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, 2017 |
Item 1. Reports to Stockholders
Table of Contents
Delaware VIP® Trust
Delaware VIP Diversified Income Series
June 30, 2017
Table of Contents
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Other than Macquarie Bank Limited (MBL), none of the entities noted are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Series is governed by US laws and regulations.
Unless otherwise noted, views expressed herein are current as of June 30, 2017, 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.
Advisory services provided by Delaware Management Company, a series of Macquarie Investment Management Business Trust, a US registered investment advisor.
The Series is distributed by Delaware Distributors, L.P., an affiliate of Macquarie Investment Management Business Trust and Macquarie Group Limited. Macquarie Investment Management (MIM), a member of Macquarie Group, refers to the companies comprising the asset management division of 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.
© 2017 Macquarie Management Holdings, Inc. (formerly, 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
For the six-month period from January 1, 2017 to June 30, 2017 (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, 2017 to June 30, 2017.
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 1/1/17 | Ending Account Value 6/30/17 | Annualized Expense Ratio | Expenses Paid During Period 1/1/17 to 6/30/17* | |||||||||
Actual Series return† | ||||||||||||
Standard Class | $1,000.00 | $1,034.30 | 0.67% | $3.38 | ||||||||
Service Class | 1,000.00 | 1,032.90 | 0.92% | 4.64 | ||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||
Standard Class | $1,000.00 | $1,021.47 | 0.67% | $3.36 | ||||||||
Service Class | 1,000.00 | 1,020.23 | 0.92% | 4.61 |
* | “Expenses Paid During Period” are equal to the Series’ annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (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, 2017 (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 | ||||
Agency Asset-Backed Securities | 0.01 | % | |||
Agency Collateralized Mortgage Obligations | 5.93 | % | |||
Agency Commercial Mortgage-Backed Securities | 1.03 | % | |||
Agency Mortgage-Backed Securities | 5.67 | % | |||
Collateralized Debt Obligations | 2.47 | % | |||
Convertible Bonds | 1.62 | % | |||
Corporate Bonds | 48.90 | % | |||
Automotive | 0.13 | % | |||
Banking | 10.88 | % | |||
Basic Industry | 4.19 | % | |||
Brokerage | 0.47 | % | |||
Capital Goods | 2.28 | % | |||
Communications | 4.65 | % | |||
Consumer Cyclical | 2.60 | % | |||
Consumer Non-Cyclical | 3.94 | % | |||
Electric | 5.60 | % | |||
Energy | 4.77 | % | |||
Finance Companies | 1.37 | % | |||
Healthcare | 0.58 | % | |||
Insurance | 2.06 | % | |||
Media | 1.20 | % | |||
Real Estate Investment Trusts | 1.03 | % | |||
Services | 0.58 | % | |||
Technology | 1.38 | % | |||
Transportation | 0.90 | % | |||
Utilities | 0.29 | % | |||
Municipal Bonds | 0.53 | % | |||
Non-Agency Asset-Backed Securities | 1.98 | % | |||
Non-Agency Collateralized Mortgage Obligations | 0.96 | % | |||
Non-Agency Commercial Mortgage-Backed Securities | 6.18 | % | |||
Regional Bonds | 0.49 | % | |||
Loan Agreements | 7.20 | % | |||
Sovereign Bonds | 7.27 | % | |||
Supranational Banks | 1.07 | % |
Security type / sector | Percentage of net assets | ||||
US Treasury Obligations | 5.65 | % | |||
Common Stock | 0.00 | % | |||
Convertible Preferred Stock | 0.37 | % | |||
Preferred Stock | 0.32 | % | |||
Option Purchased | 0.01 | % | |||
Short-Term Investments | 1.74 | % | |||
Total Value of Securities | 99.40 | % | |||
Receivables and Other Assets Net of Liabilities | 0.60 | % | |||
Total Net Assets | 100.00 | % |
Diversified Income Series-2
Table of Contents
Delaware VIP® Trust — Delaware VIP Diversified Income Series
June 30, 2017 (unaudited)
Principal amount° | Value (US $) | |||||||
Agency Asset-Backed | ||||||||
Fannie Mae Grantor Trust | 213,361 | $ | 235,804 | |||||
Fannie Mae REMIC Trust | 893 | 873 | ||||||
Total Agency Asset-Backed Securities | 236,677 | |||||||
Agency Collateralized Mortgage Obligations – 5.93% | ||||||||
Fannie Mae Connecticut Avenue Securities Series 2017-C04 2M2 4.066% 11/25/29 • | 1,035,000 | 1,049,547 | ||||||
Fannie Mae Grantor Trust | 405 | 453 | ||||||
Series 2002-T4 A3 7.50% 12/25/41 | 7,753 | 8,716 | ||||||
Series 2004-T1 1A2 6.50% 1/25/44 | 6,479 | 7,447 | ||||||
Fannie Mae Interest Strip | 1,090,619 | 179,344 | ||||||
Fannie Mae REMIC Trust | 16,471 | 19,098 | ||||||
Series 2004-W11 1A2 6.50% 5/25/44 | 27,650 | 31,893 | ||||||
Fannie Mae REMICs | 23,790 | 27,491 | ||||||
Series 2001-50 BA 7.00% 10/25/41 | 36,307 | 41,275 | ||||||
Series 2002-90 A1 6.50% 6/25/42 | 6,501 | 7,547 | ||||||
Series 2002-90 A2 6.50% 11/25/42 | 19,138 | 21,972 | ||||||
Series 2003-38 MP 5.50% 5/25/23 | 260,039 | 280,872 | ||||||
Series 2005-70 PA 5.50% 8/25/35 | 143,089 | 159,944 | ||||||
Series 2005-110 MB 5.50% 9/25/35 | 46,702 | 48,958 | ||||||
Series 2008-15 SB 5.384% 8/25/36 S• | 304,739 | 58,648 | ||||||
Series 2009-11 MP 7.00% 3/25/49 | 20,278 | 23,630 | ||||||
Series 2009-94 AC 5.00% 11/25/39 | 630,765 | 687,061 | ||||||
Series 2010-41 PN 4.50% 4/25/40 | 1,675,000 | 1,797,356 | ||||||
Series 2010-43 HJ 5.50% 5/25/40 | 225,858 | 260,466 | ||||||
Series 2010-96 DC 4.00% 9/25/25 | 1,543,069 | 1,644,833 | ||||||
Series 2010-116 Z 4.00% 10/25/40 | 39,898 | 42,321 | ||||||
Series 2010-129 SM 4.784% 11/25/40 S• | 2,316,640 | 374,888 | ||||||
Series 2012-98 MI 3.00% 8/25/31 S | 3,166,026 | 344,901 | ||||||
Series 2012-99 AI 3.50% 5/25/39 S | 1,355,782 | 159,139 | ||||||
Series 2012-115 MI 3.50% 3/25/42 S | 698,976 | 87,846 | ||||||
Series 2012-120 WI 3.00% 11/25/27 S | 3,142,879 | 302,118 | ||||||
Series 2012-122 SD 4.884% 11/25/42 S• | 3,523,670 | 699,236 | ||||||
Series 2012-125 MI 3.50% 11/25/42 S | 62,423 | 12,382 | ||||||
Series 2012-139 NS 5.484% 12/25/42 S• | 4,943,578 | 1,204,961 |
Principal amount° | Value (US $) | |||||||
Agency Collateralized Mortgage Obligations (continued) | ||||||||
Fannie Mae REMICs | 56,616 | $ | 52,449 | |||||
Series 2013-7 EI 3.00% 10/25/40 S | 1,865,520 | 236,361 | ||||||
Series 2013-20 IH 3.00% 3/25/33 S | 100,938 | 13,983 | ||||||
Series 2013-23 IL 3.00% 3/25/33 S | 85,855 | 11,721 | ||||||
Series 2013-26 ID 3.00% 4/25/33 S | 2,259,990 | 313,788 | ||||||
Series 2013-28 YB 3.00% 4/25/43 | 52,000 | 50,608 | ||||||
Series 2013-31 MI 3.00% 4/25/33 S | 751,608 | 105,419 | ||||||
Series 2013-31 NT 3.00% 4/25/43 | 48,943 | 50,741 | ||||||
Series 2013-38 AI 3.00% 4/25/33 S | 2,140,377 | 294,359 | ||||||
Series 2013-41 HI 3.00% 2/25/33 S | 3,865,307 | 428,053 | ||||||
Series 2013-43 IX 4.00% 5/25/43 S | 9,719,135 | 2,223,635 | ||||||
Series 2013-44 DI 3.00% 5/25/33 S | 6,678,260 | 952,541 | ||||||
Series 2013-44 Z 3.00% 5/25/43 | 68,405 | 65,445 | ||||||
Series 2013-45 PI 3.00% 5/25/33 S | 382,973 | 52,897 | ||||||
Series 2013-55 AI 3.00% 6/25/33 S | 3,887,354 | 546,719 | ||||||
Series 2013-59 PY 2.50% 6/25/43 | 290,000 | 269,060 | ||||||
Series 2013-62 PY 2.50% 6/25/43 | 23,000 | 21,103 | ||||||
Series 2013-69 IJ 3.00% 7/25/33 S | 882,032 | 122,306 | ||||||
Series 2013-103 SK 4.704% 10/25/43 S• | 4,652,277 | 1,034,066 | ||||||
Series 2014-36 ZE 3.00% 6/25/44 | 1,744,987 | 1,636,674 | ||||||
Series 2014-68 BS 4.934% 11/25/44 S• | 3,282,944 | 693,105 | ||||||
Series 2014-72 KZ 3.00% 11/25/44 | 20,580 | 18,896 | ||||||
Series 2014-77 AI 3.00% 10/25/40 S | 64,684 | 7,342 | ||||||
Series 2014-90 SA 4.934% 1/25/45 S• | 18,703,161 | 3,657,788 | ||||||
Series 2015-27 SA 5.234% 5/25/45 S• | 1,247,832 | 243,569 | ||||||
Series 2015-40 GZ 3.50% 5/25/45 | 1,057,243 | 1,045,197 | ||||||
Series 2015-43 PZ 3.50% 6/25/45 | 1,054,016 | 1,092,194 | ||||||
Series 2015-44 AI 3.50% 1/25/34 S | 76,945 | 11,715 | ||||||
Series 2015-44 Z 3.00% 9/25/43 | 3,529,280 | 3,455,407 | ||||||
Series 2015-45 AI 3.00% 1/25/33 S | 82,257 | 8,826 | ||||||
Series 2015-56 MI 3.50% 10/25/41 S | 1,305,992 | 205,647 | ||||||
Series 2015-89 AZ 3.50% 12/25/45 | 339,264 | 348,650 | ||||||
Series 2015-90 AZ 3.00% 6/25/41 | 33,555 | 31,404 | ||||||
Series 2015-95 SH 4.784% 1/25/46 S• | 3,047,005 | 679,912 | ||||||
Series 2016-6 AI 3.50% 4/25/34 S | 3,003,296 | 382,640 | ||||||
Series 2016-23 AI 3.50% 2/25/41 S | 1,240,444 | 181,265 | ||||||
Series 2016-30 CI 3.00% 5/25/36 S | 2,233,952 | 304,519 | ||||||
Series 2016-33 DI 3.50% 6/25/36 S | 5,656,072 | 857,399 | ||||||
Series 2016-36 SB 4.784% 3/25/43 S• | 1,878,362 | 322,914 | ||||||
Series 2016-40 IO 3.50% 7/25/36 S | 793,185 | 122,918 | ||||||
Series 2016-40 ZC 3.00% 7/25/46 | 838,759 | 785,393 | ||||||
Series 2016-50 IB 3.00% 2/25/46 S | 313,453 | 45,791 | ||||||
Series 2016-55 SK 4.784% 8/25/46 S• | 2,467,842 | 566,576 |
Diversified Income Series-3
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Agency Collateralized Mortgage | ||||||||
Fannie Mae REMICs | ||||||||
Series 2016-62 SA 4.784% 9/25/46 S• | 4,924,407 | $ | 1,212,466 | |||||
Series 2016-64 CI 3.50% 7/25/43 S | 2,924,596 | 423,818 | ||||||
Series 2016-74 GS 4.784% 10/25/46 S• | 3,640,140 | 910,843 | ||||||
Series 2016-79 JS 4.834% 11/25/46 S• | 2,911,540 | 635,427 | ||||||
Series 2016-85 SA 4.784% 11/25/46 S• | 5,537,796 | 1,313,633 | ||||||
Series 2016-95 IO 3.00% 12/25/46 S | 96,610 | 18,582 | ||||||
Series 2016-99 DI 3.50% 1/25/46 S | 1,503,967 | 249,807 | ||||||
Series 2016-105 SA 4.784% 1/25/47 S• | 3,718,704 | 824,968 | ||||||
Series 2017-4 AI 3.50% 5/25/41 S | 3,093,806 | 374,476 | ||||||
Series 2017-4 BI 3.50% 5/25/41 S | 1,751,696 | 263,649 | ||||||
Series 2017-6 NI 3.50% 3/25/46 S | 327,247 | 58,304 | ||||||
Series 2017-8 BZ 3.00% 2/25/47 | 2,531,407 | 2,346,121 | ||||||
Series 2017-8 SG 4.784% 2/25/47 S• | 4,663,015 | 1,053,798 | ||||||
Series 2017-11 EI 3.00% 3/25/42 S | 4,461,447 | 613,899 | ||||||
Series 2017-12 JI 3.50% 5/25/40 S | 1,534,412 | 204,683 | ||||||
Series 2017-16 SM 4.834% 3/25/47 S• | 5,776,315 | 1,242,369 | ||||||
Series 2017-16 WI 3.00% 1/25/45 S | 994,808 | 128,785 | ||||||
Series 2017-16 YT 3.00% 7/25/46 | 682,000 | 690,400 | ||||||
Series 2017-21 ZD 3.50% 4/25/47 | 953,293 | 943,048 | ||||||
Series 2017-24 AI 3.00% 8/25/46 S | 1,755,222 | 258,507 | ||||||
Series 2017-25 BL 3.00% 4/25/47 | 389,000 | 360,170 | ||||||
Series 2017-25 GS 5.484% 4/25/47 S• | 5,979,082 | 973,313 | ||||||
Series 2017-39 CY 3.50% 5/25/47 | 2,227,000 | 2,249,546 | ||||||
Series 2017-40 GZ 3.50% 5/25/47 | 812,720 | 835,545 | ||||||
Series 2017-45 JZ 3.00% 6/25/47 | 283,708 | 249,883 | ||||||
Series 2017-45 ZK 3.50% 6/25/47 | 606,765 | 601,221 | ||||||
Series 2017-46 VG 3.50% 4/25/38 | 494,000 | 511,088 | ||||||
Freddie Mac REMICs | ||||||||
Series 1730 Z 7.00% 5/15/24 | 17,687 | 19,602 | ||||||
Series 2326 ZQ 6.50% 6/15/31 | 17,797 | 20,116 | ||||||
Series 2809 DC 4.50% 6/15/19 | 41,433 | 42,377 | ||||||
Series 3123 HT 5.00% 3/15/26 | 30,760 | 32,935 | ||||||
Series 3290 PE 5.50% 3/15/37 | 26,031 | 29,646 | ||||||
Series 3656 PM 5.00% 4/15/40 | 1,966,160 | 2,162,736 | ||||||
Series 3662 ZB 5.50% 8/15/36 | 58,484 | 65,271 | ||||||
Series 3939 EI 3.00% 3/15/26 S | 1,156,122 | 73,927 | ||||||
Series 4030 IL 3.50% 4/15/27 S | 42,003 | 4,012 | ||||||
Series 4050 EI 4.00% 2/15/39 S | 3,351,031 | 350,931 | ||||||
Series 4065 DE 3.00% 6/15/32 | 350,000 | 357,105 | ||||||
Series 4097 VY 1.50% 8/15/42 | 50,000 | 41,958 | ||||||
Series 4101 WI 3.50% 8/15/32 S | 1,740,687 | 260,711 | ||||||
Series 4102 KG 2.50% 9/15/42 | 12,000 | 10,940 | ||||||
Series 4109 AI 3.00% 7/15/31 S | 6,006,324 | 667,478 |
Principal amount° | Value (US $) | |||||||
Agency Collateralized Mortgage | ||||||||
Freddie Mac REMICs | ||||||||
Series 4120 IK 3.00% 10/15/32 S | 5,027,352 | $ | 689,035 | |||||
Series 4122 LI 3.00% 10/15/27 S | 57,563 | 5,949 | ||||||
Series 4135 AI 3.50% 11/15/42 S | 2,899,458 | 593,499 | ||||||
Series 4142 HA 2.50% 12/15/32 | 46,666 | 47,049 | ||||||
Series 4146 IA 3.50% 12/15/32 S | 2,636,659 | 404,073 | ||||||
Series 4150 PQ 2.50% 1/15/43 | 10,818 | 9,845 | ||||||
Series 4150 UI 3.50% 8/15/32 S | 3,112,663 | 341,537 | ||||||
Series 4153 IB 2.50% 1/15/28 S | 1,478,755 | 128,114 | ||||||
Series 4156 AI 3.00% 10/15/31 S | 1,414,184 | 155,126 | ||||||
Series 4159 KS 4.991% 1/15/43 S• | 2,348,932 | 511,632 | ||||||
Series 4161 IM 3.50% 2/15/43 S | 983,501 | 208,307 | ||||||
Series 4171 MN 3.00% 2/15/43 | 27,000 | 26,505 | ||||||
Series 4171 Z 3.00% 2/15/43 | 18,764 | 17,325 | ||||||
Series 4180 ZB 3.00% 3/15/43 | 10,974 | 10,847 | ||||||
Series 4181 DI 2.50% 3/15/33 S | 1,580,897 | 189,907 | ||||||
Series 4184 GS 4.961% 3/15/43 S• | 2,622,761 | 567,147 | ||||||
Series 4185 LI 3.00% 3/15/33 S | 1,730,192 | 240,095 | ||||||
Series 4191 CI 3.00% 4/15/33 S | 693,258 | 96,582 | ||||||
Series 4210 Z 3.00% 5/15/43 | 42,055 | 38,524 | ||||||
Series 4217 HI 2.50% 6/15/28 S | 115,747 | 10,475 | ||||||
Series 4226 GZ 3.00% 7/15/43 | 106,829 | 100,382 | ||||||
Series 4251 KI 2.50% 4/15/28 S | 83,117 | 5,053 | ||||||
Series 4278 HI 4.00% 12/15/28 S | 206,038 | 21,061 | ||||||
Series 4342 CI 3.00% 11/15/33 S | 933,004 | 112,279 | ||||||
Series 4391 GZ 2.50% 12/15/40 | 32,133 | 30,969 | ||||||
Series 4433 DI 3.00% 8/15/32 S | 61,431 | 6,347 | ||||||
Series 4435 DY 3.00% 2/15/35 | 2,810,000 | 2,829,412 | ||||||
Series 4449 PI 4.00% 11/15/43 S | 81,247 | 14,769 | ||||||
Series 4453 DI 3.50% 11/15/33 S | 1,186,175 | 151,965 | ||||||
Series 4457 KZ 3.00% 4/15/45 | 2,152,285 | 2,058,134 | ||||||
Series 4494 SA 5.021% 7/15/45 S• | 756,826 | 162,550 | ||||||
Series 4504 IO 3.50% 5/15/42 S | 1,440,300 | 153,556 | ||||||
Series 4527 CI 3.50% 2/15/44 S | 3,782,590 | 647,238 | ||||||
Series 4543 HI 3.00% 4/15/44 S | 1,453,666 | 230,668 | ||||||
Series 4574 AI 3.00% 4/15/31 S | 3,315,759 | 416,892 | ||||||
Series 4581 LI 3.00% 5/15/36 S | 1,313,780 | 179,035 | ||||||
Series 4592 WT 5.50% 6/15/46 | 4,862,189 | 5,432,787 | ||||||
Series 4594 SG 4.841% 6/15/46 S• | 7,207,370 | 1,792,678 | ||||||
Series 4609 QZ 3.00% 8/15/46 | 931,982 | 866,250 | ||||||
Series 4614 HB 2.50% 9/15/46 | 1,330,000 | 1,214,743 | ||||||
Series 4618 SA 4.841% 9/15/46 S• | 1,885,149 | 452,322 | ||||||
Series 4623 LZ 2.50% 10/15/46 | 1,143,887 | 1,002,968 | ||||||
Series 4623 MW 2.50% 10/15/46 | 1,330,000 | 1,227,236 | �� | |||||
Series 4625 BI 3.50% 6/15/46 S | 5,201,214 | 1,045,587 | ||||||
Series 4625 PZ 3.00% 6/15/46 | 667,195 | 633,650 | ||||||
Series 4631 GS 4.841% 11/15/46 S• | 5,418,427 | 1,148,245 | ||||||
Series 4631 LJ 3.00% 3/15/41 | 412,000 | 409,228 | ||||||
Series 4636 NZ 3.00% 12/15/46 | 1,495,234 | 1,435,012 | ||||||
Series 4644 GI 3.50% 5/15/40 S | 2,190,050 | 345,776 | ||||||
Series 4648 MZ 3.00% 6/15/46 | 288,580 | 275,399 | ||||||
Series 4648 ND 3.00% 9/15/46 | 221,000 | 214,236 |
Diversified Income Series-4
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Agency Collateralized Mortgage | ||||||||
Freddie Mac REMICs | ||||||||
Series 4648 SA 4.841% 1/15/47 S• | 4,050,848 | $ | 897,118 | |||||
Series 4650 JE 3.00% 7/15/46 | 273,000 | 264,271 | ||||||
Series 4655 WI 3.50% 8/15/43 S | 1,684,635 | 272,850 | ||||||
Series 4656 HI 3.50% 5/15/42 S | 95,287 | 12,573 | ||||||
Series 4657 JZ 3.50% 2/15/47 | 320,715 | 324,585 | ||||||
Series 4657 NW 3.00% 4/15/45 | 349,000 | 347,570 | ||||||
Series 4657 PS 4.841% 2/15/47 S• | 4,175,868 | 912,912 | ||||||
Series 4660 GI 3.00% 8/15/43 S | 1,212,178 | 190,937 | ||||||
Series 4663 AI 3.00% 3/15/42 S | 2,886,100 | 403,218 | ||||||
Series 4663 HZ 3.50% 3/15/47 | 380,308 | 370,401 | ||||||
Series 4664 ZC 3.00% 9/15/45 | 277,068 | 270,112 | ||||||
Series 4665 NI 3.50% 7/15/41 S | 9,166,640 | 1,205,642 | ||||||
Series 4675 KS 4.841% 4/15/47 S• | 3,295,296 | 752,814 | ||||||
Series 4676 KZ 2.50% 7/15/45 | 813,379 | 712,788 | ||||||
Freddie Mac Strips | ||||||||
Series 267 S5 4.841% 8/15/42 S• | 3,236,801 | 671,505 | ||||||
Series 299 S1 4.841% 1/15/43 S• | 2,436,963 | 491,070 | ||||||
Series 319 S2 4.841% 11/15/43 S• | 1,245,758 | 272,907 | ||||||
Series 326 S2 4.791% 3/15/44 S• | 2,657,752 | 532,455 | ||||||
Series 337 S1 4.891% 9/15/44 S• | 2,530,109 | 575,704 | ||||||
Freddie Mac Structured Agency Credit Risk Debt Notes | ||||||||
Series 2015-DNA3 M2 4.066% 4/25/28 • | 1,301,619 | 1,348,152 | ||||||
Series 2015-HQA1 M2 3.866% 3/25/28 • | 899,249 | 921,966 | ||||||
Series 2015-HQA2 M2 4.016% 5/25/28 • | 1,122,195 | 1,161,866 | ||||||
Series 2016-DNA1 M2 4.116% 7/25/28 • | 755,000 | 786,006 | ||||||
Series 2016-DNA3 M2 3.216% 12/25/28 • | 640,000 | 655,985 | ||||||
Series 2016-DNA4 M2 2.516% 3/25/29 • | 575,000 | 581,488 | ||||||
Series 2016-HQA2 M2 3.466% 11/25/28 • | 740,000 | 760,434 | ||||||
Series 2017-DNA1 M2 4.466% 7/25/29 • | 2,250,000 | 2,347,102 | ||||||
Freddie Mac Structured Pass Through Certificates | ||||||||
Series T-54 2A 6.50% 2/25/43 ◆ | 11,037 | 13,002 | ||||||
Series T-58 2A 6.50% 9/25/43 ◆ | 4,201 | 4,866 | ||||||
GNMA | ||||||||
Series 2010-113 KE 4.50% 9/20/40 | 4,115,000 | 4,516,471 | ||||||
Series 2012-136 MX 2.00% 11/20/42 | 520,000 | 478,210 | ||||||
Series 2012-145 PY 2.00% 12/20/42 | 20,000 | 18,130 | ||||||
Series 2013-113 AZ 3.00% 8/20/43 | 3,418,980 | 3,327,151 | ||||||
Series 2013-113 LY 3.00% 5/20/43 | 378,000 | 378,672 | ||||||
Series 2015-64 GZ 2.00% 5/20/45 | 1,372,987 | 1,156,193 | ||||||
Series 2015-74 CI 3.00% 10/16/39 S | 2,921,064 | 396,615 |
Principal amount° | Value (US $) | |||||||
Agency Collateralized Mortgage | ||||||||
GNMA | ||||||||
Series 2015-133 AL 3.00% 5/20/45 | 3,715,000 | $ | 3,650,843 | |||||
Series 2015-142 AI 4.00% 2/20/44 S | 997,221 | 127,664 | ||||||
Series 2015-157 HZ 3.00% 10/20/45 | 57,229 | 53,586 | ||||||
Series 2016-80 JZ 3.00% 6/20/46 | 27,821 | 25,925 | ||||||
Series 2016-89 QS 4.838% 7/20/46 S• | 2,857,514 | 701,378 | ||||||
Series 2016-108 SK 4.838% 8/20/46 S• | 4,094,226 | 960,328 | ||||||
Series 2016-111 PB 2.50% 8/20/46 | 1,230,000 | 1,131,030 | ||||||
Series 2016-116 GI 3.50% 11/20/44 S | 5,049,440 | 802,517 | ||||||
Series 2016-118 DI 3.50% 3/20/43 S | 5,795,872 | 875,901 | ||||||
Series 2016-118 ES 4.888% 9/20/46 S• | 3,216,190 | 755,720 | ||||||
Series 2016-120 AS 4.888% 9/20/46 S• | 4,381,149 | 1,062,572 | ||||||
Series 2016-120 NS 4.888% 9/20/46 S• | 5,934,662 | 1,469,635 | ||||||
Series 2016-121 JS 4.888% 9/20/46 S• | 4,281,814 | 1,045,670 | ||||||
Series 2016-126 NS 4.888% 9/20/46 S• | 3,156,040 | 737,743 | ||||||
Series 2016-134 MW 3.00% 10/20/46 | 213,000 | 216,613 | ||||||
Series 2016-134 MZ 3.00% 10/20/46 | 1,489,457 | 1,460,572 | ||||||
Series 2016-147 ST 4.838% 10/20/46 S• | 2,938,815 | 688,608 | ||||||
Series 2016-149 GI 4.00% 11/20/46 S | 2,734,221 | 588,735 | ||||||
Series 2016-156 PB 2.00% 11/20/46 | 794,000 | 657,409 | ||||||
Series 2016-160 GI 3.50% 11/20/46 S | 3,505,600 | 828,841 | ||||||
Series 2016-160 GS 4.888% 11/20/46 S• | 7,972,466 | 1,957,353 | ||||||
Series 2016-160 VZ 2.50% 11/20/46 | 423,119 | 362,548 | ||||||
Series 2016-163 MI 3.50% 11/20/46 S | 2,892,604 | 347,112 | ||||||
Series 2016-163 PI 3.50% 5/20/43 S | 7,217,833 | 1,098,850 | ||||||
Series 2016-163 XI 3.00% 10/20/46 S | 4,111,034 | 554,546 | ||||||
Series 2016-171 IP 3.00% 3/20/46 S | 3,811,894 | 566,447 | ||||||
Series 2017-4 BW 3.00% 1/20/47 | 255,000 | 243,922 | ||||||
Series 2017-4 WI 4.00% 2/20/44 S | 1,816,414 | 357,502 | ||||||
Series 2017-10 IB 4.00% 1/20/47 S | 3,741,186 | 879,468 | ||||||
Series 2017-10 KZ 3.00% 1/20/47 | 293,643 | 273,834 | ||||||
Series 2017-18 GM 2.50% 2/20/47 | 222,000 | 207,161 | ||||||
Series 2017-18 QI 4.00% 3/16/41 S | 3,017,878 | 527,810 | ||||||
Series 2017-18 QS 4.928% 2/16/47 S• | 3,573,715 | 813,740 | ||||||
Series 2017-25 CZ 3.50% 2/20/47 | 1,088,608 | 1,100,966 | ||||||
Series 2017-26 SA 4.888% 2/20/47 S• | 3,748,815 | 762,501 | ||||||
Series 2017-34 DY 3.50% 3/20/47 | 580,000 | 582,764 | ||||||
Series 2017-56 JZ 3.00% 4/20/47 | 673,354 | 630,974 | ||||||
|
| |||||||
Total Agency Collateralized Mortgage Obligations (cost $146,763,532) | 143,173,961 | |||||||
|
|
Diversified Income Series-5
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Agency Commercial Mortgage-Backed | ||||||||
Freddie Mac Multifamily Structured Pass Through Certificates | ||||||||
Series K719 A1 2.53% 12/25/21 ◆ | 948,014 | $ | 963,030 | |||||
Series KS03 A4 3.161% 5/25/25 ◆• | 2,110,000 | 2,180,450 | ||||||
FREMF Mortgage Trust | ||||||||
Series 2011-K12 B 144A 4.492% 1/25/46 #• | 1,575,500 | 1,669,270 | ||||||
Series 2011-K14 B 144A 5.341% 2/25/47 #• | 820,000 | 895,480 | ||||||
Series 2011-K15 B 144A 5.116% 8/25/44 #• | 195,000 | 212,124 | ||||||
Series 2011-K704 B 144A 4.69% 10/25/30 #• | 1,435,000 | 1,468,698 | ||||||
Series 2012-K18 B 144A 4.40% 1/25/45 #• | 1,020,000 | 1,080,759 | ||||||
Series 2012-K22 B 144A 3.811% 8/25/45 #• | 1,730,000 | 1,794,311 | ||||||
Series 2012-K708 B 144A 3.883% 2/25/45 #• | 1,795,000 | 1,835,763 | ||||||
Series 2013-K32 B 144A 3.651% 10/25/46 #• | 4,020,000 | 4,154,560 | ||||||
Series 2013-K33 B 144A 3.617% 8/25/46 #• | 1,315,000 | 1,342,345 | ||||||
Series 2013-K712 B 144A 3.48% 5/25/45 #• | 990,000 | 1,013,049 | ||||||
Series 2013-K713 B 144A 3.274% 4/25/46 #• | 605,000 | 616,256 | ||||||
Series 2013-K713 C 144A 3.274% 4/25/46 #• | 2,275,000 | 2,289,246 | ||||||
Series 2014-K41 B 144A 3.962% 11/25/47 #• | 3,255,000 | 3,316,974 | ||||||
|
| |||||||
Total Agency Commercial Mortgage-Backed Securities | 24,832,315 | |||||||
|
| |||||||
Agency Mortgage-Backed Securities – 5.67% | ||||||||
Fannie Mae ARM | 542,490 | 552,673 | ||||||
2.943% 12/1/45 • | 673,851 | 689,858 | ||||||
3.103% 8/1/35 • | 13,021 | 13,750 | ||||||
3.217% 3/1/44 • | 1,287,033 | 1,327,624 | ||||||
6.098% 8/1/37 • | 53,495 | 53,404 | ||||||
Fannie Mae FHAVA | 1,162,262 | 1,256,729 | ||||||
Fannie Mae S.F. 30 yr | 341,250 | 370,196 | ||||||
4.50% 11/1/39 | 904,208 | 985,208 | ||||||
4.50% 4/1/40 | 1,848,319 | 2,006,614 | ||||||
4.50% 6/1/40 | 994,943 | 1,079,943 | ||||||
4.50% 8/1/40 | 283,640 | 306,551 |
Principal amount° | Value (US $) | |||||||
Agency Mortgage-Backed Securities (continued) | ||||||||
Fannie Mae S.F. 30 yr | 2,516,114 | $ | 2,732,710 | |||||
4.50% 8/1/41 | 2,675,455 | 2,916,673 | ||||||
4.50% 1/1/42 | 1,524,143 | 1,654,091 | ||||||
4.50% 10/1/44 | 767,749 | 831,965 | ||||||
4.50% 3/1/46 | 1,437,109 | 1,557,303 | ||||||
4.50% 7/1/46 | 2,876,190 | 3,097,330 | ||||||
5.50% 11/1/34 | 55,217 | 61,767 | ||||||
5.50% 8/1/37 | 262,261 | 293,863 | ||||||
5.50% 1/1/38 | 57,225 | 64,174 | ||||||
5.50% 3/1/38 | 294,865 | 328,926 | ||||||
5.50% 12/1/38 | 615,953 | 699,184 | ||||||
5.50% 6/1/39 | 743,986 | 831,750 | ||||||
5.50% 7/1/40 | 749,693 | 838,338 | ||||||
5.50% 6/1/41 | 1,931,490 | 2,167,948 | ||||||
5.50% 9/1/41 | 1,318,567 | 1,492,753 | ||||||
5.50% 5/1/44 | 20,210,847 | 22,631,854 | ||||||
6.00% 4/1/35 | 2,577 | 2,940 | ||||||
6.00% 3/1/36 | 526,056 | 599,712 | ||||||
6.00% 6/1/36 | 58,660 | 66,620 | ||||||
6.00% 9/1/36 | 628,783 | 722,413 | ||||||
6.00% 12/1/36 | 64,599 | 73,348 | ||||||
6.00% 2/1/37 | 192,297 | 218,960 | ||||||
6.00% 3/1/37 | 216,075 | 245,796 | ||||||
6.00% 5/1/37 | 438,461 | 496,855 | ||||||
6.00% 6/1/37 | 35,546 | 40,402 | ||||||
6.00% 7/1/37 | 836,580 | 953,970 | ||||||
6.00% 8/1/37 | 225,704 | 254,900 | ||||||
6.00% 9/1/37 | 65,171 | 74,254 | ||||||
6.00% 11/1/37 | 12,689 | 14,404 | ||||||
6.00% 5/1/38 | 1,164,819 | 1,318,646 | ||||||
6.00% 9/1/38 | 196,722 | 223,854 | ||||||
6.00% 10/1/38 | 396,038 | 449,653 | ||||||
6.00% 11/1/38 | 152,271 | 172,997 | ||||||
6.00% 1/1/39 | 272,419 | 308,547 | ||||||
6.00% 9/1/39 | 2,309,600 | 2,617,519 | ||||||
6.00% 10/1/39 | 2,448,845 | 2,793,943 | ||||||
6.00% 3/1/40 | 276,199 | 313,960 | ||||||
6.00% 7/1/40 | 1,016,812 | 1,151,948 | ||||||
6.00% 9/1/40 | 235,806 | 269,064 | ||||||
6.00% 11/1/40 | 105,692 | 120,497 | ||||||
6.00% 5/1/41 | 3,125,340 | 3,542,506 | ||||||
6.00% 6/1/41 | 1,166,696 | 1,324,174 | ||||||
6.00% 7/1/41 | 5,314,847 | 6,039,962 | ||||||
6.50% 2/1/36 | 103,042 | 117,276 | ||||||
6.50% 3/1/37 | 237,569 | 268,001 | ||||||
6.50% 5/1/40 | 523,829 | 587,349 | ||||||
7.50% 3/1/32 | 171 | 196 | ||||||
7.50% 4/1/32 | 655 | 734 | ||||||
Fannie Mae S.F. 30 yr TBA | 2,973,000 | 3,184,592 |
Diversified Income Series-6
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Agency Mortgage-Backed Securities (continued) | ||||||||
Freddie Mac ARM | 1,703,787 | $ | 1,711,072 | |||||
2.742% 2/1/47 • | 870,568 | 877,611 | ||||||
2.753% 10/1/45 • | 602,632 | 615,081 | ||||||
2.929% 10/1/45 • | 1,099,110 | 1,119,912 | ||||||
2.974% 11/1/45 • | 801,737 | 819,465 | ||||||
Freddie Mac S.F. 30 yr | 162,024 | 175,524 | ||||||
4.50% 7/1/42 | 1,492,060 | 1,609,938 | ||||||
4.50% 12/1/43 | 1,507,540 | 1,628,651 | ||||||
4.50% 8/1/44 | 2,308,387 | 2,492,027 | ||||||
4.50% 7/1/45 | 9,080,559 | 9,756,899 | ||||||
4.50% 9/1/46 | 2,343,921 | 2,510,116 | ||||||
5.00% 6/1/36 | 1,510,045 | 1,651,471 | ||||||
5.00% 5/1/41 | 1,238,648 | 1,366,359 | ||||||
5.00% 12/1/41 | 1,131,351 | 1,244,441 | ||||||
5.00% 4/1/44 | 1,353,000 | 1,496,574 | ||||||
5.50% 3/1/34 | 80,833 | 90,439 | ||||||
5.50% 12/1/34 | 71,559 | 80,169 | ||||||
5.50% 12/1/35 | 71,094 | 79,844 | ||||||
5.50% 11/1/36 | 79,669 | 89,126 | ||||||
5.50% 12/1/36 | 19,034 | 21,235 | ||||||
5.50% 9/1/37 | 91,240 | 101,636 | ||||||
5.50% 4/1/38 | 326,414 | 363,482 | ||||||
5.50% 6/1/38 | 51,159 | 56,928 | ||||||
5.50% 7/1/38 | 332,505 | 370,282 | ||||||
5.50% 1/1/39 | 323,259 | 360,452 | ||||||
5.50% 6/1/39 | 410,526 | 457,038 | ||||||
5.50% 3/1/40 | 218,272 | 242,747 | ||||||
5.50% 8/1/40 | 164,486 | 183,063 | ||||||
5.50% 1/1/41 | 223,708 | 249,067 | ||||||
5.50% 6/1/41 | 4,807,303 | 5,364,753 | ||||||
6.00% 2/1/36 | 354,617 | 401,653 | ||||||
6.00% 3/1/36 | 231,212 | 262,400 | ||||||
6.00% 9/1/37 | 201,204 | 226,432 | ||||||
6.00% 1/1/38 | 86,951 | 97,874 | ||||||
6.00% 6/1/38 | 237,705 | 268,857 | ||||||
6.00% 8/1/38 | 384,432 | 437,078 | ||||||
6.00% 5/1/40 | 1,215,729 | 1,371,473 | ||||||
6.00% 7/1/40 | 1,165,166 | 1,320,590 | ||||||
6.50% 8/1/38 | 33,693 | 37,372 | ||||||
6.50% 4/1/39 | 374,698 | 420,569 | ||||||
GNMA I S.F. 30 yr | 2,333,545 | 2,579,374 | ||||||
5.50% 2/15/41 | 659,061 | 734,912 | ||||||
7.00% 12/15/34 | 112,646 | 132,373 | ||||||
GNMA II S.F. 30 yr | 3,862,388 | 4,161,251 | ||||||
5.50% 5/20/37 | 478,592 | 531,147 | ||||||
5.50% 4/20/40 | 416,982 | 454,999 | ||||||
6.00% 2/20/39 | 535,203 | 594,862 | ||||||
6.00% 10/20/39 | 2,082,431 | 2,314,446 |
Principal amount° | Value (US $) | |||||||
Agency Mortgage-Backed Securities (continued) | ||||||||
GNMA II S.F. 30 yr | 2,103,738 | $ | 2,350,101 | |||||
6.00% 4/20/46 | 617,249 | 688,576 | ||||||
6.50% 10/20/39 | 795,073 | 897,237 | ||||||
|
| |||||||
Total Agency Mortgage-Backed Securities (cost $136,874,127) | 136,882,149 | |||||||
|
| |||||||
Collateralized Debt Obligations – 2.47% | ||||||||
AMMC CLO XIII | 2,500,000 | 2,500,000 | ||||||
Anchorage Capital CLO 6 | 1,025,000 | 1,025,000 | ||||||
Benefit Street Partners CLO II | 3,000,000 | 3,000,000 | ||||||
Benefit Street Partners CLO IV | 5,900,000 | 5,948,775 | ||||||
Benefit Street Partners CLO VI | 1,230,000 | 1,230,020 | ||||||
Black Diamond CLO | 2,000,000 | 1,998,956 | ||||||
BlueMountain CLO | 1,090,000 | 1,092,264 | ||||||
Cedar Funding III CLO | 2,420,000 | 2,421,125 | ||||||
Cedar Funding IV CLO | 3,000,000 | 2,998,482 | ||||||
Cedar Funding VI CLO | 2,400,000 | 2,417,765 | ||||||
GoldentTree Loan Management US CLO 1 | 2,630,000 | 2,640,225 | ||||||
Hull Street CLO | 2,000,000 | 1,998,992 | ||||||
JFIN CLO | 3,405,000 | 3,416,294 |
Diversified Income Series-7
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Collateralized Debt Obligations (continued) | ||||||||
KKR Financial CLO | 3,000,000 | $ | 2,998,488 | |||||
KVK CLO | 2,000,000 | 1,998,982 | ||||||
MP CLO IV | 2,000,000 | 2,000,000 | ||||||
Neuberger Berman CLO XIX | 3,300,000 | 3,300,000 | ||||||
Northwoods Capital XV | 2,500,000 | 2,498,707 | ||||||
OCP CLO | 2,500,000 | 2,496,565 | ||||||
TIAA CLO | 2,200,000 | 2,208,455 | ||||||
Venture CDO | 980,000 | 982,793 | ||||||
Venture XXIV CLO | 2,390,000 | 2,392,488 | ||||||
Venture XXVIII CLO | 4,000,000 | 3,966,856 | ||||||
Zais CLO 6 | 2,000,000 | 1,998,964 | ||||||
|
| |||||||
Total Collateralized Debt Obligations | 59,530,196 | |||||||
|
| |||||||
Convertible Bonds – 1.62% | ||||||||
Aerojet Rocketdyne Holdings 144A 2.25% exercise price $26.00, maturity date 12/15/23 # | 383,000 | 405,980 | ||||||
Alaska Communications Systems Group 6.25% exercise price $10.28, maturity date 5/1/18 | 540,000 | 562,950 | ||||||
Ares Capital 144A 3.75% exercise price $19.39, maturity date 2/1/22 # | 245,000 | 246,837 | ||||||
BioMarin Pharmaceutical 1.50% exercise price $94.15, maturity date 10/15/20 | 485,000 | 579,272 |
Principal amount° | Value (US $) | |||||||
Convertible Bonds (continued) | ||||||||
Blackhawk Network Holdings 144A 1.50% exercise price $49.83, maturity date 1/15/22 # | 963,000 | $ | 1,078,560 | |||||
Blackstone Mortgage Trust 4.375% exercise price $35.67, maturity date 5/5/22 | 853,000 | 872,726 | ||||||
Blackstone Mortgage Trust 5.25% exercise price $27.99, maturity date 12/1/18 | 1,069,000 | 1,240,040 | ||||||
Brookdale Senior Living 2.75% exercise price $29.33, maturity date 6/15/18 | 1,702,000 | 1,694,554 | ||||||
Cardtronics 1.00% exercise price $52.35, maturity date 12/1/20 | 1,072,000 | 1,032,470 | ||||||
Cemex 3.72% exercise price $11.01, maturity date 3/15/20 | 632,000 | 732,330 | ||||||
Chart Industries 2.00% exercise price $69.03, maturity date 8/1/18 | 1,234,000 | 1,229,373 | ||||||
Ciena 144A 3.75% exercise price $20.17, maturity date 10/15/18 # | 632,000 | 853,990 | ||||||
Clearwire Communications 144A 8.25% exercise price $7.08, maturity date 12/1/40 # | 1,217,000 | 1,253,510 | ||||||
DISH Network 144A 2.375% exercise price $82.22, maturity date 3/15/24 # | 982,000 | 1,034,169 | ||||||
DISH Network 144A 3.375% exercise price $65.18, maturity date 8/15/26 # | 520,000 | 633,100 | ||||||
GAIN Capital Holdings 4.125% exercise price $12.00, maturity date 12/1/18 | 821,000 | 790,213 | ||||||
General Cable 4.50% exercise price $31.33, maturity date 11/15/29 f | 1,793,000 | 1,359,318 | ||||||
Helix Energy Solutions Group 4.25% exercise price $13.89, maturity date 5/1/22 | 1,174,000 | 1,101,359 | ||||||
Hologic 2.00% exercise price $31.18, maturity date 3/1/42 f | 553,000 | 811,527 | ||||||
Infinera 1.75% exercise price $12.58, maturity date 6/1/18 | 826,000 | 891,047 | ||||||
Insulet 144A 1.25% exercise price $58.37, maturity date 9/15/21 # | 479,000 | 528,097 | ||||||
Jefferies Group 3.875% exercise price $43.72, maturity date 11/1/29 | 633,000 | 637,747 | ||||||
Kaman 144A 3.25% exercise price $65.26, maturity date 5/1/24 # | 967,000 | 984,527 | ||||||
Knowles 3.25% exercise price $18.43, maturity date 11/1/21 | 690,000 | 814,631 | ||||||
Liberty Interactive 144A 1.75% exercise price $341.10, maturity date 9/30/46 # | 655,000 | 752,022 | ||||||
Liberty Media 144A 2.25% exercise price $104.55, maturity date 9/30/46 # | 233,000 | 251,931 | ||||||
