP Smid Cap Growth Series, Delaware VIP U.S. Growth Series, and Delaware VIP Value Series. These financial statements and the related notes pertain to Delaware VIP Emerging Markets Series (Series). The Trust is an open-end investment company. The Series is considered diversified under the Investment Company Act of 1940, as amended, and offers Standard Class and Service Class shares. The Standard Class shares do not carry a 12b-1 fee and the Service Class shares carry a 12b-1 fee. The shares of the Series are sold only to separate accounts of life insurance companies.
The investment objective of the Series is to seek long-term capital appreciation.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistently followed by the Series.
Security Valuation—Equity securities and exchange-traded funds (ETFs), except those traded on the Nasdaq Stock Market LLC (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange on the valuation date. Equity securities and ETFs traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If, on a particular day, an equity security or ETF does not trade, the mean between the bid and ask prices will be used, which approximates fair value. Securities listed on a foreign exchange are normally valued at the last quoted sales price on the valuation date. U.S. government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Foreign currency exchange contracts and foreign cross currency exchange contracts are valued at the mean between the bid and ask prices, which approximates fair value. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Trust’s Board of Trustees (Board). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security. The Series may use fair value pricing more frequently for securities traded primarily in non-U.S. markets because, among other things, most foreign markets close well before the Series values its securities, generally as of 4:00 p.m. Eastern time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, government actions or pronouncements, aftermarket trading, or news events may have occurred in the interim. Whenever such a significant event occurs, the Series may value foreign securities using fair value prices based on third-party vendor modeling tools (international fair value pricing).
Federal and Foreign Income Taxes—No provision for federal income taxes has been made as the Series intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Series evaluates tax positions taken or expected to be taken in the course of preparing the Series’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Series’ tax positions taken for all open federal income tax years (Dec. 31, 2012–Dec. 31, 2015), and has concluded that no provision for federal income tax is required in the Series’ financial statements. In regard to foreign taxes only, the Series has open tax years in certain foreign countries in which it invests that may date back to the inception of the Series.
Class Accounting—Investment income, common expenses, and realized and unrealized gain (loss) on investments are allocated to the classes of the Series on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class.
Repurchase Agreements—The Series may purchase certain U.S. government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Series’ custodian or a third party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. At June 30, 2016, the Series had no open repurchase agreements.
Foreign Currency Transactions—Transactions denominated in foreign currencies are recorded at the prevailing exchange rates on the valuation date in accordance with the Series’ prospectus. The value of all assets and liabilities denominated in foreign currencies is translated daily into U.S. dollars at the exchange rate of such currencies against the U.S. dollar. Transaction gains or losses resulting from changes in exchange rates during the reporting period or upon settlement of the foreign currency transaction are reported in operations for the current period. The Series generally does not bifurcate that portion of realized gains and losses on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices. The realized gains and losses are included on the “Statement of operations” under “Net realized and unrealized gain (loss) on investments.” The Series reports certain foreign currency related transactions as components of realized gains (losses) for financial reporting purposes, whereas such components are treated as ordinary income (loss) for federal income tax purposes.
Use of Estimates—The Series is an investment company, whose financial statements are prepared in conformity with U.S. GAAP. Therefore, the Series follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Emerging Markets Series-10
Table of Contents
Delaware VIP® Emerging Markets Series
Notes to financial statements (continued)
1. Significant Accounting Policies (continued)
Other—Expenses directly attributable to the Series are charged directly to the Series. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated among such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Taxable non-cash dividends are recorded as dividend income. Foreign dividends are also recorded on the ex-dividend date or as soon after the ex-dividend date that the Series is aware of such dividends, net of all tax withholdings, a portion of which may be reclaimable. Withholding taxes and reclaims on foreign dividends have been recorded in accordance with the Series’ understanding of the applicable country’s tax rules and rates. The Series may pay foreign capital gains taxes on certain foreign securities held, which are reported as components of realized losses for financial reporting purposes, whereas such components are treated as ordinary loss for federal income tax purposes.
The Series declares and pays dividends from net investment income and distributions from net realized gain on investments, if any, following the close of the fiscal year. The Series may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
The Series may receive earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. There were no such earnings credits for the six months ended June 30, 2016.
The Series may receive earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than one dollar, the expense paid under this arrangement is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expense offset shown under “Less expense paid indirectly.” For the six month ended June 30, 2016, the Series earned $1 under this agreement.
During the six months ended June 30, 2016, the Series frequently maintained a negative cash balance with its custodian, which is considered a form of borrowing or leverage. If the Series maintains a negative cash balance and the Series’ investments decrease in value, the Series’ losses will be greater than if the Series did not maintain a negative cash balance. The Series is required to pay interest to the custodian on negative cash balances. During the six months ended June 30, 2016, the Series had an average outstanding overdraft balance equal to 2.61%% of its average net assets for which it was charged interest of $31,672, which is included on the “Statement of operations” under “Custodian fees.” The average borrowing rate charged on the overdraft was 0.51%.
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Series pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 1.25% on the first $500 million of average daily net assets of the Series, 1.20% on the next $500 million, 1.15% on the next $1.5 billion, and 1.10% on average daily net assets in excess of $2.5 billion.
DMC has contractually agreed to waive that portion, if any, of its management fee and reimburse the Series to the extent necessary to ensure that annual operating expenses (excluding any 12b-1 fees, taxes, interest, short sale dividend and interest expenses, acquired fund fees and expenses, brokerage fees, certain insurance costs, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations), do not exceed 1.35% of the Series’ average daily net assets from April 29, 2016 through June 30, 2016.* Prior to April 29, 2016, the Series’ had no management fee waiver. These expense waivers and reimbursements may only be terminated by agreement of DMC and the Series.
Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Series. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the Delaware Investments Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DIFSC under the service agreement described above are allocated among all funds in the Delaware Investments Family of Funds on a relative net asset value basis. This amount is included on the “Statement of operations” under “Accounting and administration expenses.” For the six months ended June 30, 2016, the Series was charged $11,230 for these services.
DIFSC is also the transfer agent and dividend disbursing agent of the Series. For these services, DIFSC’s fees are calculated at the annual rate of 0.0075% of the Series’ average daily net assets. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the six months ended June 30, 2016, the Series was charged $17,709 for these services. Pursuant to a sub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Series. Sub-transfer agency fees are paid directly by the Series and are also included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.”
Pursuant to a distribution agreement and distribution plan, the Series pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee of 0.30% of the average daily net assets of the Service Class shares. DDLP has contracted to waive distribution and service fees from Jan. 1, 2016 through June 30, 2016** in order to limit distribution and service fees of the Service Class shares to 0.25% of average daily net assets. Standard Class shares pay no distribution and service expenses.
Emerging Markets Series-11
Table of Contents
Delaware VIP® Emerging Markets Series
Notes to financial statements (continued)
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates (continued)
As provided in the investment management agreement, the Series bears a portion of the cost of resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Series. These amounts are included on the ���Statement of operations” under “Legal fees.” For the six months ended June 30, 2016, the Series was charged $5,364 for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees.
Trustees’ fees include expenses accrued by the Series for each Trustee’s retainer and meeting fees. Certain officers of DMC, DIFSC, and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Series.
* The contractual waiver period is from April 29, 2016 through May 1, 2017.
**The contractual waiver period is from April 29, 2015 through May 1, 2017.
3. Investments
For the six months ended June 30, 2016, the Series made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 13,698,029 | ||
Sales | 23,790,701 |
At June 30, 2016, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At June 30, 2016, the cost of investments and unrealized appreciation (depreciation) for the Series were as follows:
Cost of | Aggregate Unrealized | Aggregate Unrealized Depreciation of Investments | Net Unrealized Depreciation of Investments | |||||||||
$589,059,178 | $106,433,225 | $(188,214,287) | $(81,781,062) |
U.S. GAAP defines fair value as the price that the Series would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established 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 that 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 assumptions that market participants would use in pricing the asset or liability based on the best information available under the circumstances. The Series’ investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized below.
Level 1 | – | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) | ||
Level 2 | – | Other observable inputs, including, but 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. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) | ||
Level 3 | – | Significant unobservable inputs, including the Series’ own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. The Series may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
Emerging Markets Series-12
Table of Contents
Delaware VIP® Emerging Markets Series
Notes to financial statements (continued)
3. Investments (continued)
The following table summarizes the valuation of the Series’ investments by fair value hierarchy levels as of June 30, 2016:
Securities | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stock | ||||||||||||||||||||
Argentina | $ | 17,253,971 | $ | 4,367,848 | $ | — | $ | 21,621,819 | ||||||||||||
Bahrain | — | 335,944 | — | 335,944 | ||||||||||||||||
Brazil | 60,905,403 | — | — | 60,905,403 | ||||||||||||||||
Chile | 5,243,112 | — | — | 5,243,112 | ||||||||||||||||
China/Hong Kong | 74,998,114 | 40,926,400 | — | 115,924,514 | ||||||||||||||||
France | 8,370,000 | — | — | 8,370,000 | ||||||||||||||||
India | 13,924,362 | 13,427,309 | — | 27,351,671 | ||||||||||||||||
Indonesia | — | 1,318,405 | — | 1,318,405 | ||||||||||||||||
Malaysia | — | 6,302,471 | — | 6,302,471 | ||||||||||||||||
Mexico | 31,496,014 | — | — | 31,496,014 | ||||||||||||||||
Peru | 1,499,008 | — | — | 1,499,008 | ||||||||||||||||
Poland | — | 4,709,034 | — | 4,709,034 | ||||||||||||||||
Republic of Korea | 25,642,818 | 59,132,936 | — | 84,775,754 | ||||||||||||||||
Russia | 5,648,663 | 21,061,486 | — | 26,710,149 | ||||||||||||||||
South Africa | 4,205,846 | 10,291,964 | — | 14,497,810 | ||||||||||||||||
Taiwan | 1,770,503 | 39,770,068 | — | 41,540,571 | ||||||||||||||||
Thailand | 1,457,462 | 2,954,213 | — | 4,411,675 | ||||||||||||||||
Turkey | — | 4,741,323 | — | 4,741,323 | ||||||||||||||||
United Kingdom | 1,010,210 | — | — | 1,010,210 | ||||||||||||||||
United States | 6,819,924 | — | — | 6,819,924 | ||||||||||||||||
Exchange-Traded Fund | 7,533,500 | — | — | 7,533,500 | ||||||||||||||||
Preferred Stock1 | 7,304,656 | 22,855,149 | — | 30,159,805 | ||||||||||||||||
Participation Notes | — | — | — | — | ||||||||||||||||
Rights | — | — | — | — | ||||||||||||||||
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Total Value of Securities | $ | 275,083,566 | $ | 232,194,550 | $ | — | $ | 507,278,116 | ||||||||||||
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Foreign Currency Exchange Contract | $ | — | $ | 28 | $ | — | $ | 28 | ||||||||||||
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1Security type is valued across multiple levels. The amounts attributed to Level 1 investments and Level 2 investments represent 24.22% and 75.78%, respectively, of the total market value of this security type. Level 1 investments represent exchange traded investments and Level 2 investments represent investments with observable inputs.
As a result of utilizing international fair value pricing at June 30, 2016, a portion of the portfolio was categorized as Level 2.
The securities that have been valued at zero on the “Schedule of investments” are considered to be Level 3 investments.
During the six months ended June 30, 2016, there were no transfers between Level 1 investments, Level 2 investments, or Level 3 investments that had a significant impact to the Series. This does not include transfers between Level 1 investments and Level 2 investments due to the Series utilizing international fair value pricing during the period. In accordance with the fair valuation procedures described in Note 1, international fair value pricing of securities occurs when market volatility exceeds an established rolling threshold. If the threshold is exceeded on a given date, then prices of international securities (those that traded on exchanges that close at a different time than the time that the Series’ net asset value is determined) are established using a separate pricing feed from a third party vendor designed to establish a price for each such security as of the time that the Series’ net asset value is determined. Further, international fair value pricing uses other observable market-based inputs in place of the closing exchange price due to the events occurring after the close of the exchange or market on which the investment is principally traded, causing a change in classification between levels. The Series’ policy is to recognize transfers between levels at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when the Series has a significant amount of Level 3 investments at the beginning, interim, or end of the period in relation to net assets. Management has determined not to provide additional disclosure on Level 3 inputs since the Level 3 investments are not considered significant to the Series’ net assets at the end of the period.
Emerging Markets Series-13
Table of Contents
Delaware VIP® Emerging Markets Series
Notes to financial statements (continued)
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 6/30/16 | Year ended 12/31/15 | |||||||
Shares sold: | ||||||||
Standard Class | 830,468 | 2,613,870 | ||||||
Service Class | 493,935 | 2,337,333 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 357,439 | 254,848 | ||||||
Service Class | 565,452 | 453,722 | ||||||
2,247,294 | 5,659,773 | |||||||
Shares redeemed: | ||||||||
Standard Class | (537,458) | (1,100,029 | ) | |||||
Service Class | (1,776,760) | (2,275,226 | ) | |||||
(2,314,218) | (3,375,255 | ) | ||||||
Net increase (decrease) | (66,924) | 2,284,518 |
5. Line of Credit
The Series, along with certain other funds in the Delaware Investments® Family of Funds (Participants), is a participant in a $155,000,000 revolving line of credit to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants are charged an annual commitment fee of 0.10%, which is allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants are permitted to borrow up to a maximum of one-third of their net assets under the agreement. Each Participant is individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit available under the agreement expires on Nov. 7, 2016.
The Series had no amounts outstanding as of June 30, 2016 or at any time during the six months then ended.
6. Derivatives
U.S. GAAP requires disclosures that enable investors to understand: (1) how and why an entity uses derivatives; (2) how they are accounted for; and (3) how they affect an entity’s results of operations and financial position.
Foreign Currency Exchange Contracts
The Series may enter into foreign currency exchange contracts and foreign cross currency exchange contracts as a way of managing foreign exchange rate risk. The Series may enter into these contracts to fix the U.S. dollar value of a security that it has agreed to buy or sell for the period between the date the trade was entered into and the date the security is delivered and paid for. The Series may also use these contracts to hedge the U.S. dollar value of securities it already owns that are denominated in foreign currencies. In addition, the Series may enter into these contracts to facilitate or expedite the settlement of portfolio transactions. The change in value is recorded as an unrealized gain or loss. When the contract is closed, a realized gain or loss is recorded equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
The use of foreign currency exchange contracts and foreign cross currency exchange contracts does not eliminate fluctuations in the underlying prices of the securities, but does establish a rate of exchange that can be achieved in the future. Although foreign currency exchange contracts and foreign cross currency exchange contracts limit the risk of loss due to an unfavorable change in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency change favorably. In addition, the Series could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. The Series’ maximum risk of loss from counterparty credit risk is the value of its currency exchanged with the counterparty. The risk is generally mitigated by having a netting arrangement between the Series and the counterparty and by the posting of collateral by the counterparty to the Series to cover the Series’ exposure to the counterparty.
During the six months ended June 30, 2016, the Series entered into foreign currency exchange contracts and foreign cross currency exchange contracts to facilitate or expedite the settlement of portfolio transactions.
At June 30, 2016, the Series experienced net realized and unrealized gains or losses attributable to foreign currency holdings, which are disclosed as “Unrealized appreciation on foreign currency exchange contracts” on the “Statement of assets and liabilities” and as “Net realized gain on foreign currency exchange contracts” on the “Statement of operations.”
Emerging Markets Series-14
Table of Contents
Delaware VIP® Emerging Markets Series
Notes to financial statements (continued)
6. Derivatives (continued)
Derivatives Generally. The table below summarizes the average balance of derivative holdings by the Series during the six months ended June 30, 2016.
Long Derivatives Volume | Short Derivatives Volume | |||
Foreign currency exchange contracts (average cost) | $10,938 | $1,747 |
7. Offsetting
In December 2011, the Financial Accounting Standards Board (FASB) issued guidance that expanded disclosure requirements on the offsetting of certain assets and liabilities. The disclosures are required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset on the “Statement of assets and liabilities” and requires an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarified which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting is limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing. The guidance is effective for financial statements with fiscal years beginning on or after Jan. 1, 2013, and interim periods within those fiscal years.
In order to better define its contractual rights and to secure rights that will help the Series mitigate its counterparty risk, the Series entered into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement) or a similar agreement with certain of their derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Series and a counterparty that governs over-the-counter (OTC) derivatives and foreign exchange contracts and typically contains, among other things, collateral posting items and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Series may, under certain circumstances, offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default (close-out), including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency, or other events.
For financial reporting purposes, the Series does not offset derivative assets and derivative liabilities that are subject to netting arrangements on the “Statement of assets and liabilities.”
At June 30, 2016, the Series had the following assets and liabilities subject to offsetting provisions:
Offsetting of Financial Assets and Liabilities and Derivative Assets and Liabilities:
Counterparty | Gross Value of Derivative Asset | Gross Value of Derivative Liability | Net Position | |||
BNY Mellon | $28 | $ — | $28 |
Counterparty | Net Position | Fair Value of Non-Cash Collateral Received | Cash Collateral Received | Fair Value of Non-Cash Collateral Pledged | Cash Collateral Pledged | Net Exposure(a) | ||||||
BNY Mellon | $28 | $ — | $ — | $ — | $ — | $28 |
(a) Net exposure represents the receivable (payable) that would be due from (to) the counterparty in the event of default.
8. Securities Lending
The Series, along with other funds in the Delaware Investments® Family of Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (1) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (2) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities that are the subject of such loan, the borrower will be notified to provide additional collateral by the end of the following business day, which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial collateral requirement, upon the request of the borrower, BNY Mellon must return enough collateral to the borrower by the end of the following business day to reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security on any particular day may be more or less than the value of the security on loan.
Prior to Dec. 29, 2015, cash collateral received was generally invested in the Delaware Investments Collateral Fund No. 1 (Collective Trust), a pooled account established by BNY Mellon for the use of funds managed by DMC that participate in BNY Mellon’s securities lending program. The Collective Trust sought to maintain a net asset value per unit of $1.00.
Emerging Markets Series-15
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Delaware VIP® Emerging Markets Series
Notes to financial statements (continued)
8. Securities Lending (continued)
On Dec. 29, 2015, the assets in the Collective Trust were transferred to a series of individual separate accounts, each corresponding to a Series. The investment guidelines permit each separate account to hold certain securities that would be considered eligible securities for a money market fund. Cash collateral received is generally invested in government securities; certain obligations issued by government sponsored enterprises; repurchase agreements collateralized by U.S. Treasury securities; obligations issued by the central government of any Organization for Economic Cooperation and Development (OECD) country or its agencies, instrumentalities, or establishments; obligations of supranational organizations; commercial paper, notes, bonds, and other debt obligations; certificates of deposit, time deposits, and other bank obligations; and asset-backed securities.
In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Series or, at the discretion of the lending agent, replace the loaned securities. The Series continues to record dividends or interest, as applicable, on the securities loaned and are subject to changes in value of the securities loaned that may occur during the term of the loan. The Series has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Series receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Series, the security lending agent, and the borrower. The Series records security lending income net of allocations to the security lending agent and the borrower.
The Series may incur investment losses as a result of investing securities lending collateral. This could occur if an investment in the collateral investment account defaulted or became impaired. Under those circumstances, the value of a Series’ cash collateral account may be less than the amount the Series would be required to return to the borrowers of the securities and the Series would be required to make up for this shortfall.
During the six months ended June 30, 2016, the Series had no securities out on loan.
9. Credit and Market Risk
Some countries in which the Series may invest require governmental approval for the repatriation of investment income, capital, or the proceeds of sales of securities by foreign investors. In addition, if there is deterioration in a country’s balance of payments or for other reasons, a country may impose temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially smaller, less liquid, and more volatile than the major securities markets in the United States. Consequently, acquisition and disposition of securities by the Series may be inhibited. In addition, a significant portion of the aggregate market value of equity securities listed on the major securities exchanges in emerging markets is held by a smaller number of investors. This may limit the number of shares available for acquisition or disposition by the Series.
The Series may invest up to 10% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A promulgated under the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Series from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Series’ Board has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of the Series’ limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Series’ 10% limit on investments in illiquid securities. Rule 144A and illiquid securities have been identified on the “Schedule of investments.” When monitoring compliance with the Series’ illiquid limit, certain holdings that are common to multiple clients of the investment manager may be aggregated and considered illiquid in the aggregate solely for monitoring purposes. For purposes of determining illiquidity for financial reporting purposes, only the holdings of this Series will be considered.
10. Contractual Obligations
The Series enters into contracts in the normal course of business that contain a variety of indemnifications. The Series’ maximum exposure under these arrangements is unknown. However, the Series has not had prior claims or losses pursuant to these contracts. Management has reviewed the Series’ existing contracts and expects the risk of loss to be remote.
11. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to June 30, 2016 that would require recognition or disclosure in the Series’ financial statements.
Emerging Markets Series-16
Table of Contents
Delaware VIP® Emerging Markets Series
The Series files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q. The Series’ Forms N-Q, as well as a description of the policies and procedures that the Series uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the Commission’s website at sec.gov. In addition, a description of the policies and procedures that the Series uses to determine how to vote proxies (if any) relating to portfolio securities and the Schedule of Investments included in the Series’ most recent Form N-Q are available without charge on the Delaware Investments® Funds’ website at delawareinvestments.com/vip/literature. The Series’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330.
Information (if any) regarding how the Series voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Delaware Investments Funds’ website at delawareinvestments.com/proxy; and (ii) on the Commission’s website at sec.gov.
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SA-VIPEM 21182 (8/16) (17290) | Emerging Markets Series-17 |
Table of Contents
Delaware VIP® Trust
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Delaware VIP Smid Cap Growth Series
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Semiannual report
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June 30, 2016 |
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Table of Contents
1 | ||||||||||
Security type / sector allocation and top 10 equity holdings | 2 | |||||||||
3 | ||||||||||
5 | ||||||||||
6 | ||||||||||
6 | ||||||||||
7 | ||||||||||
9 | ||||||||||
16 |
Neither Delaware Investments nor its affiliates referred to in this document are authorized deposit-taking institutions for the purpose of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited (MBL), a subsidiary of Macquarie Group Limited and an affiliate of Delaware Investments. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Series is governed by U.S. laws and regulations.
Unless otherwise noted, views expressed herein are current as of June 30, 2016, and subject to change for events occurring after such date.
The Series is not FDIC insured and is not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor and member of Macquarie Group. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries, including the Series’ distributor, Delaware Distributors, L.P. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
This material may be used in conjunction with the offering of shares in Delaware VIP® Smid Cap Growth Series only if preceded or accompanied by the Series’ current prospectus or the summary prospectus.
© 2016 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
Table of Contents
Delaware VIP® Trust – Delaware VIP Smid Cap Growth Series
Disclosure of Series expenses
For the six-month period from January 1, 2016 to June 30, 2016 (Unaudited)
As a shareholder of the Series, you incur ongoing costs, which may include management fees; distribution and/or service (12b-1) fees; and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series 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 entire six-month period from Jan. 1, 2016 to June 30, 2016.
Actual expenses
The first section of the table shown, “Actual Series return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, 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, an $8,600 account value divided by $1,000 = 8.6), 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 the period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% Return,” provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ 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 Series and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Series, you do not incur any transaction costs, such as sales charges (loads), redemption fees or exchange fees, but shareholders of other funds may incur such costs. Also, the fees related to the variable annuity investment or the deferred sales charge that could apply have not been included. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The Series’ actual expenses shown in the table reflect fee waivers in effect for Service Class shares. The expenses shown in the table assume reinvestment of all dividends and distributions.
Expense analysis of an investment of $1,000
Expenses | ||||||||||||
Beginning | Ending | Paid During | ||||||||||
Account | Account | Annualized | Period | |||||||||
Value | Value | Expense | 1/1/16 to | |||||||||
1/1/16 | 6/30/16 | Ratio | 6/30/16* | |||||||||
| ||||||||||||
Actual Series return† | ||||||||||||
Standard Class | $1,000.00 | $1,016.20 | 0.83% | $4.16 | ||||||||
Service Class | 1,000.00 | 1,014.80 | 1.08% | 5.41 | ||||||||
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Hypothetical 5% return (5% return before expenses) | ||||||||||||
Standard Class | $1,000.00 | $1,020.74 | 0.83% | $4.17 | ||||||||
Service Class | 1,000.00 | 1,019.49 | 1.08% | 5.42 | ||||||||
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* | “Expenses Paid During Period” are equal to the Series’ annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
† | Because actual returns reflect only the most recent six-month period, the returns shown may differ significantly from fiscal year returns. |
Smid Cap Growth Series-1 |
Table of Contents
Delaware VIP® Trust — Delaware VIP Smid Cap Growth Series
Security type / sector allocation and top 10 equity holdings
As of June 30, 2016 (Unaudited)
Sector designations may be different than the sector designations presented in other Series materials. The sector designations may represent the investment manager’s internal sector classifications, which may result in the sector designations for one series being different than another series’ sector designations.
Percentage of | ||
Security type / sector | net assets | |
| ||
Common Stock² | 96.09% | |
Consumer Discretionary1 | 28.83% | |
Energy | 3.89% | |
Financial Services | 15.30% | |
Healthcare | 12.18% | |
Producer Durables | 11.64% | |
Technology | 20.10% | |
Utilities | 4.15% | |
| ||
Short-Term Investments | 3.97% | |
| ||
Total Value of Securities | 100.06% | |
| ||
Liabilities Net of Receivables and Other Assets | (0.06%) | |
| ||
Total Net Assets | 100.00% | |
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² | Narrow industries are utilized for compliance purposes for diversification whereas broad sectors are used for financial reporting. |
1 | To monitor compliance with the Series’ concentration guidelines as described in the Series’ prospectus, the Consumer Discretionary sector (as disclosed herein for financial reporting purposes) is subdivided into a variety of “industries” (in accordance with the requirements of the 1940 Act). The Consumer Discretionary sector consisted of internet, leisure time, real estate investment trusts, and retail. As of June 30, 2016 such amounts, as percentages of total net assets, were 7.75%, 2.35%, 3.92%, and 14.81%, respectively. The percentage in any such single industry will comply with the Series’ concentration policy even if the percentage in the “Consumer Discretionary sector” for financial reporting purposes may exceed 25%. |
Holdings are for informational purposes only and are subject to change at any time. They are not a recommendation to buy, sell, or hold any security.
Percentage | ||
Top 10 equity holdings | of net assets | |
| ||
Sally Beauty Holdings | 6.12% | |
Bio-Techne | 5.92% | |
Equity Commonwealth | 5.60% | |
Blackbaud | 5.45% | |
Graco | 4.94% | |
DineEquity | 4.48% | |
Dunkin’ Brands Group | 4.21% | |
j2 Global | 4.15% | |
ABIOMED | 4.10% | |
Outfront Media | 3.92% | |
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Smid Cap Growth Series-2
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Delaware VIP® Trust — Delaware VIP Smid Cap Growth Series
Schedule of investments
June 30, 2016 (Unaudited)
Number of shares | Value (U.S. $) | |||||||
Common Stock – 96.09% ² |
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Consumer Discretionary – 28.83% |
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DineEquity | 326,484 | $ | 27,679,314 | |||||
Dunkin’ Brands Group | 596,303 | 26,010,737 | ||||||
Liberty TripAdvisor Holdings Class A † | 662,362 | 14,492,481 | ||||||
Outfront Media | 1,003,424 | 24,252,758 | ||||||
Pandora Media † | 1,607,890 | 20,018,231 | ||||||
Quotient Technology † | 598,062 | 8,020,011 | ||||||
Sally Beauty Holdings † | 1,286,959 | 37,849,464 | ||||||
Shutterstock † | 433,564 | 19,857,231 | ||||||
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178,180,227 | ||||||||
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Energy – 3.89% | ||||||||
Core Laboratories | 193,801 | 24,010,006 | ||||||
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24,010,006 | ||||||||
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Financial Services – 15.30% |
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Affiliated Managers Group † | 122,086 | 17,186,046 | ||||||
Equity Commonwealth † | 1,188,770 | 34,628,870 | ||||||
LendingClub † | 1,536,253 | 6,605,888 | ||||||
LendingTree † | 92,350 | 8,157,276 | ||||||
MSCI Class A | 245,505 | 18,933,346 | ||||||
WisdomTree Investments | 921,583 | 9,022,298 | ||||||
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94,533,724 | ||||||||
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Healthcare – 12.18% | ||||||||
ABIOMED † | 231,674 | 25,319,651 | ||||||
athenahealth † | 97,238 | 13,419,816 | ||||||
Bio-Techne | 324,200 | 36,560,034 | ||||||
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75,299,501 | ||||||||
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Producer Durables – 11.64% |
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Expeditors International of Washington | 385,292 | 18,894,720 | ||||||
Graco | 386,783 | 30,551,989 | ||||||
Zebra Technologies † | 448,503 | 22,470,000 | ||||||
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71,916,709 | ||||||||
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Technology – 20.10% |
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Arista Networks † | 163,523 | 10,527,611 | ||||||
Blackbaud | 495,811 | 33,665,567 | ||||||
Ellie Mae † | 109,582 | 10,043,190 | ||||||
Logitech International Class R | 1,386,093 | 22,534,410 | ||||||
NIC | 443,139 | 9,722,470 | ||||||
Paycom Software † | 178,791 | 7,725,559 | ||||||
VeriFone Systems † | 1,028,394 | 19,066,425 | ||||||
Yelp † | 359,169 | 10,904,371 | ||||||
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124,189,603 | ||||||||
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Utilities – 4.15% | ||||||||
j2 Global | 405,825 | 25,635,965 | ||||||
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25,635,965 | ||||||||
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Total Common Stock |
| 593,765,735 | ||||||
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Principal amount° | Value (U.S. $) | |||||||
Short-Term Investments –3.97% |
| |||||||
Discount Notes – 3.58% ≠ |
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Federal Home Loan Bank | ||||||||
0.243% 8/5/16 | 1,856,023 | $ | 1,855,591 | |||||
0.319% 7/13/16 | 8,973,565 | 8,973,089 | ||||||
0.325% 8/3/16 | 3,064,590 | 3,063,915 | ||||||
0.335% 7/12/16 | 1,317,774 | 1,317,710 | ||||||
0.335% 7/21/16 | 1,830,242 | 1,830,079 | ||||||
0.34% 7/22/16 | 2,131,005 | 2,130,807 | ||||||
0.35% 7/25/16 | 1,485,322 | 1,485,163 | ||||||
0.389% 9/23/16 | 6,861 | 6,856 | ||||||
0.39% 9/21/16 | 5,625 | 5,621 | ||||||
0.53% 8/15/16 | 1,436,759 | 1,436,328 | ||||||
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22,105,159 | ||||||||
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Repurchase Agreement – 0.39% |
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Bank of America Merrill Lynch | 863,504 | 863,504 | ||||||
Bank of Montreal | 1,439,172 | 1,439,172 | ||||||
BNP Paribas | 143,324 | 143,324 | ||||||
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2,446,000 | ||||||||
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Total Short-Term Investments |
| 24,551,159 | ||||||
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Total Value of Securities – 100.06% | $ | 618,316,894 | ||
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² | Narrow industries are utilized for compliance purposes for diversification whereas broad sectors are used for financial reporting. |
Smid Cap Growth Series-3
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Delaware VIP® Smid Cap Growth Series
Schedule of investments (continued)
≠ The rate shown is the effective yield at the time of purchase.
° Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency.
† Non-income-producing security.
See accompanying notes, which are an integral part of the financial statements.
Smid Cap Growth Series-4
Table of Contents
Delaware VIP® Trust — Delaware VIP Smid Cap Growth Series | ||
Statement of assets and liabilities | June 30, 2016 (Unaudited) |
Assets: | ||||
Investments, at value1 | $ | 593,765,735 | ||
Short-term investments, at value2 | 24,551,159 | |||
Dividends and interest receivable | 518,094 | |||
Receivable for series shares sold | 59,191 | |||
|
| |||
Total assets | 618,894,179 | |||
|
| |||
Liabilities: | ||||
Cash overdraft | 314,631 | |||
Payable for series shares redeemed | 31,414 | |||
Investment management fees payable | 375,089 | |||
Other accrued expenses | 143,354 | |||
Distribution fees payable to affiliates | 47,934 | |||
Trustees’ fees and expenses payable | 1,883 | |||
Audit and tax fees payable | 16,534 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 3,799 | |||
Accounting and administration expenses payable to affiliates | 2,395 | |||
Legal fees payable to affiliates | 1,732 | |||
Reports and statements to shareholders expenses payable to affiliates | 255 | |||
|
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Total liabilities | 939,020 | |||
|
| |||
Total Net Assets | $ | 617,955,159 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 437,369,056 | ||
Undistributed net investment income | 321,589 | |||
Accumulated net realized gain on investments | 30,743,249 | |||
Net unrealized appreciation of investments | 149,522,778 | |||
Net unrealized depreciation of foreign currencies | (1,513 | ) | ||
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| |||
Total Net Assets | $ | 617,955,159 | ||
|
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Net Asset Value | ||||
Standard Class: | ||||
Net assets | $ | 384,796,465 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 14,605,298 | |||
Net asset value per share | $ | 26.35 | ||
Service Class: | ||||
Net assets | $ | 233,158,694 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 9,278,581 | |||
Net asset value per share | $ | 25.13 |
1Investments, at cost | $ | 444,244,867 | ||
2Short-term investments, at cost | 24,549,249 |
See accompanying notes, which are an integral part of the financial statements.
Smid Cap Growth Series-5
Table of Contents
Delaware VIP Smid Cap Growth Series
Statement of operations
Six months ended June 30, 2016 (Unaudited)
Investment Income: | ||||
Dividends | $ | 3,075,238 | ||
Interest | 36,163 | |||
Foreign tax withheld | (32,202 | ) | ||
|
| |||
3,079,199 | ||||
|
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Expenses: | ||||
Management fees | 2,207,279 | |||
Distribution expenses – Service Class | 332,153 | |||
Accounting and administration expenses | 97,137 | |||
Reports and statements to shareholders expenses | 51,865 | |||
Custodian fees | 26,664 | |||
Dividend disbursing and transfer agent fees and expenses | 25,512 | |||
Legal fees | 24,068 | |||
Audit and tax fees | 16,551 | |||
Trustees’ fees and expenses | 15,851 | |||
Registration fees | 377 | |||
Other | 8,815 | |||
|
| |||
2,806,272 | ||||
Less waived distribution expenses – Service Class | (55,359 | ) | ||
Less expense paid indirectly | (1 | ) | ||
|
| |||
Total operating expenses | 2,750,912 | |||
|
| |||
Net Investment Income | 328,287 | |||
|
| |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 31,045,972 | |||
Foreign currencies | 3,682 | |||
Foreign currency exchange contracts | (3,681 | ) | ||
|
| |||
Net realized gain | 31,045,973 | |||
|
| |||
Net change in unrealized appreciation (depreciation) of: | ||||
Investments | (22,625,204 | ) | ||
Foreign currencies | 1,774 | |||
Foreign currency exchange contracts | 3,639 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | (22,619,791 | ) | ||
|
| |||
Net Realized and Unrealized Gain | 8,426,182 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 8,754,469 | ||
|
|
Six months ended 6/30/16 (Unaudited) | Year ended 12/31/15 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 328,287 | $ | 935,995 | ||||
Net realized gain | 31,045,973 | 80,842,112 | ||||||
Net change in unrealized appreciation (depreciation) | (22,619,791 | ) | (38,437,282 | ) | ||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 8,754,469 | 43,340,825 | ||||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Standard Class | (901,532 | ) | (1,496,727 | ) | ||||
Service Class | — | (344,043 | ) | |||||
Net realized gain: | ||||||||
Standard Class | (49,931,968 | ) | (32,104,787 | ) | ||||
Service Class | (30,966,415 | ) | (17,711,337 | ) | ||||
|
|
|
| |||||
(81,799,915 | ) | (51,656,894 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Standard Class | 6,289,663 | 14,848,678 | ||||||
Service Class | 12,001,725 | 32,603,186 | ||||||
Net asset value of shares based upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 50,833,500 | 33,601,514 | ||||||
Service Class | 30,966,415 | 18,055,380 | ||||||
|
|
|
| |||||
100,091,303 | 99,108,758 | |||||||
|
|
|
| |||||
Cost of shares redeemed: | ||||||||
Standard Class | (21,506,342 | ) | (35,294,706 | ) | ||||
Service Class | (12,075,387 | ) | (21,227,620 | ) | ||||
|
|
|
| |||||
(33,581,729 | ) | (56,522,326 | ) | |||||
|
|
|
| |||||
Increase in net assets derived from capital share transactions | 66,509,574 | 42,586,432 | ||||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | (6,535,872 | ) | 34,270,363 | |||||
Net Assets: | ||||||||
Beginning of period | 624,491,031 | 590,220,668 | ||||||
|
|
|
| |||||
End of period | $ | 617,955,159 | $ | 624,491,031 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 321,589 | $ | 894,834 | ||||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
Smid Cap Growth Series-6
Table of Contents
Delaware VIP® Trust — Delaware VIP Smid Cap Growth Series
Financial highlights
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP Smid Cap Growth Series Standard Class | ||||||||||||||||||||||||||||||
Six months ended1 | Year ended | |||||||||||||||||||||||||||||
(Unaudited) | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | 12/31/11 | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 29.790 | $ | 30.200 | $ | 32.390 | $ | 24.370 | $ | 23.190 | $ | 22.220 | ||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||
Net investment income2 | 0.028 | 0.073 | 0.116 | 0.040 | 0.026 | 0.058 | ||||||||||||||||||||||||
Net realized and unrealized gain | 0.479 | 2.211 | 0.620 | 9.542 | 2.570 | 1.808 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total from investment operations | 0.507 | 2.284 | 0.736 | 9.582 | 2.596 | 1.866 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||||||||
Net investment income | (0.070 | ) | (0.120 | ) | (0.021 | ) | (0.007 | ) | (0.060 | ) | (0.232 | ) | ||||||||||||||||||
Net realized gain | (3.877 | ) | (2.574 | ) | (2.905 | ) | (1.555 | ) | (1.356 | ) | (0.664 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total dividends and distributions | (3.947 | ) | (2.694 | ) | (2.926 | ) | (1.562 | ) | (1.416 | ) | (0.896 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net asset value, end of period | $ | 26.350 | $ | 29.790 | $ | 30.200 | $ | 32.390 | $ | 24.370 | $ | 23.190 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total return3 | 1.62% | 7.54% | 3.15% | 41.32% | 11.02% | 8.13% | ||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 384,796 | $ | 394,406 | $ | 386,290 | $ | 422,823 | $ | 318,002 | $ | 323,798 | ||||||||||||||||||
Ratio of expenses to average net assets | 0.83% | 0.83% | 0.83% | 0.83% | 0.84% | 0.83% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets | 0.20% | 0.24% | 0.40% | 0.14% | 0.11% | 0.24% | ||||||||||||||||||||||||
Portfolio turnover | 9% | 22% | 18% | 19% | 23% | 19% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return does not include fees, charges, or expenses imposed by the variable annuity and life insurance contracts for which Delaware VIP Trust serves as an underlying investment vehicle. |
See accompanying notes, which are an integral part of the financial statements.
Smid Cap Growth Series-7
Table of Contents
Delaware VIP® Smid Cap Growth Series
Financial highlights (continued)
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP Smid Cap Growth Series Service Class | ||||||||||||||||||||||||||||||
Six months ended1 | Year ended | |||||||||||||||||||||||||||||
(Unaudited) | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | 12/31/11 | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 28.560 | $ | 29.060 | $ | 31.330 | $ | 23.670 | $ | 22.570 | $ | 21.650 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||
Net investment income (loss)2 | (0.006 | ) | (0.003 | ) | 0.042 | (0.029 | ) | (0.034 | ) | (0.002 | ) | |||||||||||||||||||
Net realized and unrealized gain | 0.453 | 2.127 | 0.593 | 9.244 | 2.492 | 1.770 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total from investment operations | 0.447 | 2.124 | 0.635 | 9.215 | 2.458 | 1.768 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||||||||
Net investment income | — | (0.050 | ) | — | — | (0.002 | ) | (0.184 | ) | |||||||||||||||||||||
Net realized gain | (3.877 | ) | (2.574 | ) | (2.905 | ) | (1.555 | ) | (1.356 | ) | (0.664 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total dividends and distributions | (3.877 | ) | (2.624 | ) | (2.905 | ) | (1.555 | ) | (1.358 | ) | (0.848 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net asset value, end of period | $ | 25.130 | $ | 28.560 | $ | 29.060 | $ | 31.330 | $ | 23.670 | $ | 22.570 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total return3 | 1.48% | 7.31% | 2.87% | 40.98% | 10.71% | 7.90% | ||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 233,159 | $ | 230,085 | $ | 203,931 | $ | 227,831 | $ | 173,948 | $ | 150,991 | ||||||||||||||||||
Ratio of expenses to average net assets | 1.08% | 1.08% | 1.08% | 1.08% | 1.09% | 1.08% | ||||||||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 1.13% | 1.13% | 1.13% | 1.13% | 1.14% | 1.13% | ||||||||||||||||||||||||
Ratio of net investment income (loss) to average net assets | (0.05% | ) | (0.01% | ) | 0.15% | (0.11% | ) | (0.14% | ) | (0.01% | ) | |||||||||||||||||||
Ratio of net investment income (loss) to average net assets prior to fees waived | (0.10% | ) | (0.06% | ) | 0.10% | (0.16% | ) | (0.19% | ) | (0.06% | ) | |||||||||||||||||||
Portfolio turnover | 9% | 22% | 18% | 19% | 23% | 19% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects a waiver by the distributor. Performance would have been lower had the waiver not been in effect. Total investment return does not include fees, charges, or expenses imposed by the variable annuity and life insurance contracts for which Delaware VIP Trust serves as an underlying investment vehicle. |
See accompanying notes, which are an integral part of the financial statements.
Smid Cap Growth Series-8
Table of Contents
Delaware VIP® Trust — Delaware VIP Smid Cap Growth Series
Notes to financial statements
June 30, 2016 (Unaudited)
Delaware VIP Trust (Trust) is organized as a Delaware statutory trust and offers 10 series: Delaware VIP Diversified Income Series, Delaware VIP Emerging Markets Series, Delaware VIP High Yield Series, Delaware VIP International Value Equity Series, Delaware VIP Limited-Term Diversified Income Series, Delaware VIP REIT Series, Delaware VIP Small Cap Value Series, Delaware VIP Smid Cap Growth Series, Delaware VIP U.S. Growth Series, and Delaware VIP Value Series. These financial statements and the related notes pertain to Delaware VIP Smid Cap Growth Series (Series). The Trust is an open-end investment company. The Series is considered diversified under the Investment Company Act of 1940, as amended, and offers Standard Class and Service Class shares. The Standard Class shares do not carry a 12b-1 fee and the Service Class shares carry a 12b-1 fee. The shares of the Series are sold only to separate accounts of life insurance companies.
The investment objective of the Series is to seek long-term capital appreciation.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistently followed by the Series.
Security Valuation—Equity securities, except those traded on the Nasdaq Stock Market LLC (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange on the valuation date. Equity securities traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If, on a particular day, an equity security does not trade, the mean between the bid and ask prices will be used, which approximates fair value. Securities listed on a foreign exchange are normally valued at the last quoted sales price on the valuation date. U.S. government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Foreign currency exchange contracts and foreign cross currency exchange contracts are valued at the mean between the bid and ask prices, which approximates fair value. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Trusts’ Board of Trustees (Board). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security. The Series may use fair value pricing more frequently for securities traded primarily in non-U.S. markets because, among other things, most foreign markets close well before the Series values its securities, generally as of 4:00 p.m. Eastern time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, government actions or pronouncements, aftermarket trading, or news events may have occurred in the interim. Whenever such a significant event occurs, the Series may value foreign securities using fair value prices based on third-party vendor modeling tools (international fair value pricing).
Federal and Foreign Income Taxes—No provision for federal income taxes has been made as the Series intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Series evaluates tax positions taken or expected to be taken in the course of preparing the Series’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Series’ tax positions taken for all open federal income tax years (Dec. 31, 2012–Dec. 31, 2015), and has concluded that no provision for federal income tax is required in the Series’ financial statements. In regard to foreign taxes only, the Series has open tax years in certain foreign countries in which it invests that may date back to the inception of the Series.
Class Accounting—Investment income, common expenses, and realized and unrealized gain (loss) on investments are allocated to the various classes of the Series on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class.
Repurchase Agreements—The Series may purchase certain U.S. government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Series’ custodian or a third-party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on June 30, 2016 and matured on the next business day.
Foreign Currency Transactions—Transactions denominated in foreign currencies are recorded at the prevailing exchange rates on the valuation date in accordance with the Series’ prospectus. The value of all assets and liabilities denominated in foreign currencies is translated daily into U.S. dollars at the exchange rate of such currencies against the U.S. dollar. Transaction gains or losses resulting from changes in exchange rates during the reporting period or upon settlement of the foreign currency transaction are reported in operations for the current period. The Series generally does not bifurcate that portion of realized gains and losses on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices. These gains and losses are included on the “Statement of operations” under “Net realized and unrealized gain (loss) on investments.” The Series reports certain foreign currency related transactions as components of realized gains (losses) for financial reporting purposes, whereas such components are treated as ordinary income (loss) for federal income tax purposes.
Use of Estimates—The Series is an investment company, whose financial statements are prepared in conformity with U.S. GAAP. Therefore, the Series follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Smid Cap Growth Series-9
Table of Contents
Delaware VIP® Smid Cap Growth Series
Notes to financial statements (continued)
1. Significant Accounting Policies (continued)
Other—Expenses directly attributable to the Series are charged directly to the Series. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated among such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Discounts and premiums on debt securities are accreted or amortized to interest income, respectively, over the lives of the respective securities using the effective interest method. Foreign dividends are also recorded on the ex-dividend date or as soon after the ex-dividend date that the Series is aware of such dividends, net of all tax withholdings, a portion of which may be reclaimable. Withholding taxes and reclaims on foreign dividends have been recorded in accordance with the Series’ understanding of the applicable country’s tax rules and rates. The Series declares and pays dividends from net investment income and distributions from net realized gain on investments, if any, following the close of the fiscal year. The Series may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
Subject to seeking best execution, the Series may direct certain security trades to brokers who have agreed to rebate a portion of the related brokerage commission to the Series in cash. In general, best execution refers to many factors, including the price paid or received for a security, the commission charged, the promptness and reliability of execution, the confidentiality and placement accorded the order, and other factors affecting the overall benefit obtained by the Series on the transaction. There were no commission rebates for the six months ended June 30, 2016.
The Series may receive earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. There were no such earnings credits for the six months ended June 30, 2016.
The Series receives earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than one dollar, the expense paid under this arrangement is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expense offset shown under “Less expense paid indirectly.” For the six months ended June 30, 2016, the Series earned $1 under this agreement.
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Series pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.75% on the first $500 million of average daily net assets of the Series, 0.70% on the next $500 million, 0.65% on the next $1.5 billion, and 0.60% on average daily net assets in excess of $2.5 billion.
Jackson Square Partners, LLC (JSP), a related party of DMC, furnishes investment sub-advisory services to the Series. Effective June 1, 2016, for these services, DMC, not the Series, pays JSP fees based on the aggregate average daily net assets of the Series at the following annual rate: 0.45% of the first $500 million; 0.42% of the next $500 million; 0.39% of the next $1.5 billion; and 0.36% of aggregate average daily net assets in excess of $2.5 billion. Prior to June 1, 2016, the Series paid JSP fees on the aggregate average daily net assets of the Series at the following annual rate: 0.375% of the first $500 million; 0.350% of the next $500 million; 0.325% of the next $1.5 billion; and 0.300% of aggregate average daily net assets in excess of $2.5 billion.
Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Series. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the Delaware Investments Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DIFSC under the service agreement described above are allocated among all funds in the Delaware Investments Family of Funds on a relative net asset value (NAV) basis. For the six months ended June 30, 2016, the Series was charged $14,153 for these services. This amount is included on the “Statement of operations” under “Accounting and administrative expenses.”
DIFSC is also the transfer agent and dividend disbursing agent of the Series. For these services, DIFSC’s fees are calculated at the annual rate of 0.0075% of the Series’ average daily net assets. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the six months ended June 30, 2016, the Series was charged $22,317 for these services. Pursuant to a sub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Series. Sub-transfer agency fees are paid by the Series and are also included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.”
Pursuant to a distribution agreement and distribution plan, the Series pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee of 0.30% of the average daily net assets of the Service Class shares. DDLP has contracted to waive distribution and service fees from Jan. 1, 2016 through June 30, 2016* in order to limit distribution and service fees of the Service Class shares to 0.25% of average daily net assets. Standard Class shares pay no distribution and service expenses.
As provided in the investment management agreement, the Series bears a portion of the cost of certain resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Series. For the six months ended June 30, 2016, the Series was charged $11,945 for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees. This amount is included on the “Statement of operations” under “Legal fees.”
Smid Cap Growth Series-10
Table of Contents
Delaware VIP® Smid Cap Growth Series
Notes to financial statements (continued)
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates (continued)
Trustees’ fees include expenses accrued by the Series for each Trustee’s retainer and meeting fees. Certain officers of DMC, DIFSC, and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Series.
*The contractual waiver period is from April 30, 2015 through May 1, 2017 or, if longer, until the Series is offered under new participation agreements or under new contracts with existing insurance companies (other than the update and modification of existing contracts in the normal course of business that may require registration or re-registration under state insurance laws as a new insurance contract, provided the new insurance contract effectively replaces the current insurance contract).
Cross trades for the six months ended June 30, 2016 were executed by the Series pursuant to procedures adopted by the Board designed to ensure compliance with Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio securities between funds of investment companies, or between a fund of an investment company and another entity, that are or could be considered affiliates by virtue of having a common investment advisor (or affiliated investment advisors), common directors/trustees and or common officers. At its regularly scheduled meetings, the Board reviews such transactions for compliance with the procedures adopted by the Board. Pursuant to these procedures, for the six months ended June 30, 2016, the Series engaged in securities sales of $8,510,295, which did not result in any realized gain (loss).
3. Investments
For the six months ended June 30, 2016, the Series made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 54,933,120 | ||
Sales | 68,858,833 |
At June 30, 2016, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At June 30, 2016, the cost and unrealized appreciation (depreciation) of investments were as follows:
Cost of | Aggregate Unrealized Appreciation of Investments | Aggregate Unrealized Depreciation of Investments | Net Unrealized Appreciation of Investments | |||||||
$468,794,116 | $189,582,857 | $(40,060,079) | $149,522,778 |
U.S. GAAP defines fair value as the price that the Series would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established 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 assumptions that market participants would use in pricing the asset or liability based on the best information available under the circumstances. The Series’ investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized below.
Level 1 – | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) | |
Level 2 – | Other observable inputs, including, but 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. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) | |
Level 3 – | Significant unobservable inputs, including the Series’ own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. The Series may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
Smid Cap Growth Series-11
Table of Contents
Delaware VIP® Smid Cap Growth Series
Notes to financial statements (continued)
3. Investments (continued)
The following table summarizes the valuation of the Series’ investments by fair value hierarchy levels as of June 30, 2016:
Securities | Level 1 | Level 2 | Total | |||||||||
Common Stock | $ | 571,231,325 | $ | 22,534,410 | $ | 593,765,735 | ||||||
Short-Term Investments | — | 24,551,159 | 24,551,159 | |||||||||
|
|
|
|
|
| |||||||
Total Value of Securities | $ | 571,231,325 | $ | 47,085,569 | $ | 618,316,894 | ||||||
|
|
|
|
|
|
During the six months ended June 30, 2016, there were no transfers between Level 1 investments, Level 2 investments, or Level 3 investments that had a significant impact to the Series. This does not include transfers between Level 1 investments and Level 2 investments due to the Series utilizing international fair value pricing during the period. In accordance with the fair valuation procedures described in Note 1, international fair value pricing of securities in the Series occurs when market volatility exceeds an established rolling threshold. If the threshold is exceeded on a given date, then prices of international securities (those that traded on exchanges that close at a different time than the time that Series’ NAV is determined) are established using a separate pricing feed from a third-party vendor designed to establish a price for each such security as of the time that the Series’ NAV is determined. Further, international fair value pricing uses other observable market-based inputs in place of the closing exchange price due to the events occurring after the close of the exchange or market on which the investment is principally traded, causing a change in classification between levels. The Series’ policy is to recognize transfers between levels at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when the Series has a significant amount of Level 3 investments at the beginning, interim, or end of the period in relation to net assets. At June 30, 2016, there were no Level 3 investments.
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 6/30/16 | Year | |||||||||
Shares sold: | ||||||||||
Standard Class | 227,162 | 496,149 | ||||||||
Service Class | 459,682 | 1,140,929 | ||||||||
Shares issued upon reinvestment | ||||||||||
Standard Class | 1,917,522 | 1,124,925 | ||||||||
Service Class | 1,223,969 | 629,546 | ||||||||
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3,828,335 | 3,391,549 | |||||||||
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Shares redeemed: | ||||||||||
Standard Class | (779,388 | ) | (1,172,481 | ) | ||||||
Service Class | (462,575 | ) | (731,606 | ) | ||||||
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(1,241,963 | ) | (1,904,087 | ) | |||||||
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Net increase | 2,586,372 | 1,487,462 | ||||||||
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5. Line of Credit
The Series, along with certain other funds in the Delaware Investments® Family of Funds (Participants), is a participant in a $155,000,000 revolving line of credit intended to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants are charged an annual commitment fee of 0.10%, which is allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants are permitted to borrow up to a maximum of one-third of their net assets under the agreement. Each Participant is individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit available under the agreement expires on Nov. 7, 2016.
The Series had no amounts outstanding as of June 30, 2016 or at any time during the period then ended.
Smid Cap Growth Series-12
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Delaware VIP® Smid Cap Growth Series
Notes to financial statements (continued)
6. Derivatives
U.S. GAAP requires disclosures that enable investors to understand: (1) how and why an entity uses derivatives; (2) how they are accounted for; and (3) how they affect an entity’s results of operations and financial position.
Foreign Currency Exchange Contracts
The Series enters into foreign currency exchange contracts and foreign cross currency exchange contracts as a way of managing foreign exchange rate risk. The Series may enter into these contracts to fix the U.S. dollar value of a security that it has agreed to buy or sell for the period between the date the trade was entered into and the date the security is delivered and paid for. The Series may also use these contracts to hedge the U.S. dollar value of securities it already owns that are denominated in foreign currencies. In addition, the Series may enter into these contracts to facilitate or expedite the settlement of portfolio transactions. The change in value is recorded as an unrealized gain or loss. When the contract is closed, a realized gain or loss is recorded equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
The use of foreign currency exchange contracts and foreign cross currency exchange contracts does not eliminate fluctuations in the underlying prices of the securities, but does establish a rate of exchange that can be achieved in the future. Although foreign currency exchange contracts and foreign cross currency exchange contracts limit the risk of loss due to an unfavorable change in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency change favorably. In addition, the Series could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. The Series’ maximum risk of loss from counterparty credit risk is the value of its currency exchanged with the counterparty. The risk is generally mitigated by having a netting arrangement between the Series and the counterparty and by the posting of collateral by the counterparty to the Series to cover the Series’ exposure to the counterparty.
There were no foreign currency exchange contracts outstanding at June 30, 2016.
During the six months ended June 30, 2016, the Series entered into foreign currency exchange contracts to fix the U.S. dollar value of a security between trade date and settlement date.
During the six months ended June 30, 2016, the Series experienced net realized gains or losses attributable to foreign currency holdings, which is disclosed as “Net realized gain (loss) on foreign currency exchange contracts” on the “Statement of operations.”
7. Offsetting
In December 2011, the Financial Accounting Standards Board (FASB) issued guidance that expanded disclosure requirements on the offsetting of certain assets and liabilities. The disclosures are required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset in the “Statement of assets and liabilities” and requires an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarified which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting is limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing.
In order to better define its contractual rights and to secure rights that will help the Series mitigate its counterparty risk, the Series entered into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement) or similar agreement with certain of its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Series and a counterparty that governs certain over-the-counter (OTC) derivatives and foreign exchange contracts and typically contains, among other things, collateral posting items and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Series may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default (close-out), including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency, or other events.
For financial reporting purposes, the Series does not offset derivative assets and derivatives liabilities that are subject to netting arrangements on the “Statement of assets and liabilities.”
Smid Cap Growth Series-13
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Delaware VIP® Smid Cap Growth Series
Notes to financial statements (continued)
7. Offsetting (continued)
At June 30, 2016, the Series had the following assets and liabilities subject to offsetting provisions:
Master Repurchase Agreements
Counterparty | Repurchase Agreements | Fair Value of Non-Cash Collateral Received | Cash Collateral Received | Net Collateral Received | Net Exposure(a) | ||||||||||||||||||||
Bank of America Merrill Lynch | $ | 863,504 | $ | (863,504 | ) | $ | — | $ | (863,504 | ) | $ | — | |||||||||||||
Bank of Montreal | 1,439,172 | (1,439,172 | ) | — | (1,439,172 | ) | — | ||||||||||||||||||
BNP Paribas | 143,324 | (143,324 | ) | — | (143,324 | ) | — | ||||||||||||||||||
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Total | $ | 2,446,000 | $ | (2,446,000 | ) | $ | — | $ | (2,446,000 | ) | $ | — | |||||||||||||
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(a)Net exposure represents the receivable (payable) that would be due from (to) the counterparty in the event of default.
8. Securities Lending
The Series, along with other funds in the Delaware Investments® Family of Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (1) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (2) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral by the end of the following business day, which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial collateral requirement, upon request of the borrower, BNY Mellon must return enough collateral to the borrower by the end of the following business day to reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security on any particular day may be more or less than the value of the security on loan.
Prior to Dec. 29, 2015, cash collateral received was generally invested in the Delaware Investments Collateral Fund No. 1 (Collective Trust), a pooled account established by BNY Mellon for the use of funds managed by DMC that participate in BNY Mellon’s securities lending program. The Collective Trust sought to maintain a NAV per unit of $1.00.
On Dec. 29, 2015, the assets in the Collective Trust were transferred to a series of individual separate accounts, each corresponding to a Series. The investment guidelines permit each separate account to hold certain securities that would be considered eligible securities for a money market fund. Cash collateral received is generally invested in government securities; certain obligations issued by government sponsored enterprises; repurchase agreements collateralized by U.S. Treasury securities; obligations issued by the central government of any Organization for Economic Cooperation and Development (OECD) country or its agencies, instrumentalities, or establishments; obligations of supranational organizations; commercial paper, notes, bonds, and other debt obligations; certificates of deposit, time deposits, and other bank obligations; and asset-backed securities.
In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Series or, at the discretion of the lending agent, replace the loaned securities. The Series continues to record dividends or interest, as applicable, on the securities loaned and is subject to changes in value of the securities loaned that may occur during the term of the loan. The Series has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Series receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Series, the security lending agent, and the borrower. The Series records security lending income net of allocations to the security lending agent and the borrower.
The Series may incur investment losses as a result of investing securities lending collateral. This could occur if an investment in the collateral investment account defaulted or became impaired. Under those circumstances, the value of a Series’ cash collateral account may be less than the amount the Series would be required to return to the borrowers of the securities and the Series would be required to make up for this shortfall.
During the six months ended June 30, 2016, the Series had no securities out on loan.
Smid Cap Growth Series-14
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Delaware VIP® Smid Cap Growth Series
Notes to financial statements (continued)
9. Credit and Market Risk
The Series invests a significant portion of its assets in small- and mid-sized companies and may be subject to certain risks associated with ownership of securities of such companies. Investments in small- or mid-sized companies may be more volatile than investments in larger companies for a number of reasons, which include more limited financial resources or a dependence on narrow product lines.
The Series may invest up to 10% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A promulgated under the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Series from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Trusts’ Board has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of the Series’ limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Series’ 10% limit on investments in illiquid securities. As of June 30, 2016, there were no Rule 144A securities held by the Series. Illiquid securities have been identified on the “Schedule of investments.” When monitoring compliance with the Series’ illiquid limit, certain holdings that are common to multiple clients of the investment manager or sub-advisor may be aggregated and considered illiquid in the aggregate solely for monitoring purposes. For purposes of determining illiquidity for financial reporting purposes, only the holdings of this Series will be considered.
10. Series Closed to New Investors
As of Feb. 24, 2012, the Series is no longer offered (1) under existing participation agreements for use with new insurance products; or (2) under new participation agreements to insurance companies that seek to include the Series in their products, except for certain insurance companies that have initiated negotiations to add the Series to a new product prior to Feb. 9, 2012. Contract holders of existing insurance companies that offer the Series will be able to continue to make purchases of shares, including purchases through reinvestment of dividends or capital gains distributions, and exchanges, regardless of whether they own, or have owned in the past, shares of the Series. The Series reserves the right to modify this policy at any time.
11. Contractual Obligations
The Series enters into contracts in the normal course of business that contain a variety of indemnifications. The Series’ maximum exposure under these arrangements is unknown. However, the Series has not had prior claims or losses pursuant to these contracts. Management has reviewed the Series’ existing contracts and expects the risk of loss to be remote.
12. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to June 30, 2016 that would require recognition or disclosure in the Series’ financial statements.
Smid Cap Growth Series-15
Table of Contents
Delaware VIP® Trust — Delaware VIP Smid Cap Growth Series
Other Series information (Unaudited)
Board consideration of Delaware VIP Smid Cap Growth Series sub-advisory agreement
At a meeting of the Board of Trustees held on May 17–19, 2016 (the “Meeting”), the Board approved a new sub-advisory agreement with Jackson Square Partners (“JSP”). In reaching the decision to approve the sub-advisory agreement with JSP, the Board considered and reviewed information provided by JSP, including its personnel, operations, and financial condition. The Board also reviewed material furnished by Delaware Management Company (“DMC”), including: a memorandum from DMC reviewing the terms of the sub-advisory agreement, the proposed sub-advisory fees, and the various services proposed to be provided by JSP; information concerning JSP’s organizational structure and the experience of its investment management personnel; copies of JSP’s Form ADV, compliance policies and procedures and its Code of Ethics; and a copy of the proposed JSP sub-advisory agreement.
In considering such information and materials, the Independent Trustees received assistance and advice from and met separately with independent legal counsel. The materials prepared by Management specifically in connection with the approval of the sub-advisory agreement were provided to the Independent Trustees in advance of the Meeting. Although attention was given to all information furnished, the following discussion addressed some primary factors relevant to the Board’s decision. This discussion of the information and factors considered by the Board is not intended to be exhaustive, but rather summarizes certain factors considered by the Board.
Nature, extent, and quality of service of DMC. The Board considered the services provided by JSP to Delaware VIP Smid Cap Growth Series (the “Series”) and its shareholders. In reviewing the nature, extent, and quality of services, the Board took account of reports furnished to it throughout the year at regular Board Meetings covering matters such as relative performance of the Series; compliance of portfolio managers with the investment policies, strategies, and restrictions for the Series; the compliance of JSP personnel with its Code of Ethics; and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of JSP and the emphasis placed on research in the investment process. The Board was satisfied with the nature, extent, and quality of the overall services provided by JSP.
Investment performance. The Board placed significant emphasis on the investment performance of the Series in view of the importance of investment performance to shareholders. Although the Board gave appropriate consideration to performance reports and discussions with portfolio managers at Investment Committee meetings, the Board gave particular weight to the Broadridge reports furnished for the Meeting. The Broadridge reports prepared for the Series showed the investment performance of its Class A shares in comparison to a group of similar funds as selected by Broadridge (the “Performance Universe”). A fund with the strongest performance ranked first, and a fund with the weakest performance ranked last. The highest/strongest performing 25% of funds in the Performance Universe make up the first quartile; the next 25%, the second quartile; the next 25%, the third quartile; and the poorest/weakest performing 25% of funds in the Performance Universe make up the fourth quartile. Comparative annualized performance for the Series was shown for the past 1-, 3-, 5-, and 10-year periods, to the extent applicable, ended Jan. 31, 2016. The Board’s objective is that the Series’ performance for the periods considered be at or above the median of its Performance Universe.
The Performance Universe for the Series consisted of the Series and all mid-cap growth funds underlying variable insurance products as selected by Broadridge. The Broadridge report comparison showed that the Series’ total return for the 1-, 3-, 5-, and 10-year periods was in the first quartile of its Performance Universe. The Board was satisfied with performance.
Comparative expenses. The Board considered expense comparison data for the Delaware Investments® Family of Funds. Management provided the Board with information on pricing levels and fee structures for the Series as of its most recently completed fiscal year. The Board also focused on the comparative analysis of effective management fees and total expense ratios of the Series versus effective management fees and expense ratios of a group of similar funds as selected by Broadridge (the “Expense Group”). In reviewing comparative costs, the Series’ contractual management fee and the actual management fee incurred by the Series were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the Series) and actual management fees (as reported by each fund) within the Expense Group, taking into account any applicable breakpoints and fee waivers. The Series’ total expenses were also compared with those of its Expense Group. The Broadridge total expenses, for comparative consistency, were shown by Broadridge for Class A shares and comparative total expenses including 12b-1 and non-12b-1 service fees. The Board considered fees paid to DMC for non-management services. The Board’s objective is to limit the Series’ total expense ratio to be competitive with that of the Expense Group.
The expense comparisons for the Series showed that the actual management fee was in the quartile with the lowest expenses of its Expense Group and its total expenses were in the quartile with the second lowest expenses of its Expense Group. The Board was satisfied with the management fee and total expenses of the Series in comparison to those of its Expense Group.
Management profitability. Trustees were also given available information on profits being realized in relation to the services being provided to the Series or in relation to JSP’s overall investment advisory business, but believed such information to be of limited relevance because the sub-advisory fees are paid by DMC out of its management fee, and changes in the level of sub-advisory fees have no impact on Series expenses. The Board was also provided information on potential fall-out benefits derived or to be derived by JSP in connection with its relationship to the Series, such as reputational enhancement, soft dollar arrangements or commissions paid to affiliated broker/dealers, as applicable.
Smid Cap Growth Series-16
Table of Contents
Delaware VIP® Trust — Delaware VIP Smid Cap Growth Series
The Series files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q. The Series’ Forms N-Q, as well as a description of the policies and procedures that the Series uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the Commission’s website at sec.gov. In addition, a description of the policies and procedures that the Series uses to determine how to vote proxies (if any) relating to portfolio securities and the Schedule of Investments included in the Series’ most recent Form N-Q are available without charge on the Delaware Investments® Funds’ website at delawareinvestments.com/vip/literature. The Series’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330.
Information (if any) regarding how the Series voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Delaware Investments Funds’ website at delawareinvestments.com/proxy; and (ii) on the Commission’s website at sec.gov.
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SA-VIPSCG 21188 (8/16) (17290) | Smid Cap Growth Series-17 |
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Delaware VIP® Trust
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Delaware VIP High Yield Series
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Semiannual report
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June 30, 2016
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Neither Delaware Investments nor its affiliates referred to in this document are authorized deposit-taking institutions for the purpose of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited (MBL), a subsidiary of Macquarie Group Limited and an affiliate of Delaware Investments. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Series is governed by U.S. laws and regulations.
Unless otherwise noted, views expressed herein are current as of June 30, 2016, and subject to change for events occurring after such date.
The Series is not FDIC insured and is not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor and member of Macquarie Group. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries, including the Series’ distributor, Delaware Distributors, L.P. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
This material may be used in conjunction with the offering of shares in Delaware VIP® High Yield Series only if preceded or accompanied by the Series’ current prospectus or the summary prospectus.
© 2016 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
Table of Contents
Delaware VIP® Trust — Delaware VIP High Yield Series
Disclosure of Series expenses
For the six-month period January 1, 2016 to June 30, 2016 (Unaudited)
As a shareholder of the Series, you incur ongoing costs, which may include management fees; distribution and/or service (12b-1) fees; and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series 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 entire six-month period from Jan. 1, 2016 to June 30, 2016.
Actual expenses
The first section of the table shown, “Actual Series Return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, 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, an $8,600 account value divided by $1,000 = 8.6), 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 the period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% Return,” provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ 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 Series and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Series, you do not incur any transaction costs, such as sales charges (loads), redemption fees or exchange fees, but shareholders of other funds may incur such costs. Also, the fees related to the variable annuity investment or the deferred sales charge that could apply have not been included. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The Series’ actual expenses shown in the table reflect fee waivers in effect for Service Class shares. The expenses shown in the table assume reinvestment of all dividends and distributions.
Expense analysis of an investment of $1,000
Beginning Account Value 1/1/16 | Ending Account Value 6/30/16 | Annualized Expense Ratio | Expenses Paid During Period 1/1/16 to 6/30/16* | |||||||||||
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Actual Series return† |
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Standard Class | $1,000.00 | $1,061.20 | 0.74% | $3.79 | ||||||||||
Service Class | 1,000.00 | 1,060.80 | 0.99% | 5.07 | ||||||||||
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Hypothetical 5% return (5% return before expenses) |
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Standard Class | $1,000.00 | $1,021.18 | 0.74% | $3.72 | ||||||||||
Service Class | 1,000.00 | 1,019.94 | 0.99% | 4.97 | ||||||||||
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* | “Expenses Paid During Period” are equal to the Series’ annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
† | Because actual returns reflect only the most recent six-month period, the returns shown may differ significantly from fiscal year returns. |
High Yield Series-1 |
Table of Contents
Delaware VIP® Trust — Delaware VIP High Yield Series
Security type / sector allocation
As of June 30, 2016 (Unaudited)
Sector designations may be different than the sector designations presented in other Series materials. The sector designations may represent the investment manager’s internal sector classifications.
Security type / sector | Percentage of net assets | |||
Convertible Bond | 0.21% | |||
Corporate Bonds | 89.08% | |||
Automotive | 0.68% | |||
Banking | 3.72% | |||
Basic Industry | 8.15% | |||
Capital Goods | 6.78% | |||
Consumer Cyclical | 6.81% | |||
Consumer Non-Cyclical | 6.25% | |||
Energy | 10.09% | |||
Financial Services | 0.64% | |||
Healthcare | 9.23% | |||
Insurance | 1.67% | |||
Media | 10.44% | |||
Services | 8.19% | |||
Technology & Electronics | 5.47% | |||
Telecommunications | 7.28% | |||
Utilities | 3.68% | |||
Senior Secured Loans | 5.92% | |||
Common Stock | 0.00% | |||
Preferred Stock | 1.52% | |||
Short-Term Investments | 1.26% | |||
Total Value of Securities | 97.99% | |||
Receivables and Other Assets Net of Liabilities | 2.01% | |||
Total Net Assets | 100.00% |
High Yield Series-2
Table of Contents
Delaware VIP® Trust — Delaware VIP High Yield Series
Schedule of investments
June 30, 2016 (Unaudited)
Principal amount° | Value (U.S. $) | |||||||
Convertible Bond – 0.21% |
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Clearwire Communications 144A 8.25% exercise price $7.08, maturity date 12/1/40 # | 572,000 | $ | 582,010 | |||||
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Total Convertible Bond | 582,010 | |||||||
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Corporate Bonds – 89.08% |
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Automotive – 0.68% |
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American Tire Distributors 144A 10.25% 3/1/22 # | 1,105,000 | 975,163 | ||||||
Group 1 Automotive 144A 5.25% 12/15/23 # | 905,000 | 893,687 | ||||||
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1,868,850 | ||||||||
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Banking – 3.72% |
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Credit Suisse Group 144A 6.25% 12/29/49 #• | 1,315,000 | 1,243,384 | ||||||
HSBC Holdings 6.875% 12/29/49 • | 500,000 | 498,750 | ||||||
JPMorgan Chase 6.75% 8/29/49 • | 2,530,000 | 2,789,325 | ||||||
Lloyds Banking Group 7.50% 4/30/49 • | 1,450,000 | 1,421,000 | ||||||
Popular 7.00% 7/1/19 | 1,805,000 | 1,777,925 | ||||||
Royal Bank of Scotland Group 8.00% 12/29/49 • | 730,000 | 682,550 | ||||||
Santander Issuances 5.179% 11/19/25 | 400,000 | 400,348 | ||||||
UBS Group 6.875% 12/29/49 • | 1,425,000 | 1,351,520 | ||||||
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10,164,802 | ||||||||
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Basic Industry – 8.15% | ||||||||
AK Steel 7.625% 5/15/20 | 954,000 | 915,840 | ||||||
ArcelorMittal | ||||||||
7.25% 2/25/22 | 640,000 | 676,800 | ||||||
10.85% 6/1/19 | 325,000 | 384,313 | ||||||
Builders FirstSource | ||||||||
144A 7.625% 6/1/21 # | 894,000 | 938,700 | ||||||
144A 10.75% 8/15/23 # | 2,025,000 | 2,212,313 | ||||||
Cemex | ||||||||
144A 7.25% 1/15/21 # | 1,695,000 | 1,792,801 | ||||||
144A 7.75% 4/16/26 # | 415,000 | 436,414 | ||||||
Chemours | ||||||||
6.625% 5/15/23 | 475,000 | 406,125 | ||||||
7.00% 5/15/25 | 420,000 | 354,375 | ||||||
CVR Partners 144A 9.25% 6/15/23 # | 790,000 | 806,787 | ||||||
FMG Resources August 2006 144A 6.875% 4/1/22 # | 1,410,000 | 1,346,550 | ||||||
Freeport-McMoRan 3.55% 3/1/22 | 890,000 | 787,650 | ||||||
Joseph T Ryerson & Son 144A 11.00% 5/15/22 # | 595,000 | 617,313 | ||||||
Kraton Polymers 144A 10.50% 4/15/23 # | 670,000 | 716,900 | ||||||
NCI Building Systems 144A 8.25% 1/15/23 # | 1,214,000 | 1,310,865 | ||||||
New Gold 144A | ||||||||
6.25% 11/15/22 # | 465,000 | 455,700 |
Principal amount° | Value (U.S. $) | |||||||
Corporate Bonds (continued) |
| |||||||
Basic Industry (continued) |
| |||||||
New Gold 144A | ||||||||
7.00% 4/15/20 # | 560,000 | $ | 574,000 | |||||
NOVA Chemicals 144A 5.00% 5/1/25 # | 1,060,000 | 1,052,050 | ||||||
PQ 144A 6.75% 11/15/22 # | 1,415,000 | 1,478,675 | ||||||
Rayonier AM Products 144A 5.50% 6/1/24 # | 914,000 | 786,040 | ||||||
Steel Dynamics 5.50% 10/1/24 | 845,000 | 866,125 | ||||||
Summit Materials | ||||||||
6.125% 7/15/23 | 1,540,000 | 1,525,555 | ||||||
144A 8.50% 4/15/22 # | 380,000 | 404,225 | ||||||
US Concrete 144A 6.375% 6/1/24 # | 1,430,000 | 1,433,575 | ||||||
|
| |||||||
22,279,691 | ||||||||
|
| |||||||
Capital Goods – 6.78% |
| |||||||
Ardagh Finance Holdings 144A PIK 8.625% 6/15/19 #T | 573,718 | 582,324 | ||||||
Ardagh Packaging Finance | ||||||||
144A 4.625% 5/15/23 # | 200,000 | 198,000 | ||||||
144A 6.00% 6/30/21 # | 1,535,000 | 1,531,163 | ||||||
144A 7.25% 5/15/24 # | 465,000 | 476,916 | ||||||
BWAY Holding 144A 9.125% 8/15/21 # | 975,000 | 938,437 | ||||||
Gardner Denver 144A 6.875% 8/15/21 # | 1,735,000 | 1,583,187 | ||||||
James Hardie International Finance 144A 5.875% 2/15/23 # | 1,320,000 | 1,356,300 | ||||||
KLX 144A 5.875% 12/1/22 # | 1,380,000 | 1,359,300 | ||||||
Plastipak Holdings 144A 6.50% 10/1/21 # | 1,450,000 | 1,486,250 | ||||||
Reynolds Group Issuer | ||||||||
144A 7.00% 7/15/24 # | 195,000 | 201,118 | ||||||
8.25% 2/15/21 | 1,915,000 | 2,003,665 | ||||||
Signode Industrial Group 144A 6.375% 5/1/22 # | 1,380,000 | 1,326,525 | ||||||
StandardAero Aviation Holdings 144A 10.00% 7/15/23 # | 1,470,000 | 1,473,675 | ||||||
TransDigm 144A 6.375% 6/15/26 # | 2,320,000 | 2,317,100 | ||||||
Zekelman Industries 144A 9.875% 6/15/23 # | 1,675,000 | 1,695,937 | ||||||
|
| |||||||
18,529,897 | ||||||||
|
| |||||||
Consumer Cyclical – 6.81% |
| |||||||
Beacon Roofing Supply 6.375% 10/1/23 | 1,030,000 | 1,084,075 | ||||||
Boyd Gaming | ||||||||
144A 6.375% 4/1/26 # | 545,000 | 572,250 | ||||||
6.875% 5/15/23 | 1,825,000 | 1,952,750 | ||||||
HD Supply 144A 5.75% 4/15/24 # | 735,000 | 766,237 | ||||||
JC Penney 8.125% 10/1/19 | 1,410,000 | 1,465,963 | ||||||
L Brands | ||||||||
6.75% 7/1/36 | 705,000 | 708,081 | ||||||
6.875% 11/1/35 | 1,500,000 | 1,526,250 | ||||||
M/I Homes 6.75% 1/15/21 | 1,101,000 | 1,101,000 | ||||||
MGM Resorts International 6.00% 3/15/23 | 1,309,000 | 1,384,267 |
High Yield Series-3
Table of Contents
Delaware VIP® High Yield Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
Corporate Bonds (continued) |
| |||||||
Consumer Cyclical (continued) |
| |||||||
MGP Growth Properties Operating Partnership 144A 5.625% 5/1/24 # | 775,000 | $ | 821,500 | |||||
Mohegan Tribal Gaming Authority 9.75% 9/1/21 | 2,580,000 | 2,760,600 | ||||||
Neiman Marcus Group 144A 8.00% 10/15/21 # | 800,000 | 656,000 | ||||||
Penske Automotive Group 5.50% 5/15/26 | 1,395,000 | 1,328,737 | ||||||
Rite Aid 144A 6.125% 4/1/23 # | 1,785,000 | 1,912,181 | ||||||
Wynn Las Vegas 144A 5.50% 3/1/25 # | 610,000 | 592,463 | ||||||
|
| |||||||
18,632,354 | ||||||||
|
| |||||||
Consumer Non-Cyclical – 6.25% |
| |||||||
Albertsons 144A 6.625% 6/15/24 # | 1,385,000 | 1,433,475 | ||||||
Dean Foods 144A 6.50% 3/15/23 # | 1,095,000 | 1,133,325 | ||||||
JBS Investments 144A 7.75% 10/28/20 # | 491,000 | 520,460 | ||||||
JBS USA 144A 5.75% 6/15/25 # | 2,270,000 | 2,145,150 | ||||||
Kronos Acquisition Holdings 144A 9.00% 8/15/23 # | 1,995,000 | 1,965,075 | ||||||
NBTY 144A 7.625% 5/15/21 # | 1,785,000 | 1,791,694 | ||||||
Post Holdings 144A 7.75% 3/15/24 # | 1,180,000 | 1,302,425 | ||||||
Prestige Brands | ||||||||
144A 5.375% 12/15/21 # | 740,000 | 754,800 | ||||||
144A 6.375% 3/1/24 # | 250,000 | 260,625 | ||||||
Spectrum Brands 6.125% 12/15/24 | 2,040,000 | 2,162,400 | ||||||
SUPERVALU 7.75% 11/15/22 | 815,000 | 684,437 | ||||||
US Foods 144A 5.875% 6/15/24 # | 1,190,000 | 1,222,725 | ||||||
Valeant Pharmaceuticals International | ||||||||
144A 5.375% 3/15/20 # | 400,000 | 343,750 | ||||||
144A 6.125% 4/15/25 # | 665,000 | 535,325 | ||||||
144A 6.75% 8/15/18 # | 855,000 | 831,487 | ||||||
|
| |||||||
17,087,153 | ||||||||
|
| |||||||
Energy – 10.09% | ||||||||
Antero Resources | ||||||||
5.125% 12/1/22 | 390,000 | 376,350 | ||||||
5.375% 11/1/21 | 550,000 | 540,375 | ||||||
6.00% 12/1/20 | 255,000 | 259,039 | ||||||
Calumet Specialty Products Partners 7.625% 1/15/22 | 964,000 | 686,850 | ||||||
Cheniere Corpus Christi Holdings 144A 7.00% 6/30/24 # | 690,000 | 709,410 | ||||||
Concho Resources | ||||||||
5.50% 10/1/22 | 635,000 | 641,350 | ||||||
5.50% 4/1/23 | 755,000 | 760,663 | ||||||
Continental Resources 5.00% 9/15/22 | 750,000 | 736,875 | ||||||
Energy Transfer Equity 7.50% 10/15/20 | 870,000 | 926,550 | ||||||
EnLink Midstream Partners 4.15% 6/1/25 | 1,732,000 | 1,599,138 | ||||||
Freeport-McMoran Oil & Gas 6.50% 11/15/20 | 1,500,000 | 1,510,680 |
Principal amount° | Value (U.S. $) | |||||||
Corporate Bonds (continued) |
| |||||||
Energy (continued) |
| |||||||
Genesis Energy | ||||||||
5.75% 2/15/21 | 1,155,000 | $ | 1,097,250 | |||||
6.00% 5/15/23 | 290,000 | 272,600 | ||||||
6.75% 8/1/22 | 977,000 | 952,575 | ||||||
Hilcorp Energy I | ||||||||
144A 5.00% 12/1/24 # | 742,000 | 695,551 | ||||||
144A 5.75% 10/1/25 # | 691,000 | 663,360 | ||||||
Laredo Petroleum 7.375% 5/1/22 | 690,000 | 695,175 | ||||||
Murphy Oil USA 6.00% 8/15/23 | 1,320,000 | 1,372,800 | ||||||
Newfield Exploration 5.625% 7/1/24 | 1,015,000 | 1,020,075 | ||||||
Noble Holding International 5.00% 3/16/18 | 755,000 | 745,563 | ||||||
NuStar Logistics 6.75% 2/1/21 | 1,325,000 | 1,344,875 | ||||||
Oasis Petroleum 6.875% 3/15/22 | 1,535,000 | 1,425,631 | ||||||
QEP Resources 5.25% 5/1/23 | 790,000 | 730,750 | ||||||
Regency Energy Partners 5.875% 3/1/22 | 940,000 | 1,006,629 | ||||||
Sabine Pass Liquefaction 144A 5.875% 6/30/26 # | 595,000 | 597,975 | ||||||
Targa Resources Partners | ||||||||
6.625% 10/1/20 | 160,000 | 164,000 | ||||||
144A 6.75% 3/15/24 # | 1,330,000 | 1,369,900 | ||||||
6.875% 2/1/21 | 1,155,000 | 1,180,987 | ||||||
Tesoro Logistics | ||||||||
6.125% 10/15/21 | 195,000 | 202,800 | ||||||
6.375% 5/1/24 | 1,090,000 | 1,147,225 | ||||||
Transocean | ||||||||
6.00% 3/15/18 | 1,000,000 | 1,020,000 | ||||||
7.375% 4/15/18 | 440,000 | 447,700 | ||||||
WPX Energy 7.50% 8/1/20 | 690,000 | 692,153 | ||||||
|
| |||||||
27,592,854 | ||||||||
|
| |||||||
Financial Services – 0.64% |
| |||||||
Ally Financial 5.75% 11/20/25 | 1,740,000 | 1,750,875 | ||||||
|
| |||||||
1,750,875 | ||||||||
|
| |||||||
Healthcare – 9.23% | ||||||||
Air Medical Merger Sub 144A 6.375% 5/15/23 # | 1,500,000 | 1,432,500 | ||||||
Amsurg 5.625% 7/15/22 | 1,075,000 | 1,108,594 | ||||||
Community Health Systems 6.875% 2/1/22 | 1,549,000 | 1,363,120 | ||||||
DaVita HealthCare Partners | ||||||||
5.00% 5/1/25 | 1,610,000 | 1,599,937 | ||||||
5.125% 7/15/24 | 415,000 | 420,385 | ||||||
HCA | ||||||||
5.375% 2/1/25 | 2,235,000 | 2,296,463 | ||||||
5.875% 2/15/26 | 745,000 | 774,800 | ||||||
HealthSouth | ||||||||
5.75% 11/1/24 | 1,550,000 | 1,563,950 | ||||||
5.75% 9/15/25 | 740,000 | 736,300 | ||||||
Hill-Rom Holdings 144A 5.75% 9/1/23 # | 1,430,000 | 1,469,325 | ||||||
IASIS Healthcare 8.375% 5/15/19 | 2,264,000 | 2,186,175 |
High Yield Series-4
Table of Contents
Delaware VIP® High Yield Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
Corporate Bonds (continued) |
| |||||||
Healthcare (continued) | ||||||||
Immucor 11.125% 8/15/19 | 305,000 | $ | 279,075 | |||||
Kinetic Concepts | ||||||||
10.50% 11/1/18 | 824,000 | 824,000 | ||||||
12.50% 11/1/19 | 475,000 | 450,063 | ||||||
LifePoint Health 5.875% 12/1/23 | 1,550,000 | 1,615,875 | ||||||
Mallinckrodt International Finance | ||||||||
4.75% 4/15/23 | 155,000 | 126,325 | ||||||
144A 5.50% 4/15/25 # | 270,000 | 242,222 | ||||||
144A 5.625% 10/15/23 # | 865,000 | 809,856 | ||||||
MPH Acquisition Holdings 144A 7.125% 6/1/24 # | 2,020,000 | 2,126,050 | ||||||
Sterigenics-Nordion Holdings 144A 6.50% 5/15/23 # | 1,675,000 | 1,700,125 | ||||||
Tenet Healthcare 8.125% 4/1/22 | 2,055,000 | 2,116,239 | ||||||
|
| |||||||
25,241,379 | ||||||||
|
| |||||||
Insurance – 1.67% | ||||||||
HUB International | ||||||||
144A 7.875% 10/1/21 # | 1,800,000 | 1,732,500 | ||||||
144A 9.25% 2/15/21 # | 395,000 | 414,750 | ||||||
USI 144A 7.75% 1/15/21 # | 1,425,000 | 1,416,094 | ||||||
XLIT 6.50% 12/29/49 • | 1,443,000 | 1,006,493 | ||||||
|
| |||||||
4,569,837 | ||||||||
|
| |||||||
Media – 10.44% | ||||||||
Altice Luxembourg 144A 7.75% 5/15/22 # | 1,095,000 | 1,110,056 | ||||||
CCO Holdings | ||||||||
144A 5.375% 5/1/25 # | 620,000 | 630,850 | ||||||
144A 5.50% 5/1/26 # | 160,000 | 162,800 | ||||||
144A 5.75% 2/15/26 # | 1,010,000 | 1,042,825 | ||||||
144A 5.875% 5/1/27 # | 1,160,000 | 1,200,600 | ||||||
Cequel Communications Holdings I 144A 7.75% 7/15/25 # | 985,000 | 1,031,787 | ||||||
Columbus International 144A 7.375% 3/30/21 # | 735,000 | 778,916 | ||||||
CSC Holdings 5.25% 6/1/24 | 1,915,000 | 1,747,437 | ||||||
DISH DBS | ||||||||
5.875% 11/15/24 | 395,000 | 368,831 | ||||||
144A 7.75% 7/1/26 # | 1,616,000 | 1,668,520 | ||||||
Gray Television 144A 5.875% 7/15/26 # | 1,580,000 | 1,587,900 | ||||||
Lamar Media 144A 5.75% 2/1/26 # | 1,282,000 | 1,337,293 | ||||||
Midcontinent Communications & Midcontinent Finance 144A 6.875% 8/15/23 # | 835,000 | 860,050 | ||||||
Neptune Finco 144A 10.875% 10/15/25 # | 490,000 | 561,354 | ||||||
Numericable-SFR 144A 7.375% 5/1/26 # | 2,785,000 | 2,757,150 | ||||||
RCN Telecom Services 144A 8.50% 8/15/20 # | 1,065,000 | 1,095,619 |
Principal amount° | Value (U.S. $) | |||||||
Corporate Bonds (continued) |
| |||||||
Media (continued) | ||||||||
Sinclair Television Group 144A 5.625% 8/1/24 # | 1,380,000 | $ | 1,416,225 | |||||
Sirius XM Radio 144A 5.375% 4/15/25 # | 1,360,000 | 1,357,450 | ||||||
Tribune Media 5.875% 7/15/22 | 1,520,000 | 1,520,000 | ||||||
Unitymedia 144A 6.125% 1/15/25 # | 1,305,000 | 1,344,019 | ||||||
Virgin Media Secured Finance 144A 5.25% 1/15/26 # | 1,470,000 | 1,429,575 | ||||||
VTR Finance 144A 6.875% 1/15/24 # | 1,895,000 | 1,894,015 | ||||||
WideOpenWest Finance 10.25% 7/15/19 | 1,571,000 | 1,633,840 | ||||||
|
| |||||||
28,537,112 | ||||||||
|
| |||||||
Services – 8.19% | ||||||||
ADT 6.25% 10/15/21 | 640,000 | 683,200 | ||||||
BlueLine Rental Finance 144A 7.00% 2/1/19 # | 1,415,000 | 1,223,975 | ||||||
Communications Sales & Leasing | ||||||||
144A 6.00% 4/15/23 # | 560,000 | 571,200 | ||||||
8.25% 10/15/23 | 645,000 | 657,500 | ||||||
ESH Hospitality 144A 5.25% 5/1/25 # | 2,015,000 | 1,972,181 | ||||||
ExamWorks Group 5.625% 4/15/23 | 1,595,000 | 1,772,444 | ||||||
GEO Group | ||||||||
5.125% 4/1/23 | 625,000 | 612,500 | ||||||
5.875% 10/15/24 | 460,000 | 468,050 | ||||||
6.00% 4/15/26 | 1,005,000 | 1,017,563 | ||||||
GFL Environmental 144A 9.875% 2/1/21 # | 925,000 | 989,750 | ||||||
Iron Mountain US Holdings 144A 5.375% 6/1/26 # | 1,485,000 | 1,446,019 | ||||||
Mattamy Group 144A 6.50% 11/15/20 # | 975,000 | 940,875 | ||||||
NES Rentals Holdings 144A 7.875% 5/1/18 # | 860,000 | 821,300 | ||||||
OPE KAG Finance Sub 144A 7.875% 7/31/23 # | 1,210,000 | 1,197,900 | ||||||
Prime Security Services Borrower 144A 9.25% 5/15/23 # | 2,030,000 | 2,156,875 | ||||||
Scientific Games 8.125% 9/15/18 | 735,000 | 723,747 | ||||||
Team Health 144A 7.25% 12/15/23 # | 1,195,000 | 1,281,781 | ||||||
United Rentals North America | ||||||||
5.50% 7/15/25 | 75,000 | 74,156 | ||||||
5.75% 11/15/24 | 1,975,000 | 1,999,687 | ||||||
Vander Intermediate Holding II 144A PIK 9.75% 2/1/19 #T | 640,000 | 345,600 | ||||||
XPO Logistics 144A 6.50% 6/15/22 # | 1,505,000 | 1,442,919 | ||||||
|
| |||||||
22,399,222 | ||||||||
|
| |||||||
Technology & Electronics – 5.47% |
| |||||||
CommScope 144A 5.50% 6/15/24 # | 815,000 | 830,281 | ||||||
CommScope Technologies Finance 144A 6.00% 6/15/25 # | 590,000 | 607,700 | ||||||
Diamond 1 Finance 144A 7.125% 6/15/24 # | 595,000 | 622,180 |
High Yield Series-5
Table of Contents
Delaware VIP® High Yield Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
Corporate Bonds (continued) |
| |||||||
Technology & Electronics (continued) |
| |||||||
Diamond 1 Finance 144A 8.10% 7/15/36 # | 1,090,000 | $ | 1,178,045 | |||||
Entegris 144A 6.00% 4/1/22 # | 1,340,000 | 1,376,850 | ||||||
First Data 144A 7.00% 12/1/23 # | 3,250,000 | 3,302,813 | ||||||
Infor US 6.50% 5/15/22 | 1,810,000 | 1,718,378 | ||||||
Micron Technology 144A 7.50% 9/15/23 # | 1,005,000 | 1,070,325 | ||||||
Microsemi 144A 9.125% 4/15/23 # | 1,305,000 | 1,442,025 | ||||||
Sensata Technologies UK Financing 144A 6.25% 2/15/26 # | 1,270,000 | 1,320,800 | ||||||
Solera 144A 10.50% 3/1/24 # | 910,000 | 961,187 | ||||||
Western Digital 144A 10.50% 4/1/24 # | 500,000 | 536,250 | ||||||
|
| |||||||
14,966,834 | ||||||||
|
| |||||||
Telecommunications – 7.28% |
| |||||||
CenturyLink | ||||||||
6.75% 12/1/23 | 1,335,000 | 1,316,644 | ||||||
7.50% 4/1/24 | 455,000 | 460,119 | ||||||
Cogent Communications Finance 144A 5.625% 4/15/21 #@ | 1,130,000 | 1,110,225 | ||||||
Cogent Communications Group 144A 5.375% 3/1/22 # | 500,000 | 503,750 | ||||||
Digicel | ||||||||
144A 6.00% 4/15/21 # | 200,000 | 172,440 | ||||||
144A 6.75% 3/1/23 # | 1,010,000 | 863,550 | ||||||
Digicel Group 144A 8.25% 9/30/20 # | 1,854,000 | 1,557,360 | ||||||
Frontier Communications | ||||||||
10.50% 9/15/22 | 1,465,000 | 1,555,647 | ||||||
11.00% 9/15/25 | 1,295,000 | 1,345,181 | ||||||
Level 3 Financing 5.375% 5/1/25 | 1,375,000 | 1,369,844 | ||||||
Sable International Finance 144A 6.875% 8/1/22 # | 740,000 | 746,897 | ||||||
Sprint | ||||||||
7.125% 6/15/24 | 735,000 | 589,837 | ||||||
7.25% 9/15/21 | 1,055,000 | 904,663 | ||||||
7.875% 9/15/23 | 505,000 | 415,363 | ||||||
Sprint Capital 6.90% 5/1/19 | 420,000 | 403,200 | ||||||
Sprint Communications | ||||||||
144A 7.00% 3/1/20 # | 510,000 | 536,515 | ||||||
144A 9.00% 11/15/18 # | 815,000 | 871,031 | ||||||
T-Mobile USA | ||||||||
6.00% 3/1/23 | 555,000 | 576,506 | ||||||
6.00% 4/15/24 | 305,000 | 316,437 | ||||||
6.375% 3/1/25 | 710,000 | 744,613 | ||||||
6.50% 1/15/26 | 1,105,000 | 1,169,919 | ||||||
Wind Acquisition Finance 144A 7.375% 4/23/21 # | 1,300,000 | 1,244,750 | ||||||
Zayo Group 6.00% 4/1/23 | 1,100,000 | 1,122,000 | ||||||
|
| |||||||
19,896,491 | ||||||||
|
| |||||||
Utilities – 3.68% | ||||||||
AES | ||||||||
5.50% 4/15/25 | 1,200,000 | 1,209,000 |
Principal amount° | Value (U.S. $) | |||||||
Corporate Bonds (continued) |
| |||||||
Utilities (continued) | ||||||||
AES | ||||||||
6.00% 5/15/26 | 205,000 | $ | 209,613 | |||||
Amerigas Partners 5.875% 8/20/26 | 1,810,000 | 1,816,787 | ||||||
Calpine | ||||||||
5.50% 2/1/24 | 835,000 | 809,950 | ||||||
5.75% 1/15/25 | 1,800,000 | 1,757,250 | ||||||
Dynegy | ||||||||
7.375% 11/1/22 | 130,000 | 126,100 | ||||||
7.625% 11/1/24 | 1,850,000 | 1,785,250 | ||||||
Emera 6.75% 6/15/76 • | 1,380,000 | 1,401,912 | ||||||
Enel 144A 8.75% 9/24/73 #• | 834,000 | 951,803 | ||||||
|
| |||||||
10,067,665 | ||||||||
|
| |||||||
Total Corporate Bonds |
| 243,585,016 | ||||||
|
| |||||||
Senior Secured Loans – 5.92% « |
| |||||||
Accudyne Industries Borrower 1st Lien 4.00% 12/13/19 | 977,173 | 881,898 | ||||||
Amaya Holdings 1st Lien 5.00% 8/1/21 | 1,422,814 | 1,383,093 | ||||||
Applied Systems 2nd Lien 7.50% 1/23/22 @ | 1,819,576 | 1,813,511 | ||||||
BJ’s Wholesale Club 2nd Lien 8.50% 3/31/20 | 1,475,936 | 1,437,808 | ||||||
Blue Ribbon 5.00% 11/13/21 | 778,050 | 778,050 | ||||||
Flint Group 2nd Lien 8.25% 9/7/22 @ | 1,375,000 | 1,282,187 | ||||||
FMG Resources August 2006 Pty Tranche B 1st Lien 4.25% 6/30/19 | 1,523,519 | 1,461,626 | ||||||
Immucor Tranche B2 1st Lien 5.00% 8/17/18 | 1,166,977 | 1,098,903 | ||||||
KIK Custom Products 1st Lien 6.00% 8/26/22 @ | 978,384 | 967,785 | ||||||
Kraton Polymers Tranche B 1st Lien 6.00% 1/6/22 | 265,000 | 261,456 | ||||||
Marina District Finance Tranche B 1st Lien 6.50% 8/15/18 | 796,380 | 797,708 | ||||||
Mohegan Tribal Gaming Authority Tranche B 5.50% 6/15/18 | 915,170 | 911,166 | ||||||
Neiman Marcus Group 1st Lien 4.25% 10/25/20 | 395,000 | 355,809 | ||||||
Solera Tranche B 1st Lien 5.75% 3/3/23 | 493,763 | 494,644 | ||||||
Stardust Finance Holdings 10.50% 3/13/23 | 495,000 | 485,100 | ||||||
Stardust Finance Holdings Tranche B 1st Lien 6.50% 3/13/22 @ | 1,113,432 | 1,088,379 |
High Yield Series-6
Table of Contents
Delaware VIP® High Yield Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
Senior Secured Loans « (continued) |
| |||||||
Windstream Services Tranche B6 1st Lien 5.75% 3/29/21 | 686,280 | $ | 686,566 | |||||
|
| |||||||
Total Senior Secured Loans | 16,185,689 | |||||||
|
| |||||||
Number of shares | ||||||||
Common Stock – 0.00% |
| |||||||
Century Communications @=† | 2,820,000 | 0 | ||||||
|
| |||||||
Total Common Stock (cost $85,371) | 0 | |||||||
|
| |||||||
Preferred Stock – 1.52% |
| |||||||
Bank of America 6.50% • | 1,655,000 | 1,764,644 | ||||||
GMAC Capital Trust I 6.411% • | 40,000 | 992,800 | ||||||
Morgan Stanley 5.55% • | 1,425,000 | 1,413,386 | ||||||
|
| |||||||
Total Preferred Stock |
| 4,170,830 | ||||||
|
|
Principal amount° | Value (U.S. $) | |||||||
Short-Term Investments – 1.26% |
| |||||||
Repurchase Agreements – 1.26% |
| |||||||
Bank of America Merrill Lynch | 1,215,118 | $ | 1,215,118 | |||||
Bank of Montreal | 2,025,197 | 2,025,197 | ||||||
BNP Paribas | 201,685 | 201,685 | ||||||
|
| |||||||
Total Short-Term Investments |
| 3,442,000 | ||||||
|
|
Total Value of Securities – 97.99% | $ | 267,965,545 | ||
|
|
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At June 30, 2016, the aggregate value of Rule 144A securities was $130,988,105, which represents 47.90% of the Series’ net assets. See Note 8 in “Notes to financial statements.” |
@ | Illiquid security. At June 30, 2016, the aggregate value of illiquid securities was $6,262,087, which represents 2.29% of the Series’ net assets. See Note 8 in “Notes to financial statements.” |
T | 100% of the income received was in the form of cash. |
= | Security is being fair valued in accordance with the Series’ fair valuation policy. At June 30, 2016, the aggregate value of fair valued securities was $0, which represents 0.00% of the Series’ net assets. See Note 1 in “Notes to financial statements.” |
° | Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency. |
† | Non-income-producing security. |
• | Variable rate security. The rate shown is the rate as of June 30, 2016. Interest rates reset periodically. |
« | Senior secured loans generally pay interest at rates which are periodically redetermined by reference to a base lending rate plus a premium. These base lending rates are generally: (i) the prime rate offered by one or more U.S. banks, (ii) the lending rate offered by one or more European banks such as the London Interbank Offered Rate (LIBOR), and (iii) the certificate of deposit rate. Senior secured loans may be subject to restrictions on resale. Stated rate in effect at June 30, 2016. |
PIK – Payment-in-kind
High Yield Series-7
Table of Contents
Delaware VIP® High Yield Series
Schedule of investments (continued)
Unfunded Commitments
The Series may invest in floating rate loans. In connection with these investments, the Series may also enter into unfunded corporate loan commitments (commitments). Commitments may obligate the Series to furnish temporary financing to a borrower until permanent financing can be arranged. In connection with these commitments, the Series earns a commitment fee, typically set as a percentage of the commitment amount. The following commitment was outstanding at June 30, 2016:
Borrower | Unfunded Loan Commitments | |
Nexstar Broadcasting | $3,345,000 |
See accompanying notes, which are an integral part of the financial statements.
High Yield Series-8
Table of Contents
Delaware VIP® Trust — Delaware VIP High Yield Series | ||
Statement of assets and liabilities | June 30, 2016 (Unaudited) |
Assets: | ||||
Investments, at value1 | $ | 264,523,545 | ||
Short-term investments, at value2 | 3,442,000 | |||
Cash | 1,894,721 | |||
Receivable for securities sold | 5,830,924 | |||
Dividend and interest receivable | 4,328,172 | |||
Receivable for series shares sold | 11,301 | |||
Other assets3 | 920,913 | |||
|
| |||
Total assets | 280,951,576 | |||
|
| |||
Liabilities: | ||||
Payable for securities purchased | 3,953,043 | |||
Payable for series shares redeemed | 182,229 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 1,717 | |||
Investment management fees payable | 143,896 | |||
Other accrued expenses | 91,855 | |||
Distribution fees payable to affiliates | 33,177 | |||
Trustees’ fees and expenses payable | 852 | |||
Audit and tax fees payable | 20,116 | |||
Accounting and administration expenses payable to affiliates | 1,082 | |||
Legal fees payable to affiliates | 515 | |||
Reports and statements to shareholders expenses payable to affiliates | 113 | |||
Bonds proceeds payable3 | 3,069,708 | |||
|
| |||
Total liabilities | 7,498,303 | |||
|
| |||
Total Net Assets | $ | 273,453,273 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 304,811,489 | ||
Undistributed net investment income | 7,947,431 | |||
Accumulated net realized loss on investments | (40,150,656 | ) | ||
Net unrealized appreciation of investments | 845,009 | |||
|
| |||
Total Net Assets | $ | 273,453,273 | ||
|
| |||
Standard Class: | ||||
Net assets | $ | 116,378,025 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 24,140,816 | |||
Net asset value per share | $ | 4.82 | ||
Service Class: | ||||
Net assets | $ | 157,075,248 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 32,664,915 | |||
Net asset value per share | $ | 4.81 | ||
| ||||
1 Investments, at cost | $ | 263,678,536 | ||
2 Short-term investments, at cost | 3,442,000 | |||
3 See Note 10 in “Notes to financial statements.” |
See accompanying notes, which are an integral part of the financial statements.
High Yield Series-9
Table of Contents
Delaware VIP High Yield Series
Statement of operations
Six months ended June 30, 2016 (Unaudited)
Investment Income: | ||||
Interest | $ | 9,133,677 | ||
Dividends | 60,429 | |||
|
| |||
9,194,106 | ||||
|
| |||
Expenses: | ||||
Management fees | 887,523 | |||
Distribution expenses - Service Class | 239,371 | |||
Accounting and administration expenses | 44,580 | |||
Reports and statements to shareholders expenses | 36,847 | |||
Audit and tax fees | 20,243 | |||
Dividend disbursing and transfer agent fees and expenses | 11,648 | |||
Legal fees | 11,140 | |||
Custodian fees | 8,971 | |||
Trustees’ fees and expenses | 7,054 | |||
Registration fees | 513 | |||
Other | 11,014 | |||
|
| |||
1,278,904 | ||||
Less expenses waived | (28,021 | ) | ||
Less waived distribution expenses - Service Class | (39,895 | ) | ||
|
| |||
Total operating expenses | 1,210,988 | |||
|
| |||
Net Investment Income | 7,983,118 | |||
|
| |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized loss on investments* | (7,945,328 | ) | ||
Net change in unrealized appreciation (depreciation) of investments | 16,312,599 | |||
|
| |||
Net Realized and Unrealized Gain | 8,367,271 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 16,350,389 | ||
|
|
*Includes $2,148,795 loss contingencies on General Motors term loan litigation.
See Notes 10 in “Notes to financial statements.”