Medicines 2.75% exercise price $48.97, maturity date 7/15/23 | 785,000 | 825,231 |
Diversified Income Series-8
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal | Value | |||||||
amount° | (US $) | |||||||
Convertible Bonds (continued) | ||||||||
Neurocrine Biosciences 144A 2.25% exercise price $75.92, maturity date 5/15/24 # | 729,000 | $ | 725,811 | |||||
New Mountain Finance 5.00% exercise price $15.80, maturity date 6/15/19 | 750,000 | 780,000 | ||||||
Novellus Systems 2.625% exercise price $33.63, maturity date 5/15/41 | 241,000 | 1,007,229 | ||||||
NuVasive 2.25% exercise price $59.82, maturity date 3/15/21 | 374,000 | 517,990 | ||||||
NXP Semiconductors 1.00% exercise price $102.84, maturity date 12/1/19 | 928,000 | 1,111,280 | ||||||
ON Semiconductor 1.00% exercise price $18.50, maturity date 12/1/20 | 678,000 | 706,815 | ||||||
Pacira Pharmaceuticals 144A 2.375% exercise price $66.89, maturity date 4/1/22 # | 947,000 | 1,008,555 | ||||||
PDC Energy 1.125% exercise price $85.39, maturity date 9/15/21 | 567,000 | 517,387 | ||||||
PROS Holdings 2.00% exercise price $33.79, maturity date 12/1/19 | 1,176,000 | 1,250,970 | ||||||
Silicon Laboratories 144A 1.375% exercise price $92.81, maturity date 3/1/22 # | 94,000 | 97,643 | ||||||
Spectrum Pharmaceuticals 2.75% exercise price $10.53, maturity date 12/15/18 | 1,293,000 | 1,375,429 | ||||||
Spirit Realty Capital 3.75% exercise price $13.00, maturity date 5/15/21 | 1,181,000 | 1,174,363 | ||||||
Synaptics 144A 0.50% exercise price $73.02, maturity date 6/15/22 # | 189,000 | 191,363 | ||||||
Synchronoss Technologies 0.75% exercise price $53.17, maturity date 8/15/19 | 739,000 | 689,117 | ||||||
Vector Group 1.75% exercise price $23.46, maturity date 4/15/20 • | 1,084,000 | 1,254,730 | ||||||
Vector Group 2.50% exercise price $15.22, maturity date 1/15/19 • | 408,000 | 598,995 | ||||||
VEREIT 3.75% exercise price $14.99, maturity date 12/15/20 | 1,545,000 | 1,592,323 | ||||||
Verint Systems 1.50% exercise price $64.46, maturity date 6/1/21 | 1,342,000 | 1,321,031 | ||||||
|
| |||||||
Total Convertible Bonds | 39,118,542 | |||||||
|
| |||||||
Corporate Bonds – 48.90% | ||||||||
Automotive – 0.13% | ||||||||
Allison Transmission 144A | 665,000 | 683,287 | ||||||
Goodyear Tire & Rubber | 980,000 | 997,150 |
Principal | Value | |||||||||||
amount° | (US $) | |||||||||||
Corporate Bonds (continued) | ||||||||||||
Automotive (continued) | ||||||||||||
Goodyear Tire & Rubber 5.00% 5/31/26 | 1,345,000 | $ | 1,395,437 | |||||||||
|
| |||||||||||
3,075,874 | ||||||||||||
|
| |||||||||||
Banking – 10.88% | ||||||||||||
Akbank TAS 144A 7.20% 3/16/27 #• | 1,915,000 | 1,992,653 | ||||||||||
Ally Financial 5.75% 11/20/25 | 1,570,000 | 1,658,313 | ||||||||||
ANZ New Zealand International 144A 2.60% 9/23/19 # | 500,000 | 503,985 | ||||||||||
Banco Nacional de Costa Rica 144A 5.875% 4/25/21 # | 1,820,000 | 1,913,366 | ||||||||||
Banco Santander 4.25% 4/11/27 | 7,000,000 | 7,280,154 | ||||||||||
Bank Nederlandse Gemeenten 3.50% 7/19/27 | AUD | 759,000 | 585,164 | |||||||||
Bank of America | AUD | 660,000 | 508,566 | |||||||||
3.705% 4/24/28 • | 2,720,000 | 2,743,879 | ||||||||||
4.183% 11/25/27 | 11,205,000 | 11,419,632 | ||||||||||
4.443% 1/20/48 • | 4,425,000 | 4,704,713 | ||||||||||
6.50% 10/23/49 • | 3,065,000 | 3,411,897 | ||||||||||
Bank of New York Mellon | 535,000 | 538,248 | ||||||||||
2.20% 8/16/23 | 2,540,000 | 2,464,595 | ||||||||||
2.50% 4/15/21 | 1,765,000 | 1,779,785 | ||||||||||
3.442% 2/7/28 • | 3,965,000 | 4,028,947 | ||||||||||
4.625% 12/29/49 • | 3,365,000 | 3,402,351 | ||||||||||
Barclays | 710,000 | 732,368 | ||||||||||
4.836% 5/9/28 | 2,180,000 | 2,231,428 | ||||||||||
8.25% 12/29/49 • | 3,910,000 | 4,154,375 | ||||||||||
BB&T 2.45% 1/15/20 | 1,335,000 | 1,350,304 | ||||||||||
BBVA Bancomer | 1,420,000 | 1,570,875 | ||||||||||
144A 7.25% 4/22/20 # | 765,000 | 840,544 | ||||||||||
BGEO Group 144A 6.00% 7/26/23 # | 1,625,000 | 1,655,875 | ||||||||||
Citigroup | 410,000 | 409,967 | ||||||||||
3.75% 10/27/23 | AUD | 1,486,000 | 1,147,366 | |||||||||
Citizens Bank | 840,000 | 841,373 | ||||||||||
2.65% 5/26/22 | 1,120,000 | 1,118,131 | ||||||||||
Citizens Financial Group | 345,000 | 342,312 | ||||||||||
4.30% 12/3/25 | 2,050,000 | 2,141,278 | ||||||||||
Compass Bank | 3,505,000 | 3,495,256 | ||||||||||
3.875% 4/10/25 | 2,280,000 | 2,275,132 | ||||||||||
Cooperatieve Rabobank | NOK | 5,290,000 | 660,418 | |||||||||
3.75% 7/21/26 | 2,520,000 | 2,524,637 | ||||||||||
Credit Suisse Group 144A 4.282% 1/9/28 # | 9,945,000 | 10,293,045 |
Diversified Income Series-9
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||||||
Corporate Bonds (continued) | ||||||||||||
Banking (continued) | ||||||||||||
Credit Suisse Group 144A 6.25% 12/29/49 #• | 5,560,000 | $ | 5,920,788 | |||||||||
Credit Suisse Group Funding Guernsey 3.80% 6/9/23 | 250,000 | 258,045 | ||||||||||
4.55% 4/17/26 | 4,635,000 | 4,933,156 | ||||||||||
Fifth Third Bancorp | 1,830,000 | 1,822,477 | ||||||||||
2.875% 7/27/20 | 975,000 | 997,698 | ||||||||||
Fifth Third Bank | 1,530,000 | 1,526,244 | ||||||||||
3.85% 3/15/26 | 2,240,000 | 2,285,006 | ||||||||||
Goldman Sachs Group | AUD | 550,000 | 426,768 | |||||||||
3.55% 2/12/21 | CAD | 400,000 | 321,348 | |||||||||
3.691% 6/5/28 • | 7,450,000 | 7,489,656 | ||||||||||
5.15% 5/22/45 | 3,850,000 | 4,293,289 | ||||||||||
5.20% 12/17/19 | NZD | 612,000 | 468,206 | |||||||||
HSBC Holdings 4.375% 11/23/26 | 1,215,000 | 1,263,262 | ||||||||||
Huntington Bancshares 2.30% 1/14/22 | 1,595,000 | 1,572,550 | ||||||||||
ICICI Bank 144A 4.00% 3/18/26 # | 2,230,000 | 2,258,580 | ||||||||||
ING Groep | 870,000 | 887,444 | ||||||||||
3.95% 3/29/27 | 605,000 | 630,443 | ||||||||||
JPMorgan Chase & Co. | 450,000 | 451,060 | ||||||||||
3.50% 12/18/26 | GBP | 264,000 | 384,174 | |||||||||
3.54% 5/1/28 • | 2,230,000 | 2,245,068 | ||||||||||
4.25% 11/2/18 | NZD | 1,840,000 | 1,369,615 | |||||||||
4.25% 10/1/27 | 435,000 | 453,072 | ||||||||||
4.26% 2/22/48 • | 4,555,000 | 4,799,890 | ||||||||||
6.75% 8/29/49 • | 3,480,000 | 3,958,500 | ||||||||||
KeyBank | 3,920,000 | 3,902,756 | ||||||||||
3.40% 5/20/26 | 3,795,000 | 3,775,941 | ||||||||||
6.95% 2/1/28 | 4,255,000 | 5,338,017 | ||||||||||
Landwirtschaftliche Rentenbank 5.375% 4/23/24 | NZD | 2,783,000 | 2,253,263 | |||||||||
Lloyds Banking Group | 2,465,000 | 2,491,696 | ||||||||||
7.50% 4/30/49 • | 1,135,000 | 1,254,884 | ||||||||||
Manufacturers & Traders Trust 2.50% 5/18/22 | 1,520,000 | 1,517,687 | ||||||||||
Morgan Stanley | CAD | 972,000 | 771,379 | |||||||||
3.95% 4/23/27 | 4,385,000 | 4,421,948 | ||||||||||
4.375% 1/22/47 | 5,125,000 | 5,367,858 | ||||||||||
5.00% 9/30/21 | AUD | 1,087,000 | 893,826 | |||||||||
Northern Trust 3.375% 5/8/32 • | 900,000 | 900,833 | ||||||||||
PNC Bank | 250,000 | 252,223 | ||||||||||
6.875% 4/1/18 | 5,710,000 | 5,924,228 |
Principal amount° | Value (US $) | |||||||||||
Corporate Bonds (continued) | ||||||||||||
Banking (continued) | ||||||||||||
PNC Financial Services Group 3.15% 5/19/27 | 1,500,000 | $ | 1,494,565 | |||||||||
5.00% 12/29/49 • | 2,680,000 | 2,767,100 | ||||||||||
Popular 7.00% 7/1/19 | 1,500,000 | 1,582,500 | ||||||||||
Royal Bank of Scotland Group 3.875% 9/12/23 | 2,040,000 | 2,083,242 | ||||||||||
8.625% 12/29/49 • | 4,440,000 | 4,850,700 | ||||||||||
Santander UK 144A 5.00% 11/7/23 # | 4,215,000 | 4,532,887 | ||||||||||
Santander UK Group Holdings 3.571% 1/10/23 | 940,000 | 962,287 | ||||||||||
State Street 3.10% 5/15/23 | 1,360,000 | 1,385,078 | ||||||||||
3.30% 12/16/24 | 1,965,000 | 2,022,901 | ||||||||||
3.55% 8/18/25 | 2,125,000 | 2,215,317 | ||||||||||
SunTrust Banks 2.70% 1/27/22 | 2,525,000 | 2,532,656 | ||||||||||
3.30% 5/15/26 | 1,245,000 | 1,219,257 | ||||||||||
5.05% 6/15/22 • | 955,000 | 971,713 | ||||||||||
SVB Financial Group 3.50% 1/29/25 | 1,350,000 | 1,327,363 | ||||||||||
Swedbank 144A 2.65% 3/10/21 # | 2,585,000 | 2,619,489 | ||||||||||
Toronto-Dominion Bank 2.50% 12/14/20 | 1,660,000 | 1,679,830 | ||||||||||
Turkiye Garanti Bankasi 144A 5.25% 9/13/22 # | 800,000 | 814,320 | ||||||||||
144A 6.25% 4/20/21 # | 1,350,000 | 1,433,801 | ||||||||||
UBS Group 6.875% 12/29/49 • | 1,490,000 | 1,610,712 | ||||||||||
UBS Group Funding Switzerland | 2,115,000 | 2,112,540 | ||||||||||
144A 3.00% 4/15/21 # | 965,000 | 980,584 | ||||||||||
144A 3.491% 5/23/23 # | 1,890,000 | 1,935,609 | ||||||||||
144A 4.125% 9/24/25 # | 2,265,000 | 2,376,954 | ||||||||||
144A 4.125% 4/15/26 # | 2,255,000 | 2,356,274 | ||||||||||
144A 4.253% 3/23/28 # | 420,000 | 439,707 | ||||||||||
US Bancorp | 2,295,000 | 2,165,707 | ||||||||||
2.625% 1/24/22 | 1,970,000 | 1,991,475 | ||||||||||
3.10% 4/27/26 | 195,000 | 192,976 | ||||||||||
3.15% 4/27/27 | 6,160,000 | 6,178,671 | ||||||||||
3.60% 9/11/24 | 2,640,000 | 2,745,014 | ||||||||||
USB Capital IX 3.50% 10/29/49 • | 7,185,000 | 6,388,543 | ||||||||||
Wells Fargo & Co. | AUD | 1,788,000 | 1,362,194 | |||||||||
3.50% 9/12/29 | GBP | 654,000 | 945,800 | |||||||||
3.584% 5/22/28 • | 6,510,000 | 6,586,200 | ||||||||||
4.75% 12/7/46 | 2,515,000 | 2,695,605 | ||||||||||
Wells Fargo Capital X 5.95% 12/15/36 | 175,000 | 198,363 | ||||||||||
Westpac Banking 4.322% 11/23/31 • | 2,110,000 | 2,166,981 | ||||||||||
Woori Bank 144A 4.75% 4/30/24 # | 1,550,000 | 1,626,386 | ||||||||||
Zions Bancorporation 4.50% 6/13/23 | 2,150,000 | 2,265,079 | ||||||||||
|
| |||||||||||
262,620,190 | ||||||||||||
|
| |||||||||||
Basic Industry – 4.19% | ||||||||||||
ArcelorMittal 6.125% 6/1/25 | 735,000 | 826,875 |
Diversified Income Series-10
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||||||
Corporate Bonds (continued) | ||||||||||||
Basic Industry (continued) | ||||||||||||
Barrick North America Finance 5.75% 5/1/43 | 5,335,000 | $ | 6,507,473 | |||||||||
BHP Billiton Finance 3.25% 9/25/24 | GBP | 325,000 | 464,471 | |||||||||
BHP Billiton Finance USA 144A 6.25% 10/19/75 #• | 6,170,000 | 6,743,810 | ||||||||||
BMC East 144A 5.50% 10/1/24 # | 120,000 | 125,700 | ||||||||||
Boise Cascade 144A 5.625% 9/1/24 # | 2,270,000 | 2,349,450 | ||||||||||
Builders FirstSource | 2,210,000 | 2,309,450 | ||||||||||
144A 10.75% 8/15/23 # | 170,000 | 196,775 | ||||||||||
CF Industries 6.875% 5/1/18 | 4,550,000 | 4,737,687 | ||||||||||
Chemours 7.00% 5/15/25 | 240,000 | 262,800 | ||||||||||
Cliffs Natural Resources 144A 5.75% 3/1/25 # | 545,000 | 516,387 | ||||||||||
Dow Chemical 8.55% 5/15/19 | 9,161,000 | 10,265,523 | ||||||||||
FMG Resources August 2006 144A 4.75% 5/15/22 # | 585,000 | 588,656 | ||||||||||
144A 5.125% 5/15/24 # | 605,000 | 606,513 | ||||||||||
Freeport-McMoRan 4.55% 11/14/24 | 1,640,000 | 1,553,900 | ||||||||||
6.875% 2/15/23 | 980,000 | 1,038,800 | ||||||||||
Georgia-Pacific 8.00% 1/15/24 | 5,305,000 | 6,814,824 | ||||||||||
HD Supply 144A 5.75% 4/15/24 # | 1,285,000 | 1,368,525 | ||||||||||
Hexion 144A 10.375% 2/1/22 # | 110,000 | 109,450 | ||||||||||
Hudbay Minerals | 20,000 | 20,725 | ||||||||||
144A 7.625% 1/15/25 # | 775,000 | 815,687 | ||||||||||
International Paper 4.40% 8/15/47 | 4,050,000 | 4,099,191 | ||||||||||
INVISTA Finance 144A 4.25% 10/15/19 # | 2,465,000 | 2,551,768 | ||||||||||
Joseph T Ryerson & Son 144A 11.00% 5/15/22 # | 80,000 | 90,700 | ||||||||||
Koppers 144A 6.00% 2/15/25 # | 200,000 | 213,000 | ||||||||||
Kraton Polymers 144A 10.50% 4/15/23 # | 180,000 | 208,800 | ||||||||||
Lennar | 690,000 | 714,909 | ||||||||||
4.75% 5/30/25 | 90,000 | 94,387 | ||||||||||
4.875% 12/15/23 | 378,000 | 403,279 | ||||||||||
M/I Homes 6.75% 1/15/21 | 190,000 | 199,975 | ||||||||||
MMC Norilsk Nickel 144A 4.10% 4/11/23 # | 1,400,000 | 1,396,325 | ||||||||||
NCI Building Systems 144A 8.25% 1/15/23 # | 655,000 | 711,494 | ||||||||||
New Gold 144A 6.25% 11/15/22 # | 80,000 | 82,600 | ||||||||||
NOVA Chemicals | 1,247,000 | 1,243,883 | ||||||||||
144A 5.25% 6/1/27 # | 460,000 | 458,850 | ||||||||||
Novelis 144A 6.25% 8/15/24 # | 1,140,000 | 1,199,850 | ||||||||||
OCP 144A 4.50% 10/22/25 # | 2,125,000 | 2,148,906 |
Principal amount° | Value (US $) | |||||||
Corporate Bonds (continued) | ||||||||
Basic Industry (continued) | ||||||||
OCP 144A 6.875% 4/25/44 # | 640,000 | $ | 724,433 | |||||
Olin 5.125% 9/15/27 | 885,000 | 913,763 | ||||||
Phosagro OAO via Phosagro Bond | ||||||||
Funding DAC 144A 3.95% 11/3/21 # | 2,240,000 | 2,258,917 | ||||||
PolyOne 5.25% 3/15/23 | 812,000 | 856,660 | ||||||
PQ 144A 6.75% 11/15/22 # | 190,000 | 204,725 | ||||||
PulteGroup 5.00% 1/15/27 | 1,002,000 | 1,032,060 | ||||||
Sherwin-Williams 3.45% 6/1/27 | 5,625,000 | 5,676,649 | ||||||
Southern Copper 5.875% 4/23/45 | 1,060,000 | 1,141,641 | ||||||
SPCM 144A 4.875% 9/15/25 # | 1,390,000 | 1,421,275 | ||||||
Standard Industries 144A 5.00% 2/15/27 # | 2,350,000 | 2,402,875 | ||||||
Steel Dynamics 5.00% 12/15/26 | 2,150,000 | 2,211,813 | ||||||
Summit Materials | 190,000 | 199,975 | ||||||
8.50% 4/15/22 | 70,000 | 79,450 | ||||||
Suzano Austria | 515,000 | 534,313 | ||||||
144A 7.00% 3/16/47 # | 1,120,000 | 1,140,160 | ||||||
Suzano Trading 144A 5.875% 1/23/21 # | 770,000 | 820,050 | ||||||
US Concrete 144A 6.375% 6/1/24 # | 1,200,000 | 1,272,000 | ||||||
6.375% 6/1/24 | 245,000 | 259,700 | ||||||
Vale Overseas | 930,000 | 1,000,680 | ||||||
6.25% 8/10/26 | 2,555,000 | 2,762,594 | ||||||
Vedanta Resources | 1,065,000 | 1,071,071 | ||||||
144A 8.25% 6/7/21 # | 1,580,000 | 1,726,577 | ||||||
VM Holding 144A 5.375% 5/4/27 # | 1,760,000 | 1,781,120 | ||||||
Westlake Chemical 5.00% 8/15/46 | 3,760,000 | 3,992,582 | ||||||
WR Grace & Co.-Conn 144A 5.625% 10/1/24 # | 1,217,000 | 1,305,233 | ||||||
Zekelman Industries 144A 9.875% 6/15/23 # | 230,000 | 259,037 | ||||||
|
| |||||||
101,090,751 | ||||||||
|
| |||||||
Brokerage – 0.47% | ||||||||
Affiliated Managers Group 3.50% 8/1/25 | 2,005,000 | 2,002,710 | ||||||
BlackRock 3.20% 3/15/27 | 1,155,000 | 1,170,639 | ||||||
E*TRADE Financial 5.875% 12/29/49 • | 2,655,000 | 2,827,575 | ||||||
Jefferies Group | 893,000 | 1,025,136 | ||||||
6.50% 1/20/43 | 750,000 | 851,358 | ||||||
Lazard Group | 475,000 | 470,175 | ||||||
3.75% 2/13/25 | 1,495,000 | 1,510,080 | ||||||
SUAM Finance 144A 4.875% 4/17/24 # | 1,405,000 | 1,494,428 | ||||||
|
| |||||||
11,352,101 | ||||||||
|
|
Diversified Income Series-11
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Corporate Bonds (continued) | ||||||||
Capital Goods – 2.28% | ||||||||
Ardagh Packaging Finance 144A 6.00% 2/15/25 # | 1,460,000 | $ | 1,536,650 | |||||
144A 7.25% 5/15/24 # | 400,000 | 439,000 | ||||||
Ball 5.25% 7/1/25 | 1,910,000 | 2,115,325 | ||||||
BWAY Holding 144A 5.50% 4/15/24 # | 2,140,000 | 2,190,825 | ||||||
CCL Industries 144A 3.25% 10/1/26 # | 1,570,000 | 1,515,201 | ||||||
Cemex 144A 7.75% 4/16/26 # | 2,250,000 | 2,579,063 | ||||||
Cemex Finance 144A 9.375% 10/12/22 # | 200,000 | 213,000 | ||||||
Cia Brasileira de Aluminio 144A 6.75% 4/5/21 # | 1,400,000 | 1,494,500 | ||||||
General Electric | 795,000 | 801,627 | ||||||
5.55% 5/4/20 | 1,295,000 | 1,423,402 | ||||||
6.00% 8/7/19 | 2,675,000 | 2,908,094 | ||||||
KLX 144A 5.875% 12/1/22 # | 1,185,000 | 1,248,694 | ||||||
LafargeHolcim Finance US 144A 3.50% 9/22/26 # | 5,470,000 | 5,419,091 | ||||||
Lennox International 3.00% 11/15/23 | 3,725,000 | 3,724,214 | ||||||
Masco 3.50% 4/1/21 | 2,785,000 | 2,875,596 | ||||||
Owens-Brockway Glass Container 144A 5.875% 8/15/23 # | 1,450,000 | 1,601,344 | ||||||
Rockwell Collins | 1,455,000 | 1,476,655 | ||||||
3.50% 3/15/27 | 4,170,000 | 4,237,450 | ||||||
Roper Technologies | 1,385,000 | 1,398,074 | ||||||
3.80% 12/15/26 | 760,000 | 782,456 | ||||||
Siemens Financieringsmaatschappij 144A 1.70% 9/15/21 # | 3,040,000 | 2,971,168 | ||||||
144A 3.125% 3/16/24 # | 3,770,000 | 3,832,243 | ||||||
St. Marys Cement Canada 144A 5.75% 1/28/27 # | 1,860,000 | 1,834,425 | ||||||
StandardAero Aviation Holdings 144A 10.00% 7/15/23 # | 90,000 | 100,125 | ||||||
TransDigm 6.375% 6/15/26 | 1,040,000 | 1,058,200 | ||||||
Union Andina de Cementos 144A 5.875% 10/30/21 # | 985,000 | 1,025,385 | ||||||
United Technologies | 2,400,000 | 2,408,998 | ||||||
3.75% 11/1/46 | 1,930,000 | 1,897,734 | ||||||
|
| |||||||
55,108,539 | ||||||||
|
| |||||||
Communications – 4.65% | ||||||||
American Tower | 105,000 | 102,481 | ||||||
4.00% 6/1/25 | 3,010,000 | 3,123,167 | ||||||
4.40% 2/15/26 | 4,040,000 | 4,242,792 | ||||||
American Tower Trust #1 144A 3.07% 3/15/23 # | 3,070,000 | 3,097,741 | ||||||
AT&T 4.25% 3/1/27 | 13,890,000 | 14,388,458 |
Principal amount° | Value (US $) | |||||||||||
Corporate Bonds (continued) | ||||||||||||
Communications (continued) | ||||||||||||
AT&T 5.25% 3/1/37 | 2,165,000 | $ | 2,316,123 | |||||||||
Bell Canada 3.35% 3/22/23 | CAD | 773,000 | 621,696 | |||||||||
Cablevision 144A 6.50% 6/15/21 # | 1,980,000 | 2,103,750 | ||||||||||
CC Holdings GS V 3.849% 4/15/23 | 1,710,000 | 1,799,778 | ||||||||||
CenturyLink | 3,230,000 | 3,371,313 | ||||||||||
6.75% 12/1/23 | 1,715,000 | 1,853,280 | ||||||||||
7.50% 4/1/24 | 50,000 | 54,875 | ||||||||||
Cincinnati Bell 144A 7.00% 7/15/24 # | 865,000 | 906,261 | ||||||||||
Columbus Cable Barbados 144A 7.375% 3/30/21 # | 1,395,000 | 1,483,931 | ||||||||||
Comcel Trust 144A 6.875% 2/6/24 # | 895,000 | 956,674 | ||||||||||
Crown Castle International 5.25% 1/15/23 | 2,190,000 | 2,435,383 | ||||||||||
Crown Castle Towers 144A 4.883% 8/15/20 # | 9,630,000 | 10,282,970 | ||||||||||
CyrusOne 144A 5.00% 3/15/24 # | 370,000 | 382,025 | ||||||||||
Deutsche Telekom International Finance | 1,360,000 | 1,326,419 | ||||||||||
144A 2.485% 9/19/23 # | 6,900,000 | 6,706,772 | ||||||||||
6.50% 4/8/22 | GBP | 416,000 | 667,959 | |||||||||
Digicel 144A 6.75% 3/1/23 # | 480,000 | 453,158 | ||||||||||
Digicel Group | 1,485,000 | 1,301,305 | ||||||||||
144A 8.25% 9/30/20 # | 1,125,000 | 1,055,981 | ||||||||||
Equinix 5.375% 5/15/27 | 850,000 | 908,437 | ||||||||||
Grupo Televisa 6.125% 1/31/46 | 970,000 | 1,085,312 | ||||||||||
GTP Acquisition Partners I 144A 2.35% 6/15/20 # | 1,095,000 | 1,083,322 | ||||||||||
Level 3 Financing 5.375% 5/1/25 | 3,009,000 | 3,174,495 | ||||||||||
Millicom International Cellular 144A 6.00% 3/15/25 # | 710,000 | 747,751 | ||||||||||
Myriad International Holdings | 1,365,000 | 1,372,473 | ||||||||||
144A 5.50% 7/21/25 # | 1,590,000 | 1,703,287 | ||||||||||
Radiate Holdco 144A 6.625% 2/15/25 # | 200,000 | 200,500 | ||||||||||
SBA Communications 144A 4.875% 9/1/24 # | 1,225,000 | 1,249,500 | ||||||||||
SBA Tower Trust | 1,800,000 | 1,799,484 | ||||||||||
144A 2.898% 10/8/19 # | 1,300,000 | 1,306,866 | ||||||||||
Sprint | 755,000 | 841,825 | ||||||||||
7.875% 9/15/23 | 1,505,000 | 1,734,513 | ||||||||||
Sprint Communications 7.00% 8/15/20 | 140,000 | 154,350 | ||||||||||
Telecom Italia 144A 5.303% 5/30/24 # | 200,000 | 215,250 | ||||||||||
Telefonica Emisiones 5.213% 3/8/47 | 3,980,000 | 4,320,596 | ||||||||||
Time Warner Cable 7.30% 7/1/38 | 6,720,000 | 8,623,776 | ||||||||||
Time Warner Entertainment 8.375% 3/15/23 | 2,495,000 | 3,142,685 |
Diversified Income Series-12
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||||||
Corporate Bonds (continued) | ||||||||||||
Communications (continued) | ||||||||||||
T-Mobile USA | 130,000 | $ | 140,887 | |||||||||
6.50% 1/15/26 | 1,845,000 | 2,041,031 | ||||||||||
Uniti Group | 455,000 | 452,611 | ||||||||||
8.25% 10/15/23 | 540,000 | 558,900 | ||||||||||
Verizon Communications | EUR | 971,000 | 1,251,593 | |||||||||
5.25% 3/16/37 | 1,010,000 | 1,090,341 | ||||||||||
VimpelCom Holdings | 1,190,000 | 1,196,640 | ||||||||||
144A 5.95% 2/13/23 # | 2,180,000 | 2,321,700 | ||||||||||
WideOpenWest Finance 10.25% 7/15/19 | 210,000 | 216,563 | ||||||||||
Wind Acquisition Finance 144A 7.375% 4/23/21 # | 1,100,000 | 1,144,687 | ||||||||||
Zayo Group | 980,000 | 1,027,775 | ||||||||||
6.00% 4/1/23 | 1,715,000 | 1,813,613 | ||||||||||
6.375% 5/15/25 | 270,000 | 292,442 | ||||||||||
|
| |||||||||||
112,247,497 | ||||||||||||
|
| |||||||||||
Consumer Cyclical – 2.60% | ||||||||||||
American Tire Distributors 144A 10.25% 3/1/22 # | 160,000 | 166,400 | ||||||||||
Boyd Gaming 6.375% 4/1/26 | 2,010,000 | 2,178,337 | ||||||||||
Cencosud 144A 6.625% 2/12/45 # | 1,115,000 | 1,221,174 | ||||||||||
CK Hutchison International 17 144A 3.50% 4/5/27 # | 1,400,000 | 1,408,147 | ||||||||||
Coach 4.125% 7/15/27 | 1,770,000 | 1,755,762 | ||||||||||
Daimler 2.75% 12/10/18 | NOK | 5,560,000 | 682,914 | |||||||||
Daimler Finance North America 144A 2.20% 10/30/21 # | 2,085,000 | 2,060,801 | ||||||||||
Dollar General 3.875% 4/15/27 | 8,000,000 | 8,209,640 | ||||||||||
Ford Motor Credit 3.096% 5/4/23 | 3,490,000 | 3,452,831 | ||||||||||
General Motors 6.75% 4/1/46 | 670,000 | 798,341 | ||||||||||
General Motors Financial | 1,525,000 | 1,550,349 | ||||||||||
5.25% 3/1/26 | 1,240,000 | 1,341,749 | ||||||||||
GLP Capital | 1,730,000 | 1,893,987 | ||||||||||
Hanesbrands 144A 4.875% 5/15/26 # | 1,615,000 | 1,647,300 | ||||||||||
Hilton Worldwide Finance 144A 4.875% 4/1/27 # | 905,000 | 949,119 | ||||||||||
Hyundai Capital America | 1,570,000 | 1,571,215 | ||||||||||
144A 2.55% 2/6/19 # | 685,000 | 687,857 | ||||||||||
144A 3.00% 3/18/21 # | 965,000 | 971,749 | ||||||||||
JC Penney 8.125% 10/1/19 | 261,000 | 285,795 | ||||||||||
JD.com 3.125% 4/29/21 | 2,985,000 | 2,988,776 | ||||||||||
KFC Holding | 788,000 | 823,460 | ||||||||||
144A 5.25% 6/1/26 # | 736,000 | 776,480 |
Principal amount° | Value (US $) | |||||||||||
Corporate Bonds (continued) | ||||||||||||
Consumer Cyclical (continued) | ||||||||||||
Landry’s 144A 6.75% 10/15/24 # | 130,000 | $ | 133,413 | |||||||||
Levi Strauss & Co. 5.00% 5/1/25 | 2,050,000 | 2,152,500 | ||||||||||
Lowe’s | 1,065,000 | 1,061,594 | ||||||||||
3.70% 4/15/46 | 3,605,000 | 3,489,193 | ||||||||||
4.05% 5/3/47 | 1,000,000 | 1,021,167 | ||||||||||
Marriott International | 1,830,000 | 1,888,412 | ||||||||||
4.50% 10/1/34 | 410,000 | 430,104 | ||||||||||
MGM Growth Properties Operating Partnership 4.50% 9/1/26 | 615,000 | 621,919 | ||||||||||
MGM Resorts International 4.625% 9/1/26 | 1,405,000 | 1,426,075 | ||||||||||
Mohegan Gaming & Entertainment 144A 7.875% 10/15/24 # | 280,000 | 292,250 | ||||||||||
New Red Finance 144A 4.25% 5/15/24 # | 780,000 | 777,028 | ||||||||||
Penn National Gaming 144A 5.625% 1/15/27 # | 2,564,000 | 2,618,485 | ||||||||||
Penske Automotive Group 5.50% 5/15/26 | 1,120,000 | 1,117,200 | ||||||||||
Scientific Games International 10.00% 12/1/22 | 1,940,000 | 2,134,000 | ||||||||||
Scotts Miracle-Gro 5.25% 12/15/26 | 2,539,000 | 2,665,950 | ||||||||||
Tempur Sealy International 5.50% 6/15/26 | 1,050,000 | 1,069,687 | ||||||||||
Toyota Motor Credit 2.80% 7/13/22 | 755,000 | 768,319 | ||||||||||
Wyndham Worldwide 4.15% 4/1/24 | 1,495,000 | 1,537,391 | ||||||||||
|
| |||||||||||
62,626,870 | ||||||||||||
|
| |||||||||||
Consumer Non-Cyclical – 3.94% | ||||||||||||
Abbott Laboratories 4.90% 11/30/46 | 3,245,000 | 3,600,840 | ||||||||||
Air Medical Group Holdings 144A 6.375% 5/15/23 # | 290,000 | 276,225 | ||||||||||
Albertsons | 1,860,000 | 1,734,450 | ||||||||||
144A 6.625% 6/15/24 # | 180,000 | 179,100 | ||||||||||
Amgen 4.00% 9/13/29 | GBP | 341,000 | 503,285 | |||||||||
Anheuser-Busch InBev Finance 3.65% 2/1/26 | 12,020,000 | 12,407,200 | ||||||||||
Becle 144A 3.75% 5/13/25 # | 4,360,000 | 4,359,976 | ||||||||||
Becton Dickinson | 1,660,000 | 1,663,929 | ||||||||||
3.363% 6/6/24 | 1,655,000 | 1,660,693 | ||||||||||
Biogen 5.20% 9/15/45 | 1,980,000 | 2,270,628 | ||||||||||
Celgene 3.25% 8/15/22 | 2,855,000 | 2,938,089 | ||||||||||
Cott Holdings 144A 5.50% 4/1/25 # | 985,000 | 1,007,163 | ||||||||||
Dean Foods 144A 6.50% 3/15/23 # | 1,610,000 | 1,702,575 | ||||||||||
ESAL 144A 6.25% 2/5/23 # | 1,535,000 | 1,346,963 | ||||||||||
Heineken 144A 3.50% 1/29/28 # | 4,810,000 | 4,892,448 | ||||||||||
inVentiv Group Holdings 144A 7.50% 10/1/24 # | 110,000 | 119,900 |
Diversified Income Series-13
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Corporate Bonds (continued) | ||||||||
Consumer Non-Cyclical (continued) | ||||||||
JBS USA 144A 5.75% 6/15/25 # | 200,000 | $ | 189,000 | |||||
Kernel Holding 144A 8.75% 1/31/22 # | 1,990,000 | 2,140,444 | ||||||
Kroger 2.65% 10/15/26 | 1,560,000 | 1,441,766 | ||||||
Lamb Weston Holdings | 500,000 | 517,500 | ||||||
144A 4.875% 11/1/26 # | 1,425,000 | 1,483,781 | ||||||
Live Nation Entertainment 144A 4.875% 11/1/24 # | 1,898,000 | 1,931,215 | ||||||
Marfrig Holdings Europe 144A 8.00% 6/8/23 # | 2,155,000 | 2,193,143 | ||||||
MHP 144A 7.75% 5/10/24 # | 1,430,000 | 1,454,739 | ||||||
Molson Coors Brewing | 6,320,000 | 6,091,380 | ||||||
4.20% 7/15/46 | 2,005,000 | 1,975,891 | ||||||
Mylan 3.95% 6/15/26 | 2,850,000 | 2,893,297 | ||||||
New York and Presbyterian Hospital 4.063% 8/1/56 | 1,630,000 | 1,634,879 | ||||||
Pernod Ricard 144A 4.45% 1/15/22 # | 4,040,000 | 4,335,619 | ||||||
Pfizer 3.00% 12/15/26 | 2,720,000 | 2,731,231 | ||||||
Post Holdings | 2,345,000 | 2,345,000 | ||||||
144A 5.75% 3/1/27 # | 280,000 | 289,100 | ||||||
Revlon Consumer Products 6.25% 8/1/24 | 805,000 | 704,375 | ||||||
Reynolds American 4.00% 6/12/22 | 2,720,000 | 2,885,175 | ||||||
Shire Acquisitions Investments Ireland 2.40% 9/23/21 | 2,710,000 | 2,680,797 | ||||||
2.875% 9/23/23 | 2,590,000 | 2,570,399 | ||||||
Team Health Holdings 144A 6.375% 2/1/25 # | 150,000 | 145,875 | ||||||
Thermo Fisher Scientific 3.00% 4/15/23 | 4,530,000 | 4,572,052 | ||||||
Tyson Foods 3.55% 6/2/27 | 3,330,000 | 3,356,017 | ||||||
Zimmer Biomet Holdings 4.625% 11/30/19 | 3,645,000 | 3,839,366 | ||||||
|
| |||||||
95,065,505 | ||||||||
|
| |||||||
Electric – 5.60% | ||||||||
AES Gener 144A 8.375% 12/18/73 #• | 1,815,000 | 1,951,125 | ||||||
Ameren 3.65% 2/15/26 | 2,090,000 | 2,137,817 | ||||||
Ameren Illinois 9.75% 11/15/18 | 5,900,000 | 6,521,612 | ||||||
American Transmission Systems 144A 5.25% 1/15/22 # | 5,410,000 | 5,968,447 | ||||||
Appalachian Power 3.30% 6/1/27 | 275,000 | 279,105 | ||||||
Cleveland Electric Illuminating 5.50% 8/15/24 | 365,000 | 418,854 | ||||||
CMS Energy 6.25% 2/1/20 | 2,210,000 | 2,434,094 | ||||||
ComEd Financing III 6.35% 3/15/33 | 2,055,000 | 2,208,264 | ||||||
Consumers Energy 3.25% 8/15/46 | 1,795,000 | 1,652,648 | ||||||
Dominion Energy | 1,645,000 | 1,688,114 | ||||||
3.90% 10/1/25 | 2,245,000 | 2,328,186 |
Principal amount° | Value (US $) | |||||||||||
Corporate Bonds (continued) | ||||||||||||
Electric (continued) | ||||||||||||
DTE Energy | 5,120,000 | $ | 4,879,995 | |||||||||
3.30% 6/15/22 | 2,180,000 | 2,239,085 | ||||||||||
Duke Energy 2.65% 9/1/26 | 3,525,000 | 3,354,894 | ||||||||||
Emera 6.75% 6/15/76 • | 3,545,000 | 4,023,575 | ||||||||||
Emera US Finance | 780,000 | 783,336 | ||||||||||
4.75% 6/15/46 | 2,660,000 | 2,822,327 | ||||||||||
Enel 144A 8.75% 9/24/73 #• | 3,502,000 | 4,176,135 | ||||||||||
Enel Americas 4.00% 10/25/26 | 1,200,000 | 1,214,700 | ||||||||||
Enel Finance International | 5,965,000 | 5,920,227 | ||||||||||
144A 6.00% 10/7/39 # | 615,000 | 734,629 | ||||||||||
Entergy | 635,000 | 609,322 | ||||||||||
4.00% 7/15/22 | 1,820,000 | 1,925,484 | ||||||||||
Entergy Louisiana | 1,170,000 | 1,167,641 | ||||||||||
4.05% 9/1/23 | 4,045,000 | 4,332,834 | ||||||||||
4.95% 1/15/45 | 545,000 | 562,650 | ||||||||||
Exelon | 5,645,000 | 5,795,490 | ||||||||||
3.95% 6/15/25 | 2,445,000 | 2,534,597 | ||||||||||
Fortis 144A 3.055% 10/4/26 # | 4,800,000 | 4,641,677 | ||||||||||
Great Plains Energy | 1,680,000 | 1,703,061 | ||||||||||
4.85% 6/1/21 | 1,195,000 | 1,274,451 | ||||||||||
Indiana Michigan Power 3.20% 3/15/23 | 1,455,000 | 1,476,406 | ||||||||||
IPALCO Enterprises 5.00% 5/1/18 | 1,365,000 | 1,394,006 | ||||||||||
Kansas City Power & Light 3.65% 8/15/25 | 3,445,000 | 3,502,432 | ||||||||||
LG&E & KU Energy 4.375% 10/1/21 | 3,765,000 | 4,005,444 | ||||||||||
Metropolitan Edison 144A 4.00% 4/15/25 # | 2,270,000 | 2,332,977 | ||||||||||
National Rural Utilities Cooperative Finance | 2,530,000 | 2,534,612 | ||||||||||
4.75% 4/30/43 • | 2,830,000 | 2,898,837 | ||||||||||
5.25% 4/20/46 • | 990,000 | 1,044,069 | ||||||||||
New York State Electric & Gas 144A 3.25% 12/1/26 # | 2,495,000 | 2,501,664 | ||||||||||
Newfoundland & Labrador Hydro 3.60% 12/1/45 | CAD | 400,000 | 323,717 | |||||||||
NextEra Energy Capital Holdings 3.55% 5/1/27 | 7,635,000 | 7,768,315 | ||||||||||
NV Energy 6.25% 11/15/20 | 2,380,000 | 2,679,297 | ||||||||||
Pampa Energia 144A 7.50% 1/24/27 # | 1,705,000 | 1,782,032 | ||||||||||
Pennsylvania Electric 5.20% 4/1/20 | 3,235,000 | 3,419,599 | ||||||||||
Perusahaan Listrik Negara | 1,175,000 | 1,157,646 | ||||||||||
144A 5.25% 5/15/47 # | 955,000 | 959,175 | ||||||||||
144A 5.50% 11/22/21 # | 1,190,000 | 1,300,075 |
Diversified Income Series-14
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Corporate Bonds (continued) | ||||||||
Electric (continued) | ||||||||
Public Service Co. of Oklahoma 5.15% 12/1/19 | 1,705,000 | $ | 1,818,488 | |||||
Rochester Gas & Electric 144A 3.10% 6/1/27 # | 365,000 | 365,074 | ||||||
SCANA 4.125% 2/1/22 | 2,300,000 | 2,315,622 | ||||||
Southern | 3,415,000 | 3,347,554 | ||||||
4.40% 7/1/46 | 135,000 | 138,212 | ||||||
Trans-Allegheny Interstate Line 144A 3.85% 6/1/25 # | 1,190,000 | 1,236,201 | ||||||
Union Electric 2.95% 6/15/27 | 1,330,000 | 1,318,130 | ||||||
Wisconsin Electric Power 4.30% 12/15/45 | 1,280,000 | 1,350,295 | ||||||
|
| |||||||
135,254,255 | ||||||||
|
| |||||||
Energy – 4.77% | ||||||||
Alta Mesa Holdings 144A 7.875% 12/15/24 # | 190,000 | 192,375 | ||||||
AmeriGas Partners 5.875% 8/20/26 | 1,970,000 | 2,029,100 | ||||||
Anadarko Petroleum | 2,020,000 | 2,261,418 | ||||||
6.60% 3/15/46 | 5,045,000 | 6,251,698 | ||||||
Antero Resources 5.625% 6/1/23 | 230,000 | 234,025 | ||||||
BP Capital Markets | 3,375,000 | 3,429,942 | ||||||
3.224% 4/14/24 | 2,840,000 | 2,869,868 | ||||||
Cheniere Corpus Christi Holdings 5.875% 3/31/25 | 710,000 | 759,700 | ||||||
Crestwood Midstream Partners 144A 5.75% 4/1/25 # | 1,050,000 | 1,050,000 | ||||||
Diamondback Energy 144A 4.75% 11/1/24 # | 2,295,000 | 2,295,000 | ||||||
Ecopetrol | 805,000 | 882,280 | ||||||
7.375% 9/18/43 | 690,000 | 743,958 | ||||||
Energy Transfer | 3,845,000 | 4,218,042 | ||||||
9.70% 3/15/19 | 2,189,000 | 2,452,599 | ||||||
Energy Transfer Equity | 120,000 | 124,800 | ||||||
7.50% 10/15/20 | 1,105,000 | 1,240,363 | ||||||
Enterprise Products Operating 7.034% 1/15/68 • | 465,000 | 478,485 | ||||||
Gazprom OAO Via Gaz Capital 144A 4.95% 3/23/27 # | 2,440,000 | 2,457,690 | ||||||
Genesis Energy | 745,000 | 709,613 | ||||||
5.75% 2/15/21 | 60,000 | 60,150 | ||||||
6.00% 5/15/23 | 80,000 | 78,800 | ||||||
6.75% 8/1/22 | 855,000 | 861,413 | ||||||
Gulfport Energy 144A 6.00% 10/15/24 # | 1,255,000 | 1,226,763 |
Principal amount° | Value (US $) | |||||||
Corporate Bonds (continued) | ||||||||
Energy (continued) | ||||||||
Gulfport Energy 6.625% 5/1/23 | 595,000 | $ | 599,463 | |||||
Hilcorp Energy I | 1,690,000 | 1,563,250 | ||||||
144A 5.75% 10/1/25 # | 90,000 | 85,275 | ||||||
Holly Energy Partners 144A 6.00% 8/1/24 # | 110,000 | 114,950 | ||||||
KazMunayGas National | 875,000 | 868,044 | ||||||
144A 4.75% 4/19/27 # | 2,150,000 | 2,113,396 | ||||||
Kunlun Energy 144A 2.875% 5/13/20 # | 850,000 | 856,868 | ||||||
Laredo Petroleum 6.25% 3/15/23 | 700,000 | 698,250 | ||||||
MPLX 4.875% 12/1/24 | 4,195,000 | 4,479,694 | ||||||
Murphy Oil 6.875% 8/15/24 | 2,090,000 | 2,189,275 | ||||||
Murphy Oil USA 6.00% 8/15/23 | 2,150,000 | 2,279,000 | ||||||
Nabors Industries 144A 5.50% 1/15/23 # | 602,000 | 572,653 | ||||||
Newfield Exploration | 140,000 | 145,600 | ||||||
5.75% 1/30/22 | 1,140,000 | 1,205,550 | ||||||
Noble Energy 5.05% 11/15/44 | 5,620,000 | 5,800,818 | ||||||
Oasis Petroleum 6.875% 3/15/22 | 110,000 | 107,250 | ||||||
Pertamina Persero | 320,000 | 342,463 | ||||||
144A 5.25% 5/23/21 # | 1,640,000 | 1,779,741 | ||||||
144A 5.625% 5/20/43 # | 860,000 | 891,890 | ||||||
Perusahaan Gas Negara Persero 144A 5.125% 5/16/24 # | 1,410,000 | 1,517,769 | ||||||
Petrobras Global Finance | 1,220,000 | 1,243,424 | ||||||
6.75% 1/27/41 | 1,100,000 | 1,034,000 | ||||||
7.25% 3/17/44 | 1,035,000 | 1,021,545 | ||||||
7.375% 1/17/27 | 1,250,000 | 1,325,625 | ||||||
Petroleos Mexicanos | 865,000 | 930,307 | ||||||
6.75% 9/21/47 | 939,000 | 950,625 | ||||||
Plains All American Pipeline 8.75% 5/1/19 | 3,490,000 | 3,881,728 | ||||||
QEP Resources 5.25% 5/1/23 | 1,350,000 | 1,282,500 | ||||||
Raizen Fuels Finance 144A 5.30% 1/20/27 # | 2,025,000 | 2,057,906 | ||||||
Sabine Pass Liquefaction | 7,665,000 | 8,529,612 | ||||||
5.75% 5/15/24 | 2,220,000 | 2,475,611 | ||||||
Shell International Finance 4.375% 5/11/45 | 1,120,000 | 1,176,682 | ||||||
Southern Gas Corridor 144A 6.875% 3/24/26 # | 1,050,000 | 1,139,460 | ||||||
Southwestern Energy | 555,000 | 519,966 | ||||||
6.70% 1/23/25 | 235,000 | 230,887 |
Diversified Income Series-15
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||||||
Corporate Bonds (continued) | ||||||||||||
Energy (continued) | ||||||||||||
Spectra Energy Capital 3.30% 3/15/23 | 1,755,000 | $ | 1,763,528 | |||||||||
Summit Midstream Holdings 5.75% 4/15/25 | 130,000 | 131,300 | ||||||||||
Targa Resources Partners 144A 5.375% 2/1/27 # | 1,715,000 | 1,783,600 | ||||||||||
Tengizchevroil Finance Co. International 144A 4.00% 8/15/26 # | 1,840,000 | 1,778,268 | ||||||||||
Tesoro 144A 4.75% 12/15/23 # | 2,950,000 | 3,191,605 | ||||||||||
Tesoro Logistics 5.25% 1/15/25 | 900,000 | 948,375 | ||||||||||
Transcanada Trust | 1,150,000 | 1,184,356 | ||||||||||
5.875% 8/15/76 • | 1,475,000 | 1,604,357 | ||||||||||
Transocean 144A 9.00% 7/15/23 # | 170,000 | 177,225 | ||||||||||
Transocean Proteus 144A 6.25% 12/1/24 # | 750,500 | 769,263 | ||||||||||
WildHorse Resource Development 144A 6.875% 2/1/25 # | 200,000 | 188,500 | ||||||||||
Woodside Finance | 1,105,000 | 1,102,913 | ||||||||||
144A 3.70% 9/15/26 # | 455,000 | 448,943 | ||||||||||
144A 8.75% 3/1/19 # | 3,220,000 | 3,557,404 | ||||||||||
YPF 144A 24.167% 7/7/20 #• | 3,175,000 | 3,468,687 | ||||||||||
|
| |||||||||||
115,017,483 | ||||||||||||
|
| |||||||||||
Finance Companies – 1.37% | ||||||||||||
AerCap Global Aviation Trust 144A 6.50% 6/15/45 #• | 3,920,000 | 4,184,600 | ||||||||||
AerCap Ireland Capital 3.95% 2/1/22 | 4,010,000 | 4,178,981 | ||||||||||
Air Lease | 2,330,000 | 2,319,520 | ||||||||||
3.625% 4/1/27 | 2,175,000 | 2,179,876 | ||||||||||
Aviation Capital Group | 3,865,000 | 3,855,001 | ||||||||||
144A 4.875% 10/1/25 # | 2,480,000 | 2,705,551 | ||||||||||
Banco Nacional de Desenvolvimento Economico e Social 144A 4.75% 5/9/24 # | 1,590,000 | 1,558,200 | ||||||||||
Equate Petrochemical 144A 3.00% 3/3/22 # | 1,370,000 | 1,352,738 | ||||||||||
General Electric 4.25% 1/17/18 | NZD | 420,000 | 310,613 | |||||||||
International Lease Finance 8.625% 1/15/22 | 3,390,000 | 4,177,975 | ||||||||||
Park Aerospace Holdings 144A 5.50% 2/15/24 # | 1,880,000 | 1,968,360 | ||||||||||
SMBC Aviation Capital Finance 144A 2.65% 7/15/21 # | 1,835,000 | 1,803,269 | ||||||||||
SURA Asset Management 144A 4.375% 4/11/27 # | 875,000 | 885,937 | ||||||||||
Temasek Financial I 144A 2.375% 1/23/23 # | 1,615,000 | 1,600,074 | ||||||||||
|
| |||||||||||
33,080,695 | ||||||||||||
|
|
Principal amount° | Value (US $) | |||||||
Corporate Bonds (continued) | ||||||||
Healthcare – 0.58% | ||||||||
Change Healthcare Holdings 144A 5.75% 3/1/25 # | 200,000 | $ | 204,750 | |||||
DaVita | 1,986,000 | 1,995,930 | ||||||
5.125% 7/15/24 | 80,000 | 81,350 | ||||||
HCA | 1,920,000 | 2,030,016 | ||||||
7.58% 9/15/25 | 80,000 | 92,200 | ||||||
HealthSouth | 595,000 | 615,825 | ||||||
5.75% 11/1/24 | 1,960,000 | 2,019,780 | ||||||
5.75% 9/15/25 | 610,000 | 645,075 | ||||||
Hill-Rom Holdings | 595,000 | 609,875 | ||||||
144A 5.75% 9/1/23 # | 765,000 | 808,987 | ||||||
Mallinckrodt International Finance | 1,352,000 | 1,189,760 | ||||||
144A 5.625% 10/15/23 # | 80,000 | 73,400 | ||||||
MPH Acquisition Holdings 144A 7.125% 6/1/24 # | 260,000 | 277,875 | ||||||
Quintiles IMS 144A 5.00% 10/15/26 # | 1,445,000 | 1,493,769 | ||||||
Tenet Healthcare 8.00% 8/1/20 | 405,000 | 410,569 | ||||||
THC Escrow 144A 5.125% 5/1/25 # | 895,000 | 900,594 | ||||||
Universal Health Services 144A 5.00% 6/1/26 # | 485,000 | 505,613 | ||||||
|
| |||||||
13,955,368 | ||||||||
|
| |||||||
Insurance – 2.06% | ||||||||
Allstate 3.28% 12/15/26 | 4,315,000 | 4,388,536 | ||||||
Berkshire Hathaway 2.75% 3/15/23 | 1,365,000 | 1,383,968 | ||||||
Berkshire Hathaway Energy 3.75% 11/15/23 | 3,405,000 | 3,586,109 | ||||||
Berkshire Hathaway Finance 2.90% 10/15/20 | 2,260,000 | 2,333,339 | ||||||
Brighthouse Financial 144A 3.70% 6/22/27 # | 2,245,000 | 2,215,117 | ||||||
HUB International 144A 7.875% 10/1/21 # | 300,000 | 313,500 | ||||||
Manulife Financial 4.061% 2/24/32 • | 2,845,000 | 2,876,360 | ||||||
MetLife | 2,525,000 | 2,655,818 | ||||||
6.40% 12/15/36 | 110,000 | 127,325 | ||||||
6.817% 8/15/18 | 225,000 | 237,610 | ||||||
144A 9.25% 4/8/38 # | 2,655,000 | 3,962,587 | ||||||
NUVEEN FINANCE | 1,885,000 | 1,913,098 | ||||||
144A 4.125% 11/1/24 # | 8,145,000 | 8,440,786 | ||||||
Principal Life Global Funding II 144A 3.00% 4/18/26 # | 1,700,000 | 1,677,608 | ||||||
Progressive 4.125% 4/15/47 | 5,845,000 | 6,096,358 | ||||||
Prudential Financial 4.50% 11/15/20 | 795,000 | 853,484 |
Diversified Income Series-16
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Corporate Bonds (continued) | ||||||||
Insurance (continued) | ||||||||
Prudential Financial 5.375% 5/15/45 • | 1,730,000 | $ | 1,877,050 | |||||
USIS Merger Sub 144A 6.875% 5/1/25 # | 455,000 | 464,100 | ||||||
Willis North America 3.60% 5/15/24 | 930,000 | 940,520 | ||||||
XLIT | 1,325,000 | 1,238,875 | ||||||
5.50% 3/31/45 | 2,045,000 | 2,193,222 | ||||||
|
| |||||||
49,775,370 | ||||||||
|
| |||||||
Media – 1.20% | ||||||||
CCO Holdings | 720,000 | 738,000 | ||||||
144A 5.50% 5/1/26 # | 1,045,000 | 1,111,619 | ||||||
144A 5.75% 2/15/26 # | 200,000 | 214,500 | ||||||
144A 5.875% 5/1/27 # | 150,000 | 160,687 | ||||||
CSC Holdings | 1,780,000 | 1,886,800 | ||||||
144A 10.875% 10/15/25 # | 240,000 | 289,500 | ||||||
DISH DBS 7.75% 7/1/26 | 710,000 | 843,125 | ||||||
Gray Television 144A 5.875% 7/15/26 # | 2,290,000 | 2,341,525 | ||||||
Lamar Media 5.75% 2/1/26 | 1,264,000 | 1,366,700 | ||||||
Midcontinent Communications 144A 6.875% 8/15/23 # | 820,000 | 887,650 | ||||||
Nexstar Broadcasting 144A 5.625% 8/1/24 # | 1,620,000 | 1,644,300 | ||||||
Nielsen Co. Luxembourg 144A 5.00% 2/1/25 # | 1,885,000 | 1,936,837 | ||||||
SFR Group 144A 6.25% 5/15/24 # | 2,080,000 | 2,204,800 | ||||||
Sinclair Television Group 144A 5.125% 2/15/27 # | 1,400,000 | 1,361,500 | ||||||
Sirius XM Radio 144A 5.375% 4/15/25 # . | 2,706,000 | 2,804,093 | ||||||
Tribune Media 5.875% 7/15/22 | 857,000 | 901,993 | ||||||
Unitymedia 144A 6.125% 1/15/25 # | 790,000 | 851,225 | ||||||
UPCB Finance IV 144A 5.375% 1/15/25 # | 1,198,000 | 1,259,397 | ||||||
Virgin Media Secured Finance 144A 5.25% 1/15/26 # | 2,095,000 | 2,188,353 | ||||||
VTR Finance 144A 6.875% 1/15/24 # | 3,825,000 | 4,064,063 | ||||||
|
| |||||||
29,056,667 | ||||||||
|
| |||||||
Real Estate Investment Trusts – 1.03% | ||||||||
Corporate Office Properties | 1,750,000 | 1,741,206 | ||||||
5.25% 2/15/24 | 1,755,000 | 1,881,534 | ||||||
CubeSmart 3.125% 9/1/26 | 2,200,000 | 2,094,818 | ||||||
DDR 7.875% 9/1/20 | 1,015,000 | 1,163,373 | ||||||
Education Realty Operating Partnership 4.60% 12/1/24 | 2,190,000 | 2,229,906 | ||||||
ESH Hospitality 144A 5.25% 5/1/25 # | 2,135,000 | 2,217,731 | ||||||
Hospitality Properties Trust 4.50% 3/15/25 | 2,025,000 | 2,081,706 | ||||||
Host Hotels & Resorts 3.75% 10/15/23 | 710,000 | 724,851 |
Principal amount° | Value (US $) | |||||||
Corporate Bonds (continued) | ||||||||
Real Estate Investment Trusts (continued) | ||||||||
Host Hotels & Resorts | 890,000 | $ | 906,400 | |||||
4.50% 2/1/26 | 1,680,000 | 1,764,931 | ||||||
LifeStorage 3.50% 7/1/26 | 1,620,000 | 1,553,486 | ||||||
Physicians Realty 4.30% 3/15/27 | 1,045,000 | 1,061,188 | ||||||
Regency Centers 3.60% 2/1/27 | 2,225,000 | 2,214,333 | ||||||
Trust F/1401 144A 5.25% 1/30/26 # | 1,470,000 | 1,528,065 | ||||||
WP Carey 4.60% 4/1/24 | 1,680,000 | 1,752,116 | ||||||
|
| |||||||
24,915,644 | ||||||||
|
| |||||||
Services – 0.58% | ||||||||
Advanced Disposal Services 144A 5.625% 11/15/24 # | 200,000 | 206,500 | ||||||
Aramark Services 4.75% 6/1/26 | 2,250,000 | 2,340,000 | ||||||
Avis Budget Car Rental 144A 6.375% 4/1/24 # | 830,000 | 832,075 | ||||||
GEO Group | 390,000 | 393,900 | ||||||
5.875% 10/15/24 | 100,000 | 103,750 | ||||||
6.00% 4/15/26 | 130,000 | 135,525 | ||||||
Herc Rentals | 57,000 | 60,420 | ||||||
144A 7.75% 6/1/24 # | 902,000 | 956,120 | ||||||
Iron Mountain US Holdings 144A 5.375% 6/1/26 # | 1,545,000 | 1,629,975 | ||||||
KAR Auction Services 144A 5.125% 6/1/25 # | 515,000 | 525,944 | ||||||
Prime Security Services Borrower 144A 9.25% 5/15/23 # | 1,880,000 | 2,047,621 | ||||||
ServiceMaster 144A 5.125% 11/15/24 # | 1,900,000 | 1,971,250 | ||||||
United Rentals North America 5.50% 5/15/27 | 2,585,000 | 2,669,013 | ||||||
|
| |||||||
13,872,093 | ||||||||
|
| |||||||
Technology – 1.38% | ||||||||
Apple 3.20% 5/11/27 | 4,695,000 | 4,745,391 | ||||||
CDK Global 5.00% 10/15/24 | 2,050,000 | 2,188,375 | ||||||
CDW Finance 5.00% 9/1/25 | 2,050,000 | 2,137,125 | ||||||
Cisco Systems 1.85% 9/20/21 | 2,270,000 | 2,243,144 | ||||||
CommScope Technologies | 1,860,000 | 1,860,000 | ||||||
144A 6.00% 6/15/25 # | 110,000 | 117,975 | ||||||
Dell International 144A 6.02% 6/15/26 # | 1,610,000 | 1,776,624 | ||||||
Entegris 144A 6.00% 4/1/22 # | 160,000 | 167,600 | ||||||
First Data | 1,195,000 | 1,245,787 | ||||||
144A 7.00% 12/1/23 # | 1,195,000 | 1,278,650 | ||||||
Genesys Telecommunications Laboratories 144A 10.00% 11/30/24 # | 50,000 | 56,313 | ||||||
Infor US 6.50% 5/15/22 | 170,000 | 176,800 | ||||||
Microsoft | 725,000 | 720,442 | ||||||
4.25% 2/6/47 | 9,960,000 | 10,827,367 |
Diversified Income Series-17
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Corporate Bonds (continued) | ||||||||
Technology (continued) | ||||||||
NXP 144A 4.625% 6/1/23 # | 1,580,000 | $ | 1,708,375 | |||||
Solera 144A 10.50% 3/1/24 # | 120,000 | 138,450 | ||||||
Symantec 144A 5.00% 4/15/25 # | 1,260,000 | 1,321,816 | ||||||
Western Digital 144A 7.375% 4/1/23 # | 555,000 | 611,194 | ||||||
|
| |||||||
33,321,428 | ||||||||
|
| |||||||
Transportation – 0.90% | ||||||||
Air Canada 2015-1 Class A Pass | ||||||||
Through Trust 144A 3.60% 3/15/27 #◆ | 1,230,997 | 1,252,539 | ||||||
American Airlines 2014-1 Class A Pass | 965,059 | 989,185 | ||||||
American Airlines 2015-1 Class A Pass | 632,747 | 637,493 | ||||||
American Airlines 2015-2 Class AA Pass | 452,515 | 463,239 | ||||||
American Airlines 2016-1 Class AA Pass | 726,158 | 744,675 | ||||||
Penske Truck Leasing 144A 3.30% 4/1/21 # | 1,815,000 | 1,866,021 | ||||||
144A 3.40% 11/15/26 # | 775,000 | 763,163 | ||||||
144A 4.20% 4/1/27 # | 6,190,000 | 6,407,758 | ||||||
Transnet SOC 144A 4.00% 7/26/22 # | 1,358,000 | 1,325,100 | ||||||
United Airlines 2014-1 Class A Pass Through Trust 4.00% 4/11/26 ◆ | 750,139 | 784,814 | ||||||
United Airlines 2014-2 Class A Pass Through Trust 3.75% 9/3/26 ◆ | 1,302,146 | 1,350,977 | ||||||
United Airlines 2016-1 Class AA Pass Through Trust 3.10% 7/7/28 ◆ | 1,110,000 | 1,110,000 | ||||||
United Parcel Service 5.125% 4/1/19 | 2,180,000 | 2,305,221 | ||||||
XPO Logistics 144A 6.125% 9/1/23 # | 1,728,000 | 1,805,760 | ||||||
|
| |||||||
21,805,945 | ||||||||
|
| |||||||
Utilities – 0.29% | ||||||||
AES | 2,197,000 | 2,309,596 | ||||||
6.00% 5/15/26 | 10,000 | 10,750 | ||||||
AES Andres 144A 7.95% 5/11/26 # | 1,200,000 | 1,306,176 | ||||||
Calpine | 1,135,000 | 1,117,975 | ||||||
5.50% 2/1/24 | 1,148,000 | 1,092,035 | ||||||
5.75% 1/15/25 | 260,000 | 245,050 | ||||||
Dynegy | 725,000 | 751,281 | ||||||
144A 8.00% 1/15/25 # | 180,000 | 175,500 | ||||||
|
| |||||||
7,008,363 | ||||||||
|
| |||||||
Total Corporate Bonds | 1,180,250,638 | |||||||
|
| |||||||
Loan Agreements – 7.20% « |
| |||||||
Accudyne Industries Borrower 1st Lien 4.226% 12/13/19 | 2,170,058 | 2,156,495 |
Principal amount° | Value (US $) | |||||||
Loan Agreements « (continued) | ||||||||
Air Medical Group Holdings Tranche B 1st Lien | 4,351,725 | $ | 4,279,377 | |||||
5.00% 4/28/22 | 425,000 | 423,884 | ||||||
Albertsons Tranche B 1st Lien | 2,916,195 | 2,924,404 | ||||||
3.976% 8/25/21 | 175,000 | 173,906 | ||||||
Alpha 3 Tranche B1 1st Lien 4.296% 1/31/24 | 495,000 | 497,104 | ||||||
Amaya Holdings 2nd Lien 8.00% 8/1/22 . | 425,000 | 428,121 | ||||||
Amaya Holdings Tranche B | 2,990,531 | 2,999,670 | ||||||
American Airlines Tranche B | 1,048,969 | 1,052,101 | ||||||
American Tire Distributors | 415,000 | 416,186 | ||||||
Applied Systems 2nd Lien 7.796% 1/23/22 | 4,257,133 | 4,303,250 | ||||||
ASP AMC Merger Sub 1st Lien 4.796% 4/13/24 | 562,956 | 558,030 | ||||||
ATI Holdings Acquisition 1st Lien 5.65% 5/10/23 | 1,624,952 | 1,641,202 | ||||||
Avolon TLB Borrower 1 US Tranche B2 1st Lien 3.962% 3/20/22 | 1,250,000 | 1,262,507 | ||||||
BJ’s Wholesale Club 1st Lien 4.968% 2/3/24 | 964,000 | 936,787 | ||||||
BJ’s Wholesale Club 2nd Lien 8.71% 1/27/25 | 1,557,000 | 1,521,482 | ||||||
Blue Ribbon 1st Lien 5.227% 11/13/21 | 2,233,571 | 2,190,296 | ||||||
Builders FirstSource 1st Lien 4.069% 2/29/24 | 3,380,922 | 3,379,512 | ||||||
BWAY Tranche B 1st Lien 4.326% 4/3/24 | 1,855,000 | 1,855,662 | ||||||
Caesars Entertainment Tranche B 1st Lien 2.50% 4/4/24 | 825,000 | 823,453 | ||||||
Calpine Construction Finance 1st Lien 3.48% 5/3/20 | 441,550 | 441,481 | ||||||
Calpine Tranche B 1st Lien 4.05% 1/15/23 | 433,400 | 433,355 | ||||||
Centurylink Tranche B 1st Lien 1.375% 1/31/25 | 1,886,000 | 1,867,813 | ||||||
CH Hold 2nd Lien 8.476% 2/1/25 | 965,000 | 992,141 | ||||||
Change Healthcare Holdings Tranche B 1st Lien 3.795% 3/1/24 | 2,997,488 | 3,001,702 | ||||||
Chesapeake Energy 1st Lien 8.686% 8/23/21 | 1,215,000 | 1,299,671 | ||||||
CityCenter Holdings Tranche B 1st Lien 3.716% 4/18/24 | 1,060,000 | 1,063,028 | ||||||
Colorado Buyer 2nd Lien 8.42% 5/1/25 | 620,000 | 629,300 | ||||||
Constellis Holdings 1st Lien 6.296% 4/21/24 | 1,090,000 | 1,080,008 |
Diversified Income Series-18
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Loan Agreements « (continued) | ||||||||
Constellis Holdings 2nd Lien 10.296% 4/21/25 | 610,000 | $ | 602,756 | |||||
CSC Holdings Tranche B 1st Lien 3.459% 7/17/25 | 810,000 | 808,735 | ||||||
DaVita Tranche B 1st Lien 3.976% 6/24/21 | 1,847,488 | 1,860,521 | ||||||
Dynegy Tranche C 1st Lien 4.476% 2/7/24 | 3,152,100 | 3,148,920 | ||||||
Energy Future Intermediate Holding 1st Lien 4.00% 6/28/18 | 1,945,000 | 1,953,105 | ||||||
Energy Transfer Equity 1st Lien 3.826% 2/2/24 | 970,000 | 966,449 | ||||||
ESH Hospitality Tranche B 1st Lien 3.726% 8/30/23 | 550,844 | 553,550 | ||||||
ExamWorks Group Tranche B1 1st Lien 4.476% 7/27/23 | 2,262,929 | 2,279,430 | ||||||
First Data 1st Lien | 1,036,554 | 1,036,266 | ||||||
3.716% 4/26/24 | 2,277,547 | 2,279,539 | ||||||
First Eagle Holdings Tranche B 1st Lien 4.796% 12/1/22 | 2,718,676 | 2,747,562 | ||||||
Flex Acquisition 1st Lien 4.398% 12/29/23 | 1,035,000 | 1,040,434 | ||||||
Flying Fortress Holdings Tranche B 1st Lien 3.546% 10/30/22 | 1,472,500 | 1,481,089 | ||||||
Forterra Finance Tranche B 1st Lien 4.226% 10/25/23 | 2,098,988 | 1,986,692 | ||||||
Frontier Communications Tranche B 1st Lien 4.91% 6/1/24 | 2,540,000 | 2,505,075 | ||||||
Gardner Denver 1st Lien 4.546% 7/30/20 | 1,531,826 | 1,537,187 | ||||||
Gates Global Tranche B 1st Lien 4.546% 3/31/24 | 1,564,499 | 1,568,085 | ||||||
Genesys Telecommunications Laboratories Tranche B 1st Lien 5.158% 12/1/23 | 1,714,436 | 1,721,722 | ||||||
Genoa a QoL Healthcare 1st Lien 4.976% 10/28/23 | 1,811,313 | 1,821,501 | ||||||
HCA Tranche B9 1st Lien 3.226% 3/18/23 | 402,938 | 404,476 | ||||||
Hoya Midco Tranche B 1st Lien 5.00% 6/27/24 | 1,255,000 | 1,258,137 | ||||||
HUB International Tranche B 1st Lien 4.422% 10/2/20 | 1,049,576 | 1,054,666 | ||||||
Hyperion Insurance Group Tranche B 1st Lien 5.50% 4/29/22 | 2,302,852 | 2,321,562 | ||||||
Ineos US Finance Tranche B 1st Lien 3.976% 3/31/22 | 1,824,060 | 1,831,755 | ||||||
3.976% 3/31/24 | 103,116 | 103,696 |
Principal amount° | Value (US $) | |||||||
Loan Agreements « (continued) | ||||||||
inVentiv Group Holdings Tranche B 1st Lien 2.25% 6/26/24 | 905,000 | $ | 907,828 | |||||
4.952% 11/30/23 | 4,581,975 | 4,603,249 | ||||||
JBS USA Tranche B 1st Lien 5.75% 10/30/22 | 3,366,563 | 3,286,081 | ||||||
JC Penney Tranche B 1st Lien 5.45% 6/23/23 | 1,064,369 | 1,053,459 | ||||||
KIK Custom Products Tranche B 1st Lien 5.793% 8/26/22 | 1,382,933 | 1,393,996 | ||||||
Kingpin Intermediate Holdings Tranche B 1st Lien 5.25% 6/29/24 | 1,255,000 | 1,262,844 | ||||||
Kingpin Intermediate Holdings Tranche B 2nd Lien 9.75% 6/29/25 | 1,045,000 | 1,042,387 | ||||||
Kloeckner Pentaplast of America Tranche B 1st Lien 5.25% 6/29/22 | 1,535,000 | 1,522,528 | ||||||
Kraton Polymers Tranche B 1st Lien 5.226% 1/6/22 | 1,695,047 | 1,713,931 | ||||||
Kronos 2nd Lien 9.42% 11/1/24 | 1,220,000 | 1,266,766 | ||||||
Kronos Tranche B 1st Lien 4.68% 11/1/23 | 885,550 | 892,695 | ||||||
Landry’s 1st Lien 3.968% 10/4/23 | 886,105 | 884,536 | ||||||
Level 3 Financing Tranche B 1st Lien 3.466% 2/22/24 | 935,000 | 938,312 | ||||||
MGM Growth Properties Operating Partnership Tranche B 1st Lien 3.476% 5/1/23 | 1,205,698 | 1,209,013 | ||||||
Mohegan Gaming & Entertainment Tranche B 1st Lien 5.226% 10/13/23 | 2,773,106 | 2,801,530 | ||||||
MPH Acquisition Holdings Tranche B 1st Lien 4.296% 6/7/23 | 1,713,883 | 1,715,811 | ||||||
ON Semiconductor 3.476% 3/31/23 | 711,843 | 713,845 | ||||||
Panda Hummel Tranche B1 1st Lien 7.226% 10/27/22 | 540,000 | 515,700 | ||||||
Panda Stonewall Tranche B 1st Lien 6.796% 11/13/21 | 1,001,000 | 925,925 | ||||||
Penn National Gaming Tranche B 1st Lien 3.726% 1/19/24 | 927,675 | 933,224 | ||||||
PetSmart 4.22% 3/10/22 | 980,000 | 912,549 | ||||||
PQ Tranche 1st Lien 5.476% 11/4/22 | 2,919,361 | 2,951,705 | ||||||
Radiate Holdco 1st Lien 4.226% 2/1/24 . | 3,900,225 | 3,855,131 | ||||||
Republic of Angola 7.57% 12/16/23 | 3,562,813 | 3,206,532 | ||||||
Revlon Consumer Products Tranche B 1st Lien 4.726% 9/7/23 | 2,495,750 | 2,333,007 | ||||||
Rite Aid 2nd Lien 5.98% 8/21/20 | 285,000 | 286,959 | ||||||
Russell Investments US Institutional Holdco Tranche B 1st Lien 6.795% 6/1/23 | 4,063,890 | 4,112,149 | ||||||
SAM Finance Tranche B 1st Lien 4.50% 12/17/20 | 1,846,565 | 1,859,919 |
Diversified Income Series-19
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Loan Agreements « (continued) | ||||||||
Scientific Games International Tranche B3 1st Lien 5.076% 10/1/21 | 3,036,194 | $ | 3,069,808 | |||||
SFR Group Tranche B 1st Lien 3.944% 6/22/25 | 2,800,000 | 2,781,251 | ||||||
SFR Group Tranche B10 1st Lien 4.422% 1/31/25 | 1,681,550 | 1,680,048 | ||||||
Sinclair Television Group Tranche B2 1st Lien 3.48% 1/3/24 | 1,232,377 | 1,235,325 | ||||||
Sprint Communications Tranche B 1st Lien 3.75% 2/2/24 | 3,077,288 | 3,080,583 | ||||||
StandardAero Aviation Holdings 1st Lien 4.75% 7/7/22 | 1,117,853 | 1,125,399 | ||||||
Summit Materials Tranche B1 1st Lien 3.795% 7/17/22 | 1,341,729 | 1,354,517 | ||||||
Summit Midstream Partners Holdings Tranche B 1st Lien 7.226% 5/21/22 | 1,235,000 | 1,251,981 | ||||||
Surgery Center Holdings 1st Lien 4.25% 6/20/24 | 280,000 | 281,050 | ||||||
Team Health Holdings | 1,695,750 | 1,688,755 | ||||||
Telenet Financing USD Tranche A1 1st Lien 3.909% 6/30/25 | 1,050,000 | 1,051,641 | ||||||
TKC Holdings 1st Lien 5.31% 2/1/23 | 1,256,850 | 1,256,064 | ||||||
TransDigm Tranche F 1st Lien 4.226% 6/9/23 | 3,019,923 | 3,020,394 | ||||||
Tribune Media Tranche B 1st Lien 4.226% 12/27/20 | 939,359 | 947,138 | ||||||
Uniti Group 1st Lien 6.25% 10/24/22 | 3,826,806 | 3,830,779 | ||||||
Univision Communications Tranche C 1st Lien 3.976% 3/15/24 | 1,429,008 | 1,405,341 | ||||||
USI Tranche B 1st Lien 4.18% 4/6/24 | 3,155,000 | 3,139,619 | ||||||
USIC Holdings 4.923% 12/9/23 | 1,716,375 | 1,722,811 | ||||||
VC GB Holdings 2nd Lien 9.226% 2/28/25 | 675,000 | 668,250 | ||||||
Virgin Media Bristol Tranche I 1st Lien 3.909% 1/31/25 | 735,000 | 736,302 | ||||||
Western Digital 1st Lien 3.976% 4/29/23 | 578,095 | 582,476 | ||||||
WideOpenWest Finance Tranche B 1st Lien 4.702% 8/19/23 | 1,620,030 | 1,622,967 | ||||||
Windstream Services Tranche B6 1st Lien 5.21% 3/30/21 | 2,313,860 | 2,309,522 | ||||||
Zayo Group Tranche B2 1st Lien 3.716% 1/19/24 | 346,757 | 348,274 | ||||||
Zekelman Industries Tranche B 1st Lien 4.75% 6/14/21 | 1,093,978 | 1,104,006 | ||||||
|
| |||||||
Total Loan Agreements | 173,900,750 | |||||||
|
|
Principal amount° | Value (US $) | |||||||
Municipal Bonds – 0.53% | ||||||||
Bay Area, California Toll Authority (Taxable Build America Bonds) 6.907% 10/1/50 | 2,115,000 | $ | 3,205,008 | |||||
Buckeye, Ohio Tobacco Settlement Financing Authority (Asset-Backed Senior Turbo) | 805,000 | 789,399 | ||||||
Commonwealth of Massachusetts Series C 5.00% 10/1/25 | 480,000 | 592,733 | ||||||
New Jersey Turnpike Authority (Taxable Build America Bonds) | 1,160,000 | 1,694,992 | ||||||
Series F 7.414% 1/1/40 | 555,000 | 835,558 | ||||||
Oregon State Taxable Pension (Taxable Build America Bonds) 5.892% 6/1/27 | 5,000 | 6,061 | ||||||
South Carolina Public Service Authority Series D 4.77% 12/1/45 | 680,000 | 675,288 | ||||||
State of California Various Purposes (Taxable Build America Bonds) 7.55% 4/1/39 | 1,685,000 | 2,577,865 | ||||||
Texas Water Development Board Series A 5.00% 10/15/45 | 580,000 | 670,561 | ||||||
(Water Implementation Revenue) 5.00% 10/15/46 | 1,590,000 | 1,857,374 | ||||||
|
| |||||||
Total Municipal Bonds | 12,904,839 | |||||||
|
| |||||||
Non-Agency Asset-Backed Securities – 1.98% | ||||||||
AEP Texas Central Transition Funding II Series 2006-A A4 5.17% 1/1/18 | 408,659 | 412,428 | ||||||
Ally Master Owner Trust Series 2012-5 A 1.54% 9/15/19 | 1,915,000 | 1,915,379 | ||||||
American Express Credit Account Master Trust Series 2013-2 A 1.579% 5/17/21 • | 960,000 | 963,912 | ||||||
Avis Budget Rental Car Funding AESOP Series 2013-1A A 144A 1.92% 9/20/19 # | 1,850,000 | 1,849,140 | ||||||
Series 2014-1A A 144A 2.46% 7/20/20 # | 2,775,000 | 2,782,362 | ||||||
Bank of America Credit Card Trust Series 2014-A3 A 1.449% 1/15/20 • | 1,745,000 | 1,745,580 | ||||||
Capital One Multi-Asset Execution Trust Series 2016-A1 A1 1.609% 2/15/22 • | 1,000,000 | 1,005,883 | ||||||
Citibank Credit Card Issuance Trust Series 2017-A6 A6 1.826% 5/14/29 • | 1,465,000 | 1,474,386 | ||||||
CNH Equipment Trust Series 2016-B A2B 1.559% 10/15/19 • | 220,415 | 220,700 |
Diversified Income Series-20
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Non-Agency Asset-Backed Securities (continued) | ||||||||
Discover Card Execution Note Trust Series 2017-A5 A5 1.816% 12/15/26 • | 2,570,000 | $ | 2,583,660 | |||||
Ford Credit Auto Owner Trust Series 2017-1 A 144A 2.62% 8/15/28 # | 3,530,000 | 3,571,981 | ||||||
Ford Credit Floorplan Master Owner Trust A Series 2017-1 A2 1.579% 5/15/22 • | 630,000 | 630,563 | ||||||
Golden Credit Card Trust Series 2014-2A A 144A 1.609% 3/15/21 #• | 1,195,000 | 1,198,161 | ||||||
HOA Funding Series 2014-1A A2 144A 4.846% 8/20/44 # | 2,882,250 | 2,725,974 | ||||||
Hyundai Auto Lease Securitization Trust Series 2016-C A3 144A 1.49% 2/18/20 # | 555,000 | 553,838 | ||||||
Mercedes-Benz Auto Lease Trust Series 2016-A A2B 1.719% 7/16/18 • | 444,703 | 444,997 | ||||||
Mercedes-Benz Master Owner Trust Series 2016-AA A 144A 1.739% 5/15/20 #• | 1,665,000 | 1,671,153 | ||||||
Morgan Stanley ABS Capital I Trust Series 2005-HE5 M1 1.846% 9/25/35 • | 373,134 | 373,030 | ||||||
Navistar Financial Dealer Note Master Owner Trust II Series 2016-1 A 144A 2.566% 9/27/21 #• | 1,125,000 | 1,131,004 | ||||||
New Century Home Equity Loan Trust Series 2005-2 M1 1.861% 6/25/35 • | 7,615 | 7,613 | ||||||
Nissan Auto Lease Trust Series 2016-B A3 1.50% 7/15/19 | 2,080,000 | 2,075,426 | ||||||
PFS Financing Series 2015-AA A 144A 1.779% 4/15/20 #• | 750,000 | 749,848 | ||||||
Synchrony Credit Card Master Note Trust Series 2012-6 A 1.36% 8/17/20 | 865,000 | 864,919 | ||||||
Series 2015-2 A 1.60% 4/15/21 | 1,730,000 | 1,730,315 | ||||||
Towd Point Mortgage Trust Series 2015-5 A1B 144A 2.75% 5/25/55 #• | 1,274,975 | 1,284,793 | ||||||
Series 2015-6 A1B 144A 2.75% 4/25/55 #• | 1,340,928 | 1,351,257 | ||||||
Series 2016-1 A1B 144A 2.75% 2/25/55 #• | 858,368 | 864,764 |
Principal amount° | Value (US $) | |||||||
Non-Agency Asset-Backed Securities (continued) | ||||||||
Towd Point Mortgage Trust Series 2016-2 A1 144A 3.00% 8/25/55 #• | 819,583 | $ | 831,013 | |||||
Series 2016-3 A1 144A 2.25% 4/25/56 #• | 1,141,363 | 1,137,904 | ||||||
Series 2017-1 A1 144A 2.75% 10/25/56 #• | 941,788 | 948,988 | ||||||
Series 2017-2 A1 144A 2.75% 4/25/57 #• | 541,198 | 546,343 | ||||||
Verizon Owner Trust Series 2016-2A A 144A 1.68% 5/20/21 # | 1,490,000 | 1,485,970 | ||||||
Series 2017-1A A 144A 2.06% 9/20/21 # | 1,620,000 | 1,625,882 | ||||||
Volkswagen Credit Auto Master Trust Series 2014-1A A2 144A 1.40% 7/22/19 # | 5,050,000 | 5,049,540 | ||||||
|
| |||||||
Total Non-Agency Asset-Backed Securities | 47,808,706 | |||||||
|
| |||||||
Non-Agency Collateralized Mortgage | ||||||||
American Home Mortgage Investment Trust | 44,471 | 43,898 | ||||||
Amherst Pierpoint Series AM-1240 IO 4.00% 12/31/49 S | 5,005,000 | 1,083,895 | ||||||
Banc of America Alternative Loan Trust Series 2005-1 2A1 5.50% 2/25/20 | 61,653 | 59,771 | ||||||
Bank of America Alternative Loan Trust Series 2005-6 7A1 5.50% 7/25/20 | 48,884 | 46,944 | ||||||
Citicorp Mortgage Securities Trust Series 2006-3 1A9 5.75% 6/25/36 | 89,241 | 88,190 | ||||||
Citicorp Residential Mortgage Trust Series 2006-3 A5 5.534% 11/25/36 f | 1,800,000 | 1,894,396 | ||||||
JPMorgan Mortgage Trust Series 2014-2 B1 144A 3.424% 6/25/29 #• | 795,761 | 797,810 | ||||||
Series 2014-2 B2 144A 3.424% 6/25/29 #• | 297,445 | 292,213 | ||||||
Series 2014-IVR6 2A4 144A 2.50% 7/25/44 #• | 1,050,000 | 1,045,210 | ||||||
Series 2015-4 B1 144A 3.628% 6/25/45 #• | 1,100,642 | 1,084,850 | ||||||
Series 2015-4 B2 144A 3.628% 6/25/45 #• | 789,591 | 769,224 | ||||||
Series 2016-4 B1 144A 3.904% 10/25/46 #• | 537,024 | 541,191 |
Diversified Income Series-21
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Non-Agency Collateralized Mortgage Obligations (continued) | ||||||||
JPMorgan Mortgage Trust Series 2016-4 B2 144A 3.904% 10/25/46 #• | 921,316 | $ | 937,483 | |||||
Series 2017-1 B2 144A 3.572% 1/25/47 #• | 1,727,893 | 1,717,623 | ||||||
Series 2017-2 A3 144A 3.50% 5/25/47 #• | 911,227 | 924,182 | ||||||
JPMorgan Trust Series 2015-1 B1 144A 2.617% 12/25/44 #• | 1,427,490 | 1,417,823 | ||||||
Series 2015-1 B2 144A 2.617% 12/25/44 #• | 1,320,551 | 1,304,192 | ||||||
Series 2015-5 B2 144A 2.867% 5/25/45 #• | 1,095,632 | 1,071,400 | ||||||
Series 2015-6 B1 144A 3.623% 10/25/45 #• | 764,716 | 758,528 | ||||||
Series 2015-6 B2 144A 3.623% 10/25/45 #• | 740,819 | 726,954 | ||||||
New Residential Mortgage Loan Trust | 529,961 | 545,943 | ||||||
Series 2017-1A A1 144A 4.00% 2/25/57 #• | 1,234,291 | 1,283,112 | ||||||
Series 2017-2A A3 144A 4.00% 3/25/57 #• | 1,230,193 | 1,280,795 | ||||||
Sequoia Mortgage Trust Series 2014-2 A4 144A 3.50% 7/25/44 #• | 865,109 | 878,593 | ||||||
Series 2015-1 B2 144A 3.877% 1/25/45 #• | 849,752 | 855,840 | ||||||
Series 2017-4 A1 144A 3.50% 7/25/47 #• | 990,000 | 1,005,929 | ||||||
Washington Mutual Mortgage Pass Through Certificates Series 2005-1 5A2 6.00% 3/25/35 ◆ | 52,615 | 16,873 | ||||||
Wells Fargo Mortgage-Backed Securities Trust Series 2006-2 3A1 5.75% 3/25/36 | 217,553 | 217,897 | ||||||
Series 2006-3 A11 5.50% 3/25/36 | 268,075 | 273,398 | ||||||
Series 2006-AR5 2A1 3.33% 4/25/36 • | 240,479 | 226,874 | ||||||
|
| |||||||
Total Non-Agency Collateralized Mortgage Obligations | 23,191,031 | |||||||
|
|
Principal amount° | Value (US $) | |||||||
Non-Agency Commercial Mortgage-Backed Securities – 6.18% | ||||||||
Banc of America Commercial Mortgage Trust Series 2007-4 AM 6.158% 2/10/51 • | 436,323 | $ | 436,466 | |||||
Series 2017-BNK3 C 4.352% 2/15/50 • | 805,000 | 821,596 | ||||||
BANK Series 2017-BNK5 A5 3.39% 6/15/60 | 2,170,000 | 2,206,025 | ||||||
Series 2017-BNK5 B 3.896% 6/15/60 | 1,500,000 | 1,528,359 | ||||||
Bear Stearns Commercial Mortgage Securities Trust Series 2007-PW18 A4 5.70% 6/11/50 | 837,450 | 841,495 | ||||||
CD Mortgage Trust Series 2016-CD2 A3 3.248% 11/10/49 | 5,000,000 | 5,065,947 | ||||||
Series 2016-CD2 A4 3.526% 11/10/49 • | 1,365,000 | 1,409,344 | ||||||
CFCRE Commercial Mortgage Trust Series 2011-C2 C 144A 5.945% 12/15/47 #• | 880,000 | 971,011 | ||||||
Series 2016-C7 A3 3.839% 12/10/54 | 4,850,000 | 5,070,247 | ||||||
Series 2017-C8 A4 3.572% 6/15/50 | 1,810,000 | 1,848,154 | ||||||
Citigroup Commercial Mortgage Trust Series 2007-C6 AM 5.866% 12/10/49 • | 1,230,000 | 1,230,822 | ||||||
Series 2014-GC25 A4 3.635% 10/10/47 | 2,275,000 | 2,365,443 | ||||||
Series 2015-GC27 A5 3.137% 2/10/48 | 5,210,000 | 5,232,828 | ||||||
Series 2016-P3 A4 3.329% 4/15/49 | 3,035,000 | 3,091,337 | ||||||
COMM Mortgage Trust Series 2013-CR6 AM 144A 3.147% 3/10/46 # | 1,765,000 | 1,778,978 | ||||||
Series 2013-WWP A2 144A 3.424% 3/10/31 # | 2,540,000 | 2,629,636 | ||||||
Series 2014-CR19 A5 3.796% 8/10/47 | 9,707,000 | 10,190,728 | ||||||
Series 2014-CR20 AM 3.938% 11/10/47 | 7,775,000 | 8,104,634 | ||||||
Series 2015-3BP A 144A 3.178% 2/10/35 # | 3,960,000 | 3,996,385 | ||||||
Series 2015-CR23 A4 3.497% 5/10/48 | 1,910,000 | 1,964,662 | ||||||
DB-JPM Series 2016-C1 A4 3.276% 5/10/49 | 4,915,000 | 4,988,906 | ||||||
DBUBS Mortgage Trust Series 2016-C3 A5 2.89% 9/10/49 | 1,985,000 | 1,950,932 | ||||||
DB-UBS Mortgage Trust Series 2011-LC1A C 144A 5.871% 11/10/46 #• | 2,320,000 | 2,533,952 |
Diversified Income Series-22
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Non-Agency Commercial Mortgage-Backed Securities (continued) | ||||||||
GRACE Mortgage Trust Series 2014-GRCE A 144A 3.369% 6/10/28 # | 5,605,000 | $ | 5,821,057 | |||||
Series 2014-GRCE B 144A 3.52% 6/10/28 # | 1,765,000 | 1,813,654 | ||||||