Delaware VIP High Yield Series
Statements of changes in net assets
Six months ended 6/30/16 (Unaudited) | Year ended 12/31/15 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 7,983,118 | $ | 19,869,559 | ||||
Net realized loss | (7,945,328 | ) | (32,247,661 | ) | ||||
Net change in unrealized appreciation (depreciation) | 16,312,599 | (7,507,504 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 16,350,389 | (19,885,606 | ) | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Standard Class | (8,340,632 | ) | (8,984,307 | ) | ||||
Service Class | (11,240,941 | ) | (12,848,401 | ) | ||||
Net realized gain: | ||||||||
Standard Class | — | (1,883,806 | ) | |||||
Service Class | — | (2,807,214 | ) | |||||
|
|
|
| |||||
(19,581,573 | ) | (26,523,728 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Standard Class | 9,693,220 | 14,266,248 | ||||||
Service Class | 8,896,979 | 17,113,206 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 8,340,632 | 10,868,113 | ||||||
Service Class | 11,240,941 | 15,655,615 | ||||||
|
|
|
| |||||
38,171,772 | 57,903,182 | |||||||
|
|
|
| |||||
Cost of shares redeemed: | ||||||||
Standard Class | (11,992,981 | ) | (34,167,382 | ) | ||||
Service Class | (23,755,041 | ) | (50,908,596 | ) | ||||
|
|
|
| |||||
(35,748,022 | ) | (85,075,978 | ) | |||||
|
|
|
| |||||
Increase (decrease) in net assets derived from capital share transactions | 2,423,750 | (27,172,796 | ) | |||||
|
|
|
| |||||
Net Decrease in Net Assets | (807,434 | ) | (73,582,130 | ) | ||||
Net Assets: | ||||||||
Beginning of period | 274,260,707 | 347,842,837 | ||||||
|
|
|
| |||||
End of period | $ | 273,453,273 | $ | 274,260,707 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 7,947,431 | $ | 19,545,886 | ||||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
High Yield Series-10
Table of Contents
Delaware VIP® Trust — Delaware VIP High Yield Series
Financial highlights
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP High Yield Series Standard Class | ||||||||||||||||||||||||||||||
Six months ended 6/30/161 | Year ended | |||||||||||||||||||||||||||||
(Unaudited) | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | 12/31/11 | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 4.890 | $ | 5.670 | $ | 6.190 | $ | 6.110 | $ | 5.680 | $ | 6.040 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||
Net investment income2 | 0.145 | 0.336 | 0.341 | 0.385 | 0.440 | 0.468 | ||||||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.148 | (0.666 | ) | (0.341 | ) | 0.157 | 0.519 | (0.309 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total from investment operations | 0.293 | (0.330 | ) | — | 0.542 | 0.959 | 0.159 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||||||||
Net investment income | (0.363 | ) | (0.372 | ) | (0.420 | ) | (0.462 | ) | (0.529 | ) | (0.519 | ) | ||||||||||||||||||
Net realized gain | — | (0.078 | ) | (0.100 | ) | — | — | — | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total dividends and distributions | (0.363 | ) | (0.450 | ) | (0.520 | ) | (0.462 | ) | (0.529 | ) | (0.519 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net asset value, end of period | $ | 4.820 | $ | 4.890 | $ | 5.670 | $ | 6.190 | $ | 6.110 | $ | 5.680 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total return3 | 6.12% | (6.60% | ) | (0.29% | ) | 9.22% | 17.82% | 2.38% | ||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 116,378 | $ | 111,748 | $ | 139,666 | $ | 151,253 | $ | 147,293 | $ | 117,636 | ||||||||||||||||||
Ratio of expenses to average net assets | 0.74% | 0.75% | 0.75% | 0.74% | 0.74% | 0.74% | ||||||||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 0.76% | 0.76% | 0.75% | 0.74% | 0.74% | 0.74% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets | 5.99% | 6.25% | 5.67% | 6.34% | 7.52% | 8.02% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 5.97% | 6.24% | 5.67% | 6.34% | 7.52% | 8.02% | ||||||||||||||||||||||||
Portfolio turnover | 63% | 99% | 103% | 88% | 76% | 78% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during some of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. Total investment return does not include fees, charges, or expenses imposed by the variable annuity and life insurance contracts for which Delaware VIP Trust serves as an underlying investment vehicle. |
See accompanying notes, which are an integral part of the financial statements.
High Yield Series-11
Table of Contents
Delaware VIP® High Yield Series
Financial highlights (continued)
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP High Yield Series Service Class | ||||||||||||||||||||||||||||||
Six months ended 6/30/161 | Year Ended | |||||||||||||||||||||||||||||
(Unaudited) | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | 12/31/11 | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 4.870 | $ | 5.650 | $ | 6.170 | $ | 6.090 | $ | 5.670 | $ | 6.020 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||
Net investment income2 | 0.138 | 0.322 | 0.325 | 0.369 | 0.424 | 0.454 | ||||||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.152 | (0.667 | ) | (0.340 | ) | 0.158 | 0.510 | (0.299 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total from investment operations | 0.290 | (0.345 | ) | (0.015 | ) | 0.527 | 0.934 | 0.155 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||||||||
Net investment income | (0.350 | ) | (0.357 | ) | (0.405 | ) | (0.447 | ) | (0.514 | ) | (0.505 | ) | ||||||||||||||||||
Net realized gain | — | (0.078 | ) | (0.100 | ) | — | — | — | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total dividends and distributions | (0.350 | ) | (0.435 | ) | (0.505 | ) | (0.447 | ) | (0.514 | ) | (0.505 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net asset value, end of period | $ | 4.810 | $ | 4.870 | $ | 5.650 | $ | 6.170 | $ | 6.090 | $ | 5.670 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total return3 | 6.08% | (6.87% | ) | (0.54% | ) | 8.98% | 17.35% | 2.33% | ||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 157,075 | $ | 162,513 | $ | 208,177 | $ | 250,979 | $ | 274,221 | $ | 266,435 | ||||||||||||||||||
Ratio of expenses to average net assets | 0.99% | 1.00% | 1.00% | 0.99% | 0.99% | 0.99% | ||||||||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 1.06% | 1.06% | 1.05% | 1.04% | 1.04% | 1.04% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets | 5.74% | 6.00% | 5.42% | 6.09% | 7.27% | 7.77% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 5.67% | 5.94% | 5.37% | 6.04% | 7.22% | 7.72% | ||||||||||||||||||||||||
Portfolio turnover | 63% | 99% | 103% | 88% | 76% | 78% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect. Total investment return does not include fees, charges, or expenses imposed by the variable annuity and life insurance contracts for which Delaware VIP Trust serves as an underlying investment vehicle. |
See accompanying notes, which are an integral part of the financial statements.
High Yield Series-12
Table of Contents
Delaware VIP® Trust — Delaware VIP High Yield Series
Notes to financial statements
June 30, 2016 (Unaudited)
Delaware VIP Trust (Trust) is organized as a Delaware statutory trust and offers 10 series: Delaware VIP Diversified Income Series, Delaware VIP Emerging Markets Series, Delaware VIP High Yield Series, Delaware VIP International Value Equity Series, Delaware VIP Limited-Term Diversified Income Series, Delaware VIP REIT Series, Delaware VIP Small Cap Value Series, Delaware VIP Smid Cap Growth Series, Delaware VIP U.S. Growth Series, and Delaware VIP Value Series. These financial statements and the related notes pertain to Delaware VIP High Yield Series (Series). The Trust is an open-end investment company. The Series is considered diversified under the Investment Company Act of 1940 (1940 Act), as amended, and offers Standard Class and Service Class shares. The Standard Class shares do not carry a 12b-1 fee and the Service Class shares carry a 12b-1 fee. The shares of the Series are sold only to separate accounts of life insurance companies.
The investment objective of the Series is to seek total return and, as a secondary objective, high current income.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistently followed by the Series.
Security Valuation—Equity securities, except those traded on the Nasdaq Stock Market LLC (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange on the valuation date. Equity securities traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If, on a particular day, an equity security does not trade, the mean between the bid and ask prices will be used, which approximates fair value. U.S. government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Other debt securities are valued based upon valuations provided by an independent pricing service or broker and reviewed by management. To the extent current market prices are not available, the pricing service may take into account developments related to the specific security, as well as transactions in comparable securities. Valuations for fixed income securities utilize matrix systems, which reflect such factors as security prices, yields, maturities, and ratings, and are supplemented by dealer and exchange quotations. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Trust’s Board of Trustees (the Board). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security.
Federal Income Taxes—No provision for federal income taxes has been made as the Series intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Series evaluates tax positions taken or expected to be taken in the course of preparing the Series’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Series’ tax positions taken for all open federal income tax years (Dec. 31, 2012–Dec. 31, 2015), and has concluded that no provision for federal income tax is required in the Series’ financial statements.
Class Accounting—Investment income, common expenses, and realized and unrealized gain (loss) on investments are allocated to the classes of the Series on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class.
Repurchase Agreements—The Series may purchase certain U.S. government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Series’ custodian or a third-party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on June 30, 2016 and matured on the next business day.
Use of Estimates—The Series is an investment company, whose financial statements are prepared in conformity with U.S. GAAP. Therefore, the Series follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other—Expenses directly attributable to the Series are charged directly to the Series. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated among such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Discounts and premiums on debt securities are accreted or amortized to interest income, respectively over the lives of the respective securities using the effective interest method. The Series declares and pays dividends from net investment income and distributions from net realized gain on investments, if any, following the close of the fiscal year. The Series may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
The Series may receive earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. There were no such earnings credits for the six months ended June 30, 2016.
High Yield Series-13
Table of Contents
Delaware VIP® High Yield Series
Notes to financial statements (continued)
1. Significant Accounting Policies (continued)
The Series receives earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than one dollar, the expense paid under this arrangement is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expense offset shown under “Less expense paid indirectly.” For the six months ended June 30, 2016, the Series earned less than one dollar under this agreement.
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Series pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.65% on the first $500 million of average daily net assets of the Series, 0.60% on the next $500 million, 0.55% on the next $1.5 billion, and 0.50% on average daily net assets in excess of $2.5 billion.
DMC has contractually agreed to waive all or a portion of its investment advisory fees and/or pay/reimburse expenses (excluding any 12b-1 fees, acquired fund fees and expenses, taxes, interest, short sale and dividend interest expenses, brokerage fees, certain insurance costs, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations) in order to prevent annual series operating expenses from exceeding 0.74% of the Series’ average daily net assets from Jan. 1, 2016 through June 30, 2016.* This waiver and reimbursement may only be terminated by agreement of DMC and the Series.
Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Series. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the Delaware Investments Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DIFSC under the service agreement described above are allocated among all funds in the Delaware Investments Family of Funds on a relative net asset value (NAV) basis. For the six months ended June 30, 2016, the Series was charged $6,495 for these services. This amount is included on the “Statement of operations” under “Accounting and administration expenses.”
DIFSC is also the transfer agent and dividend disbursing agent of the Series. For these services, DIFSC’s fees are calculated at the annual rate of 0.0075% of the Series’ average daily net assets. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the six months ended June 30, 2016, the Series was charged $10,241 for these services. Pursuant to a sub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Series. Sub-transfer agency fees are paid by the Series and are also included on the “Statement of operation” under “Dividend disbursing and transfer agent fees and expenses.”
Pursuant to a distribution agreement and distribution plan, the Series pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee of 0.30% of the average daily net assets of the Service Class shares. DDLP has contracted to waive distribution and service fees from Jan. 1, 2016 through June 30, 2016** in order to limit 12b-1 fees of the Service Class shares to 0.25% of average daily net assets. This waiver and reimbursement may only be terminated by agreement of DDLP and the Series. Standard Class shares pay no distribution and service expenses.
As provided in the investment management agreement, the Series bears a portion of the cost of certain resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Series. For the six months ended June 30, 2016, the Series was charged $3,068 for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees. This amount is included on the “Statement of operations” under “Legal fees.”
Trustees’ fees include expenses accrued by the Series for each Trustee’s retainer and meeting fees. Certain officers of DMC, DIFSC, and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Series.
*The contractual waiver period is from April 29, 2015 through May 1, 2017.
**The contractual waiver period is from April 29, 2015 through May 1, 2017.
Cross trades for the six months ended June 30, 2016 were executed by the Series pursuant to procedures adopted by the Board designed to ensure compliance with Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio securities between series of investment companies, or between a series of an investment company and another entity, that are or could be considered affiliates by virtue of having a common investment adviser (or affiliated investment advisers), common directors/trustees and/or common officers. At its regularly scheduled meetings, the Board reviews such transactions for compliance with the procedures adopted by the Board. Pursuant to these procedures, for the six months ended June 30, 2016, the Series engaged in securities purchases of $1,520,379 and securities sales of $10,318,341, which resulted in net realized gains of $4,679.
3. Investments
For the six months ended June 30, 2016, the Series made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 164,970,658 | ||
Sales | 168,316,825 |
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Delaware VIP® High Yield Series
Notes to financial statements (continued)
3. Investments (continued)
At June 30, 2016, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At June 30, 2016, the cost and unrealized appreciation (depreciation) of investments for the Series were as follows:
Cost of Investments | Aggregate Unrealized Appreciation of Investments | Aggregate Unrealized Depreciation of Investments | Net Unrealized Appreciation of Investments |
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$266,980,318 | $6,109,555 | $(5,124,328) | $985,227 |
On Dec. 22, 2010, the Regulated Investment Company Modernization Act of 2010 (Act) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes were generally effective for taxable years beginning after the date of enactment. Under the Act, the Series is permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.
At Dec. 31, 2015, losses incurred that will be carried forward under the Act are as follows:
Loss carryforward character | ||||
Short-term | Long-term | Total | ||
$14,215,475 | $15,692,112 | $29,907,587 |
U.S. GAAP defines fair value as the price that the Series would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established 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 assumptions that market participants would use in pricing the asset or liability based on the best information available under the circumstances. The Series’ investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized below.
Level 1 – | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) | |
Level 2 – | Other observable inputs, including, but 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. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) | |
Level 3 – | Significant unobservable inputs, including the Series’ own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. The Series may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
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Notes to financial statements (continued)
3. Investments (continued)
The following table summarizes the valuation of the Series’ investments by fair value hierarchy levels as of June 30, 2016:
Securities | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Corporate Debt | $ | — | $ | 244,167,026 | $ | — | $ | 244,167,026 | ||||||||||||
Senior Secured Loans | — | 16,185,689 | — | 16,185,689 | ||||||||||||||||
Common Stock | — | — | — | — | ||||||||||||||||
Preferred Stock1 | 992,800 | 3,178,030 | — | 4,170,830 | ||||||||||||||||
Short-Term Investments | — | 3,442,000 | — | 3,442,000 | ||||||||||||||||
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Total Value of Securities | $ | 992,800 | $ | 266,972,745 | $ | — | $ | 267,965,545 | ||||||||||||
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1Security type is valued across multiple levels. The amount attributed to Level 1 investments and Level 2 investments represents the following percentages of the total market value of these security types for the Series. Level 1 investments represent exchange-traded investments, while Level 2 investments represent investments with observable inputs or matrix priced investments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||
Preferred Stock | 23.80% | 76.20% | — | 100.00 | % |
The securities that are valued at zero on the “Schedule of investments” are considered to be Level 3 investments in these tables.
During the six months ended June 30, 2016, there were no transfers between Level 1 investments, Level 2 investments, or Level 3 investments that had a significant impact to the Series. The Series’ policy is to recognize transfers between levels at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when the Series has a significant amount of Level 3 investments at the beginning, interim, or end of the period in relation to net assets. Management has determined not to provide additional disclosure on Level 3 inputs since the Level 3 investments are not considered significant to the Series’ net assets at the end of the period.
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 6/30/16 | Year ended | |||||||||
Shares sold: | ||||||||||
Standard Class | 1,993,098 | 2,683,525 | ||||||||
Service Class | 1,842,607 | 3,177,996 | ||||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||||
Standard Class | 1,759,627 | 2,005,187 | ||||||||
Service Class | 2,376,520 | 2,893,829 | ||||||||
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7,971,852 | 10,760,537 | |||||||||
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Shares redeemed: | ||||||||||
Standard Class | (2,478,153 | ) | (6,467,748 | ) | ||||||
Service Class | (4,929,749 | ) | (9,562,322 | ) | ||||||
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(7,407,902 | ) | (16,030,070 | ) | |||||||
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Net increase (decrease) | 563,950 | (5,269,533 | ) | |||||||
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5. Line of Credit
The Series, along with certain other funds in the Delaware Investments® Family of Funds (Participants), is a participant in a $155,000,000 revolving line of credit intended to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants are charged an annual commitment fee of 0.10%, which is allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants are permitted to borrow up to a maximum of one third of their net assets under the agreement. Each Participant is individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit available under the agreement expires on Nov. 7, 2016.
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Delaware VIP® High Yield Series
Notes to financial statements (continued)
5. Line of Credit (continued)
The Series had no amount outstanding as of June 30, 2016 or at any time during the six months then ended.
6. Offsetting
In December 2011, the Financial Accounting Standards Board (FASB) issued guidance that expanded disclosure requirements on the offsetting of certain assets and liabilities. The disclosures are required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset on the “Statement of assets and liabilities,” and require an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarified which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting is limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing.
In order to better define its contractual rights and to secure rights that will help the Series mitigate its counterparty risk, the Series entered into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement) or a similar agreement with certain of its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Series and a counterparty that governs certain over-the-counter (OTC) derivatives and foreign exchange contracts and typically contains, among other things, collateral posting items and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Series may, under certain circumstances, offset with the counterparty certain derivative financial instruments payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default (close-out), including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency, or other events.
For financial reporting purposes, the Series does not offset derivative assets and derivatives liabilities that are subject to netting arrangements on the “Statement of assets and liabilities.”
At June 30, 2016, the Series had the following assets and liabilities subject to offsetting provisions:
Master Repurchase Agreements
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Fair Value of | |||||||||||||||||||||||||
Repurchase | Non-Cash | Cash Collateral | Net Collateral | ||||||||||||||||||||||
Counterparty | Agreements | Collateral Received | Received | Received | Net Exposure(a) | ||||||||||||||||||||
Bank of America Merrill Lynch | $ | 1,215,118 | $ | (1,215,118 | ) | $ | — | $ | (1,215,118 | ) | $ | — | |||||||||||||
Bank of Montreal | 2,025,197 | (2,025,197 | ) | — | (2,025,197 | ) | — | ||||||||||||||||||
BNP Paribas | 201,685 | (201,685 | ) | — | (201,685 | ) | — | ||||||||||||||||||
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Total | $ | 3,442,000 | $ | (3,442,000 | ) | $ | — | $ | (3,442,000 | ) | $ | — | |||||||||||||
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(a)Net exposure represents the receivable (payable) that would be due from (to) the counterparty in the event of default.
7. Securities Lending
The Series, along with other funds in the Delaware Investments® Family of Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (1) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (2) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities that are the subject of such loan, the borrower will be notified to provide additional collateral by the end of the following business day, which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial collateral requirement, upon the request of the borrower, BNY Mellon must return enough collateral to the borrower by the end of the following business day to reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security on any particular day may be more or less than the value of the security on loan.
Prior to Dec. 29, 2015, cash collateral received was generally invested in the Delaware Investments Collateral Fund No. 1 (Collective Trust), a pooled account established by BNY Mellon for the use of funds managed by DMC that participate in BNY Mellon’s securities lending program. The Collective Trust sought to maintain a NAV per unit of $1.00.
On Dec. 29, 2015, the assets in the Collective Trust were transferred to a series of individual separate accounts, each corresponding to a Series. The investment guidelines permit each separate account to hold certain securities that would be considered eligible securities for a money market fund. Cash collateral received is generally invested in government securities; certain obligations issued by government sponsored enterprises; repurchase agreements collateralized by U.S. Treasury securities; obligations issued by the central government of any Organization for Economic Cooperation and Development (OECD) country or its agencies, instrumentalities, or establishments; obligations of supranational organizations; commercial paper, notes, bonds, and other debt obligations; certificates of deposit, time deposits, and other bank obligations; and asset-backed securities.
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Delaware VIP® High Yield Series
Notes to financial statements (continued)
7. Securities Lending (continued)
In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Series or, at the discretion of the lending agent, replace the loaned securities. The Series continues to record dividends or interest, as applicable, on the securities loaned and is subject to changes in value of the securities loaned that may occur during the term of the loan. The Series has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Series receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Series, the security lending agent, and the borrower. The Series records security lending income net of allocations to the security lending agent and the borrower.
The Series may incur investment losses as a result of investing securities lending collateral. This could occur if an investment in the collateral investment account defaulted or became impaired. Under those circumstances, the value of the Series’ cash collateral account may be less than the amount the Series would be required to return to the borrowers of the securities and the Series would be required to make up for this shortfall.
During the six months ended June 30, 2016, the Series had no securities out on loan.
8. Credit and Market Risk
The Series invests in high yield fixed income securities, which are securities rated lower than BBB- by Standard & Poor’s Financial Services LLC and lower than Baa3 by Moody’s Investors Service, Inc., or similarly rated by another nationally recognized statistical rating organization. Investments in these higher yielding securities are generally accompanied by a greater degree of credit risk than higher rated securities. Additionally, lower rated securities may be more susceptible to adverse economic and competitive industry conditions than investment grade securities.
The Series invests in certain obligations that may have liquidity protection designed to ensure that the receipt of payments due on the underlying security is timely. Such protection may be provided through guarantees, insurance policies or letters of credit obtained by the issuer or sponsor through third parties, through various means of structuring the transaction or through a combination of such approaches. The Series will not pay any additional fees for such credit support, although the existence of credit support may increase the price of the security.
The Series invests in bank loans and other securities that may subject it to direct indebtedness risk, the risk that the Series will not receive payment of principal, interest, and other amounts due in connection with these investments and will depend primarily on the financial condition of the borrower. Loans that are fully secured offer the Series more protection than unsecured loans in the event of nonpayment of scheduled interest or principal, although there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower’s obligation, or that the collateral can be liquidated. Some loans or claims may be in default at the time of purchase. Certain of the loans and the other direct indebtedness acquired by the Series may involve revolving credit facilities or other standby financing commitments that obligate the Series to pay additional cash on a certain date or on demand. These commitments may require the Series to increase its investment in a company at a time when the Series might not otherwise decide to do so (including at a time when the company’s financial condition makes it unlikely that such amounts will be repaid). To the extent that the Series is committed to advance additional funds, it will at all times hold and maintain cash or other high grade debt obligations in an amount sufficient to meet such commitments.
As the Series may be required to rely upon another lending institution to collect and pass on to the Series amounts payable with respect to the loan and to enforce the Series’ rights under the loan and other direct indebtedness, an insolvency, bankruptcy, or reorganization of the lending institution may delay or prevent the Series from receiving such amounts. The highly leveraged nature of many loans may make them especially vulnerable to adverse changes in economic or market conditions. Investments in such loans and other direct indebtedness may involve additional risk to the Series.
The Series may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A, promulgated under the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Series from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Board has delegated to DMC, the day-to-day functions of determining whether individual securities are liquid for purposes of the Series’ limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Series’ 15% limit on investments in illiquid securities. Rule 144A and illiquid securities have been identified on the “Schedule of investments.” When monitoring compliance with the Series’ illiquid limit, certain holdings that are common to multiple clients of the investment manager may be aggregated and considered illiquid in the aggregate solely for monitoring purposes. For purposes of determining illiquidity for financial reporting purposes, only the holdings of this Series will be considered.
9. Contractual Obligations
The Series enters into contracts in the normal course of business that contain a variety of indemnifications. The Series’ maximum exposure under these arrangements is unknown. However, the Series has not had prior claims or losses pursuant to these contracts. Management has reviewed the Series’ existing contracts and expects the risk of loss to be remote.
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Delaware VIP® High Yield Series
Notes to financial statements (continued)
10. General Motors Term Loan Litigation
The Series received notice of a litigation proceeding related to a General Motors Corporation (G.M.) term loan participation previously held by the Series in 2009. We believe the matter subject to the litigation notice will likely lead to a recovery from the Series of certain amounts received by the Series because a U.S. Court of Appeals has ruled that the Series and similarly situated investors were unsecured creditors rather than secured lenders of G.M. as a result of an erroneous Uniform Commercial Code filing made by a third party. The Series received the full principal on the loans in 2009 after the G.M. bankruptcy. However, based upon the court ruling the estate is seeking to recover such amounts arguing that, as unsecured creditors, the Series should not have received payment in full. Based upon currently available information related to the litigation and the Series’ potential exposure, the Series recorded a liability of $3,069,708 and an asset of $920,913 based on the expected recoveries to unsecured creditors as of June 30, 2016 that resulted in a net decrease in the Series’ NAV to reflect this likely recovery.
11. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to June 30, 2016 that would require recognition or disclosure in the Series’ financial statements.
The Series files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q. The Series’ Forms N-Q, as well as a description of the policies and procedures that the Series uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the Commission’s website at sec.gov. In addition, a description of the policies and procedures that the Series uses to determine how to vote proxies (if any) relating to portfolio securities and the Schedule of Investments included in the Series’ most recent Form N-Q are available without charge on the Delaware Investments® Funds’ website at delawareinvestments.com/vip/literature. The Series’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330.
Information (if any) regarding how the Series voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Delaware Investments Funds’ website at delawareinvestments.com/proxy; and (ii) on the Commission’s website at sec.gov.
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SA-VIPHY 21183 (8/16) (17290) | High Yield Series-19 |
Table of Contents
Delaware VIP® Trust
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Delaware VIP International Value Equity Series
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Semiannual report
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June 30, 2016 |
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Neither Delaware Investments nor its affiliates referred to in this document are authorized deposit-taking institutions for the purpose of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited (MBL), a subsidiary of Macquarie Group Limited and an affiliate of Delaware Investments. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Series is governed by U.S. laws and regulations.
Unless otherwise noted, views expressed herein are current as of June 30, 2016, and subject to change for events occurring after such date.
The Series is not FDIC insured and is not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor and member of Macquarie Group. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries, including the Series’ distributor, Delaware Distributors, L.P. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
This material may be used in conjunction with the offering of shares in Delaware VIP® International Value Equity Series only if preceded or accompanied by the Series’ current prospectus or the summary prospectus.
© 2016 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
Table of Contents
Delaware VIP® Trust — Delaware VIP International Value Equity Series
Disclosure of Series expenses
For the six-month period from January 1, 2016 to June 30, 2016 (Unaudited)
As a shareholder of the Series, you incur ongoing costs, which may include management fees; distribution and/or service (12b-1) fees; and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series 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 entire six-month period from Jan. 1, 2016 to June 30, 2016.
Actual expenses
The first section of the table shown, “Actual Series return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, 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, an $8,600 account value divided by $1,000 = 8.6), 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 the period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% return,” provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ 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 Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Series, you do not incur any transaction costs, such as sales charges (loads), redemption fees or exchange fees, but shareholders of other funds may incur such costs. Also, the fees related to the variable annuity investment or the deferred sales charge that could apply have not been included. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The Series’ actual expenses shown in the table reflect fee waivers in effect for Service Class shares. The expenses shown in the table assume reinvestment of all dividends and distributions.
Expense analysis of an investment of $1,000
Beginning Account Value 1/1/16 | Ending Account Value 6/30/16 | Annualized Expense Ratio | Expenses 6/ 30/16* | |||||||||
Actual Series return† | ||||||||||||
Standard Class | $1,000.00 | $980.90 | 1.04% | $5.12 | ||||||||
Service Class | 1,000.00 | 979.30 | 1.29% | 6.35 | ||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||
Standard Class | $1,000.00 | $1,019.69 | 1.04% | $5.22 | ||||||||
Service Class | 1,000.00 | 1,018.45 | 1.29% | 6.47 |
* | “Expenses Paid During Period” are equal to the Series’ annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
† | Because actual returns reflect only the most recent six-month period, the returns shown may differ significantly from fiscal year returns. |
International Value Equity Series-1 |
Table of Contents
Delaware VIP® Trust — Delaware VIP International Value Equity Series
Security type / country and sector allocations
As of June 30, 2016 (Unaudited)
Sector designations may be different than the sector designations presented in other Series materials. The sector designations may represent the investment manager’s internal sector classifications.
Security type / sector | Percentage of net assets | ||||
Common Stock by Country | 103.36% | ||||
Australia | 1.28% | ||||
Canada | 6.22% | ||||
China/Hong Kong | 7.48% | ||||
Denmark | 2.50% | ||||
France | 19.03% | ||||
Germany | 6.64% | ||||
Indonesia | 1.75% | ||||
Israel | 3.39% | ||||
Italy | 1.08% | ||||
Japan | 24.72% | ||||
Netherlands | 4.08% | ||||
Republic of Korea | 2.84% | ||||
Russia | 1.14% | ||||
Sweden | 4.69% | ||||
Switzerland | 5.43% | ||||
United Kingdom | 11.09% | ||||
Short-Term Investments | 3.54% | ||||
Total Value of Securities | 106.90% | ||||
Liabilities Net of Receivables and Other Assets | (6.90)% | ||||
Total Net Assets | 100.00% | ||||
Common stock by sector | Percentage of net assets | ||||
Consumer Discretionary | 18.02% | ||||
Consumer Staples | 10.29% | ||||
Energy | 5.71% | ||||
Financials | 15.07% | ||||
Healthcare | 14.15% | ||||
Industrials | 20.54% | ||||
Information Technology | 7.47% | ||||
Materials | 2.86% | ||||
Telecommunication Services | 7.76% | ||||
Utilities | 1.49% | ||||
Total | 103.36% |
International Value Equity Series-2
Table of Contents
Delaware VIP® Trust — Delaware VIP International Value Equity Series
Schedule of investments
June 30, 2016 (Unaudited)
Number of shares | Value (U.S. $) | |||||||
Common Stock – 103.36% D |
| |||||||
Australia – 1.28% | ||||||||
Coca-Cola Amatil | 124,059 | $ | 765,816 | |||||
|
| |||||||
765,816 | ||||||||
|
| |||||||
Canada – 6.22% | ||||||||
Alamos Gold | 60,868 | 523,429 | ||||||
CGI Group Class A † | 41,314 | 1,764,867 | ||||||
Suncor Energy | 36,600 | 1,015,321 | ||||||
Yamana Gold | 81,783 | 425,389 | ||||||
|
| |||||||
3,729,006 | ||||||||
China/Hong Kong – 7.48% |
| |||||||
CNOOC | 820,000 | 1,023,540 | ||||||
Techtronic Industries | 302,359 | 1,262,651 | ||||||
Yue Yuen Industrial Holdings | 553,500 | 2,193,698 | ||||||
|
| |||||||
4,479,889 | ||||||||
|
| |||||||
Denmark – 2.50% | ||||||||
Carlsberg Class B | 15,691 | 1,497,047 | ||||||
|
| |||||||
1,497,047 | ||||||||
|
| |||||||
France – 19.03% | ||||||||
AXA | 72,683 | 1,437,133 | ||||||
Kering | 5,207 | 838,234 | ||||||
Publicis Groupe | 8,890 | 594,763 | ||||||
Rexel | 40,237 | 505,875 | ||||||
Sanofi | 27,087 | 2,250,462 | ||||||
Teleperformance | 22,298 | 1,899,390 | ||||||
TOTAL | 28,848 | 1,383,435 | ||||||
Valeo | 13,923 | 618,099 | ||||||
Vinci | 26,571 | 1,875,032 | ||||||
|
| |||||||
11,402,423 | ||||||||
|
| |||||||
Germany – 6.64% | ||||||||
Bayerische Motoren Werke | 16,270 | 1,184,051 | ||||||
Deutsche Post | 50,517 | 1,423,191 | ||||||
STADA Arzneimittel | 26,458 | 1,371,243 | ||||||
|
| |||||||
3,978,485 | ||||||||
|
| |||||||
Indonesia – 1.75% | ||||||||
Bank Rakyat Indonesia Persero | 1,274,455 | 1,048,663 | ||||||
|
| |||||||
1,048,663 | ||||||||
|
| |||||||
Israel – 3.39% | ||||||||
Teva Pharmaceutical Industries ADR | 40,500 | 2,034,315 | ||||||
|
| |||||||
2,034,315 | ||||||||
|
| |||||||
Italy – 1.08% | ||||||||
Intesa Sanpaolo | 339,410 | 646,478 | ||||||
|
| |||||||
646,478 | ||||||||
|
| |||||||
Japan – 24.72% | ||||||||
East Japan Railway | 21,056 | 1,951,330 | ||||||
ITOCHU | 153,235 | 1,874,556 | ||||||
Japan Tobacco | 46,400 | 1,870,022 | ||||||
Minebea | 62,800 | 426,657 | ||||||
Mitsubishi UFJ Financial Group | 407,935 | 1,828,713 | ||||||
Nippon Telegraph & Telephone | 58,818 | 2,758,265 | ||||||
Nitori Holdings | 9,658 | 1,171,362 |
Number of shares | Value (U.S. $) | |||||||
Common Stock D (continued) | ||||||||
Japan (continued) | ||||||||
Sumitomo Rubber Industries | 78,900 | $ | 1,056,305 | |||||
Toyota Motor | 38,043 | 1,875,464 | ||||||
|
| |||||||
14,812,674 | ||||||||
|
| |||||||
Netherlands – 4.08% | ||||||||
ING Groep CVA | 111,112 | 1,149,555 | ||||||
Koninklijke Philips | 52,091 | 1,293,746 | ||||||
|
| |||||||
2,443,301 | ||||||||
|
| |||||||
Republic of Korea – 2.84% |
| |||||||
Samsung Electronics | 1,365 | 1,699,905 | ||||||
|
| |||||||
1,699,905 | ||||||||
|
| |||||||
Russia – 1.14% | ||||||||
Mobile TeleSystems ADR | 82,300 | 681,444 | ||||||
|
| |||||||
681,444 | ||||||||
|
| |||||||
Sweden – 4.69% | ||||||||
Nordea Bank | 189,135 | 1,604,555 | ||||||
Tele2 Class B | 137,746 | 1,209,319 | ||||||
|
| |||||||
2,813,874 | ||||||||
|
| |||||||
Switzerland – 5.43% | ||||||||
Aryzta † | 29,600 | 1,093,894 | ||||||
Novartis | 26,157 | 2,158,961 | ||||||
|
| |||||||
3,252,855 | ||||||||
|
| |||||||
United Kingdom – 11.09% |
| |||||||
Meggitt | 194,835 | 1,059,014 | ||||||
National Grid | 60,505 | 889,746 | ||||||
Playtech | 95,287 | 1,013,707 | ||||||
Rio Tinto | 24,640 | 765,480 | ||||||
Shire | 10,739 | 663,697 | ||||||
Standard Chartered | 173,425 | 1,315,771 | ||||||
Tesco † | 400,135 | 939,756 | ||||||
|
| |||||||
6,647,171 | ||||||||
|
| |||||||
Total Common Stock | 61,933,346 | |||||||
|
| |||||||
Principal amount° | ||||||||
Short-Term Investments – 3.54% | ||||||||
Discount Notes – 3.24% ≠ |
| |||||||
Federal Home Loan Bank | ||||||||
0.264% 8/5/16 | 294,570 | 294,501 | ||||||
0.325% 8/3/16 | 287,402 | 287,339 | ||||||
0.331% 7/13/16 | 638,586 | 638,552 | ||||||
0.335% 7/12/16 | 70,187 | 70,184 | ||||||
0.335% 7/21/16 | 97,482 | 97,474 | ||||||
0.34% 7/22/16 | 268,330 | 268,305 | ||||||
0.35% 7/25/16 | 236,461 | 236,436 | ||||||
0.39% 9/21/16 | 23,222 | 23,208 | ||||||
0.39% 9/23/16 | 28,327 | 28,309 | ||||||
|
| |||||||
1,944,308 | ||||||||
|
|
International Value Equity Series-3
Table of Contents
Delaware VIP® International Value Equity Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
Short-Term Investments (continued) | ||||||||
Repurchase Agreements – 0.30% | ||||||||
Bank of America Merrill Lynch | 62,839 | $ | 62,839 | |||||
Bank of Montreal | 104,731 | 104,731 |
Principal amount° | Value (U.S. $) | |||||||
Short-Term Investments (continued) | ||||||||
Repurchase Agreements (continued) | ||||||||
BNP Paribas | 10,430 | $ | 10,430 | |||||
|
| |||||||
178,000 | ||||||||
|
| |||||||
Total Short-Term Investments | 2,122,308 | |||||||
|
|
Total Value of Securities – 106.90% | $ | 64,055,654 | ||
|
|
≠ | The rate shown is the effective yield at the time of purchase. | |
° | Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency. | |
† | Non-income-producing security. | |
D | Securities have been classified by country of origin. Aggregate classification by business sectors has been presented on page 2 in “Security type / country and sector allocations.” |
The following foreign currency exchange contracts were outstanding at June 30, 2016:1
Foreign Currency Exchange Contracts
Counterparty | Contracts to Receive (Deliver) | In Exchange For | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||
|
|
|
|
|
|
| ||||||||||
BNYM | EUR | 782,858 | USD | (869,445) | 7/1/16 | $ (639) | ||||||||||
BNYM | GBP | 480,751 | USD | (639,148) | 7/1/16 | 855 | ||||||||||
BNYM | JPY | (34,238,530) | USD | 333,363 | 7/5/16 | 1,755 | ||||||||||
$1,971 |
The use of foreign currency exchange contracts involves elements of market risk and risks in excess of the amounts disclosed in these financial statements. The foreign currency exchange contracts presented above represent the Series’ total exposure in such contracts, whereas only the net unrealized appreciation (depreciation) is reflected in the Series’ net assets.
1See Note 6 in “Notes to financial statements.”
International Value Equity Series-4
Table of Contents
Delaware VIP® International Value Equity Series
Schedule of investments (continued)
Summary of abbreviations:
ADR – American Depositary Receipt
BNYM – BNY Mellon
CVA – Dutch Certificate
EUR – European Monetary Unit
GBP – British Pound Sterling
JPY – Japanese Yen
USD – U.S. Dollar
See accompanying notes, which are an integral part of the financial statements.
International Value Equity Series-5
Table of Contents
Delaware VIP® Trust — Delaware VIP International Value Equity Series | ||
Statement of assets and liabilities | June 30, 2016 (Unaudited) |
Assets: | ||||
Investments, at value1 | $ | 61,933,346 | ||
Short-term investments, at value2 | 2,122,308 | |||
Cash | 102,567 | |||
Foreign currencies, at value3 | 60,815 | |||
Receivable for securities sold | 1,382,228 | |||
Dividends and interest receivable | 268,564 | |||
Receivable for series shares sold | 3,755 | |||
Securities lending income receivable | 557 | |||
Unrealized appreciation on foreign currency exchange contracts | 2,610 | |||
|
| |||
Total assets | 65,876,750 | |||
|
| |||
Liabilities: | ||||
Payable for series shares redeemed | 3,554,135 | |||
Payable for securities purchased | 2,303,770 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 390 | |||
Investment management fees payable | 44,274 | |||
Other accrued expenses | 30,993 | |||
Audit and tax fees payable | 18,185 | |||
Trustees’ fees and expenses payable | 195 | |||
Distribution fees payable to affiliates | 46 | |||
Unrealized depreciation on foreign currency exchange contracts | 639 | |||
Accounting and administration expenses payable to affiliates | 246 | |||
Legal fees payable to affiliates | 115 | |||
Reports and statements to shareholders expenses payable to affiliates | 26 | |||
|
| |||
Total liabilities | 5,953,014 | |||
|
| |||
Total Net Assets | $ | 59,923,736 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 79,846,520 | ||
Undistributed net investment income | 920,500 | |||
Accumulated net realized loss on investments | (19,346,908 | ) | ||
Net unrealized depreciation of investments | (1,489,759 | ) | ||
Net unrealized depreciation of foreign currencies | (8,588 | ) | ||
Net unrealized appreciation of foreign currency exchange contracts | 1,971 | |||
|
| |||
Total Net Assets | $ | 59,923,736 | ||
|
| |||
Net Assets Value: | ||||
Standard Class: | ||||
Net assets | $ | 59,701,480 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 5,703,838 | |||
Net asset value per share | $ | 10.47 | ||
Service Class: | ||||
Net assets | $ | 222,256 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 21,259 | |||
Net asset value per share | $ | 10.45 | ||
| ||||
1Investments, at cost | $ | 63,423,257 | ||
2Short-term investments, at cost | 2,122,156 | |||
3Foreign currencies, at cost | 64,231 |
See accompanying notes, which are an integral part of the financial statements.
International Value Equity Series-6
Table of Contents
Delaware VIP International Value Equity Series
Statement of operations
Six months ended June 30, 2016 (Unaudited)
Investment Income: | ||||
Dividends | $ | 1,380,076 | ||
Securities lending income | 4,858 | |||
Interest | 2,564 | |||
Foreign tax withheld | (146,360 | ) | ||
|
| |||
1,241,138 | ||||
|
| |||
Expenses: | ||||
Management fees | 258,734 | |||
Audit and tax fees | 18,324 | |||
Reports and statements to shareholders expenses | 10,416 | |||
Accounting and administration expenses | 9,935 | |||
Custodian fees | 7,167 | |||
Dividend disbursing and transfer agent fees and expenses | 2,663 | |||
Legal fees | 2,374 | |||
Trustees’ fees and expenses | 1,626 | |||
Registration fees | 407 | |||
Distribution expenses - Service Class | 277 | |||
Other | 3,625 | |||
|
| |||
315,548 | ||||
Less waived distribution expenses - Service Class | (46 | ) | ||
|
| |||
Total operating expenses | 315,502 | |||
|
| |||
Net Investment Income | 925,636 | |||
|
| |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (1,258,277 | ) | ||
Foreign currencies | 24,827 | |||
Foreign currency exchange contracts | (12,426 | ) | ||
|
| |||
Net realized loss | (1,245,876 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) of: | ||||
Investments | (823,178 | ) | ||
Foreign currencies | (2,473 | ) | ||
Foreign currency exchange contracts | 1,971 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | (823,680 | ) | ||
|
| |||
Net Realized and Unrealized Loss | (2,069,556 | ) | ||
|
| |||
Net Decrease in Net Assets Resulting from Operations | $ | (1,143,920 | ) | |
|
|
Delaware VIP International Value Equity Series
Statements of changes in net assets
Six months ended 6/30/16 (Unaudited) | Year ended 12/31/15 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 925,636 | $ | 1,057,346 | ||||
Net realized gain (loss) | (1,245,876 | ) | 2,636,348 | |||||
Net change in unrealized appreciation (depreciation) | (823,680 | ) | (3,582,818 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | (1,143,920 | ) | 110,876 | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Standard Class | (1,045,938 | ) | (1,218,855 | ) | ||||
Service Class | (3,162 | ) | (2,423 | ) | ||||
|
|
|
| |||||
(1,049,100 | ) | (1,221,278 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Standard Class | 4,496,738 | 12,406,523 | ||||||
Service Class | 83,404 | 291,375 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 1,045,938 | 1,218,855 | ||||||
Service Class | 3,162 | 2,423 | ||||||
|
|
|
| |||||
5,629,242 | 13,919,176 | |||||||
|
|
|
| |||||
Cost of shares redeemed: | ||||||||
Standard Class | (5,939,190 | ) | (8,214,676 | ) | ||||
Service Class | (5,465 | ) | (304,176 | ) | ||||
|
|
|
| |||||
(5,944,655 | ) | (8,518,852 | ) | |||||
|
|
|
| |||||
Increase (decrease) in net assets derived from capital share transactions | (315,413 | ) | 5,400,324 | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | (2,508,433 | ) | 4,289,922 | |||||
Net Assets: | ||||||||
Beginning of period | 62,432,169 | 58,142,247 | ||||||
|
|
|
| |||||
End of period | $ | 59,923,736 | $ | 62,432,169 | ||||
Undistributed net investment income | $ | 920,500 | $ | 1,043,964 | ||||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
International Value Equity Series-7
Table of Contents
Delaware VIP® Trust — Delaware VIP International Value Equity Series
Financial highlights
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP International Value Equity Series Standard Class | ||||||||||||||||||||||||||||||
Six months ended 6/30/161 | Year ended | |||||||||||||||||||||||||||||
(Unaudited) | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | 12/31/11 | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.840 | $ | 10.990 | $ | 12.190 | $ | 10.090 | $ | 8.980 | $ | 10.610 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||
Net investment income2 | 0.157 | 0.189 | 0.254 | 0.176 | 0.177 | 0.243 | ||||||||||||||||||||||||
Net realized and unrealized gain (loss) | (0.349 | ) | (0.114 | ) | (1.297 | ) | 2.094 | 1.171 | (1.745 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total from investment operations | (0.192 | ) | 0.075 | (1.043 | ) | 2.270 | 1.348 | (1.502 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||||||||
Net investment income | (0.178 | ) | (0.225 | ) | (0.157 | ) | (0.170 | ) | (0.238 | ) | (0.128 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total dividends and distributions | (0.178 | ) | (0.225 | ) | (0.157 | ) | (0.170 | ) | (0.238 | ) | (0.128 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net asset value, end of period | $ | 10.470 | $ | 10.840 | $ | 10.990 | $ | 12.190 | $ | 10.090 | $ | 8.980 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total return3 | (1.91% | ) | 0.49% | (8.67% | ) | 22.78% | 15.20% | (14.43% | ) | |||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 59,702 | $ | 62,285 | $ | 57,986 | $ | 57,733 | $ | 47,122 | $ | 43,036 | ||||||||||||||||||
Ratio of expenses to average net assets | 1.04% | 1.04% | 1.07% | 1.09% | 1.07% | 1.05% | ||||||||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 1.04% | 1.04% | 1.07% | 1.09% | 1.07% | 1.08% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets | 3.04% | 1.66% | 2.13% | 1.59% | 1.88% | 2.32% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 3.04% | 1.66% | 2.13% | 1.59% | 1.88% | 2.29% | ||||||||||||||||||||||||
Portfolio turnover | 8% | 11% | 27% | 28% | 36% | 47% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during some of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. Total investment return does not include fees, charges, or expenses imposed by the variable annuity and life insurance contracts for which Delaware VIP Trust serves as an underlying investment vehicle. |
See accompanying notes, which are an integral part of the financial statements.
International Value Equity Series-8
Table of Contents
Delaware VIP® International Value Equity Series
Financial highlights (continued)
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP International Value Equity Series Service Class | ||||||||||||||||||||||||||||||
Six months ended 6/30/161 | Year ended | |||||||||||||||||||||||||||||
(Unaudited) | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | 12/31/11 | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.820 | $ | 10.970 | $ | 12.160 | $ | 10.070 | $ | 8.970 | $ | 10.600 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||
Net investment income2 | 0.145 | 0.160 | 0.223 | 0.148 | 0.154 | 0.214 | ||||||||||||||||||||||||
Net realized and unrealized gain (loss) | (0.365 | ) | (0.115 | ) | (1.284 | ) | 2.088 | 1.158 | (1.740 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total from investment operations | (0.220 | ) | 0.045 | (1.061 | ) | 2.236 | 1.312 | (1.526 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||||||||
Net investment income | (0.150 | ) | (0.195 | ) | (0.129 | ) | (0.146 | ) | (0.212 | ) | (0.104 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total dividends and distributions | (0.150 | ) | (0.195 | ) | (0.129 | ) | (0.146 | ) | (0.212 | ) | (0.104 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net asset value, end of period | $ | 10.450 | $ | 10.820 | $ | 10.970 | $ | 12.160 | $ | 10.070 | $ | 8.970 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total return3 | (2.07% | ) | 0.24% | (8.82% | ) | 22.45% | 14.79% | (14.62% | ) | |||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 222 | $ | 147 | $ | 156 | $ | 25 | $ | 30 | $ | 17 | ||||||||||||||||||
Ratio of expenses to average net assets | 1.29% | 1.29% | 1.32% | 1.34% | 1.32% | 1.30% | ||||||||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 1.34% | 1.34% | 1.37% | 1.39% | 1.37% | 1.38% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets | 2.79% | 1.41% | 1.88% | 1.34% | 1.63% | 2.07% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 2.74% | 1.36% | 1.83% | 1.29% | 1.58% | 1.99% | ||||||||||||||||||||||||
Portfolio turnover | 8% | 11% | 27% | 28% | 36% | 47% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect. Total investment return does not include fees, charges, or expenses imposed by the variable annuity and life insurance contracts for which Delaware VIP Trust serves as an underlying investment vehicle. |
See accompanying notes, which are an integral part of the financial statements.
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Delaware VIP® Trust — Delaware VIP International Value Equity Series
Notes to financial statements
June 30, 2016 (Unaudited)
Delaware VIP Trust (Trust) is organized as a Delaware statutory trust and offers 10 series: Delaware VIP Diversified Income Series, Delaware VIP Emerging Markets Series, Delaware VIP High Yield Series, Delaware VIP International Value Equity Series, Delaware VIP Limited-Term Diversified Income Series, Delaware VIP REIT Series, Delaware VIP Small Cap Value Series, Delaware VIP Smid Cap Growth Series, Delaware VIP U.S. Growth Series, and Delaware VIP Value Series. These financial statements and the related notes pertain to Delaware VIP International Value Equity Series (Series). The Trust is an open-end investment company. The Series is considered diversified under the Investment Company Act of 1940, as amended, and offers Standard Class and Service Class shares. The Standard Class shares do not carry a 12b-1 fee and the Service Class shares carry a 12b-1 fee. The shares of the Series are sold only to separate accounts of life insurance companies.
The investment objective of the Series is to seek long-term growth without undue risk to principal.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistently followed by the Series.
Security Valuation — Equity securities, except those traded on the Nasdaq Stock Market LLC (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange on the valuation date. Equity securities traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If, on a particular day, an equity security does not trade, the mean between the bid and ask prices will be used, which approximates fair value. Securities listed on a foreign exchange are normally valued at the last quoted sales price on the valuation date. U.S. government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Open-end investment company securities are valued at net asset value (NAV) per share, as reported by the underlying investment company. Foreign currency exchange contracts and foreign cross currency exchange contracts are valued at the mean between the bid and ask prices, which approximates fair value. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Trust’s Board of Trustees (Board). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security. The Series may use fair value pricing more frequently for securities traded primarily in non-U.S. markets because, among other things, most foreign markets close well before the Series values its securities, generally as of 4:00 p.m. Eastern time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, government actions or pronouncements, aftermarket trading, or news events may have occurred in the interim. Whenever such a significant event occurs, the Series may value foreign securities using fair value prices based on third-party vendor modeling tools (international fair value pricing).
Federal and Foreign Income Taxes — No provision for federal income taxes has been made as the Series intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Series evaluates tax positions taken or expected to be taken in the course of preparing the Series’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Series’ tax positions taken for all open federal income tax years (Dec. 31, 2012–Dec. 31, 2015), and has concluded that no provision for federal income tax is required in the Series’ financial statements. In regard to foreign taxes only, the Series has open tax years in certain foreign countries in which it invests in that may date back to the inception of the Series.
Class Accounting — Investment income, common expenses, and realized and unrealized gain (loss) on investments are allocated to the various classes of the Series on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class.
Repurchase Agreements — The Series may purchase certain U.S. government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Series’ custodian or a third-party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on June 30, 2016 and will mature on the next business day.
Foreign Currency Transactions — Transactions denominated in foreign currencies are recorded at the prevailing exchange rates on the valuation date in accordance with the Series’ prospectus. The value of all assets and liabilities denominated in foreign currencies is translated daily into U.S. dollars at the exchange rate of such currencies against the U.S. dollar. Transaction gains or losses resulting from changes in exchange rates during the reporting period or upon settlement of the foreign currency transaction are reported in operations for the current period. The Series generally does not bifurcate that portion of realized gains and losses on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices. These gains and losses are included on the “Statement of operations” under “Net realized and unrealized gain (loss) on investments.” The Series reports certain foreign currency related transactions as components of realized gains (losses) for financial reporting purposes, whereas such components are treated as ordinary income (loss) for federal income tax purposes.
Use of Estimates — The Series is an investment company, whose financial statements are prepared in conformity with U.S. GAAP. Therefore, the Series follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
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Delaware VIP® International Value Equity Series Delaware VIP International Value Equity Series
Notes to financial statements (continued)
1. Significant Accounting Policies (continued)
Other — Expenses directly attributable to the Series are charged directly to the Series. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated among such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Discounts and premiums on debt securities are accreted or amortized to interest income, respectively, over the lives of the respective securities using the effective interest method. Taxable non-cash dividends are recorded as dividend income. Foreign dividends are also recorded on the ex-dividend date or as soon after the ex-dividend date that the Series is aware of such dividends, net of all tax withholdings, a portion of which may be reclaimable. Withholding taxes and reclaims on foreign dividends have been recorded in accordance with the Series’ understanding of the applicable country’s tax rules and rates.
The Series declares and pays dividends from net investment income and distributions from net realized gain on investments, if any, following the close of the fiscal year. The Series may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
The Series may receive earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. There were no such earnings credits for the six months ended June 30, 2016.
The Series may receive earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than one dollar, the expense paid under this arrangement is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expense offset shown under “Less expense paid indirectly.” For the six months ended June 30, 2016, the Series earned less than $1 under this agreement.
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Series pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.85% on the first $500 million of average daily net assets of the Series, 0.80% on the next $500 million, 0.75% on the next $1.5 billion, and 0.70% on average daily net assets in excess of $2.5 billion.
Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Series. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the Delaware Investments Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DIFSC under the service agreement described above are allocated among all funds in the Delaware Investments Family of Funds on a relative NAV basis. For the six months ended June 30, 2016, the Series was charged $1,448 for these services. This amount is included on the “Statement of operations” under “Accounting and administration expenses.”
DIFSC is also the transfer agent and dividend disbursing agent of the Series. For these services, DIFSC’s fees are calculated at the annual rate of 0.0075% of the Series’ average daily net assets. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the six months ended June 30, 2016, the Series was charged $2,283 for these services. Pursuant to a sub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Series. Sub-transfer agency fees are paid by the Series and are also included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.”
Pursuant to a distribution agreement and distribution plan, the Series pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee of 0.30% of the average daily net assets of the Service Class shares. DDLP has contracted to waive distribution and service fees from Jan. 1, 2016 through June 30, 2016* in order to limit distribution and service fees of the Service Class shares to 0.25% of average daily net assets. Standard Class shares pay no distribution and service expenses.
As provided in the investment management agreement, the Series bears a portion of the cost of certain resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Series. For the six months ended June 30, 2016, the Series was charged $684 for internal legal, tax, and regulatory services provided by DMC and/or its affiliates’ employees. This amount is included on the “Statement of operations” under “Legal fees.”
Trustees’ fees include expenses accrued by the Series for each Trustee’s retainer and meeting fees. Certain officers of DMC, DIFSC, and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Series.
*The contractual waiver period is from April 29, 2015 through May 1, 2017.
3. Investments
For the six months ended June 30, 2016, the Series made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 7,001,585 | ||
Sales | 4,957,337 |
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Notes to financial statements (continued)
3. Investments (continued)
At June 30, 2016, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At June 30, 2016, the cost and unrealized appreciation (depreciation) of investments for federal income tax purposes were as follows:
Cost of Investments | Aggregate Unrealized Appreciation of Investments | Aggregate Unrealized Depreciation of Investments | Net Unrealized Depreciation of Investments | |||||||||||||
$65,545,413 | $9,684,960 | $(11,174,719) | $(1,489,759) | |||||||||||||
U.S. GAAP defines fair value as the price that the Series would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established 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 assumptions that market participants would use in pricing the asset or liability based on the best information available under the circumstances. The Series’ investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized below.
Level 1 - | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) | |
Level 2 - | Other observable inputs, including, but 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. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) | |
Level 3 - | Significant unobservable inputs, including the Series’ own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. The Series may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
The following table summarizes the valuation of the Series’ investments by fair value hierarchy levels as of June 30, 2016:
Securities | Level 1 | Level 2 | Total | |||||||||
Common Stock | ||||||||||||
Australia | $ | — | $ | 765,816 | $ | 765,816 | ||||||
Canada | 3,729,006 | — | 3,729,006 | |||||||||
China/Hong Kong | — | 4,479,889 | 4,479,889 | |||||||||
Denmark | — | 1,497,047 | 1,497,047 | |||||||||
France | — | 11,402,423 | 11,402,423 | |||||||||
Germany | — | 3,978,485 | 3,978,485 | |||||||||
Indonesia | — | 1,048,663 | 1,048,663 | |||||||||
Israel | 2,034,315 | — | 2,034,315 | |||||||||
Italy | — | 646,478 | 646,478 | |||||||||
Japan | 426,657 | 14,386,017 | 14,812,674 | |||||||||
Netherlands | — | 2,443,301 | 2,443,301 | |||||||||
Republic of Korea | — | 1,699,905 | 1,699,905 | |||||||||
Russia | 681,444 | — | 681,444 | |||||||||
Sweden | — | 2,813,874 | 2,813,874 | |||||||||
Switzerland | — | 3,252,855 | 3,252,855 | |||||||||
United Kingdom | — | 6,647,171 | 6,647,171 | |||||||||
Short-Term Investments | — | 2,122,308 | 2,122,308 | |||||||||
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Total Value of Securities | $ | 6,871,422 | $ | 57,184,232 | $ | 64,055,654 | ||||||
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Foreign Currency Exchange Contracts | $ | — | $ | 1,971 | $ | 1,971 |
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Delaware VIP® International Value Equity Series Delaware VIP International Value Equity Series
Notes to financial statements (continued)
3. Investments (continued)
During the six months ended June 30, 2016, there were no transfers between Level 1 investments, Level 2 investments, or Level 3 investments that had a significant impact to the Series. This does not include transfers between Level 1 investments and Level 2 investments due to the Series utilizing international fair value pricing during the period. In accordance with the fair valuation procedures described in Note 1, international fair value pricing of securities occurs when market volatility exceeds an established rolling threshold. If the threshold is exceeded on a given date, then prices of international securities (those that traded on exchanges that close at a different time than the time that the Series’ NAV is determined) are established using a separate pricing feed from a third party vendor designed to establish a price for each such security as of the time that the Series’ NAV is determined. Further, international fair value pricing uses other observable market-based inputs in place of the closing exchange price due to the events occurring after the close of the exchange or market on which the investment is principally traded, causing a change in classification between levels. The Series’ policy is to recognize transfers between levels at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when the Series has a significant amount of Level 3 investments at the beginning, interim, or end of the period in relation to net assets. At June 30, 2016, there were no Level 3 investments.
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 6/30/16 | Year ended 12/31/15 | |||||||||
Shares sold: | ||||||||||
Standard Class | 431,043 | 1,092,086 | ||||||||
Service Class | 7,860 | 26,308 | ||||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||||
Standard Class | 97,116 | 101,741 | ||||||||
Service Class | 294 | 202 | ||||||||
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536,313 | 1,220,337 | |||||||||
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Shares redeemed: | ||||||||||
Standard Class | (569,060 | ) | (724,411 | ) | ||||||
Service Class | (528 | ) | (27,154 | ) | ||||||
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(569,588 | ) | (751,565 | ) | |||||||
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Net increase (decrease) | (33,275 | ) | 468,772 | |||||||
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5. Line of Credit
The Series, along with certain other funds in the Delaware Investments® Family of Funds (Participants), is a participant in a $155,000,000 revolving line of credit intended to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants are charged an annual commitment fee of 0.10%, which is allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants are permitted to borrow up to a maximum of one-third of their net assets under the agreement. Each Participant is individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit available under the agreement expires on Nov. 7, 2016.
The Series had no amounts outstanding as of June 30, 2016 or at any time during the six months then ended.
6. Derivatives
U.S. GAAP requires disclosures that enable investors to understand: (1) how and why an entity uses derivatives; (2) how they are accounted for; and (3) how they affect an entity’s results of operations and financial position.
Foreign Currency Exchange Contracts
The Series may enter into foreign currency exchange contracts and foreign cross currency exchange contracts as a way of managing foreign exchange rate risk. The Series may enter into these contracts to fix the U.S. dollar value of a security that it has agreed to buy or sell for the period between the date the trade was entered into and the date the security is delivered and paid for. The Series may also use these contracts to hedge the U.S. dollar value of securities it already owns that are denominated in foreign currencies. In addition, the Series may enter into these contracts to facilitate or expedite the settlement of portfolio transactions. The change in value is recorded as an unrealized gain or loss. When the contract is closed, a realized gain or loss is recorded equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
The use of foreign currency exchange contracts and foreign cross currency exchange contracts does not eliminate fluctuations in the underlying prices of the securities, but does establish a rate of exchange that can be achieved in the future. Although foreign currency exchange contracts and foreign cross currency exchange contracts limit the risk of loss due
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Delaware VIP® International Value Equity Series Delaware VIP International Value Equity Series
Notes to financial statements (continued)
6. Derivatives (continued)
to an unfavorable change in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency change favorably. In addition, the Series could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. The Series’ maximum risk of loss from counterparty credit risk is the value of its currency exchanged with the counterparty. The risk is generally mitigated by having a netting arrangement between the Series and the counterparty and by the posting of collateral by the counterparty to the Series to cover the Series’ exposure to the counterparty.
During the six months ended June 30, 2016, the Series entered into foreign currency exchange contracts to fix the U.S. dollar value of a security between trade date and settlement date and to facilitate or expedite the settlement of portfolio transactions.
During the six months ended June 30, 2016, the Series had foreign currency risk, which is disclosed as “Unrealized appreciation or depreciation on foreign currency exchange contracts” on the “Statement of assets and liabilities” and as “Net realized loss on foreign currency exchange contracts” on the “Statement of operations.”
Derivatives Generally. The table below summarizes the average balance of derivative holdings by the Series during the six months ended June 30, 2016.
Long Derivatives Volume | Short Derivatives Volume | |||||||||
Foreign currency exchange contracts (Average cost) | $ | 43,446 | $ | 29,346 |
7. Offsetting
In December 2011, the Financial Accounting Standards Board (FASB) issued guidance that expanded disclosure requirements on the offsetting of certain assets and liabilities. The disclosures are required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset on the “Statement of assets and liabilities” and requires an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarified which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting is limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing.
In order to better define its contractual rights and to secure rights that will help the Series mitigate its counterparty risk, the Series entered into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement) or a similar agreement with certain of its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Series and a counterparty that governs certain over-the-counter (OTC) derivatives and foreign exchange contracts and typically contains, among other things, collateral posting items and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Series may, under certain circumstances, offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default (close-out), including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency, or other events.
For financial reporting purposes, the Series does not offset derivative assets and derivative liabilities that are subject to netting arrangements on the “Statement of assets and liabilities.”
At June 30, 2016, the Series had the following assets and liabilities subject to offsetting provisions:
Master Repurchase Agreements
Counterparty | Repurchase Agreements | Fair Value of Non-Cash Collateral Received | Cash Collateral Received | Net Collateral Received | Net Exposure(a) | |||||||||||||||||||||
Bank of America Merrill Lynch | $ | 62,839 | $ | (62,839 | ) | $ | — | $ | (62,839 | ) | $— | |||||||||||||||
Bank of Montreal | 104,731 | (104,731 | ) | — | (104,731 | ) | — | |||||||||||||||||||
BNP Paribas | 10,430 | (10,430 | ) | — | (10,430 | ) | — | |||||||||||||||||||
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Total | $ | 178,000 | $ | (178,000 | ) | $ | — | $ | (178,000 | ) | $— | |||||||||||||||
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(a)Net amount represents the receivable (payable) that would be due from (to) the counterparty in the event of default.
8. Securities Lending
The Series, along with other funds in the Delaware Investments® Family of Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (1) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (2) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities that are the subject of such loan, the borrower will be notified to provide additional collateral by the end of the following business day,
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Notes to financial statements (continued)
8. Securities Lending (continued)
which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial collateral requirement, upon the request of the borrower, BNY Mellon must return enough collateral to the borrower by the end of the following business day to reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security on any particular day, may be more or less than the value of the security on loan.
Prior to Dec. 29, 2015, cash collateral received was generally invested in the Delaware Investments Collateral Fund No. 1 (Collective Trust), a pooled account established by BNY Mellon for the use of funds managed by DMC that participate in BNY Mellon’s securities lending program. The Collective Trust sought to maintain a NAV per unit of $1.00.
On Dec. 29, 2015, the assets in the Collective Trust were transferred to a series of individual separate accounts, each corresponding to a Series. The investment guidelines permit each separate account to hold certain securities that would be considered eligible securities for a money market fund. Cash collateral received is generally invested in government securities; certain obligations issued by government sponsored enterprises; repurchase agreements collateralized by U.S. Treasury securities; obligations issued by the central government of any Organization for Economic Cooperation and Development (OECD) country or its agencies, instrumentalities, or establishments; obligations of supranational organizations, commercial paper, notes, bonds and other debt obligations; certificates of deposit, time deposits and other bank obligations; and asset-backed securities.
In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Series or, at the discretion of the lending agent, replace the loaned securities. The Series continues to record dividends or interest, as applicable, on the securities loaned and are subject to changes in value of the securities loaned that may occur during the term of the loan. The Series has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Series receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Series, the security lending agent, and the borrower. The Series records security lending income net of allocations to the security lending agent and the borrower.
The Series may incur investment losses as a result of investing securities lending collateral. This could occur if an investment in the collateral investment account defaulted or became impaired. Under those circumstances, the value of a Series’ cash collateral account may be less than the amount the Series would be required to return to the borrowers of the securities and the Series would be required to make up for this shortfall.
As of June 30, 2016, the Series had no securities out on loan.
9. Credit and Market Risk
Some countries in which the Series may invest require governmental approval for the repatriation of investment income, capital, or the proceeds of sales of securities by foreign investors. In addition, if there is deterioration in a country’s balance of payments or for other reasons, a country may impose temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially smaller, less liquid, and more volatile than the major securities markets in the United States. Consequently, acquisition and disposition of securities by the Series may be inhibited. In addition, a significant portion of the aggregate market value of equity securities listed on the major securities exchanges in emerging markets is held by a smaller number of investors. This may limit the number of shares available for acquisition or disposition by the Series.
The Series may invest up to 10% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A promulgated under the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Series from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Series’ Board has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of the Series’ limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Series’ 10% limit on investments in illiquid securities. As of June 30, 2016, there were no Rule 144A securities held by the Series and no securities have been determined to be illiquid under the Series’ Liquidity Procedures. When monitoring compliance with the Series’ illiquid limit, certain holdings that are common to multiple clients of the investment manager may be aggregated and considered illiquid in the aggregate solely for monitoring purposes. For purposes of determining illiquidity for financial reporting purposes, only the holdings of this Series will be considered.
10. Contractual Obligations
The Series enters into contracts in the normal course of business that contain a variety of indemnifications. The Series’ maximum exposure under these arrangements is unknown. However, the Series has not had prior claims or losses pursuant to these contracts. Management has reviewed the Series’ existing contracts and expects the risk of loss to be remote.
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Delaware VIP® International Value Equity Series Delaware VIP International Value Equity Series
Notes to financial statements (continued)
11. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to June 30, 2016 that would require recognition or disclosure in the Series’ financial statements.
The Series files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q. The Series’ Forms N-Q, as well as a description of the policies and procedures that the Series uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the Commission’s website at sec.gov. In addition, a description of the policies and procedures that the Series uses to determine how to vote proxies (if any) relating to portfolio securities and the Schedule of Investments included in the Series’ most recent Form N-Q are available without charge on the Delaware Investments® Funds’ website at delawareinvestments.com/vip/literature. The Series’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330.
Information (if any) regarding how the Series voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Delaware Investments Funds’ website at delawareinvestments.com/proxy; and (ii) on the Commission’s website at sec.gov.
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SA-VIPIVE 21184 (8/16) (17290) | International Value Equity Series-16 |
Table of Contents
Delaware VIP® Trust
|
Delaware VIP Limited-Term Diversified Income Series
|
Semiannual report
|
June 30, 2016 |
Table of Contents
Neither Delaware Investments nor its affiliates referred to in this document are authorized deposit-taking institutions for the purpose of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited (MBL), a subsidiary of Macquarie Group Limited and an affiliate of Delaware Investments. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Series is governed by U.S. laws and regulations.
Unless otherwise noted, views expressed herein are current as of June 30, 2016, and subject to change for events occurring after such date.
The Series is not FDIC insured and is not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor and member of Macquarie Group. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries, including the Series’ distributor, Delaware Distributors, L.P. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
This material may be used in conjunction with the offering of shares in Delaware VIP® Limited-Term Diversified Income Series only if preceded or accompanied by the Series’ current prospectus or the summary prospectus.
© 2016 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
Table of Contents
Delaware VIP® Trust — Delaware VIP Limited-Term Diversified Income Series
Disclosure of Series expenses
For the six-month period January 1, 2016 to June 30, 2016 (Unaudited)
As a shareholder of the Series, you incur ongoing costs, which may include management fees; distribution and/or service (12b-1) fees; and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series 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 entire six-month period from Jan. 1, 2016 to June 30, 2016.
Actual expenses
The first section of the table shown, “Actual Series return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, 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, an $8,600 account value divided by $1,000 = 8.6), 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 the period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% return,” provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ 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 Series and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Series, you do not incur any transaction costs, such as sales charges (loads), redemption fees or exchange fees, but shareholders of other funds may incur such costs. Also, the fees related to the variable annuity investment or the deferred sales charge that could apply have not been included. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The Series’ actual expenses shown in the table reflect fee waivers in effect for Service Class shares. The expenses shown in the table assume reinvestment of all dividends and distributions.
Expense analysis of an investment of $1,000
Beginning Account Value 1/1/16 | Ending Account Value 6/30/16 | Annualized Expense Ratio | Expenses Paid During Period 1/1/16 to 6/30/16* | |||||
Actual Series return† | ||||||||
Standard Class | $1,000.00 | $1,024.70 | 0.56% | $2.82 | ||||
Service Class | 1,000.00 | 1,023.50 | 0.81% | 4.08 | ||||
Hypothetical 5% return (5% return before expenses) | ||||||||
Standard Class | $1,000.00 | $1,022.08 | 0.56% | $2.82 | ||||
Service Class | 1,000.00 | 1,020.84 | 0.81% | 4.07 |
* | “Expenses Paid During Period” are equal to the Series’ annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
† | Because actual returns reflect only the most recent six-month period, the returns shown may differ significantly from fiscal year returns. |
Limited-Term Diversified Income Series-1 |
Table of Contents
Delaware VIP® Trust — Delaware VIP Limited-Term Diversified Income Series
Security type / sector allocation
As of June 30, 2016 (Unaudited)
Sector designations may be different than the sector designations presented in other Series materials. The sector designations may represent the investment manager’s internal sector classifications, which may result in the sector designations for one series being different than another series’ sector designations.
Security type / sector | Percentage of net assets | |
Agency Asset-Backed Security | 0.00% | |
Agency Collateralized Mortgage Obligations | 1.80% | |
Agency Commercial Mortgage-Backed Securities | 0.47% | |
Agency Mortgage-Backed Securities | 14.25% | |
Convertible Bond | 0.12% | |
Corporate Bonds | 34.17% | |
Banking | 12.96% | |
Basic Industry | 0.96% | |
Brokerage | 0.24% | |
Capital Goods | 0.38% | |
Communications | 2.70% | |
Consumer Cyclical | 3.13% | |
Consumer Non-Cyclical | 3.91% | |
Electric | 4.56% | |
Energy | 1.32% | |
Finance Companies | 0.24% | |
Insurance | 0.61% | |
Natural Gas | 0.48% | |
Real Estate | 0.24% | |
Technology | 1.59% | |
Transportation | 0.85% | |
Municipal Bonds | 1.04% | |
Non-Agency Asset-Backed Securities | 36.01% | |
Non-Agency Collateralized Mortgage Obligations | 0.25% | |
Non-Agency Commercial Mortgage-Backed Securities | 1.03% | |
U.S. Treasury Obligations | 9.06% | |
Preferred Stock | 1.02% | |
Short-Term Investments | 0.87% | |
Total Value of Securities | 100.09% | |
Liabilities Net of Receivables and Other Assets | (0.09%) | |
Total Net Assets | 100.00% |
Limited-Term Diversified Income Series-2
Table of Contents
Delaware VIP® Trust — Delaware VIP Limited-Term Diversified Income Series
Schedule of investments
June 30, 2016 (Unaudited)
Principal amount° | Value (U.S. $) | |||||||
Agency Asset-Backed Security – 0.00% | ||||||||
Fannie Mae Grantor Trust Series 2003-T4 2A5 5.002% 9/26/33 f | 19,314 | $ | 21,929 | |||||
|
| |||||||
Total Agency Asset-Backed Security (cost $19,157) | 21,929 | |||||||
|
| |||||||
Agency Collateralized Mortgage Obligations – 1.80% | ||||||||
Fannie Mae Connecticut Avenue Securities | ||||||||
Series 2015-C03 1M1 1.953% 7/25/25 • | 4,944,761 | 4,958,843 | ||||||
Series 2015-C03 2M1 1.953% 7/25/25 • | 4,791,390 | 4,814,457 | ||||||
Series 2015-C04 2M1 2.153% 4/25/28 • | 2,067,894 | 2,064,765 | ||||||
Series 2016-C03 1M1 2.453% 10/25/28 • | 1,754,427 | 1,766,614 | ||||||
Fannie Mae Grantor Trust | 14,690 | 16,750 | ||||||
Fannie Mae REMICs | ||||||||
Series 2002-90 A1 6.50% 6/25/42 | 461 | 545 | ||||||
Series 2003-52 NA 4.00% 6/25/23 | 52,683 | 55,314 | ||||||
Series 2003-120 BL 3.50% 12/25/18 | 80,092 | 82,689 | ||||||
Series 2004-49 EB 5.00% 7/25/24 | 11,391 | 12,463 | ||||||
Series 2005-66 FD 0.753% 7/25/35 • | 257,711 | 256,851 | ||||||
Series 2005-110 MB 5.50% 9/25/35 | 3,195 | 3,413 | ||||||
Series 2011-88 AB 2.50% 9/25/26 | 56,234 | 56,987 | ||||||
Series 2011-113 MC 4.00% 12/25/40 | 116,370 | 121,300 | ||||||
Freddie Mac REMICs | ||||||||
Series 2326 ZQ 6.50% 6/15/31 | 15,927 | 18,291 | ||||||
Series 2931 GC 5.00% 1/15/34 | 7,186 | 7,236 | ||||||
Series 3016 FL 0.832% 8/15/35 • | 23,159 | 23,200 | ||||||
Series 3027 DE 5.00% 9/15/25 | 12,369 | 13,569 | ||||||
Series 3067 FA 0.792% 11/15/35 • | 1,085,859 | 1,084,113 | ||||||
Series 3232 KF 0.892% 10/15/36 • | 41,971 | 42,054 | ||||||
Series 3297 BF 0.682% 4/15/37 • | 398,905 | 396,851 | ||||||
Series 3737 NA 3.50% 6/15/25 | 66,842 | 69,915 | ||||||
Series 3780 LF 0.842% 3/15/29 • | 128,284 | 128,414 | ||||||
Series 3800 AF 0.942% 2/15/41 • | 2,230,879 | 2,239,865 | ||||||
Series 3803 TF 0.842% 11/15/28 • | 122,310 | 122,615 | ||||||
Series 4163 CW 3.50% 4/15/40 | 1,927,316 | 2,004,929 | ||||||
Freddie Mac Strips | 2,101 | 2,079 | ||||||
Freddie Mac Structured Agency Credit Risk Debt Notes | ||||||||
Series 2014-DN4 M2 2.853% 10/25/24 • | 346,722 | 349,139 | ||||||
Series 2015-DNA3 M2 3.303% 4/25/28 • | 920,000 | 945,791 |
Principal amount° | Value (U.S. $) | |||||||
Agency Collateralized Mortgage Obligations (continued) | ||||||||
Freddie Mac Structured Agency Credit Risk Debt Notes | ||||||||
Series 2015-HQ2 M2 2.403% 5/25/25 • | 500,000 | $ | 495,973 | |||||
Series 2015-HQA1 M2 3.103% 3/25/28 • | 775,000 | 792,982 | ||||||
Series 2015-HQA2 M2 3.253% 5/25/28 • | 1,025,000 | 1,049,551 | ||||||
Series 2016-DNA1 M2 3.353% 7/25/28 • | 720,000 | 742,449 | ||||||
Series 2016-DNA3 M2 2.446% 12/25/28 • | 410,000 | 412,731 | ||||||
Series 2016-HQA2 M2 2.703% 11/25/28 • | 480,000 | 482,783 | ||||||
Freddie Mac Structured Pass Through Securities | ||||||||
Series T-54 2A 6.50% 2/25/43 ¿ | 889 | 1,081 | ||||||
Series T-58 2A 6.50% 9/25/43 ¿ | 20,553 | 24,506 | ||||||
|
| |||||||
Total Agency Collateralized Mortgage Obligations (cost $25,528,943) | 25,661,108 | |||||||
|
| |||||||
Agency Mortgage-Backed Securities – 14.25% | ||||||||
Fannie Mae ARM | ||||||||
1.855% 8/1/37 • | 216,180 | 222,877 | ||||||
2.166% 1/1/35 • | 535,594 | 556,182 | ||||||
2.329% 9/1/38 • | 486,152 | 521,348 | ||||||
2.399% 8/1/37 • | 103,962 | 109,827 | ||||||
2.401% 3/1/38 • | 2,798 | 2,932 | ||||||
2.443% 8/1/34 • | 11,940 | 12,495 | ||||||
2.46% 9/1/35 • | 123,737 | 130,842 | ||||||
2.486% 12/1/33 • | 7,417 | 7,877 | ||||||
2.527% 7/1/36 • | 15,982 | 16,871 | ||||||
2.53% 8/1/36 • | 10,485 | 11,009 | ||||||
2.549% 11/1/35 • | 63,693 | 67,285 | ||||||
2.592% 6/1/36 • | 21,143 | 22,133 | ||||||
2.593% 8/1/35 • | 2,829 | 2,989 | ||||||
2.594% 7/1/36 • | 16,351 | 17,445 | ||||||
2.834% 4/1/36 • | 4,574 | 4,840 | ||||||
2.909% 6/1/34 • | 8,057 | 8,486 | ||||||
2.966% 4/1/46 • | 4,989,461 | 5,212,290 | ||||||
3.212% 4/1/44 • | 416,783 | 436,661 | ||||||
3.449% 1/1/41 • | 107,374 | 112,522 | ||||||
6.10% 8/1/37 • | 26,125 | 26,112 | ||||||
Fannie Mae Relocation 30 yr 5.00% 1/1/34 | 7,999 | 8,472 | ||||||
Fannie Mae S.F. 15 yr | ||||||||
2.50% 5/1/31 | 522,607 | 541,998 | ||||||
3.00% 11/1/26 | 1,163,439 | 1,228,794 | ||||||
3.00% 2/1/30 | 3,584,000 | 3,763,172 |
Limited-Term Diversified Income Series-3
Table of Contents
Delaware VIP® Limited-Term Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
Agency Mortgage-Backed Securities (continued) | ||||||||
Fannie Mae S.F. 15 yr | ||||||||
3.00% 10/1/30 | 5,982,715 | $ | 6,311,038 | |||||
3.50% 11/1/27 | 214,584 | 228,395 | ||||||
3.50% 6/1/29 | 2,180,160 | 2,327,843 | ||||||
3.50% 8/1/29 | 135,649 | 144,215 | ||||||
4.00% 11/1/25 | 2,413,507 | 2,572,951 | ||||||
4.00% 5/1/27 | 1,144,500 | 1,220,084 | ||||||
Fannie Mae S.F. 20 yr 3.00% 5/1/36 | 1,111,616 | 1,166,574 | ||||||
Fannie Mae S.F. 30 yr | ||||||||
4.50% 7/1/36 | 176,009 | 192,764 | ||||||
4.50% 6/1/38 | 201,877 | 221,188 | ||||||
4.50% 4/1/39 | 915,443 | 998,811 | ||||||
4.50% 6/1/39 | 450,735 | 492,395 | ||||||
4.50% 9/1/39 | 227,511 | 248,864 | ||||||
4.50% 11/1/39 | 717,257 | 798,239 | ||||||
4.50% 1/1/40 | 739,386 | 817,786 | ||||||
4.50% 4/1/40 | 156,302 | 171,346 | ||||||
4.50% 8/1/40 | 238,657 | 262,873 | ||||||
4.50% 9/1/40 | 1,137,727 | 1,247,282 | ||||||
4.50% 11/1/40 | 399,873 | 438,309 | ||||||
4.50% 2/1/41 | 2,820,983 | 3,089,347 | ||||||
4.50% 3/1/41 | 803,445 | 880,735 | ||||||
4.50% 4/1/41 | 1,214,721 | 1,328,582 | ||||||
4.50% 8/1/41 | 441,757 | 492,566 | ||||||
4.50% 10/1/41 | 4,774,224 | 5,235,066 | ||||||
4.50% 12/1/41 | 1,905,763 | 2,088,342 | ||||||
4.50% 1/1/42 | 1,195,759 | 1,316,610 | ||||||
4.50% 4/1/42 | 251,328 | 275,375 | ||||||
4.50% 8/1/42 | 394,610 | 436,179 | ||||||
4.50% 1/1/43 | 1,198,856 | 1,313,033 | ||||||
4.50% 9/1/43 | 988,624 | 1,082,908 | ||||||
4.50% 11/1/43 | 1,439,299 | 1,571,991 | ||||||
4.50% 4/1/44 | 2,105,378 | 2,296,585 | ||||||
4.50% 6/1/44 | 3,912,133 | 4,280,126 | ||||||
4.50% 8/1/44 | 12,739,910 | 13,938,620 | ||||||
4.50% 10/1/44 | 176,174 | 195,673 | ||||||
4.50% 12/1/44 | 797,418 | 872,521 | ||||||
4.50% 1/1/45 | 5,275,412 | 5,765,136 | ||||||
4.50% 4/1/45 | 8,678,096 | 9,483,613 | ||||||
5.00% 4/1/33 | 123,497 | 137,919 | ||||||
5.00% 2/1/35 | 88,191 | 98,438 | ||||||
5.00% 10/1/35 | 125,005 | 139,257 | ||||||
5.00% 2/1/36 | 79,578 | 88,577 | ||||||
5.00% 8/1/37 | 328,255 | 365,798 | ||||||
5.00% 12/1/39 | 361,630 | 406,079 | ||||||
5.00% 1/1/40 | 79,558 | 89,544 | ||||||
5.00% 11/1/44 | 1,623,458 | 1,809,326 | ||||||
5.50% 12/1/32 | 29,133 | 33,042 | ||||||
5.50% 6/1/33 | 98,293 | 111,374 | ||||||
5.50% 11/1/33 | 824,951 | 935,446 |
Principal amount° | Value (U.S. $) | |||||||
Agency Mortgage-Backed Securities (continued) | ||||||||
Fannie Mae S.F. 30 yr | ||||||||
5.50% 7/1/34 | 42,730 | $ | 48,502 | |||||
5.50% 9/1/34 | 520,413 | 590,993 | ||||||
5.50% 12/1/34 | 135,357 | 153,804 | ||||||
5.50% 3/1/35 | 148,167 | 167,847 | ||||||
5.50% 5/1/35 | 501,659 | 569,648 | ||||||
5.50% 9/1/35 | 425,553 | 481,081 | ||||||
5.50% 12/1/35 | 149,179 | 169,271 | ||||||
5.50% 1/1/36 | 555,327 | 629,878 | ||||||
5.50% 4/1/36 | 1,596,038 | 1,807,345 | ||||||
5.50% 5/1/36 | 252,612 | 284,465 | ||||||
5.50% 7/1/36 | 43,820 | 49,772 | ||||||
5.50% 9/1/36 | 47,422 | 53,576 | ||||||
5.50% 10/1/36 | 496,320 | 558,859 | ||||||
5.50% 2/1/37 | 3,006,783 | 3,385,186 | ||||||
5.50% 4/1/37 | 394,203 | 443,372 | ||||||
5.50% 6/1/37 | 487,213 | 548,012 | ||||||
5.50% 8/1/37 | 588,231 | 667,112 | ||||||
5.50% 9/1/37 | 632,617 | 711,326 | ||||||
5.50% 1/1/38 | 5,423,349 | 6,117,335 | ||||||
5.50% 2/1/38 | 54,352 | 61,649 | ||||||
5.50% 4/1/38 | 655,050 | 737,535 | ||||||
5.50% 6/1/38 | 1,199,942 | 1,350,153 | ||||||
5.50% 8/1/38 | 124,510 | 141,209 | ||||||
5.50% 6/1/39 | 639,908 | 724,853 | ||||||
5.50% 11/1/39 | 717,846 | 808,853 | ||||||
5.50% 3/1/40 | 2,278,617 | 2,587,972 | ||||||
5.50% 3/1/41 | 25,256,148 | 28,651,630 | ||||||
5.50% 9/1/41 | 3,959,308 | 4,488,453 | ||||||
6.00% 11/1/34 | 911 | 1,040 | ||||||
6.00% 4/1/36 | 4,524 | 5,168 | ||||||
6.00% 9/1/36 | 242,365 | 282,598 | ||||||
6.00% 7/1/37 | 509,439 | 590,956 | ||||||
6.00% 8/1/37 | 236,381 | 270,873 | ||||||
6.00% 1/1/38 | 82,373 | 94,351 | ||||||
6.00% 5/1/38 | 873,143 | 999,246 | ||||||
6.00% 1/1/39 | 264,779 | 303,384 | ||||||
6.00% 2/1/39 | 346,520 | 397,854 | ||||||
6.00% 10/1/39 | 2,111,607 | 2,450,696 | ||||||
6.00% 5/1/41 | 500,826 | 573,144 | ||||||
6.00% 7/1/41 | 5,190,954 | 5,943,491 | ||||||
6.50% 6/1/29 | 643 | 740 | ||||||
6.50% 1/1/34 | 661 | 808 | ||||||
6.50% 4/1/36 | 136 | 156 | ||||||
6.50% 6/1/36 | 2,314 | 2,663 | ||||||
6.50% 10/1/36 | 2,046 | 2,354 | ||||||
6.50% 8/1/37 | 195 | 225 | ||||||
7.00% 12/1/34 | 563 | 654 | ||||||
7.00% 12/1/35 | 752 | 863 | ||||||
7.00% 12/1/37 | 1,308 | 1,414 | ||||||
7.50% 6/1/31 | 4,887 | 5,926 |
Limited-Term Diversified Income Series-4
Table of Contents
Delaware® VIP Limited-Term Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
Agency Mortgage-Backed Securities (continued) | ||||||||
Fannie Mae S.F. 30 yr | ||||||||
7.50% 4/1/32 | 217 | $ | 256 | |||||
7.50% 5/1/33 | 583 | 588 | ||||||
7.50% 6/1/34 | 273 | 322 | ||||||
9.00% 7/1/20 | 2,104 | 2,199 | ||||||
10.00% 8/1/19 | 1,203 | 1,209 | ||||||
Freddie Mac ARM | ||||||||
2.408% 10/1/36 • | 3,532 | 3,741 | ||||||
2.495% 1/1/44 • | 1,749,765 | 1,814,184 | ||||||
2.635% 7/1/38 • | 357,793 | 379,245 | ||||||
2.65% 10/1/37 • | 37,645 | 39,613 | ||||||
2.769% 6/1/37 • | 147,614 | 154,733 | ||||||
2.807% 4/1/33 • | 3,168 | 3,285 | ||||||
2.951% 11/1/44 • | 286,968 | 297,955 | ||||||
3.107% 3/1/46 • | 1,125,862 | 1,177,024 | ||||||
4.852% 8/1/38 • | 9,212 | 9,688 | ||||||
Freddie Mac S.F. 15 yr | ||||||||
3.50% 9/1/29 | 7,204,698 | 7,658,661 | ||||||
4.00% 1/1/29 | 4,647,554 | 4,952,769 | ||||||
Freddie Mac S.F. 20 yr | 187,389 | 196,448 | ||||||
Freddie Mac S.F. 30 yr | ||||||||
4.50% 4/1/39 | 134,454 | 148,860 | ||||||
4.50% 10/1/39 | 364,575 | 399,720 | ||||||
4.50% 5/1/40 | 5,118,562 | 5,709,315 | ||||||
4.50% 3/1/42 | 1,439,537 | 1,582,986 | ||||||
4.50% 8/1/44 | 517,075 | 569,992 | ||||||
4.50% 7/1/45 | 2,345,954 | 2,575,223 | ||||||
5.00% 6/1/36 | 1,285,151 | 1,427,020 | ||||||
5.50% 6/1/36 | 38,174 | 42,966 | ||||||
5.50% 5/1/37 | 341,095 | 384,666 | ||||||
5.50% 3/1/40 | 206,394 | 231,311 | ||||||
5.50% 8/1/40 | 695,766 | 780,502 | ||||||
5.50% 6/1/41 | 5,082,429 | 5,716,461 | ||||||
6.00% 2/1/36 | 517,861 | 594,599 | ||||||
6.00% 3/1/36 | 381,495 | 439,599 | ||||||
6.00% 1/1/38 | 77,162 | 88,078 | ||||||
6.00% 6/1/38 | 207,775 | 237,046 | ||||||
6.00% 8/1/38 | 933,645 | 1,083,035 | ||||||
6.00% 7/1/40 | 513,169 | 588,013 | ||||||
7.00% 11/1/33 | 4,092 | 4,944 | ||||||
9.00% 4/1/17 | 59 | 60 | ||||||
GNMA I S.F. 30 yr | 16,783 | 20,456 | ||||||
GNMA II S.F. 30 yr | ||||||||
5.50% 5/20/37 | 384,969 | 429,460 | ||||||
5.50% 4/20/40 | 398,160 | 436,650 | ||||||
6.00% 2/20/39 | 608,393 | 693,317 | ||||||
6.00% 4/20/46 | 615,411 | 708,788 | ||||||
|
| |||||||
Total Agency Mortgage-Backed Securities | 203,567,506 | |||||||
|
|
Principal amount° | Value (U.S. $) | |||||||
Agency Commercial Mortgage-Backed Securities – 0.47% | ||||||||
FREMF Mortgage Trust | ||||||||
Series 2011-K15 B 144A 5.116% 8/25/44 #• | 125,000 | $ | 137,976 | |||||
Series 2012-K22 B 144A 3.811% 8/25/45 #• | 1,115,000 | 1,164,615 | ||||||
Series 2012-K708 B 144A 3.883% 2/25/45 #• | 1,170,000 | 1,208,906 | ||||||
Series 2013-K35 C 144A 4.077% 8/25/23 #• | 230,000 | 224,636 | ||||||
Series 2013-K712 B 144A 3.484% 5/25/45 #• | 1,175,000 | 1,202,321 | ||||||
NCUA Guaranteed Notes Trust | ||||||||
Series 2010-C1 A2 2.90% 10/29/20 | 100,866 | 100,911 | ||||||
Series 2011-C1 2A 0.976% 3/9/21 • | 2,646,724 | 2,642,066 | ||||||
|
| |||||||
Total Agency Commercial Mortgage-Backed Securities | 6,681,431 | |||||||
|
| |||||||
Convertible Bond – 0.12% | ||||||||
Jefferies Group 3.875% exercise price $44.19, maturity date 11/1/29 | 1,645,000 | 1,671,731 | ||||||
|
| |||||||
Total Convertible Bond | 1,671,731 | |||||||
|
| |||||||
Corporate Bonds – 34.17% | ||||||||
Banking – 12.96% | ||||||||
ANZ New Zealand International 144A 2.60% 9/23/19 # | 7,290,000 | 7,462,634 | ||||||
Bank of America | ||||||||
2.625% 10/19/20 | 2,370,000 | 2,410,205 | ||||||
4.45% 3/3/26 | 11,610,000 | 12,167,176 | ||||||
Bank of New York Mellon | ||||||||
2.45% 11/27/20 | 5,100,000 | 5,250,419 | ||||||
2.50% 4/15/21 | 1,000,000 | 1,036,907 | ||||||
BB&T | ||||||||
2.05% 5/10/21 | 7,500,000 | 7,615,035 | ||||||
2.45% 1/15/20 | 2,085,000 | 2,144,164 | ||||||
Branch Banking & Trust 3.625% 9/16/25 | 1,570,000 | 1,692,151 | ||||||
Citizens Bank | ||||||||
2.30% 12/3/18 | 5,285,000 | 5,357,183 | ||||||
2.45% 12/4/19 | 5,065,000 | 5,136,249 | ||||||
Commonwealth Bank of Australia 2.40% 11/2/20 | 8,600,000 | 8,862,360 | ||||||
Compass Bank 2.75% 9/29/19 | 9,170,000 | 9,062,876 | ||||||
Cooperatieve Rabobank 2.50% 1/19/21 | 1,775,000 | 1,820,571 | ||||||
Credit Suisse | ||||||||
2.30% 5/28/19 | 8,285,000 | 8,399,432 | ||||||
3.00% 10/29/21 | 925,000 | 948,172 | ||||||
Credit Suisse Group Funding Guernsey 144A 3.80% 6/9/23 # | 2,640,000 | 2,637,204 |
Limited-Term Diversified Income Series-5
Table of Contents
Delaware® VIP Limited-Term Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
Corporate Bonds (continued) | ||||||||
Banking (continued) | ||||||||
Fifth Third Bancorp 2.875% 7/27/20 | 2,345,000 | $ | 2,449,728 | |||||
Fifth Third Bank | ||||||||
2.25% 6/14/21 | 240,000 | 243,911 | ||||||
2.30% 3/15/19 | 1,090,000 | 1,111,874 | ||||||
3.85% 3/15/26 | 1,190,000 | 1,252,207 | ||||||
HSBC Holdings 6.875% 12/29/49 • | 1,280,000 | 1,276,800 | ||||||
JPMorgan Chase | ||||||||
2.40% 6/7/21 | 2,820,000 | 2,861,364 | ||||||
2.75% 6/23/20 | 1,180,000 | 1,216,581 | ||||||
4.25% 10/1/27 | 7,110,000 | 7,539,487 | ||||||
KeyBank | ||||||||
2.35% 3/8/19 | 4,160,000 | 4,250,746 | ||||||
3.18% 5/22/22 | 940,000 | 964,552 | ||||||
Lloyds Banking Group 3.10% 7/6/21 | 535,000 | 534,604 | ||||||
Morgan Stanley | ||||||||
2.45% 2/1/19 | 2,760,000 | 2,813,566 | ||||||
3.875% 1/27/26 | 4,465,000 | 4,749,487 | ||||||
3.95% 4/23/27 | 5,180,000 | 5,249,997 | ||||||
PNC Bank | ||||||||
2.30% 6/1/20 | 2,645,000 | 2,710,953 | ||||||
2.45% 11/5/20 | 2,985,000 | 3,068,881 | ||||||
2.60% 7/21/20 | 2,060,000 | 2,134,434 | ||||||
Santander UK Group Holdings 2.875% 10/16/20 | 5,445,000 | 5,413,822 | ||||||
Skandinaviska Enskilda Banken 144A 2.375% 3/25/19 # | 7,410,000 | 7,553,391 | ||||||
State Street 2.55% 8/18/20 | 2,220,000 | 2,305,066 | ||||||
SunTrust Banks | ||||||||
2.35% 11/1/18 | 1,830,000 | 1,859,520 | ||||||
2.50% 5/1/19 | 7,305,000 | 7,462,006 | ||||||
SVB Financial Group 3.50% 1/29/25 | 2,430,000 | 2,427,052 | ||||||
Toronto-Dominion Bank 2.25% 11/5/19 | 6,935,000 | 7,119,991 | ||||||
U.S. Bank | ||||||||
1.40% 4/26/19 | 3,500,000 | 3,521,714 | ||||||
2.125% 10/28/19 | 5,760,000 | 5,906,955 | ||||||
UBS Group Funding Jersey 144A 3.00% 4/15/21 # | 5,915,000 | 6,039,688 | ||||||
US Bancorp 2.35% 1/29/21 | 3,365,000 | 3,475,746 | ||||||
USB Capital IX 3.50% 10/29/49 @• | 2,220,000 | 1,817,625 | ||||||
Wells Fargo 2.625% 12/15/16 | 1,450,000 | 1,462,254 | ||||||
Zions Bancorporation 4.50% 6/13/23 | 2,195,000 | 2,329,674 | ||||||
|
| |||||||
185,126,414 | ||||||||
|
| |||||||
Basic Industry – 0.96% | ||||||||
Georgia-Pacific | ||||||||
144A 2.539% 11/15/19 # | 4,000,000 | 4,099,616 | ||||||
144A 5.40% 11/1/20 # | 2,365,000 | 2,681,241 | ||||||
LyondellBasell Industries 5.75% 4/15/24 | 1,225,000 | 1,460,285 | ||||||
PPG Industries 2.30% 11/15/19 | 1,820,000 | 1,836,056 | ||||||
WestRock 3.50% 3/1/20 | 1,990,000 | 2,056,074 |
Principal amount° | Value (U.S. $) | |||||||
Corporate Bonds (continued) | ||||||||
Basic Industry (continued) | ||||||||
WestRock 4.45% 3/1/19 | 1,510,000 | $ | 1,596,639 | |||||
|
| |||||||
13,729,911 | ||||||||
|
| |||||||
Brokerage – 0.24% | ||||||||
Jefferies Group 5.125% 1/20/23 | 3,115,000 | 3,276,880 | ||||||
Lazard Group 6.85% 6/15/17 | 131,000 | 137,026 | ||||||
|
| |||||||
3,413,906 | ||||||||
|
| |||||||
Capital Goods – 0.38% | ||||||||
Crane 2.75% 12/15/18 | 420,000 | 431,928 | ||||||
Fortune Brands Home & Security 3.00% 6/15/20 | 1,285,000 | 1,328,612 | ||||||
Waste Management | ||||||||
2.40% 5/15/23 | 1,205,000 | 1,224,268 | ||||||
2.60% 9/1/16 | 2,365,000 | 2,370,484 | ||||||
|
| |||||||
5,355,292 | ||||||||
|
| |||||||
Communications – 2.70% | ||||||||
21st Century Fox America 4.50% 2/15/21 | 2,945,000 | 3,291,559 | ||||||
American Tower | ||||||||
2.80% 6/1/20 | 2,005,000 | 2,053,623 | ||||||
3.30% 2/15/21 | 945,000 | 986,862 | ||||||
4.40% 2/15/26 | 964,000 | 1,048,634 | ||||||
AT&T | ||||||||
2.45% 6/30/20 | 2,890,000 | 2,953,308 | ||||||
2.80% 2/17/21 | 160,000 | 164,341 | ||||||
3.60% 2/17/23 | 1,910,000 | 1,995,335 | ||||||
4.125% 2/17/26 | 2,625,000 | 2,825,369 | ||||||
Crown Castle International 5.25% 1/15/23 | 2,095,000 | 2,358,572 | ||||||
Crown Castle Towers 144A 3.663% 5/15/25 # | 3,785,000 | 3,913,955 | ||||||
GTP Acquisition Partners I 144A 2.35% 6/15/20 # | 1,080,000 | 1,079,039 | ||||||
Omnicom Group 3.60% 4/15/26 | 440,000 | 464,358 | ||||||
SBA Tower Trust | ||||||||
144A 2.24% 4/16/18 # | 1,660,000 | 1,665,320 | ||||||
144A 2.898% 10/15/19 # | 1,520,000 | 1,541,105 | ||||||
Sky 144A 3.75% 9/16/24 # | 4,710,000 | 4,902,055 | ||||||
Verizon Communications | ||||||||
4.50% 9/15/20 | 3,640,000 | 4,044,135 | ||||||
5.15% 9/15/23 | 2,830,000 | 3,300,937 | ||||||
|
| |||||||
38,588,507 | ||||||||
|
| |||||||
Consumer Cyclical – 3.13% | ||||||||
BMW U.S. Capital 144A 2.00% 4/11/21 # | 3,185,000 | 3,228,501 | ||||||
CVS Health | ||||||||
2.125% 6/1/21 | 2,550,000 | 2,584,305 | ||||||
3.875% 7/20/25 | 2,297,000 | 2,531,393 | ||||||
Ford Motor Credit 3.096% 5/4/23 | 5,080,000 | 5,158,852 |
Limited-Term Diversified Income Series-6
Table of Contents
Delaware® VIP Limited-Term Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
Corporate Bonds (continued) | ||||||||
Consumer Cyclical (continued) | ||||||||
Ford Motor Credit 3.336% 3/18/21 | 720,000 | $ | 747,542 | |||||
General Motors 3.50% 10/2/18 | 1,610,000 | 1,658,508 | ||||||
General Motors Financial | ||||||||
3.15% 1/15/20 | 2,455,000 | 2,487,227 | ||||||
3.45% 4/10/22 | 215,000 | 215,127 | ||||||
3.70% 5/9/23 | 905,000 | 911,038 | ||||||
4.375% 9/25/21 | 990,000 | 1,045,916 | ||||||
Historic TW 6.875% 6/15/18 | 1,340,000 | 1,480,851 | ||||||
Hyundai Capital America | ||||||||
144A 2.125% 10/2/17 # | 260,000 | 261,699 | ||||||
144A 2.55% 2/6/19 # | 3,000,000 | 3,051,423 | ||||||
144A 3.00% 3/18/21 # | 150,000 | 155,546 | ||||||
INVISTA Finance 144A 4.25% 10/15/19 # | 2,525,000 | 2,474,500 | ||||||
Starbucks 2.10% 2/4/21 | 4,745,000 | 4,880,152 | ||||||
Toyota Motor Credit 1.375% 1/10/18 | 200,000 | 201,447 | ||||||
Viacom 2.50% 12/15/16 | 4,960,000 | 4,982,037 | ||||||
Walgreens Boots Alliance 2.60% 6/1/21 | 6,525,000 | 6,654,234 | ||||||
|
| |||||||
44,710,298 | ||||||||
|
| |||||||
Consumer Non-Cyclical – 3.91% | ||||||||
AbbVie 2.30% 5/14/21 | 8,495,000 | 8,607,933 | ||||||
Aetna 2.40% 6/15/21 | 6,455,000 | 6,593,453 | ||||||
Anheuser-Busch InBev Finance | ||||||||
2.65% 2/1/21 | 7,455,000 | 7,739,117 | ||||||
3.65% 2/1/26 | 120,000 | 128,805 | ||||||
Molson Coors Brewing 2.10% 7/15/21 | 3,845,000 | 3,861,191 | ||||||
Mylan 144A 3.15% 6/15/21 # | 5,180,000 | 5,260,212 | ||||||
Pernod Ricard 144A 4.45% 1/15/22 # | 4,125,000 | 4,550,543 | ||||||
Perrigo Finance Unlimited 3.50% 12/15/21 | 1,600,000 | 1,648,592 | ||||||
Reynolds American | ||||||||
4.00% 6/12/22 | 2,765,000 | 3,008,956 | ||||||
4.45% 6/12/25 | 5,185,000 | 5,817,461 | ||||||
Sysco 2.50% 7/15/21 | 3,645,000 | 3,729,025 | ||||||
Thermo Fisher Scientific 3.00% 4/15/23 | 4,730,000 | 4,835,943 | ||||||
|
| |||||||
55,781,231 | ||||||||
|
| |||||||
Electric – 4.56% | ||||||||
Ameren 2.70% 11/15/20 | 7,615,000 | 7,850,562 | ||||||
Arizona Public Service 2.20% 1/15/20 | 8,255,000 | 8,459,930 | ||||||
CenterPoint Energy 5.95% 2/1/17 | 1,675,000 | 1,716,803 | ||||||
CMS Energy 6.25% 2/1/20 | 2,945,000 | 3,392,982 | ||||||
DTE Energy | ||||||||
2.40% 12/1/19 | 3,350,000 | 3,423,285 | ||||||
3.30% 6/15/22 | 2,145,000 | 2,263,655 | ||||||
Electricite de France 144A 5.25% 12/29/49 #• | 2,705,000 | 2,606,673 | ||||||
Entergy 4.00% 7/15/22 | 6,555,000 | 7,043,288 | ||||||
Exelon 2.85% 6/15/20 | 3,500,000 | 3,613,781 | ||||||
Exelon Generation 4.25% 6/15/22 | 1,675,000 | 1,788,751 | ||||||
IPALCO Enterprises 3.45% 7/15/20 | 4,765,000 | 4,860,300 |
Principal amount° | Value (U.S. $) | |||||||
Corporate Bonds (continued) | ||||||||
Electric (continued) | ||||||||
Kansas City Power & Light 6.375% 3/1/18 | 3,715,000 | $ | 4,000,814 | |||||
LG&E & KU Energy 3.75% 11/15/20 | 470,000 | 505,233 | ||||||
NV Energy 6.25% 11/15/20 | 2,350,000 | 2,784,915 | ||||||
Pacific Gas & Electric 3.50% 10/1/20 | 250,000 | 268,921 | ||||||
Public Service Electric & Gas 1.90% 3/15/21 | 2,565,000 | 2,610,598 | ||||||
Southern 2.35% 7/1/21 | 7,740,000 | 7,902,795 | ||||||
|
| |||||||
65,093,286 | ||||||||
|
| |||||||
Energy – 1.32% | ||||||||
BG Energy Capital 144A 2.875% 10/15/16 # | 3,535,000 | 3,547,751 | ||||||
Chevron 2.10% 5/16/21 | 5,575,000 | 5,685,279 | ||||||
Regency Energy Partners 5.875% 3/1/22 | 2,170,000 | 2,323,814 | ||||||
TransCanada PipeLines 1.625% 11/9/17 | 2,130,000 | 2,135,532 | ||||||
Woodside Finance 144A 8.75% 3/1/19 # | 4,420,000 | 5,095,000 | ||||||
|
| |||||||
18,787,376 | ||||||||
|
| |||||||
Finance Companies – 0.24% | ||||||||
AerCap Ireland Capital 3.95% 2/1/22 | 3,200,000 | 3,208,000 | ||||||
General Electric 1.013% 5/5/26 • | 305,000 | 286,734 | ||||||
|
| |||||||
3,494,734 | ||||||||
|
| |||||||
Insurance – 0.61% | ||||||||
Berkshire Hathaway Finance 2.90% 10/15/20 | 1,530,000 | 1,625,448 | ||||||
Metropolitan Life Global Funding I 144A 1.875% 6/22/18 # | 1,435,000 | 1,449,644 | ||||||
Pricoa Global Funding I 144A 1.60% 5/29/18 # | 920,000 | 926,007 | ||||||
Principal Life Global Funding II 144A 3.00% 4/18/26 # | 1,775,000 | 1,812,673 | ||||||
TIAA Asset Management Finance | ||||||||
144A 2.95% 11/1/19 # | 1,910,000 | 1,958,260 | ||||||
144A 4.125% 11/1/24 # | 900,000 | 947,112 | ||||||
|
| |||||||
8,719,144 | ||||||||
|
| |||||||
Natural Gas – 0.48% | ||||||||
Sempra Energy 2.30% 4/1/17 | 3,460,000 | 3,489,275 | ||||||
Williams Partners 7.25% 2/1/17 | 3,251,000 | 3,348,715 | ||||||
|
| |||||||
6,837,990 | ||||||||
|
| |||||||
Real Estate – 0.24% | ||||||||
Host Hotels & Resorts 3.75% 10/15/23 | 635,000 | 640,613 | ||||||
Kimco Realty 3.40% 11/1/22 | 420,000 | 440,853 | ||||||
Simon Property Group 2.50% 7/15/21 | 1,890,000 | 1,948,526 | ||||||
WEA Finance 144A 3.75% 9/17/24 # | 400,000 | 417,720 | ||||||
|
| |||||||
3,447,712 | ||||||||
|
| |||||||
Technology – 1.59% | ||||||||
Amphenol 3.125% 9/15/21 | 11,135,000 | 11,523,957 |
Limited-Term Diversified Income Series-7 |
Table of Contents
Delaware® VIP Limited-Term Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
Corporate Bonds (continued) | ||||||||
Technology (continued) | ||||||||
FLIR Systems 3.125% 6/15/21 | 1,045,000 | $ | 1,074,175 | |||||
Fortive 144A 2.35% 6/15/21 # | 2,630,000 | 2,671,633 | ||||||
National Semiconductor 6.60% 6/15/17 | 925,000 | 974,043 | ||||||
Oracle | ||||||||
1.90% 9/15/21 | 740,000 | 743,258 | ||||||
2.40% 9/15/23 | 5,730,000 | 5,755,945 | ||||||
|
| |||||||
22,743,011 | ||||||||
|
| |||||||
Transportation – 0.85% | ||||||||
Norfolk Southern 2.90% 6/15/26 | 2,150,000 | 2,216,859 | ||||||
Penske Truck Leasing | ||||||||
144A 3.30% 4/1/21 # | 1,130,000 | 1,162,859 | ||||||
144A 3.375% 2/1/22 # | 3,470,000 | 3,543,033 | ||||||
Ryder System 3.45% 11/15/21 | 4,240,000 | 4,439,004 | ||||||
United Airlines 2015-1 Class AA Pass-Through Trust 3.45% 12/1/27 ¿ | 740,000 | 772,375 | ||||||
|
| |||||||
12,134,130 | ||||||||
|
| |||||||
Total Corporate Bonds | 487,962,942 | |||||||
|
| |||||||
Municipal Bonds – 1.04% | ||||||||
County of Baltimore, Maryland 5.00% 2/1/26 | 3,320,000 | 4,399,664 | ||||||
New York City, New York | ||||||||
Series C 5.00% 8/1/26 | 1,850,000 | 2,404,537 | ||||||
Series C 5.00% 8/1/27 | 1,030,000 | 1,328,350 | ||||||
University of California Series Y-2 0.967% 7/1/41 • | 6,670,000 | 6,670,467 | ||||||
|
| |||||||
Total Municipal Bonds | 14,803,018 | |||||||