GS Mortgage Securities Trust Series 2010-C1 C 144A 5.635% 8/10/43 #• | 1,010,000 | 1,070,175 | ||||||
Series 2015-GC32 A4 3.764% 7/10/48 | 1,240,000 | 1,301,200 | ||||||
Series 2017-GS5 A4 3.674% 3/10/50 | 2,980,000 | 3,109,930 | ||||||
Series 2017-GS5 XA 0.972% 3/10/50 • | 20,988,787 | 1,380,827 | ||||||
Series 2017-GS6 A3 3.433% 5/10/50 | 1,810,000 | 1,850,887 | ||||||
Houston Galleria Mall Trust Series 2015-HGLR A1A2 144A 3.087% 3/5/37 # | 2,235,000 | 2,228,524 | ||||||
JPMBB Commercial Mortgage Securities Trust | 1,610,000 | 1,687,268 | ||||||
Series 2015-C32 A5 3.598% 11/15/48 | 3,185,000 | 3,291,933 | ||||||
JPM-BB Commercial Mortgage Securities Trust Series 2015-C33 A4 3.77% 12/15/48 | 4,160,000 | 4,354,688 | ||||||
JPM-DB Commercial Mortgage Securities Trust | 3,385,000 | 3,397,205 | ||||||
JPMorgan Chase Commercial Mortgage Securities Trust Series 2005-CB11 E 5.702% 8/12/37 • | 600,000 | 622,800 | ||||||
Series 2011-C5 C 144A 5.588% 8/15/46 #• | 1,100,000 | 1,186,494 | ||||||
Series 2013-LC11 B 3.499% 4/15/46 | 1,565,000 | 1,569,530 | ||||||
Series 2015-JP1 A5 3.914% 1/15/49 | 1,590,000 | 1,688,500 | ||||||
Series 2016-JP2 A4 2.822% 8/15/49 | 5,565,000 | 5,439,217 | ||||||
Series 2016-JP2 AS 3.056% 8/15/49 | 2,965,000 | 2,892,052 | ||||||
Series 2016-JP3 B 3.397% 8/15/49 • | 700,000 | 685,758 | ||||||
Series 2016-WIKI A 144A 2.798% 10/5/31 # | 1,610,000 | 1,633,270 | ||||||
Series 2016-WIKI B 144A 3.201% 10/5/31 # | 1,490,000 | 1,517,717 | ||||||
LB-UBS Commercial Mortgage Trust Series 2006-C6 AJ 5.452% 9/15/39 • | 1,842,495 | 1,604,088 | ||||||
Morgan Stanley BAML Trust | ||||||||
Series 2014-C17 A5 3.741% 8/15/47 | 1,640,000 | 1,717,839 | ||||||
Series 2015-C23 A4 3.719% 7/15/50 | 5,490,000 | 5,747,995 |
Principal amount° | Value (US $) | |||||||||||
Non-Agency Commercial Mortgage-Backed Securities (continued) | ||||||||||||
Morgan Stanley BAML Trust | 1,970,000 | $ | 2,033,783 | |||||||||
Series 2016-C29 A4 3.325% 5/15/49 | 1,620,000 | 1,645,847 | ||||||||||
Morgan Stanley Capital I Trust Series 2006-HQ10 B 5.448% 11/12/41 • | 2,910,000 | 2,739,351 | ||||||||||
Series 2006-T21 B 144A 5.32% 10/12/52 #• | 800,000 | 803,131 | ||||||||||
Wells Fargo Commercial Mortgage Trust Series 2014-LC18 A5 3.405% 12/15/47 | 570,000 | 582,297 | ||||||||||
Series 2015-C30 XA 1.153% 9/15/58 • | 15,670,043 | 953,867 | ||||||||||
Series 2015-NXS3 A4 3.617% 9/15/57 | 3,120,000 | 3,228,948 | ||||||||||
Series 2016-BNK1 A3 2.652% 8/15/49 | 2,575,000 | 2,479,910 | ||||||||||
Series 2017-C38 A5 3.453% 7/15/50 | 2,240,000 | 2,307,021 | ||||||||||
Series 2017-RB1 XA 1.445% 3/15/50 • | 20,606,227 | 2,022,017 | ||||||||||
WF-RBS Commercial Mortgage Trust Series 2012-C10 A3 2.875% 12/15/45 | 2,405,000 | 2,424,486 | ||||||||||
|
| |||||||||||
Total Non-Agency Commercial Mortgage-Backed Securities | 149,091,153 | |||||||||||
|
| |||||||||||
Regional Bonds – 0.49% D | ||||||||||||
Argentina – 0.24% | ||||||||||||
Provincia de Buenos Aires 144A 7.875% 6/15/27 # | 1,775,000 | 1,842,095 | ||||||||||
Provincia de Cordoba | 1,680,000 | 1,676,884 | ||||||||||
144A 7.45% 9/1/24 # | 2,185,000 | 2,273,842 | ||||||||||
|
| |||||||||||
5,792,821 | ||||||||||||
|
| |||||||||||
Australia – 0.12% | ||||||||||||
New South Wales Treasury 4.00% 5/20/26 | AUD | 1,087,500 | 912,315 | |||||||||
Queensland Treasury | AUD | 1,228,000 | 908,799 | |||||||||
144A 3.25% 7/21/28 # | AUD | 1,291,000 | 992,206 | |||||||||
|
| |||||||||||
2,813,320 | ||||||||||||
|
| |||||||||||
Canada – 0.13% | ||||||||||||
Province of Ontario Canada 3.45% 6/2/45 | CAD | 1,488,000 | 1,253,819 | |||||||||
Province of Quebec Canada 1.65% 3/3/22 | CAD | 2,281,000 | 1,743,836 |
Diversified Income Series-23
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||||||
Regional Bonds D (continued) | ||||||||||||
Canada (continued) | ||||||||||||
Province of Quebec Canada 6.00% 10/1/29 | CAD | 224,000 | $ | 232,892 | ||||||||
|
| |||||||||||
3,230,547 | ||||||||||||
|
| |||||||||||
Total Regional Bonds | 11,836,688 | |||||||||||
|
| |||||||||||
Sovereign Bonds – 7.27% D | ||||||||||||
Argentina – 0.64% | ||||||||||||
Argentine Bonos del Tesoro 15.50% 10/17/26 | ARS | 31,756,000 | 2,206,605 | |||||||||
16.00% 10/17/23 | ARS | 28,690,000 | 1,921,067 | |||||||||
22.75% 3/5/18 | ARS | 105,741,000 | 6,902,237 | |||||||||
Argentine Republic Government International Bond 5.625% 1/26/22 | 2,185,000 | 2,242,903 | ||||||||||
7.125% 7/6/36 | 600,000 | 596,100 | ||||||||||
144A 7.125% 6/28/17 # | 1,750,000 | 1,590,750 | ||||||||||
|
| |||||||||||
15,459,662 | ||||||||||||
|
| |||||||||||
Bahrain – 0.08% | ||||||||||||
Bahrain Government International Bond 144A 7.00% 10/12/28 # | 1,800,000 | 1,826,485 | ||||||||||
|
| |||||||||||
1,826,485 | ||||||||||||
|
| |||||||||||
Bermuda – 0.07% | ||||||||||||
Bermuda Government International Bond 144A 3.717% 1/25/27 # | 1,600,000 | 1,614,128 | ||||||||||
|
| |||||||||||
1,614,128 | ||||||||||||
|
| |||||||||||
Bolivia – 0.07% | ||||||||||||
Bolivian Government International Bond 144A 4.50% 3/20/28 # | 1,800,000 | 1,766,250 | ||||||||||
|
| |||||||||||
1,766,250 | ||||||||||||
|
| |||||||||||
Brazil – 0.35% | ||||||||||||
Brazil Notas do Tesouro Nacional Series F 10.00% 1/1/25 | BRL | 25,578,000 | 7,555,477 | |||||||||
Brazilian Government International Bond 6.00% 4/7/26 | 800,000 | 865,200 | ||||||||||
|
| |||||||||||
8,420,677 | ||||||||||||
|
| |||||||||||
Canada – 0.02% | ||||||||||||
Canadian Government Bond 2.75% 12/1/48 | CAD | 496,000 | 436,257 | |||||||||
|
| |||||||||||
436,257 | ||||||||||||
|
| |||||||||||
Chile – 0.12% | ||||||||||||
Bonos de la Tesoreria de la Republica en pesos 4.50% 3/1/21 | CLP | 1,795,000,000 | 2,829,636 | |||||||||
|
| |||||||||||
2,829,636 | ||||||||||||
|
| |||||||||||
Colombia – 0.10% | ||||||||||||
Colombia Government International Bond 5.00% 6/15/45 | 2,411,000 | 2,437,521 | ||||||||||
|
| |||||||||||
2,437,521 | ||||||||||||
|
|
Principal amount° | Value (US $) | |||||||||||
Sovereign Bonds D (continued) | ||||||||||||
Costa Rica – 0.04% | ||||||||||||
Costa Rica Government International Bond 144A 4.25% 1/26/23 # | 1,030,000 | $ | 1,008,113 | |||||||||
|
| |||||||||||
1,008,113 | ||||||||||||
|
| |||||||||||
Croatia – 0.07% | ||||||||||||
Croatia Government International Bond 144A 5.50% 4/4/23 # | 1,545,000 | 1,692,246 | ||||||||||
|
| |||||||||||
1,692,246 | ||||||||||||
|
| |||||||||||
Ecuador – 0.14% | ||||||||||||
Ecuador Government International Bond 144A 8.75% 6/2/23 # | 1,800,000 | 1,777,500 | ||||||||||
144A 9.65% 12/13/26 # | 1,700,000 | 1,706,290 | ||||||||||
|
| |||||||||||
3,483,790 | ||||||||||||
|
| |||||||||||
Egypt – 0.18% | ||||||||||||
Egypt Government International Bond 144A 6.125% 1/31/22 # | 1,400,000 | 1,432,494 | ||||||||||
144A 8.50% 1/31/47 # | 2,600,000 | 2,809,404 | ||||||||||
|
| |||||||||||
4,241,898 | ||||||||||||
|
| |||||||||||
Hungary – 0.17% | ||||||||||||
Hungary Government Bond 3.00% 6/26/24 | HUF | 398,100,000 | 1,528,967 | |||||||||
Hungary Government International Bond 5.75% 11/22/23 | 2,360,000 | 2,702,795 | ||||||||||
|
| |||||||||||
4,231,762 | ||||||||||||
|
| |||||||||||
India – 0.12% | ||||||||||||
Export-Import Bank of India 144A 3.375% 8/5/26 # | 3,000,000 | 2,942,604 | ||||||||||
|
| |||||||||||
2,942,604 | ||||||||||||
|
| |||||||||||
Indonesia – 0.41% | ||||||||||||
Indonesia Government International Bond 144A 5.125% 1/15/45 # | 600,000 | 643,837 | ||||||||||
Indonesia Treasury Bond 7.50% 8/15/32 | IDR | 36,197,000,000 | 2,755,345 | |||||||||
8.375% 9/15/26 | IDR | 35,310,000,000 | 2,928,922 | |||||||||
9.00% 3/15/29 | IDR | 41,655,000,000 | 3,565,627 | |||||||||
|
| |||||||||||
9,893,731 | ||||||||||||
|
| |||||||||||
Ivory Coast – 0.14% | ||||||||||||
Ivory Coast Government International Bond 144A 6.125% 6/15/33 # | 3,400,000 | 3,276,750 | ||||||||||
|
| |||||||||||
3,276,750 | ||||||||||||
|
| |||||||||||
Jamaica – 0.06% | ||||||||||||
Jamaica Government International Bond 8.00% 3/15/39 | 1,240,000 | 1,469,400 | ||||||||||
|
| |||||||||||
1,469,400 | ||||||||||||
|
| |||||||||||
Jordan – 0.08% | ||||||||||||
Jordan Government International Bond 144A 5.75% 1/31/27 # | 1,830,000 | 1,824,327 | ||||||||||
|
| |||||||||||
1,824,327 | ||||||||||||
|
|
Diversified Income Series-24
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||||||
Sovereign Bonds D (continued) | ||||||||||||
Mexico – 0.74% | ||||||||||||
Mexican Bonos 5.75% 3/5/26 | MXN | 91,415,900 | $ | 4,707,311 | ||||||||
6.50% 6/9/22 | MXN | 200,610,000 | 11,000,044 | |||||||||
Mexico Government International Bond 4.15% 3/28/27 | 525,000 | 544,294 | ||||||||||
4.35% 1/15/47 | 1,700,000 | 1,600,890 | ||||||||||
|
| |||||||||||
17,852,539 | ||||||||||||
|
| |||||||||||
New Zealand – 0.10% |
| |||||||||||
New Zealand Government Bond 2.75% 4/15/25 | NZD | 3,296,000 | 2,395,998 | |||||||||
|
| |||||||||||
2,395,998 | ||||||||||||
|
| |||||||||||
Nigeria – 0.10% | ||||||||||||
Nigeria Government International Bond 144A 7.875% 2/16/32 # | 2,300,000 | 2,501,342 | ||||||||||
|
| |||||||||||
2,501,342 | ||||||||||||
|
| |||||||||||
Peru – 0.25% | ||||||||||||
Peruvian Government International Bond 144A 6.90% 8/12/37 # | PEN | 9,040,000 | 3,057,567 | |||||||||
6.95% 8/12/31 | PEN | 8,430,000 | 2,880,926 | |||||||||
|
| |||||||||||
5,938,493 | ||||||||||||
|
| |||||||||||
Poland – 0.23% | ||||||||||||
Republic of Poland Government Bond 2.50% 7/25/26 | PLN | 17,759,000 | 4,536,257 | |||||||||
3.25% 7/25/25 | PLN | 3,319,000 | 903,817 | |||||||||
|
| |||||||||||
5,440,074 | ||||||||||||
|
| |||||||||||
Portugal – 0.08% | ||||||||||||
Portugal Government International Bond 144A 5.125% 10/15/24 # | 1,881,000 | 1,923,323 | ||||||||||
|
| |||||||||||
1,923,323 | ||||||||||||
|
| |||||||||||
Republic of Korea – 0.15% | ||||||||||||
Export-Import Bank of Korea 144A 3.00% 5/22/18 # | NOK | 1,100,000 | 134,109 | |||||||||
4.00% 6/7/27 | AUD | 530,000 | 406,564 | |||||||||
Inflation Linked Korea Treasury Bond 1.125% 6/10/23 | KRW | 3,372,072,759 | 2,978,335 | |||||||||
|
| |||||||||||
3,519,008 | ||||||||||||
|
| |||||||||||
Russia – 0.04% | ||||||||||||
Russian Foreign Bond - Eurobond 144A 4.75% 5/27/26 # | 1,000,000 | 1,045,425 | ||||||||||
|
| |||||||||||
1,045,425 | ||||||||||||
|
| |||||||||||
Senegal – 0.05% | ||||||||||||
Senegal Government International Bond 144A 6.25% 5/23/33 # | 1,100,000 | 1,119,264 | ||||||||||
|
| |||||||||||
1,119,264 | ||||||||||||
|
|
Principal amount° | Value (US $) | |||||||
Sovereign Bonds D (continued) | ||||||||
Serbia – 0.07% | ||||||||
Serbia International Bond 144A 4.875% 2/25/20 # | 1,635,000 | $ | 1,706,136 | |||||
|
| |||||||
1,706,136 | ||||||||
|
| |||||||
South Africa – 0.86% |
| |||||||
Republic of South Africa Government Bond 8.00% 1/31/30 | ZAR | 197,329,000 | 13,664,549 | |||||
8.75% 1/31/44 | ZAR | 79,875,000 | 5,450,628 | |||||
Republic of South Africa Government International Bond 5.875% 5/30/22 | 1,615,000 | 1,767,106 | ||||||
|
| |||||||
20,882,283 | ||||||||
|
| |||||||
Sri Lanka – 0.11% | ||||||||
Sri Lanka Government International Bond 144A 6.20% 5/11/27 # | 1,355,000 | 1,356,230 | ||||||
144A 6.825% 7/18/26 # | 1,205,000 | 1,272,390 | ||||||
|
| |||||||
2,628,620 | ||||||||
|
| |||||||
Turkey – 1.24% | ||||||||
Export Credit Bank of Turkey 144A 5.375% 10/24/23 # | 2,045,000 | 2,070,460 | ||||||
Turkey Government Bond 8.00% 3/12/25 | TRY | 103,227,000 | 25,913,470 | |||||
Turkey Government International Bond 3.25% 3/23/23 | 2,200,000 | 2,067,824 | ||||||
|
| |||||||
30,051,754 | ||||||||
|
| |||||||
Ukraine – 0.08% | ||||||||
Ukraine Government International Bond 144A 7.75% 9/1/22 # | 2,000,000 | 2,014,640 | ||||||
|
| |||||||
2,014,640 | ||||||||
|
| |||||||
United Kingdom – 0.02% |
| |||||||
United Kingdom Gilt 3.50% 1/22/45 | GBP | 340,300 | 594,979 | |||||
|
| |||||||
594,979 | ||||||||
|
| |||||||
Uruguay – 0.29% | ||||||||
Uruguay Government International Bond 144A 9.875% 6/20/22 # | UYU | 197,045,000 | 7,104,474 | |||||
|
| |||||||
7,104,474 | ||||||||
|
| |||||||
Total Sovereign Bonds |
| 175,573,589 | ||||||
|
| |||||||
Supranational Banks – 1.07% | ||||||||
Asian Development Bank 3.50% 5/30/24 | NZD | 2,708,000 | 1,973,659 | |||||
Inter-American Development Bank 6.25% 6/15/21 | IDR | 106,600,000,000 | 8,021,703 | |||||
International Bank for Reconstruction & Development 1.279% 4/17/19 • | 1,507,000 | 1,506,613 | ||||||
2.50% 11/25/24 | 1,507,000 | 1,521,861 | ||||||
3.375% 1/25/22 | NZD | 1,200,000 | 887,725 |
Diversified Income Series-25
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||||||
Supranational Banks (continued) | ||||||||||||
International Bank for Reconstruction & Development 3.50% 1/22/21 | | NZD | | 6,655,000 | $ | 4,969,141 | ||||||
4.625% 10/6/21 | NZD | 1,119,000 | 870,083 | |||||||||
International Finance 3.00% 5/6/21 | NZD | 790,000 | 578,460 | |||||||||
3.625% 5/20/20 | NZD | 472,000 | 353,797 | |||||||||
6.30% 11/25/24 | INR | 320,160,000 | 5,037,187 | |||||||||
|
| |||||||||||
Total Supranational Banks |
| 25,720,229 | ||||||||||
|
| |||||||||||
US Treasury Obligations – 5.65% |
| |||||||||||
US Treasury Bond 3.00% 5/15/47 | 46,745,000 | 48,334,517 | ||||||||||
US Treasury Notes 1.75% 5/31/22 | 24,400,000 | 24,257,040 | ||||||||||
1.75% 6/30/22 | 20,405,000 | 20,273,490 | ||||||||||
2.25% 2/15/27 | 31,375,000 | 31,240,182 | ||||||||||
2.375% 5/15/27 | 12,120,000 | 12,200,016 | ||||||||||
|
| |||||||||||
Total US Treasury Obligations | 136,305,245 | |||||||||||
|
| |||||||||||
Number of shares | ||||||||||||
Common Stock – 0.00% |
| |||||||||||
Century Communications =† | 2,500,000 | 0 | ||||||||||
Mirant (Escrow) | 110,000 | 0 | ||||||||||
|
| |||||||||||
Total Common Stock |
| 0 | ||||||||||
|
| |||||||||||
Convertible Preferred Stock – 0.37% |
| |||||||||||
A Schulman 6.00% exercise price $52.33, expiration date 12/31/49 | 719 | 625,185 | ||||||||||
American Tower 5.50% exercise price $115.11, expiration date 2/15/18 | 2,260 | 273,980 | ||||||||||
AMG Capital Trust II 5.15% exercise price $200.00, expiration date 10/15/37 | 16,129 | 957,659 | ||||||||||
Bank of America 7.25% exercise price $50.00, expiration date 12/31/49 | 568 | 716,810 | ||||||||||
Becton Dickinson 6.125% exercise price $211.80, expiration date 5/1/20 | 9,108 | 498,936 | ||||||||||
DTE Energy 6.50% exercise price $116.31, expiration date 10/1/19 | 13,034 | 714,915 | ||||||||||
El Paso Energy Capital Trust I 4.75% exercise price $50.00, expiration date 3/31/28 | 24,847 | 1,244,835 | ||||||||||
Huntington Bancshares 8.50% exercise price $11.95, expiration date 12/31/49 | 714 | 1,031,016 |
Number of shares | Value (US $) | |||||||
Convertible Preferred Stock (continued) | ||||||||
Teva Pharmaceutical Industries 7.00% exercise price $75.00, expiration date 12/15/18 | 435 | $ | 258,607 | |||||
T-Mobile US 5.50% exercise price $31.02, expiration date 12/15/17 | 7,467 | 736,545 | ||||||
Wells Fargo & Co. 7.50% exercise price $156.71, expiration date 12/31/49 | 829 | 1,086,910 | ||||||
Welltower 6.50% exercise price $57.42, expiration date 12/31/49 | 11,507 | 762,454 | ||||||
|
| |||||||
Total Convertible Preferred Stock | 8,907,852 | |||||||
|
| |||||||
Preferred Stock – 0.32% | ||||||||
General Electric 5.00% • | 4,996,000 | 5,308,999 | ||||||
Integrys Holdings 6.00% • | 84,450 | 2,281,206 | ||||||
USB Realty 144A 2.305% #• | 300,000 | 263,250 | ||||||
|
| |||||||
Total Preferred Stock | 7,853,455 | |||||||
|
| |||||||
Number of contracts | ||||||||
Options Purchased – 0.01% | ||||||||
Currency Call Option – 0.00% |
| |||||||
USD vs JPY strike price $1.09, expiration date 9/27/17 (BAML) | 3,600,000 | 25,223 | ||||||
|
| |||||||
25,223 | ||||||||
|
| |||||||
Currency Put Options – 0.01% |
| |||||||
USD vs BRL strike price $0.04, expiration date 9/27/17 (BAML) | 1,800,000 | 24,161 | ||||||
USD vs KRW strike price $11.60, expiration date 9/27/17 (BAML) | 1,800,000 | 21,052 | ||||||
USD vs MXN strike price $0.19, expiration date 8/11/17 (BAML) | 3,000,000 | 13,970 | ||||||
USD vs MXN strike price $0.19, expiration date 9/27/17 (BAML) | 1,800,000 | 36,835 | ||||||
USD vs TRY strike price $0.04, expiration date 09/27/17 (BAML) | 1,800,000 | 19,225 | ||||||
USD vs TWD strike price $0.31, expiration date 9/27/17 (BAML) | 1,800,000 | 16,355 | ||||||
|
| |||||||
131,598 | ||||||||
|
| |||||||
Total Options Purchased | 156,821 | |||||||
|
|
Diversified Income Series-26
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Short-Term Investments – 1.74% | ||||||||
Discount Note – 0.19% ≠ | ||||||||
Federal Home Loan Bank 0.95% 7/10/17 | 4,494,047 | $ | 4,493,180 | |||||
|
| |||||||
4,493,180 | ||||||||
|
| |||||||
Repurchase Agreements – 1.27% | ||||||||
Bank of America Merrill Lynch 0.99%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $8,502,436 (collateralized by US government obligations 3.375% 5/15/44; market value $8,671,774). | 8,501,734 | 8,501,734 | ||||||
Bank of Montreal 0.93%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $14,170,655 (collateralized by | ||||||||
US government obligations 0.625%–3.75% 7/31/17–2/15/45; market value $14,452,950). | 14,169,557 | 14,169,557 | ||||||
BNP Paribas 1.05%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $7,960,813 (collateralized by US government obligations 0.00%–2.00% 8/15/17–11/15/45; market value $8,119,325). | 7,960,117 | 7,960,117 | ||||||
|
| |||||||
30,631,408 | ||||||||
|
| |||||||
US Treasury Obligation – 0.28% | ||||||||
US Treasury Bill 0.70% 7/13/17 | 6,800,669 | 6,799,227 | ||||||
|
| |||||||
6,799,227 | ||||||||
|
| |||||||
Total Short-Term Investments | 41,923,815 | |||||||
|
| |||||||
Total Value of Securities – 99.40% | $ | 2,399,198,651 | ||||||
|
|
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At June 30, 2017, the aggregate value of Rule 144A securities was $627,723,009, which represents 26.01% of the Fund’s 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 Fund’s fair valuation policy. At June 30, 2017, the aggregate value of fair valued securities was $0, which represents 0.00% of the Fund’s net assets. See Note 1 in “Notes to financial statements.” |
≠ | The rate shown is the effective yield at the time of purchase. |
« | Loan agreements generally pay interest at rates which are periodically reset 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 US 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. Loan agreements may be subject to restrictions on resale. Stated rate in effect at June 30, 2017. |
° | Principal amount shown is stated in US dollars unless noted that the security is denominated in another currency. |
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. |
† | Non-income producing security. |
• | Variable rate security. Each rate shown is as of June 30, 2017. 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, 2017. |
Diversified Income Series-27
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
The following foreign currency exchange contracts, futures contracts, and swap contracts were outstanding at June 30, 2017:1
Foreign Currency Exchange Contracts | ||||||||||||||||||||||||||||||
Counterparty | Contracts to Receive (Deliver) | In Exchange For | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||||
BAML | AUD | (8,656,352 | ) | USD | 6,508,019 | 7/21/17 | $ | (143,311 | ) | |||||||||||||||||||||
BAML | CAD | (7,533,959 | ) | USD | 5,628,979 | 7/21/17 | (183,207 | ) | ||||||||||||||||||||||
BAML | COP | 16,617,838,254 | USD | (5,653,287 | ) | 7/21/17 | (218,283 | ) | ||||||||||||||||||||||
BAML | EUR | 5,064,752 | USD | (5,673,332 | ) | 7/21/17 | 118,134 | |||||||||||||||||||||||
BAML | JPY | 241,649,158 | USD | (2,175,384 | ) | 7/21/17 | (24,857 | ) | ||||||||||||||||||||||
BAML | NZD | (11,737,239 | ) | USD | 8,451,247 | 7/21/17 | (146,433 | ) | ||||||||||||||||||||||
BNP | AUD | (2,761,456 | ) | USD | 2,079,153 | 7/21/17 | (42,683 | ) | ||||||||||||||||||||||
BNP | NOK | 9,218,492 | USD | (1,082,562 | ) | 7/21/17 | 22,141 | |||||||||||||||||||||||
CSFB | COP | 8,559,904,137 | USD | (2,810,396 | ) | 7/21/17 | (10,807 | ) | ||||||||||||||||||||||
GS | BRL | 22,877,787 | USD | (6,951,621 | ) | 7/21/17 | (79,235 | ) | ||||||||||||||||||||||
HSBC | EUR | 1,780,728 | USD | (1,988,895 | ) | 7/21/17 | 47,340 | |||||||||||||||||||||||
HSBC | GBP | 2,330,182 | USD | (2,973,896 | ) | 7/21/17 | 63,253 | |||||||||||||||||||||||
HSBC | INR | 421,903,952 | USD | (6,537,700 | ) | 7/21/17 | (25,679 | ) | ||||||||||||||||||||||
JPMC | KRW | (3,488,943,940 | ) | USD | 3,104,595 | 7/21/17 | 56,892 | |||||||||||||||||||||||
JPMC | PLN | (3,466,675 | ) | USD | 924,054 | 7/21/17 | (11,353 | ) | ||||||||||||||||||||||
JPMC | SEK | (813,406 | ) | USD | 93,308 | 7/21/17 | (3,364 | ) | ||||||||||||||||||||||
TD | BRL | 8,894,325 | USD | (2,703,577 | ) | 7/21/17 | (31,762 | ) | ||||||||||||||||||||||
TD | JPY | 1,408,688,238 | USD | (12,782,168 | ) | 7/21/17 | (245,716 | ) | ||||||||||||||||||||||
UBS | BRL | 18,251,126 | USD | (5,549,478 | ) | 7/21/17 | (66,921 | ) | ||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
$ | (925,851 | ) | ||||||||||||||||||||||||||||
|
|
Futures Contracts
Contracts to Buy (Sell) | Notional Cost (Proceeds) | Notional Value | Expiration Date | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||
270 | Canadian 3 yr Bonds | $ | 30,111,169 | $ | 29,263,186 | 9/21/17 | $ | (847,983 | ) | ||||||||||||||||
(283) | E-mini S&P 500 Index | (34,424,423 | ) | (34,255,735 | ) | 9/18/17 | 168,688 | ||||||||||||||||||
5 | Euro-BTP | 764,571 | 771,750 | 9/8/17 | 7,179 | ||||||||||||||||||||
(907) | Euro-Bund | (169,752,961 | ) | (167,685,997 | ) | 9/8/17 | 2,066,964 | ||||||||||||||||||
1,161 | US Treasury 10 yr Notes | 147,173,590 | 145,741,781 | 9/21/17 | (1,431,809 | ) | |||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
$ | (26,128,054 | ) | $ | (36,961 | ) | ||||||||||||||||||||
|
|
|
|
Swap Contracts
CDS Contracts2
Counterparty | Swap Referenced Obligation | Notional Amount3 | Annual Protection Payments | Termination Date | Upfront Payments Paid (Received) | Unrealized Appreciation (Depreciation)4 | ||||||||||||||||||
Protection Purchased / Moody’s ratings: | ||||||||||||||||||||||||
ICE | CDX.NA.HY.285 | 38,510,000 | 5.00% | 6/20/22 | $ | (2,786,063 | ) | $ | 134,746 | |||||||||||||||
JPM | CDX.EM.276 | 5,035,000 | 1.00% | 6/20/22 | 267,236 | (36,234 | ) | |||||||||||||||||
Protection Sold / Moody’s ratings: | ||||||||||||||||||||||||
MSC | CMBX.NA.BBB-.67 | 8,800,000 | 3.00% | 5/11/63 | (989,146 | ) | (38,387 | ) | ||||||||||||||||
|
|
|
| |||||||||||||||||||||
$ | (3,507,973 | ) | $ | 60,125 | ||||||||||||||||||||
|
|
|
|
Diversified Income Series-28
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Interest Rate Swap Contracts8
Counterparty & Referenced Obligation | Notional Amount3 | Fixed Interest Rate Paid (Received) | Floating Interest Rate Paid (Received) | Termination Date | Unrealized Appreciation (Depreciation)4 | ||||||||||||||||||||
CME - BAML 30 yr IRS | 4,415,000 | 2.767% | (1.280%) | 12/21/46 | $(192,445) | ||||||||||||||||||||
LCH - BAML 30 yr IRS | 1,135,000 | 2.661% | (1.170%) | 1/27/47 | (31,600) | ||||||||||||||||||||
LCH - BAML 30 yr IRS | 1,130,000 | 2.623% | (1.153%) | 1/24/47 | (22,058) | ||||||||||||||||||||
LCH - BAML 30 yr IRS | 1,815,000 | 2.687% | (1.170%) | 1/30/47 | (60,554) | ||||||||||||||||||||
LCH - BAML 30 yr IRS | 1,130,000 | 2.596% | (1.153%) | 1/23/47 | (15,510) | ||||||||||||||||||||
LCH - BAML 30 yr IRS | 2,215,000 | 2.716% | (1.287%) | 12/22/46 | (87,632) | ||||||||||||||||||||
LCH - BAML 30 yr IRS | 1,575,000 | 2.480% | (1.158%) | 1/11/47 | 18,311 | ||||||||||||||||||||
|
| ||||||||||||||||||||||||
$(391,488) | |||||||||||||||||||||||||
|
|
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 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 US 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 $(122,422).
5Markit’s North America High Yield CDX Index, or the CDX.NA.HY Index, is composed of 100 of the most liquid North American entities with high yield credit ratings that trade is in the CDS market.
6Markit’s CDX Emerging Markets Index, or the CDX.EM Index is composed of 15 sovereign issuers from the following countries: Argentina, Brazil, Chile, China, Colombia, Indonesia, Malaysia, Mexico, Panama, Peru, Philippines, Russia, South Africa, Turkey, and Venezuela, which have S&P credit quality ratings of CCC and above.
7Markit’s CMBX Index or the CMBX.NA Index is a synthetic tradable index referencing a basket of 25 commercial mortgage-backed securities in North America. Credit-quality rating are measured on a scale that generally ranges from AAA (highest) to D (lowest). US Agency and US Agency mortgage-backed securities appear under US Government.
8An interest rate swap agreement is an exchange of interest rates between counterparties. Periodic payments (receipt) 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 (losses) on swap contracts.
Summary of abbreviations:
ABS – Asset-Backed Security
ARM – Adjustable Rate Mortgage
ARS – Argentine Peso
AUD – Australian Dollar
BAML – Bank of America Merrill Lynch
BNP – BNP Paribas
BRL – Brazilian Real
CAD – Canadian Dollar
CDO – Collateralized Debt Obligation
CDS – Credit Default Swap
CDX.EM – Credit Default Swap Index Emerging Market
CDX.NA.HY – Credit Default Swap Index North American High Yield
CITI – Citigroup Global Markets
CLO – Collateralized Loan Obligation
Diversified Income Series-29
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Summary of abbreviations (continued):
CLP – Chilean Peso
CMBX.NA – Commercial Mortgaged-Backed Securities Index North America
CME – Chicago Mercantile Exchange Inc.
COP – Colombian Peso
CSFB – Credit Suisse First Boston
CME – Chicago Mercantile Exchange Inc.
DB-JPM – Deutsche Bank JPMorgan
DB-UBS – Deutsche Bank Union Bank of Switzerland
EUR – European Monetary Unit
FHAVA – Federal Housing Administration and Veterans Administration
FREMF – Freddie Mac Multifamily
GBP – British Pound Sterling
GNMA – Government National Mortgage Association
GS – Goldman Sachs
HSBC – Hong Kong Shanghai Bank
HUF – Hungarian Forint equals
ICE – Intercontinental Exchange, Inc.
IDR – Indonesian Rupiah
INR – Indian Rupee
IRS – Interest Rate Swap
JPM-BB – JPMorgan Barclays Bank
JPM-DB – JPMorgan Deutsche Bank
JPMC – JPMorgan Chase Bank
JPY – Japanese Yen
KRW – South Korean Won
LB-UBS – Lehman Brothers Union Bank of Switzerland
LCH – London Clearing House
MSC – Morgan Stanley Capital
MXN – Mexican Peso
NOK – Norwegian Krone
NZD – New Zealand Dollar
PEN – Peruvian Nuevo Sol
PLN – Polish Zloty
REIT – Real Estate Investment Trust
REMIC – Real Estate Mortgage Investment Conduit
S&P – Standard & Poor’s Financial Services LLC
SEK – Swedish Krona
S.F. – Single Family
TBA – To be announced
TD – Toronto Dominion Bank
TRY – Turkish Lira
TWD – Taiwan Dollar
UBS – Union Bank of Switzerland
Diversified Income Series-30
Table of Contents
Delaware VIP® Diversified Income Series
Schedule of investments (continued)
Summary of abbreviations (continued):
USD – US
Dollar UYU – Uruguayan Peso
WF-RBS – Wells Fargo Royal Bank of Scotland
yr – Year
ZAR – South African Rand
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
Statement of assets and liabilities June 30, 2017 (Unaudited)
Assets: | ||||
Investments, at value1 | $ | 2,357,118,015 | ||
Short-term investments, at value2 | 41,923,815 | |||
Foreign currencies, at value3 | 5,051,644 | |||
Options purchased, at value4 | 156,821 | |||
Cash collateral due from brokers | 13,573,064 | |||
Cash | 3,935,869 | |||
Receivable for securities sold | 37,290,514 | |||
Dividends and interest receivables | 20,845,900 | |||
Unrealized appreciation on foreign currency exchange contracts | 307,760 | |||
Upfront payments paid on credit default swap contracts | 267,236 | |||
Unrealized appreciation on credit default swap contracts | 216,229 | |||
Variation margin due from brokers on centrally cleared interest rate swap contracts | 76,665 | |||
Receivable for series shares sold | 42,285 | |||
Swap payments receivable | 17,043 | |||
Unrealized appreciation on interest rate swap contracts | 8,996 | |||
Other assets4 | 1,305,392 | |||
|
| |||
Total assets | 2,482,137,248 | |||
|
| |||
Liabilities: | ||||
Payable for securities purchased | 55,188,984 | |||
Bonds proceeds payable5 | 4,351,308 | |||
Upfront payments received on credit default swap contracts | 3,775,209 | |||
Unrealized depreciation on foreign currency exchange contracts | 1,233,611 | |||
Management fees payable to affiliates | 1,154,499 | |||
Other accrued expenses payable | 682,589 | |||
Unrealized depreciation on interest rate swap contracts | 477,149 | |||
Distribution fees payable to affiliates | 430,022 | |||
Cash collateral due to brokers | 330,000 | |||
Payable for series shares redeemed | 262,103 | |||
Variation margin due to broker on futures contracts | 226,930 | |||
Swap payments payable | 137,010 | |||
Variation margin due to broker on credit default swap contracts | 81,483 | |||
Unrealized depreciation on credit default swap contracts | 74,621 | |||
Audit and tax fees payable | 24,140 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 14,902 | |||
Accounting and administration expenses payable to affiliates | 9,181 | |||
Trustees’ fees and expenses payable to affiliates | 6,167 | |||
Legal fees payable to affiliates | 6,104 | |||
Reports and statements to shareholders expenses payable to affiliates | 1,580 | |||
Other liabilities | 65,570 | |||
|
| |||
Total liabilities | 68,533,162 | |||
|
| |||
Total Net Assets | $ | 2,413,604,086 | ||
|
|
Diversified Income Series-32
Table of Contents
Delaware VIP® Trust — Delaware VIP Diversified Income Series
Statement of assets and liabilities (continued)
Net Assets Consist of: | ||||
Paid-in capital | $ | 2,400,923,349 | ||
Undistributed net investment income | 33,544,211 | |||
Accumulated net realized loss | (49,198,804 | ) | ||
Net unrealized appreciation of investments | 29,772,065 | |||
Net unrealized appreciation of foreign currencies | 54,995 | |||
Net unrealized depreciation of foreign currency exchange contracts | (925,851 | ) | ||
Net unrealized depreciation of futures contracts | (36,961 | ) | ||
Net unrealized depreciation of options purchased | (75,133 | ) | ||
Net unrealized depreciation of swap contracts | (453,785 | ) | ||
|
| |||
Total Net Assets | $ | 2,413,604,086 | ||
|
| |||
Net Asset Value: | ||||
Standard Class: | ||||
Net assets | $ | 323,074,559 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 31,174,650 | |||
Net asset value per share | $ | 10.36 | ||
Service Class: | ||||
Net assets | $ | 2,090,529,527 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 202,894,489 | |||
Net asset value per share | $ | 10.30 | ||
| ||||
1 Investments, at cost | $ | 2,327,280,725 | ||
2 Short-term investments, at cost | 41,923,470 | |||
3 Foreign currencies, at cost | 5,004,520 | |||
4 Options purchased, at cost | 231,954 |
5 See Note 11 in “Notes to financial statements.”
See accompanying notes, which are an integral part of the financial statements.