|
| |||||||
Non-Agency Asset-Backed Securities – 36.01% | ||||||||
AEP Texas Central Transition Funding II Series 2006-A A4 5.17% 1/1/18 | 678,617 | 698,727 | ||||||
Ally Master Owner Trust | ||||||||
Series 2012-5 A 1.54% 9/15/19 | 8,490,000 | 8,516,664 | ||||||
Series 2014-1 A1 0.912% 1/15/19 • | 3,220,000 | 3,220,537 | ||||||
Series 2014-4 A2 1.43% 6/17/19 | 2,130,000 | 2,135,016 | ||||||
American Express Credit Account Master Trust | ||||||||
Series 2012-1 A 0.712% 1/15/20 • | 8,200,000 | 8,204,798 | ||||||
Series 2013-2 A 0.862% 5/17/21 • | 3,290,000 | 3,292,392 | ||||||
Series 2014-1 A 0.812% 12/15/21 • | 10,735,000 | 10,734,999 | ||||||
ARI Fleet Lease Trust Series 2015-A A2 144A 1.11% 11/15/18 # | 292,433 | 292,432 | ||||||
Avis Budget Rental Car Funding AESOP Series 2013-2A A 144A 2.97% 2/20/20 # | 8,750,000 | 8,971,704 |
Principal amount° | Value (U.S. $) | |||||||
Non-Agency Asset-Backed Securities (continued) | ||||||||
Bank of America Credit Card Trust | ||||||||
Series 2007-A4 A4 0.482% 11/15/19 • | 8,614,000 | $ | 8,600,647 | |||||
Series 2014-A2 A 0.712% 9/16/19 • | 14,972,000 | 14,986,228 | ||||||
Series 2014-A3 A 0.732% 1/15/20 • | 11,060,000 | 11,076,465 | ||||||
Barclays Dryrock Issuance Trust Series 2014-2 A 0.782% 3/16/20 • | 2,500,000 | 2,499,581 | ||||||
BMW Floorplan Master Owner Trust Series 2015-1A A 144A 0.942% 7/15/20 #• | 1,700,000 | 1,700,104 | ||||||
Cabela’s Credit Card Master Note Trust | ||||||||
Series 2014-2 A 0.892% 7/15/22 • | 3,750,000 | 3,714,401 | ||||||
Series 2015-1A A1 2.26% 3/15/23 | 5,300,000 | 5,432,519 | ||||||
Capital One Multi-Asset Execution Trust | ||||||||
Series 2007-A1 A1 0.492% 11/15/19 • | 8,585,000 | 8,579,355 | ||||||
Series 2007-A2 A2 0.522% 12/16/19 • | 585,000 | 584,493 | ||||||
Series 2007-A5 A5 0.482% 7/15/20 • | 6,850,000 | 6,828,409 | ||||||
Series 2014-A3 A3 0.822% 1/18/22 • | 3,850,000 | 3,847,912 | ||||||
Series 2014-A5 A5 1.48% 7/15/20 | 1,585,000 | 1,595,327 | ||||||
Series 2016-A1 A1 0.90% 2/15/22 • | 3,000,000 | 3,005,178 | ||||||
Chase Issuance Trust | ||||||||
Series 2007-A5 A5 0.482% 3/15/19 • | 100,000 | 99,893 | ||||||
Series 2007-A12 A12 0.492% 8/15/19 • | 1,250,000 | 1,248,276 | ||||||
Series 2007-B1 B1 0.692% 4/15/19 • | 6,100,000 | 6,084,085 | ||||||
Series 2012-A10 A10 0.702% 12/16/19 • | 16,750,000 | 16,749,998 | ||||||
Series 2013-A3 A3 0.722% 4/15/20 • | 6,110,000 | 6,101,175 | ||||||
Series 2013-A7 A 0.872% 9/15/20 • | 2,550,000 | 2,555,115 | ||||||
Series 2013-A9 A 0.862% 11/16/20 • | 10,175,000 | 10,177,571 | ||||||
Series 2014-A5 A5 0.812% 4/15/21 • | 8,190,000 | 8,178,830 | ||||||
Series 2014-A7 A7 1.38% 11/15/19 | 5,500,000 | 5,528,535 | ||||||
Series 2015-A6 A6 0.692% 5/15/19 • | 15,266,000 | 15,272,741 | ||||||
Series 2016-A1 A 0.852% 5/17/21 • | 2,290,000 | 2,290,658 | ||||||
Series 2016-A3 A3 0.55% 6/15/23 • | 7,600,000 | 7,604,771 | ||||||
Chesapeake Funding | ||||||||
Series 2012-2A A 144A 0.92% 5/7/24 #• | 30,294 | 30,288 | ||||||
Series 2014-1A A 144A 0.885% 3/7/26 #• | 4,206,741 | 4,190,903 | ||||||
CIT Equipment Collateral Series 2014-VT1 A2 144A 0.86% 5/22/17 # | 216,213 | 216,000 | ||||||
Citibank Credit Card Issuance Trust | ||||||||
Series 2008-A7 A7 1.823% 5/20/20 • | 694,000 | 707,940 | ||||||
Series 2013-A2 A2 0.732% 5/26/20 • | 5,647,000 | 5,650,389 | ||||||
Series 2013-A4 A4 0.872% 7/24/20 • | 18,985,000 | 18,953,677 | ||||||
Series 2013-A7 A7 0.875% 9/10/20 • | 6,632,000 | 6,652,798 |
Limited-Term Diversified Income Series-8
Table of Contents
Delaware® VIP Limited-Term Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
Non-Agency Asset-Backed Securities (continued) | ||||||||
Citibank Credit Card Issuance Trust | ||||||||
Series 2013-A12 A12 0.862% 11/7/18 • | 1,865,000 | $ | 1,865,438 | |||||
Series 2014-A7 A7 0.652% 8/24/18 • | 500,000 | 500,049 | ||||||
CNH Equipment Trust Series 2016-B A2B 1.05% 10/15/19 • | 1,085,000 | 1,083,630 | ||||||
Discover Card Execution Note Trust Series 2012-A4 A4 0.812% 11/15/19 • | 2,550,000 | 2,553,649 | ||||||
Series 2013-A1 A1 0.742% 8/17/20 • | 9,795,000 | 9,805,990 | ||||||
Series 2013-A6 A6 0.892% 4/15/21 • | 9,350,000 | 9,367,388 | ||||||
Series 2014-A1 A1 0.872% 7/15/21 • | 12,984,000 | 13,013,833 | ||||||
Series 2015-A1 A1 0.792% 8/17/20 • | 11,275,000 | 11,297,691 | ||||||
Series 2015-A3 A 1.45% 3/15/21 | 1,305,000 | 1,318,589 | ||||||
Enterprise Fleet Financing Series 2014-1 A2 144A 0.87% 9/20/19 # | 834,016 | 833,027 | ||||||
FirstKey Lending Trust Series 2015-SFR1 A 144A 2.553% 3/9/47 # | 681,240 | 685,864 | ||||||
Ford Credit Auto Lease Trust Series 2015-A A3 1.13% 6/15/18 | 1,025,000 | 1,026,050 | ||||||
Ford Credit Auto Owner Trust | ||||||||
Series 2016-A A2B 0.842% 12/15/18 • | 2,000,000 | 2,002,668 | ||||||
Series 2016-B A2B 0.752% 3/15/19 • | 1,225,000 | 1,226,260 | ||||||
Ford Credit Floorplan Master Owner Trust A | ||||||||
Series 2013-5 A2 0.912% 9/15/18 • | 1,000,000 | 1,000,107 | ||||||
Series 2014-1 A1 1.20% 2/15/19 | 6,318,000 | 6,334,117 | ||||||
Series 2014-1 A2 0.842% 2/15/19 • | 14,665,000 | 14,658,882 | ||||||
Series 2014-4 A2 0.792% 8/15/19 • | 2,640,000 | 2,628,928 | ||||||
Series 2015-1 A2 0.842% 1/15/20 • | 15,082,000 | 15,036,007 | ||||||
Series 2015-2 A2 1.012% 1/15/22 • | 19,155,000 | 19,101,433 | ||||||
GE Dealer Floorplan Master Note Trust | ||||||||
Series 2012-2 A 1.198% 4/22/19 • | 16,930,000 | 16,970,354 | ||||||
Series 2014-1 A 0.828% 7/20/19 • | 6,398,000 | 6,383,038 | ||||||
Series 2015-1 A 0.938% 1/20/20 • | 7,290,000 | 7,267,096 | ||||||
Golden Credit Card Trust | ||||||||
Series 2014-1A A 144A 0.893% 3/15/19 #• | 570,000 | 569,221 | ||||||
Series 2014-2A A 144A 0.892% 3/15/21 #• | 8,195,000 | 8,147,187 | ||||||
Series 2015-1A A 144A 0.882% 2/15/20 #• | 10,175,000 | 10,151,834 | ||||||
GreatAmerica Leasing Receivables Series 2014-1 A3 144A 0.89% 7/15/17 # | 3,311,356 | 3,309,451 |
Principal amount° | Value (U.S. $) | |||||||
Non-Agency Asset-Backed Securities (continued) | ||||||||
Hertz Fleet Lease Funding Series 2014-1 A 144A 0.845% 4/10/28 #• | 2,314,858 | $ | 2,308,677 | |||||
HOA Funding Series 2014-1A A2 144A 4.846% 8/20/44 # | 352,225 | 311,649 | ||||||
Honda Auto Receivables Owner Trust Series 2015-3 A3 1.27% 4/18/19 | 3,000,000 | 3,012,636 | ||||||
Hyundai Auto Lease Securitization Trust | ||||||||
Series 2014-A A4 144A 1.01% 9/15/17 # | 1,530,000 | 1,529,935 | ||||||
Series 2015-A A3 144A 1.42% 9/17/18 # | 5,300,000 | 5,313,283 | ||||||
Series 2016-A A2B 144A 0.992% 7/16/18 #• | 7,600,000 | 7,606,391 | ||||||
Hyundai Auto Receivables Trust | ||||||||
Series 2015-C A2B 0.812% 11/15/18 • | 1,422,152 | 1,423,157 | ||||||
Series 2016-A A2B 0.812% 6/17/19 • | 4,000,000 | 4,004,776 | ||||||
Mercedes-Benz Auto Lease Trust Series 2016-A A2B 1.002% 7/16/18 • | 870,000 | 869,676 | ||||||
Mercedes-Benz Master Owner Trust | ||||||||
Series 2015-AA A 144A 0.762% 4/15/19 #• | 1,500,000 | 1,500,000 | ||||||
Series 2015-BA A 144A 0.822% 4/15/20 #• | 16,600,000 | 16,520,501 | ||||||
Navistar Financial Dealer Note Master Owner Trust II Series 2014-1 A 144A 1.203% 10/25/19 #• | 6,500,000 | 6,479,389 | ||||||
NextGear Floorplan Master Owner Trust Series 2014-1A A 144A 1.92% 10/15/19 # | 1,420,000 | 1,414,002 | ||||||
Nissan Auto Lease Trust | ||||||||
Series 2014-B A3 1.12% 9/15/17 | 7,500,000 | 7,506,952 | ||||||
Series 2015-B A2B 0.972% 12/15/17 • | 950,612 | 951,959 | ||||||
Series 2016-A A2B 0.822% 8/15/18 • | 870,000 | 871,305 | ||||||
Nissan Auto Receivables Owner Trust | ||||||||
Series 2013-C A3 0.67% 8/15/18 | 907,742 | 906,707 | ||||||
Series 2015-C A2B 0.792% 11/15/18 • | 481,874 | 481,875 | ||||||
Series 2016-A A2B 0.792% 2/15/19 • | 3,500,000 | 3,504,288 | ||||||
Series 2016-B A2B 0.742% 4/15/19 • | 2,175,000 | 2,177,062 | ||||||
Nissan Master Owner Trust Receivables Series 2015-A A1 0.842% 1/15/20 • | 2,855,000 | 2,850,288 | ||||||
Penarth Master Issuer Series 2015-1A A1 144A 0.848% 3/18/19 #• | 545,000 | 542,980 |
Limited-Term Diversified Income Series-9
Table of Contents
Delaware® VIP Limited-Term Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
Non-Agency Asset-Backed Securities (continued) | ||||||||
Penarth Master Issuer Series 2015-2A A1 144A 0.848% 5/18/19 #• | 4,000,000 | $ | 3,983,212 | |||||
PFS Financing | ||||||||
Series 2014-AA A 144A 1.042% 2/15/19 #• | 6,000,000 | 5,980,611 | ||||||
Series 2015-AA A 144A 1.062% 4/15/20 #• | 1,000,000 | 990,323 | ||||||
Popular ABS Mortgage Pass Through Trust Series 2006-C A4 0.703% 7/25/36 ¿• | 1,559,000 | 1,499,897 | ||||||
Porsche Innovative Lease Owner Trust Series 2015-1 A3 144A 1.19% 7/23/18 # | 1,080,000 | 1,081,135 | ||||||
Synchrony Credit Card Master Note Trust | ||||||||
Series 2012-6 A 1.36% 8/17/20 | 1,180,000 | 1,182,988 | ||||||
Series 2015-2 A 1.60% 4/15/21 | 1,120,000 | 1,124,536 | ||||||
Toyota Auto Receivables Trust Series 2016-B A2B 0.692% 10/15/18 • | 1,000,000 | 1,000,445 | ||||||
Trade MAPS 1 Series 2013-1A A 144A 1.145% 12/10/18 #• | 11,750,000 | 11,702,905 | ||||||
Volkswagen Auto Lease Trust Series 2015-A A3 1.25% 12/20/17 | 1,085,000 | 1,084,998 | ||||||
Volkswagen Credit Auto Master Trust Series 2014-1A A2 144A 1.40% 7/22/19 # | 3,130,000 | 3,111,265 | ||||||
Volvo Financial Equipment Series 2014-1A A3 144A 0.82% 4/16/18 # | 2,245,016 | 2,240,869 | ||||||
Wheels Series 2014-1A A2 144A 0.84% 3/20/23 # | 1,208,506 | 1,206,229 | ||||||
World Financial Network Credit Card Master Trust Series 2015-A A 0.922% 2/15/22 • | 965,000 | 963,817 | ||||||
|
| |||||||
Total Non-Agency Asset-Backed Securities | 514,190,030 | |||||||
|
| |||||||
Non-Agency Collateralized Mortgage Obligations – 0.25% | ||||||||
American Home Mortgage Investment Trust Series 2005-2 5A1 5.064% 9/25/35 f | 13,466 | 13,403 | ||||||
Bank of America Alternative Loan Trust Series 2005-6 7A1 5.50% 7/25/20 | 13,662 | 13,368 |
Principal amount° | Value (U.S. $) | |||||||
Non-Agency Collateralized Mortgage Obligations (continued) | ||||||||
JPMorgan Mortgage Trust Series 2014-IVR6 2A4 144A 2.50% 7/25/44 #• | 650,000 | $ | 656,241 | |||||
Sequoia Mortgage Trust Series 2014-2 A4 144A 3.50% 7/25/44 #• | 734,747 | 755,412 | ||||||
Towd Point Mortgage Trust | ||||||||
Series 2015-5 A1B 144A 2.75% 5/25/55 #• | 1,053,099 | 1,066,172 | ||||||
Series 2015-6 A1B 144A 2.75% 4/25/55 #• | 1,074,300 | 1,088,359 | ||||||
|
| |||||||
Total Non-Agency Collateralized Mortgage Obligations | 3,592,955 | |||||||
|
| |||||||
Non-Agency Commercial Mortgage-Backed | ||||||||
Banc of America Commercial Mortgage Trust Series 2007-4 AM 6.00% 2/10/51 • | 205,000 | 213,606 | ||||||
Bear Stearns Commercial Mortgage Securities Trust Series 2007-PW16 A1A 5.91% 6/11/40 • | 2,567,059 | 2,650,302 | ||||||
Citigroup Commercial Mortgage Trust Series 2007-C6 AM 5.901% 12/10/49 • | 760,000 | 762,707 | ||||||
Commercial Mortgage Trust Series 2007-GG9 AM 5.475% 3/10/39 | 780,000 | 793,054 | ||||||
DB-UBS Mortgage Trust Series 2011-LC1A A3 144A 5.002% 11/10/46 # | 1,015,000 | 1,137,030 | ||||||
Hilton USA Trust | ||||||||
Series 2013-HLT AFX 144A 2.662% 11/5/30 # | 510,000 | 512,178 | ||||||
Series 2013-HLT AFX 144A 3.367% 11/5/30 # | 2,420,000 | 2,431,858 | ||||||
JPMorgan Chase Commercial Mortgage Securities Trust Series 2006-LDP8 AM 5.44% 5/15/45 | 2,606,000 | 2,607,247 | ||||||
LB-UBS Commercial Mortgage Trust | ||||||||
Series 2006-C6 AJ 5.452% 9/15/39 • | 1,550,000 | 1,543,548 | ||||||
Series 2006-C6 AM 5.413% 9/15/39 | 2,055,000 | 2,062,154 | ||||||
|
| |||||||
Total Non-Agency Commercial Mortgage-Backed Securities | 14,713,684 | |||||||
|
|
Limited-Term Diversified Income Series-10
Table of Contents
Delaware® VIP Limited-Term Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
U.S. Treasury Obligations – 9.06% | ||||||||
U.S. Treasury Notes | ||||||||
0.46% 4/30/18 • | 129,030,000 | 129,079,548 | ||||||
1.625% 5/15/26 | 300,000 | 303,680 | ||||||
|
| |||||||
Total U.S. Treasury Obligations | 129,383,228 | |||||||
|
| |||||||
Number of shares | ||||||||
Preferred Stock – 1.02% | ||||||||
General Electric 5.00% • | 5,497,000 | 5,839,188 | ||||||
Morgan Stanley 5.55% • | 2,500,000 | 2,479,625 | ||||||
PNC Preferred Funding Trust II 144A 1.875% #• | 6,900,000 | 6,089,250 | ||||||
USB Realty 144A 1.775% #@• | 200,000 | 160,250 | ||||||
|
| |||||||
Total Preferred Stock (cost $14,826,618) | 14,568,313 | |||||||
|
| |||||||
Principal amount° | ||||||||
Short-Term Investments – 0.87% | ||||||||
Discount Notes – 0.87% ≠ | ||||||||
Federal Home Loan Bank 0.243% 8/5/16 | 2,820,037 | 2,819,380 |
Principal amount° | Value (U.S. $) | |||||||
Short-Term Investments (continued) | ||||||||
Discount Notes≠ (continued) | ||||||||
Federal Home Loan Bank | ||||||||
0.311% 7/13/16 | 811,987 | $ | 811,944 | |||||
0.325% 8/3/16 | 2,080,560 | 2,080,102 | ||||||
0.335% 7/12/16 | 651,230 | 651,198 | ||||||
0.335% 7/21/16 | 904,485 | 904,405 | ||||||
0.34% 7/22/16 | 1,892,140 | 1,891,964 | ||||||
0.349% 7/25/16 | 15,186 | 15,184 | ||||||
0.39% 9/21/16 | 42,908 | 42,882 | ||||||
0.39% 9/23/16 | 52,340 | 52,307 | ||||||
0.53% 8/15/16 | 3,198,944 | 3,197,985 | ||||||
|
| |||||||
12,467,351 | ||||||||
|
| |||||||
Total Short-Term Investments | 12,467,351 | |||||||
|
|
Total Value of | $ | 1,429,285,226 | ||
|
|
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At June 30, 2016, the aggregate value of Rule 144A securities was $219,452,612, which represents 15.37% of the Series’ net assets. See Note 8 in “Notes to financial statements.” |
@ | Illiquid security. At June 30, 2016, the aggregate value of illiquid securities was $1,977,875, which represents 0.14% of the Series’ net assets. See Note 8 in “Notes to financial statements.” |
¿ | Pass Through Agreement. Security represents the contractual right to receive a proportionate amount of underlying payments due to the counterparty pursuant to various agreements related to the rescheduling of obligations and the exchange of certain notes. |
≠ | The rate shown is the effective yield at the time of purchase. |
° | Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency. |
• | Variable rate security. The rate shown is the rate as of June 30, 2016. Interest rates reset periodically. |
f | Step coupon bond. Coupon increases or decreases periodically based on a predetermined schedule. Stated rate in effect at June 30, 2016. |
Summary of abbreviations:
ARM – Adjustable Rate Mortgage
DB – Deutsche Bank
GNMA – Government National Mortgage Association
LB – Lehman Brothers
NCUA – National Credit Union Administration
REMIC – Real Estate Mortgage Investment Conduit
S.F. – Single Family
UBS – Union Bank of Switzerland
yr – Year
See accompanying notes, which are an integral part of the financial statements
Limited-Term Diversified Income Series-11
Table of Contents
Delaware VIP® Trust — Delaware VIP Limited-Term Diversified Income Series | ||
Statement of assets and liabilities | June 30, 2016 (unaudited) |
Assets: | ||||
Investments, at value1 | $ | 1,416,817,875 | ||
Short-term investments, at value2 | 12,467,351 | |||
Cash | 15,085,475 | |||
Receivable for securities sold | 31,074,667 | |||
Interest receivable | 4,919,813 | |||
Receivable for series shares sold | 13,785 | |||
|
| |||
Total assets | 1,480,378,966 | |||
|
| |||
Liabilities: | ||||
Payable for securities purchased | 50,211,736 | |||
Payable for series shares redeemed | 568,145 | |||
Income distribution payable | 446,810 | |||
Investment management fees payable | 557,507 | |||
Other accrued expenses | 289,235 | |||
Distribution fees payable | 278,658 | |||
Audit and tax fees payable | 23,639 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 8,779 | |||
Accounting and administration expenses payable to affiliates | 5,535 | |||
Trustees’ fees and expenses payable | 4,332 | |||
Legal fees payable to affiliates | 2,604 | |||
Reports and statements to shareholders expenses payable to affiliates | 590 | |||
|
| |||
Total liabilities | 52,397,570 | |||
|
| |||
Total Net Assets | $ | 1,427,981,396 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 1,429,582,320 | ||
Distributions in excess of net investment income | (2,514,950 | ) | ||
Accumulated net realized loss on investments | (12,160,666 | ) | ||
Net unrealized appreciation of investments | 13,074,692 | |||
|
| |||
Total Net Assets | $ | 1,427,981,396 | ||
|
| |||
Net Asset Value | ||||
Standard Class: | ||||
Net assets | $ | 68,393,612 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 6,877,762 | |||
Net asset value per share | $ | 9.94 | ||
Service Class: | ||||
Net assets | $ | 1,359,587,784 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 137,637,161 | |||
Net asset value per share | $ | 9.88 | ||
| ||||
1 Investments, at cost | $ | 1,403,744,908 | ||
2 Short-term investments, at cost | 12,465,626 |
See accompanying notes, which are an integral part of the financial statements.
Limited-Term Diversified Income Series-12
Table of Contents
Delaware VIP Limited-Term Diversified Income Series
Statement of operations
Six months ended June 30, 2016 (Unaudited)
Delaware VIP Limited-Term Diversified Income Series
Statements of changes in net assets
Investment Income: | ||||
Interest | $ | 12,630,923 | ||
Expenses: | ||||
Management fees | 3,381,756 | |||
Distribution expenses – Service Class | 2,030,831 | |||
Accounting and administration expenses | 231,923 | |||
Reports and statements to shareholders expenses | 94,416 | |||
Dividend disbursing and transfer agent fees and expenses | 60,419 | |||
Legal fees | 46,814 | |||
Trustees’ fees and expenses | 37,522 | |||
Custodian fees | 33,924 | |||
Audit and tax fees | 24,243 | |||
Registration fees | 377 | |||
Other | 30,978 | |||
|
| |||
5,973,203 | ||||
Less waived distribution expenses – Service Class | (338,472 | ) | ||
|
| |||
Total operating expenses | 5,634,731 | |||
|
| |||
Net Investment Income | 6,996,192 | |||
|
| |||
Net Realized and Unrealized Gain (Loss) | ||||
Net realized gain on: | ||||
Investments | 10,197,334 | |||
Futures contracts | 1,375,368 | |||
|
| |||
Net realized gain | 11,572,702 | |||
|
| |||
Net change in unrealized appreciation (depreciation) of: | ||||
Investments | 15,061,764 | |||
Futures contracts | 45,311 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | 15,107,075 | |||
|
| |||
Net Realized and Unrealized Gain | 26,679,777 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 33,675,969 | ||
|
|
Six months ended 6/30/16 (Unaudited) | Year ended 12/31/15 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 6,996,192 | $ | 16,337,709 | ||||
Net realized gain | 11,572,702 | 3,334,265 | ||||||
Net change in unrealized appreciation (depreciation) | 15,107,075 | (11,432,409 | ) | |||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 33,675,969 | 8,239,565 | ||||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Standard Class | (546,327 | ) | (1,038,467 | ) | ||||
Service Class | (9,460,262 | ) | (20,222,493 | ) | ||||
|
|
|
| |||||
(10,006,589 | ) | (21,260,960 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Standard Class | 10,048,565 | 14,159,254 | ||||||
Service Class | 37,918,762 | 73,226,858 | ||||||
Net asset value of shares based upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 544,399 | 1,039,647 | ||||||
Service Class | 9,455,898 | 20,286,055 | ||||||
|
|
|
| |||||
57,967,624 | 108,711,814 | |||||||
|
|
|
| |||||
Cost of shares redeemed: | ||||||||
Standard Class | (5,941,638 | ) | (11,356,366 | ) | ||||
Service Class | (81,259,469 | ) | (115,692,591 | ) | ||||
|
|
|
| |||||
(87,201,107 | ) | (127,048,957 | ) | |||||
|
|
|
| |||||
Decrease in net assets derived from capital share transactions | (29,233,483 | ) | (18,337,143 | ) | ||||
|
|
|
| |||||
Net Decrease in Net Assets | (5,564,103 | ) | (31,358,538 | ) | ||||
Net Assets: | ||||||||
Beginning of period | 1,433,545,499 | 1,464,904,037 | ||||||
|
|
|
| |||||
End of period | $ | 1,427,981,396 | $ | 1,433,545,499 | ||||
|
|
|
| |||||
Undistributed (distributions in excess of) net investment income | $ | (2,514,950 | ) | $ | 495,447 | |||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
Limited-Term Diversified Income Series-13
Table of Contents
Delaware VIP® Trust — Delaware VIP Limited-Term Diversified Income Series
Financial highlights
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP Limited-Term Diversified Income Series Standard Class | |||||||||||||||||||||||||||||||||
Six months ended 6/30/161 (Unaudited) |
Year ended | ||||||||||||||||||||||||||||||||
12/31/15 |
12/31/14 |
12/31/13 |
12/31/12 |
12/31/11 | |||||||||||||||||||||||||||||
Net asset value, beginning of period | $ 9.780 | $ 9.870 | $ 9.860 | $10.120 | $10.090 | $10.150 | |||||||||||||||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||||||||
Net investment income2 | 0.060 | 0.134 | 0.120 | 0.092 | 0.095 | 0.119 | |||||||||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.181 | (0.057 | ) | 0.046 | (0.199 | ) | 0.183 | 0.171 | |||||||||||||||||||||||||
Total from investment operations | 0.241 | 0.077 | 0.166 | (0.107 | ) | 0.278 | 0.290 | ||||||||||||||||||||||||||
Less dividends and distributions from: | |||||||||||||||||||||||||||||||||
Net investment income | (0.081 | ) | (0.167 | ) | (0.156 | ) | (0.142 | ) | (0.171 | ) | (0.193 | ) | |||||||||||||||||||||
Net realized gain | — | — | — | (0.007 | ) | (0.077 | ) | (0.157 | ) | ||||||||||||||||||||||||
Return of capital | — | — | — | (0.004 | ) | — | — | ||||||||||||||||||||||||||
Total dividends and distributions | (0.081 | ) | (0.167 | ) | (0.156 | ) | (0.153 | ) | (0.248 | ) | (0.350 | ) | |||||||||||||||||||||
Net asset value, end of period | $ 9.940 | $ 9.780 | $ 9.870 | $ 9.860 | $10.120 | $10.090 | |||||||||||||||||||||||||||
Total return3 | 2.47% | 0.78% | 1.69% | (1.06% | ) | 2.78% | 2.91% | ||||||||||||||||||||||||||
Ratios and supplemental data: | |||||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $68,393 | $62,646 | $59,362 | $50,161 | $51,194 | $43,427 | |||||||||||||||||||||||||||
Ratio of expenses to average net assets | 0.56% | 0.56% | 0.56% | 0.56% | 0.57% | 0.58% | |||||||||||||||||||||||||||
Ratio of net investment income to average net assets | 1.22% | 1.36% | 1.22% | 0.92% | 0.93% | 1.17% | |||||||||||||||||||||||||||
Portfolio turnover | 96% | 128% | 113% | 236% | 284% | 432% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return does not include fees, charges, or expenses imposed by the variable annuity and life insurance contracts for which Delaware VIP Trust serves as an underlying investment vehicle. |
See accompanying notes, which are an integral part of the financial statements.
Limited-Term Diversified Income Series-14
Table of Contents
Delaware VIP® Limited-Term Diversified Income Series
Financial highlights (continued)
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP Limited-Term Diversified Income Series Service Class | ||||||||||||||||||||||||||||||||
Six months ended 6/30/161 (Unaudited) |
Year ended | |||||||||||||||||||||||||||||||
12/31/15 |
12/31/14 |
12/31/13 |
12/31/12 |
12/31/11 | ||||||||||||||||||||||||||||
Net asset value, beginning of period | $ 9.720 | $ 9.800 | $ 9.790 | $ 10.050 | $ 10.020 | $ 10.090 | ||||||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||
Net investment income2 | 0.047 | 0.109 | 0.095 | 0.066 | 0.069 | 0.093 | ||||||||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.181 | (0.048 | ) | 0.046 | (0.199 | ) | 0.182 | 0.161 | ||||||||||||||||||||||||
Total from investment operations | 0.228 | 0.061 | 0.141 | (0.133 | ) | 0.251 | 0.254 | |||||||||||||||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||||||||||
Net investment income | (0.068 | ) | (0.141 | ) | (0.131 | ) | (0.116 | ) | (0.144 | ) | (0.167 | ) | ||||||||||||||||||||
Net realized gain | — | — | — | (0.007 | ) | (0.077 | ) | (0.157 | ) | |||||||||||||||||||||||
Return of capital | — | — | — | (0.004 | ) | — | — | |||||||||||||||||||||||||
Total dividends and distributions | (0.068 | ) | (0.141 | ) | (0.131 | ) | (0.127 | ) | (0.221 | ) | (0.324 | ) | ||||||||||||||||||||
Net asset value, end of period | $ 9.880 | $ 9.720 | $ 9.800 | $ 9.790 | $ 10.050 | $ 10.020 | ||||||||||||||||||||||||||
Total return3 | 2.35% | 0.62% | 1.44% | (1.33% | ) | 2.53% | 2.56% | |||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $1,359,588 | $1,370,899 | $1,405,542 | $1,331,406 | $1,127,086 | $937,874 | ||||||||||||||||||||||||||
Ratio of expenses to average net assets | 0.81% | 0.81% | 0.81% | 0.81% | 0.82% | 0.83% | ||||||||||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 0.86% | 0.86% | 0.86% | 0.86% | 0.87% | 0.88% | ||||||||||||||||||||||||||
Ratio of net investment income to average net assets | 0.97% | 1.11% | 0.97% | 0.67% | 0.68% | 0.92% | ||||||||||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 0.92% | 1.06% | 0.92% | 0.62% | 0.63% | 0.87% | ||||||||||||||||||||||||||
Portfolio turnover | 96% | 128% | 113% | 236% | 284% | 432% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects a waiver by the distributor. Performance would have been lower had the waiver not been in effect. Total investment return does not include fees, charges, or expenses imposed by the variable annuity and life insurance contracts for which Delaware VIP Trust serves as an underlying investment vehicle. |
See accompanying notes, which are an integral part of the financial statements.
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Delaware VIP® Trust — Delaware VIP Limited-Term Diversified Income Series
Notes to financial statements
June 30, 2016 (Unaudited)
Delaware VIP Trust (Trust) is organized as a Delaware statutory trust and offers 10 series: Delaware VIP Diversified Income Series, Delaware VIP Emerging Markets Series, Delaware VIP High Yield Series, Delaware VIP International Value Equity Series, Delaware VIP Limited-Term Diversified Income Series, Delaware VIP REIT Series, Delaware VIP Small Cap Value Series, Delaware VIP Smid Cap Growth Series, Delaware VIP U.S. Growth Series, and Delaware VIP Value Series. These financial statements and the related notes pertain to Delaware VIP Limited-Term Diversified Income Series (Series). The Trust is an open-end investment company. The Series is considered diversified under the Investment Company Act of 1940, as amended, and offers Standard Class and Service Class shares. The Standard Class shares do not carry a 12b-1 fee and the Service Class shares carry a 12b-1 fee. The shares of the Series are sold only to separate accounts of life insurance companies.
The investment objective of the Series is to seek maximum total return, consistent with reasonable risk.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistently followed by the Series
Security Valuation—Debt securities are valued based upon valuations provided by an independent pricing service or broker and reviewed by management. To the extent current market prices are not available, the pricing service may take into account developments related to the specific security, as well as transactions in comparable securities. U.S. government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Valuations for fixed income securities utilize matrix systems, which reflect such factors as security prices, yields, maturities, and ratings, and are supplemented by dealer and exchange quotations. For asset-backed securities, collateralized mortgage obligations, commercial mortgage securities, and U.S. government agency mortgage securities, pricing vendors utilize matrix pricing which considers prepayment speed, attributes of the collateral, yield or price of bonds of comparable quality, coupon, maturity, and type as well as broker/dealer-supplied prices. Equity securities, except those traded on the Nasdaq Stock Market LLC (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange on the valuation date. Equity securities traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If, on a particular day, an equity security does not trade, the mean between the bid and ask prices will be used, which approximates fair value. Futures contracts are valued at the daily quoted settlement prices. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Trust’s Board of Trustees (Board). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of a trading in a security.
Federal and Foreign Income Taxes—No provision for federal income taxes has been made as the Series intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Series evaluates tax positions taken or expected to be taken in the course of preparing the Series’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Series’ tax positions taken for all open federal income tax years (Dec. 31, 2012–Dec. 31, 2015), and has concluded that no provision for federal income tax is required in the Series’ financial statements. In regard to foreign taxes only, the Series has open tax years in certain foreign countries in which it invests that may date back to the inception of the Series.
Class Accounting—Investment income and common expenses are allocated to the classes of the Series on the basis of “settled shares” of each class in relation to the net assets of the Series. Realized and unrealized gain (loss) on investments is allocated to the classes of the Series on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class.
Repurchase Agreements—The Series may purchase certain U.S. government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Series’ custodian or a third-party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on June 30, 2016 and matured on the next business day.
To Be Announced Trades (TBA)—The Series may contract to purchase or sell securities for a fixed price at a transaction date beyond the customary settlement period (examples: when issued, delayed delivery, forward commitment, or TBA transactions) consistent with the Series’ ability to manage its investment portfolio and meet redemption requests. These transactions involve a commitment by the Series to purchase or sell securities for a predetermined price or yield with payment and delivery taking place more than three days in the future, or after a period longer than the customary settlement period for that type of security. No interest will be earned by the Series on such purchases until the securities are delivered or the transaction is completed; however, the market value may change prior to delivery.
Use of Estimates—The Series is an investment company, whose financial statements are prepared in conformity with U.S. GAAP. Therefore, the Series follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
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Delaware VIP® Limited-Term Diversified Income Series
Notes to financial statements (continued)
1. Significant Accounting Policies (continued)
Other—Expenses directly attributable to the Series are charged directly to the Series. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated among such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Interest income is recorded on the accrual basis. Discounts and premiums on debt securities are accreted or amortized to interest income, respectively, over the lives of the respective securities using the effective interest method. Realized gains (losses) on paydowns of mortgage- and asset-backed securities are classified as interest income. The Series declares dividends daily from net investment income and pays the dividends monthly and declares and pays distributions from net realized gain on investments, if any, following the close of the fiscal year. The Series may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
The Series may receive earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. There were no such earnings credits for the six months ended June 30, 2016.
The Series receives earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than one dollar, the expense paid under this arrangement is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expense offset shown under “Less expense paid indirectly.” For the six months ended June 30, 2016, the Series earned less than one dollar under this agreement.
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Series pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.50% on the first $500 million of average daily net assets of the Series, 0.475% on the next $500 million, 0.45% on the next $1.5 billion, and 0.425% on average daily net assets in excess of $2.5 billion.
Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Series. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DIFSC under the service agreement described above are allocated among all funds in the Delaware Investments Family of Funds on a relative net asset value (NAV) basis. For the six months ended June 30, 2016, the Series was charged $33,779 for these services. This amount is included on the “Statement of operations” under “Accounting and administration expenses.”
DIFSC is also the transfer agent and dividend disbursing agent of the Series. For these services, DIFSC’s fees are calculated at the annual rate of 0.0075% of the Series’ average daily net assets. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the six months ended June 30, 2016, the Series was charged $53,255 for these services. Pursuant to a sub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Series. Sub-transfer agency fees are paid by the Series and are also included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.”
Pursuant to a distribution agreement and distribution plan, the Series pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee of 0.30% of the average daily net assets of the Service Class shares. DDLP has contracted to waive distribution and service fees from Jan. 1, 2016 through June 30, 2016* in order to limit distribution and service fees of the Service Class shares to 0.25% of average daily net assets. Standard Class shares pay no distribution and service expenses.
As provided in the investment management agreement, the Series bears a portion of the cost of certain resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Series. For the six months ended June 30, 2016, the Series was charged $15,860 for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees. This amount is included on the “Statement of operations” under “Legal fees.”
Trustees’ fees include expenses accrued by the Series for each Trustee’s retainer and meeting fees. Certain officers of DMC, DIFSC, and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Series.
*The contractual waiver period is from April 29, 2015 through May 1, 2017.
3. Investments
For the six months ended June 30, 2016, the Series made purchases and sales of investment securities other than short-term investments as follows:
Purchases other than U.S. government securities | $ | 769,101,626 | ||
Purchases of U.S. government securities | 587,279,947 | |||
Sales other than U.S. government securities | 796,213,499 | |||
Sales of U.S. government securities | 585,777,815 |
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Delaware VIP® Limited-Term Diversified Income Series
Notes to financial statements (continued)
3. Investments (continued)
At June 30, 2016, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At June 30, 2016, the cost of investments and unrealized appreciation (depreciation) were as follows:
Cost of Investments | Aggregate Unrealized Appreciation of Investments | Aggregate Unrealized Depreciation of Investments | Net Unrealized Appreciation of Investments | |||||
$1,419,926,219 | $13,856,750 | $(4,497,743) | $9,359,007 |
U.S. GAAP defines fair value as the price that the Series would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established 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 assumptions that market participants would use in pricing the asset or liability developed based on the best information available under the circumstances. The Series’ investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized below.
Level 1 | – | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) | ||
Level 2 | – | Other observable inputs, including but 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. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) | ||
Level 3 | – | Significant unobservable inputs, including the Series’ own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. The Series may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
The following table summarizes the valuation of the Series’ investments by fair value hierarchy levels as of June 30, 2016:
Securities | Level 2 | |||
Agency, asset-backed & mortgage-backed securities | $ | 768,428,643 | ||
Corporate debt | 489,634,673 | |||
Municipal bonds | 14,803,018 | |||
Preferred stock | 14,568,313 | |||
Short-term investments | 12,467,351 | |||
U.S. Treasury obligations | 129,383,228 | |||
|
| |||
Total Value of Securities | $ | 1,429,285,226 | ||
|
|
During the six months ended June 30, 2016, there were no transfers between Level 1 investments, Level 2 investments, or Level 3 investments that had a significant impact to the Series. The Series’ policy is to recognize transfers between levels at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when the Series has a significant amount of Level 3 investments at the beginning, interim, or end of the period in relation to net assets. At June 30, 2016, there were no Level 3 investments.
On Dec. 22, 2010, the Regulated Investment Company Modernization Act of 2010 (Act) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes were generally effective for taxable years beginning after the date of enactment. Under the Act, the Series is permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.
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Delaware VIP® Limited-Term Diversified Income Series
Notes to financial statements (continued)
Losses incurred that will be carried forward under the Act are as follows:
Loss carryforward character | ||||||
Short-term | Long-term | |||||
$(11,075,808) | $(8,118,282) |
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 6/30/16 | Year ended 12/31/15 | |||||||||
Shares sold: | ||||||||||
Standard Class | 1,018,465 | 1,433,915 | ||||||||
Service Class | 3,870,649 | 7,468,551 | ||||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||||
Standard Class | 55,156 | 105,354 | ||||||||
Service Class | 964,294 | 2,069,058 | ||||||||
5,908,564 | 11,076,878 | |||||||||
Shares redeemed: | ||||||||||
Standard Class | (600,945 | ) | (1,149,117 | ) | ||||||
Service Class | (8,299,650 | ) | (11,809,936 | ) | ||||||
(8,900,595 | ) | (12,959,053 | ) | |||||||
Net decrease | (2,992,031 | ) | (1,882,175 | ) |
5. Line of Credit
The Series, along with certain other funds in the Delaware Investments® Family of Funds (Participants), was a participant in a $155,000,000 revolving line of credit intended to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants were charged an annual commitment fee of 0.10%, which is allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants are permitted to borrow up to a maximum of one-third of their net assets under the agreement. Each Participant is individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit available under the agreement expires on Nov. 7, 2016.
The Series had no amounts outstanding as of June 30, 2016 or at any time during the period then ended.
6. Derivatives
U.S. GAAP requires disclosures that enable investors to understand: (1) how and why an entity uses derivatives; (2) how they are accounted for; and (3) how they affect an entity’s results of operations and financial position.
Futures Contracts
A futures contract is an agreement in which the writer (or seller) of the contract agrees to deliver to the buyer an amount of cash or securities equal to a specific dollar amount times the difference between the value of a specific security or index at the close of the last trading day of the contract and the price at which the agreement is made. The Series may use futures in the normal course of pursuing its investment objective. The Series may invest in futures contracts to hedge its existing portfolio securities against fluctuations in value caused by changes in interest rates or market conditions. Upon entering into a futures contract, the Series deposits cash or pledges U.S. government securities to a broker, equal to the minimum “initial margin” requirements of the exchange on which the contract is traded. Subsequent payments are received from the broker or paid to the broker each day, based on the daily fluctuation in the market value of the contract. These receipts or payments are known as “variation margin” and are recorded daily by the Series as unrealized gains or losses until the contracts are closed. When the contracts are closed, the Series records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Risks of entering into futures contracts include potential imperfect correlation between the futures contracts and the underlying securities and the possibility of an illiquid secondary market for these instruments. When investing in futures, there is reduced counterparty credit risk to the Series because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default.
There were no open futures contracts at June 30, 2016.
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Delaware VIP® Limited-Term Diversified Income Series
Notes to financial statements (continued)
6. Derivatives (continued)
During the six months ended June 30, 2016, the Series entered into futures contracts to hedge the Series’ then existing portfolio securities against fluctuations in value caused by changes in interest rates or market conditions.
During the six months ended June 30, 2016, the Series had interest risk, which is disclosed as “Net realized gain on futures contracts” on the “Statement of operations.”
Derivatives Generally. The table below summarizes the average balance of derivative holdings by the Series during the six months ended June 30, 2016.
Long Derivative Volume | Short Derivative Volume | |||||||||
Futures contracts (average notional value) | $ | 5,623,176 | $ — |
7. Securities Lending
The Series, along with other funds in the Delaware Investments® Family of Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (1) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (2) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities that are the subject of such loan, the borrower will be notified to provide additional collateral by the end of the following business day, which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial collateral requirement, upon the request of the borrower, BNY Mellon must return enough collateral to the borrower by the end of the following business day to reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security on any particular day may be more or less than the value of the security on loan.
Prior to Dec. 29, 2015, cash collateral received was generally invested in the Delaware Investments Collateral Fund No. 1 (Collective Trust), a pooled account established by BNY Mellon for the use of funds managed by DMC that participate in BNY Mellon’s securities lending program. The Collective Trust sought to maintain a NAV per unit of $1.00.
On Dec. 29, 2015, the assets in the Collective Trust were transferred to a series of individual separate accounts, each corresponding to a Series. The investment guidelines permit each separate account to hold certain securities that would be considered eligible securities for a money market fund. Cash collateral received is generally invested in government securities; certain obligations issued by government sponsored enterprises; repurchase agreements collateralized by U.S. Treasury securities; obligations issued by the central government of any Organization for Economic Cooperation and Development (OECD) country or its agencies, instrumentalities, or establishments; obligations of supranational organizations; commercial paper, notes, bonds, and other debt obligations; certificates of deposit, time deposits, and other bank obligations; and asset-backed securities.
In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Series or, at the discretion of the lending agent, replace the loaned securities. The Series continues to record dividends or interest, as applicable, on the securities loaned and is subject to changes in value of the securities loaned that may occur during the term of the loan. The Series has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Series receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Series, the security lending agent, and the borrower. The Series records security lending income net of allocations to the security lending agent and the borrower.
The Series may incur investment losses as a result of investing securities lending collateral. This could occur if an investment in the collateral investment account defaulted or became impaired. Under those circumstances, the value of a Series’ cash collateral account may be less than the amount the Series would be required to return to the borrowers of the securities and the Series would be required to make up for this shortfall.
During the six months ended June 30, 2016, the Series had no securities out on loan.
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Delaware VIP® Limited-Term Diversified Income Series
Notes to financial statements (continued)
8. Credit and Market Risk
The Series invests in fixed income securities whose value is derived from an underlying pool of mortgages or consumer loans. The value of these securities is sensitive to changes in economic conditions, including delinquencies and/or defaults, and may be adversely affected by shifts in the market’s perception of the issuers and changes in interest rates. Investors receive principal and interest payments as the underlying mortgages and consumer loans are paid back. Some of these securities are collateralized mortgage obligations (CMOs). CMOs are debt securities issued by U.S. government agencies or by financial institutions and other mortgage lenders, which are collateralized by a pool of mortgages held under an indenture. Prepayment of mortgages may shorten the stated maturity of the obligations and can result in a loss of premium, if any has been paid. Certain of these securities may be stripped (securities which provide only the principal or interest feature of the underlying security). The yield to maturity on an interest-only CMO is extremely sensitive not only to changes in prevailing interest rates, but also to the rate of principal payments (including prepayments) on the related underlying mortgage assets. A rapid rate of principal payments may have a material adverse effect on the Series’ yield to maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the Series may fail to recoup its initial investment in these securities even if the securities are rated in the highest rating categories.
The Series invests in high yield fixed income securities, which are securities rated lower than BBB- by Standard & Poor’s Financial Services LLC and lower than Baa3 by Moody’s Investors Service, Inc. or similarly rated by another nationally recognized statistical rating organization. Investments in these higher yielding securities are generally accompanied by a greater degree of credit risk than higher rated securities. Additionally, lower rated securities may be more susceptible to adverse economic and competitive industry conditions than investment grade securities.
The Series invests in certain obligations held by the Series that may have liquidity protection designed to ensure that the receipt of payments due on the underlying security is timely. Such protection may be provided through guarantees, insurance policies or letter of credit obtained by the issuer or sponsor through third parties, through various means of structuring the transaction or through a combination of such approaches. The Series will not pay any additional fees for such credit support, although the existence of credit support may increase the price of the security.
The Series may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Series from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Board has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of the Series’ limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Series’ 15% limit on investments in illiquid securities. Rule 144A and illiquid securities have been identified on the “Schedule of investments. ”When monitoring compliance with the Series’ illiquid limit, certain holdings that are common to multiple clients of the investment manager may be aggregated and considered illiquid in the aggregate solely for monitoring purposes. For purposes of determining illiquidity for financial reporting purposes, only the holdings of the Series will be considered.
9. Contractual Obligations
The Series enters into contracts in the normal course of business that contain a variety of indemnifications. The Series’ maximum exposure under these arrangements is unknown. However, the Series has not had prior claims or losses pursuant to these contracts. Management has reviewed the Series’ existing contracts and expects the risk of loss to be remote.
10. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to June 30, 2016 that would require recognition or disclosure in the Series’ financial statements.
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Table of Contents
Delaware VIP® Limited-Term Diversified Income Series
The Series files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q. The Series’ Forms N-Q, as well as a description of the policies and procedures that the Series uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the Commission’s website at sec.gov. In addition, a description of the policies and procedures that the Series uses to determine how to vote proxies (if any) relating to portfolio securities and the Schedule of Investments included in the Series’ most recent Form N-Q are available without charge on the Delaware Investments® Funds’ website at delawareinvestments.com/vip/literature. The Series’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330.
Information (if any) regarding how the Series voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Delaware Investments Funds’ website at delawareinvestments.com/proxy; and (ii) on the Commission’s website at sec.gov.
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SA-VIPLTD 21185 (8/16) (17290) | Limited-Term Diversified Income Series-22 |
Table of Contents
Delaware VIP® Trust
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Delaware VIP REIT Series
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Semiannual report
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June 30, 2016 |
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Table of Contents
1 | ||||||||
Security type / sector allocation and top 10 equity holdings | 2 | |||||||
3 | ||||||||
5 | ||||||||
6 | ||||||||
6 | ||||||||
7 | ||||||||
9 |
Neither Delaware Investments nor its affiliates referred to in this document are authorized deposit-taking institutions for the purpose of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited (MBL), a subsidiary of Macquarie Group Limited and an affiliate of Delaware Investments. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Series is governed by U.S. laws and regulations.
Unless otherwise noted, views expressed herein are current as of June 30, 2016, and subject to change for events occurring after such date.
The Series is not FDIC insured and is not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor and member of Macquarie Group. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries, including the Series’ distributor, Delaware Distributors, L.P. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
This material may be used in conjunction with the offering of shares in Delaware VIP® REIT Series only if preceded or accompanied by the Series’ current prospectus or the summary prospectus.
© 2016 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
Table of Contents
Delaware VIP® Trust — Delaware VIP REIT Series
Disclosure of Series expenses
For the six-month period from January 1, 2016 to June 30, 2016 (Unaudited)
As a shareholder of the Series, you incur ongoing costs, which may include management fees; distribution and/or service (12b-1) fees; and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series 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 entire six-month period from Jan. 1, 2016 to June 30, 2016.
Actual expenses
The first section of the table shown, “Actual Series return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, 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, an $8,600 account value divided by $1,000 = 8.6), 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 the period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% return,” provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ 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 Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Series, you do not incur any transaction costs, such as sales charges (loads), redemption fees or exchange fees, but shareholders of other funds may incur such costs. Also, the fees related to the variable annuity investment or the deferred sales charge that could apply have not been included. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The Series’ actual expenses shown in the table reflect fee waivers in effect for Service Class shares. The expenses shown in the table assume reinvestment of all dividends and distributions.
Expense analysis of an investment of $1,000
Expenses | ||||||||||||
Beginning | Ending | Paid During | ||||||||||
Account | Account | Annualized | Period | |||||||||
Value | Value | Expense | 1/1/16 to | |||||||||
1/1/16 | 6/30/16 | Ratio | 6/30/16* | |||||||||
Actual Series return† | ||||||||||||
Standard Class | $1,000.00 | $1,104.90 | 0.84% | $4.40 | ||||||||
Service Class | 1,000.00 | 1,103.70 | 1.09% | 5.70 | ||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||
Standard Class | $1,000.00 | $1,020.69 | 0.84% | $4.22 | ||||||||
Service Class | 1,000.00 | 1,019.44 | 1.09% | 5.47 |
* | “Expenses Paid During Period” are equal to the Series’ annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
† | Because actual returns reflect only the most recent six-month period, the returns shown may differ significantly from fiscal year returns. |
REIT Series-1 |
Table of Contents
Delaware VIP® Trust — Delaware VIP REIT Series
Security type / sector allocation and top 10 equity holdings
As of June 30, 2016 (Unaudited)
Sector designations may be different than the sector designations presented in other Series materials. The sector designations may represent the investment manager’s internal sector classifications.
Security type / sector | Percentage of net assets | ||||
Convertible Bond | 0.63% | ||||
Common Stock | 92.98% | ||||
Diversified REITs | 11.46% | ||||
Healthcare REITs | 5.21% | ||||
Hotel REITs | 4.15% | ||||
Industrial REITs | 6.51% | ||||
Mall REITs | 14.47% | ||||
Manufactured Housing REIT | 1.29% | ||||
Multifamily REITs | 12.55% | ||||
Office REITs | 11.34% | ||||
Office/Industrial REIT | 3.44% | ||||
Self-Storage REITs | 5.73% | ||||
Shopping Center REITs | 12.06% | ||||
Single Tenant REITs | 4.12% | ||||
Specialty REIT | 0.65% | ||||
Short-Term Investments | 5.52% | ||||
Total Value of Securities | 99.13% | ||||
Receivables and Other Assets Net of Liabilities | 0.87% | ||||
Total Net Assets | 100.00% |
Holdings are for informational purposes only and are subject to change at any time. They are not a recommendation to buy, sell, or hold any security.
Top 10 equity holdings | Percentage of net assets | ||||
Simon Property Group | 9.49% | ||||
General Growth Properties | 3.85% | ||||
Equinix | 3.63% | ||||
AvalonBay Communities | 3.56% | ||||
Duke Realty | 3.44% | ||||
Public Storage | 3.29% | ||||
Vornado Realty Trust | 3.21% | ||||
Equity Residential | 2.92% | ||||
Ventas | 2.90% | ||||
Host Hotels & Resorts
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| 2.67%
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REIT Series-2
Table of Contents
Delaware VIP® Trust – Delaware VIP REIT Series
Schedule of investments
June 30, 2016 (Unaudited)
Principal amount° | Value (U.S. $) | |||||||
Convertible Bond – 0.63% |
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VEREIT 3.75% exercise price $14.99, maturity date 12/15/20 @ | 3,324,000 | $ | 3,305,319 | |||||
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Total Convertible Bond | 3,305,319 | |||||||
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Number of shares | ||||||||
Common Stock – 92.98% |
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Diversified REITs – 11.46% |
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CoreSite Realty | 67,000 | 5,942,230 | ||||||
Digital Realty Trust | 74,375 | 8,106,131 | ||||||
Equinix | 49,050 | 19,018,157 | ||||||
Liberty Property Trust | 158,450 | 6,293,634 | ||||||
Vornado Realty Trust | 167,793 | 16,799,435 | ||||||
Washington Real Estate Investment Trust | 123,425 | 3,882,951 | ||||||
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60,042,538 | ||||||||
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Healthcare REITs – 5.21% |
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Healthcare Realty Trust | 135,200 | 4,730,648 | ||||||
Ventas | 208,874 | 15,210,205 | ||||||
Welltower | 96,770 | 7,370,971 | ||||||
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27,311,824 | ||||||||
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Hotel REITs – 4.15% | ||||||||
Host Hotels & Resorts | 862,843 | 13,986,685 | ||||||
Pebblebrook Hotel Trust | 168,986 | 4,435,883 | ||||||
Sunstone Hotel Investors | 273,426 | 3,300,252 | ||||||
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21,722,820 | ||||||||
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Industrial REITs – 6.51% |
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DCT Industrial Trust | 223,791 | 10,750,920 | ||||||
First Industrial Realty Trust | 364,425 | 10,138,303 | ||||||
Prologis | 269,797 | 13,230,845 | ||||||
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34,120,068 | ||||||||
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Mall REITs – 14.47% |
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General Growth Properties | 675,736 | 20,150,447 | ||||||
Macerich | 12,700 | 1,084,453 | ||||||
Simon Property Group | 229,253 | 49,724,976 | ||||||
Taubman Centers | 64,750 | 4,804,450 | ||||||
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75,764,326 | ||||||||
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Manufactured Housing REIT – 1.29% |
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Equity LifeStyle Properties | 84,128 | 6,734,446 | ||||||
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6,734,446 | ||||||||
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Multifamily REITs – 12.55% |
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American Campus Communities | 102,150 | 5,400,671 | ||||||
Apartment Investment & Management | 223,650 | 9,876,384 | ||||||
AvalonBay Communities | 103,489 | 18,668,381 | ||||||
Equity Residential | 221,725 | 15,272,418 | ||||||
Essex Property Trust | 20,945 | 4,777,345 | ||||||
Post Properties | 86,525 | 5,282,351 | ||||||
UDR | 174,275 | 6,434,233 | ||||||
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65,711,783 | ||||||||
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Number of shares | Value (U.S. $) | |||||||
Common Stock (continued) |
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Office REITs – 11.34% |
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Alexandria Real Estate Equities | 126,625 | $ | 13,108,220 | |||||
Boston Properties | 83,390 | 10,999,141 | ||||||
Douglas Emmett | 147,675 | 5,245,416 | ||||||
Empire State Realty Trust | 331,475 | 6,294,710 | ||||||
Equity Commonwealth @† | 285,850 | 8,326,811 | ||||||
Hudson Pacific Properties | 123,086 | 3,591,649 | ||||||
Mack-Cali Realty | 297,675 | 8,037,225 | ||||||
SL Green Realty | 35,343 | 3,762,969 | ||||||
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59,366,141 | ||||||||
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Office/Industrial REIT – 3.44% |
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Duke Realty | 676,650 | 18,039,489 | ||||||
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18,039,489 | ||||||||
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Self-Storage REITs – 5.73% |
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CubeSmart | 190,795 | 5,891,750 | ||||||
Extra Space Storage | 74,250 | 6,871,095 | ||||||
Public Storage | 67,486 | 17,248,747 | ||||||
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30,011,592 | ||||||||
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Shopping Center REITs – 12.06% |
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Brixmor Property Group | 246,125 | 6,512,467 | ||||||
DDR | 369,807 | 6,708,299 | ||||||
Equity One | 290,000 | 9,332,200 | ||||||
Federal Realty Investment Trust | 66,975 | 11,087,711 | ||||||
Kimco Realty | 251,215 | 7,883,127 | ||||||
Regency Centers | 110,789 | 9,276,363 | ||||||
Retail Properties of America | 316,875 | 5,355,187 | ||||||
Urban Edge Properties | 235,200 | 7,023,072 | ||||||
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63,178,426 | ||||||||
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Single Tenant REITs – 4.12% |
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National Retail Properties | 128,950 | 6,669,294 | ||||||
Spirit Realty Capital | 602,882 | 7,698,803 | ||||||
STORE Capital | 243,975 | 7,185,064 | ||||||
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21,553,161 | ||||||||
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Specialty REIT – 0.65% |
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GEO Group | 99,450 | 3,399,201 | ||||||
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3,399,201 | ||||||||
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Total Common Stock | 486,955,815 | |||||||
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Principal amount° | ||||||||
Short-Term Investments – 5.52% |
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Discount Notes – 4.10% ≠ |
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Federal Home Loan Bank | ||||||||
0.275% 8/5/16 | 3,372,325 | 3,371,540 | ||||||
0.323% 7/13/16 | 5,322,590 | 5,322,308 | ||||||
0.325% 8/3/16 | 2,479,094 | 2,478,549 | ||||||
0.335% 7/12/16 | 1,259,050 | 1,258,988 | ||||||
0.335% 7/21/16 | 1,748,681 | 1,748,525 |
REIT Series-3
Table of Contents
Delaware VIP® REIT Series
Schedule of investments (continued)
Principal amount° | Value (U.S. $) | |||||||
Short-Term Investments (continued) |
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Discount Notes≠ (continued) |
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Federal Home Loan Bank | ||||||||
0.34% 7/22/16 | 2,859,521 | $ | 2,859,255 | |||||
0.35% 7/25/16 | 1,255,630 | 1,255,495 | ||||||
0.38% 7/18/16 | 1,977,717 | 1,977,566 | ||||||
0.39% 9/21/16 | 445,359 | 445,085 | ||||||
0.39% 9/23/16 | 543,253 | 542,911 | ||||||
0.53% 8/15/16 | 193,364 | 193,306 | ||||||
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21,453,528 | ||||||||
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Repurchase Agreements – 1.42% |
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Bank of America Merrill Lynch | 2,630,049 | 2,630,049 | ||||||
Bank of Montreal | 4,383,415 | 4,383,415 |
Principal amount° | Value (U.S. $) | |||||||
Short-Term Investments (continued) |
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Repurchase Agreements (continued) |
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BNP Paribas | 436,536 | $ | 436,536 | |||||
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7,450,000 | ||||||||
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Total Short-Term Investments |
| 28,903,528 | ||||||
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Total Value of Securities – 99.13% | $ | 519,164,662 | ||
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@ | Illiquid security. At June 30, 2016, the aggregate value of illiquid securities was $11,632,130, which represents 2.22% of the Series’ net assets. See Note 9 in “Notes to financial statements.” | |
≠ | The rate shown is the effective yield at the time of purchase. | |
° | Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency. | |
† | Non-income-producing security. |
REIT – Real Estate Investment Trust
See accompanying notes, which are an integral part of the financial statements.
REIT Series-4
Table of Contents
Delaware VIP® Trust — Delaware VIP REIT Series | June 30, 2016 (Unaudited) | |
Statement of assets and liabilities |
Assets: | ||||
Investments, at value1 | $ | 490,261,134 | ||
Short-term investments, at value2 | 28,903,528 | |||
Cash | 764,312 | |||
Receivable for securities sold | 3,106,122 | |||
Dividends and interest receivable | 1,475,193 | |||
Receivable for series shares sold | 17,611 | |||
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Total assets | 524,527,900 | |||
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Liabilities: | ||||
Investment management fees payable | 308,351 | |||
Payable for series shares redeemed | 281,447 | |||
Other accrued expenses | 127,887 | |||
Distribution fees payable to affiliates | 50,635 | |||
Audit and tax fees payable to affiliates | 16,952 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 3,084 | |||
Accounting and administration expenses payable to affiliates | 1,944 | |||
Trustees’ fees and expenses payable to affiliates | 1,503 | |||
Legal fees payable to affiliates | 900 | |||
Reports and statements to shareholders expenses payable to affiliates | 216 | |||
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Total liabilities | 792,919 | |||
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Total Net Assets | $ | 523,734,981 | ||
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Net Assets Consist of: | ||||
Paid-in capital | $ | 431,208,778 | ||
Undistributed net investment income | 7,361,928 | |||
Accumulated net realized gain on investments | 18,127,229 | |||
Net unrealized appreciation of investments | 67,037,046 | |||
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Total Net Assets | $ | 523,734,981 | ||
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Net Asset Value: | ||||
Standard Class: | ||||
Net assets | $ | 265,115,908 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 16,311,647 | |||
Net asset value per share | $ | 16.25 | ||
Service Class: | ||||
Net assets | $ | 258,619,073 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 15,926,510 | |||
Net asset value per share | $ | 16.24 | ||
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1Investments, at cost | $ | 423,225,931 | ||
2Short-term investments, at cost | 28,901,685 |
See accompanying notes, which are an integral part of the financial statements.
REIT Series-5
Table of Contents
Delaware VIP® Trust — | ||
Delaware VIP REIT Series | ||
Statement of operations | ||
Six months ended June 30, 2016 (Unaudited) |
Investment Income: | ||||
Dividends | $ | 8,920,693 | ||
Interest | 113,860 | |||
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9,034,553 | ||||
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Expenses: | ||||
Management fees | 1,788,464 | |||
Distribution expenses – Service Class | 351,740 | |||
Accounting and administration expenses | 77,838 | |||
Reports and statements to shareholders expenses | 50,744 | |||
Dividend disbursing and transfer agent fees and expenses | 20,367 | |||
Audit and tax fees | 16,951 | |||
Legal fees | 13,552 | |||
Trustees’ fees and expenses | 12,533 | |||
Custodian fees | 10,196 | |||
Registration fees | 976 | |||
Other | 6,561 | |||
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2,349,922 | ||||
Less waived distribution expenses – Service Class | (58,623 | ) | ||
Less expense paid indirectly | (1 | ) | ||
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Total operating expenses | 2,291,298 | |||
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Net Investment Income | 6,743,255 | |||
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Net Realized and Unrealized Loss: | ||||
Net realized gain on: | ||||
Investments | 22,963,561 | |||
Options written | 129,790 | |||
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Net realized gain | 23,093,351 | |||
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Net change in unrealized appreciation (depreciation) of investments | 19,269,194 | |||
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Net Realized and Unrealized Gain | 42,362,545 | �� | ||
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Net Increase in Net Assets Resulting from Operations | $ | 49,105,800 | ||
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Delaware VIP Trust — | ||||
Delaware VIP REIT Series | ||||
Statements of changes in net assets |
Six months 6/30/16 | Year ended 12/31/15 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 6,743,255 | $ | 5,981,129 | ||||
Net realized gain | 23,093,351 | 43,445,286 | ||||||
Net change in unrealized appreciation (depreciation) | 19,269,194 | (33,412,258 | ) | |||||
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Net increase in net assets resulting from operations | 49,105,800 | 16,014,157 | ||||||
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Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Standard Class | (3,173,253 | ) | (3,142,659 | ) | ||||
Service Class | (2,494,399 | ) | (2,450,241 | ) | ||||
Net realized gain: | ||||||||
Standard Class | (15,210,259 | ) | — | |||||
Service Class | (14,715,477 | ) | — | |||||
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(35,593,388 | ) | (5,592,900 | ) | |||||
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Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Standard Class | 5,663,897 | 18,864,753 | ||||||
Service Class | 9,146,977 | 20,431,862 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 18,383,512 | 3,142,659 | ||||||
Service Class | 17,209,876 | 2,450,241 | ||||||
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50,404,262 | 44,889,515 | |||||||
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Cost of shares redeemed: | ||||||||
Standard Class | (10,301,419 | ) | (42,778,685 | ) | ||||
Service Class | (12,601,207 | ) | (41,736,004 | ) | ||||
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(22,902,626 | ) | (84,514,689 | ) | |||||
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Increase (decrease) in net assets derived from capital share transactions | 27,501,636 | (39,625,174 | ) | |||||
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Net Increase (Decrease) in Net Assets | 41,014,048 | (29,203,917 | ) | |||||
Net Assets: | ||||||||
Beginning of period | 482,720,933 | 511,924,850 | ||||||
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End of period | $ | 523,734,981 | $ | 482,720,933 | ||||
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Undistributed net investment income | $ | 7,361,928 | $ | 6,286,325 | ||||
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See accompanying notes, which are an integral part of the financial statements.
REIT Series-6
Table of Contents
Delaware VIP® Trust — Delaware VIP REIT Series
Financial highlights
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP REIT Series Standard Class | ||||||||||||||||||||||||||||||
Six months ended 6/30/151 | Year ended | |||||||||||||||||||||||||||||
(Unaudited) | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | 12/31/11 | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 15.890 | $ | 15.500 | $ | 12.140 | $ | 12.060 | $ | 10.470 | $ | 9.580 | ||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||
Net investment income2 | 0.228 | 0.205 | 0.195 | 0.180 | 0.189 | 0.165 | ||||||||||||||||||||||||
Net realized and unrealized gain | 1.337 | 0.373 | 3.353 | 0.095 | 1.576 | 0.883 | ||||||||||||||||||||||||
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Total from investment operations | 1.565 | 0.578 | 3.548 | 0.275 | 1.765 | 1.048 | ||||||||||||||||||||||||
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Less dividends and distributions from: | ||||||||||||||||||||||||||||||
Net investment income | (0.208 | ) | (0.188 | ) | (0.188 | ) | (0.195 | ) | (0.175 | ) | (0.158 | ) | ||||||||||||||||||
Net realized gain | (0.997 | ) | — | — | — | — | — | |||||||||||||||||||||||
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Total dividends and distributions | (1.205 | ) | (0.188 | ) | (0.188 | ) | (0.195 | ) | (0.175 | ) | (0.158 | ) | ||||||||||||||||||
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Net asset value, end of period | $ | 16.250 | $ | 15.890 | $ | 15.500 | $ | 12.140 | $ | 12.060 | $ | 10.470 | ||||||||||||||||||
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Total return3 | 10.49% | 3.75% | 29.46% | 2.14% | 16.94% | 10.96% | ||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 265,116 | $ | 244,618 | $ | 260,182 | $ | 198,950 | $ | 210,618 | $ | 187,545 | ||||||||||||||||||
Ratio of expenses to average net assets | 0.84% | 0.85% | 0.84% | 0.84% | 0.84% | 0.85% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets | 2.95% | 1.32% | 1.41% | 1.42% | 1.64% | 1.64% | ||||||||||||||||||||||||
Portfolio turnover | 57% | 75% | 84% | 97% | 91% | 108% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return does not include fees, charges, or expenses imposed by the variable annuity and life insurance contracts for which Delaware VIP Trust serves as an underlying investment vehicle. |
See accompanying notes, which are an integral part of the financial statements.
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Delaware VIP® REIT Series
Financial highlights (continued)
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP REIT Series Service Class | ||||||||||||||||||||||||||||||
Six months ended 6/30/151 | Year ended | |||||||||||||||||||||||||||||
(Unaudited) | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | 12/31/11 | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 15.860 | $ | 15.470 | $ | 12.120 | $ | 12.040 | $ | 10.460 | $ | 9.580 | ||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||
Net investment income2 | 0.208 | 0.166 | 0.160 | 0.148 | 0.160 | 0.140 | ||||||||||||||||||||||||
Net realized and unrealized gain | 1.338 | 0.377 | 3.346 | 0.098 | 1.570 | 0.876 | ||||||||||||||||||||||||
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Total from investment operations | 1.546 | 0.543 | 3.506 | 0.246 | 1.730 | 1.016 | ||||||||||||||||||||||||
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Less dividends and distributions from: | ||||||||||||||||||||||||||||||
Net investment income | (0.169 | ) | (0.153 | ) | (0.156 | ) | (0.166 | ) | (0.150 | ) | (0.136 | ) | ||||||||||||||||||
Net realized gain | (0.997 | ) | — | — | — | — | — | |||||||||||||||||||||||
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Total dividends and distributions | (1.166 | ) | (0.153 | ) | (0.156 | ) | (0.166 | ) | (0.150 | ) | (0.136 | ) | ||||||||||||||||||
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Net asset value, end of period | $ | 16.240 | $ | 15.860 | $ | 15.470 | $ | 12.120 | $ | 12.040 | $ | 10.460 | ||||||||||||||||||
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Total return3 | 10.37% | 3.52% | 29.12% | 1.92% | 16.61% | 10.62% | ||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 258,619 | $ | 238,103 | $ | 251,743 | $ | 198,530 | $ | 209,023 | $ | 176,031 | ||||||||||||||||||
Ratio of expenses to average net assets | 1.09% | 1.10% | 1.09% | 1.09% | 1.09% | 1.10% | ||||||||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 1.14% | 1.15% | 1.14% | 1.14% | 1.14% | 1.15% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets | 2.70% | 1.07% | 1.16% | 1.17% | 1.39% | 1.39% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 2.65% | 1.02% | 1.11% | 1.12% | 1.34% | 1.34% | ||||||||||||||||||||||||
Portfolio turnover | 57% | 75% | 84% | 97% | 91% | 108% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects a waiver by the distributor. Performance would have been lower had the waiver not been in effect. Total investment return does not include fees, charges, or expenses imposed by the variable annuity and life insurance contracts for which Delaware VIP Trust serves as an underlying investment vehicle. |
See accompanying notes, which are an integral part of the financial statements.
REIT Series-8
Table of Contents
Delaware VIP® Trust — Delaware VIP REIT Series
Notes to financial statements
June 30, 2016 (Unaudited)
Delaware VIP Trust (Trust) is organized as a Delaware statutory trust and offers 10 series: Delaware VIP Diversified Income Series, Delaware VIP Emerging Markets Series, Delaware VIP High Yield Series, Delaware VIP International Value Equity Series, Delaware VIP Limited-Term Diversified Income Series, Delaware VIP REIT Series, Delaware VIP Small Cap Value Series, Delaware VIP Smid Cap Growth Series, Delaware VIP U.S. Growth Series, and Delaware VIP Value Series. These financial statements and the related notes pertain to Delaware VIP REIT Series (Series). The Trust is an open-end investment company. The Series is considered diversified under the Investment Company Act of 1940, as amended, and offers Standard Class and Service Class shares. The Standard Class shares do not carry a 12b-1 fee and the Service Class shares carry a 12b-1 fee. The shares of the Series are sold only to separate accounts of life insurance companies.
The investment objectives of the Series are to seek maximum long-term total return, with capital appreciation as a secondary objective.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistently followed by the Series.
Security Valuation — Equity securities, except those traded on the Nasdaq Stock Market LLC (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange on the valuation date. Equity securities traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If, on a particular day, an equity security does not trade, the mean between the bid and ask prices will be used, which approximates fair value. U.S. government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Exchange-traded options are valued at the last reported sale price or, if no sales are reported, at the mean between the last reported bid and ask prices, which approximates fair value. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Trust’s Board of Trustees (Board). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security.
Federal Income Taxes — No provision for federal income taxes has been made as the Series intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Series evaluates tax positions taken or expected to be taken in the course of preparing the Series’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Series’ tax positions taken for all open federal income tax years (Dec. 31, 2012–Dec. 31, 2015), and has concluded that no provision for federal income tax is required in the Series’ financial statements.
Class Accounting — Investment income, common expenses, and realized and unrealized gain (loss) on investments are allocated to the classes of the Series on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class.
Repurchase Agreements — The Series may purchase certain U.S. government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Series’ custodian or a third party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on June 30, 2016 and matured on the next business day.
Use of Estimates — The Series is an investment company, whose financial statements are prepared in conformity with U.S. GAAP. Therefore, the Series follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other — Expenses directly attributable to the Series are charged directly to the Series. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated among such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Discounts and premiums on debt securities are accreted or amortized to interest income, respectively, over the lives of the respective securities using the effective interest method. Distributions received from investments in real estate investment trusts (REITs) are recorded as dividend income on the ex-dividend date, subject to reclassification upon notice of the character of such distributions by the issuer. The Series declares and pays dividends from net investment income and distributions from net realized gain on investments, if any, following the close of the fiscal year. The Series may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
Subject to seeking best execution, the Series may direct certain security trades to brokers who have agreed to rebate a portion of the related brokerage commission to the Series in cash. In general, best execution refers to many factors, including the price paid or received for a security, the commission charged, the promptness and reliability of execution, the confidentiality and placement accorded the order, and other factors affecting the overall benefit obtained by the Series on the transaction. There were no commission rebates for the six months ended June 30, 2016.
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Delaware VIP® REIT Series
Notes to financial statements (continued)
1. Significant Accounting Policies (continued)
The Series may receive earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. There were no such earnings credits for the six months ended June 30, 2016.
The Series receives earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than one dollar, the expense paid under this arrangement is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expense offset shown under “Less expense paid indirectly.” For the six months ended June 30, 2016, the Series earned $1 under this agreement.
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Series pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.75% on the first $500 million of average daily net assets of the Series, 0.70% on the next $500 million, 0.65% on the next $1.5 billion, and 0.60% on average daily net assets in excess of $2.5 billion.
Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Series. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DIFSC under the service agreement described above are allocated among all funds in the Delaware Investments Family of Funds on a relative net asset value (NAV) basis. For the six months ended June 30, 2016, the Series was charged $11,342 for these services. This amount is included on the “Statement of operations” under “Accounting and administration expenses.”
DIFSC is also the transfer agent and dividend disbursing agent of the Series. For these services, DIFSC’s fees are calculated at the annual rate of 0.0075% of the Series’ average daily net assets. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the six months ended June 30, 2016, the Series was charged $17,885 for these services. Pursuant to a sub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Series. Sub-transfer agency fees are paid by the Series and are also included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.”
Pursuant to a distribution agreement and distribution plan, the Series pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee of 0.30% of the average daily net assets of the Service Class shares. DDLP has contracted to waive distribution and service fee from Jan. 1, 2016 to June 30, 2016,* in order to limit distribution and service fee of the Service Class shares to 0.25% of average daily net assets. Standard Class shares pay no distribution and service expenses.
As provided in the investment management agreement, the Series bears a portion of the cost of resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Series. For the six months ended June 30, 2016, the Series was charged $5,340 for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees. This amount is included on the “Statement of operations” under “Legal fees.”
Trustees’ fees include expenses accrued by the Series for each Trustee’s retainer and meeting fees. Certain officers of DMC, DIFSC, and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Series.
*The contractual waiver period is from April 30, 2015 through May 1, 2017.
3. Investments
For the six months ended June 30, 2016, the Series made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 261,852,119 | ||
Sales | 285,567,175 |
At June 30, 2016, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At June 30, 2016, the cost and unrealized appreciation (depreciation) of investments were as follows:
Cost of Investments | Aggregate Unrealized Appreciation of investments | Aggregate Unrealized Depreciation of investments | Net Unrealized Appreciation of investments | |||||
$452,127,616 | $68,246,629 | $(1,209,583) | $67,037,046 |
U.S. GAAP defines fair value as the price that the Series would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established 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
REIT Series-10
Table of Contents
Delaware VIP® REIT Series
Notes to financial statements (continued)
3. Investments (continued)
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 assumptions that market participants would use in pricing the asset or liability based on the best information available under the circumstances. The Series’ investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized below.
Level 1 – Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts)
Level 2 – Other observable inputs, including, but 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. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities)
Level 3 – Significant unobservable inputs, including the Series’ own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities)
Level 3 investments are valued using significant unobservable inputs. The Series may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
The following table summarizes the valuation of the Series’ investments by fair value hierarchy levels as of June 30, 2016:
Securities | Level 1 | Level 2 | Total | |||||||||
Convertible Bond | $ | — | $ | 3,305,319 | $ | 3,305,319 | ||||||
Common Stock | 486,955,815 | — | 486,955,815 | |||||||||
Short-Term Investments | — | 28,903,528 | 28,903,528 | |||||||||
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| |||||||
Total Value of Securities | $ | 486,955,815 | $ | 32,208,847 | $ | 519,164,662 | ||||||
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|
During the six months ended June 30, 2016, there were no transfers between Level 1 investments, Level 2 investments, or Level 3 investments that had a significant impact to the Series. The Series’ policy is to recognize transfers between levels at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when the Series has a significant amount of Level 3 investments at the beginning, interim, or end of the period in relation to the Series’ net assets. At June 30, 2016, there were no Level 3 investments.
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 6/30/16 | Year ended 12/31/15 | |||||||
Shares sold: | ||||||||
Standard Class | 356,609 | 1,195,116 | ||||||
Service Class | 585,772 | 1,295,509 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 1,227,203 | 200,680 | ||||||
Service Class | 1,149,624 | 156,465 | ||||||
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| |||||
3,319,208 | 2,847,770 | |||||||
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| |||||
Shares redeemed: | ||||||||
Standard Class | (665,900 | ) | (2,788,833 | ) | ||||
Service Class | (823,097 | ) | (2,708,577 | ) | ||||
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| |||||
(1,488,997 | ) | (5,497,410 | ) | |||||
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| |||||
Net increase (decrease) | 1,830,211 | (2,649,640 | ) | |||||
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|
REIT Series-11
Table of Contents
Delaware VIP® REIT Series
Notes to financial statements (continued)
5. Line of Credit
The Series, along with certain other funds in the Delaware Investments® Family of Funds (Participants), is a participant in a $155,000,000 revolving line of credit intended to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants are charged an annual commitment fee of 0.10%, which is allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants are permitted to borrow up to a maximum of one-third of their net assets under the agreement. Each Participant is individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit available under the agreement expires on Nov. 7, 2016.
The Series had no amounts outstanding as of June 30, 2016 or at any time during the period then ended.
6. Derivatives
U.S. GAAP requires disclosures that enable investors to understand: (1) how and why an entity uses derivatives; (2) how they are accounted for; and (3) how they affect an entity’s results of operations and financial position.
Options Contracts – During the six months ended June 30, 2016, the Series entered into options contracts in the normal course of pursuing its investment objective. The Series may buy or write options contracts for any number of reasons, including without limitation: to manage the Series’ exposure to changes in securities prices caused by interest rates or market conditions and foreign currencies; as an efficient means of adjusting the Series’ overall exposure to certain markets; to protect the value of portfolio securities; and as a cash management tool. The Series may buy or write call or put options on securities, futures, swaps, swaptions, financial indices, and foreign currencies. When the Series buys an option, a premium is paid and an asset is recorded and adjusted on a daily basis to reflect the current market value of the option purchased. When the Series writes an option, a premium is received and a liability is recorded and adjusted on a daily basis to reflect the current market value of the option written. Premiums received from writing options that expire unexercised are treated by the Series on the expiration date as realized gains. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is treated as realized gain or loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether the Series has a realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Series. The Series, as writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option. When writing options, the Series is subject to minimal counterparty risk because the counterparty is only obligated to pay premiums and does not bear the market risk of an unfavorable market change.
Transactions in options written during the six months ended June 30, 2016 were as follows:
Number of Contracts | Premiums | |||||||||
Options outstanding December 31, 2015 | — | $ — | ||||||||
Options Written | 660 | 129,790 | ||||||||
Options Expired | (660) | (129,790 | ) | |||||||
Options outstanding June 30, 2016 | — | $ — |
During the six months ended June 30, 2016, the Series used options contracts to protect the value of portfolio securities.
Derivatives generally. The table below summarizes the average balance of derivative holdings by the Series during the six months ended June 30, 2016:
Long Derivative Volume | Short Derivative Volume | |||||||
Options contracts (Average notional value) | $ — | $7,117 |
7. Offsetting
In December 2011, the Financial Accounting Standards Board (FASB) issued guidance that expanded disclosure requirements on the offsetting of certain assets and liabilities. The disclosures are required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset on the “Statement of assets and liabilities” and requires an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarified which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting is limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing.
In order to better define its contractual rights and to secure rights that will help the Series mitigate its counterparty risk, the Series entered into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement) or a similar agreement with certain of its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Series and a counterparty that governs certain over-the-counter (OTC) derivatives and foreign exchange contracts and typically contains, among other things, collateral posting items and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Series may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the
REIT Series-12
Table of Contents
Delaware VIP® REIT Series
Notes to financial statements (continued)
7. Offsetting (continued)
ISDA Master Agreement typically permit a single net payment in the event of default (close-out), including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency, or other events.
For financial reporting purposes, the Series does not offset derivative assets and derivative liabilities that are subject to netting arrangements on the “Statement of assets and liabilities.”
At June 30, 2016, the Series had the following assets and liabilities subject to offsetting provisions:
Master Repurchase Agreements
Counterparty | Repurchase Agreements | Fair Value of Non-Cash Collateral Received | Cash Collateral Received | Net Collateral Received | Net Exposure(a) | |||||
Bank of America Merrill Lynch | $2,630,049 | $(2,630,049) | $ — | $(2,630,049) | $ — | |||||
Bank of Montreal | 4,383,415 | (4,383,415) | — | (4,383,415) | — | |||||
BNP Paribas | 436,536 | (436,536) | — | (436,536) | — | |||||
Total | $7,450,000 | $(7,450,000) | $ — | $(7,450,000) | $ — |
(a)Net exposure represents the receivable (payable) that would be due from (to) the counterparty in an event of default.
8. Securities Lending
The Series, along with other funds in the Delaware Investments® Family of Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (1) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (2) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral by the end of the following business day which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial collateral requirement, upon the request of the borrower, BNY Mellon must return enough collateral to the borrower by the end of the following business day to reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security on any particular day may be more or less than the value of the security on loan.
Prior to Dec. 29, 2015, cash collateral received was generally invested in the Delaware Investments Collateral Fund No. 1 (Collective Trust), a pooled account established by BNY Mellon for the use of funds managed by DMC that participate in BNY Mellon’s securities lending program. The Collective Trust sought to maintain a NAV per unit of $1.00.
On Dec. 29, 2015, the assets in the Collective Trust were transferred to a series of individual separate accounts, each corresponding to a Series. The investment guidelines permit each separate account to hold certain securities that would be considered eligible securities for a money market fund. Cash collateral received is generally invested in government securities; certain obligations issued by government sponsored enterprises; repurchase agreements collateralized by U.S. Treasury securities; obligations issued by the central government of any Organization for Economic Cooperation and Development (OECD) country or its agencies, instrumentalities or establishments; obligations of supranational organizations; commercial paper, notes, bonds, and other debt obligations; certificates of deposit, time deposits, and other bank obligations; and asset-backed securities.
In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Series or, at the discretion of the lending agent, replace the loaned securities. The Series continues to record dividends or interest, as applicable, on the securities loaned and are subject to changes in value of the securities loaned that may occur during the term of the loan. The Series has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Series receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Series, the security lending agent, and the borrower. The Series records security lending income net of allocations to the security lending agent and the borrower.
The Series may incur investment losses as a result of investing securities lending collateral. This could occur if an investment in the collateral investment account defaulted or became impaired. Under those circumstances, the value of a Series’ cash collateral account may be less than the amount the Series would be required to return to the borrowers of the securities and the Series would be required to make up for this shortfall.
During the six months ended June 30, 2016, the Series had no securities out on loan.
REIT Series-13
Table of Contents
Delaware VIP® REIT Series
Notes to financial statements (continued)
9 Credit and Market Risk
The Series concentrates its investments in the real estate industry and is subject to the risks associated with that industry. If the Series holds real estate directly as a result of defaults or receives rental income directly from real estate holdings, its tax status as a regulated investment company may be jeopardized. The Series is also affected by interest rate changes, particularly if the REITs it holds use floating rate debt to finance their ongoing operations. Its investments may also tend to fluctuate more widely than that of a fund that invests in a broader range of industries.
The Series may invest up to 10% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A, promulgated under Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Series from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Board has delegated to DMC, the day-to-day functions of determining whether individual securities are liquid for purposes of the Series’ limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Series’ 10% limit on investments in illiquid securities. As of June 30, 2016, there were no Rule 144A securities held by the Series and no securities have been determined to be illiquid under the Series’ liquidity procedures. When monitoring compliance with the Series’ illiquid limit, certain holdings that are common to multiple clients of the investment manager may be aggregated and considered illiquid in the aggregate solely for monitoring purposes. For purposes of determining illiquidity for financial reporting purposes, only the holdings of this Series will be considered.
10. Contractual Obligations
The Series enters into contracts in the normal course of business that contain a variety of indemnifications. The Series’ maximum exposure under these arrangements is unknown. However, the Series has not had prior claims or losses pursuant to these contracts. Management has reviewed the Series’ existing contracts and expects the risk of loss to be remote.
11. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to June 30, 2016 that would require recognition or disclosure in the Series’ financial statements.
The Series files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q. The Series’ Forms N-Q, as well as a description of the policies and procedures that the Series uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the Commission’s website at sec.gov. In addition, a description of the policies and procedures that the Series uses to determine how to vote proxies (if any) relating to portfolio securities and the Schedule of Investments included in the Series’ most recent Form N-Q are available without charge on the Delaware Investments® Funds’ website at delawareinvestments.com/vip/literature. The Series’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330.
Information (if any) regarding how the Series voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Delaware Investments Funds’ website at delawareinvestments.com/proxy; and (ii) on the Commission’s website at sec.gov.
|
SA-VIPREIT 21186 (8/16) (17290) | REIT Series-14 |
Table of Contents
Delaware VIP® Trust
|
Delaware VIP Small Cap Value Series
|
Semiannual report
|
June 30, 2016
|
Table of Contents
1 | ||||||||
Security type / sector allocation and top 10 equity holdings | 2 | |||||||
3 | ||||||||
5 | ||||||||
6 | ||||||||
6 | ||||||||
7 | ||||||||
9 |
Neither Delaware Investments nor its affiliates referred to in this document are authorized deposit-taking institutions for the purpose of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited (MBL), a subsidiary of Macquarie Group Limited and an affiliate of Delaware Investments. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Series is governed by U.S. laws and regulations.
Unless otherwise noted, views expressed herein are current as of June 30, 2016, and subject to change for events occurring after such date.
The Series is not FDIC insured and is not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor and member of Macquarie Group. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries, including the Series’ distributor, Delaware Distributors, L.P. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
This material may be used in conjunction with the offering of shares in Delaware VIP® Small Cap Value Series only if preceded or accompanied by the Series’ current prospectus or the summary prospectus.
© 2016 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
Table of Contents
Delaware VIP® Trust — Delaware VIP Small Cap Value Series
Disclosure of Series expenses
For the six-month period from January 1, 2016 to June 30, 2016 (Unaudited)
As a shareholder of the Series, you incur ongoing costs, which may include management fees; distribution and/or service (12b-1) fees; and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series 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 entire six-month period from Jan. 1, 2016 to June 30, 2016.
Actual expenses
The first section of the table shown, “Actual Series Return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, 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, an $8,600 account value divided by $1,000 = 8.6), 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 the period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% Return,” provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ 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 Series and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Series, you do not incur any transaction costs, such as sales charges (loads), redemption fees or exchange fees, but shareholders of other funds may incur such costs. Also, the fees related to the variable annuity investment or the deferred sales charge that could apply have not been included. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The Series’ actual expenses shown in the table reflect fee waivers in effect for Service class shares. The expenses shown in the table assume reinvestment of all dividends and distributions.
Expense analysis of an investment of $1,000
Expenses | ||||||||||||
Beginning | Ending | Paid During | ||||||||||
Account | Account | Annualized | Period | |||||||||
Value | Value | Expense | 1/1/16 to | |||||||||
1/1/16 | 6/30/16 | Ratio | 6/30/16* | |||||||||
Actual Series return† | ||||||||||||
Standard Class | $1,000.00 | $1,080.20 | 0.80% | $4.14 | ||||||||
Service Class | 1,000.00 | 1,078.60 | 1.05% | 5.43 | ||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||
Standard Class | $1,000.00 | $1,020.89 | 0.80% | $4.02 | ||||||||
Service Class | 1,000.00 | 1,019.64 | 1.05% | 5.27 |
* | “Expenses Paid During Period” are equal to the Series’ annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
† | Because actual returns reflect only the most recent six-month period, the returns shown may differ significantly from fiscal year returns. |
Small Cap Value Series-1 |
Table of Contents
Delaware VIP® Trust — Delaware VIP Small Cap Value Series
Security type / sector allocation and top 10 equity holdings
As of June 30, 2016 (Unaudited)
Sector designations may be different than the sector designations presented in other Series materials. The sector designations may represent the investment manager’s internal sector classifications.
Security type / sector | Percentage of net assets | ||||
Common Stock² | 99.71% | ||||
Basic Industry | 10.52% | ||||
Business Services | 1.65% | ||||
Capital Spending | 7.40% | ||||
Consumer Cyclical | 3.88% | ||||
Consumer Services | 7.19% | ||||
Consumer Staples | 3.48% | ||||
Energy | 6.40% | ||||
Financial Services1 | 26.30% | ||||
Healthcare | 5.53% | ||||
Real Estate | 9.40% | ||||
Technology | 12.41% | ||||
Transportation | 2.39% | ||||
Utilities | 3.16% | ||||
Short-Term Investments | 0.69% | ||||
Total Value of Securities | 100.40% | ||||
Liabilities Net of Receivables and Other Assets | (0.40% | ) | |||
Total Net Assets | 100.00% |
² | Narrow industries are utilized for compliance purposes for diversification whereas broad sectors are used for financial reporting. |
1 | To monitor compliance with the Series’ concentration guidelines as described in the Series’ Prospectus and Statement of Additional Information, the Financial Services sector (as disclosed herein for financial reporting purposes) is subdivided into a variety of “industries” (in accordance with the requirements of the 1940 Act). The Financial Services sector consisted of diversified financial services, banks, insurance and investment companies. As of June 30, 2016, such amounts, as percentage of total net assets, were 0.84%, 18.95%, 5.76%, and 0.75%, respectively. The percentage in any such single industry will comply with the Series’ concentration policy even if the percentages in the Financial Services sector for financial reporting purposes may exceed 25%. |
Holdings are for informational purposes only and are subject to change at any time. They are not a recommendation to buy, sell, or hold any security.
Top 10 equity holdings | Percentage of net assets | ||||
East West Bancorp | 2.61% | ||||
Berry Plastics Group | 2.13% | ||||
Selective Insurance Group | 1.95% | ||||
Synopsys | 1.77% | ||||
Webster Financial | 1.76% | ||||
Southwest Gas | 1.70% | ||||
MasTec | 1.68% | ||||
Olin | 1.62% | ||||
Bank of Hawaii | 1.59% | ||||
Highwoods Properties
|
| 1.49%
|
|
Small Cap Value Series-2
Table of Contents
Delaware VIP® Trust — Delaware VIP Small Cap Value Series
Schedule of investments
June 30, 2016 (Unaudited)
Number of shares | Value (U.S. $) | |||||||
Common Stock – 99.71% ² |
| |||||||
Basic Industry – 10.52% |
| |||||||
Albemarle | 171,200 | $ | 13,577,872 | |||||
Berry Plastics Group † | 556,200 | 21,608,370 | ||||||
Chemtura † | 413,900 | 10,918,682 | ||||||
Clearwater Paper † | 182,994 | 11,962,318 | ||||||
HB Fuller | 344,300 | 15,145,757 | ||||||
Kaiser Aluminum | 91,100 | 8,236,351 | ||||||
Olin | 660,900 | 16,416,756 | ||||||
PH Glatfelter | 116,790 | 2,284,412 | ||||||
Trinseo | 153,556 | 6,592,159 | ||||||
|
| |||||||
106,742,677 | ||||||||
|
| |||||||
Business Services – 1.65% |
| |||||||
Deluxe | 123,500 | 8,196,695 | ||||||
Essendant | 149,400 | 4,565,664 | ||||||
WESCO International † | 77,200 | 3,975,028 | ||||||
|
| |||||||
16,737,387 | ||||||||
|
| |||||||
Capital Spending – 7.40% |
| |||||||
Altra Industrial Motion | 310,870 | 8,387,273 | ||||||
CIRCOR International | 78,200 | 4,456,618 | ||||||
EnPro Industries | 109,700 | 4,869,583 | ||||||
H&E Equipment Services | 463,800 | 8,826,114 | ||||||
ITT | 379,300 | 12,130,014 | ||||||
MasTec † | 762,400 | 17,016,768 | ||||||
Primoris Services | 418,900 | 7,929,777 | ||||||
Regal Beloit | 100,200 | 5,516,010 | ||||||
Thermon Group Holdings † | 310,700 | 5,968,547 | ||||||
|
| |||||||
75,100,704 | ||||||||
|
| |||||||
Consumer Cyclical – 3.88% |
| |||||||
Barnes Group | 226,500 | 7,501,680 | ||||||
Knoll | 294,593 | 7,152,718 | ||||||
Meritage Homes † | 282,400 | 10,601,296 | ||||||
Standard Motor Products | 184,001 | 7,319,560 | ||||||
Tenneco † | 145,100 | 6,763,111 | ||||||
|
| |||||||
39,338,365 | ||||||||
|
| |||||||
Consumer Services – 7.19% |
| |||||||
Asbury Automotive Group † | 70,900 | 3,739,266 | ||||||
Cato Class A | 117,254 | 4,422,821 | ||||||
Cheesecake Factory | 182,600 | 8,790,364 | ||||||
Cinemark Holdings | 201,413 | 7,343,518 | ||||||
Finish Line Class A | 104,700 | 2,113,893 | ||||||
Genesco † | 58,851 | 3,784,708 | ||||||
International Speedway Class A | 208,100 | 6,960,945 | ||||||
Meredith | 123,750 | 6,423,864 | ||||||
Steven Madden † | 203,500 | 6,955,630 | ||||||
Texas Roadhouse | 156,600 | 7,140,960 | ||||||
UniFirst | 72,800 | 8,424,416 | ||||||
Wolverine World Wide | 336,900 | 6,845,808 | ||||||
|
| |||||||
72,946,193 | ||||||||
|
| |||||||
Consumer Staples – 3.48% |
| |||||||
Core-Mark Holding Class A | 194,464 | 9,112,583 | ||||||
J&J Snack Foods | 81,500 | 9,720,505 | ||||||
Pinnacle Foods | 188,200 | 8,711,778 |
Number of shares | Value (U.S. $) | |||||||
Common Stock ² (continued) |
| |||||||
Consumer Staples (continued) |
| |||||||
Scotts Miracle-Gro Class A | 111,300 | $ | 7,780,983 | |||||
|
| |||||||
35,325,849 | ||||||||
|
| |||||||
Energy – 6.40% | ||||||||
Dril-Quip † | 96,900 | 5,661,867 | ||||||
Helix Energy Solutions Group † | 731,600 | 4,945,616 | ||||||
Jones Energy Class A † | 180,200 | 742,424 | ||||||
Oasis Petroleum † | 676,100 | 6,314,774 | ||||||
Patterson-UTI Energy | 597,300 | 12,734,436 | ||||||
SM Energy | 287,800 | 7,770,600 | ||||||
Southwest Gas | 218,800 | 17,221,748 | ||||||
Western Refining | 332,300 | 6,855,349 | ||||||
Whiting Petroleum † | 286,600 | 2,653,916 | ||||||
|
| |||||||
64,900,730 | ||||||||
|
| |||||||
Financial Services – 26.30% |
| |||||||
American Equity Investment Life | ||||||||
Holding | 539,000 | 7,680,750 | ||||||
Bank of Hawaii | 234,000 | 16,099,200 | ||||||
Boston Private Financial Holdings | 652,500 | 7,686,450 | ||||||
Community Bank System | 337,600 | 13,871,984 | ||||||
East West Bancorp | 774,136 | 26,459,968 | ||||||
First Financial Bancorp | 558,400 | 10,860,880 | ||||||
First Interstate BancSystem | 211,400 | 5,940,340 | ||||||
First Midwest Bancorp | 512,800 | 9,004,768 | ||||||
Great Western Bancorp | 438,600 | 13,833,444 | ||||||
Hancock Holding | 500,100 | 13,057,611 | ||||||
Independent Bank | 94,200 | 4,304,940 | ||||||
Infinity Property & Casualty | 103,600 | 8,356,376 | ||||||
Main Street Capital | 232,000 | 7,621,200 | ||||||
NBT Bancorp | 434,600 | 12,442,598 | ||||||
ProAssurance | 223,100 | 11,947,005 | ||||||
Prosperity Bancshares | 183,200 | 9,341,368 | ||||||
S&T Bancorp | 248,642 | 6,079,297 | ||||||
Selective Insurance Group | 518,800 | 19,823,348 | ||||||
Stifel Financial † | 270,500 | 8,507,225 | ||||||
Umpqua Holdings | 323,800 | 5,009,186 | ||||||
Validus Holdings | 220,321 | 10,705,397 | ||||||
Valley National Bancorp | 1,181,200 | 10,772,544 | ||||||
Webster Financial | 526,100 | 17,861,095 | ||||||
WesBanco | 310,800 | 9,650,340 | ||||||
|
| |||||||
266,917,314 | ||||||||
|
| |||||||
Healthcare – 5.53% |
| |||||||
Haemonetics † | 136,400 | 3,954,236 | ||||||
Owens & Minor | 278,350 | 10,404,723 | ||||||
Service International | 278,400 | 7,527,936 | ||||||
STERIS | 124,998 | 8,593,613 | ||||||
Teleflex | 48,900 | 8,670,459 | ||||||
VCA † | 117,999 | 7,977,912 | ||||||
VWR † | 311,720 | 9,008,708 | ||||||
|
| |||||||
56,137,587 | ||||||||
|
| |||||||
Real Estate – 9.40% | ||||||||
Alexander & Baldwin | 217,571 | 7,863,016 | ||||||
Brandywine Realty Trust | 856,933 | 14,396,474 |
Small Cap Value Series -3
Table of Contents
Delaware VIP® Small Cap Value Series
Schedule of investments (continued)
Number of | Value | |||||||
shares | (U.S. $) | |||||||
Common Stock ² (continued) |
| |||||||
Real Estate (continued) |
| |||||||
Education Realty Trust | 196,900 | $ | 9,084,966 | |||||
Healthcare Realty Trust | 327,900 | 11,473,221 | ||||||
Highwoods Properties | 286,900 | 15,148,320 | ||||||
Lexington Realty Trust | 1,069,400 | 10,811,634 | ||||||
Ramco-Gershenson Properties Trust | 427,500 | 8,383,275 | ||||||
Summit Hotel Properties | 573,100 | 7,587,844 | ||||||
Washington Real Estate Investment Trust | 337,700 | 10,624,042 | ||||||
|
| |||||||
95,372,792 | ||||||||
|
| |||||||
Technology – 12.41% | ||||||||
Brocade Communications Systems | 602,000 | 5,526,360 | ||||||
Cirrus Logic † | 234,100 | 9,080,739 | ||||||
CommScope Holding † | 436,445 | 13,542,888 | ||||||
Electronics For Imaging † | 275,800 | 11,870,432 | ||||||
NetScout Systems † | 324,563 | 7,221,527 | ||||||
ON Semiconductor † | 1,169,900 | 10,318,518 | ||||||
PTC † | 295,700 | 11,112,406 | ||||||
Super Micro Computer † | 292,500 | 7,268,625 | ||||||
Synopsys † | 332,700 | 17,992,416 | ||||||
Tech Data † | 146,300 | 10,511,655 | ||||||
Teradyne | 492,200 | 9,691,418 | ||||||
Vishay Intertechnology | 953,400 | 11,812,626 | ||||||
|
| |||||||
125,949,610 | ||||||||
|
| |||||||
Transportation – 2.39% |
| |||||||
Kirby † | 98,300 | 6,132,937 | ||||||
Matson | 186,600 | 6,025,314 | ||||||
Saia † | 135,750 | 3,412,755 | ||||||
Werner Enterprises | 376,800 | 8,655,096 | ||||||
|
| |||||||
24,226,102 | ||||||||
|
| |||||||
Utilities – 3.16% | ||||||||
Black Hills | 159,000 | 10,023,360 | ||||||
El Paso Electric | 209,100 | 9,884,157 | ||||||
NorthWestern | 192,600 | 12,147,282 | ||||||
|
| |||||||
32,054,799 | ||||||||
|
| |||||||
Total Common Stock | 1,011,750,109 | |||||||
|
|
Principal | Value | |||||||
amount° | (U.S. $) | |||||||
Short-Term Investments – 0.69% |
| |||||||
Discount Notes – 0.56% ≠ |
| |||||||
Federal Home Loan Bank | ||||||||
0.266% 8/5/16 | 2,033,973 | $ | 2,033,499 | |||||
0.31% 7/13/16 | 701,808 | 701,771 | ||||||
0.325% 8/3/16 | 460,689 | 460,588 | ||||||
0.335% 7/12/16 | 241,287 | 241,275 | ||||||
0.335% 7/21/16 | 335,120 | 335,090 | ||||||
0.34% 7/22/16 | 66,351 | 66,345 | ||||||
0.38% 7/18/16 | 462,657 | 462,622 | ||||||
0.39% 9/21/16 | 160,810 | 160,711 | ||||||
0.39% 9/23/16 | 196,158 | 196,034 | ||||||
0.53% 8/15/16 | 996,991 | 996,692 | ||||||
|
| |||||||
5,654,627 | ||||||||
|
| |||||||
Repurchase Agreements – 0.13% |
| |||||||
Bank of America Merrill Lynch 0.29%, dated 6/30/16, to be repurchased on 7/1/16, repurchase price $464,940 (collateralized by U.S. government obligations 4.25% 11/15/40; market value $474,235) | 464,936 | 464,936 | ||||||
Bank of Montreal | 774,894 | 774,894 | ||||||
BNP Paribas | 77,170 | 77,170 | ||||||
|
| |||||||
1,317,000 | ||||||||
|
| |||||||
Total Short-Term Investments |
| 6,971,627 | ||||||
|
|
Total Value of Securities – 100.40% | $ | 1,018,721,736 | ||
|
|
² | Narrow industries are utilized for compliance purposes for diversification whereas broad sectors are used for financial reporting. |
≠ | The rate shown is the effective yield at the time of purchase. |
° | Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency. |
† | Non-income-producing security. |
See accompanying notes, which are an integral part of the financial statements.