Diversified Income Series-33
Table of Contents
Delaware VIP® Trust —
Delaware VIP Diversified Income Series
Six months ended June 30, 2017 (Unaudited)
Investment Income: | ||||
Interest | $ | 45,878,526 | ||
Dividends | 299,698 | |||
Foreign tax withheld | (44,893 | ) | ||
|
| |||
46,133,331 | ||||
|
| |||
Expenses: | ||||
Management fees | 6,774,287 | |||
Distribution expenses – Service Class | 3,009,127 | |||
Accounting and administration expenses | 357,215 | |||
Reports and statements to shareholders expenses | 206,092 | |||
Legal fees | 98,598 | |||
Dividend disbursing and transfer agent fees and expenses | 97,877 | |||
Custodian fees | 61,083 | |||
Trustees’ fees and expenses | 58,256 | |||
Audit and tax | 25,137 | |||
Registration fees | 3,070 | |||
Other | 64,273 | |||
|
| |||
10,755,015 | ||||
Less waived distribution expenses – Service Class | (501,521 | ) | ||
Less expense paid indirectly | (1 | ) | ||
|
| |||
Total operating expenses | 10,253,493 | |||
|
| |||
Net Investment Income | 35,879,838 | |||
|
| |||
Net Realized and Unrealized Gain (Loss): |
| |||
Net realized gain (loss) on: | ||||
Investments | (2,552,667 | ) | ||
Foreign currencies | 89,272 | |||
Foreign currency exchange contracts | (84,257 | ) | ||
Futures contracts | (2,855,734 | ) | ||
Options purchased | (10,800 | ) | ||
Options written | 709,250 | |||
Swap contracts | (1,558,310 | ) | ||
|
| |||
Net realized loss | (6,263,246 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) of: | ||||
Investments1 | 48,602,032 | |||
Foreign currencies | 76,221 | |||
Foreign currency exchange contracts | (1,307,881 | ) | ||
Futures contracts | (176,024 | ) | ||
Options purchased | (75,133 | ) | ||
Swap contracts | (236,281 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) | 46,882,934 | |||
|
| |||
Net Realized and Unrealized Gain | 40,619,688 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 76,499,526 |
2 Includes $65,570 capital gains taxes accrued.
Delaware VIP Trust —
Delaware VIP Diversified Income Series
Statements of changes in net assets
Six months ended 6/30/17 (Unaudited) | Year ended 12/31/16 | |||||||
Increase (Decrease) in Net Assets from | ||||||||
Operations: | ||||||||
Net investment income | $ | 35,879,838 | $ | 53,367,960 | ||||
Net realized gain (loss) | (6,263,246 | ) | 9,776,010 | |||||
Net change in unrealized appreciation | ||||||||
(depreciation) | 46,882,934 | 7,367,075 | ||||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 76,499,526 | 70,511,045 | ||||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Standard Class | (8,640,054 | ) | (11,261,327 | ) | ||||
Service Class | (49,949,319 | ) | (58,403,940 | ) | ||||
|
|
|
| |||||
(58,589,373 | ) | (69,665,267 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Standard Class | 11,866,371 | 17,237,247 | ||||||
Service Class | 125,905,029 | 128,123,758 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 8,640,054 | 11,261,327 | ||||||
Service Class | 49,949,319 | 58,403,940 | ||||||
|
|
|
| |||||
196,360,773 | 215,026,272 | |||||||
|
|
|
| |||||
Cost of shares redeemed: | ||||||||
Standard Class | (22,247,814 | ) | (45,534,410 | ) | ||||
Service Class | (15,294,842 | ) | (103,873,311 | ) | ||||
|
|
|
| |||||
(37,542,656 | ) | (149,407,721 | ) | |||||
|
|
|
| |||||
Increase in net assets derived from capital share transactions | 158,818,117 | 65,618,551 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 176,728,270 | 66,464,329 | ||||||
Net Assets: | ||||||||
Beginning of period | 2,236,875,816 | 2,170,411,487 | ||||||
|
|
|
| |||||
End of period | $ | 2,413,604,086 | $ | 2,236,875,816 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 33,544,211 | $ | 56,253,746 | ||||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
Diversified Income Series-34
Table of Contents
Delaware VIP® Trust — Delaware VIP Diversified Income Series
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 6/30/171 (Unaudited) | 12/31/16 | 12/31/15 | Year ended 12/31/14 | 12/31/13 | 12/31/12 | |||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.29 | $ | 10.29 | $ | 10.84 | $ | 10.53 | $ | 11.07 | $ | 11.02 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income2 | 0.17 | 0.27 | 0.35 | 0.33 | 0.33 | 0.38 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.18 | 0.09 | (0.45 | ) | 0.22 | (0.46 | ) | 0.38 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.35 | 0.36 | (0.10 | ) | 0.55 | (0.13 | ) | 0.76 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||
Net investment income | (0.28 | ) | (0.36 | ) | (0.33 | ) | (0.24 | ) | (0.26 | ) | (0.36 | ) | ||||||||||||
Net realized gain | — | — | (0.12 | ) | — | (0.15 | ) | (0.35 | ) | |||||||||||||||
|
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|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.28 | ) | (0.36 | ) | (0.45 | ) | (0.24 | ) | (0.41 | ) | (0.71 | ) | ||||||||||||
|
|
|
|
|
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| |||||||||||||
Net asset value, end of period | $ | 10.36 | $ | 10.29 | $ | 10.29 | $ | 10.84 | $ | 10.53 | $ | 11.07 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
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| |||||||||||||
Total return3 | 3.43% | 3.52% | (1.08% | ) | 5.32% | (1.26% | ) | 7.20% | ||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 323,075 | $ | 322,535 | $ | 339,023 | $ | 473,568 | $ | 489,953 | $ | 531,992 | ||||||||||||
Ratio of expenses to average net assets | 0.67% | 0.67% | 0.67% | 0.67% | 0.67% | 0.68% | ||||||||||||||||||
Ratio of net investment income to average net assets | 3.30% | 2.63% | 3.29% | 3.09% | 3.10% | 3.43% | ||||||||||||||||||
Portfolio turnover | 78% | 247% | 250% | 252% | 260% | 216% |
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-35
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 6/30/171 (Unaudited) | 12/31/16 | 12/31/15 | Year ended 12/31/14 | 12/31/13 | 12/31/12 | |||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.22 | $ | 10.22 | $ | 10.77 | $ | 10.47 | $ | 11.00 | $ | 10.96 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income2 | 0.16 | 0.25 | 0.32 | 0.31 | 0.30 | 0.35 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.17 | 0.08 | (0.45 | ) | 0.21 | (0.45 | ) | 0.37 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.33 | 0.33 | (0.13 | ) | 0.52 | (0.15 | ) | 0.72 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||
Net investment income | (0.25 | ) | (0.33 | ) | (0.30 | ) | (0.22 | ) | (0.23 | ) | (0.33 | ) | ||||||||||||
Net realized gain | — | — | (0.12 | ) | — | (0.15 | ) | (0.35 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.25 | ) | (0.33 | ) | (0.42 | ) | (0.22 | ) | (0.38 | ) | (0.68 | ) | ||||||||||||
|
|
|
|
|
|
|
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|
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|
| |||||||||||||
Net asset value, end of period | $ | 10.30 | $ | 10.22 | $ | 10.22 | $ | 10.77 | $ | 10.47 | $ | 11.00 | ||||||||||||
|
|
|
|
|
|
|
|
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|
|
| |||||||||||||
Total return3 | 3.29% | 3.28% | (1.34% | ) | 4.98% | (1.42% | ) | 6.87% | ||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 2,090,529 | $ | 1,914,341 | $ | 1,831,388 | $ | 1,819,811 | $ | 1,536,240 | $ | 1,519,853 | ||||||||||||
Ratio of expenses to average net assets | 0.92% | 0.92% | 0.92% | 0.92% | 0.92% | 0.93% | ||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 0.97% | 0.97% | 0.97% | 0.97% | 0.97% | 0.98% | ||||||||||||||||||
Ratio of net investment income to average net assets | 3.05% | 2.38% | 3.04% | 2.84% | 2.85% | 3.18% | ||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 3.00% | 2.33% | 2.99% | 2.79% | 2.80% | 3.13% | ||||||||||||||||||
Portfolio turnover | 78% | 247% | 250% | 252% | 260% | 216% |
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-36
Table of Contents
Delaware VIP® Trust — Delaware VIP Diversified Income Series
June 30, 2017 (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 Core Series (formerly, 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, as amended (1940 Act), and offers Standard Class and Service Class shares. The Standard Class shares do not carry a distribution and/or service (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 US generally accepted accounting principles (US 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. US government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Equity 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 as set-backed securities, collateralized mortgage obligations, commercial mortgage securities, and US 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 on the Series’ federal income tax returns through the six months ended June 30, 2017 and for all open tax years (years ended Dec. 31, 2013–Dec. 31, 2016), 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. If applicable, the Series recognizes interest accrued on unrecognized tax benefits in interest expense and penalties in other expenses on the “Statement of operations.” During the six months ended June 30, 2017, the Series did not incur any interest or tax penalties.
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 US 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, 2017, 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.
Diversified Income Series-37
Table of Contents
Delaware VIP® Diversified Income Series
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 US dollars at the exchange rate of such currencies against the US 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 US GAAP. Therefore, the Series follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with US 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 FundsSM by Macquarie (Delaware Funds) are generally allocated among such funds on the basis of average net assets. Management fees and certain 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, 2017.
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 $1, 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, 2017, 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 Macquarie Investment Management Business Trust (formerly, Delaware Management Business Trust) and the investment manager, an annual fee which is calculated daily and paid monthly 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 daily and paid monthly based on the aggregate daily net assets of the Delaware 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 Funds on a relative net asset value (NAV) basis. For the six months ended June 30, 2017, the Series was charged $54,008 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 daily and paid monthly 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, 2017, the Series was charged $87,305 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 12b-1 fee of 0.30% of the average daily net assets of the Service Class shares. DDLP has contracted to waive 12b-1 fee from Jan. 1, 2017 through June 30, 2017*, in order to limit 12b-1 fee of the Service Class shares to 0.25% of average daily net assets. Standard Class shares pay no 12b-1 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, 2017, the Series was charged $26,944 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.
Cross trades for the six months ended June 30, 2017 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 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, 2017, the Series engaged in securities purchases of $67,271,167 and securities sales of $10,228,488, which resulted in net realized gains of $28.
* The aggregate contractual waiver period covering this report is from April 29, 2016 through May 1, 2018.
3. Investments
For the six months ended June 30, 2017, the Series made purchases and sales of investment securities other than short-term investments as follows:
Purchases other than US government securities | $ | 1,504,877,664 | ||
Purchases of US government securities | 442,581,458 | |||
Sales other than US government securities | 1,421,619,979 | |||
Sales of US government securities | 376,420,940 |
At June 30, 2017, 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, 2017, 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 | |||
$2,369,204,195 | $51,247,712 | $(21,410,077) | $29,837,635 |
Under the Regulated Investment Company Modernization Act of 2010 (Act), net capital losses recognized for tax years beginning after Dec. 22, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Losses incurred that will be carried forward under the Act as of Dec. 31, 2016 were as follows:
Short-term | Loss carryforward character No Expiration
Long-term | Total | ||
$14,754,875 | $23,131,304 | $37,886,179 |
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Notes to financial statements (continued)
3. Investments (continued)
US 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, 2017:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Securities | ||||||||||||||||
Assets: | ||||||||||||||||
Agency, Asset- & Mortgage-Backed Securities1 | $ | — | $ | 521,825,076 | $ | 3,390,916 | $ | 525,215,992 | ||||||||
Collateralized Debt Obligations | — | 59,530,196 | — | 59,530,196 | ||||||||||||
Corporate Debt | — | 1,219,369,180 | — | 1,219,369,180 | ||||||||||||
Foreign Debt | — | 213,130,506 | — | 213,130,506 | ||||||||||||
Municipal Bonds | — | 12,904,839 | — | 12,904,839 | ||||||||||||
Loan Agreements1 | — | 169,100,043 | 4,800,707 | 173,900,750 | ||||||||||||
Common Stock | — | — | — | — | ||||||||||||
Convertible Preferred Stock1 | 273,980 | 8,633,872 | — | 8,907,852 | ||||||||||||
Preferred Stock | — | 7,853,455 | — | 7,853,455 | ||||||||||||
Option Purchased | — | 156,821 | — | 156,821 | ||||||||||||
US Treasury Obligations | — | 136,305,245 | — | 136,305,245 | ||||||||||||
Short-Term Investments | — | 41,923,815 | — | 41,923,815 | ||||||||||||
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Total Value of Securities | $ | 273,980 | $ | 2,390,733,048 | $ | 8,191,623 | $ | 2,399,198,651 | ||||||||
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Derivatives: | ||||||||||||||||
Foreign Currency Exchange Contracts | $ | — | $ | (925,851 | ) | $ | — | $ | (925,851 | ) | ||||||
Futures Contracts | (36,961 | ) | — | — | (36,961 | ) | ||||||||||
Swap Contracts | — | (331,363 | ) | — | (331,363 | ) |
The securities that have been valued at zero on the “Schedule of investments” are considered to be Level 3 investments in this table.
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Notes to financial statements (continued)
3. Investments (continued)
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 | — | 99.35% | 0.65% | 100.00% | ||||
Loan Agreements | — | 97.24% | 2.76% | 100.00% | ||||
Convertible Preferred Stock | 3.08% | 96.92% | — | 100.00% |
During the six months ended June 30, 2017, 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 a reconciliation of Level 3 investments as they are not considered significant to the Series’ net assets at the beginning, interim, or end of the period. 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 6/30/17 | Year ended 12/31/16 | |||||||
Shares sold: | ||||||||
Standard Class | 1,143,724 | 1,659,239 | ||||||
Service Class | 12,222,428 | 12,404,945 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 841,290 | 1,101,891 | ||||||
Service Class | 4,887,409 | 5,742,767 | ||||||
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19,094,851 | 20,908,842 | |||||||
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Shares redeemed: | ||||||||
Standard Class | (2,144,595 | ) | (4,371,189 | ) | ||||
Service Class | (1,482,025 | ) | (10,044,572 | ) | ||||
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(3,626,620 | ) | (14,415,761 | ) | |||||
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Net increase | 15,468,231 | 6,493,081 | ||||||
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5. Line of Credit
The Series, along with certain other funds in the Delaware 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 0.15%, which is allocated across the Participants on the basis of relative net assets 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 will expire on Nov. 6, 2017.
The Series had no amount outstanding as of June 30, 2017, or at any time during the period then ended.
6. Derivatives
US 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 US 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 US 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
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Notes to financial statements (continued)
6. Derivatives (continued)
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, 2017, the Series entered into foreign currency exchange contracts to hedge the US dollar value of securities it already owns 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 US 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 clearing house, as counterparty to all exchange-traded futures, guarantees against default. At June 30, 2017, the Series posted $5,856,000 in cash as margin for open futures contracts, which is presented on the “Statement of assets and liabilities” as “Cash collateral due from brokers.”
During the six months ended June 30, 2017, the Series entered into futures contracts to hedge the Series’ existing portfolio securities against fluctuations in value caused by changes in interest rates or market conditions and to hedge currency risks associated with the Series’ investments.
Options Contracts – The Series may enter 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.
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Notes to financial statements (continued)
6. Derivatives (continued)
Transactions in options written during the six months ended June 30, 2017 for the Series were as follows:
Call Options | Number of Contracts | Premiums | ||||||
Options outstanding at Dec. 31, 2016 | — | $ | — | |||||
Options written | 980 | 709,250 | ||||||
Options expired | (980 | ) | (709,250 | ) | ||||
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Options outstanding at June 30, 2017 | — | $ | — | |||||
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During the six months ended June 30, 2017, the Series entered into options contracts to manage the Series’ exposure to changes in securities prices caused by interest rates or market conditions and to protect the value of portfolio securities.
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 rate swap contracts 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’ 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, 2017, 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, 2017, the Series entered into CDS contracts as a purchaser 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.
During the six months ended June 30, 2017, the Series entered into CDS contracts as a seller of protection. 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 as unrealized appreciation or depreciation daily. 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 are posted to counterparties for centrally cleared CDS basket trades, as determined by the applicable central counterparty. As disclosed in the footnotes to the Schedule of Investments, at June 30, 2017, the notional value of the protection sold was $8,800,000 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
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Notes to financial statements (continued)
6. Derivatives (continued)
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, 2017, net unrealized appreciation of the protection sold was $60,125.
CDS contracts may involve greater risks than if the Series had invested in the reference obligation directly. CDS contracts are subject to general market 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, 2017, the Series entered into CDS contracts to hedge against credit events and to gain exposure to certain securities or markets.
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, 2017, the Series posted $5,927,064 in cash as collateral for certain open centrally cleared swap contracts, which is presented as “Cash collateral due from brokers” on the “Statement of assets and liabilities.” At June 30, 2017, for bilateral open derivatives contracts, the Series posted $1,790,000 in cash as collateral, which is presented as “Cash collateral due from brokers” on the “Statement of assets and liabilities.” At June 30, 2017, the Series received $330,000 in cash as collateral for certain open derivatives, which is presented as “Cash collateral due to brokers” on the “Statement of assets and liabilities.”
Fair values of derivative instruments as of June 30, 2017 were as follows:
Asset Derivatives Fair Value | |||||||||||||||||||||||||
Statement of Assets and Liabilities Location | Currency Contracts | Equity Contracts | Interest Rate Contracts | Credit Contracts | Total | ||||||||||||||||||||
Unrealized appreciation on foreign currency exchange contracts | $ | 307,760 | $ | — | $ | — | $ | — | $ | 307,760 | |||||||||||||||
Variation margin due to broker from futures contracts* | — | 168,688 | 2,074,143 | — | 2,242,831 | ||||||||||||||||||||
Unrealized appreciation on credit default swap contracts | — | — | — | 216,229 | 216,229 | ||||||||||||||||||||
Variation margin due from brokers on centrally cleared interest rate swap contracts | — | — | 76,665 | — | 76,665 | ||||||||||||||||||||
Unrealized appreciation on interest rate swap contracts | — | — | 8,996 | — | 8,996 | ||||||||||||||||||||
Options purchased, at value | 156,821 | — | — | — | 156,821 | ||||||||||||||||||||
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Total | $ | 464,581 | $ | 168,688 | $ | 2,159,804 | $ | 216,229 | $ | 3,009,302 | |||||||||||||||
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Liability Derivatives Fair Value | ||||||||||||||||||
Statement of Assets and Liabilities Location | Currency | Interest Rate Contracts | Credit Contracts | Total | ||||||||||||||
Unrealized depreciation on foreign currency exchange contracts | $1,233,611 | $ | — | $ | — | $ | 1,233,611 | |||||||||||
Variation margin due to broker from futures contracts* | — | 2,279,792 | — | 2,279,792 | ||||||||||||||
Variation margin due to broker credit default swap contracts | — | — | 81,483 | 81,483 | ||||||||||||||
Unrealized depreciation on credit default swap contracts | — | — | 74,621 | 74,621 | ||||||||||||||
Unrealized depreciation on interest rate swap contracts | — | 477,149 | — | 477,149 | ||||||||||||||
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Total | $1,233,611 | $ | 2,756,941 | $ | 156,104 | $ | 4,146,656 | |||||||||||
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*Includes cumulative appreciation/depreciation of futures contracts from the date the contracts were opened through June 30, 2017. Only current day variation margin is reported on the “Statement of assets and liabilities.”
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Notes to financial statements (continued)
6. Derivatives (continued)
The effect of derivative instruments on the “Statement of operations” for the six months ended June 30, 2017 was as follows:
Net Realized Gain (Loss) on: | ||||||||||||||||||||||||||||||
Foreign Currency Exchange Contracts | Futures Contracts | Options Purchased | Options Written | Swap Contracts | Total | |||||||||||||||||||||||||
Currency contracts | $(84,257) | $ | — | $ | (10,800 | ) | $ | — | $ | (95,057 | ) | |||||||||||||||||||
Equity contracts | — | (1,309,722 | ) | — | — | — | (1,309,722 | ) | ||||||||||||||||||||||
Interest rate contracts | — | (1,546,012 | ) | — | 709,250 | (37,531 | ) | (874,293 | ) | |||||||||||||||||||||
Credit contracts | — | — | — | — | (1,520,779 | ) | (1,520,779 | ) | ||||||||||||||||||||||
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| |||||||||||||||||||
Total | $(84,257) | $ | (2,855,734 | ) | $ | (10,800 | ) | $ | 709,250 | $ | (1,558,310 | ) | $ | (3,799,851 | ) | |||||||||||||||
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Net Change in Unrealized Appreciation (Depreciation) of: | ||||||||||||||||||||||||||||||
Foreign Currency Exchange Contracts | Futures Contracts | Options Purchased | Swaps Contracts | Total | ||||||||||||||||||||||||||
Currency contracts | $(1,307,881) | $ | — | $ | — | $ | — | $ | (1,307,881 | ) | ||||||||||||||||||||
Equity contracts | — | 168,688 | — | — | 168,688 | |||||||||||||||||||||||||
Interest rate contracts | — | (344,712 | ) | (75,133 | ) | (257,155 | ) | (677,000 | ) | |||||||||||||||||||||
Credit contracts | — | — | — | 20,874 | 20,874 | |||||||||||||||||||||||||
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|
|
|
|
|
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|
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| |||||||||||||||||||||
Total | $(1,307,881) | $(176,024) | $ | (75,133 | ) | $ | (236,281 | ) | $ | (1,795,319 | ) | |||||||||||||||||||
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Derivatives Generally. The table below summarizes the average balance of derivative holdings by the Series during the six months ended June 30, 2017:
Long Derivatives Volume | Short Derivatives Volume | |||||||
Foreign currency exchange contracts (average cost) | USD | 54,831,057 | USD | 53,709,626 | ||||
Futures contracts (average notional value) | 171,642,181 | 91,892,202 | ||||||
Options contracts (average notional value) | 18,285 | 307,602 | ||||||
CDS contracts (average notional value)* | 21,708,950 | 2,686,840 | ||||||
Interest rate swap contracts (average notional value)** | USD | — | 12,788,160 |
* 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.”
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Notes to financial statements (continued)
7. Offsetting (continued)
At June 30, 2017, 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 | ||||||||||||
Bank of America Merrill Lynch | $ | 118,134 | $ | (791,224 | ) | $ | (673,090 | ) | |||||||
BNP Paribas | 22,141 | (42,683 | ) | (20,542 | ) | ||||||||||
Credit Suisse First Boston | — | (10,807 | ) | (10,807 | ) | ||||||||||
Goldman Sachs | — | (79,235 | ) | (79,235 | ) | ||||||||||
Hong Kong Shanghai Bank | 110,593 | (25,679 | ) | 84,914 | |||||||||||
JPMorgan Chase Bank | 56,892 | (50,951 | ) | 5,941 | |||||||||||
Morgan Stanley Capital | — | (38,387 | ) | (38,387 | ) | ||||||||||
Toronto Dominion Bank | — | (277,478 | ) | (277,478 | ) | ||||||||||
Union Bank of Switzerland | — | (66,921 | ) | (66,921 | ) | ||||||||||
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| ||||||||||
Total | $ | 307,760 | $ | (1,383,365 | ) | $ | (1,075,605 | ) | |||||||
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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) | ||||||||||||||||||||||||
Bank of America Merrill Lynch | $ | (673,090 | ) | $ | — | $ | — | $ | — | $ | 673,090 | $ | — | |||||||||||||||||
BNP Paribas | (20,542 | ) | — | — | — | — | (20,542 | ) | ||||||||||||||||||||||
Credit Suisse First Boston | (10,807 | ) | — | — | — | — | (10,807 | ) | ||||||||||||||||||||||
Goldman Sachs | (79,235 | ) | — | — | — | 60,000 | (19,235 | ) | ||||||||||||||||||||||
Hong Kong Shanghai Bank | 84,914 | — | (84,914 | ) | — | — | — | |||||||||||||||||||||||
JPMorgan Chase Bank | 5,941 | — | (5,941 | ) | — | — | — | |||||||||||||||||||||||
Morgan Stanley Capital | (38,387 | ) | — | — | — | 38,387 | — | |||||||||||||||||||||||
Toronto Dominion Bank | (277,478 | ) | — | — | — | 150,000 | (127,478 | ) | ||||||||||||||||||||||
Union Bank of Switzerland | (66,921 | ) | — | — | — | 66,921 | — | |||||||||||||||||||||||
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| |||||||||||||||||||
Total | $ | (1,075,605 | ) | $ | — | $ | (90,855 | ) | $ | — | $ | 988,398 | $ | (178,062 | ) | |||||||||||||||
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Master Repurchase Agreements
Counterparty | Repurchase Agreements | Fair Value of Non-Cash Collateral Received(a) | Cash Collateral Received | Net Collateral Received | Net Exposure(b) | ||||||||||||||||||||
Bank of America Merrill Lynch | $ | 8,501,734 | $ | (8,501,734 | ) | $ | — | $ | (8,501,734 | ) | $ | — | |||||||||||||
Bank of Montreal | 14,169,557 | (14,169,557 | ) | — | (14,169,557 | ) | — | ||||||||||||||||||
BNP Paribas | 7,960,117 | (7,960,117 | ) | — | (7,960,117 | ) | — | ||||||||||||||||||
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| ||||||||||||||||
Total | $ | 30,631,408 | $ | (30,631,408 | ) | $ | — | $ | (30,631,408 | ) | $ | — | |||||||||||||
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(a)The value of the related collateral received exceeded the value of the net position and repurchase agreements as of June 30, 2017.
(b)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 Funds, may lend its securities pursuant to a security lending agreement (Lending Agreement) with The Bank of New York 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 US securities and foreign securities that are denominated and payable in US 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
Diversified Income Series-46
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Delaware VIP® Diversified Income Series
Notes to financial statements (continued)
8. Securities Lending (continued)
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.
Cash collateral received by each Series of the Trust is generally invested in 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 US 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. A Series can also accept US government securities and letters of credit (non-cash collateral) in connection with securities loans.
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, 2017, 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. When a loan agreement is purchased the Fund may pay an assignment fee. On an ongoing basis, the Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of a loan agreement. Prepayment penalty fees are received upon the prepayment of a loan agreement by a borrower. Prepayment penalty, facility, commitment, consent and amendment fees are recorded to income as earned or paid.
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
Diversified Income Series-47
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Delaware VIP® Diversified Income Series
Notes to financial statements (continued)
9. Credit and Market Risk (continued) are debt securities issued by US 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 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’ 15% limit on investments in illiquid securities. Rule 144A securities have been identified on the “Schedule of investments.”
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 US 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, 2017 that resulted in a net decrease in the Series’ NAV to reflect this likely recovery.
12. Recent Accounting Pronouncements
On Oct. 13, 2016, the Securities and Exchange Commission amended existing rules intended to modernize reporting and disclosure of information. These amendments relate to Regulation S-X which sets forth the form and content of financial statements. At this time, management is evaluating the implications of adopting these amendments and their impact on the financial statements and accompanying notes.
13. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to June 30, 2017 that would require recognition or disclosure in the Series’ financial statements.
Diversified Income Series-48
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Delaware VIP® 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 Series’ website at delawarefunds.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 Series’ website at delawarefunds.com/proxy; and (ii) on the Commission’s website at sec.gov.
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SA-VIPDIVINC 21593 (8/17) (235363) | Diversified Income Series-49 |
Table of Contents
Delaware VIP® Trust
Delaware VIP Emerging Markets Series
June 30, 2017
Table of Contents
1 | ||||||
2 | ||||||
3 | ||||||
6 | ||||||
7 | ||||||
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10 | ||||||
Other than Macquarie Bank Limited (MBL), none of the entities noted are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Series is governed by US laws and regulations.
Unless otherwise noted, views expressed herein are current as of June 30, 2017, 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.
Advisory services provided by Delaware Management Company, a series of Macquarie Investment Management Business Trust, a US registered investment advisor.
The Series is distributed by Delaware Distributors, L.P., an affiliate of Macquarie Investment Management Business Trust and Macquarie Group Limited. Macquarie Investment Management (MIM), a member of Macquarie Group, refers to the companies comprising the asset management division of 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.
© 2017 Macquarie Management Holdings, Inc. (formerly, Delaware Management Holdings, Inc.)
All third-party marks cited are the property of their respective owners. |
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Table of Contents
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Delaware VIP® Trust — Delaware VIP Emerging Markets Series
For the six-month period from January 1, 2017 to June 30, 2017 (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, 2017 to June 30, 2017.
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 1/1/17 | Ending Account Value 6/30/17 | Annualized Expense Ratio | Expenses Paid During Period 1/1/17 to 6/30/17* | |||||||||
Actual Series return† | ||||||||||||
Standard Class | $ | 1,000.00 | $ | 1,196.90 | 1.35% | $7.35 | ||||||
Service Class | 1,000.00 | 1,195.60 | 1.60% | 8.71 | ||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||
Standard Class | $ | 1,000.00 | $ | 1,018.10 | 1.35% | $6.76 | ||||||
Service Class | 1,000.00 | 1,016.86 | 1.60% | 8.00 |
* | “Expenses Paid During Period” are equal to the Series’ annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (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
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Delaware VIP® Trust — Delaware VIP Emerging Markets Series
Security type / country and sector allocations
As of June 30, 2017 (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 | 92.59 | % | |||
Argentina | 4.90 | % | |||
Bahrain | 0.09 | % | |||
Brazil | 12.20 | % | |||
Chile | 0.56 | % | |||
China/Hong Kong | 21.96 | % | |||
India | 6.62 | % | |||
Indonesia | 0.34 | % | |||
Malaysia | 1.19 | % | |||
Mexico | 5.84 | % | |||
Peru | 0.25 | % | |||
Republic of Korea | 20.25 | % | |||
Russia | 5.41 | % | |||
South Africa | 1.44 | % | |||
Taiwan | 7.85 | % | |||
Thailand | 0.90 | % | |||
Turkey | 0.86 | % | |||
United Kingdom | 0.31 | % | |||
United States | 1.62 | % | |||
Exchange-Traded Fund | 1.70 | % | |||
Preferred Stock by Country | 6.83 | % | |||
Brazil | 1.89 | % | |||
Republic of Korea | 3.15 | % | |||
Russia | 1.79 | % | |||
Participation Notes | 0.00 | % | |||
Total Value of Securities | 101.12 | % | |||
Liabilities Net of Receivables and Other Assets | (1.12 | %) | |||
Total Net Assets | 100.00 | % |
Common stock, preferred stock, and participation notes by sector² | Percentage of net assets | ||||
Consumer Discretionary | 9.76 | % | |||
Consumer Staples | 9.19 | % | |||
Energy | 13.29 | % | |||
Financials | 9.72 | % | |||
Industrials | 3.67 | % | |||
Information Technology* | 34.44 | % | |||
Materials | 5.15 | % | |||
Real Estate | 3.11 | % | |||
Telecommunication Services | 11.45 | % | |||
Utilities | 1.34 | % | |||
Total | 101.12 | % |
²Narrow industries are utilized for compliance purposes for diversification whereas broad sectors are used for financial reporting.
* 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, Internet, semiconductors, and software. As of June 30, 2017, such amounts, as a percentage of total net assets, were 17.36%, 14.93%, and 2.15%, 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
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Delaware VIP® Trust — Delaware VIP Emerging Markets Series
June 30, 2017 (Unaudited)
Number of shares | Value (US $) | |||||||
Common Stock – 92.59% D |
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Argentina – 4.90% | ||||||||
Arcos Dorados Holdings Class A † | 449,841 | $ | 3,351,315 | |||||
Cresud ADR † | 328,977 | 6,398,603 | ||||||
Grupo Clarin Class B GDR 144A # | 209,100 | 6,018,358 | ||||||
IRSA Inversiones y Representaciones ADR † | 430,000 | 10,371,600 | ||||||
Pampa Energia ADR † | 44,500 | 2,618,825 | ||||||
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28,758,701 | ||||||||
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Bahrain – 0.09% | ||||||||
Aluminium Bahrain GDR 144A # | 91,200 | 551,112 | ||||||
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551,112 | ||||||||
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Brazil – 12.20% | ||||||||
Aes Tiete Energia | 330,193 | 1,362,473 | ||||||
B2W Cia Digital † | 2,553,158 | 8,970,618 | ||||||
Banco Bradesco ADR | 726,000 | 6,171,000 | ||||||
Banco Santander Brasil ADR | 368,200 | 2,772,546 | ||||||
Braskem ADR | 78,499 | 1,626,499 | ||||||
BRF ADR | 341,500 | 4,026,285 | ||||||
Centrais Eletricas Brasileiras † | 711,800 | 2,681,416 | ||||||
Cia Brasileira de Distribuicao ADR † | 395,790 | 7,737,695 | ||||||
Cia Hering | 514,500 | 3,067,215 | ||||||
Cyrela Brazil Realty Empreendimentos e Participacoes | 266,900 | 891,842 | ||||||
Gerdau | 389,400 | 1,191,861 | ||||||
Gerdau ADR | 444,900 | 1,356,945 | ||||||
Hypermarcas | 553,000 | 4,625,443 | ||||||
Itau Unibanco Holding ADR | 732,050 | 8,089,153 | ||||||
Petroleo Brasileiro ADR † | 488,906 | 3,906,359 | ||||||
Rumo † | 166,548 | 433,852 | ||||||
Telefonica Brasil ADR | 392,181 | 5,290,522 | ||||||
TIM Participacoes ADR | 500,000 | 7,400,000 | ||||||
|
| |||||||
71,601,724 | ||||||||
|
| |||||||
Chile – 0.56% | ||||||||
Sociedad Quimica y Minera de Chile ADR | 100,000 | 3,302,000 | ||||||
|
| |||||||
3,302,000 | ||||||||
|
| |||||||
China/Hong Kong – 21.96% |
| |||||||
Alibaba Group Holding ADR † | 75,000 | 10,567,500 | ||||||
Baidu ADR † | 100,000 | 17,886,000 | ||||||
China Mengniu Dairy | 1,448,000 | 2,837,597 | ||||||
China Mobile ADR | 200,000 | 10,618,000 | ||||||
China Petroleum & Chemical | 2,260,000 | 1,762,855 | ||||||
China Petroleum & Chemical ADR | 42,234 | 3,319,592 | ||||||
China Yuchai International | 131,183 | 2,388,842 | ||||||
Ctrip.com International ADR † | 170,000 | 9,156,200 | ||||||
First Pacific | 3,185,195 | 2,349,900 | ||||||
JD.com ADR † | 91,700 | 3,596,474 | ||||||
Kunlun Energy | 4,622,900 | 3,919,794 | ||||||
PetroChina Class H | 3,000,000 | 1,836,707 | ||||||
SINA † | 200,000 | 16,994,000 | ||||||
Sohu.com † | 491,279 | 22,137,032 | ||||||
Tencent Holdings | 412,500 | 14,751,295 |
Number of shares | Value (US $) | |||||||
Common Stock D (continued) |
| |||||||
China/Hong Kong (continued) |
| |||||||
Tianjin Development Holdings | 35,950 | $ | 20,076 | |||||
Tingyi Cayman Islands Holding | 1,706,000 | 2,023,396 | ||||||
Weibo ADR † | 40,000 | 2,658,800 | ||||||
ZTO Express Cayman ADR † | 3,768 | 52,601 | ||||||
|
| |||||||
128,876,661 | ||||||||
|
| |||||||
India – 6.62% | ||||||||
Indiabulls Real Estate GDR † | 44,628 | 138,213 | ||||||
Makemytrip † | 100,000 | 3,355,000 | ||||||
RattanIndia Infrastructure GDR =† | 131,652 | 8,554 | ||||||
Reliance Industries † | 800,000 | 17,079,869 | ||||||
Reliance Industries | 430,000 | 18,232,000 | ||||||
Sify Technologies ADR | 91,200 | 64,770 | ||||||
|
| |||||||
38,878,406 | ||||||||
|
| |||||||
Indonesia – 0.34% | ||||||||
Tambang Batubara Bukit Asam Persero . | 2,241,097 | 2,010,857 | ||||||
|
| |||||||
2,010,857 | ||||||||
|
| |||||||
Malaysia – 1.19% | ||||||||
Hong Leong Bank | 1,549,790 | 5,653,783 | ||||||
UEM Sunrise † | 4,748,132 | 1,327,329 | ||||||
|
| |||||||
6,981,112 | ||||||||
|
| |||||||
Mexico – 5.84% | ||||||||
America Movil Class L ADR | 213,289 | 3,395,561 | ||||||
Cemex ADR † | 506,188 | 4,768,291 | ||||||
Fomento Economico Mexicano ADR | 98,307 | 9,667,510 | ||||||
Grupo Financiero Banorte Class O | 754,700 | 4,788,413 | ||||||
Grupo Lala | 606,200 | 1,111,276 | ||||||
Grupo Televisa ADR | 432,500 | 10,540,025 | ||||||
|
| |||||||
34,271,076 | ||||||||
|
| |||||||
Peru – 0.25% | ||||||||
Cia de Minas Buenaventura ADR | 125,440 | 1,442,560 | ||||||
|
| |||||||
1,442,560 | ||||||||
|
| |||||||
Republic of Korea – 20.25% |
| |||||||
CJ | 45,695 | 7,568,241 | ||||||
Hite Jinro | 150,000 | 3,054,669 | ||||||
KB Financial Group ADR | 134,209 | 6,776,212 | ||||||
KCC | 3,272 | 1,248,287 | ||||||
LG Display ADR | 188,309 | 3,026,126 | ||||||
LG Electronics | 62,908 | 4,409,581 | ||||||
LG Uplus | 500,000 | 6,817,288 | ||||||
Lotte Chilsung Beverage | 2,200 | 3,295,722 | ||||||
Lotte Confectionery | 29,040 | 5,025,495 | ||||||
NCSoft | 7,931 | 2,630,612 | ||||||
Netmarble Games 144A #† | 6,022 | 815,811 | ||||||
Samsung Electronics | 19,654 | 40,831,672 | ||||||
Samsung Life Insurance | 71,180 | 7,278,818 | ||||||
SK Hynix | 90,000 | 5,301,752 | ||||||
SK Telecom | 16,491 | 3,833,943 | ||||||
SK Telecom ADR | 660,000 | 16,942,200 | ||||||
|
| |||||||
118,856,429 | ||||||||
|
|
Emerging Markets Series-3
Table of Contents
|
Delaware VIP® Emerging Markets Series
Schedule of investments (continued)
Number of shares | Value (US $) | |||||||
Common Stock D (continued) |
| |||||||
Russia – 5.41% | ||||||||
Enel Russia PJSC GDR | 15,101 | $ | 14,485 | |||||
Etalon Group GDR 144A #= | 354,800 | 1,275,506 | ||||||
Gazprom PJSC ADR | 783,900 | 3,102,676 | ||||||
LUKOIL PJSC ADR (London International Exchange) | 133,500 | 6,501,450 | ||||||
MegaFon PJSC ADR | 234,178 | 2,145,070 | ||||||
Mobile TeleSystems ADR | 154,402 | 1,293,889 | ||||||
Sberbank of Russia PJSC = | 3,308,402 | 8,167,363 | ||||||
Surgutneftegas OJSC ADR | 294,652 | 1,267,004 | ||||||
T Plus = | 25,634 | 0 | ||||||
VEON ADR | 692,688 | 2,708,410 | ||||||
Yandex Class A † | 200,000 | 5,248,000 | ||||||
|
| |||||||
31,723,853 | ||||||||
|
| |||||||
South Africa – 1.44% | ||||||||
ArcelorMittal South Africa † | 374,610 | 151,762 | ||||||
Impala Platinum Holdings † | 135,751 | 382,375 | ||||||
Sun International | 168,124 | 709,122 | ||||||
Tongaat-Hulett | 182,915 | 1,628,863 | ||||||
Vodacom Group | 444,868 | 5,585,971 | ||||||
|
| |||||||
8,458,093 | ||||||||
|
| |||||||
Taiwan – 7.85% | ||||||||
Formosa Chemicals & Fibre | 2,128,998 | 6,683,738 | ||||||
Hon Hai Precision Industry | 1,605,706 | 6,175,792 | ||||||
MediaTek | 1,045,000 | 8,948,800 | ||||||
President Chain Store | 890,000 | 8,001,808 | ||||||
Taiwan Semiconductor Manufacturing | 2,375,864 | 16,284,275 | ||||||
|
| |||||||
46,094,413 | ||||||||
|
| |||||||
Thailand – 0.90% | ||||||||
Bangkok Bank-Foreign | 638,091 | 3,700,439 | ||||||
PTT Exploration & Production - Foreign | 617,051 | 1,566,696 | ||||||
|
| |||||||
5,267,135 | ||||||||
|
|
Number of shares | Value (US $) | |||||||
Common Stock D (continued) |
| |||||||
Turkey – 0.86% |
| |||||||
Turkcell Iletisim Hizmetleri | 368,462 | $ | 1,212,690 | |||||
Turkiye Sise ve Cam Fabrikalari | 2,955,292 | 3,863,731 | ||||||
|
| |||||||
5,076,421 | ||||||||
|
| |||||||
United Kingdom – 0.31% |
| |||||||
Anglo American ADR † | 92,815 | 617,405 | ||||||
Griffin Mining † | 1,642,873 | 1,184,892 | ||||||
|
| |||||||
1,802,297 | ||||||||
|
| |||||||
United States – 1.62% |
| |||||||
Altaba † | 157,300 | 8,569,704 | ||||||
Avon Products † | 241,200 | 916,560 | ||||||
|
| |||||||
9,486,264 | ||||||||
|
| |||||||
Total Common Stock |
| 543,439,114 | ||||||
|
| |||||||
Exchange-Traded Fund – 1.70% |
| |||||||
iShares MSCI Turkey ETF | 240,000 | 9,962,400 | ||||||
|
| |||||||
Total Exchange-Traded Fund |
| 9,962,400 | ||||||
|
| |||||||
Preferred Stock – 6.83% |
| |||||||
Brazil – 1.89% |
| |||||||
Braskem Class A 3.63% | 288,768 | 2,991,493 | ||||||
Centrais Eletricas Brasileiras Class B † | 233,700 | 1,149,842 | ||||||
Petroleo Brasileiro Class A ADR † | 403,795 | 3,012,311 | ||||||
Vale Class A † | 489,400 | 3,979,727 | ||||||
|
| |||||||
11,133,373 | ||||||||
|
| |||||||
Republic of Korea – 3.15% |
| |||||||
CJ 1.57% | 28,030 | 2,217,118 | ||||||
Samsung Electronics 1.44% | 9,995 | 16,265,953 | ||||||
|
| |||||||
18,483,071 | ||||||||
|
| |||||||
Russia – 1.79% |
| |||||||
AK Transneft =† | 3,887 | 10,512,531 | ||||||
|
| |||||||
10,512,531 | ||||||||
|
| |||||||
Total Preferred Stock |
| 40,128,975 | ||||||
|
|
Emerging Markets Series-4
Table of Contents
|
Delaware VIP® Emerging Markets Series
Schedule of investments (continued)
Number of shares | Value (US $) | |||||||
Participation Notes – 0.00% | ||||||||
Lehman Indian Oil | 100,339 | $ | 0 | |||||
Lehman Oil & Natural Gas | 146,971 | 0 | ||||||
|
| |||||||
Total Participation Notes | 0 | |||||||
|
|
Total Value of Securities – 101.12% | $ | 593,530,489 | ||
|
|
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At June 30, 2017, the aggregate value of Rule 144A securities was $26,892,787, which represents 4.58% 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, 2017, the aggregate value of fair valued securities was $19,963,954, which represents 3.40% of the Series’ net assets. See Note 1 in “Notes to financial statements.” |
D | Securities have been classified by country of origin. Aggregate classification by business sector has been presented on page 2 in “Security type / country and sector allocations.” |
† | Non-income producing security. |
Summary of Abbreviations:
ADR – American Depositary Receipt
ETF – Exchange Traded Fund
GDR – Global Depositary Receipt
LEPO – Low Exercise Price Option
OJSC – Open Joint Stock Company
PJSC – Public Joint Stock Company
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, 2017 (Unaudited) |
Assets: | ||||
Investments, at value1 | $ | 593,530,489 | ||
Foreign currencies, at value2 | 3,057,440 | |||
Dividends and interest receivable | 1,329,818 | |||
Receivable for series shares sold | 81,973 | |||
Foreign tax reclaims receivable | 4,845 | |||
|
| |||
Total assets | 598,004,565 | |||
|
| |||
Liabilities: | ||||
Cash due to custodian | 7,974,357 | |||
Payable for series shares redeemed | 354,625 | |||
Investment management fees payable | 602,738 | |||
Other accrued expenses | 404,458 | |||
Distribution fees payable to affiliates | 72,913 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 3,641 | |||
Accounting and administration expenses payable to affiliates | 2,243 | |||
Trustees’ fees and expenses payable | 1,514 | |||
Legal fees payable to affiliates | 1,495 | |||
Reports and statements to shareholders payable to affiliates | 384 | |||
Deferred capital gains tax | 1,645,011 | |||
|
| |||
Total liabilities | 11,063,379 | |||
|
| |||
Total Net Assets | $ | 586,941,186 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 544,970,690 | ||
Distributions in excess of net investment income | (1,547,876 | ) | ||
Accumulated net realized loss on investments | (14,010,375 | ) | ||
Net unrealized appreciation of investments | 57,573,810 | |||
Net unrealized depreciation of foreign currencies | (45,063 | ) | ||
|
| |||
Total Net Assets | $ | 586,941,186 | ||
|
| |||
Standard Class: | ||||
Net assets | $ | 235,817,686 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 11,048,108 | |||
Net asset value per share | $ | 21.34 | ||
Service Class: | ||||
Net assets | $ | 351,123,500 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 16,489,620 | |||
Net asset value per share | $ | 21.29 | ||
1Investments, at cost | $ | 534,311,668 | ||
2Foreign currencies, at cost | 3,098,697 |
See accompanying notes, which are an integral part of the financial statements.