Small Cap Value Series -4
Table of Contents
Delaware VIP® Trust — Delaware VIP Small Cap Value Series Statement of assets and liabilities | June 30, 2016 (unaudited)
|
Assets: | ||||
Investments, at value1 | $ | 1,011,750,109 | ||
Short-term investments, at value2 | 6,971,627 | |||
Cash | 576,833 | |||
Dividends and interest receivable | 1,360,424 | |||
Receivable for securities sold | 1,040,862 | |||
Receivable for series shares sold | 139,770 | |||
|
| |||
Total assets | 1,021,839,625 | |||
|
| |||
Liabilities: | ||||
Payable for series shares redeemed | 4,506,740 | |||
Payable for securities purchased | 1,674,607 | |||
Investment management fees payable | 607,055 | |||
Other accrued expenses | 202,933 | |||
Distribution fees payable to affiliates | 135,078 | |||
Audit and tax fees payable | 16,334 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 6,295 | |||
Accounting and administration expenses payable to affiliates | 3,968 | |||
Trustees’ fees and expenses payable | 3,129 | |||
Legal fees payable to affiliates | 1,887 | |||
Reports and statements to shareholders expenses payable to affiliates | 421 | |||
|
| |||
Total liabilities | 7,158,447 | |||
|
| |||
Total Net Assets | $ | 1,014,681,178 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 762,749,740 | ||
Undistributed net investment income | 4,735,712 | |||
Accumulated net realized gain on investments | 11,389,612 | |||
Net unrealized appreciation of investments | 235,806,114 | |||
|
| |||
Total Net Assets | $ | 1,014,681,178 | ||
|
| |||
Standard Class: | ||||
Net assets | $ | 363,792,715 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 11,109,710 | |||
Net asset value per share | $ | 32.75 | ||
Service Class: | ||||
Net assets | $ | 650,888,463 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 19,940,833 | |||
Net asset value per share | $ | 32.64 | ||
1Investments, at cost | $ | 775,944,678 | ||
2Short-term investments, at cost | 6,970,944 |
See accompanying notes, which are an integral part of the financial statements.
Small Cap Value Series-5
Table of Contents
Delaware VIP Small Cap Value Series
Statement of operations
Six months ended June 30, 2016 (Unaudited)
Investment Income: | ||||
Dividends | $ | 9,625,834 | ||
Interest | 16,233 | |||
|
| |||
9,642,067 | ||||
|
| |||
Expenses: | ||||
Management fees | 3,473,160 | |||
Distribution expenses - Service Class | 921,467 | |||
Accounting and administration expenses | 156,160 | |||
Reports and statements to shareholders expenses | 67,508 | |||
Dividends disbursing and transfer agent fees and expenses | 40,961 | |||
Legal fees | 31,060 | |||
Trustees’ fees and expenses | 24,368 | |||
Custodian fees | 19,403 | |||
Audit and tax fees | 16,380 | |||
Registration fees | 3,377 | |||
Other | 13,592 | |||
|
| |||
4,767,436 | ||||
Less waived distribution expenses - Service Class | (153,578 | ) | ||
Less expense paid indirectly | (2 | ) | ||
|
| |||
Total operating expenses | 4,613,856 | |||
|
| |||
Net Investment Income | 5,028,211 | |||
|
| |||
Net Realized and Unrealized Gain: | ||||
Net realized gain on investments | 11,837,554 | |||
Net change in unrealized appreciation (depreciation) of investments | 59,167,193 | |||
|
| |||
Net Realized and Unrealized Gain | 71,004,747 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 76,032,958 | ||
|
|
Delaware VIP Small Cap Value Series
Statements of changes in net assets
Six months ended 6/30/16 (Unaudited) | Year ended 12/31/15 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 5,028,211 | $ | 7,835,557 | ||||
Net realized gain | 11,837,554 | 92,916,036 | ||||||
Net change in unrealized appreciation (depreciation) | 59,167,193 | (167,091,216 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 76,032,958 | (66,339,623 | ) | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Standard Class | (3,599,852 | ) | (2,672,814 | ) | ||||
Service Class | (4,789,432 | ) | (3,234,601 | ) | ||||
Net realized gain: | ||||||||
Standard Class | (33,171,518 | ) | (38,859,324 | ) | ||||
Service Class | (59,630,251 | ) | (72,585,147 | ) | ||||
|
|
|
| |||||
(101,191,053 | ) | (117,351,886 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Standard Class | 18,388,566 | 39,434,777 | ||||||
Service Class | 16,587,459 | 39,076,909 | ||||||
Net asset value of shares based upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 36,771,370 | 41,532,138 | ||||||
Service Class | 64,419,683 | 75,819,748 | ||||||
|
|
|
| |||||
136,167,078 | 195,863,572 | |||||||
|
|
|
| |||||
Cost of shares repurchased: | ||||||||
Standard Class | (26,217,335 | ) | (51,838,581 | ) | ||||
Service Class | (34,979,689 | ) | (94,268,839 | ) | ||||
|
|
|
| |||||
(61,197,024 | ) | (146,107,420 | ) | |||||
|
|
|
| |||||
Increase in net assets derived from capital share transactions | 74,970,054 | 49,756,152 | ||||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | 49,811,959 | (133,935,357 | ) | |||||
Net Assets: | ||||||||
Beginning of period | 964,869,219 | 1,098,804,576 | ||||||
|
|
|
| |||||
End of period | $ | 1,014,681,178 | $ | 964,869,219 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 4,735,712 | $ | 8,096,785 | ||||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
Small Cap Value Series-6
Table of Contents
Delaware VIP® Trust — Delaware VIP Small Cap Value Series
Financial highlights
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP Small Cap Value Series Standard Class | |||||||||||||||||||||||||||||||||
Six months ended 6/30/161 (Unaudited) | 12/31/15 | 12/31/14 | Year ended 12/31/13 | 12/31/12 | 12/31/11 | ||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 33.720 | $ | 40.230 | $ | 41.720 | $ | 33.140 | $ | 31.390 | $ | 31.960 | |||||||||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||||||||
Net investment income2 | 0.196 | 0.334 | 0.274 | 0.238 | 0.265 | 0.181 | |||||||||||||||||||||||||||
Net realized and unrealized gain (loss) | 2.450 | (2.431 | ) | 2.058 | 10.368 | 3.982 | (0.593 | ) | |||||||||||||||||||||||||
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|
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|
|
|
|
| ||||||||||||||||||||||
Total from investment operations | 2.646 | (2.097 | ) | 2.332 | 10.606 | 4.247 | (0.412 | ) | |||||||||||||||||||||||||
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| ||||||||||||||||||||||
Less dividends and distributions from: | |||||||||||||||||||||||||||||||||
Net investment income | (0.354 | ) | (0.284 | ) | (0.233 | ) | (0.276 | ) | (0.195 | ) | (0.158 | ) | |||||||||||||||||||||
Net realized gain | (3.262 | ) | (4.129 | ) | (3.589 | ) | (1.750 | ) | (2.302 | ) | — | ||||||||||||||||||||||
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|
|
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|
|
|
|
| ||||||||||||||||||||||
Total dividends and distributions | (3.616 | ) | (4.413 | ) | (3.822 | ) | (2.026 | ) | (2.497 | ) | (0.158 | ) | |||||||||||||||||||||
|
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|
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|
|
|
|
|
|
| ||||||||||||||||||||||
Net asset value, end of period | $ | 32.750 | $ | 33.720 | $ | 40.230 | $ | 41.720 | $ | 33.140 | $ | 31.390 | |||||||||||||||||||||
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|
|
|
|
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|
|
|
|
| ||||||||||||||||||||||
Total return3 | 8.02% | (6.22% | ) | 5.86% | 33.50% | 13.90% | (1.33% | ) | |||||||||||||||||||||||||
Ratios and supplemental data: | |||||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 363,793 | $ | 343,847 | $ | 379,542 | $ | 354,211 | $ | 271,272 | $ | 243,440 | |||||||||||||||||||||
Ratio of expenses to average net assets | 0.80% | 0.80% | 0.80% | 0.80% | 0.81% | 0.81% | |||||||||||||||||||||||||||
Ratio of net investment income to average net assets | 1.21% | 0.90% | 0.68% | 0.64% | 0.82% | 0.57% | |||||||||||||||||||||||||||
Portfolio turnover | 4% | 18% | 16% | 23% | 14% | 17% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return does not include fees, charges, or expenses imposed by the variable annuity and life insurance contracts for which Delaware VIP Trust serves as an underlying investment vehicle. |
See accompanying notes, which are an integral part of the financial statements.
Small Cap Value Series-7
Table of Contents
Delaware VIP® Small Cap Value Series
Financial highlights (continued)
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP Small Cap Value Series Service Class | ||||||||||||||||||||||||||||||
Six months | ||||||||||||||||||||||||||||||
ended | ||||||||||||||||||||||||||||||
6/30/161 | Year ended | |||||||||||||||||||||||||||||
(Unaudited) | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | 12/31/11 | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 33.580 | $ | 40.080 | $ | 41.580 | $ | 33.040 | $ | 31.300 | $ | 31.890 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||
Net investment income2 | 0.155 | 0.241 | 0.173 | 0.145 | 0.184 | 0.101 | ||||||||||||||||||||||||
Net realized and unrealized gain (loss) | 2.429 | (2.428 | ) | 2.057 | 10.340 | 3.974 | (0.600 | ) | ||||||||||||||||||||||
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|
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|
|
|
|
|
|
|
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| |||||||||||||||||||
Total from investment operations | 2.584 | (2.187 | ) | 2.230 | 10.485 | 4.158 | (0.499 | ) | ||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||||||||
Net investment income | (0.262 | ) | (0.184 | ) | (0.141 | ) | (0.195 | ) | (0.116 | ) | (0.091 | ) | ||||||||||||||||||
Net realized gain | (3.262 | ) | (4.129 | ) | (3.589 | ) | (1.750 | ) | (2.302 | ) | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total dividends and distributions | (3.524 | ) | (4.313 | ) | (3.730 | ) | (1.945 | ) | (2.418 | ) | (0.091 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net asset value, end of period | $ | 32.640 | $ | 33.580 | $ | 40.080 | $ | 41.580 | $ | 33.040 | $ | 31.300 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total return3 | 7.86% | (6.46% | ) | 5.62% | 33.17% | 13.63% | (1.59% | ) | ||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 650,888 | $ | 621,022 | $ | 719,263 | $ | 722,548 | $ | 593,021 | $ | 579,080 | ||||||||||||||||||
Ratio of expenses to average net assets | 1.05% | 1.05% | 1.05% | 1.05% | 1.06% | 1.06% | ||||||||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 1.10% | 1.10% | 1.10% | 1.10% | 1.11% | 1.11% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets | 0.96% | 0.65% | 0.43% | 0.39% | 0.57% | 0.32% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 0.91% | 0.60% | 0.38% | 0.34% | 0.52% | 0.27% | ||||||||||||||||||||||||
Portfolio turnover | 4% | 18% | 16% | 23% | 14% | 17% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects a waiver by the distributor. Performance would have been lower had the waiver not been in effect. Total investment return does not include fees, charges, or expenses imposed by the variable annuity and life insurance contracts for which Delaware VIP Trust serves as an underlying investment vehicle. |
See accompanying notes, which are an integral part of the financial statements.
Small Cap Value Series-8
Table of Contents
Delaware VIP® Trust — Delaware VIP Small Cap Value Series
Notes to financial statements
June 30, 2016 (Unaudited)
Delaware VIP Trust (Trust) is organized as a Delaware statutory trust and offers 10 series: Delaware VIP Diversified Income Series, Delaware VIP Emerging Markets Series, Delaware VIP High Yield Series, Delaware VIP International Value Equity Series, Delaware VIP Limited-Term Diversified Income Series, Delaware VIP REIT Series, Delaware VIP Small Cap Value Series, Delaware VIP Smid Cap Growth Series, Delaware VIP U.S. Growth Series, and Delaware VIP Value Series. These financial statements and the related notes pertain to Delaware VIP Small Cap Value Series (Series). The Trust is an open-end investment company. The Series is considered diversified under the Investment Company Act of 1940, as amended, and offers Standard Class and Service Class shares. The Standard Class shares do not carry a 12b-1 fee and the Service Class shares carry a 12b-1 fee. The shares of the Series are sold only to separate accounts of life insurance companies.
The investment objective of the Series is to seek capital appreciation.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistently followed by the Series.
Security Valuation — Equity securities, except those traded on the Nasdaq Stock Market LLC (Nasdaq) are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange on the valuation date. Equity securities traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If, on a particular, day an equity security does not trade, the mean between the bid and ask prices will be used, which approximates fair value. U.S. government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Trust’s Board of Trustees (Board). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security.
Federal Income Taxes — No provision for federal income taxes has been made as the Series intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Series evaluates tax positions taken or expected to be taken in the course of preparing the Series’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Series’ tax positions taken for all open federal income tax years (Dec. 31, 2012–Dec. 31, 2015), and has concluded that no provision for federal income tax is required in the Series’ financial statements.
Class Accounting — Investment income, common expenses, and realized and unrealized gain (loss) on investments are allocated to the classes of the Series on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class.
Repurchase Agreements — The Series may purchase certain U.S. government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Series’ custodian or a third-party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on June 30, 2016, and matured on the next business day.
Use of Estimates — The Series is an investment company, whose financial statements are prepared in conformity with U.S. GAAP. Therefore, the Series follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other — Expenses directly attributable to the Series are charged directly to the Series. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated among such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Discounts and premiums on debt securities are accreted or amortized to interest income, respectively, over the lives of the respective securities using the effective interest method. Distributions received from investments in real estate investment trusts (REITs) are recorded as dividend income on the ex-dividend date, subject to reclassification upon notice of the character of such distribution by the issuer. The Series declares and pays dividends from net investment income and distributions from net realized gain on investments, if any, annually. The Series may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
Subject to seeking best execution, the Series may direct certain security trades to brokers who have agreed to rebate a portion of the related brokerage commission to the Series in cash. Such commission rebates are included on the “Statement of operations” under “Net realized gain on investments” and totaled $517 for the six months ended June 30, 2016. In general, best execution refers to many factors, including the price paid or received for a security, the commission charged, the promptness and reliability of execution, the confidentiality and placement accorded the order, and other factors affecting the overall benefit obtained by the Series on the transaction.
Small Cap Value Series-9
Table of Contents
Delaware VIP® Small Cap Value Series
Notes to financial statements
1. Significant Accounting Policies (continued)
The Series may receive earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. There were no such earnings credits for the six months ended June 30, 2016.
The Series receives earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than one dollar, the expense paid under this arrangement is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expense offset shown under “Less expense paid indirectly.” For the six months ended June 30, 2016, the Series earned $2 under this agreement.
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Series pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.75% on the first $500 million of average daily net assets of the Series, 0.70% on the next $500 million, 0.65% on the next $1.5 billion, and 0.60% on average daily net assets in excess of $2.5 billion.
Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Series. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DIFSC under the service agreement described above are allocated among all funds in the Delaware Investments Family of Funds on a relative net asset value (NAV) basis. For the six months ended June 30, 2016, the Series was charged $22,760 for these services. This amount is included on the “Statement of operations” under “Accounting and administration expenses.”
DIFSC is also the transfer agent and dividend disbursing agent of the Series. For these services, DIFSC’s fees are calculated at the annual rate of 0.0075% of the Series’ average daily net assets. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the six months ended June 30, 2016, the Series was charged $35,892 for these services. Pursuant to a sub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Series. Sub-transfer agency fees are passed on to and paid by the Series.
Pursuant to a distribution agreement and distribution plan, the Series pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee of 0.30% of the average daily net assets of the Service Class shares. DDLP has contracted to waive distribution and service fees from Jan. 1, 2016 through June 30, 2016* in order to limit distribution and service fees of the Service Class shares to 0.25% of average daily net assets. Standard Class shares pay no distribution and service expenses.
As provided in the investment management agreement, the Series bears a portion of the cost of certain resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Series. For the six months ended June 30, 2016, the Series was charged $10,830 for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees.
Trustees’ fees include expenses accrued by the Series for each Trustee’s retainer and meeting fees. Certain officers of DMC, DIFSC, and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Series.
*The contractual waiver period is from April 30, 2015 through May 1, 2017.
3. Investments
For the six months ended June 30, 2016, the Series made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 42,900,644 | ||
Sales | 55,654,771 |
At June 30, 2016, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At June 30, 2016, the cost and unrealized appreciation (depreciation) of investments for the Series were as follows:
Cost of Investments | Aggregate Unrealized Appreciation of Investments | Aggregate Unrealized Depreciation of Investments | Net Unrealized Appreciation of Investments | |||||||||||||
$782,915,622 | $305,046,051 | $(69,239,937) | $235,806,114 | |||||||||||||
U.S. GAAP defines fair value as the price that the Series would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established 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 assumptions that market participants would use in pricing the asset or liability developed based on the best information
Small Cap Value Series-10
Table of Contents
Delaware VIP® Small Cap Value Series
Notes to financial statements
3. Investments (continued)
available under the circumstances. The Series’ investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized below.
Level 1 – | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) | |
Level 2 – | Other observable inputs, including, but 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. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) | |
Level 3 – | Significant unobservable inputs, including the Series’ own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. The Series may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
The following table summarizes the valuation of the Series’ investments by fair value hierarchy levels as of June 30, 2016:
Securities | Level 1 | Level 2 | Total | |||||||||
Common Stock | $ | 1,011,750,109 | $ | — | $ | 1,011,750,109 | ||||||
Short-Term Investments | — | 6,971,627 | 6,971,627 | |||||||||
|
|
|
|
|
| |||||||
Total Value of Securities | $ | 1,011,750,109 | $ | 6,971,627 | $ | 1,018,721,736 | ||||||
|
|
|
|
|
|
During the six months ended June 30, 2016, there were no transfers between Level 1 investments, Level 2 investments, or Level 3 investments that had a significant impact to the Series. The Series’ policy is to recognize transfers between levels at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when the Series has a significant amount of Level 3 investments at the beginning, interim, or end of the period in relation to the Series’s net assets. At June 30, 2016, there were no Level 3 investments.
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 6/30/16 | Year ended 12/31/15 | ||||||||||||||
Shares sold: | |||||||||||||||
Standard Class | 572,799 | 1,054,751 | |||||||||||||
Service Class | 514,683 | 1,047,158 | |||||||||||||
Shares issued upon reinvestment of dividends and distributions: | |||||||||||||||
Standard Class | 1,140,905 | 1,118,560 | |||||||||||||
Service Class | 2,003,723 | 2,046,969 | |||||||||||||
|
|
|
| ||||||||||||
4,232,110 | 5,267,438 | ||||||||||||||
|
|
|
| ||||||||||||
Shares redeemed: | |||||||||||||||
Standard Class | (799,949 | ) | (1,410,812 | ) | |||||||||||
Service Class | (1,071,499 | ) | (2,547,918 | ) | |||||||||||
|
|
|
| ||||||||||||
(1,871,448 | ) | (3,958,730 | ) | ||||||||||||
|
|
|
| ||||||||||||
Net increase | 2,360,662 | 1,308,708 | |||||||||||||
|
|
|
|
Small Cap Value Series-11
Table of Contents
Delaware VIP® Small Cap Value Series
Notes to financial statements
5. Line of Credit
The Series, along with certain other funds in the Delaware Investments® Family of Funds (Participants), is a participant in a $155,000,000 revolving line of credit intended to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants are charged an annual commitment fee of 0.10%, which is allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants are permitted to borrow up to a maximum of one-third of their net assets under the agreement. Each Participant is individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit available under the agreement expires on Nov. 7, 2016.
The Series had no amounts outstanding as of June 30, 2016 or at any time during the period then ended.
6. Offsetting
In December 2011, the Financial Accounting Standards Board (FASB) issued guidance that expanded disclosure requirements on the offsetting of certain assets and liabilities. The disclosures are required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset on the “Statement of assets and liabilities” and require an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarified which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting is limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing.
In order to better define its contractual rights and to secure rights that will help the Series mitigate its counterparty risk, the Series entered into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement) or a similar agreement with certain of its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Series and a counterparty that governs certain over-the-counter (OTC) derivatives and foreign exchange contracts and typically contains, among other things, collateral posting items and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Series may, under certain circumstances, offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default (close-out), including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events.
For financial reporting purposes, the Series does not offset derivative assets and derivatives liabilities that are subject to netting arrangements on the “Statement of assets and liabilities.”
At June 30, 2016, the Series had the following assets and liabilities subject to offsetting provisions:
Master Repurchase Agreements
Repurchase | Fair Value of Non-Cash | Cash Collateral | Net Collateral | ||||||||||||||||||||||||
Counterparty | Agreements | Collateral Received | Received | Received | Net Exposure(a) | ||||||||||||||||||||||
Bank of America Merrill Lynch | $ | 464,936 | $ | (464,936 | ) | $ | — | $ | (464,936 | ) | $ | — | |||||||||||||||
Bank of Montreal | 774,894 | (774,894 | ) | — | (774,894 | ) | — | ||||||||||||||||||||
BNP Paribas | 77,170 | (77,170 | ) | — | (77,170 | ) | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Total | $ | 1,317,000 | $ | (1,317,000 | ) | $ | — | $ | (1,317,000 | ) | $ | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
(a)Net exposure represents the receivable (payable) that would be due from (to) the counterparty in the event of default.
7. Securities Lending
The Series, along with other funds in the Delaware Investments Family of Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (1) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (2) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral by the end of the following business day which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial collateral requirement, upon request of the borrower, BNY Mellon must return enough collateral to the borrower by the end of the following business day to reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security may be more or less than the value of the security on loan.
Prior to Dec. 29, 2015, cash collateral received was generally invested in the Delaware Investments Collateral Fund No. 1 (Collective Trust), a pooled account established by BNY Mellon for the use of funds managed by DMC that participate in BNY Mellon’s securities lending program. The Collective Trust sought to maintain a NAV per unit of $1.00.
Small Cap Value Series-12
Table of Contents
Delaware VIP® Small Cap Value Series
Notes to financial statements
7. Securities Lending (continued)
On Dec. 29, 2015, the assets in the Collective Trust were transferred to a series of individual separate accounts, each corresponding to a Series. The investment guidelines permit each separate account to hold certain securities that would be considered eligible securities for a money market fund. Cash collateral received is generally invested in government securities; certain obligations issued by government sponsored enterprises; repurchase agreements collateralized by U.S. Treasury securities; obligations issued by the central government of any Organization for Economic Cooperation and Development (OECD) country or its agencies, instrumentalities or establishments; obligations of supranational organizations; commercial paper, notes, bonds, and other debt obligations; certificates of deposit, time deposits, and other bank obligations; and asset-backed securities.
In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Series or, at the discretion of the lending agent, replace the loaned securities. The Series continues to record dividends or interest, as applicable, on the securities loaned and is subject to changes in value of the securities loaned that may occur during the term of the loan. The Series has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Series receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Series, the security lending agent, and the borrower. The Series records security lending income net of allocations to the security lending agent and the borrower.
The Series may incur investment losses as a result of investing securities lending collateral. This could occur if an investment in the collateral investment account defaulted or became impaired. Under those circumstances, the value of a Series’ cash collateral account may be less than the amount the Series would be required to return to the borrowers of the securities and the Series would be required to make up for this shortfall.
During the six months ended June 30, 2016, the Series had no securities out on loan.
8. Credit and Market Risk
The Series invests a significant portion of its assets in small companies and may be subject to certain risks associated with ownership of securities of such companies. Investments in small-sized companies may be more volatile than investments in larger companies for a number of reasons, which include limited financial resources or a dependence on narrow product lines.
The Series invests in REITs and is subject to the risks associated with that industry. If the Series holds real estate directly as a result of defaults or receives rental income directly from real estate holdings, its tax status as a regulated investment company may be jeopardized. There were no direct real estate holdings during the six months ended June 30, 2016. The Series’ REIT holdings are also affected by interest rate changes, particularly if the REITs it holds use floating rate debt to finance their ongoing operations.
The Series may invest up to 10% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A promulgated under the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Series from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Series’ Board has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of the Series’ limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Series’ 10% limit on investments in illiquid securities. As of June 30, 2016, there were no Rule 144A securities held by the Series and no securities have been determined to be illiquid under the Series’ Liquidity Procedures. When monitoring compliance with the Series’ illiquid limit, certain holdings that are common to multiple clients of the investment manager may be aggregated and considered illiquid in the aggregate solely for monitoring purposes. For purposes of determining illiquidity for financial reporting purposes, only the holdings of the Series will be considered.
9. Contractual Obligations
The Series enters into contracts in the normal course of business that contain a variety of indemnifications. The Series’ maximum exposure under these arrangements is unknown. However, the Series has not had prior claims or losses pursuant to these contracts. Management has reviewed the Series’ existing contracts and expects the risk of loss to be remote.
10. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to June 30, 2016 that would require recognition or disclosure in the Series’ financial statements.
Small Cap Value Series-13
Table of Contents
Delaware VIP® Small Cap Value Series
Notes to financial statements
The Series files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q. The Series’ Forms N-Q, as well as a description of the policies and procedures that the Series uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the Commission’s website at sec.gov. In addition, a description of the policies and procedures that the Series uses to determine how to vote proxies (if any) relating to portfolio securities and the Schedule of Investments included in the Series’ most recent Form N-Q are available without charge on the Delaware Investments® Funds’ website at delawareinvestments.com/vip/literature. The Series’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330.
Information (if any) regarding how the Series voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Delaware Investments Funds’ website at delawareinvestments.com/proxy; and (ii) on the Commission’s website at sec.gov.
|
SA-VIPSCV 21187 (8/16) (17290) | Small Cap Value Series-14 |
Table of Contents
Delaware VIP® Trust |
Delaware VIP U.S. Growth Series |
Semiannual report
|
June 30, 2016
|
Table of Contents
Neither Delaware Investments nor its affiliates referred to in this document are authorized deposit-taking institutions for the purpose of the Banking Act of 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited (MBL), a subsidiary of Macquarie Group Limited and an affiliate of Delaware Investments. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Series is governed by U.S. laws and regulations.
Unless otherwise noted, views expressed herein are current as of June 30, 2016, and subject to change for events occurring after such date.
The Series is not FDIC insured and is not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries, including the Series’ distributor, Delaware Distributors, L.P. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
This material may be used in conjunction with the offering of shares in Delaware VIP® U.S. Growth Series only if preceded or accompanied by the Series’ current prospectus or the summary prospectus.
© 2016 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
Table of Contents
Delaware VIP® Trust — Delaware VIP U.S. Growth Series
Disclosure of Series expenses
For the six-month period from January 1, 2016 to June 30, 2016 (Unaudited)
As a shareholder of the Series, you incur ongoing costs, which may include management fees; distribution and/or service (12b-1) fees; and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series 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 entire six-month period from Jan. 1, 2016 to June 30, 2016.
Actual expenses
The first section of the table shown, “Actual Series Return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, 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, an $8,600 account value divided by $1,000 = 8.6), 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 the period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% Return,” provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ 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 Series and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Series, you do not incur any transaction costs, such as sales charges (loads), redemption fees, or exchange fees, but shareholders of other funds may incur such costs. Also, the fees related to the variable annuity investment or the deferred sales charge that could apply have not been included. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The Series’ actual expenses shown in the table reflect fee waivers in effect for Service Class shares. The expenses shown in the table assume reinvestment of all dividends and distributions.
Expense analysis of an investment of $1,000
Beginning Account Value 1/1/16 | Ending Account Value 6/30/16 | Annualized Expense Ratio | Expenses Paid During Period 1/1/16 to 6/30/16* | |||||
Actual Series return† | ||||||||
Standard Class | $1,000.00 | $ 922.80 | 0.75% | $3.59 | ||||
Service Class | 1,000.00 | 922.20 | 1.00% | 4.78 | ||||
Hypothetical 5% return (5% return before expenses) | ||||||||
Standard Class | $1,000.00 | $1,021.13 | 0.75% | $3.77 | ||||
Service Class | 1,000.00 | 1,019.89 | 1.00% | 5.02 |
* | “Expenses Paid During Period” are equal to the Series’ annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
† | Because actual returns reflect only the most recent six-month period, the returns shown may differ significantly from fiscal year returns. |
U.S. Growth Series-1 |
Table of Contents
Delaware VIP® Trust — Delaware VIP U.S. Growth Series
Security type / sector allocation and top 10 equity holdings
As of June 30, 2016 (Unaudited)
Sector designations may be different than the sector designations presented in other series materials. The sector designations may represent the investment manager’s internal sector classifications.
Security type / sector | Percentage of net assets | ||||
Common Stock² | 98.07% | ||||
Consumer Discretionary | 20.79% | ||||
Consumer Staples | 4.36% | ||||
Financial Services1 | 26.93% | ||||
Healthcare | 18.58% | ||||
Technology1 | 27.41% | ||||
Short-Term Investments | 1.37% | ||||
Total Value of Securities | 99.44% | ||||
Receivables and Other Assets Net of Liabilities | 0.56% | ||||
Total Net Assets | 100.00% |
² | Narrow industries are utilized for compliance purposes for diversification whereas broad sectors are used for financial reporting. |
1 | To monitor compliance with the Series’ concentration guidelines as described in the Series’ prospectus and statement of additional information, the Financial Services and Technology sectors (as disclosed herein for financial reporting purposes) is subdivided into a variety of “industries” (in accordance with the requirements of the Investment Company Act of 1940). The Financial Services sector consisted of commercial services, diversified financial services, and real estate investment trusts. As of June 30, 2016 such amounts, as a percentage of total net assets, were 4.83%, 13.37%, and 8.74%, respectively. The Technology sector consisted of internet, semiconductors, and software. As of June 30, 2016 such amounts, as a percentage of total net assets, were 10.68%, 4.88%, and 11.85%, respectively. The percentage in any such single industry will comply with the Series’ concentration policy even if the percentages in the Financial Services and Technology sectors for financial reporting purposes may exceed 25%. |
Holdings are for informational purposes only and are subject to change at any time. They are not a recommendation to buy, sell, or hold any security.
Top 10 equity holdings | Percentage of net assets | ||||
Visa Class A | 5.65% | ||||
Crown Castle International | 5.49% | ||||
Celgene | 5.08% | ||||
QUALCOMM | 4.88% | ||||
PayPal Holdings | 4.83% | ||||
Allergan | 4.80% | ||||
Electronic Arts | 4.79% | ||||
Microsoft | 4.58% | ||||
Liberty Interactive QVC Group Class A | 4.49% | ||||
Walgreens Boots Alliance
| 4.36%
|
U.S. Growth Series-2
Table of Contents
Delaware VIP® Trust — Delaware VIP U.S. Growth Series
Schedule of investments
June 30, 2016 (Unaudited)
Number of shares | Value (U.S. $) | |||||||
Common Stock – 98.07% ² |
| |||||||
Consumer Discretionary – 20.79% |
| |||||||
Discovery Communications Class A † | 36,100 | $ | 910,803 | |||||
Discovery Communications Class C † | 164,765 | 3,929,645 | ||||||
eBay † | 483,047 | 11,308,130 | ||||||
L Brands | 164,007 | 11,009,790 | ||||||
Liberty Global Class A † | 88,249 | 2,564,516 | ||||||
Liberty Global Class C † | 273,467 | 7,834,830 | ||||||
Liberty Global LiLac Class A † | 11,011 | 355,206 | ||||||
Liberty Global LiLac Class C † | 34,120 | 1,108,564 | ||||||
Liberty Interactive QVC Group Class A † | 657,074 | 16,669,967 | ||||||
Nielsen Holdings | 187,541 | 9,746,506 | ||||||
Quintiles Transnational Holdings † | 9,415 | 614,988 | ||||||
TripAdvisor † | 173,236 | 11,139,075 | ||||||
|
| |||||||
77,192,020 | ||||||||
|
| |||||||
Consumer Staples – 4.36% |
| |||||||
Walgreens Boots Alliance | 194,338 | 16,182,525 | ||||||
|
| |||||||
16,182,525 | ||||||||
|
| |||||||
Financial Services – 26.93% |
| |||||||
Crown Castle International | �� | 200,925 | 20,379,823 | |||||
Equinix | 31,137 | 12,072,749 | ||||||
Intercontinental Exchange | 51,882 | 13,279,717 | ||||||
MasterCard Class A | 174,556 | 15,371,401 | ||||||
PayPal Holdings † | 491,122 | 17,930,864 | ||||||
Visa Class A | 283,092 | 20,996,934 | ||||||
|
| |||||||
100,031,488 | ||||||||
|
| |||||||
Healthcare – 18.58% |
| |||||||
Allergan † | 77,131 | 17,824,203 | ||||||
Biogen † | 53,821 | 13,014,994 | ||||||
Celgene † | 191,129 | 18,851,053 | ||||||
DENTSPLY SIRONA | 147,913 | 9,176,522 | ||||||
Novo Nordisk ADR | 188,753 | 10,151,136 | ||||||
|
| |||||||
69,017,908 | ||||||||
|
| |||||||
Technology – 27.41% |
| |||||||
Alphabet Class A † | 19,669 | 13,837,732 | ||||||
Alphabet Class C † | 15,831 | 10,956,635 | ||||||
Electronic Arts † | 235,046 | 17,807,085 | ||||||
Facebook Class A † | 130,017 | 14,858,343 | ||||||
IMS Health Holdings † | 9,135 | 231,664 | ||||||
Intuit | 80,082 | 8,937,952 | ||||||
Microsoft | 332,680 | 17,023,236 | ||||||
QUALCOMM | 338,662 | 18,142,123 | ||||||
|
| |||||||
101,794,770 | ||||||||
|
| |||||||
Total Common Stock | 364,218,711 | |||||||
|
|
Principal amount° | Value (U.S. $) | |||||||
Short-Term Investments – 1.37% |
| |||||||
Discount Notes – 1.20% ≠ |
| |||||||
Federal Home Loan Bank | ||||||||
0.243% 8/5/16 | 172,615 | $ | 172,575 | |||||
0.314% 7/13/16 | 2,141,385 | 2,141,272 | ||||||
0.325% 8/3/16 | 140,718 | 140,687 | ||||||
0.335% 7/12/16 | 562,156 | 562,129 | ||||||
0.335% 7/21/16 | 780,773 | 780,703 | ||||||
0.34% 7/22/16 | 169,815 | 169,799 | ||||||
0.35% 7/25/16 | 150,901 | 150,885 | ||||||
0.38% 7/18/16 | 228,398 | 228,380 | ||||||
0.53% 8/15/16 | 103,087 | 103,056 | ||||||
|
| |||||||
4,449,486 | ||||||||
|
| |||||||
Repurchase Agreements – 0.17% |
| |||||||
Bank of America Merrill Lynch | 226,996 | 226,996 | ||||||
Bank of Montreal | 378,327 | 378,327 | ||||||
BNP Paribas | 37,677 | 37,677 | ||||||
|
| |||||||
643,000 | ||||||||
|
| |||||||
Total Short-Term Investments |
| 5,092,486 | ||||||
|
|
Total Value of Securities – 99.44% | 369,311,197 |
U.S. Growth Series-3
Table of Contents
Delaware VIP® U.S. Growth Series
Schedule of investments (continued)
² | Narrow industries are utilized for compliance purposes for diversification whereas broad sectors are used for financial reporting. |
≠ | The rate shown is the effective yield at the time of purchase. |
° | Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency. |
† | Non-income-producing security. |
ADR – American Depositary Receipt
See accompanying notes, which are an integral part of the financial statements.
U.S. Growth Series-4
Table of Contents
Delaware VIP® Trust — Delaware VIP U.S. Growth Series | ||
Statement of assets and liabilities | June 30, 2016 (Unaudited) |
Assets: | |||||
Investments, at value1 | $ | 364,218,711 | |||
Short-term investments, at value2 | 5,092,486 | ||||
Cash | 223,190 | ||||
Receivable for securities sold | 3,760,219 | ||||
Receivable for series shares sold | 229,385 | ||||
Dividends and interest receivable | 39,105 | ||||
|
| ||||
Total assets | 373,563,096 | ||||
|
| ||||
Liabilities: | |||||
Payable for securities purchased | 1,503,828 | ||||
Payable for series shares redeemed | 252,754 | ||||
Investment management fees payable | 200,420 | ||||
Other accrued expenses | 118,722 | ||||
Distribution fees payable to affiliates | 67,779 | ||||
Audit and tax fees payable to affiliates | 16,334 | ||||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 2,313 | ||||
Accounting and administration expenses payable to affiliates | 1,458 | ||||
Legal fees payable to affiliates | 1,304 | ||||
Trustees’ fees and expenses payable to affiliates | 1,171 | ||||
Reports and statements to shareholders payable to affiliates | 153 | ||||
|
| ||||
Total liabilities | 2,166,236 | ||||
|
| ||||
Total Net Assets | $ | 371,396,860 | |||
|
| ||||
Net Assets Consist of: | |||||
Paid-in capital | $ | 308,198,945 | |||
Distributions in excess of net investment income | (57,065 | ) | |||
Accumulated net realized loss | (11,378,705 | ) | |||
Net unrealized appreciation of investments | 74,633,685 | ||||
|
| ||||
Total Net Assets | $ | 371,396,860 | |||
|
| ||||
Standard Class: | |||||
Net assets | $ | 47,089,538 | |||
Shares of beneficial interest outstanding, unlimited authorization, no par | 5,431,268 | ||||
Net asset value per share | $ | 8.67 | |||
Service Class: | |||||
Net assets | $ | 324,307,322 | |||
Shares of beneficial interest outstanding, unlimited authorization, no par | 38,310,354 | ||||
Net asset value per share | $ | 8.47 | |||
| |||||
1Investments, at cost | $ | 289,585,352 | |||
2Short-term investments, at cost | 5,092,160 |
See accompanying notes, which are an integral part of the financial statements.
U.S. Growth Series-5
Table of Contents
Investment Income: | |||||
Dividends | $ | 1,801,783 | |||
Interest | 8,758 | ||||
Foreign tax withheld | (34,546 | ) | |||
|
| ||||
1,775,995 | |||||
|
| ||||
Expenses: | |||||
Management fees | 1,212,041 | ||||
Distribution expenses - Service Class | 491,915 | ||||
Accounting and administration expenses | 60,901 | ||||
Reports and statements to shareholders | 46,642 | ||||
Legal fees | 16,682 | ||||
Audit and tax fees | 16,343 | ||||
Dividend disbursing and transfer agent fees and expenses | 15,920 | ||||
Trustees’ fees and expenses | 9,697 | ||||
Custodian fees | 9,430 | ||||
Registration fees | 4,897 | ||||
Other | 5,806 | ||||
|
| ||||
1,890,274 | |||||
Less waived distribution expenses - Service Class | (81,986 | ) | |||
|
| ||||
Total operating expenses | 1,808,288 | ||||
|
| ||||
Net Investment Loss | (32,293 | ) | |||
|
| ||||
Net Realized and Unrealized Loss: | |||||
Net realized loss on investments | (9,094,000 | ) | |||
Net change in unrealized appreciation (depreciation) of investments | (22,829,667 | ) | |||
|
| ||||
Net Realized And Unrealized Loss | (31,923,667 | ) | |||
|
| ||||
Net Decrease in Net Assets Resulting from Operations | $ | (31,955,960 | ) | ||
|
|
Six months ended 6/30/16 (Unaudited) | Year ended 12/31/15 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (32,293 | ) | $ | 1,677,533 | |||
Net realized gain (loss) | (9,094,000 | ) | 110,853,775 | |||||
Net change in unrealized appreciation (depreciation) | (22,829,667 | ) | (86,840,112 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | (31,955,960 | ) | 25,691,196 | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Standard Class | (315,595 | ) | (720,106 | ) | ||||
Service Class | (1,361,730 | ) | (1,281,789 | ) | ||||
Net realized gain: | ||||||||
Standard Class | (13,642,821 | ) | (9,901,463 | ) | ||||
Service Class | (97,717,762 | ) | (29,374,328 | ) | ||||
|
|
|
| |||||
(113,037,908 | ) | (41,277,686 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Standard Class | 4,417,196 | 17,136,450 | ||||||
Service Class | 9,156,807 | 20,285,073 | ||||||
Net asset value of shares based upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 13,958,416 | 3,431,786 | ||||||
Service Class | 99,079,492 | 30,656,116 | ||||||
|
|
|
| |||||
126,611,911 | 71,509,425 | |||||||
|
|
|
| |||||
Cost of shares redeemed: | ||||||||
Standard Class | (3,526,796 | ) | (127,658,252 | ) | ||||
Service Class | (18,440,370 | ) | (43,233,826 | ) | ||||
|
|
|
| |||||
(21,967,166 | ) | (170,892,078 | ) | |||||
|
|
|
| |||||
Increase (decrease) in net assets derived from capital share transactions | 104,644,745 | (99,382,653 | ) | |||||
|
|
|
| |||||
Net Decrease in Net Assets | (40,349,123 | ) | (114,969,143 | ) | ||||
Net Assets: | ||||||||
Beginning of period | 411,745,983 | 526,715,126 | ||||||
|
|
|
| |||||
End of period | $ | 371,396,860 | $ | 411,745,983 | ||||
|
|
|
| |||||
Undistributed (distributions in excess of) net investment income | $ | (57,065 | ) | $ | 1,652,553 | |||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
U.S. Growth Series-6
Table of Contents
Delaware VIP® Trust — Delaware VIP U.S. Growth Series
Financial highlights
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP U.S. Growth Series Standard Class | ||||||||||||||||||||||||||||||
Six months ended 6/30/161 (Unaudited) | 12/31/15 | 12/31/14 | Year ended 12/31/13 | 12/31/12 | 12/31/11 | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 13.310 | $ | 13.750 | $ | 13.140 | $ | 10.170 | $ | 8.750 | $ | 8.150 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||
Net investment income2 | 0.011 | 0.077 | 0.075 | 0.030 | 0.039 | 0.012 | ||||||||||||||||||||||||
Net realized and unrealized gain (loss) | (0.980 | ) | 0.663 | 1.495 | 3.395 | 1.381 | 0.610 | |||||||||||||||||||||||
|
|
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|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total from investment operations | (0.969 | ) | 0.740 | 1.570 | 3.425 | 1.420 | 0.622 | |||||||||||||||||||||||
|
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|
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| |||||||||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||||||||
Net investment income | (0.083 | ) | (0.080 | ) | (0.030 | ) | (0.038 | ) | — | (0.022 | ) | |||||||||||||||||||
Net realized gain | (3.588 | ) | (1.100 | ) | (0.930 | ) | (0.417 | ) | — | — | ||||||||||||||||||||
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|
|
|
|
|
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|
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| |||||||||||||||||||
Total dividends and distributions | (3.671 | ) | (1.180 | ) | (0.960 | ) | (0.455 | ) | — | (0.022 | ) | |||||||||||||||||||
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| |||||||||||||||||||
Net asset value, end of period | $ | 8.670 | $ | 13.310 | $ | 13.750 | $ | 13.140 | $ | 10.170 | $ | 8.750 | ||||||||||||||||||
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| |||||||||||||||||||
Total return3 | (7.72% | ) | 5.39% | 12.78% | 34.75% | 16.23% | 7.63% | |||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 47,090 | $ | 50,055 | $ | 160,730 | $ | 145,086 | $ | 106,069 | $ | 87,389 | ||||||||||||||||||
Ratio of expenses to average net assets | 0.75% | 0.75% | 0.74% | 0.74% | 0.74% | 0.74% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets | 0.20% | 0.56% | 0.58% | 0.27% | 0.40% | 0.13% | ||||||||||||||||||||||||
Portfolio turnover | 12% | 39% | 26% | 20% | 35% | 43% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return does not include fees, charges, or expenses imposed by the variable annuity and life insurance contracts for which Delaware VIP Trust serves as an underlying investment vehicle. |
See accompanying notes, which are an integral part of the financial statements.
U.S. Growth Series-7
Table of Contents
Delaware VIP® U.S. Growth Series
Financial highlights (continued)
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP U.S. Growth Series Service Class | |||||||||||||||||||||||||||||||||
Six months | |||||||||||||||||||||||||||||||||
ended | |||||||||||||||||||||||||||||||||
6/30/161 | Year ended | ||||||||||||||||||||||||||||||||
(Unaudited) | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | 12/31/11 | ||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 13.070 | $ | 13.530 | $ | 12.940 | $ | 10.030 | $ | 8.650 | $ | 8.050 | |||||||||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||||||||
Net investment income (loss)2 | (0.003 | ) | 0.041 | 0.042 | 0.002 | 0.014 | (0.010 | ) | |||||||||||||||||||||||||
Net realized and unrealized gain (loss) | (0.959 | ) | 0.647 | 1.480 | 3.339 | 1.366 | 0.614 | ||||||||||||||||||||||||||
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| ||||||||||||||||||||||
Total from investment operations | (0.962 | ) | 0.688 | 1.522 | 3.341 | 1.380 | 0.604 | ||||||||||||||||||||||||||
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|
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|
|
| ||||||||||||||||||||||
Less dividends and distributions from: | |||||||||||||||||||||||||||||||||
Net investment income | (0.050 | ) | (0.048 | ) | (0.002 | ) | (0.014 | ) | — | (0.004 | ) | ||||||||||||||||||||||
Net realized gain | (3.588 | ) | (1.100 | ) | (0.930 | ) | (0.417 | ) | — | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Total dividends and distributions | (3.638 | ) | (1.148 | ) | (0.932 | ) | (0.431 | ) | — | (0.004 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Net asset value, end of period | $ | 8.470 | $ | 13.070 | $ | 13.530 | $ | 12.940 | $ | 10.030 | $ | 8.650 | |||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Total return3 | (7.78% | ) | 5.08% | 12.48% | 34.44% | 15.95% | 7.50% | ||||||||||||||||||||||||||
Ratios and supplemental data: | |||||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 324,307 | $ | 361,691 | $ | 365,985 | $ | 343,295 | $ | 281,973 | $ | 236,541 | |||||||||||||||||||||
Ratio of expenses to average net assets | 1.00% | 1.00% | 0.99% | 0.99% | 0.99% | 0.99% | |||||||||||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 1.05% | 1.05% | 1.04% | 1.04% | 1.04% | 1.04% | |||||||||||||||||||||||||||
Ratio of net investment income (loss) to average net assets | (0.05% | ) | 0.31% | 0.33% | 0.02% | 0.15% | (0.12% | ) | |||||||||||||||||||||||||
Ratio of net investment income (loss) to average net assets prior to fees waived | (0.10% | ) | 0.26% | 0.28% | (0.03% | ) | 0.10% | (0.17% | ) | ||||||||||||||||||||||||
Portfolio turnover | 12% | 39% | 26% | 20% | 35% | 43% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects a waiver by the distributor. Performance would have been lower had the waiver not been in effect. Total investment return does not include fees, charges, or expenses imposed by the variable annuity and life insurance contracts for which Delaware VIP Trust serves as an underlying investment vehicle. |
See accompanying notes, which are an integral part of the financial statements.
U.S. Growth Series-8
Table of Contents
Delaware VIP® Trust — Delaware VIP U.S. Growth Series
Notes to financial statements
June 30, 2016 (Unaudited)
Delaware VIP Trust (Trust) is organized as a Delaware statutory trust and offers 10 series: Delaware VIP Diversified Income Series, Delaware VIP Emerging Markets Series, Delaware VIP High Yield Series, Delaware VIP International Value Equity Series, Delaware VIP Limited-Term Diversified Income Series, Delaware VIP REIT Series, Delaware VIP Small Cap Value Series, Delaware VIP Smid Cap Growth Series, Delaware VIP U.S. Growth Series, and Delaware VIP Value Series. These financial statements and the related notes pertain to Delaware VIP U.S. Growth Series (Series). The Trust is an open-end investment company. The Series is considered diversified under the Investment Company Act of 1940, as amended, and offers Standard Class and Service Class shares. The Standard Class shares do not carry a 12b-1 fee and the Service Class shares carry a 12b-1 fee. The shares of the Series are sold only to separate accounts of life insurance companies.
The investment objective of the Series is to seek long-term capital appreciation.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistently followed by the Series.
Security Valuation—Equity securities, except those traded on the Nasdaq Stock Market LLC (Nasdaq) are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange on the valuation date. Equity securities traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If, on a particular day, an equity security does not trade, then the mean between the bid and ask prices will be used, which approximates fair value. U.S. government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Trust’s Board of Trustees (Board). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security. The Series may use fair value pricing more frequently for securities traded primarily in non-U.S. markets because, among other things, most foreign markets close well before the Series values its securities, generally as of 4:00 p.m. Eastern time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, government actions or pronouncements, aftermarket trading, or news events may have occurred in the interim. Whenever such a significant event occurs, the Series may value foreign securities using fair value prices based on third-party vendor modeling tools (international fair value pricing).
Federal and Foreign Income Taxes—No provision for federal income taxes has been made as the Series intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Series evaluates tax positions taken or expected to be taken in the course of preparing the Series’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Series’ tax positions taken for all open federal income tax years (Dec. 31, 2012–Dec. 31, 2015), and has concluded that no provision for federal income tax is required in the Series’ financial statements. In regard to foreign taxes only, the Series has open tax years in certain foreign countries in which it invests that may date back to the inception of the Series.
Class Accounting—Investment income, common expenses, and realized and unrealized gain (loss) on investments are allocated to the classes of the Series on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class.
Repurchase Agreements—The Series may purchase certain U.S. government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Series’ custodian or a third-party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on June 30, 2016 and matured the following business day.
Use of Estimates—The Series is an investment company, whose financial statements are prepared in conformity with U.S. GAAP. Therefore, the Series follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other—Expenses directly attributable to the Series are charged directly to the Series. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated among such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Foreign dividends are also recorded on the ex-dividend date or as soon after the ex-dividend date that the Series is aware of such dividends, net of all tax withholdings, a portion of which may be reclaimable. Withholding taxes and reclaims on foreign dividends have been recorded in accordance with the Series’ understanding of the applicable country’s tax rules and rates. The Series declares and pays dividends from net investment income and distributions from net realized gain on investments, if any, following the close of the fiscal year. The Series may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
U.S. Growth Series-9
Table of Contents
Delaware VIP® U.S. Growth Series
Notes to financial statements (continued)
1. Significant Accounting Policies (continued)
Subject to seeking best execution, the Series may direct certain security trades to brokers who have agreed to rebate a portion of the related brokerage commission to the Series in cash. Such commission rebates are included on the “Statement of operations” under “Net realized gain on investments” and totaled $x for the six months ended June 30, 2016. In general, best execution refers to many factors, including the price paid or received for a security, the commission charged, the promptness and reliability of execution, the confidentiality and placement accorded the order, and other factors affecting the overall benefit obtained by the Series on the transaction.
The Series may receive earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. There were no such earnings credits for the six months ended June 30, 2016.
The Series receives earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than one dollar, the expense paid under this arrangement is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expense offset shown under “Less expense paid indirectly.” For the six months ended June 30, 2016, the Series earned less than one dollar under this agreement.