Emerging Markets Series-6
Table of Contents
|
Delaware VIP® Trust —
Delaware VIP Emerging Markets Series Statement of operations
Six months ended June 30, 2017 (Unaudited)
Investment Income: | ||||
Dividends | $ | 7,612,447 | ||
Interest | 17 | |||
Foreign tax withheld | (815,307 | ) | ||
|
| |||
6,797,157 | ||||
|
| |||
Expenses: | ||||
Management fees | 3,507,557 | |||
Distribution expenses - Service Class | 512,455 | |||
Custodian fees | 126,539 | |||
Accounting and administration expenses | 86,520 | |||
Reports and statements to shareholders | 33,436 | |||
Dividend disbursing and transfer agent fees and expenses | 23,814 | |||
Audit and tax | 23,176 | |||
Legal fees | 19,950 | |||
Trustees’ fees and expenses | 13,998 | |||
Registration fees | 167 | |||
Other | 9,221 | |||
|
| |||
4,356,833 | ||||
Less waived distribution expenses - Service Class | (85,409 | ) | ||
Less expenses waived | (32,151 | ) | ||
Less expense paid indirectly | (1 | ) | ||
|
| |||
Total operating expenses | 4,239,272 | |||
|
| |||
Net Investment Income | 2,557,885 | |||
|
| |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (5,032,886 | ) | ||
Foreign currencies | 14,234 | |||
Foreign currency exchange contracts | 36,400 | |||
|
| |||
Net realized loss | (4,982,252 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) of: | ||||
Investments* | 101,168,198 | |||
Foreign currencies | 31,400 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | 101,199,598 | |||
|
| |||
Net Realized and Unrealized Gain | 96,217,346 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 98,775,231 | ||
|
|
* Includes $878,931 increase in capital gains tax accrued.
Delaware VIP Trust —
Delaware VIP Emerging Markets Series
Statements of changes in net assets
Six months ended 6/30/17 (Unaudited) | Year ended 12/31/16 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 2,557,885 | $ | 1,906,075 | ||||
Net realized loss | (4,982,252 | ) | (7,723,030 | ) | ||||
Net change in unrealized appreciation (depreciation) | 101,199,598 | 71,998,196 | ||||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 98,775,231 | 66,181,241 | ||||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Standard Class | (1,380,619 | ) | (2,030,270 | ) | ||||
Service Class | (1,408,749 | ) | (2,640,795 | ) | ||||
Net realized gain: | ||||||||
Standard Class | — | (4,039,055 | ) | |||||
Service Class | — | (6,943,628 | ) | |||||
|
|
|
| |||||
(2,789,368 | ) | (15,653,748 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Standard Class | 15,707,240 | 27,763,272 | ||||||
Service Class | 11,307,542 | 20,375,722 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 1,380,619 | 6,069,325 | ||||||
Service Class | 1,408,749 | 9,584,423 | ||||||
|
|
|
| |||||
29,804,150 | 63,792,742 | |||||||
|
|
|
| |||||
Cost of shares redeemed: | ||||||||
Standard Class | (15,512,681 | ) | (28,056,005 | ) | ||||
Service Class | (30,512,285 | ) | (61,248,819 | ) | ||||
|
|
|
| |||||
(46,024,966 | ) | (89,304,824 | ) | |||||
|
|
|
| |||||
Decrease in net assets derived from capital share transactions | (16,220,816 | ) | (25,512,082 | ) | ||||
|
|
|
| |||||
Net Increase in Net Assets | 79,765,047 | 25,015,411 | ||||||
Net Assets: | ||||||||
Beginning of period | 507,176,139 | 482,160,728 | ||||||
|
|
|
| |||||
End of period | $ | 586,941,186 | $ | 507,176,139 | ||||
|
|
|
| |||||
Distributions in excess of net investment income | $ | (1,547,876 | ) | $ | (1,316,393 | ) | ||
|
|
|
|
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
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 6/30/171 | Year ended | |||||||||||||||||||||||
(Unaudited) | 12/31/16 | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | |||||||||||||||||||
Net asset value, beginning of period | $ | 17.94 | $ | 16.27 | $ | 19.54 | $ | 21.47 | $ | 19.84 | $ | 17.51 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income2 | 0.11 | 0.09 | 0.13 | 0.13 | 0.14 | 0.21 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 3.42 | 2.15 | (2.86 | ) | (1.84 | ) | 1.84 | 2.31 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 3.53 | 2.24 | (2.73 | ) | (1.71 | ) | 1.98 | 2.52 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||
Net investment income | (0.13 | ) | (0.19 | ) | (0.16 | ) | (0.14 | ) | (0.35 | ) | (0.19 | ) | ||||||||||||
Net realized gain | — | (0.38 | ) | (0.38 | ) | (0.08 | ) | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.13 | ) | (0.57 | ) | (0.54 | ) | (0.22 | ) | (0.35 | ) | (0.19 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 21.34 | $ | 17.94 | $ | 16.27 | $ | 19.54 | $ | 21.47 | $ | 19.84 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return3 | 19.69% | 13.93% | (14.51% | ) | (8.06% | ) | 10.14% | 14.44% | ||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 235,818 | $ | 196,918 | $ | 172,098 | $ | 172,200 | $ | 175,134 | $ | 140,966 | ||||||||||||
Ratio of expenses to average net assets | 1.35% | 1.37% | 1.37% | 1.38% | 1.41% | 1.40% | ||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 1.36% | 1.40% | 1.37% | 1.38% | 1.41% | 1.40% | ||||||||||||||||||
Ratio of net investment income to average net assets | 1.06% | 0.53% | 0.70% | 0.62% | 0.68% | 1.11% | ||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 1.05% | 0.50% | 0.70% | 0.62% | 0.68% | 1.11% | ||||||||||||||||||
Portfolio turnover | 3% | 8% | 6% | 5% | 16% | 22% |
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 6/30/171 | Year ended | |||||||||||||||||||||||
(Unaudited) | 12/31/16 | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | |||||||||||||||||||
Net asset value, beginning of period | $ | 17.88 | $ | 16.21 | $ | 19.48 | $ | 21.40 | $ | 19.78 | $ | 17.45 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income2 | 0.08 | 0.05 | 0.08 | 0.08 | 0.09 | 0.16 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 3.41 | 2.14 | (2.86 | ) | (1.84 | ) | 1.83 | 2.31 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 3.49 | 2.19 | (2.78 | ) | (1.76 | ) | 1.92 | 2.47 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||
Net investment income | (0.08 | ) | (0.14 | ) | (0.11 | ) | (0.08 | ) | (0.30 | ) | (0.14 | ) | ||||||||||||
Net realized gain | — | (0.38 | ) | (0.38 | ) | (0.08 | ) | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.08 | ) | (0.52 | ) | (0.49 | ) | (0.16 | ) | (0.30 | ) | (0.14 | ) | ||||||||||||
|
|
|
|
|
|
|
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Net asset value, end of period | $ | 21.29 | $ | 17.88 | $ | 16.21 | $ | 19.48 | $ | 21.40 | $ | 19.78 | ||||||||||||
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Total return3 | 19.56% | 13.68% | (14.77% | ) | (8.26% | ) | 9.86% | 14.19% | ||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 351,123 | $ | 310,258 | $ | 310,063 | $ | 362,469 | $ | 406,571 | $ | 389,349 | ||||||||||||
Ratio of expenses to average net assets | 1.60% | 1.62% | 1.62% | 1.63% | 1.66% | 1.65% | ||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 1.66% | 1.70% | 1.67% | 1.68% | 1.71% | 1.70% | ||||||||||||||||||
Ratio of net investment income to average net assets | 0.81% | 0.28% | 0.45% | 0.37% | 0.43% | 0.86% | ||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 0.75% | 0.20% | 0.40% | 0.32% | 0.38% | 0.81% | ||||||||||||||||||
Portfolio turnover | 3% | 8% | 6% | 5% | 16% | 22% |
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
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Delaware VIP® Trust — Delaware VIP Emerging Markets Series
June 30, 2017 (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 Core Series (formerly, 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 distribution and/or service (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 US generally accepted accounting principles (US 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. US 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-US markets because, among other things, most foreign markets close well before the Series values its securities, generally as of 4:00pm 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 on the Series’ federal income tax returns through the six months ended June 30, 2017 and for all open tax years (years ended Dec. 31, 2013–Dec. 31, 2016), 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. If applicable, the Series recognizes interest accrued on unrecognized tax benefits in interest expense and penalties in other expenses on the Statement of operations. During the six months ended June 30, 2017, the Series did not incur any interest or tax penalties.
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 US 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, 2017, 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 US dollars at the exchange rate of such currencies against the US 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 US GAAP. Therefore, the Series follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that
Emerging Markets Series-10
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Delaware VIP® Emerging Markets Series
Notes to financial statements (continued)
1. Significant Accounting Policies (continued)
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 FundsSM by Macquarie (Delaware Funds) are generally allocated among such funds on the basis of average net assets. Management fees and certain 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, 2017.
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 $1, 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, 2017, the Series earned $1 under this agreement.
During the six months ended June 30, 2017, 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, 2017, the Series had an average outstanding overdraft balance equal to 1.16% of its average net assets for which it was charged interest of $108,186, which is included on the “Statement of operations” under “Custodian fees.” The average borrowing rate charged on the overdraft was 3.31%.
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 Macquarie Investment Management Business Trust (formerly Delaware Management Business Trust) and the investment manager, an annual fee which is calculated daily and paid monthly at the rate of 1.25% on the first $500 million of average daily and paid monthly 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, acquired fund fees and expenses, taxes, interest, short sale dividend and 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), do not exceed 1.36% of the Series’ average daily net assets from May 1, 2017 through June 30, 2017.* Prior to May 1, 2017, the expenses were capped at 1.35% of the Series’ average daily net assets. 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 daily and paid monthly based on the aggregate daily net assets of the Delaware 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 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, 2017, the Series was charged $13,081 for these services.
DIFSC is also the transfer agent and dividend disbursing agent of the Series. For these services, DIFSC’s fees are calculated daily and paid monthly 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, 2017, the Series was charged $21,147 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.”
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Delaware VIP® Emerging Markets Series
Notes to financial statements (continued)
2. Investment Management, Administration Agreements, and Other Transactions with Affiliates (continued)
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 12b-1 fee of 0.30% of the average daily net assets of the Service Class shares. DDLP has contracted to waive the 12b-1 fee from Jan. 1, 2017 through June 30, 2017* in order to limit the 12b-1 fee of the Service Class shares to 0.25% of average daily net assets. Standard Class shares pay no 12b-1 fee.
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, 2017, the Series was charged $6,457 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 aggregate contractual waiver period covering this report is from April 29, 2016 through May 1, 2018.
3. Investments
For the six months ended June 30, 2017, the Series made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 18,141,933 | ||
Sales | 37,007,094 |
At June 30, 2017, 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, 2017, the cost of investments and unrealized appreciation (depreciation) for the Series were as follows:
Cost of Investments | Aggregate Unrealized Appreciation of Investments | Aggregate Unrealized Depreciation of Investments | Net Unrealized Appreciation of Investments | |||
$534,311,668 | $186,455,111 | $(127,236,290) | $59,218,821 |
Under the Regulated Investment Company Modernization Act of 2010 (Act), net capital losses for tax years beginning after Dec. 22, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses.
The Series has capital loss carryforwards available to offset future realized gains as follows:
Loss carryforward character | ||
Short-term | Long-term | |
$ — | $8,255,393 |
US 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) |
Emerging Markets Series-12
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Delaware VIP® Emerging Markets Series
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, 2017:
Securities | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Common Stock | ||||||||||||||||
Argentina | $ | 22,740,343 | $ | 6,018,358 | $ | — | $ | 28,758,701 | ||||||||
Bahrain | — | 551,112 | — | 551,112 | ||||||||||||
Brazil | 71,601,724 | — | — | 71,601,724 | ||||||||||||
Chile | 3,302,000 | — | — | 3,302,000 | ||||||||||||
China/Hong Kong | 128,876,661 | — | — | 128,876,661 | ||||||||||||
India | 38,869,852 | 8,554 | — | 38,878,406 | ||||||||||||
Indonesia | — | 2,010,857 | — | 2,010,857 | ||||||||||||
Malaysia | 6,981,112 | — | — | 6,981,112 | ||||||||||||
Mexico | 34,271,076 | — | — | 34,271,076 | ||||||||||||
Peru | 1,442,560 | — | — | 1,442,560 | ||||||||||||
Republic of Korea | 118,856,429 | — | — | 118,856,429 | ||||||||||||
Russia | 22,266,499 | 8,181,848 | 1,275,506 | 31,723,853 | ||||||||||||
South Africa | 8,458,093 | — | — | 8,458,093 | ||||||||||||
Taiwan | 46,094,413 | — | — | 46,094,413 | ||||||||||||
Thailand | 5,267,135 | — | — | 5,267,135 | ||||||||||||
Turkey | 5,076,421 | — | — | 5,076,421 | ||||||||||||
United Kingdom | 1,802,297 | — | — | 1,802,297 | ||||||||||||
United States | 9,486,264 | — | — | 9,486,264 | ||||||||||||
Exchange-Traded Fund | 9,962,400 | — | — | 9,962,400 | ||||||||||||
Preferred Stock1 | 29,616,444 | 10,512,531 | — | 40,128,975 | ||||||||||||
Participation Notes | — | — | — | — | ||||||||||||
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Total Value of Securities | $ | 564,971,723 | $ | 27,283,260 | $ | 1,275,506 | $ | 593,530,489 | ||||||||
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1Security type is valued across multiple levels. The amounts attributed to Level 1 investments and Level 2 investments represent 73.80% and 26.20%, 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, 2017, a portion of the common stock in 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, 2017, 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.
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Delaware VIP® Emerging Markets Series
Notes to financial statements (continued)
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 6/30/17 | Year ended 12/31/16 | |||||||
Shares sold: | ||||||||
Standard Class | 773,204 | 1,626,179 | ||||||
Service Class | 560,144 | 1,201,505 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 67,184 | 357,439 | ||||||
Service Class | 68,686 | 565,453 | ||||||
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1,469,218 | 3,750,576 | |||||||
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Shares redeemed: | ||||||||
Standard Class | (770,490 | ) | (1,584,591 | ) | ||||
Service Class | (1,492,110 | ) | (3,537,319 | ) | ||||
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(2,262,600 | ) | (5,121,910 | ) | |||||
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Net decrease | (793,382 | ) | (1,371,334 | ) | ||||
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5. Line of Credit
The Series, along with certain other funds in the Delaware 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 0.15%, which was allocated across the Participants on the basis of relative net assets 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. 6, 2017.
The Series had no amounts outstanding as of June 30, 2017 or at any time during the period then ended.
6. Derivatives
US 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 US 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 US 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, 2017, 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, 2017, the Series experienced net realized and unrealized gains or losses attributable to foreign currency holdings, which are disclosed as “Net realized gain on foreign currency exchange contracts” on the “Statement of operations.”
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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, 2017.
Long Derivatives Volume | Short Derivatives Volume | |||
Foreign currency exchange contracts (average cost) | $60,100 | $4,148 |
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, 2017, the Series had the no assets and liabilities subject to offsetting provisions.
8. Securities Lending
The Series, along with other funds in the Delaware 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 US securities and foreign securities that are denominated and payable in US 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.
Cash collateral received by each series of the Trust is generally invested in 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 US 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 short fall 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.
Emerging Markets Series-15
Table of Contents
|
Delaware VIP® Emerging Markets 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, 2017, 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 securities have been identified on the “Schedule of investments.”
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. Recent Accounting Pronouncements
On Oct. 13, 2016, the Securities and Exchange Commission amended existing rules intended to modernize reporting and disclosure of information. These amendments relate to Regulation S-X which sets forth the form and content of financial statements. At this time, management is evaluating the implications of adopting these amendments and their impact on the financial statements and accompanying notes.
12. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to June 30, 2017 that would require recognition or disclosure in the Series’ financial statements.
Emerging Markets Series-16
Table of Contents
|
Delaware VIP® Emerging Markets Series
Notes to financial statements (continued)
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 Series’ website at delawarefunds.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 Series’ website at delawarefunds.com/proxy; and (ii) on the Commission’s website at sec.gov.
|
SA-VIPEM 21594 (8/17) (235363) | Emerging Markets Series-17 |
Table of Contents
Delaware VIP® Trust
Delaware VIP Smid Cap Core Series
(formerly, Delaware VIP Smid Cap Growth Series)
June 30, 2017
Table of Contents
3 | ||||||
Security type / sector allocation and top 10 equity holdings | 4 | |||||
5 | ||||||
8 | ||||||
9 | ||||||
9 | ||||||
10 | ||||||
12 | ||||||
Other than Macquarie Bank Limited (MBL), none of the entities noted are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Series is governed by US laws and regulations.
Unless otherwise noted, views expressed herein are current as of June 30, 2017, 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.
Advisory services provided by Delaware Management Company, a series of Macquarie Investment Management Business Trust, a US registered investment advisor.
The Series is distributed by Delaware Distributors, L.P., an affiliate of Macquarie Investment Management Business Trust and Macquarie Group Limited. Macquarie Investment Management (MIM), a member of Macquarie Group, refers to the companies comprising the asset management division of 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 Core Series only if preceded or accompanied by the Series’ current prospectus or the summary prospectus.
© 2017 Macquarie Management Holdings, Inc. (formerly, 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 Core Series
For the six-month period from January 1, 2017 to June 30, 2017 (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, 2017 to June 30, 2017.
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 1/1/17 | Ending Account Value 6/30/17 | Annualized Expense Ratio | Expenses Paid During Period | |||||||||
Actual Series return† | ||||||||||||
Standard Class | $1,000.00 | $1,073.90 | 0.82% | $4.22 | ||||||||
Service Class | 1,000.00 | 1,072.70 | 1.07% | 5.50 | ||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||
Standard Class | $1,000.00 | $1,020.73 | 0.82% | $4.11 | ||||||||
Service Class | 1,000.00 | 1,019.49 | 1.07% | 5.36 |
* | “Expenses Paid During Period” are equal to the Series’ annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (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 Core Series-1
Table of Contents
Delaware VIP® Trust — Delaware VIP Smid Cap Core Series
Security type / sector allocation and top 10 equity holdings
As of June 30, 2017 (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 | 97.45% | ||||
Basic Materials | 9.12% | ||||
Business Services | 5.89% | ||||
Capital Goods | 9.53% | ||||
Communications Services | 0.92% | ||||
Consumer Discretionary | 2.84% | ||||
Consumer Services | 2.50% | ||||
Consumer Staples | 1.86% | ||||
Credit Cyclicals | 1.99% | ||||
Energy | 4.89% | ||||
Financial Services | 17.67% | ||||
Healthcare | 12.59% | ||||
Media | 1.23% | ||||
Real Estate Investment Trusts | 8.05% | ||||
Technology | 13.16% | ||||
Transportation | 1.84% | ||||
Utilities | 3.37% | ||||
Short-Term Investments | 2.42% | ||||
Total Value of Securities | 99.87% | ||||
Receivables and Other Assets Net of Liabilities | 0.13% | ||||
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 | |
Aramark | 1.28% | |
Western Alliance Bancorp | 1.24% | |
Reinsurance Group of America | 1.23% | |
Spire | 1.22% | |
Tenneco | 1.19% | |
MGIC Investment | 1.18% | |
NorthWestern | 1.16% | |
Lazard Class A | 1.13% | |
Great Western Bancorp | 1.12% | |
Diamondback Energy | 1.11% |
Smid Cap Core Series-2
Table of Contents
Delaware VIP® Trust — Delaware VIP Smid Cap Core Series
June 30, 2017 (Unaudited)
Number of shares | Value (US $) | |||||||
Common Stock – 97.45% |
| |||||||
Basic Materials – 9.12% |
| |||||||
Axalta Coating Systems † | 174,789 | $ | 5,600,240 | |||||
Balchem | 81,782 | 6,355,279 | ||||||
Continental Building Products † | 225,662 | 5,257,925 | ||||||
Eastman Chemical | 69,486 | 5,836,129 | ||||||
Huntsman | 231,420 | 5,979,893 | ||||||
Kaiser Aluminum | 47,595 | 4,213,109 | ||||||
Minerals Technologies | 87,722 | 6,421,250 | ||||||
Neenah Paper | 80,453 | 6,456,353 | ||||||
Reliance Steel & Aluminum | 89,493 | 6,515,985 | ||||||
Worthington Industries | 130,450 | 6,551,199 | ||||||
|
| |||||||
59,187,362 | ||||||||
|
| |||||||
Business Services – 5.89% |
| |||||||
Aramark | 202,549 | 8,300,458 | ||||||
Convergys | 203,606 | 4,841,751 | ||||||
Gartner † | 42,848 | 5,292,156 | ||||||
On Assignment † | 94,360 | 5,109,594 | ||||||
TransUnion † | 108,668 | 4,706,411 | ||||||
US Ecology | 84,250 | 4,254,625 | ||||||
WageWorks † | 85,515 | 5,746,608 | ||||||
|
| |||||||
38,251,603 | ||||||||
|
| |||||||
Capital Goods – 9.53% |
| |||||||
AAON | 88,748 | 3,270,364 | ||||||
Acuity Brands | 18,821 | 3,825,933 | ||||||
Barnes Group | 70,071 | 4,101,256 | ||||||
Belden | 46,825 | 3,532,010 | ||||||
ESCO Technologies | 57,003 | 3,400,229 | ||||||
Esterline Technologies † | 35,125 | 3,329,850 | ||||||
Graco | 58,278 | 6,368,620 | ||||||
Granite Construction | 136,093 | 6,565,126 | ||||||
Kadant | 68,950 | 5,185,040 | ||||||
KLX † | 80,793 | 4,039,650 | ||||||
Lincoln Electric Holdings | 54,860 | 5,052,057 | ||||||
Oshkosh | 49,950 | 3,440,556 | ||||||
Rockwell Collins | 31,277 | 3,286,587 | ||||||
United Rentals † | 29,075 | 3,277,043 | ||||||
Woodward | 47,450 | 3,206,671 | ||||||
|
| |||||||
61,880,992 | ||||||||
|
| |||||||
Communications Services – 0.92% |
| |||||||
InterXion Holding † | 130,038 | 5,953,140 | ||||||
|
| |||||||
5,953,140 | ||||||||
|
| |||||||
Consumer Discretionary – 2.84% |
| |||||||
Five Below † | 93,851 | 4,633,424 | ||||||
Malibu Boats Class A † | 156,491 | 4,048,422 | ||||||
Steven Madden † | 146,461 | 5,851,117 | ||||||
Tractor Supply | 72,042 | 3,905,397 | ||||||
|
| |||||||
18,438,360 | ||||||||
|
| |||||||
Consumer Services – 2.50% |
| |||||||
Cheesecake Factory | 67,053 | 3,372,766 | ||||||
Chuy’s Holdings † | 78,234 | 1,830,676 | ||||||
Del Frisco’s Restaurant Group † | 203,252 | 3,272,357 |
Number of shares | Value (US $) | |||||||
Common Stock (continued) |
| |||||||
Consumer Services (continued) |
| |||||||
Hawaiian Holdings † | 78,229 | $ | 3,672,851 | |||||
Jack in the Box | 41,250 | 4,063,125 | ||||||
|
| |||||||
16,211,775 | ||||||||
|
| |||||||
Consumer Staples – 1.86% |
| |||||||
Casey’s General Stores | 39,485 | 4,229,238 | ||||||
J&J Snack Foods | 24,753 | 3,269,129 | ||||||
Pinnacle Foods | 77,577 | 4,608,074 | ||||||
|
| |||||||
12,106,441 | ||||||||
|
| |||||||
Credit Cyclicals – 1.99% |
| |||||||
BorgWarner | �� | 123,275 | 5,221,929 | |||||
Tenneco | 133,264 | 7,706,657 | ||||||
|
| |||||||
12,928,586 | ||||||||
|
| |||||||
Energy – 4.89% |
| |||||||
Carrizo Oil & Gas † | 134,442 | 2,341,980 | ||||||
Core Laboratories | 21,622 | 2,189,660 | ||||||
Diamondback Energy † | 81,342 | 7,223,983 | ||||||
Parsley Energy Class A † | 204,402 | 5,672,155 | ||||||
Patterson-UTI Energy | 149,103 | 3,010,390 | ||||||
RSP Permian † | 80,255 | 2,589,829 | ||||||
SRC Energy † | 446,128 | 3,002,441 | ||||||
Superior Energy Services † | 281,585 | 2,936,932 | ||||||
US Silica Holdings | 78,339 | 2,780,251 | ||||||
|
| |||||||
31,747,621 | ||||||||
|
| |||||||
Financial Services – 17.67% |
| |||||||
Arthur J. Gallagher | 88,194 | 5,049,107 | ||||||
East West Bancorp | 104,191 | 6,103,509 | ||||||
Essent Group † | 143,833 | 5,341,958 | ||||||
Great Western Bancorp | 178,437 | 7,282,014 | ||||||
Lazard Class A | 157,915 | 7,316,202 | ||||||
MGIC Investment † | 686,240 | 7,685,888 | ||||||
Old National Bancorp | 337,466 | 5,821,289 | ||||||
Primerica | 73,039 | 5,532,704 | ||||||
Prosperity Bancshares | 83,692 | 5,376,374 | ||||||
Reinsurance Group of America | 62,410 | 8,012,820 | ||||||
RenaissanceRe Holdings | 35,912 | 4,993,564 | ||||||
Selective Insurance Group | 77,204 | 3,864,060 | ||||||
Sterling Bancorp | 257,728 | 5,992,176 | ||||||
Stifel Financial † | 142,354 | 6,545,437 | ||||||
Umpqua Holdings | 329,430 | 6,048,335 | ||||||
Validus Holdings | 98,178 | 5,102,311 | ||||||
Webster Financial | 123,339 | 6,440,763 | ||||||
Western Alliance Bancorp † | 163,022 | 8,020,682 | ||||||
WSFS Financial | 92,918 | 4,213,831 | ||||||
|
| |||||||
114,743,024 | ||||||||
|
| |||||||
Healthcare – 12.59% | ||||||||
ABIOMED † | 41,303 | 5,918,720 | ||||||
Align Technology † | 41,739 | 6,265,859 | ||||||
Alkermes † | 96,827 | 5,613,061 | ||||||
Bio-Techne | 45,825 | 5,384,437 | ||||||
Catalent † | 150,245 | 5,273,599 |
Smid Cap Core Series-3
Table of Contents
Delaware VIP® Smid Cap Core Series
Schedule of investments (continued)
Number of shares | Value (US $) | |||||||
Common Stock (continued) |
| |||||||
Healthcare (continued) |
| |||||||
DexCom † | 79,334 | $ | 5,803,282 | |||||
Exact Sciences † | 93,418 | 3,304,195 | ||||||
HealthSouth | 109,589 | 5,304,108 | ||||||
ICON (Ireland) † | 61,026 | 5,967,732 | ||||||
Ligand Pharmaceuticals Class B † | 52,204 | 6,337,566 | ||||||
Medicines † | 120,552 | 4,582,181 | ||||||
Neurocrine Biosciences † | 101,670 | 4,676,820 | ||||||
TESARO † | 33,825 | 4,730,765 | ||||||
WellCare Health Plans † | 39,762 | 7,139,665 | ||||||
West Pharmaceutical Services | 57,451 | 5,430,268 | ||||||
|
| |||||||
81,732,258 | ||||||||
|
| |||||||
Media – 1.23% |
| |||||||
Cinemark Holdings | 77,949 | 3,028,319 | ||||||
Interpublic Group | 201,678 | 4,961,279 | ||||||
|
| |||||||
7,989,598 | ||||||||
|
| |||||||
Real Estate Investment Trusts – 8.05% |
| |||||||
Apartment Investment & Management | 129,671 | 5,571,963 | ||||||
Brixmor Property Group | 311,302 | 5,566,080 | ||||||
DCT Industrial Trust | 55,503 | 2,966,080 | ||||||
EPR Properties | 65,401 | 4,700,370 | ||||||
Equity Commonwealth † | 114,925 | 3,631,630 | ||||||
First Industrial Realty Trust | 103,860 | 2,972,473 | ||||||
Gramercy Property Trust | 142,183 | 4,224,257 | ||||||
Kite Realty Group Trust | 326,860 | 6,187,460 | ||||||
Life Storage | 84,487 | 6,260,487 | ||||||
Pebblebrook Hotel Trust | 128,972 | 4,158,057 | ||||||
Ramco-Gershenson Properties Trust | 467,193 | 6,026,790 | ||||||
|
| |||||||
52,265,647 | ||||||||
|
| |||||||
Technology – 13.16% |
| |||||||
Arista Networks † | 27,069 | 4,054,665 | ||||||
Blackbaud | 28,480 | 2,442,160 | ||||||
ExlService Holdings † | 96,841 | 5,382,423 | ||||||
GrubHub † | 87,406 | 3,810,902 | ||||||
Guidewire Software † | 62,304 | 4,280,908 | ||||||
II-VI † | 90,743 | 3,112,485 | ||||||
j2 Global | 76,591 | 6,517,128 | ||||||
KeyW Holding † | 293,333 | 2,742,664 | ||||||
LendingTree † | 20,582 | 3,544,220 | ||||||
MACOM Technology Solutions Holdings † | 68,716 | 3,832,291 | ||||||
MaxLinear Class A † | 132,611 | 3,698,521 | ||||||
Microsemi † | 149,648 | 7,003,526 | ||||||
NETGEAR † | 83,692 | 3,607,125 | ||||||
Paycom Software † | 34,727 | 2,375,674 | ||||||
Proofpoint † | 62,454 | 5,422,881 | ||||||
PTC † | 60,774 | 3,349,863 | ||||||
Semtech † | 143,136 | 5,117,112 | ||||||
SS&C Technologies Holdings | 103,501 | 3,975,473 | ||||||
Tyler Technologies † | 23,108 | 4,059,382 | ||||||
WNS Holdings ADR † | 137,401 | 4,721,098 |
Number of shares | Value (US $) | |||||||
Common Stock (continued) |
| |||||||
Technology (continued) |
| |||||||
Yelp † | 79,831 | $ | 2,396,527 | |||||
|
| |||||||
85,447,028 | ||||||||
|
| |||||||
Transportation – 1.84% |
| |||||||
Genesee & Wyoming † | 80,662 | 5,516,474 | ||||||
XPO Logistics † | 99,002 | 6,398,499 | ||||||
|
| |||||||
11,914,973 | ||||||||
|
| |||||||
Utilities – 3.37% |
| |||||||
NorthWestern | 123,866 | 7,558,303 | ||||||
South Jersey Industries | 186,914 | 6,386,851 | ||||||
Spire | 113,276 | 7,901,001 | ||||||
|
| |||||||
21,846,155 | ||||||||
|
| |||||||
Total Common Stock | 632,644,563 | |||||||
|
| |||||||
Principal amount° | ||||||||
Short-Term Investments – 2.42% |
| |||||||
Discount Note – 0.28% ≠ |
| |||||||
Federal Home Loan Bank 0.95% 7/10/17 | 1,803,417 | 1,803,069 | ||||||
|
| |||||||
1,803,069 | ||||||||
|
| |||||||
Repurchase Agreement – 1.71% |
| |||||||
Bank of America Merrill Lynch 0.99%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $3,081,361 (collateralized by US government obligations 3.375% 5/15/44; market value $3,142,731) | 3,081,107 | 3,081,107 | ||||||
Bank of Montreal 0.93%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $5,135,576 (collateralized by US government obligations 0.625%-3.75% 7/31/17-2/15/45; market value $5,237,883) | 5,135,178 | 5,135,178 | ||||||
BNP Paribas | 2,884,820 | 2,884,820 | ||||||
|
| |||||||
11,101,105 | ||||||||
|
|
Smid Cap Core Series-4
Table of Contents
Delaware VIP® Smid Cap Core Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Short-Term Investments (continued) |
| |||||||
US Treasury Obligation – 0.43% ≠ |
| |||||||
US Treasury Bill 0.70% 7/13/17 | 2,827,286 | $ | 2,826,686 | |||||
|
| |||||||
2,826,686 | ||||||||
|
| |||||||
Total Short-Term Investments | 15,730,860 | |||||||
|
|
Total Value of Securities – 99.87% | $ | 648,375,423 | ||||
|
|
≠ | The rate shown is the effective yield at the time of purchase. |
° | Principal amount shown is stated in US 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.
Smid Cap Core Series-5
Table of Contents
Delaware VIP® Trust — Delaware VIP Smid Cap Core Series | ||||
Statement of assets and liabilities | June 30, 2017 (Unaudited) |
Assets: | ||||
Investments, at value1 | $ | 632,644,563 | ||
Short-term investments, at value2 | 15,730,860 | |||
Cash | 264,883 | |||
Dividends and interest receivable | 631,649 | |||
Receivable for series shares sold | 298,886 | |||
Foreign tax reclaims receivable | 365,194 | |||
|
| |||
Total assets | 649,936,035 | |||
|
| |||
Liabilities: | ||||
Investment management fees payable to affiliates | 395,428 | |||
Other accrued expenses | 167,367 | |||
Payable for series shares redeemed | 57,873 | |||
Distribution fees payable to affiliates | 49,229 | |||
Audit and tax fees payable | 16,733 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 4,017 | |||
Accounting and administration expenses payable to affiliates | 2,474 | |||
Trustees’ fees and expenses payable | 1,649 | |||
Legal fees payable to affiliates | 1,636 | |||
Reports and statements to shareholders expenses payable to affiliates | 425 | |||
|
| |||
Total liabilities | 696,831 | |||
|
| |||
Total Net Assets | $ | 649,239,204 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 428,617,610 | ||
Distributions in excess of net investment income | (64,369 | ) | ||
Accumulated net realized gain on investments | 187,438,962 | |||
Net unrealized appreciation of investments | 33,242,920 | |||
Net unrealized appreciation of foreign currencies | 4,081 | |||
|
| |||
Total Net Assets | $ | 649,239,204 | ||
|
| |||
Net Asset Value | ||||
Standard Class: | ||||
Net assets | $ | 410,324,582 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 14,632,584 | |||
Net asset value per share | $ | 28.04 | ||
Service Class: | ||||
Net assets | $ | 238,914,622 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 8,966,326 | |||
Net asset value per share | $ | 26.65 |
1Investments, at cost | $ | 599,401,783 | ||
2Short-term investments, at cost | 15,730,720 |
See accompanying notes, which are an integral part of the financial statements.
Smid Cap Core Series-6
Table of Contents
Delaware VIP® Trust —
Delaware VIP Smid Cap Core Series
Six months ended June 30, 2017 (Unaudited)
Investment Income: | ||||
Dividends | $ | 2,861,107 | ||
Interest | 98,404 | |||
Foreign tax withheld | (94,288 | ) | ||
|
| |||
2,865,223 | ||||
|
| |||
Expenses: | ||||
Management fees | 2,356,076 | |||
Distribution expenses – Service Class | 354,285 | |||
Accounting and administration expenses | 98,073 | |||
Reports and statements to shareholders expenses | 50,825 | |||
Legal fees | 28,724 | |||
Dividend disbursing and transfer agent fees and expenses | 26,755 | |||
Audit and tax fees | 16,750 | |||
Trustees’ fees and expenses | 16,087 | |||
Custodian fees | 9,541 | |||
Registration fees | 2,342 | |||
Other | 8,326 | |||
|
| |||
2,967,784 | ||||
Less waived distribution expenses – Service Class | (59,048 | ) | ||
Less expense paid indirectly | (1 | ) | ||
|
| |||
Total operating expenses | 2,908,735 | |||
|
| |||
Net Investment Loss | (43,512 | ) | ||
|
| |||
Net Realized and Unrealized Gain (Loss): |
| |||
Net realized gain (loss) on: | ||||
Investments | 188,639,041 | |||
Foreign currencies | (73,897 | ) | ||
Foreign currency exchange contracts | (114,719 | ) | ||
|
| |||
Net realized gain | 188,450,425 | |||
|
| |||
Net change in unrealized appreciation (depreciation) of: | ||||
Investments | (143,040,148 | ) | ||
Foreign currencies | 21,303 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | (143,018,845 | ) | ||
|
| |||
Net Realized and Unrealized Gain | 45,431,580 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 45,388,068 | ||
|
|
Delaware VIP Trust —
Delaware VIP Smid Cap Core Series
Statements of changes in net assets
Six months ended 6/30/17 (Unaudited) | Year ended 12/31/16 | |||||||
Increase (Decrease) in Net Assets from Operations: |
| |||||||
Net investment income (loss) | $ | (43,512 | ) | $ | 1,451,373 | |||
Net realized gain | 188,450,425 | 42,866,620 | ||||||
Net change in unrealized appreciation (depreciation) | (143,018,845 | ) | 4,124,790 | |||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 45,388,068 | 48,442,783 | ||||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: |
| |||||||
Net investment income: | ||||||||
Standard Class | (1,251,028 | ) | (901,532 | ) | ||||
Service Class | (211,590 | ) | — | |||||
Net realized gain: | ||||||||
Standard Class | (26,972,718 | ) | (49,931,968 | ) | ||||
Service Class | (16,605,555 | ) | (30,966,415 | ) | ||||
|
|
|
| |||||
(45,040,891 | ) | (81,799,915 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: |
| |||||||
Proceeds from shares sold: |
| |||||||
Standard Class | 7,479,690 | 11,355,546 | ||||||
Service Class | 7,843,574 | 17,800,251 | ||||||
Net asset value of shares based upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 28,223,607 | 50,833,500 | ||||||
Service Class | 16,817,144 | 30,966,415 | ||||||
|
|
|
| |||||
60,364,015 | 110,955,712 | |||||||
|
|
|
| |||||
Cost of shares redeemed: |
| |||||||
Standard Class | (20,823,837 | ) | (41,403,985 | ) | ||||
Service Class | (16,882,191 | ) | (34,451,586 | ) | ||||
|
|
|
| |||||
(37,706,028 | ) | (75,855,571 | ) | |||||
|
|
|
| |||||
Increase in net assets derived from capital share transactions | 22,657,987 | 35,100,141 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 23,005,164 | 1,743,009 | ||||||
Net Assets: | ||||||||
Beginning of period | 626,234,040 | 624,491,031 | ||||||
|
|
|
| |||||
End of period | $ | 649,239,204 | $ | 626,234,040 | ||||
|
|
|
| |||||
Undistributed (distributions in excess of) net investment income | $ | (64,369 | ) | $ | 1,441,761 | |||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
Smid Cap Core Series-7
Table of Contents
Delaware VIP® Trust — Delaware VIP Smid Cap Core Series
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP Smid Cap Core Series Standard Class | ||||||||||||||||||||||||
Six months ended 6/30/171, 2 | Year ended | |||||||||||||||||||||||
(Unaudited) | 12/31/16 | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | |||||||||||||||||||
Net asset value, beginning of period | $ | 28.08 | $ | 29.79 | $ | 30.20 | $ | 32.39 | $ | 24.37 | $ | 23.19 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income3 | 0.01 | 0.09 | 0.07 | 0.12 | 0.04 | 0.03 | ||||||||||||||||||
Net realized and unrealized gain | 2.00 | 2.15 | 2.21 | 0.62 | 9.55 | 2.57 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 2.01 | 2.24 | 2.28 | 0.74 | 9.59 | 2.60 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||
Net investment income | (0.09 | ) | (0.07 | ) | (0.12 | ) | (0.02 | ) | (0.01 | ) | (0.06 | ) | ||||||||||||
Net realized gain | (1.96 | ) | (3.88 | ) | (2.57 | ) | (2.91 | ) | (1.56 | ) | (1.36 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (2.05 | ) | (3.95 | ) | (2.69 | ) | (2.93 | ) | (1.57 | ) | (1.42 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 28.04 | $ | 28.08 | $ | 29.79 | $ | 30.20 | $ | 32.39 | $ | 24.37 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return4 | 7.39% | 8.29% | 7.54% | 3.15% | 41.32% | 11.02% | ||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 410,324 | $ | 394,898 | $ | 394,406 | $ | 386,290 | $ | 422,823 | $ | 318,002 | ||||||||||||
Ratio of expenses to average net assets | 0.82% | 0.82% | 0.83% | 0.83% | 0.83% | 0.84% | ||||||||||||||||||
Ratio of net investment income to average net assets | 0.08% | 0.33% | 0.24% | 0.40% | 0.14% | 0.11% | ||||||||||||||||||
Portfolio turnover | 106% | 15% | 23% | 18% | 19% | 23% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | Effective April 28, 2017, Jackson Square Partners, LLC no longer serves as sub-advisor to the Series. The Series’ portfolio turnover rate increased substantially during the six months ended June 30, 2017. |
3 | The average shares outstanding method has been applied for per share information. |
4 | 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 Core Series-8
Table of Contents
Delaware VIP® Trust — Delaware VIP Smid Cap Core Series
Financial highlights (continued)
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP Smid Cap Core Series Service Class | ||||||||||||||||||||||||
Six months ended 6/30/171, 2 | Year ended | |||||||||||||||||||||||
(Unaudited) | 12/31/16 | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | |||||||||||||||||||
Net asset value, beginning of period | $ | 26.75 | $ | 28.56 | $ | 29.06 | $ | 31.33 | $ | 23.67 | $ | 22.57 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income (loss)3 | (0.02 | ) | 0.02 | — | 4 | 0.04 | (0.03 | ) | (0.03 | ) | ||||||||||||||
Net realized and unrealized gain | 1.91 | 2.05 | 2.12 | 0.60 | 9.25 | 2.49 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 1.89 | 2.07 | 2.12 | 0.64 | 9.22 | 2.46 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||
Net investment income | (0.03 | ) | — | (0.05 | ) | — | — | — | 5 | |||||||||||||||
Net realized gain | (1.96 | ) | (3.88 | ) | (2.57 | ) | (2.91 | ) | (1.56 | ) | (1.36 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (1.99 | ) | (3.88 | ) | (2.62 | ) | (2.91 | ) | (1.56 | ) | (1.36 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 26.65 | $ | 26.75 | $ | 28.56 | $ | 29.06 | $ | 31.33 | $ | 23.67 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return6 | 7.27% | 8.02% | 7.31% | 2.87% | 40.98% | 10.71% | ||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 238,915 | $ | 231,336 | $ | 230,085 | $ | 203,931 | $ | 227,831 | $ | 173,948 | ||||||||||||
Ratio of expenses to average net assets | 1.07% | 1.07% | 1.08% | 1.08% | 1.08% | 1.09% | ||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 1.12% | 1.12% | 1.13% | 1.13% | 1.13% | 1.14% | ||||||||||||||||||
Ratio of net investment income (loss) to average net assets | (0.17% | ) | 0.08% | (0.01% | ) | 0.15% | (0.11% | ) | (0.14% | ) | ||||||||||||||
Ratio of net investment income (loss) to average net assets prior to fees waived | (0.22% | ) | 0.03% | (0.06% | ) | 0.10% | (0.16% | ) | (0.19% | ) | ||||||||||||||
Portfolio turnover | 106% | 15% | 23% | 18% | 19% | 23% |
1 | Ratios have been annualized and total return and portfolio turnover have not been annualized. |
2 | Effective April 28, 2017, Jackson Square Partners, LLC no longer serves as sub-advisor to the Series. The Series’ portfolio turnover rate increased substantially during the six months ended June 30, 2017. |
3 | The average shares outstanding method has been applied for per share information. |
4 | Amount is less than $(0.005) per share. |
5 | For the year ended Dec. 31, 2012, net investment income distributions of $15,963 were made by the Series’ Service Class, which calculated to a de minimis amount of $0.002 per share. |
6 | 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 Core Series-9
Table of Contents
Delaware VIP® Trust — Delaware VIP Smid Cap Core Series
June 30, 2017 (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 Core Series (formerly, 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 Core Series (Series). The Trust is an open-end investment company. The Series is considered diversified under the Investment Company Act of 1940, as amended (1940 Act), and offers Standard Class and Service Class shares. The Standard Class shares do not carry a distribution and service (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 US generally accepted accounting principles (US 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. US 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.