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Series pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.65% on the first $500 million of average daily net assets of the Series, 0.60% on the next $500 million, 0.55% on the next $1.5 billion, and 0.50% on average daily net assets in excess of $2.5 billion.
Jackson Square Partners, LLC (JSP), a related party of DMC, furnishes investment sub-advisory services to the Series. Effective June 1, 2016, for these services, DMC, not the Series, pays JSP fees based on the aggregate average daily net assets of the Series at the following annual rate: 0.39% of the first $500 million; 0.36% of the next $500 million; 0.33% of the next $1.5 billion; and 0.30% of aggregate average daily net assets in excess of $2.5 billion. Prior to June 1, 2016, the Series paid JSP fees on the aggregate average daily net assets of the Series at the following annual rate: 0.375% of the first $500 million; 0.350% of the next $500 million; 0.325% of the next $1.5 billion; and 0.300% of aggregate average daily net assets in excess of $2.5 billion.
Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Series. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DIFSC under the service agreement described above are allocated among all funds in the Delaware Investments Family of Funds on a relative net asset value (NAV) basis. For the six months ended June 30, 2016, the Series was charged $8,870 for these services. This amount is included on the “Statement of operations” under “Accounting and administration expenses.”
DIFSC is also the transfer agent and dividend disbursing agent of the Series. For these services, DIFSC’s fees are calculated at the annual rate of 0.0075% of the Series average daily net assets. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the six months ended June 30, 2016, the Series was charged $13,985 for these services. Pursuant to a sub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Series. Sub-transfer agency fees are paid by the Series and are also included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.”
Pursuant to a distribution agreement and distribution plan, the Series pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee of 0.30% of the average daily net assets of the Service Class shares. DDLP has contracted to waive distribution and service fees from Jan. 1, 2016 through June 30, 2016* in order to limit distribution and service fees of the Service Class shares to 0.25% of average daily net assets. Standard Class shares pay no distribution and service expenses.
As provided in the investment management agreement, the Series bears a portion of the cost of certain resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Series. For the six months ended June 30, 2016, the Series was charged $9,415 for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees. This amount is included on the “Statement of operations” under “Legal fees.”
Trustees’ fees include expenses accrued by the Series for each Trustee’s retainer and meeting fees. Certain officers of DMC, DIFSC, and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Series.
*The contractual waiver period is from April 30, 2015 through May 1, 2017.
3. Investments
For the six months ended June 30, 2016, the Series made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 43,688,593 | ||
Sales | 52,820,537 |
U.S. Growth Series-10
Table of Contents
Delaware VIP® U.S. Growth Series
Notes to financial statements (continued)
3. Investments (continued)
At June 30, 2016, the cost of investments for federal tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At June 30, 2016, the cost and unrealized appreciation (depreciation) of investments were as follows:
Cost of | Aggregate Unrealized Appreciation of Investments | Aggregate Unrealized Depreciation of Investments | Net Unrealized Appreciation of Investments | |||||||
$294,677,512 | $97,481,111 | $(22,847,426) | $74,633,685 |
U.S. GAAP defines fair value as the price that the Series would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established 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 assumptions that market participants would use in pricing the asset or liability based on the best information available under the circumstances. The Series’ investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized below.
Level 1 | – | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) | ||
Level 2 | – | Other observable inputs, including, but 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. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) | ||
Level 3 | – | Significant unobservable inputs, including the Series’ own assumptions used to determine the fair value of investments) (Examples: broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. The Series may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
The following table summarizes the valuation of the Series’ investments by fair value hierarchy levels as of June 30, 2016:
Securities | Level 1 | Level 2 | Total | |||||||||
Common Stock | $ | 364,218,711 | $ | — | $ | 364,218,711 | ||||||
Short-Term Investments | — | 5,092,486 | 5,092,486 | |||||||||
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|
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|
|
| |||||||
Total Value of Securities | $ | 364,218,711 | $ | 5,092,486 | $ | 369,311,197 | ||||||
|
|
|
|
|
|
During the six months ended June 30, 2016, there were no transfers between Level 1 investments, Level 2 investments, or Level 3 investments that had a significant impact to the Series. The Series’ policy is to recognize transfers between levels at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when the Series has a significant amount of Level 3 investments at the beginning, interim, or end of the period in relation to net assets. At June 30, 2016, there were no Level 3 investments.
U.S. Growth Series-11
Table of Contents
Delaware VIP® U.S. Growth Series
Notes to financial statements (continued)
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 6/30/16 | Year ended 12/31/15 | ||||||||||||||
Shares sold: | |||||||||||||||
Standard Class | 404,663 | 1,282,134 | |||||||||||||
Service Class | 849,388 | 1,532,091 | |||||||||||||
Shares issued upon reinvestment of dividends and distributions: | |||||||||||||||
Standard Class | 1,584,383 | 258,029 | |||||||||||||
Service Class | 11,520,871 | 2,343,740 | |||||||||||||
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| ||||||||||||
14,359,305 | 5,415,994 | ||||||||||||||
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| ||||||||||||
Shares redeemed: | |||||||||||||||
Standard Class | (318,419 | ) | (9,465,211 | ) | |||||||||||
Service Class | (1,738,492 | ) | (3,254,991 | ) | |||||||||||
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| ||||||||||||
(2,056,911 | ) | (12,720,202 | ) | ||||||||||||
|
|
|
| ||||||||||||
Net increase (decrease) | 12,302,394 | (7,304,208 | ) | ||||||||||||
|
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|
|
5. Line of Credit
The Series, along with certain other funds in the Delaware Investments® Family of Funds (Participants), is a participant in a $155,000,000 revolving line of credit intended to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants are charged an annual commitment fee of 0.10%, which is allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants are permitted to borrow up to a maximum of one third of their net assets under the agreement. Each Participant is individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit available under the agreement expires on Nov. 7, 2016.
The Series had no amounts outstanding as of June 30, 2016 or at any time during the period then ended.
6. Offsetting
In December 2011, the Financial Accounting Standards Board (FASB) issued guidance that expanded disclosure requirements on the offsetting of certain assets and liabilities. The disclosures are required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset on the “Statement of assets and liabilities” and requires an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarified which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting is limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing.
In order to better define its contractual rights and to secure rights that will help the Series mitigate its counterparty risk, the Series entered into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement) or a similar agreement with certain of its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Series and a counterparty that governs certain over-the-counter (OTC) derivatives and foreign exchange contracts and typically contains, among other things, collateral posting items and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Series may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default (close-out), including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency, or other events.
For financial reporting purposes, the Series does not offset derivative assets and derivative liabilities that are subject to netting arrangements on the “Statement of assets and liabilities.”
U.S. Growth Series-12
Table of Contents
Delaware VIP® U.S. Growth Series
Notes to financial statements (continued)
6. Offsetting (continued)
At June 30, 2016, the Series had the following assets and liabilities subject to offsetting provisions:
Master Repurchase Agreements
Counterparty | Repurchase | Fair Value of | Cash Collateral Received | Net Collateral Received | Net Exposure(a) | ||||||||||||||||||||
Bank of America Merrill Lynch | $ | 226,996 | $ | (226,996 | ) | $ | — | $ | (226,996 | ) | $ | — | |||||||||||||
Bank of Montreal | 378,327 | (378,327 | ) | — | $ | (378,327 | ) | — | |||||||||||||||||
BNP Paribas | 37,677 | (37,677 | ) | — | $ | (37,677 | ) | — | |||||||||||||||||
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| ||||||||||||||||
Total | $ | 643,000 | $ | (643,000 | ) | $ | — | $ | (643,000 | ) | $ | — | |||||||||||||
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(a)Net exposure represents the receivable (payable) that would be due from (to) the counterparty in an event of default.
7. Securities Lending
The Series, along with other funds in the Delaware Investments® Family of Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (1) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (2) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral by the end of the following business day, which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial collateral requirement, upon the request of the borrower, BNY Mellon must return enough collateral to the borrower by the end of the following business day to reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security on any particular day may be more or less than the value of the security on loan.
Prior to Dec. 29, 2015, cash collateral received was generally invested in the Delaware Investments Collateral Fund No. 1 (Collective Trust), a pooled account established by BNY Mellon for the use of funds managed by DMC that participate in BNY Mellon’s securities lending program. The Collective Trust sought to maintain a NAV per unit of $1.00.
On Dec. 29, 2015, the assets in the Collective Trust were transferred to a series of individual separate accounts, each corresponding to a Series. The investment guidelines permit each separate account to hold certain securities that would be considered eligible securities for a money market fund. Cash collateral received is generally invested in government securities; certain obligations issued by government sponsored enterprises; repurchase agreements collateralized by U.S. Treasury securities; obligations issued by the central government of any Organization for Economic Cooperation and Development (OECD) country or its agencies, instrumentalities, or establishments; obligations of supranational organizations; commercial paper, notes, bonds, and other debt obligations; certificates of deposit, time deposits, and other bank obligations; and asset-backed securities.
In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Series or, at the discretion of the lending agent, replace the loaned securities. The Series continues to record dividends or interest, as applicable, on the securities loaned and are subject to changes in value of the securities loaned that may occur during the term of the loan. The Series has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Series receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Series, the security lending agent, and the borrower. The Series records security lending income net of allocations to the security lending agent and the borrower.
The Series may incur investment losses as a result of investing securities lending collateral. This could occur if an investment in the collateral investment account defaulted or became impaired. Under those circumstances, the value of a Series’ cash collateral account may be less than the amount the Series would be required to return to the borrowers of the securities and the Series would be required to make up for this shortfall.
During the six months ended June 30, 2016, the Series had no securities out on loan.
8. Credit and Market Risk
The Series may invest up to 15% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A promulgated under the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Series from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Board has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of the Series’ limitation on investments in illiquid securities. Securities eligible for resale pursuant
U.S. Growth Series-13
Table of Contents
Delaware VIP® U.S. Growth Series
Notes to financial statements (continued)
8. Credit and Market Risk (continued)
to Rule 144A, which are determined to be liquid, are not subject to the Series’ 15% limit on investments in illiquid securities. As of June 30, 2016, there were no Rule 144A securities held by the Series and no securities have been determined to be illiquid under the Series’ liquidity procedures. When monitoring compliance with the Series’ illiquid limit, certain holdings that are common to multiple clients of the investment manager may be aggregated and considered illiquid in the aggregate solely for monitoring purposes. For purposes of determining illiquidity for financial reporting purposes, only the holdings of the Series will be considered.
9. Contractual Obligations
The Series enters into contracts in the normal course of business that contain a variety of indemnifications. The Series’ maximum exposure under these arrangements is unknown. However, the Series has not had prior claims or losses pursuant to these contracts. Management has reviewed the Series’ existing contracts and expects the risk of loss to be remote.
10. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to June 30, 2016 that would require recognition or disclosure in the Series’ financial statements.
U.S. Growth Series-14
Table of Contents
Delaware VIP® Trust — Delaware VIP U.S. Growth Series
Other Series information (Unaudited)
Board consideration of Delaware VIP U.S. Growth Series sub-advisory agreement
At a meeting of the Board of Trustees held on May 17–19, 2016 (the “Meeting”), the Board approved a new sub-advisory agreement with Jackson Square Partners (“JSP”). In reaching the decision to approve the sub-advisory agreement with JSP, the Board considered and reviewed information provided by JSP, including its personnel, operations, and financial condition. The Board also reviewed material furnished by Delaware Management Company (“DMC”), including: a memorandum from DMC reviewing the terms of the sub-advisory agreement, the proposed sub-advisory fees, and the various services proposed to be provided by JSP; information concerning JSP’s organizational structure and the experience of its investment management personnel; copies of JSP’s Form ADV, compliance policies and procedures, and its Code of Ethics; and a copy of the proposed JSP sub-advisory agreement.
In considering such information and materials, the Independent Trustees received assistance and advice from and met separately with independent legal counsel. The materials prepared by Management specifically in connection with the approval of the sub-advisory agreement were provided to the Independent Trustees in advance of the Meeting. Although attention was given to all information furnished, the following discussion addressed some primary factors relevant to the Board’s decision. This discussion of the information and factors considered by the Board is not intended to be exhaustive, but rather summarizes certain factors considered by the Board.
Nature, extent, and quality of service. The Board considered the services provided by JSP to Delaware VIP U.S. Growth Series (the “Series”) and its shareholders. In reviewing the nature, extent, and quality of services, the Board took account of reports furnished to it throughout the year at regular Board Meetings covering matters such as relative performance of the Series; compliance of portfolio managers with the investment policies, strategies, and restrictions for the Series; the compliance of JSP. personnel with its Code of Ethics; and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of JSP and the emphasis placed on research in the investment process. The Board was satisfied with the nature, extent, and quality of the overall services provided by JSP.
Investment performance. The Board placed significant emphasis on the investment performance of the Series in view of the importance of investment performance to shareholders. Although the Board gave appropriate consideration to performance reports and discussions with portfolio managers at Investment Committee meetings, the Board gave particular weight to the Broadridge reports furnished for the Meeting. The Broadridge reports prepared for the Series showed the investment performance of its Class A shares in comparison to a group of similar funds as selected by Broadridge (the “Performance Universe”). A fund with the best performance ranked first, and a fund with the weakest performance ranked last. The highest/strongest performing 25% of funds in the Performance Universe make up the first quartile; the next 25%, the second quartile; the next 25%, the third quartile; and the poorest/weakest performing 25% of funds in the Performance Universe make up the fourth quartile. Comparative annualized performance for the Series was shown for the past 1-, 3-, 5-, and 10-year periods, to the extent applicable, ended Jan. 31, 2016. The Board’s objective is that the Series’ performance for the periods considered be at or above the median of its Performance Universe.
The Performance Universe for the Series consisted of the Series and all large-cap growth funds underlying variable insurance products as selected by Broadridge. The Broadridge report comparison showed that the Series’ total return for the 1- and 5-year periods was in the first quartile of its Performance Universe. The report further showed that the Series’ total return for the 3- and 10-year periods was in the second quartile of its Performance Universe. The Board was satisfied with performance.
Comparative expenses. The Board considered expense comparison data for the Delaware Investments® Family of Funds. Management provided the Board with information on pricing levels and fee structures for the Series as of its most recently completed fiscal year. The Board also focused on the comparative analysis of effective management fees and total expense ratios of the Series versus effective management fees and expense ratios of a group of similar funds as selected by Broadridge (the “Expense Group”). In reviewing comparative costs, the Series’ contractual management fee and the actual management fee incurred by the Series were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the Series) and actual management fees (as reported by each fund) within the Expense Group, taking into account any applicable breakpoints and fee waivers. The Series’ total expenses were also compared with those of its Expense Group. The Broadridge total expenses, for comparative consistency, were shown by Broadridge for Class A shares and comparative total expenses including 12b-1 and non-12b-1 service fees. The Board considered fees paid to DMC for non-management services. The Board’s objective is to limit the Series’ total expense ratio to be competitive with that of the Expense Group.
The expense comparisons for the Series showed that the actual management fee was in the quartile with the second lowest expenses of its Expense Group and its total expenses were in the quartile with the lowest expenses of the Expense Group. The Board was satisfied with the management fee and total expenses of the Series in comparison to those of its Expense Group.
Management profitability. Trustees were also given available information on profits being realized in relation to the services being provided to the Series or in relation to JSP’s overall investment advisory business, but believed such information to be of limited relevance because the sub-advisory fees are paid by DMC out of its management fee, and changes in the level of sub-advisory fees have no impact on Series expenses. The Board was also provided information on potential fallout benefits derived or to be derived by JSP in connection with its relationship to the Series, such as reputational enhancement, soft dollar arrangements or commissions paid to affiliated broker/dealers, as applicable.
U.S. Growth Series-15
Table of Contents
Delaware VIP® Trust — Delaware VIP U.S. Growth Series
Other Series information (Unaudited)
The Series files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q. The Series’ Forms N-Q, as well as a description of the policies and procedures that the Series uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the Commission’s website at sec.gov. In addition, a description of the policies and procedures that the Series uses to determine how to vote proxies (if any) relating to portfolio securities and the Schedule of Investments included in the Series’ most recent Form N-Q are available without charge on the Delaware Investments® Funds’ website at delawareinvestments.com/vip/literature. The Series’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330.
Information (if any) regarding how the Series voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Delaware Investments Funds’ website at delawareinvestments.com/proxy; and (ii) on the Commission’s website at sec.gov.
|
SA-VIPUSG 21189 (8/16) (17290) | U.S. Growth Series-16 |
Table of Contents
Delaware VIP® Trust
|
Delaware VIP Value Series
|
Semiannual report
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June 30, 2016 |
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Table of Contents
1 | ||||||||||
Security type / sector allocation and top 10 equity holdings | 2 | |||||||||
3 | ||||||||||
5 | ||||||||||
6 | ||||||||||
6 | ||||||||||
7 | ||||||||||
9 |
Neither Delaware Investments nor its affiliates referred to in this document are authorized deposit-taking institutions for the purpose of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited (MBL), a subsidiary of Macquarie Group Limited and an affiliate of Delaware Investments. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Series is governed by U.S. laws and regulations.
Unless otherwise noted, views expressed herein are current as of June 30, 2016, and subject to change for events occurring after such date.
The Series is not FDIC insured and is not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor and member of Macquarie Group. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries, including the Series’ distributor, Delaware Distributors, L.P. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
This material may be used in conjunction with the offering of shares in Delaware VIP® Value Series only if preceded or accompanied by the Series’ current prospectus or the summary prospectus.
© 2016 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
Table of Contents
Delaware VIP® Trust — Delaware VIP Value Series
Disclosure of Series expenses
For the six-month period from January 1, 2016 to June 30, 2016 (Unaudited)
As a shareholder of the Series, you incur ongoing costs, which may include management fees; distribution and/or service (12b-1) fees; and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series 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 entire six-month period from Jan. 1, 2016 to June 30, 2016.
Actual expenses
The first section of the table shown, “Actual Series Return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, 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, an $8,600 account value divided by $1,000 = 8.6), 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 the period.
Hypothetical example for comparison purposes
The second section of the table shown, “Hypothetical 5% Return,” provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ 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 Series and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Series, you do not incur any transaction costs, such as sales charges (loads), redemption fees or exchange fees, but shareholders of other funds may incur such costs. Also, the fees related to the variable annuity investment or the deferred sales charge that could apply have not been included. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The Series’ actual expenses shown in the table reflect fee waivers in effect for Service Class shares. The expenses shown in the table assume reinvestment of all dividends and distributions.
Expense analysis of an investment of $1,000
Expenses | ||||||||||||
Beginning | Ending | Paid During | ||||||||||
Account | Account | Annualized | Period | |||||||||
Value | Value | Expense | 1/1/16 to | |||||||||
1/1/16 | 6/30/16 | Ratio | 6/30/16* | |||||||||
| ||||||||||||
Actual Series return† | ||||||||||||
Standard Class | $1,000.00 | $1,106.90 | 0.71% | $3.72 | ||||||||
Service Class | 1,000.00 | 1,105.60 | 0.96% | 5.03 | ||||||||
| ||||||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||
Standard Class | $1,000.00 | $1,021.33 | 0.71% | $3.57 | ||||||||
Service Class | 1,000.00 | 1,020.09 | 0.96% | 4.82 | ||||||||
|
* | “Expenses Paid During Period” are equal to the Series’ annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
† | Because actual returns reflect only the most recent six-month period, the returns shown may differ significantly from fiscal year returns. |
Value Series-1 |
Table of Contents
Delaware VIP® Trust — Delaware VIP Value Series
Security type / sector allocation and top 10 equity holdings
As of June 30, 2016 (Unaudited)
Sector designations may be different than the sector designations presented in other Series materials. The sector designations may represent the investment manager’s internal sector classifications.
Percentage of | ||
Security type / sector | net assets | |
| ||
Common Stock | 95.86% | |
Consumer Discretionary | 6.00% | |
Consumer Staples | 12.14% | |
Energy | 13.68% | |
Financials | 11.95% | |
Healthcare | 18.52% | |
Industrials | 9.60% | |
Information Technology | 11.52% | |
Materials | 2.78% | |
Telecommunications | 6.46% | |
Utilities | 3.21% | |
| ||
Short-Term Investments | 4.09% | |
| ||
Total Value of Securities | 99.95% | |
| ||
Receivables and Other Assets Net of Liabilities | 0.05% | |
| ||
Total Net Assets | 100.00% | |
|
Holdings are for informational purposes only and are subject to change at any time. They are not a recommendation to buy, sell, or hold any security.
Percentage | ||
Top 10 equity holdings | of net assets | |
| ||
Waste Management | 3.33% | |
AT&T | 3.25% | |
Quest Diagnostics | 3.25% | |
Edison International | 3.21% | |
Verizon Communications | 3.20% | |
Halliburton | 3.20% | |
Northrop Grumman | 3.19% | |
Pfizer | 3.17% | |
Kraft Heinz | 3.17% | |
Chevron | 3.15% | |
|
Value Series-2
Table of Contents
Delaware VIP® Trust — Delaware VIP Value Series
Schedule of investments
June 30, 2016 (Unaudited)
Number of | Value | |||||||
shares | (U.S. $) | |||||||
Common Stock – 95.86% |
| |||||||
Consumer Discretionary – 6.00% |
| |||||||
Johnson Controls | 525,500 | $ | 23,258,630 | |||||
Lowe’s | 290,400 | 22,990,968 | ||||||
|
| |||||||
46,249,598 | ||||||||
|
| |||||||
Consumer Staples – 12.14% |
| |||||||
Archer-Daniels-Midland | 550,200 | 23,598,078 | ||||||
CVS Health | 232,400 | 22,249,976 | ||||||
Kraft Heinz | 275,833 | 24,405,704 | ||||||
Mondelez International | 513,100 | 23,351,181 | ||||||
|
| |||||||
93,604,939 | ||||||||
|
| |||||||
Energy – 13.68% | ||||||||
Chevron | 232,000 | 24,320,560 | ||||||
ConocoPhillips | 526,000 | 22,933,600 | ||||||
Halliburton | 544,900 | 24,678,521 | ||||||
Marathon Oil | 672,500 | 10,094,225 | ||||||
Occidental Petroleum | 310,200 | 23,438,712 | ||||||
|
| |||||||
105,465,618 | ||||||||
|
| |||||||
Financials – 11.95% |
| |||||||
Allstate | 342,400 | 23,950,880 | ||||||
Bank of New York Mellon | 571,000 | 22,183,350 | ||||||
BB&T | 627,800 | 22,355,958 | ||||||
Marsh & McLennan | 345,600 | 23,659,776 | ||||||
|
| |||||||
92,149,964 | ||||||||
|
| |||||||
Healthcare – 18.52% |
| |||||||
Cardinal Health | 284,000 | 22,154,840 | ||||||
Express Scripts Holding † | 309,550 | 23,463,890 | ||||||
Johnson & Johnson | 197,300 | 23,932,490 | ||||||
Merck | 412,500 | 23,764,125 | ||||||
Pfizer | 693,741 | 24,426,621 | ||||||
Quest Diagnostics @ | 307,400 | 25,025,434 | ||||||
|
| |||||||
142,767,400 | ||||||||
|
| |||||||
Industrials – 9.60% |
| |||||||
Northrop Grumman | 110,700 | 24,606,396 | ||||||
Raytheon | 174,600 | 23,736,870 | ||||||
Waste Management | 387,200 | 25,659,744 | ||||||
|
| |||||||
74,003,010 | ||||||||
|
| |||||||
Information Technology – 11.52% |
| |||||||
CA @ | 684,516 | 22,472,660 | ||||||
Cisco Systems | 789,500 | 22,650,755 | ||||||
Intel | 721,000 | 23,648,800 | ||||||
Xerox @ | 2,109,100 | 20,015,359 | ||||||
|
| |||||||
88,787,574 | ||||||||
|
|
Number of | Value | |||||||
shares | (U.S. $) | |||||||
Common Stock (continued) |
| |||||||
Materials – 2.78% |
| |||||||
EI du Pont de Nemours | 331,000 | $ | 21,448,800 | |||||
|
| |||||||
21,448,800 | ||||||||
|
| |||||||
Telecommunications – 6.46% |
| |||||||
AT&T | 580,624 | 25,088,763 | ||||||
Verizon Communications | 442,000 | 24,681,280 | ||||||
|
| |||||||
49,770,043 | ||||||||
|
| |||||||
Utilities – 3.21% | ||||||||
Edison International | 318,800 | 24,761,196 | ||||||
|
| |||||||
24,761,196 | ||||||||
|
| |||||||
Total Common Stock |
| 739,008,142 | ||||||
|
| |||||||
Principal | ||||||||
amount° | ||||||||
Short-Term Investments – 4.09% |
| |||||||
Discount Notes – 2.48% ≠ |
| |||||||
Federal Home Loan Bank | ||||||||
0.262% 8/5/16 | 12,626,068 | 12,623,126 | ||||||
0.318% 7/13/16 | 1,740,100 | 1,740,008 | ||||||
0.325% 8/3/16 | 529,059 | 528,943 | ||||||
0.335% 7/12/16 | 413,795 | 413,775 | ||||||
0.335% 7/21/16 | 574,716 | 574,664 | ||||||
0.34% 7/22/16 | 570,172 | 570,119 | ||||||
0.35% 7/25/16 | 235,333 | 235,308 | ||||||
0.38% 7/18/16 | 197,133 | 197,118 | ||||||
0.39% 9/21/16 | 873,546 | 873,009 | ||||||
0.39% 9/23/16 | 1,065,560 | 1,064,889 | ||||||
0.53% 8/15/16 | 283,042 | 282,957 | ||||||
|
| |||||||
19,103,916 | ||||||||
|
| |||||||
Repurchase Agreements – 1.61% |
| |||||||
Bank of America Merrill Lynch | 4,400,478 | 4,400,478 | ||||||
Bank of Montreal | 7,334,131 | 7,334,131 |
Value Series-3
Table of Contents
Delaware VIP® Value Series
Schedule of investments (continued)
Principal | Value | |||||||
amount° | (U.S. $) | |||||||
Short-Term Investments (continued) |
| |||||||
Repurchase Agreements (continued) |
| |||||||
BNP Paribas | 730,391 | $ | 730,391 | |||||
|
| |||||||
12,465,000 | ||||||||
|
| |||||||
Total Short-Term Investments |
| 31,568,916 | ||||||
|
|
Total Value of Securities – 99.95% | $ | 770,577,058 | ||
|
|
@ | Illiquid security. At June 30, 2016, the aggregate value of illiquid securities was $67,513,453, which represents 8.76% of the Series’ net assets. See Note 8 in “Notes to financial statements.” |
≠ | The rate shown is the effective yield at the time of purchase. |
° | Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency. |
† | Non-income-producing security. |
See accompanying notes, which are an integral part of the financial statements.
Value Series-4
Table of Contents
Delaware VIP® Trust — Delaware VIP Value Series | ||
Statement of assets and liabilities | June 30, 2016 (Unaudited) |
Assets: | ||||
Investments, at value1 | $ | 739,008,142 | ||
Short-term investments, at value2 | 31,568,916 | |||
Dividends and interest receivable | 1,377,690 | |||
Receivable for series shares sold | 24,816 | |||
|
| |||
Total assets | 771,979,564 | |||
|
| |||
Liabilities: | ||||
Cash overdraft | 15,136 | |||
Payable for series shares redeemed | 404,015 | |||
Audit and tax fees payable | 16,334 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 4,654 | |||
Accounting and administration expenses payable to affiliates | 2,934 | |||
Reports and statements to shareholders expenses payable to affiliates | 319 | |||
Investment management fees payable | 392,829 | |||
Other accrued expenses | 125,869 | |||
Distribution fees payable to affiliates | 69,506 | |||
Trustees’ fees and expenses payable | 2,280 | |||
Legal fees payable to affiliates | 1,810 | |||
|
| |||
Total liabilities | 1,035,686 | |||
|
| |||
Total Net Assets | $ | 770,943,878 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 473,024,723 | ||
Undistributed net investment income | 6,411,292 | |||
Accumulated net realized gain on investments | 12,990,223 | |||
Net unrealized appreciation of investments | 278,517,640 | |||
|
| |||
Total Net Assets | $ | 770,943,878 | ||
|
| |||
Net Asset Value: | ||||
Standard Class: | ||||
Net assets | $ | 425,999,692 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 15,083,848 | |||
Net asset value per share | $ | 28.24 | ||
Service Class: | ||||
Net assets | $ | 344,944,186 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 12,237,392 | |||
Net asset value per share | $ | 28.19 | ||
1Investments, at cost | $ | 460,491,742 | ||
2Short-term investments, at cost | 31,567,676 |
See accompanying notes, which are an integral part of the financial statements.
Value Series-5
Table of Contents
Delaware VIP Value Series
Statement of operations
Six months ended June 30, 2016 (Unaudited)
Investment Income: | ||||
Dividends | $ | 9,271,727 | ||
Interest | 16,531 | |||
|
| |||
9,288,258 | ||||
|
| |||
Expenses: | ||||
Management fees | 2,212,034 | |||
Distribution expenses – Service Class | 462,868 | |||
Accounting and administration expenses | 113,535 | |||
Reports and statements to shareholders expenses | 37,791 | |||
Dividend disbursing and transfer agent fees and expenses | 29,652 | |||
Legal fees | 23,289 | |||
Trustees’ fees and expenses | 17,879 | |||
Audit and tax fees | 16,334 | |||
Custodian fees | 14,068 | |||
Registration fees | 2,115 | |||
Other | 10,050 | |||
|
| |||
2,939,615 | ||||
Less waived distribution expenses – Service Class | (77,145 | ) | ||
Less expense paid indirectly | (1 | ) | ||
|
| |||
Total operating expenses | 2,862,469 | |||
|
| |||
Net Investment Income | 6,425,789 | |||
|
| |||
Net Realized and Unrealized Gain: | ||||
Net realized gain on investments | 16,328,630 | |||
Net change in unrealized appreciation (depreciation) of investments | 50,788,838 | |||
|
| |||
Net Realized and Unrealized Gain | 67,117,468 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 73,543,257 | ||
|
|
Six months ended 6/30/16 (Unaudited) | Year ended 12/31/15 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 6,425,789 | $ | 13,579,859 | ||||
Net realized gain | 16,328,630 | 77,813,693 | ||||||
Net change in unrealized appreciation (depreciation) | 50,788,838 | (94,550,115 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 73,543,257 | (3,156,563 | ) | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Standard Class | (7,928,234 | ) | (8,223,700 | ) | ||||
Service Class | (5,649,583 | ) | (4,842,691 | ) | ||||
Net realized gain: | ||||||||
Standard Class | (36,394,752 | ) | — | |||||
Service Class | (29,532,407 | ) | — | |||||
|
|
|
| |||||
(79,504,976 | ) | (13,066,391 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Standard Class | 10,287,371 | 28,402,258 | ||||||
Service Class | 21,968,037 | 26,622,421 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 44,322,986 | 6,824,315 | ||||||
Service Class | 35,181,990 | 4,842,691 | ||||||
|
|
|
| |||||
111,760,384 | 66,691,685 | |||||||
|
|
|
| |||||
Cost of shares redeemed: | ||||||||
Standard Class | (14,783,059 | ) | (159,537,651 | ) | ||||
Service Class | (14,211,518 | ) | (50,559,612 | ) | ||||
|
|
|
| |||||
(28,994,577 | ) | (210,097,263 | ) | |||||
|
|
|
| |||||
Increase (decrease) in net assets derived from capital share transactions | 82,765,807 | (143,405,578 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets: | 76,804,088 | (159,628,532 | ) | |||||
Net Assets: | ||||||||
Beginning of period | 694,139,790 | 853,768,322 | ||||||
|
|
|
| |||||
End of period | $ | 770,943,878 | $ | 694,139,790 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 6,411,292 | $ | 13,563,320 | ||||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
Value Series-6
Table of Contents
Delaware VIP® Trust — Delaware VIP Value Series
Financial highlights
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP Value Series Standard Class | ||||||||||||||||||||||||||||||
Six months ended 6/30/161 | Year ended | |||||||||||||||||||||||||||||
(Unaudited) | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | 12/31/11 | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 28.640 | $ | 29.240 | $ | 26.090 | $ | 19.880 | $ | 17.730 | $ | 16.490 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||
Net investment income2 | 0.269 | 0.546 | 0.478 | 0.451 | 0.418 | 0.382 | ||||||||||||||||||||||||
Net realized and unrealized gain (loss) | 2.635 | (0.646 | ) | 3.126 | 6.170 | 2.163 | 1.191 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total from investment operations | 2.904 | (0.100 | ) | 3.604 | 6.621 | 2.581 | 1.573 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||||||||
Net investment income | (0.591 | ) | (0.500 | ) | (0.454 | ) | (0.411 | ) | (0.431 | ) | (0.333 | ) | ||||||||||||||||||
Net realized gain | (2.713 | ) | — | — | — | — | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total dividends and distributions | (3.304 | ) | (0.500 | ) | (0.454 | ) | (0.411 | ) | (0.431 | ) | (0.333 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net asset value, end of period | $ | 28.240 | $ | 28.640 | $ | 29.240 | $ | 26.090 | $ | 19.880 | $ | 17.730 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total return3 | 10.69% | (0.41% | ) | 14.00% | 33.69% | 14.73% | 9.54% | |||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 426,000 | $ | 389,570 | $ | 523,240 | $ | 473,403 | $ | 350,444 | $ | 310,494 | ||||||||||||||||||
Ratio of expenses to average net assets | 0.71% | 0.71% | 0.71% | 0.71% | 0.73% | 0.73% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets | 1.96% | 1.88% | 1.74% | 1.94% | 2.21% | 2.23% | ||||||||||||||||||||||||
Portfolio turnover | 6% | 17% | 12% | 14% | 21% | 20% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return does not include fees, charges, or expenses imposed by the variable annuity and life insurance contracts for which Delaware VIP Trust serves as an underlying investment vehicle. |
See accompanying notes, which are an integral part of the financial statements.
Value Series-7
Table of Contents
Delaware VIP® Value Series
Financial highlights (continued)
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP Value Series Service Class | ||||||||||||||||||||||||||||||
Six months ended 6/30/161 | Year ended | |||||||||||||||||||||||||||||
(Unaudited) | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | 12/31/11 | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 28.560 | $ | 29.160 | $ | 26.030 | $ | 19.840 | $ | 17.700 | $ | 16.470 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||
Net investment income2 | 0.234 | 0.472 | 0.409 | 0.393 | 0.370 | 0.338 | ||||||||||||||||||||||||
Net realized and unrealized gain (loss) | 2.628 | (0.640 | ) | 3.117 | 6.161 | 2.158 | 1.188 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total from investment operations | 2.862 | (0.168 | ) | 3.526 | 6.554 | 2.528 | 1.526 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||||||||
Net investment income | (0.519 | ) | (0.432 | ) | (0.396 | ) | (0.364 | ) | (0.388 | ) | (0.296 | ) | ||||||||||||||||||
Net realized gain | (2.713 | ) | — | — | — | — | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total dividends and distributions | (3.232 | ) | (0.432 | ) | (0.396 | ) | (0.364 | ) | (0.388 | ) | (0.296 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net asset value, end of period | $ | 28.190 | $ | 28.560 | $ | 29.160 | $ | 26.030 | $ | 19.840 | $ | 17.700 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total return3 | 10.56% | (0.64% | ) | 13.70% | 33.37% | 14.44% | 9.26% | |||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 344,944 | $ | 304,570 | $ | 330,528 | $ | 285,695 | $ | 210,804 | $ | 176,363 | ||||||||||||||||||
Ratio of expenses to average net assets | 0.96% | 0.96% | 0.96% | 0.96% | 0.98% | 0.98% | ||||||||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 1.01% | 1.01% | 1.01% | 1.01% | 1.03% | 1.03% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets | 1.71% | 1.63% | 1.49% | 1.69% | 1.96% | 1.98% | ||||||||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 1.66% | 1.58% | 1.44% | 1.64% | 1.91% | 1.93% | ||||||||||||||||||||||||
Portfolio turnover | 6% | 17% | 12% | 14% | 21% | 20% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | The average shares outstanding method has been applied for per share information. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during all of the periods shown reflects a waiver by the distributor. Performance would have been lower had the waiver not been in effect. Total investment return does not include fees, charges, or expenses imposed by the variable annuity and life insurance contracts for which Delaware VIP Trust serves as an underlying investment vehicle. |
See accompanying notes, which are an integral part of the financial statements.
Value Series-8
Table of Contents
Delaware VIP® Trust — Delaware VIP Value Series
Notes to financial statements
June 30, 2016 (Unaudited)
Delaware VIP Trust (Trust) is organized as a Delaware statutory trust and offers 10 series: Delaware VIP Diversified Income Series, Delaware VIP Emerging Markets Series, Delaware VIP High Yield Series, Delaware VIP International Value Equity Series, Delaware VIP Limited-Term Diversified Income Series, Delaware VIP REIT Series, Delaware VIP Small Cap Value Series, Delaware VIP Smid Cap Growth Series, Delaware VIP U.S. Growth Series, and Delaware VIP Value Series. These financial statements and the related notes pertain to Delaware VIP Value Series (Series). The Trust is an open-end investment company. The Series is considered diversified under the Investment Company Act of 1940, as amended, and offers Standard Class and Service Class shares. The Standard Class shares do not carry a 12b-1 fee and the Service Class shares carry a 12b-1 fee. The shares of the Series are sold only to separate accounts of life insurance companies.
The investment objective of the Series is to seek long-term capital appreciation.
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistently followed by the Series.
Security Valuation—Equity securities, except those traded on the Nasdaq Stock Market LLC (Nasdaq), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange on the valuation date. Equity securities traded on the Nasdaq are valued in accordance with the Nasdaq Official Closing Price, which may not be the last sales price. If, on a particular day, an equity security does not trade, the mean between the bid and ask prices will be used, which approximates fair value. U.S. government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Generally, other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Trust’s Board of Trustees (Board). In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures or suspension of trading in a security.
Federal Income Taxes—No provision for federal income taxes has been made as the Series intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. The Series evaluates tax positions taken or expected to be taken in the course of preparing the Series’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Series’ tax positions taken for all open federal income tax years (Dec. 31, 2012–Dec. 31, 2015), and has concluded that no provision for federal income tax is required in the Series’ financial statements.
Class Accounting—Investment income, common expenses, and realized and unrealized gain (loss) on investments are allocated to the classes of the Series on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class.
Repurchase Agreements—The Series may purchase certain U.S. government securities subject to the counterparty’s agreement to repurchase them at an agreed upon date and price. The counterparty will be required on a daily basis to maintain the value of the collateral subject to the agreement at not less than the repurchase price (including accrued interest). The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system with the Series’ custodian or a third-party sub-custodian. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings. All open repurchase agreements as of the date of this report were entered into on June 30, 2016 and matured on the next business day.
Use of Estimates—The Series is an investment company, whose financial statements are prepared in conformity with U.S. GAAP. Therefore, the Series follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material.
Other—Expenses directly attributable to the Series are charged directly to the Series. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated among such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Discounts and premiums on debt securities are accreted or amortized to interest income, respectively, over the lives of the respective securities using the effective interest method. The Series declares and pays distributions from net investment income and distributions from net realized gain on investments, if any, following the close of the fiscal year. The Series may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
Subject to seeking best execution, the Series may direct certain security trades to brokers who have agreed to rebate a portion of the related brokerage commission to the Series in cash. In general, best execution refers to many factors, including the price paid or received for a security, the commission charged, the promptness and reliability of execution, the confidentiality and placement accorded the order, and other factors affecting the overall benefit obtained by the Series on the transaction. There were no commission rebates for the six months ended June 30, 2016.
Value Series-9
Table of Contents
Delaware VIP® Value Series
Notes to financial statements (continued)
1. Significant Accounting Policies (continued)
The Series may receive earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. There were no such earnings credits for the six months ended June 30, 2016.
The Series receives earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than one dollar, the expense paid under this arrangement is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expense offset shown under “Less expense paid indirectly.” For the six months ended June 30, 2016, the Series earned $1 under this agreement.
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Series pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.75% on the first $500 million of average daily net assets of the Series, 0.70% on the next $500 million, 0.65% on the next $1.5 billion, and 0.60% on average daily net assets in excess of $2.5 billion.
Delaware Investments Fund Services Company (DIFSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Series. For these services, DIFSC’s fees are calculated based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DIFSC under the service agreement described above are allocated among all funds in the Delaware Investments Family of Funds on a relative net asset value (NAV) basis. For the six months ended June 30, 2016, the Series was charged $16,548 for these services. This amount is included on the “Statement of operations” under “Accounting and administration expenses.”
DIFSC is also the transfer agent and dividend disbursing agent of the Series. For these services, DIFSC’s fees are calculated at the annual rate of 0.0075% of the Series’ average daily net assets. This amount is included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.” For the six months ended June 30, 2016, the Series was charged $26,096 for these services. Pursuant to a sub-transfer agency agreement between DIFSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Series. Sub-transfer agency fees are paid by the Series and are also included on the “Statement of operations” under “Dividend disbursing and transfer agent fees and expenses.”
Pursuant to a distribution agreement and distribution plan, the Series pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee of 0.30% of the average daily net assets of the Service Class shares. DDLP has contracted to waive distribution and service fees from Jan. 1, 2016 to June 30, 2016*, in order to limit distribution and service fee of the Service Class shares to 0.25% of average daily net assets. Standard Class shares pay no distribution and service expenses.
As provided in the investment management agreement, the Series bears a portion of the cost of certain resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Series. For the six months ended June 30, 2016, the Series was charged $9,131 for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees. This amount is included on the “Statement of operations” under “Legal fees.”
Trustees’ fees include expenses accrued by the Series for each Trustee’s retainer and meeting fees. Certain officers of DMC, DIFSC, and DDLP are officers and/or Trustees of the Trust. These officers and Trustees are paid no compensation by the Series.
*The contractual waiver period is from April 30, 2015 through May 1, 2017.
3. Investments
For the six months ended June 30, 2016, the Series made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 40,844,822 | ||
Sales | 55,145,425 |
At June 30, 2016, the cost of investments for federal income tax purposes has been estimated since final tax characteristics cannot be determined until fiscal year end. At June 30, 2016, the cost and unrealized appreciation (depreciation) of investments for the Series were as follows:
Cost of | Aggregate Unrealized | Aggregate Unrealized | Net Unrealized Appreciation of Investments | |||
$492,059,418 | $292,997,459 | $(14,479,819) | $278,517,640 |
Value Series-10
Table of Contents
Delaware VIP® Value Series
Notes to financial statements (continued)
3. Investments (continued)
U.S. GAAP defines fair value as the price that the Series would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established 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 assumptions that market participants would use in pricing the asset or liability based on the best information available under the circumstances. The Series’ investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized below.
Level 1 – | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) | |
Level 2 – | Other observable inputs, including, but 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. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) | |
Level 3 – | Significant unobservable inputs including the Series’ own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. The Series may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
The following table summarizes the valuation of the Series’ investments by fair value hierarchy levels as of June 30, 2016:
Securities | Level 1 | Level 2 | Total | |||||||||
Common Stock | $ | 739,008,142 | $ | — | $ | 739,008,142 | ||||||
Short-Term Investments | — | 31,568,916 | 31,568,916 | |||||||||
|
|
|
|
|
| |||||||
Total Value of Securities | $ | 739,008,142 | $ | 31,568,916 | $ | 770,577,058 | ||||||
|
|
|
|
|
|
During the six months ended June 30, 2016, there were no transfers between Level 1 investments, Level 2 investments, or Level 3 investments that had a significant impact to the Series. The Series’ policy is to recognize transfers between levels at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when the Series has a significant amount of Level 3 investments at the beginning, interim, or end of the period in relation to the Series’ net assets. At June 30, 2016, there were no Level 3 investments.
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 6/30/16 | Year ended 12/31/15 | ||||||||||||||
Shares sold: | |||||||||||||||
Standard Class | 374,841 | 977,560 | |||||||||||||
Service Class | 785,956 | 918,920 | |||||||||||||
Shares issued upon reinvestment of dividends and distributions: | |||||||||||||||
Standard Class | 1,644,028 | 228,391 | |||||||||||||
Service Class | 1,306,909 | 162,288 | |||||||||||||
|
|
|
| ||||||||||||
4,111,734 | 2,287,159 | ||||||||||||||
|
|
|
| ||||||||||||
Shares redeemed: | |||||||||||||||
Standard Class | (536,754 | ) | (5,498,915 | ) | |||||||||||
Service Class | (520,399 | ) | (1,749,877 | ) | |||||||||||
|
|
|
| ||||||||||||
(1,057,153 | ) | (7,248,792 | ) | ||||||||||||
|
|
|
| ||||||||||||
Net increase (decrease) | 3,054,581 | (4,961,633 | ) | ||||||||||||
|
|
|
|
Value Series-11
Table of Contents
Delaware VIP® Value Series
Notes to financial statements (continued)
5. Line of Credit
The Series, along with certain other funds in the Delaware Investments® Family of Funds (Participants), is a participant in a $155,000,000 revolving line of credit intended to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants are charged an annual commitment fee of 0.10%, which is allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants are permitted to borrow up to a maximum of one-third of their net assets under the agreement. Each Participant is individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit available under the agreement expires on Nov. 7, 2016.
The Series had no amounts outstanding as of June 30, 2016 or at any time during the period then ended.
6. Offsetting
In December 2011, the Financial Accounting Standards Board (FASB) issued guidance that expanded disclosure requirements on the offsetting of certain assets and liabilities. The disclosures are required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset on the “Statement of assets and liabilities” and require an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarified which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting is limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing.
In order to better define its contractual rights and to secure rights that will help the Series mitigate its counterparty risk, the Series entered into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement) or a similar agreement with certain of its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Series and a counterparty that governs certain over-the-counter (OTC) derivatives and foreign exchange contracts and typically contains, among other things, collateral posting items and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Series may, under certain circumstances, offset with the counterparty certain derivative financial instruments payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default (close-out), including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency, or other events.
For financial reporting purposes, the Series does not offset derivative assets and derivatives liabilities that are subject to netting arrangements on the “Statement of assets and liabilities.”
At June 30, 2016, the Series had the following assets and liabilities subject to offsetting provisions:
Master Repurchase Agreements
Counterparty | Repurchase Agreements | Fair Value of Non-Cash Collateral Received | Cash Collateral Received | Net Collateral Received | Net Exposure(a) | ||||||||||||||||||||
Bank of America Merrill Lynch | $ | 4,400,478 | $ | (4,400,478 | ) | $ | — | $ | (4,400,478 | ) | $ | — | |||||||||||||
Bank of Montreal | 7,334,131 | (7,334,131 | ) | — | (7,334,131 | ) | — | ||||||||||||||||||
BNP Paribas | 730,391 | (730,391 | ) | — | (730,391 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total | $ | 12,465,000 | $ | (12,465,000 | ) | $ | — | $ | (12,465,000 | ) | $ | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
(a)Net exposure represents the net receivable (payable) that would be due from (to) the counterparty in an event of default.
7. Securities Lending
The Series, along with other funds in the Delaware Investments Family of Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York Mellon (BNY Mellon). At the time a security is loaned, the borrower must post collateral equal to the required percentage of the market value of the loaned security, including any accrued interest. The required percentage is: (1) 102% with respect to U.S. securities and foreign securities that are denominated and payable in U.S. dollars; and (2) 105% with respect to foreign securities. With respect to each loan, if on any business day the aggregate market value of securities collateral plus cash collateral held is less than the aggregate market value of the securities that are the subject of such loan, the borrower will be notified to provide additional collateral by the end of the following business day, which, together with the collateral already held, will be not less than the applicable initial collateral requirements for such security loan. If the aggregate market value of securities collateral and cash collateral held with respect to a security loan exceeds the applicable initial collateral requirement, upon the request of the borrower, BNY Mellon must return enough collateral to the borrower by the end of the following business day to reduce the value of the remaining collateral to the applicable initial collateral requirement for such security loan. As a result of the foregoing, the value of the collateral held with respect to a loaned security on any particular day may be more or less than the value of the security on loan.
Prior to Dec. 29, 2015, cash collateral received was generally invested in the Delaware Investments Collateral Fund No. 1 (Collective Trust), a pooled account established by BNY Mellon for the use of funds managed by DMC that participate in BNY Mellon’s securities lending program. The Collective Trust sought to maintain a NAV per unit of $1.00.
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Notes to financial statements (continued)
7. Securities Lending (continued)
On Dec. 29, 2015, the assets in the Collective Trust were transferred to a series of individual separate accounts, each corresponding to a Series. The investment guidelines permit each separate account to hold certain securities that would be considered eligible securities for a money market fund. Cash collateral received is generally invested in government securities; certain obligations issued by government sponsored enterprises; repurchase agreements collateralized by U.S. Treasury securities; obligations issued by the central government of any Organization for Economic Cooperation and Development (OECD) country or its agencies, instrumentalities, or establishments; obligations of supranational organizations; commercial paper, notes, bonds, and other debt obligations; certificates of deposit, time deposits, and other bank obligations; and asset-backed securities.
In the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Series or, at the discretion of the lending agent, replace the loaned securities. The Series continues to record dividends or interest, as applicable, on the securities loaned and are subject to changes in value of the securities loaned that may occur during the term of the loan. The Series has the right under the Lending Agreement to recover the securities from the borrower on demand. With respect to security loans collateralized by non-cash collateral, the Series receives loan premiums paid by the borrower. With respect to security loans collateralized by cash collateral, the earnings from the collateral investments are shared among the Series, the security lending agent, and the borrower. The Series records security lending income net of allocations to the security lending agent and the borrower.
The Series may incur investment losses as a result of investing securities lending collateral. This could occur if an investment in the collateral investment account defaulted or became impaired. Under those circumstances, the value of a Series’ cash collateral account may be less than the amount the Series would be required to return to the borrowers of the securities and the Series would be required to make up for this shortfall.
During the six months ended June 30, 2016, the Series had no securities out on loan.
8. Credit and Market Risk
The Series may invest up to 10% of its net assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Series from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Series’ Board has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of the Series’ limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to the Series’ 10% limit on investments in illiquid securities. As of June 30, 2016, there were no Rule 144A securities held by the Series. Illiquid securities have been identified on the “Schedule of investments.” When monitoring compliance with the Series’ illiquid limit, certain holdings that are common to multiple clients of the investment manager may be aggregated and considered illiquid in the aggregate solely for monitoring purposes. For purposes of determining illiquidity for financial reporting purposes, only the holdings of this Series will be considered.
9. Contractual Obligations
The Series enters into contracts in the normal course of business that contain a variety of indemnifications. The Series’ maximum exposure under these arrangements is unknown. However, the Series has not had prior claims or losses pursuant to these contracts. Management has reviewed the Series’ existing contracts and expects the risk of loss to be remote.
10. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to June 30, 2016 that would require recognition or disclosure in the Series’ financial statements.
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The Series files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q. The Series’ Forms N-Q, as well as a description of the policies and procedures that the Series uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the Commission’s website at sec.gov. In addition, a description of the policies and procedures that the Series uses to determine how to vote proxies (if any) relating to portfolio securities and the Schedule of Investments included in the Series’ most recent Form N-Q are available without charge on the Delaware Investments® Funds’ website at delawareinvestments.com/vip/literature. The Series’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330.
Information (if any) regarding how the Series voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Delaware Investments Funds’ website at delawareinvestments.com/proxy; and (ii) on the Commission’s website at sec.gov.
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SA-VIPV 21190 (8/16) (17290) | Value Series-14 |
Item 2. Code of Ethics
Not applicable.
Item 3. Audit Committee Financial Expert
Not applicable.
Item 4. Principal Accountant Fees and Services
Not applicable.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Investments
(a) Included as part of report to shareholders filed under Item 1 of this Form N-CSR.
(b) Divestment of securities in accordance with Section 13(c) of the Investment Company Act of 1940.
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
Not applicable.
Item 11. Controls and Procedures
The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of the filing of this report and have concluded that they are effective in providing reasonable assurance that the information required to be disclosed by the registrant in its reports or statements filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.
There were no significant changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by the report to stockholders included herein (i.e., the registrant’s second fiscal quarter) that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
(a) (1) Code of Ethics
Not applicable. | |
(2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are attached hereto as Exhibit 99.CERT. | |
(3) Written solicitations to purchase securities pursuant to Rule 23c-1 under the Securities Exchange Act of 1934. | |
Not applicable. |
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished herewith as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized.
DELAWARE VIP® TRUST
/s/ SHAWN LYTLE | |
By: | Shawn Lytle |
Title: | President and Chief Executive Officer |
Date: | September 2, 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.
/s/ SHAWN LYTLE | |
By: | Shawn Lytle |
Title: | President and Chief Executive Officer |
Date: | September 2, 2016 |
/s/ RICHARD SALUS | |
By: | Richard Salus |
Title: | Chief Financial Officer |
Date: | September 2, 2016 |