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 on the Series’ federal income tax returns through the six months ended June 30, 2017, and for all open tax years (years ended Dec. 31, 2013–Dec. 31, 2016), 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. If applicable, the Series recognizes interest accrued on unrecognized tax benefits in interest expense and penalties in other expenses on the “Statement of operations.” During the six months ended June 30, 2017, the Series did not incur any interest or tax penalties.
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 US 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, 2017, 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 US dollars at the exchange rate of such currencies against the US 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 US GAAP. Therefore, the Series follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with US 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 Core Series-10
Table of Contents
Delaware VIP® Smid Cap Core 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 FundsSM by Macquarie (Delaware Funds) are generally allocated among such funds on the basis of average net assets. Management fees and certain 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. Distributions received from investments in real estate investment trusts (REITs) are recorded as dividend income on 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, 2017.
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, 2017.
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 $1, 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, 2017, 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 Macquarie Investment Management Business Trust, (formerly, Delaware Management Business Trust), and the investment manager, an annual fee which is calculated daily and paid monthly 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.
Prior to April 28, 2017, Jackson Square Partners, LLC (JSP), a related party of DMC, furnished investment sub-advisory services to the Series. For these services, DMC, not the Series, paid 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.
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 daily and paid monthly based on the aggregate daily net assets of the Delaware 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 Funds on a relative net asset value (NAV) basis. For the six months ended June 30, 2017, the Series was charged $14,795 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 daily and paid monthly 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, 2017, the Series was charged $23,915 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 12b-1 fee of 0.30% of the average daily net assets of the Service Class shares. DDLP has contracted to waive 12b-1 fees from Jan. 1, 2017 through June 30, 2017* in order to limit 12b-1 fees of the Service Class shares to 0.25% of average daily net assets. Standard Class shares pay no 12b-1 fees.
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, 2017, the Series was charged $11,485 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 Core Series-11
Table of Contents
Delaware VIP® Smid Cap Core 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.
Cross trades for the six months ended June 30, 2017 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, 2017, the Series engaged in securities purchases of $4,757,054.
*The aggregate contractual waiver period covering this report is from April 29, 2016 through May 1, 2018.
3. Investments
For the six months ended June 30, 2017, the Series made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 649,258,425 | ||
Sales | 658,020,035 |
At June 30, 2017, 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, 2017, 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 | |||
$615,132,503 | $47,364,378 | $(14,121,458) | $33,242,920 |
US 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 Core Series-12
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Delaware VIP® Smid Cap Core 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, 2017:
Securities | Level 1 | Level 2 | Total | |||||||||
Assets: | ||||||||||||
Common Stock | $ | 632,644,563 | $ | — | $ | 632,644,563 | ||||||
Short-Term Investments | — | 15,730,860 | 15,730,860 | |||||||||
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Total Value of Securities | $ | 632,644,563 | $ | 15,730,860 | $ | 648,375,423 | ||||||
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During the six months ended June 30, 2017, 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 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, 2017, there were no Level 3 investments.
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 6/30/17 | Year ended 12/31/16 | |||||||
Shares sold: | ||||||||
Standard Class | 263,859 | 410,393 | ||||||
Service Class | 289,097 | 681,271 | ||||||
Shares issued upon reinvestment of | ||||||||
Standard Class | 1,036,494 | 1,917,522 | ||||||
Service Class | 649,561 | 1,223,969 | ||||||
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2,239,011 | 4,233,155 | |||||||
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Shares redeemed: | ||||||||
Standard Class | (730,742 | ) | (1,504,944 | ) | ||||
Service Class | (620,629 | ) | (1,314,448 | ) | ||||
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(1,351,371 | ) | (2,819,392 | ) | |||||
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Net increase | 887,640 | 1,413,763 | ||||||
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5. Line of Credit
The Series, along with certain other funds in the Delaware 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 0.15%, which is allocated across the Participants on the basis of relative net assets 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. 6, 2017.
The Series had no amounts outstanding as of June 30, 2017 or at any time during the period then ended.
Smid Cap Core Series-13
Table of Contents
Delaware VIP® Smid Cap Core Series
Notes to financial statements (continued)
6. Derivatives
US 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 US 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 US 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, 2017.
During the six months ended June 30, 2017, the Series entered into foreign currency exchange contracts to fix the US dollar value of a security between trade date and settlement date.
During the six months ended June 30, 2017, 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.”
Derivatives Generally. The table below summarizes the average balance of derivative holdings by the Series during the six months ended June 30, 2017.
Long Derivative Volume | Short Derivative Volume | |||
Foreign currency exchange contracts (average cost) | $— | $246,368 |
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 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.
Smid Cap Core Series-14
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Delaware VIP® Smid Cap Core Series
Notes to financial statements (continued)
7. Offsetting (continued)
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.”
Master Repurchase Agreements
Counterparty | Repurchase Agreements | Fair Value of Non-Cash Collateral Received(a) | Cash Collateral Received | Net Collateral Received | Net Exposure(b) | |||||||||||
Bank of America Merrill Lynch | $ | 3,081,107 | $ | (3,081,107 | ) | $— | $ | (3,081,107 | ) | $— | ||||||
Bank of Montreal | 5,135,178 | (5,135,178 | ) | — | (5,135,178 | ) | — | |||||||||
BNP Paribas | 2,884,820 | (2,884,820 | ) | — | (2,884,820 | ) | — | |||||||||
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Total | $ | 11,101,105 | $ | (11,101,105 | ) | $— | $ | (11,101,105 | ) | $— | ||||||
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(a) | The value of the related collateral received exceeded the value of the repurchase agreements as of June 30, 2017. |
(b) | 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 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 US securities and foreign securities that are denominated and payable in US 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 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.
Cash collateral received by each series of the Trust is generally invested in 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 US 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. A Series can also accept US government securities and letters of credit (non-cash collateral) in connection with securities loans.
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, 2017, the Series had no securities out on loan.
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.
Smid Cap Core Series-15
Table of Contents
Delaware VIP® Smid Cap Core Series
Notes to financial statements (continued)
9. Credit and Market Risk (continued)
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, 2017. 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.
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 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, 2017, there were no Rule 144A securities held by the Series.
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. Recent Accounting Pronouncements
On Oct. 13, 2016, the Securities and Exchange Commission amended existing rules intended to modernize reporting and disclosure of information. These amendments relate to Regulation S-X which sets forth the form and content of financial statements. At this time, management is evaluating the implications of adopting these amendments and their impact on the financial statements and accompanying notes.
12. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to June 30, 2017 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 Series’ website at delawarefunds.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 Series’ website at delawarefunds.com/proxy; and (ii) on the Commission’s website at sec.gov.
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SA-VIPSCC 21600 (8/17) (235363) | Smid Cap Core Series-16 |
Table of Contents
Delaware VIP® Trust
Delaware VIP High Yield Series
June 30, 2017
Table of Contents
1 | ||||||
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12 | ||||||
Other than Macquarie Bank Limited (MBL), none of the entities noted are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Series is governed by US laws and regulations.
Unless otherwise noted, views expressed herein are current as of June 30, 2017, 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.
Advisory services provided by Delaware Management Company, a series of Macquarie Investment Management Business Trust, a US registered investment advisor.
The Series is distributed by Delaware Distributors, L.P., an affiliate of Macquarie Investment Management Business Trust and Macquarie Group Limited. Macquarie Investment Management (MIM), a member of Macquarie Group, refers to the companies comprising the asset management division of 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.
© 2017 Macquarie Management Holdings, Inc. (formerly, Delaware Management Holdings, Inc.)
All third-party marks cited are the property of their respective owners. |
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Table of Contents
Delaware VIP® Trust — Delaware VIP High Yield Series
For the six-month period January 1, 2017 to June 30, 2017 (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, 2017 to June 30, 2017.
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 1/1/17 | Ending Account Value 6/30/17 | Annualized Expense Ratio | Expenses Period | |||||||||
Actual Series return† | ||||||||||||
Standard Class | $1,000.00 | $1,045.90 | 0.74% | $3.75 | ||||||||
Service Class | 1,000.00 | 1,043.60 | 0.99% | 5.02 | ||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||
Standard Class | $1,000.00 | $1,021.12 | 0.74% | $3.71 | ||||||||
Service Class | 1,000.00 | 1,019.89 | 0.99% | 4.96 |
* | “Expenses Paid During Period” are equal to the Series’ annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (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, 2017 (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 | 0.15 | % | |||
Corporate Bonds | 91.33 | % | |||
Automotive | 0.44 | % | |||
Banking | 3.18 | % | |||
Basic Industry | 14.18 | % | |||
Capital Goods | 3.07 | % | |||
Consumer Cyclical | 6.78 | % | |||
Consumer Non-Cyclical | 4.00 | % | |||
Energy | 14.37 | % | |||
Financial Services | 1.53 | % | |||
Healthcare | 9.92 | % | |||
Insurance | 1.71 | % | |||
Media | 10.40 | % | |||
Retail | 0.44 | % | |||
Services | 5.52 | % | |||
Technology & Electronics | 3.97 | % | |||
Telecommunications | 7.87 | % | |||
Transportation | 0.65 | % | |||
Utilities | 3.30 | % | |||
Municipal Bond | 0.29 | % | |||
Loan Agreements | 3.01 | % | |||
Common Stock | 0.00 | % | |||
Preferred Stock | 1.04 | % | |||
Short-Term Investments | 3.54 | % | |||
Total Value of Securities | 99.36 | % | |||
Receivables and Other Assets Net of Liabilities | 0.64 | % | |||
Total Net Assets | 100.00 | % |
High Yield Series-2
Table of Contents
Delaware VIP® Trust — Delaware VIP High Yield Series
June 30, 2017 (Unaudited)
Principal amount° | Value (US $) | |||||||
Convertible Bond – 0.15% |
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General Cable 4.50% exercise price | 525,000 | $ | 398,016 | |||||
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Total Convertible Bond |
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Corporate Bonds – 91.33% |
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Automotive – 0.44% |
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American Tire Distributors 144A | 1,145,000 | 1,190,800 | ||||||
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1,190,800 | ||||||||
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Banking – 3.18% | ||||||||
Ally Financial 5.75% 11/20/25 | 1,740,000 | 1,837,875 | ||||||
Credit Suisse Group 144A | 1,315,000 | 1,400,330 | ||||||
Lloyds Banking Group 7.50% 4/30/49 • | 620,000 | 685,487 | ||||||
Popular 7.00% 7/1/19 | 1,895,000 | 1,999,225 | ||||||
Royal Bank of Scotland Group | 1,010,000 | 1,103,425 | ||||||
UBS Group 6.875% 12/29/49 • | 1,425,000 | 1,540,446 | ||||||
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8,566,788 | ||||||||
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Basic Industry – 14.18% |
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Allegheny Technologies | 620,000 | 651,000 | ||||||
BMC East 144A 5.50% 10/1/24 # | 855,000 | 895,613 | ||||||
Boise Cascade 144A 5.625% 9/1/24 # | 1,465,000 | 1,516,275 | ||||||
Builders FirstSource | 730,000 | 762,850 | ||||||
144A 10.75% 8/15/23 # | 1,230,000 | 1,423,725 | ||||||
Cemex 144A 7.75% 4/16/26 # | 1,880,000 | 2,154,950 | ||||||
CEMEX Finance 144A 6.00% 4/1/24 # | 785,000 | 836,103 | ||||||
Chemours | 760,000 | 780,900 | ||||||
7.00% 5/15/25 | 565,000 | 618,675 | ||||||
Cliffs Natural Resources 144A | 1,355,000 | 1,283,863 | ||||||
Coeur Mining 144A 5.875% 6/1/24 # | 940,000 | 915,325 | ||||||
FMG Resources August 2006 144A | 705,000 | 706,763 | ||||||
Freeport-McMoRan 6.875% 2/15/23 | 2,325,000 | 2,464,500 | ||||||
Hexion 144A 10.375% 2/1/22 # | 740,000 | 736,300 | ||||||
Hudbay Minerals | 140,000 | 145,075 | ||||||
144A 7.625% 1/15/25 # | 1,150,000 | 1,210,375 | ||||||
James Hardie International Finance 144A | 200,000 | 210,500 | ||||||
Joseph T Ryerson & Son 144A | 1,155,000 | 1,309,481 | ||||||
Koppers 144A 6.00% 2/15/25 # | 1,410,000 | 1,501,650 | ||||||
Kraton Polymers | 1,040,000 | 1,097,200 | ||||||
144A 10.50% 4/15/23 # | 580,000 | 672,800 |
Principal amount° | Value (US $) | |||||||
Corporate Bonds (continued) |
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Basic Industry (continued) | ||||||||
NCI Building Systems 144A | 1,214,000 | $ | 1,318,707 | |||||
New Gold | 465,000 | 480,113 | ||||||
144A 6.375% 5/15/25 # | 995,000 | 1,027,337 | ||||||
NOVA Chemicals 144A 5.25% 6/1/27 # | 1,365,000 | 1,361,587 | ||||||
Novelis 144A 6.25% 8/15/24 # | 1,795,000 | 1,889,237 | ||||||
Olin 5.125% 9/15/27 | 2,050,000 | 2,116,625 | ||||||
PQ 144A 6.75% 11/15/22 # | 615,000 | 662,663 | ||||||
Steel Dynamics 5.00% 12/15/26 | 1,375,000 | 1,414,531 | ||||||
Summit Materials 144A 5.125% 6/1/25 # | 725,000 | 744,937 | ||||||
6.125% 7/15/23 | 1,540,000 | 1,620,850 | ||||||
8.50% 4/15/22 | 380,000 | 431,300 | ||||||
US Concrete 6.375% 6/1/24 | 1,430,000 | 1,515,800 | ||||||
Zekelman Industries | 1,580,000 | 1,779,475 | ||||||
|
| |||||||
38,257,085 | ||||||||
|
| |||||||
Capital Goods – 3.07% |
| |||||||
Ardagh Packaging Finance 144A | 1,290,000 | 1,357,725 | ||||||
BWAY Holding | 1,265,000 | 1,295,044 | ||||||
144A 7.25% 4/15/25 # | 1,010,000 | 1,027,675 | ||||||
Flex Acquisition 144A 6.875% 1/15/25 # | 1,335,000 | 1,390,903 | ||||||
General Cable 5.75% 10/1/22 | 490,000 | 492,450 | ||||||
StandardAero Aviation Holdings 144A | 1,215,000 | 1,351,687 | ||||||
TransDigm 6.375% 6/15/26 | 1,350,000 | 1,373,625 | ||||||
|
| |||||||
8,289,109 | ||||||||
|
| |||||||
Consumer Cyclical – 6.78% |
| |||||||
AMC Entertainment Holdings 144A | 1,320,000 | 1,396,309 | ||||||
Boyd Gaming 6.375% 4/1/26 | 1,865,000 | 2,021,194 | ||||||
ESH Hospitality 144A 5.25% 5/1/25 # | 2,015,000 | 2,093,081 | ||||||
JC Penney 8.125% 10/1/19 | 468,000 | 512,460 | ||||||
Landry’s 144A 6.75% 10/15/24 # | 1,330,000 | 1,364,913 | ||||||
Live Nation Entertainment 144A | 962,000 | 978,835 | ||||||
MGM Resorts International 4.625% 9/1/26 | 1,445,000 | 1,466,675 | ||||||
Mohegan Gaming & Entertainment 144A 7.875% 10/15/24 # | 1,800,000 | 1,878,750 | ||||||
Penn National Gaming 144A 5.625% 1/15/27 # | 1,380,000 | 1,409,325 | ||||||
Penske Automotive Group 5.50% 5/15/26 | 1,910,000 | 1,905,225 | ||||||
Rite Aid 144A 6.125% 4/1/23 # | 710,000 | 701,125 |
High Yield Series-3
Table of Contents
Delaware VIP® High Yield Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Corporate Bonds (continued) | ||||||||
Consumer Cyclical (continued) | ||||||||
Scientific Games International | 2,320,000 | $ | 2,552,000 | |||||
|
| |||||||
18,279,892 | ||||||||
|
| |||||||
Consumer Non-Cyclical – 4.00% | ||||||||
Albertsons | 95,000 | 88,587 | ||||||
144A 6.625% 6/15/24 # | 1,850,000 | 1,840,750 | ||||||
Cott Holdings | 1,540,000 | 1,574,650 | ||||||
Dean Foods | 1,095,000 | 1,157,963 | ||||||
JBS USA | 1,415,000 | 1,337,175 | ||||||
Kronos Acquisition Holdings | 1,395,000 | 1,395,000 | ||||||
Post Holdings | 705,000 | 705,000 | ||||||
144A 5.75% 3/1/27 # | 695,000 | 717,587 | ||||||
Revlon Consumer Products | 1,375,000 | 1,203,125 | ||||||
Tempur Sealy International | 765,000 | 779,344 | ||||||
|
| |||||||
10,799,181 | ||||||||
|
| |||||||
Energy – 14.37% | ||||||||
Alta Mesa Holdings | 1,355,000 | 1,371,937 | ||||||
AmeriGas Partners | 1,370,000 | 1,411,100 | ||||||
Antero Resources | 505,000 | 492,375 | ||||||
5.625% 6/1/23 | 322,000 | 327,635 | ||||||
Cheniere Corpus Christi Holdings | 615,000 | 631,144 | ||||||
5.875% 3/31/25 | 615,000 | 658,050 | ||||||
7.00% 6/30/24 | 690,000 | 772,800 | ||||||
Chesapeake Energy | 399,000 | 423,439 | ||||||
144A 8.00% 1/15/25 # | 425,000 | 422,344 | ||||||
144A 8.00% 6/15/27 # | 695,000 | 683,706 | ||||||
Crestwood Midstream Partners | 1,325,000 | 1,325,000 | ||||||
Genesis Energy | 320,000 | 304,800 | ||||||
5.75% 2/15/21 | 835,000 | 837,087 | ||||||
6.00% 5/15/23 | 290,000 | 285,650 | ||||||
6.75% 8/1/22 | 977,000 | 984,327 | ||||||
Gulfport Energy | 1,435,000 | 1,445,763 | ||||||
Halcon Resources | 1,435,000 | 1,298,675 | ||||||
Hilcorp Energy I | 742,000 | 686,350 | ||||||
144A 5.75% 10/1/25 # | 691,000 | 654,723 | ||||||
Laredo Petroleum | 1,460,000 | 1,456,350 | ||||||
Murphy Oil | 1,895,000 | 1,985,013 | ||||||
Murphy Oil USA | 2,680,000 | 2,797,250 |
Principal amount° | Value (US $) | |||||||
Corporate Bonds (continued) | ||||||||
Energy (continued) | ||||||||
Newfield Exploration | 1,355,000 | $ | 1,409,200 | |||||
NuStar Logistics | 1,500,000 | 1,578,750 | ||||||
Oasis Petroleum | 350,000 | 341,250 | ||||||
6.875% 3/15/22 | 1,305,000 | 1,272,375 | ||||||
Precision Drilling | 895,000 | 880,456 | ||||||
6.625% 11/15/20 | 609,868 | 600,720 | ||||||
144A 7.75% 12/15/23 # | 490,000 | 485,100 | ||||||
QEP Resources | 1,935,000 | 2,017,237 | ||||||
Southwestern Energy | 685,000 | 641,759 | ||||||
6.70% 1/23/25 | 1,365,000 | 1,341,113 | ||||||
Summit Midstream Holdings | 900,000 | 909,000 | ||||||
Targa Resources Partners | 1,345,000 | 1,398,800 | ||||||
Tesoro Logistics | 1,360,000 | 1,433,100 | ||||||
Transocean 144A | 1,220,000 | 1,271,850 | ||||||
Transocean Proteus | 593,750 | 608,594 | ||||||
WildHorse Resource Development | 1,410,000 | 1,328,925 | ||||||
|
| |||||||
38,773,747 | ||||||||
|
| |||||||
Financial Services – 1.53% | ||||||||
AerCap Global Aviation Trust | 1,370,000 | 1,462,475 | ||||||
E*TRADE Financial | 1,365,000 | 1,453,725 | ||||||
NFP 144A | 1,200,000 | 1,215,000 | ||||||
|
| |||||||
4,131,200 | ||||||||
|
| |||||||
Healthcare – 9.92% | ||||||||
Air Medical Group Holdings | 2,150,000 | 2,047,875 | ||||||
ASP AMC Merger Sub | 750,000 | 714,375 | ||||||
Change Healthcare Holdings | 1,430,000 | 1,463,963 | ||||||
CHS | 1,310,000 | 1,357,291 | ||||||
DaVita | 1,610,000 | 1,618,050 | ||||||
5.125% 7/15/24 | 15,000 | 15,253 | ||||||
HCA | 2,545,000 | 2,690,829 | ||||||
5.875% 2/15/26 | 745,000 | 806,463 | ||||||
7.58% 9/15/25 | 580,000 | 668,450 | ||||||
HealthSouth | 790,000 | 814,095 | ||||||
5.75% 9/15/25 | 1,785,000 | 1,887,637 | ||||||
Hill-Rom Holdings | 535,000 | 548,375 | ||||||
144A 5.75% 9/1/23 # | 860,000 | 909,450 |
High Yield Series-4
Table of Contents
Delaware VIP® High Yield Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Corporate Bonds (continued) | ||||||||
Healthcare (continued) | ||||||||
inVentiv Group Holdings | 755,000 | $ | 822,950 | |||||
Mallinckrodt International Finance | 270,000 | 237,600 | ||||||
144A 5.625% 10/15/23 # | 865,000 | 793,637 | ||||||
MPH Acquisition Holdings | 2,020,000 | 2,158,875 | ||||||
Surgery Center Holdings | 690,000 | 700,350 | ||||||
144A 8.875% 4/15/21 # | 690,000 | 749,513 | ||||||
Team Health Holdings | 1,030,000 | 1,001,675 | ||||||
Tenet Healthcare | 2,050,000 | 2,078,187 | ||||||
8.125% 4/1/22 | 820,000 | 873,300 | ||||||
THC Escrow III | 1,130,000 | 1,137,063 | ||||||
144A 7.00% 8/1/25 # | 655,000 | 654,181 | ||||||
|
| |||||||
26,749,437 | ||||||||
|
| |||||||
Insurance – 1.71% | ||||||||
HUB International | 1,800,000 | 1,881,000 | ||||||
KIRS Midco 3 | 600,000 | 609,750 | ||||||
USIS Merger Sub | 2,085,000 | 2,126,700 | ||||||
|
| |||||||
4,617,450 | ||||||||
|
| |||||||
Media – 10.40% | ||||||||
Altice Luxembourg | 2,060,000 | 2,188,750 | ||||||
CCO Holdings | 160,000 | 170,200 | ||||||
144A 5.75% 2/15/26 # | 845,000 | 906,263 | ||||||
144A 5.875% 5/1/27 # | 2,010,000 | 2,153,213 | ||||||
Cequel Communications Holdings I | 530,000 | 588,300 | ||||||
CSC Holdings 144A 10.875% 10/15/25 # | 2,795,000 | 3,371,469 | ||||||
DISH DBS | 1,261,000 | 1,497,437 | ||||||
Gray Television | 2,060,000 | 2,106,350 | ||||||
Lamar Media | 932,000 | 1,007,725 | ||||||
Nexstar Broadcasting | 1,310,000 | 1,329,650 | ||||||
Nielsen Co. Luxembourg | 750,000 | 770,625 | ||||||
SFR Group | 2,045,000 | 2,226,494 | ||||||
Sinclair Television Group | 1,440,000 | 1,400,400 | ||||||
Sirius XM Radio | 1,360,000 | 1,409,300 | ||||||
Tribune Media | 1,185,000 | 1,247,213 | ||||||
Virgin Media Secured Finance | 1,470,000 | 1,535,503 |
Principal amount° | Value (US $) | |||||||
Corporate Bonds (continued) | ||||||||
Media (continued) | ||||||||
VTR Finance 144A | 2,535,000 | $ | 2,693,437 | |||||
WideOpenWest Finance | 1,413,000 | 1,457,156 | ||||||
|
| |||||||
28,059,485 | ||||||||
|
| |||||||
Retail – 0.44% | ||||||||
Petsmart | 1,210,000 | 1,172,187 | ||||||
|
| |||||||
1,172,187 | ||||||||
|
| |||||||
Services – 5.52% | ||||||||
Advanced Disposal Services 144A 5.625% 11/15/24 # | 1,410,000 | 1,455,825 | ||||||
Avis Budget Car Rental | 1,035,000 | 1,037,587 | ||||||
Cardtronics | 1,075,000 | 1,109,937 | ||||||
Covanta Holding | 1,345,000 | 1,308,013 | ||||||
GEO Group | 460,000 | 477,250 | ||||||
6.00% 4/15/26 | 1,005,000 | 1,047,713 | ||||||
Herc Rentals | 350,000 | 371,000 | ||||||
144A 7.75% 6/1/24 # | 909,000 | 963,540 | ||||||
Iron Mountain US Holdings | 1,485,000 | 1,566,675 | ||||||
KAR Auction Services | 650,000 | 663,813 | ||||||
Prime Security Services Borrower | 3,135,000 | 3,414,517 | ||||||
United Rentals North America | 1,435,000 | 1,481,637 | ||||||
|
| |||||||
14,897,507 | ||||||||
|
| |||||||
Technology & Electronics – 3.97% |
| |||||||
CDK Global | 1,280,000 | 1,366,400 | ||||||
CDW Finance | 695,000 | 724,537 | ||||||
CommScope Technologies | 1,390,000 | 1,390,000 | ||||||
144A 6.00% 6/15/25 # | 590,000 | 632,775 | ||||||
Entegris | 1,340,000 | 1,403,650 | ||||||
Genesys Telecommunications Laboratories 144A | 675,000 | 760,219 | ||||||
Infor US | 1,210,000 | 1,258,400 | ||||||
Sensata Technologies UK Financing | 1,270,000 | 1,390,650 | ||||||
Solera | 910,000 | 1,049,913 | ||||||
Symantec | 690,000 | 723,851 | ||||||
|
| |||||||
10,700,395 | ||||||||
|
| |||||||
Telecommunications – 7.87% |
| |||||||
CenturyLink | 1,335,000 | 1,442,641 | ||||||
7.50% 4/1/24 | 665,000 | 729,837 | ||||||
Cincinnati Bell 144A | 1,960,000 | 2,053,492 |
High Yield Series-5
Table of Contents
Delaware VIP® High Yield Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Corporate Bonds (continued) | ||||||||
Telecommunications (continued) | ||||||||
Columbus Cable Barbados | 420,000 | $ | 446,775 | |||||
CyrusOne 144A | 1,225,000 | 1,278,594 | ||||||
Level 3 Financing | 1,200,000 | 1,266,000 | ||||||
Radiate Holdco 144A | 1,380,000 | 1,383,450 | ||||||
Sprint | 2,020,000 | 2,252,300 | ||||||
7.875% 9/15/23 | 505,000 | 582,013 | ||||||
Telecom Italia | 560,000 | 602,700 | ||||||
T-Mobile USA | 710,000 | 769,463 | ||||||
6.50% 1/15/26 | 1,580,000 | 1,747,875 | ||||||
Uniti Group | 2,025,000 | 2,015,519 | ||||||
Wind Acquisition Finance | 2,000,000 | 2,081,250 | ||||||
Zayo Group | 525,000 | 550,594 | ||||||
6.375% 5/15/25 | 1,875,000 | 2,030,850 | ||||||
|
| |||||||
21,233,353 | ||||||||
|
| |||||||
Transportation – 0.65% | ||||||||
XPO Logistics 144A | 1,680,000 | 1,755,600 | ||||||
|
| |||||||
1,755,600 | ||||||||
|
| |||||||
Utilities – 3.30% | ||||||||
AES | 1,200,000 | 1,261,500 | ||||||
6.00% 5/15/26 | 205,000 | 220,375 | ||||||
Calpine | 835,000 | 794,294 | ||||||
5.75% 1/15/25 | 1,075,000 | 1,013,187 | ||||||
Dynegy | 665,000 | 689,106 | ||||||
7.375% 11/1/22 | 710,000 | 702,900 | ||||||
144A 8.00% 1/15/25 # | 1,850,000 | 1,803,750 | ||||||
Emera | 1,245,000 | 1,413,075 | ||||||
Enel | 834,000 | 994,545 | ||||||
|
| |||||||
8,892,732 | ||||||||
|
| |||||||
Total Corporate Bonds | 246,365,948 | |||||||
|
| |||||||
Municipal Bond – 0.29% | ||||||||
Buckeye, Ohio Tobacco Settlement Financing Authority (Asset-Backed Senior Turbo) Series A-2 | 810,000 | 794,302 | ||||||
|
| |||||||
Total Municipal Bond | 794,302 | |||||||
|
| |||||||
Loan Agreements – 3.01% « | ||||||||
Accudyne Industries Borrower 1st Lien | 755,173 | 750,453 |
Principal amount° | Value (US $) | |||||||
Loan Agreements « (continued) | ||||||||
Applied Systems 2nd Lien | 2,022,500 | $ | 2,044,410 | |||||
BJ’s Wholesale Club 2nd Lien | 533,000 | 520,841 | ||||||
CH Hold 2nd Lien | 340,000 | 349,563 | ||||||
Colorado Buyer | 680,000 | 690,200 | ||||||
Kronos 2nd Lien | 1,320,000 | 1,370,599 | ||||||
Russell Investments US Institutional Holdco Tranche B 1st Lien | 1,285,503 | 1,300,768 | ||||||
Summit Midstream Partners Holdings | 680,000 | 689,350 | ||||||
VC GB Holdings 2nd Lien | 410,000 | 405,900 | ||||||
|
| |||||||
Loan Agreements | 8,122,084 | |||||||
|
| |||||||
Number of shares | ||||||||
Common Stock – 0.00% | ||||||||
Century Communications =† | 2,820,000 | 0 | ||||||
|
| |||||||
Total Common Stock | 0 | |||||||
|
| |||||||
Preferred Stock – 1.04% | ||||||||
Bank of America | 1,590,000 | 1,769,956 | ||||||
GMAC Capital Trust I | 40,000 | 1,048,000 | ||||||
|
| |||||||
Total Preferred Stock | 2,817,956 | |||||||
|
| |||||||
Principal amount° | ||||||||
Short-Term Investments – 3.54% | ||||||||
Repurchase Agreements – 3.54% | ||||||||
Bank of America Merrill Lynch 0.99%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $2,650,355 (collateralized by US government obligations 3.375% 5/15/44; market value $2,703,141) | 2,650,137 | 2,650,137 | ||||||
Bank of Montreal 0.93%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $4,417,237 (collateralized by US government obligations 0.625%-3.75% 7/31/17-2/15/45; market value $4,505,233) | 4,416,894 | 4,416,894 |
“High Yield Series-6
Table of Contents
Delaware VIP® High Yield Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Short-Term Investments (continued) |
| |||||||
Repurchase Agreements (continued) |
| |||||||
BNP Paribas | ||||||||
1.05%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $2,481,522 (collateralized by US government obligations 0.00%-2.00% 8/15/17-11/15/45; market value $2,530,933) | 2,481,305 | $ | 2,481,305 | |||||
|
| |||||||
Total Short-Term Investments |
| 9,548,336 | ||||||
|
|
Total Value of Securities – 99.36% | $ | 268,046,642 | ||
|
|
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At June 30, 2017, the aggregate value of Rule 144A securities was $145,536,249, which represents 53.95% of the Series’ net assets. See Note 8 in “Notes to financial statements.” |
= | Security is being fair valued in accordance with the Series’ fair valuation policy. At June 30, 2017, 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.” |
« | Loan agreements generally pay interest at rates which are periodically reset 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 US 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. Loan agreements may be subject to restrictions on resale. Stated rate in effect at June 30, 2017. |
° | Principal amount shown is stated in US dollars unless noted that the security is denominated in another currency. |
† | Non-income producing security. |
• | Variable rate security. Each rate shown is as of June 30, 2017. 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, 2017. |
See accompanying notes, which are an integral part of the financial statements.
High Yield Series-7
Table of Contents
Delaware VIP® Trust — Delaware VIP High Yield Series | ||
Statement of assets and liabilities | June 30, 2017 (Unaudited) |
Assets: | ||||
Investments, at value1 | $ | 258,498,306 | ||
Short-term investments, at value2 | 9,548,336 | |||
Cash | 146,717 | |||
Dividend and interest receivable | 4,328,156 | |||
Receivable for securities sold | 3,715,672 | |||
Other assets3 | 920,913 | |||
Receivable for series shares sold | 28,895 | |||
|
| |||
Total assets | 277,186,995 | |||
|
| |||
Liabilities: | ||||
Payable for securities purchased | 4,028,120 | |||
Bonds proceeds payable3 | 3,069,708 | |||
Investment management fees payable to affiliates | 145,143 | |||
Other accrued expenses | 106,180 | |||
Payable for series shares redeemed | 39,665 | |||
Distribution fees payable to affiliates | 33,130 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 1,675 | |||
Accounting and administration expenses payable to affiliates | 1,032 | |||
Trustees’ fees and expenses payable | 698 | |||
Legal fees payable to affiliates | 689 | |||
Reports and statements to shareholders expenses payable to affiliates | 176 | |||
|
| |||
Total liabilities | 7,426,216 | |||
|
| |||
Total Net Assets | $ | 269,760,779 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 287,187,139 | ||
Undistributed net investment income | 7,270,580 | |||
Accumulated net realized loss on investments | (32,074,571 | ) | ||
Net unrealized appreciation of investments | 7,377,631 | |||
|
| |||
Total Net Assets | $ | 269,760,779 | ||
|
| |||
Standard Class: | ||||
Net assets | $ | 109,801,164 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 21,705,640 | |||
Net asset value per share | $ | 5.06 | ||
Service Class: | ||||
Net assets | $ | 159,959,615 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 31,710,336 | |||
Net asset value per share | $ | 5.04 | ||
| ||||
1 Investments, at cost | $ | 251,120,676 | ||
2 Short-term investments, at cost | 9,548,336 | |||
3 See Note 10 in “Notes to financial statements.” |
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
Six months ended June 30, 2017 (Unaudited)
Investment Income: | ||||
Interest | $ | 8,462,205 | ||
Dividends | 43,501 | |||
|
| |||
8,505,706 | ||||
|
| |||
Expenses: | ||||
Management fees | 882,440 | |||
Distribution expenses – Service Class | 240,722 | |||
Accounting and administration expenses | 41,666 | |||
Reports and statements to shareholders expenses | 28,591 | |||
Audit and tax fees | 19,938 | |||
Legal fees | 13,990 | |||
Dividend disbursing and transfer agent fees and expenses | 11,511 | |||
Trustees’ fees and expenses | 6,878 | |||
Custodian fees | 5,284 | |||
Registration fees | 167 | |||
Other | 9,789 | |||
|
| |||
1,260,976 | ||||
Less expenses waived | (13,063 | ) | ||
Less waived distribution expenses – Service Class | (40,121 | ) | ||
Less expense paid indirectly | (1 | ) | ||
|
| |||
Total operating expenses | 1,207,791 | |||
|
| |||
Net Investment Income | 7,297,915 | |||
|
| |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain on investments | 4,838,421 | |||
Net change in unrealized appreciation (depreciation) of investments | (83,259 | ) | ||
|
| |||
Net Realized and Unrealized Gain | 4,755,162 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 12,053,077 | ||
|
|
Delaware VIP Trust —
Delaware VIP High Yield Series
Statements of changes in net assets
Six months ended 6/30/17 (Unaudited) | Year ended 12/31/16 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 7,297,915 | $ | 16,072,307 | ||||
Net realized gain (loss) | 4,838,421 | (5,041,243 | ) | |||||
Net change in unrealized appreciation (depreciation) | (83,259 | ) | 22,928,480 | |||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 12,053,077 | 33,959,544 | ||||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Standard Class | (6,549,527 | ) | (8,340,632 | ) | ||||
Service Class | (9,180,849 | ) | (11,240,941 | ) | ||||
|
|
|
| |||||
(15,730,376 | ) | (19,581,573 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Standard Class | 4,679,066 | 16,768,971 | ||||||
Service Class | 3,118,845 | 16,200,727 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 6,549,527 | 8,340,632 | ||||||
Service Class | 9,180,849 | 11,240,941 | ||||||
|
|
|
| |||||
23,528,287 | 52,551,271 | |||||||
|
|
|
| |||||
Cost of shares redeemed: | ||||||||
Standard Class | (12,490,651 | ) | (30,302,987 | ) | ||||
Service Class | (11,044,613 | ) | (37,441,907 | ) | ||||
|
|
|
| |||||
(23,535,264 | ) | (67,744,894 | ) | |||||
|
|
|
| |||||
Decrease in net assets derived from capital share transactions | (6,977 | ) | (15,193,623 | ) | ||||
|
|
|
| |||||
Net Decrease in Net Assets | (3,684,276 | ) | (815,652 | ) | ||||
Net Assets: | ||||||||
Beginning of period | 273,445,055 | 274,260,707 | ||||||
|
|
|
| |||||
End of period | $ | 269,760,779 | $ | 273,445,055 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 7,270,580 | $ | 15,703,041 | ||||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
High Yield Series-9
Table of Contents
Delaware VIP® Trust — Delaware VIP High Yield Series
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 | ||||||||||||||||||||||||||||||||||||||||
6/30/171 | Year ended | |||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||
(unaudited) | 12/31/16 | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | |||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 5.14 | $ | 4.89 | $ | 5.67 | $ | 6.19 | $ | 6.11 | $ | 5.68 | ||||||||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.14 | 0.29 | 0.34 | 0.34 | 0.39 | 0.44 | ||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.09 | 0.32 | (0.67 | ) | (0.34 | ) | 0.15 | 0.52 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Total from investment operations | 0.23 | 0.61 | (0.33 | ) | — | 0.54 | 0.96 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||||||||||||||||||
Net investment income | (0.31 | ) | (0.36 | ) | (0.37 | ) | (0.42 | ) | (0.46 | ) | (0.53 | ) | ||||||||||||||||||||||||||||
Net realized gain | — | — | (0.08 | ) | (0.10 | ) | — | — | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Total dividends and distributions | (0.31 | ) | (0.36 | ) | (0.45 | ) | (0.52 | ) | (0.46 | ) | (0.53 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Net asset value, end of period | $ | 5.06 | $ | 5.14 | $ | 4.89 | $ | 5.67 | $ | 6.19 | $ | 6.11 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Total return3 | 4.59% | 13.16% | (6.60% | ) | (0.29% | ) | 9.22% | 17.82% | ||||||||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 109,801 | $ | 112,614 | $ | 111,748 | $ | 139,666 | $ | 151,253 | $ | 147,293 | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 0.74% | 0.74% | 0.75% | 0.75% | 0.74% | 0.74% | ||||||||||||||||||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 0.75% | 0.75% | 0.76% | 0.75% | 0.74% | 0.74% | ||||||||||||||||||||||||||||||||||
Ratio of net investment income to average net assets | 5.52% | 5.95% | 6.25% | 5.67% | 6.34% | 7.52% | ||||||||||||||||||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 5.51% | 5.94% | 6.24% | 5.67% | 6.34% | 7.52% | ||||||||||||||||||||||||||||||||||
Portfolio turnover | 52% | 112% | 99% | 103% | 88% | 76% |
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-10
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 6/30/171 | Year ended | |||||||||||||||||||||||
|
| |||||||||||||||||||||||
(unaudited) | 12/31/16 | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | |||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, beginning of period | $ | 5.12 | $ | 4.87 | $ | 5.65 | $ | 6.17 | $ | 6.09 | $ | 5.67 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income2 | 0.13 | 0.28 | 0.32 | 0.33 | 0.37 | 0.42 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.09 | 0.32 | (0.66 | ) | (0.35 | ) | 0.16 | 0.51 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.22 | 0.60 | (0.34 | ) | (0.02 | ) | 0.53 | 0.93 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||
Net investment income | (0.30 | ) | (0.35 | ) | (0.36 | ) | (0.40 | ) | (0.45 | ) | (0.51 | ) | ||||||||||||
Net realized gain | — | — | (0.08 | ) | (0.10 | ) | — | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.30 | ) | (0.35 | ) | (0.44 | ) | (0.50 | ) | (0.45 | ) | (0.51 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 5.04 | $ | 5.12 | $ | 4.87 | $ | 5.65 | $ | 6.17 | $ | 6.09 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return3 | 4.36% | 12.91% | (6.87% | ) | (0.54% | ) | 8.98% | 17.35% | ||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 159,960 | $ | 160,831 | $ | 162,513 | $ | 208,177 | $ | 250,979 | $ | 274,221 | ||||||||||||
Ratio of expenses to average net assets | 0.99% | 0.99% | 1.00% | 1.00% | 0.99% | 0.99% | ||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 1.05% | 1.05% | 1.06% | 1.05% | 1.04% | 1.04% | ||||||||||||||||||
Ratio of net investment income to average net assets | 5.27% | 5.70% | 6.00% | 5.42% | 6.09% | 7.27% | ||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 5.21% | 5.64% | 5.94% | 5.37% | 6.04% | 7.22% | ||||||||||||||||||
Portfolio turnover | 52% | 112% | 99% | 103% | 88% | 76% |
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-11
Table of Contents
Delaware VIP® Trust — Delaware VIP High Yield Series
June 30, 2017 (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 Core Series (formerly, 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, as amended (1940 Act), and offers Standard Class and Service Class shares. The Standard Class shares do not carry a distribution and/or service (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 US generally accepted accounting principles (US 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. US 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 on the Series’ federal income tax returns through the six months ended June 30, 2017 and for all open tax years (years ended Dec. 31, 2013–Dec. 31, 2016), and has concluded that no provision for federal income tax is required in the Series’ financial statements. If applicable, the Series recognizes interest accrued on unrecognized tax benefits in interest expense and penalties in other expenses on the “Statement of operations.” During the six months ended June 30, 2017, the Series did not incur any interest or tax penalties.
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 US 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, 2017, and matured on the next business day.
Use of Estimates—The Series is an investment company, whose financial statements are prepared in conformity with US GAAP. Therefore, the Series follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with US 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 FundsSM by Macquarie (Delaware Funds) are generally allocated among such funds on the basis of average net assets. Management fees and certain 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.
High Yield Series-12
Table of Contents
Delaware VIP® High Yield 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, 2017.
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 $1, 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, 2017, 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 Macquarie Investment Management Business Trust (formerly, Delaware Management Business Trust) and the investment manager, an annual fee which is calculated daily and paid monthly 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 fee, 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 0.75% of the Series’ average daily net assets from Jan. 1, 2017 through June 30, 2017.* 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 daily and paid monthly based on the aggregate daily net assets of the Delaware 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 Funds on a relative net asset value (NAV) basis. For the six months ended June 30, 2017, the Series was charged $6,299 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 daily and paid monthly 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, 2017, the Series was charged $10,182 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 12b-1 fee of 0.30% of the average daily net assets of the Service Class shares. DDLP has contracted to waive 12b-1 fees from Jan. 1, 2017 through June 30, 2017** in order to limit 12b-1 fee 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 12b-1 fee.
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, 2017, the Series was charged $3,165 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 aggregate contractual waiver period covering this report is from May 1, 2017 through May 1, 2018. Prior to May 1, 2017, the aggregate contractual waiver was 0.74% from April, 29, 2016 to April 30, 2017.
**The aggregate contractual waiver period covering this report is from April 29, 2016 through May 1, 2018.
Cross trades for the six months ended June 30, 2017 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 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, 2017, the Series engaged in securities purchases of $224,294 and securities sales of $557,146, which resulted in net realized gains of $13,125.
High Yield Series-13
Table of Contents
Delaware VIP® High Yield Series
Notes to financial statements (continued)
3. Investments
For the six months ended June 30, 2017, the Series made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 137,220,765 | ||
Sales | 146,253,107 |
At June 30, 2017, 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, 2017, the cost and unrealized appreciation (depreciation) of investments for the Series were as follows:
Cost of | Aggregate Unrealized Appreciation of Investments | Aggregate Unrealized Depreciation of Investments | Net Unrealized Appreciation of Investments | |||
$260,675,272 | $8,742,605 | $(1,371,234) | $7,371,371 |
Under the Regulated Investment Company Modernization Act (Act), net capital losses recognized for the tax years beginning after Dec. 22, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. The Series has capital loss carryovers available to offset future realized gains as follows:
Loss carryforward character | ||||
No Expiration | ||||
Short-term | Long-term | Total | ||
$13,258,383 | $21,702,275 | $34,960,658 |
US 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.
High Yield Series-14
Table of Contents
Delaware VIP® High Yield 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, 2017:
Securities | Level 2 | Level 3 | Total | |||||||||
Assets: | ||||||||||||
Corporate Debt | $ | 246,763,964 | $ | — | $ | 246,763,964 | ||||||
Loan Agreements1 | 7,716,184 | 405,900 | 8,122,084 | |||||||||
Municipal Bonds | 794,302 | — | 794,302 | |||||||||
Common Stock | — | — | — | |||||||||
Preferred Stock | 2,817,956 | — | 2,817,956 | |||||||||
Short-Term Investments | 9,548,336 | — | 9,548,336 | |||||||||
|
|
|
|
|
| |||||||
Total Value of Securities | $ | 267,640,742 | $ | 405,900 | $ | 268,046,642 | ||||||
|
|
|
|
|
|
1Security type is valued across multiple levels. The amount attributed to Level 2 investments and Level 3 investments represents the following percentages of the total market value of the security type for the Series. Level 2 investments represent investments with observable inputs or matrix priced investments, while Level 3 investments represent investments without observable inputs.
Level 2 | Level 3 | Total | ||||||||||
Loan Agreements | 95.00 | % | 5.00 | % | 100.00 | % |
A security that has been valued at zero on the “Schedule of investments” is considered to be Level 3 investments in this table.
During the six months ended June 30, 2017, 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 year in relation to net assets. Management has determined not to provide a reconciliation of Level 3 investments as they were not considered significant to the Series’ net assets at the beginning, interim, or end of the period. 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 6/30/17 | Year ended | |||||||
Shares sold: | ||||||||
Standard Class | 896,393 | 3,403,817 | ||||||
Service Class | 604,561 | 3,320,262 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 1,315,166 | 1,759,627 | ||||||
Service Class | 1,847,253 | 2,376,520 | ||||||
|
|
|
| |||||
4,663,373 | 10,860,226 | |||||||
|
|
|
| |||||
Shares redeemed: | ||||||||
Standard Class | (2,420,126 | ) | (6,115,481 | ) | ||||
Service Class | (2,156,512 | ) | (7,657,285 | ) | ||||
|
|
|
| |||||
(4,576,638 | ) | (13,772,766 | ) | |||||
|
|
|
| |||||
Net increase (decrease) | 86,735 | (2,912,540 | ) | |||||
|
|
|
|
5. Line of Credit
The Series, along with certain other funds in the Delaware 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 0.15%, which is allocated across the Participants on the basis of relative net assets 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. 6, 2017.
High Yield Series-15
Table of Contents
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, 2017 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, 2017, 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(a) | Cash Collateral Received | Net Collateral Received | Net Exposure(b) | ||||||||||||||||||||
Bank of America Merrill Lynch | $ | 2,650,137 | $ | (2,650,137 | ) | $ | — | $ | (2,650,137 | ) | $ | — | |||||||||||||
Bank of Montreal | 4,416,894 | (4,416,894 | ) | — | (4,416,894 | ) | — | ||||||||||||||||||
BNP Paribas | 2,481,305 | (2,481,305 | ) | — | (2,481,305 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total | $ | 9,548,336 | $ | (9,548,336 | ) | $ | — | $ | (9,548,336 | ) | $ | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
{a)The value of the related collateral received exceeded the value of the repurchase agreements as of June 30, 2017.
(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 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 US securities and foreign securities that are denominated and payable in US 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.
Cash collateral received by each series of the Trust is generally invested in 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 US 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. A Series can also accept US government securities and letters of credit (non-cash collateral) in connection with securities loans.
High Yield Series-16
Table of Contents
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 short fall 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, 2017, 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. When a loan agreement is purchased, the Series may pay an assignment fee. On an ongoing basis, the Series may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of a loan agreement. Prepayment penalty fees are received upon the prepayment of a loan agreement by a borrower. Prepayment penalty, facility, commitment, consent and amendment fees are recorded to income as earned or paid.
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 securities have been identified on the “Schedule of investments.”
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.
High Yield Series-17
Table of Contents
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 US 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, 2017 that resulted in a net decrease in the Series’ NAV to reflect this likely recovery.
11. Recent Accounting Pronouncements
On Oct. 13, 2016, the Securities and Exchange Commission amended existing rules intended to modernize reporting and disclosure of information. These amendments relate to Regulation S-X which sets forth the form and content of financial statements. At this time, management is evaluating the implications of adopting these amendments and their impact on the financial statements and accompanying notes.
12. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to June 30, 2017 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 Series’ website at delawarefunds.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 Series’ website at delawarefunds.com/proxy; and (ii) on the Commission’s website at sec.gov.
|
SA-VIPHY 21595 (8/17) (235363) | High Yield Series-18 |
Delaware VIP® Trust
Delaware VIP International Value Equity Series
June 30, 2017
Table of contents
1 | ||||||
2 | ||||||
3 | ||||||
5 | ||||||
6 | ||||||
6 | ||||||
7 | ||||||
9 |
Other than Macquarie Bank Limited (MBL), none of the entities noted are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Series is governed by US laws and regulations.
Unless otherwise noted, views expressed herein are current as of June 30, 2017, 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.
Advisory services provided by Delaware Management Company, a series of Macquarie Investment Management Business Trust, a US registered investment advisor.
The Series is distributed by Delaware Distributors, L.P., an affiliate of Macquarie Investment Management Business Trust and Macquarie Group Limited. Macquarie Investment Management (MIM), a member of Macquarie Group, refers to the companies comprising the asset management division of 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.
© 2017 Macquarie Management Holdings, Inc. (formerly, Delaware Management Holdings, Inc.)
All third-party marks cited are the property of their respective owners.
Delaware VIP® Trust — Delaware VIP International Value Equity Series
For the six-month period from January 1, 2017 to June 30, 2017 (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, 2017 to June 30, 2017.
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 1/1/17 | Ending Account Value 6/30/17 | Annualized Expense Ratio | Expenses Paid During Period 1/1/17 to 6/30/17* | |||||||||
Actual Series return† | ||||||||||||
Standard Class | $ | 1,000.00 | $ | 1,139.10 | 1.04% | $5.52 | ||||||
Service Class | 1,000.00 | 1,137.70 | 1.29% | 6.84 | ||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||
Standard Class | $ | 1,000.00 | $ | 1,019.64 | 1.04% | $5.21 | ||||||
Service Class | 1,000.00 | 1,018.40 | 1.29% | 6.46 |
* | “Expenses Paid During Period” are equal to the Series’ annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (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
Delaware VIP® Trust — Delaware VIP International Value Equity Series
Security type / country and sector allocations
As of June 30, 2017 (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 | 97.30% | |
Australia | 0.51% | |
Canada | 4.22% | |
China/Hong Kong | 6.16% | |
Denmark | 2.11% | |
France | 18.64% | |
Germany | 4.73% | |
Indonesia | 1.96% | |
Israel | 1.81% | |
Italy | 3.27% | |
Japan | 22.91% | |
Netherlands | 5.07% | |
Republic of Korea | 3.39% | |
Russia | 0.93% | |
Sweden | 5.24% | |
Switzerland | 3.43% | |
United Kingdom | 12.92% | |
Short-Term Investments | 2.26% | |
Securities Lending Collateral | 2.37% | |
Total Value of Securities | 101.93% | |
Obligation to Return Securities Lending Collateral | (2.37%) | |
Receivables and Other Assets Net of Liabilities | 0.44% | |
Total Net Assets | 100.00% |
Common stock by sector | Percentage of net assets | |
Consumer Discretionary | 17.73% | |
Consumer Staples | 7.70% | |
Energy | 4.55% | |
Financials | 18.79% | |
Healthcare | 10.08% | |
Industrials | 21.53% | |
Information Technology | 7.73% | |
Materials | 2.57% | |
Telecommunication Services | 6.10% | |
Utilities | 0.52% | |
Total | 97.30% |
International Value Equity Series-2
Delaware VIP® Trust – Delaware VIP International Value Equity Series
June 30, 2017 (Unaudited)
Number of shares | Value (US $) | |||||||
Common Stock – 97.30% D | ||||||||
Australia – 0.51% | ||||||||
Coca-Cola Amatil | 54,116 | $ | 383,909 | |||||
|
| |||||||
383,909 | ||||||||
|
| |||||||
Canada – 4.22% | ||||||||
Alamos Gold | 61,768 | 438,206 | ||||||
CGI Group Class A † | 28,414 | 1,451,813 | ||||||
Suncor Energy | 37,100 | 1,083,991 | ||||||
Yamana Gold | 82,783 | 199,808 | ||||||
|
| |||||||
3,173,818 | ||||||||
|
| |||||||
China/Hong Kong – 6.16% | ||||||||
CNOOC | 819,000 | 896,893 | ||||||
Techtronic Industries | 306,859 | 1,410,991 | ||||||
Yue Yuen Industrial Holdings | 560,500 | 2,326,009 | ||||||
|
| |||||||
4,633,893 | ||||||||
|
| |||||||
Denmark – 2.11% | ||||||||
Carlsberg Class B | 14,826 | 1,583,860 | ||||||
|
| |||||||
1,583,860 | ||||||||
|
| |||||||
France – 18.64% | ||||||||
AXA | 73,633 | 2,014,193 | ||||||
Kering | 5,273 | 1,795,926 | ||||||
Publicis Groupe | 9,005 | 671,717 | ||||||
Rexel | 40,762 | 666,919 | ||||||
Sanofi | 27,050 | 2,587,778 | ||||||
Teleperformance | 11,700 | 1,498,678 | ||||||
TOTAL | 29,225 | 1,444,824 | ||||||
Valeo | 14,104 | 950,263 | ||||||
Vinci | 28,012 | 2,390,905 | ||||||
|
| |||||||
14,021,203 | ||||||||
|
| |||||||
Germany – 4.73% | ||||||||
Bayerische Motoren Werke | 16,482 | 1,530,089 | ||||||
Deutsche Post | 54,032 | 2,025,409 | ||||||
|
| |||||||
3,555,498 | ||||||||
|
| |||||||
Indonesia – 1.96% | ||||||||
Bank Rakyat Indonesia Persero | 1,291,155 | 1,473,252 | ||||||
|
| |||||||
1,473,252 | ||||||||
|
| |||||||
Israel – 1.81% | ||||||||
Teva Pharmaceutical Industries ADR | 41,000 | 1,362,020 | ||||||
|
| |||||||
1,362,020 | ||||||||
|
| |||||||
Italy – 3.27% | ||||||||
Leonardo † | 46,676 | 775,675 | ||||||
UniCredit | 90,265 | 1,685,622 | ||||||
|
| |||||||
2,461,297 | ||||||||
|
| |||||||
Japan – 22.91% | ||||||||
East Japan Railway | 21,356 | 2,040,189 | ||||||
ITOCHU | 160,035 | 2,374,736 | ||||||
Japan Tobacco * | 47,100 | 1,652,845 | ||||||
MINEBEA MITSUMI | 82,200 | 1,319,146 | ||||||
Mitsubishi UFJ Financial Group | 411,535 | 2,761,739 | ||||||
Nippon Telegraph & Telephone | 51,518 | 2,432,190 | ||||||
Nitori Holdings | 9,558 | 1,278,082 |
Number of shares | Value (US $) | |||||||
Common Stock D (continued) | ||||||||
Japan (continued) | ||||||||
Sumitomo Rubber Industries * | 79,900 | $ | 1,346,881 | |||||
Toyota Motor | 38,643 | 2,024,656 | ||||||
|
| |||||||
17,230,464 | ||||||||
|
| |||||||
Netherlands – 5.07% | ||||||||
ING Groep | 112,558 | 1,941,228 | ||||||
Koninklijke Philips | 52,772 | 1,874,206 | ||||||
|
| |||||||
3,815,434 | ||||||||
|
| |||||||
Republic of Korea – 3.39% | ||||||||
Samsung Electronics | 1,229 | 2,553,278 | ||||||
|
| |||||||
2,553,278 | ||||||||
|
| |||||||
Russia – 0.93% | ||||||||
Mobile TeleSystems ADR | 83,400 | 698,892 | ||||||
|
| |||||||
698,892 | ||||||||
|
| |||||||
Sweden – 5.24% | ||||||||
Nordea Bank | 195,142 | 2,483,082 | ||||||
Tele2 Class B | 139,545 | 1,460,927 | ||||||
|
| |||||||
3,944,009 | ||||||||
|
| |||||||
Switzerland – 3.43% | ||||||||
Aryzta *† | 11,349 | 373,171 | ||||||
Novartis | 26,498 | 2,205,173 | ||||||
|
| |||||||
2,578,344 | ||||||||
|
| |||||||
United Kingdom – 12.92% | ||||||||
Imperial Brands | 39,950 | 1,794,354 | ||||||
Meggitt | 197,376 | 1,225,978 | ||||||
National Grid | 31,632 | 392,133 | ||||||
Playtech | 145,773 | 1,805,588 | ||||||
Rio Tinto | 30,704 | 1,296,490 | ||||||
Shire | 25,875 | 1,428,244 | ||||||
Standard Chartered † | 175,687 | 1,778,417 | ||||||
|
| |||||||
9,721,204 | ||||||||
|
| |||||||
Total Common Stock | 73,190,375 | |||||||
|
| |||||||
Principal amount° | ||||||||
Short-Term Investments – 2.26% | ||||||||
Discount Note – 0.26% ≠ | ||||||||
Federal Home Loan Bank 0.95% 7/10/17 | 194,632 | 194,594 | ||||||
|
| |||||||
194,594 | ||||||||
|
| |||||||
Repurchase Agreements – 1.59% | ||||||||
Bank of America Merrill Lynch 0.99%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $332,295 (collateralized by US government obligations 3.375% 5/15/44; market value $338,913) | 332,268 | 332,268 |
International Value Equity Series-3
Delaware VIP® International Value Equity Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Short-Term Investments (continued) |
| |||||||
Repurchase Agreements (continued) |
| |||||||
Bank of Montreal 0.93%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $553,822 (collateralized by US government obligations 0.625%-3.75% 7/31/17-2/15/45; market value $564,855) | 553,779 | $ | 553,779 | |||||
BNP Paribas 1.05%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $311,127 (collateralized by US government obligations 0.00%-2.00% 8/15/17-11/15/45; market value $317,322) | 311,100 | 311,100 | ||||||
|
| |||||||
1,197,147 | ||||||||
|
| |||||||
US Treasury Obligation – 0.41% ≠ |
| |||||||
US Treasury Bill 0.70% 7/13/17 | 304,895 | 304,831 | ||||||
|
| |||||||
304,831 | ||||||||
|
| |||||||
Total Short-Term Investments | 1,696,572 | |||||||
|
| |||||||
Total Value of Securities Before Securities Lending | 74,886,947 | |||||||
|
| |||||||
Number of shares | ||||||||
Securities Lending Collateral – 2.37% ** |
| |||||||
Certificates of Deposit – 0.42% ≠ |
| |||||||
Australia & New Zealand Banking Group (London) 1.15% 7/3/17 | 80,000 | 80,000 | ||||||
National Australia Bank (Cayman) 1.05% 7/3/17 | 80,000 | 80,000 |
Number of shares | Value (US $) | |||||||
Securities Lending Collateral ** (continued) |
| |||||||
Certificates of Deposit≠ (continued) |
| |||||||
National Bank of Canada (Montreal) 1.05% 7/3/17 | 80,000 | $ | 80,000 | |||||
Royal Bank of Canada (Toronto) 1.05% 7/3/17 | 80,000 | 80,000 | ||||||
|
| |||||||
320,000 | ||||||||
|
| |||||||
Repurchase Agreements – 1.95% |
| |||||||
Bank of Nova Scotia 1.10%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $415,504 (collateralized by US government obligations 0.00%-3.625% 7/15/17-4/30/22; market value $423,815). | 415,466 | 415,466 | ||||||
Credit Agricole 1.06%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $415,503 (collateralized by US government obligations 1.875% 2/28/22; market value $423,777) | 415,466 | 415,466 | ||||||
JP Morgan Securities 1.08%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $415,503 (collateralized by US government obligations 0.00%-3.50% 10/15/17-9/30/21; market value $423,795). | 415,466 | 415,466 | ||||||
Merrill Lynch, Pierce, Fenner & Smith 1.05%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $218,599 (collateralized by US government obligations 2.125% 8/15/21; market value $222,952) | 218,580 | 218,580 | ||||||
|
| |||||||
1,464,978 | ||||||||
|
| |||||||
Total Securities Lending Collateral | 1,784,978 | |||||||
|
|
Total Value of Securities – 101.93% | $76,671,925∎ | |||
|
|
* | Fully or partially on loan. |
** | See Note 8 in “Notes to financial statements” for additional information on securities lending collateral and non-cash collateral. |
≠ | The rate shown is the effective yield at the time of purchase. |
∎ | Includes $3,339,151 of securities loaned for which the counterparty pledged additional non-cash collateral valued at $1,724,064. |
° | Principal amount shown is stated in US dollars unless noted that the security is denominated in another currency. |
D | Securities have been classified by country of origin. Aggregate classification by business sector has been presented on page 2 in “ Security type / country and sector allocations.” |
† | Non-income producing security. |
ADR | - American Depositary Receipt |
See accompanying notes, which are an integral part of the financial statements.
International Value Equity Series-4
Delaware VIP® Trust — Delaware VIP International Value Equity Series | ||
Statement of assets and liabilities | June 30, 2017 (Unaudited) |
Assets: | ||||
Investments, at value1,2 | $ | 73,190,375 | ||
Short-term investments, at value3 | 1,696,572 | |||
Short-term investments held as collateral for loaned securities, at value4 | 1,784,978 | |||
Foreign currencies, at value5 | 112,924 | |||
Cash | 46,468 | |||
Foreign tax reclaims receivable | 180,817 | |||
Dividends and interest receivable | 89,844 | |||
Receivable for series shares sold | 25,441 | |||
Securities lending income receivable | 543 | |||
|
| |||
Total assets | 77,127,962 | |||
|
| |||
Liabilities: | ||||
Obligation to return securities lending collateral | 1,784,219 | |||
Investment management fees payable | 52,800 | |||
Other accrued expenses | 47,078 | |||
Audit and tax fees payable | 18,384 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 466 | |||
Payable for series shares redeemed | 322 | |||
Accounting and administration expenses payable to affiliates | 287 | |||
Legal fees payable to affiliates | 194 | |||
Trustees’ fees and expenses payable | 192 | |||
Distribution fees payable to affiliates | 114 | |||
Reports and statements to shareholders expenses payable to affiliates | 49 | |||
Other liabilities | 920 | |||
|
| |||
Total liabilities | 1,905,025 | |||
|
| |||
Total Net Assets | $ | 75,222,937 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 80,157,549 | ||
Undistributed net investment income | 974,124 | |||
Accumulated net realized loss on investments | (14,968,851 | ) | ||
Net unrealized appreciation of investments | 9,056,842 | |||
Net unrealized appreciation of foreign currencies | 3,273 | |||
|
| |||
Total Net Assets | $ | 75,222,937 | ||
|
| |||
Net Assets Value: | ||||
Standard Class: | ||||
Net assets | $ | 74,662,503 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 5,995,728 | |||
Net asset value per share | $ | 12.45 | ||
Service Class: | ||||
Net assets | $ | 560,434 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 45,066 | |||
Net asset value per share | $ | 12.44 |
1Investments, at cost | $ | 64,133,548 | ||
2Including securities on loan | 3,339,151 | |||
3Short-term investments, at cost | 1,696,557 | |||
4Short-term investments held as collateral for loaned securities, at cost | 1,784,978 | |||
5Foreign currencies, at cost | 112,839 |
See accompanying notes, which are an integral part of the financial statements.
International Value Equity Series-5
Delaware VIP® Trust —
Delaware VIP International Value Equity Series
Six months ended June 30, 2017 (Unaudited)
Investment Income: | ||||
Dividends | $ | 1,493,797 | ||
Interest | 5,818 | |||
Securities lending income | 4,397 | |||
Foreign tax withheld | (162,292 | ) | ||
|
| |||
1,341,720 | ||||
|
| |||
Expenses: | ||||
Management fees | 298,333 | |||
Audit and tax fees | 18,883 | |||
Custodian fees | 14,379 | |||
Reports and statements to shareholders expenses | 11,500 | |||
Accounting and administration expenses | 10,770 | |||
Dividend disbursing and transfer agent fees and expenses | 3,006 | |||
Legal fees | 2,239 | |||
Trustees’ fees and expenses | 1,737 | |||
Registration fees | 317 | |||
Distribution expenses – Service Class | 631 | |||
Other | 3,813 | |||
|
| |||
365,608 | ||||
Less waived distribution expenses – Service Class | (105 | ) | ||
Less expense paid indirectly | (1 | ) | ||
|
| |||
Total operating expenses | 365,502 | |||
|
| |||
Net Investment Income | 976,218 | |||
|
| |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (198,812 | ) | ||
Foreign currencies | 16,822 | |||
Foreign currency exchange contracts | 5,124 | |||
|
| |||
Net realized loss | (176,866 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) of: | ||||
Investments | 8,369,067 | |||
Foreign currencies | 10,726 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | 8,379,793 | |||
|
| |||
Net Realized and Unrealized Gain | 8,202,927 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 9,179,145 | ||
|
|
Delaware VIP Trust —
Delaware VIP International Value Equity Series
Statements of changes in net assets
Six months ended 6/30/17 (Unaudited) | Year ended 12/31/16 | |||||||
Increase (Decrease) in | ||||||||
Net investment income | $ | 976,218 | $ | 1,109,653 | ||||
Net realized gain (loss) | (176,866 | ) | 118,605 | |||||
Net change in unrealized appreciation (depreciation) | 8,379,793 | 1,353,018 | ||||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 9,179,145 | 2,581,276 | ||||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Standard Class | (1,129,748 | ) | (1,045,938 | ) | ||||
Service Class | (6,001 | ) | (3,162 | ) | ||||
|
|
|
| |||||
(1,135,749 | ) | (1,049,100 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Standard Class | 3,047,374 | 9,590,281 | ||||||
Service Class | 221,909 | 244,525 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 1,129,748 | 1,045,938 | ||||||
Service Class | 6,001 | 3,162 | ||||||
|
|
|
| |||||
4,405,032 | 10,883,906 | |||||||
|
|
|
| |||||
Cost of shares redeemed: | ||||||||
Standard Class | (3,144,989 | ) | (8,812,705 | ) | ||||
Service Class | (43,041 | ) | (73,007 | ) | ||||
|
|
|
| |||||
(3,188,030 | ) | (8,885,712 | ) | |||||
|
|
|
| |||||
Increase in net assets derived from capital share transactions | 1,217,002 | 1,998,194 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 9,260,398 | 3,530,370 | ||||||
Net Assets: | ||||||||
Beginning of period | 65,962,539 | 62,432,169 | ||||||
|
|
|
| |||||
End of period | $ | 75,222,937 | $ | 65,962,539 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 974,124 | $ | 1,133,655 | ||||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
International Value Equity Series-6
Delaware VIP® Trust — Delaware VIP International Value Equity Series
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 6/30/171 (Unaudited) | 12/31/16 | 12/31/15 | Year ended 12/31/14 | 12/31/13 | 12/31/12 | |||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, beginning of period | $ | 11.11 | $ | 10.84 | $ | 10.99 | $ | 12.19 | $ | 10.09 | $ | 8.98 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income2 | 0.16 | 0.19 | 0.19 | 0.25 | 0.18 | 0.18 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 1.37 | 0.26 | (0.11 | ) | (1.29 | ) | 2.09 | 1.17 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 1.53 | 0.45 | 0.08 | (1.04 | ) | 2.27 | 1.35 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||
Net investment income | (0.19 | ) | (0.18 | ) | (0.23 | ) | (0.16 | ) | (0.17 | ) | (0.24 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.19 | ) | (0.18 | ) | (0.23 | ) | (0.16 | ) | (0.17 | ) | (0.24 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 12.45 | $ | 11.11 | $ | 10.84 | $ | 10.99 | $ | 12.19 | $ | 10.09 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return3 | 13.91% | 4.19% | 0.49% | (8.67% | ) | 22.78% | 15.20% | |||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 74,663 | $ | 65,633 | $ | 62,285 | $ | 57,986 | $ | 57,733 | $ | 47,122 | ||||||||||||
Ratio of expenses to average net assets | 1.04% | 1.02% | 1.04% | 1.07% | 1.09% | 1.07% | ||||||||||||||||||
Ratio of net investment income to average net assets | 2.78% | 1.78% | 1.66% | 2.13% | 1.59% | 1.88% | ||||||||||||||||||
Portfolio turnover | 6% | 19% | 11% | 27% | 28% | 36% |
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.
International Value Equity Series-7
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 6/30/171 (Unaudited) | 12/31/16 | 12/31/15 | Year ended 12/31/14 | 12/31/13 | 12/31/12 | |||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, beginning of period | $ | 11.09 | $ | 10.82 | $ | 10.97 | $ | 12.16 | $ | 10.07 | $ | 8.97 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income2 | 0.15 | 0.16 | 0.16 | 0.22 | 0.15 | 0.15 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 1.36 | 0.26 | (0.11 | ) | (1.28 | ) | 2.09 | 1.16 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 1.51 | 0.42 | 0.05 | (1.06 | ) | 2.24 | 1.31 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||
Net investment income | (0.16 | ) | (0.15 | ) | (0.20 | ) | (0.13 | ) | (0.15 | ) | (0.21 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.16 | ) | (0.15 | ) | (0.20 | ) | (0.13 | ) | (0.15 | ) | (0.21 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 12.44 | $ | 11.09 | $ | 10.82 | $ | 10.97 | $ | 12.16 | $ | 10.07 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return3 | 13.77% | 3.92% | 0.24% | (8.82%) | 22.45% | 14.79% | ||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 560 | $ | 330 | $ | 147 | $ | 156 | $ | 25 | $ | 30 | ||||||||||||
Ratio of expenses to average net assets | 1.29% | 1.27% | 1.29% | 1.32% | 1.34% | 1.32% | ||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 1.34% | 1.32% | 1.34% | 1.37% | 1.39% | 1.37% | ||||||||||||||||||
Ratio of net investment income to average net assets | 2.53% | 1.53% | 1.41% | 1.88% | 1.34% | 1.63% | ||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 2.48% | 1.48% | 1.36% | 1.83% | 1.29% | 1.58% | ||||||||||||||||||
Portfolio turnover | 6% | 19% | 11% | 27% | 28% | 36% |
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.
International Value Equity Series-8
Delaware VIP® Trust – Delaware VIP International Value Equity Series
June 30, 2017 (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 Core Series (formerly, 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 distribution and/or service (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 US generally accepted accounting principles (US 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. Equity securities listed on a foreign exchange are normally valued at the last quoted sales price on the valuation date. US 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-US markets because, among other things, most foreign markets close well before the Series values its securities, generally as of 4:00pm 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 on the Series’ federal income tax returns through the six months ended June 30, 2017 and for all open tax years (years ended Dec. 31, 2013–Dec. 31, 2016), and has concluded that no provision for federal income tax is required in the Series’ financial statements. If applicable, the Fund recognizes interest accrued on unrecognized tax benefits in interest expense and penalties in other expenses on the “Statement of operations.” During the six months ended June 30, 2017, the Fund did not incur any interest or tax penalties. 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 US 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, 2017, 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 US dollars at the exchange rate of such currencies against the US 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 US GAAP. Therefore, the Series follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that
International Value Equity Series-9
Delaware VIP® International Value Equity Series
Notes to financial statements (continued)
1. Significant Accounting Policies (continued)
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 FundsSM by Macquarie (Delaware Funds) are generally allocated among such funds on the basis of average net assets. Management fees and certain 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, 2017.
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 $1, 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, 2017, 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 Macquarie Investment Management Business Trust (formerly, 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 daily and paid monthly based on the aggregate daily net assets of the Delaware 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 Funds on a relative NAV basis. For the six months ended June 30, 2017, the Series was charged $1,628 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 daily and paid monthly 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, 2017, the Series was charged $2,632 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 12b-1 fee of 0.30% of the average daily net assets of the Service Class shares. DDLP has contracted to waive 12b-1 fees from Jan. 1, 2017 through June 30, 2017* in order to limit 12b-1 fee of the Service Class shares to 0.25% of average daily net assets. Standard Class shares pay no 12b-1 fee.
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, 2017, the Series was charged $803 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 aggregate contractual waiver period covering this report is from April 29, 2016 through May 1, 2018.
International Value Equity Series-10
Delaware VIP® International Value Equity Series
Notes to financial statements (continued)
3. Investments
For the six months ended June 30, 2017, the Series made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 6,118,733 | ||
Sales | 4,372,531 |
At June 30, 2017, 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, 2017, the cost and unrealized appreciation (depreciation) of investments in the Series were as follows:
Cost of Investments | Aggregate Unrealized Appreciation of Investments | Aggregate Unrealized Depreciation of Investments | Net Unrealized Appreciation of Investments | |||
$67,615,083 | $17,558,606 | $(8,501,764) | $9,056,842 |
Qualified late year ordinary and capital losses (including currency and specified gain/loss items) represent losses realized from Nov. 1, 2016 through Dec. 31, 2016, that, in accordance with federal income tax regulations, the Series has elected to defer and treat as having arisen on the first day of the following fiscal year. At Dec. 31, 2016, the Fund deferred $13,971 of qualified late year ordinary losses.
For federal income tax purposes, capital loss carry forwards may be carried forward and applied against future capital gains. Capital loss carry forwards remaining at Dec. 31, 2016 will expire as follows: $12,723,821 will expire in 2017.
Under the Regulated Investment Company Modernization Act of 2010 (Act), net capital losses recognized for the tax years beginning after Dec. 22, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses. At Dec. 31, 2016, there were no capital loss carry forwards incurred that will be carried forward under the Act.
US 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.
International Value Equity Series-11
Delaware VIP® International Value Equity 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, 2017:
Securities | Level 1 | Level 2 | Total | |||||||||
Assets: | ||||||||||||
Common Stock | �� | |||||||||||
Australia | $ | 383,909 | $ | — | $ | 383,909 | ||||||
Canada | 3,173,818 | — | 3,173,818 | |||||||||
China/Hong Kong | 4,633,893 | — | 4,633,893 | |||||||||
Denmark | 1,583,860 | — | 1,583,860 | |||||||||
France | 14,021,203 | — | 14,021,203 | |||||||||
Germany | 3,555,498 | — | 3,555,498 | |||||||||
Indonesia | — | 1,473,252 | 1,473,252 | |||||||||
Israel | 1,362,020 | — | 1,362,020 | |||||||||
Italy | 2,461,297 | — | 2,461,297 | |||||||||
Japan | 17,230,464 | — | 17,230,464 | |||||||||
Netherlands | 3,815,434 | — | 3,815,434 | |||||||||
Republic of Korea | 2,553,278 | — | 2,553,278 | |||||||||
Russia | 698,892 | — | 698,892 | |||||||||
Sweden | 3,944,009 | — | 3,944,009 | |||||||||
Switzerland | 2,578,344 | — | 2,578,344 | |||||||||
United Kingdom | 9,721,204 | — | 9,721,204 | |||||||||
Securities Lending Collateral | — | 1,784,978 | 1,784,978 | |||||||||
Short-Term Investments | — | 1,696,572 | 1,696,572 | |||||||||
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Total Value of Securities | $ | 71,717,123 | $ | 4,954,802 | $ | 76,671,925 | ||||||
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As a result of utilizing international fair value pricing at June 30, 2017, a portion of the common stock in the portfolio was categorized as Level 1.
During the six months ended June 30, 2017, 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 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. During the six months ended June 30, 2017, there were no Level 3 investments.
International Value Equity Series-12
Delaware VIP® International Value Equity Series
Notes to financial statements (continued)
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 6/30/17 | Year ended 12/31/16 | |||||||
Shares sold: | ||||||||
Standard Class | 258,240 | 894,718 | ||||||
Service Class | 18,559 | 22,471 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 97,814 | 97,116 | ||||||
Service Class | 520 | 294 | ||||||
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375,133 | 1,014,599 | |||||||
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Shares redeemed: | ||||||||
Standard Class | (266,615 | ) | (830,284 | ) | ||||
Service Class | (3,715 | ) | (6,696 | ) | ||||
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(270,330 | ) | (836,980 | ) | |||||
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Net increase | 104,803 | 177,619 | ||||||
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5. Line of Credit
The Series, along with certain other funds in the Delaware Funds (Participants) is 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 0.15%, which is allocated across the Participants on the basis of relative net assets 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. 6, 2017.
The Series had no amounts outstanding as of June 30, 2017, or at any time during the six months then ended.
6. Derivatives
US 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 US 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 US 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, 2017, the Series entered into foreign currency exchange contracts to fix the US 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, 2017, 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.”
International Value Equity Series-13
Delaware VIP® International Value Equity 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, 2017.
Long Derivatives Volume | Short Derivatives Volume | |||||||||
Foreign currency exchange contracts (Average cost) | $ | 31,467 | $ | 26,807 |
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, 2017, 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(a) | Cash Collateral Received | Net Collateral Received | Net Exposure(b) | ||||||||||||||||||||
Bank of America Merrill Lynch | $ | 332,268 | $ | (332,268 | ) | $ | — | $ | (332,268 | ) | $ | — | |||||||||||||
Bank of Montreal | 553,779 | (553,779 | ) | — | (553,779 | ) | — | ||||||||||||||||||
BNP Paribas | 311,100 | (311,100 | ) | — | (311,100 | ) | — | ||||||||||||||||||
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Total | $ | 1,197,147 | $ | (1,197,147 | ) | $ | — | $ | (1,197,147 | ) | $ | — | |||||||||||||
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Securities Lending
Securities lending transactions are entered into by the Series under Master Securities Lending Agreements (each, an “MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Series, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MLSA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and the Series can reinvest cash collateral, or, upon an event of default, resell, or re-pledge the collateral.
As of June 30, 2017, the following table is a summary of the Series securities lending agreement by counterparty which are subject to offset under an MSLA:
Counterparty | Securities Loaned at Value | Cash Collateral Received(a) | Fair Value of Non-Cash Collateral Received | Net Exposure(b) | ||||||||||||||||
BNY Mellon | $ | 3,339,151 | $ | (1,615,087 | ) | $ | (1,724,064 | ) | $ | — |
(a) | The value of the related collateral received exceeded the value of the repurchase agreements and securities lending as of June 30, 2017. |
(b) | Net exposure represents the receivable (payable) that would be due from (to) the counterparty in the event of default. |
International Value Equity Series-14
Delaware VIP® International Value Equity Series
Notes to financial statements (continued)
8. Securities Lending
The Series, along with other funds in the Delaware 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 US securities and foreign securities that are denominated and payable in US 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.
Cash collateral received by each Series of the Trust is generally invested in 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 US 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 as disclosed on the “Schedule of Investments.” Securities purchased with cash collateral are valued at the market value. A Series can also accept US government securities and letters of credit (non-cash collateral) in connection with securities loans.
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.
The following table reflects a breakdown of transactions accounted for as secured borrowings, the gross obligation by the type of collateral pledged, and the remaining contractual maturity of those transactions as of June 30, 2017:
Remaining Contractual Maturity of the Agreements as of June 30, 2017
Securities Lending Transactions | Overnight and Continuous | Under 30 days | Between 30 and 90 days | Over 90 days | Total | |||||
Common stocks | $1,784,978 | $— | $— | $— | $1,784,978 |
At June 30, 2017, the value of securities on loan was $3,339,151 for which the Series received cash collateral of $1,784,978 and non-cash collateral of $1,724,064. At June 30, 2017, the value of invested collateral was $1,784,978. Investments purchased with cash collateral are presented on the “Schedule of investments” under the caption “Securities Lending Collateral.”
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.
International Value Equity Series-15
Delaware VIP® International Value Equity Series
Notes to financial statements (continued)
9. Credit and Market Risk (continued)
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, 2017, there were no Rule 144A securities held by the Series.
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. Recent Accounting Pronouncements
On Oct. 13, 2016, the Securities and Exchange Commission amended existing rules intended to modernize reporting and disclosure of information. These amendments relate to Regulation S-X which sets forth the form and content of financial statements. At this time, management is evaluating the implications of adopting these amendments and their impact on the financial statements and accompanying notes.
12. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to June 30, 2017 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 Series’ website at delawarefunds.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 Series’ website at delawarefunds.com/proxy; and (ii) on the Commission’s website at sec.gov.
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SA-VIPIVE 21596 (8/17) (235363) | International Value Equity Series-16 |
Table of Contents
Delaware VIP® Trust
Delaware VIP Limited-Term Diversified Income Series
June 30, 2017
Table of Contents
Table of contents | ||||
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16 |
Other than Macquarie Bank Limited (MBL), none of the entities noted are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Series is governed by US laws and regulations.
Unless otherwise noted, views expressed herein are current as of June 30, 2017, 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.
Advisory services provided by Delaware Management Company, a series of Macquarie Investment Management Business Trust, a US registered investment advisor.
The Series is distributed by Delaware Distributors, L.P., an affiliate of Macquarie Investment Management Business Trust and Macquarie Group Limited. Macquarie Investment Management (MIM), a member of Macquarie Group, refers to the companies comprising the asset management division of 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.
© 2017 Macquarie Management Holdings, Inc. (formerly, Delaware Management Holdings, Inc.)
All third-party marks cited are the property of their respective owners.
Table of Contents
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Delaware VIP® Trust — Delaware VIP Limited-Term Diversified Income Series
For the six-month period from January 1, 2017 to June 30, 2017 (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, 2017 to June 30, 2017.
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 1/1/17 | Ending Account Value 6/30/17 | Annualized Expense Ratio | Expenses Period | |||||||||||||
Actual Series return† | ||||||||||||||||
Standard Class | $1,000.00 | $1,015.00 | 0.55% | $2.75 | ||||||||||||
Service Class | 1,000.00 | 1,014.80 | 0.80% | 4.00 | ||||||||||||
Hypothetical 5% return (5% return before expenses) |
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Standard Class | $1,000.00 | $1,022.07 | 0.55% | $2.76 | ||||||||||||
Service Class | 1,000.00 | 1,020.83 | 0.80% | 4.01 |
* | “Expenses Paid During Period” are equal to the Series’ annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (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
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Delaware VIP® Trust — Delaware VIP Limited-Term Diversified Income Series
Security type / sector allocation
As of June 30, 2017 (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 | 1.01 | % | |||||
Agency Commercial Mortgage-Backed Securities | 0.36 | % | |||||
Agency Mortgage-Backed Securities | 14.13 | % | |||||
Convertible Bond | 0.12 | % | |||||
Corporate Bonds | 40.92 | % | |||||
Banking | 18.13 | % | |||||
Basic Industry | 1.53 | % | |||||
Brokerage | 0.24 | % | |||||
Capital Goods | 1.18 | % | |||||
Communications | 3.72 | % | |||||
Consumer Cyclical | 1.56 | % | |||||
Consumer Non-Cyclical | 1.69 | % | |||||
Electric | 5.99 | % | |||||
Energy | 2.88 | % | |||||
Finance Companies | 1.23 | % | |||||
Insurance | 0.69 | % | |||||
Natural Gas | 0.49 | % | |||||
Real Estate | 0.35 | % | |||||
Technology | 0.71 | % | |||||
Transportation | 0.53 | % | |||||
Municipal Bonds | 0.35 | % | |||||
Non-Agency Asset-Backed Securities | 31.14 | % | |||||
Non-Agency Collateralized Mortgage Obligations | 0.13 | % | |||||
Non-Agency Commercial Mortgage-Backed Securities | 0.13 | % | |||||
US Treasury Obligation | 8.95 | % | |||||
Preferred Stock | 0.61 | % | |||||
Short-Term Investments | 1.90 | % | |||||
Total Value of Securities | 99.75 | % | |||||
Receivables and Other Assets Net of Liabilities | 0.25 | % | |||||
Total Net Assets | 100.00 | % |
Limited-Term Diversified Income Series-2
Table of Contents
|
Delaware VIP® Trust — Delaware VIP Limited-Term Diversified Income Series
June 30, 2017 (Unaudited)
Principal amount° | Value (US $) | |||||||
Agency Asset-Backed Security – 0.00% | ||||||||
Fannie Mae Grantor Trust Series 2003-T4 2A5 4.754% 9/26/33 f | 17,069 | $ | 18,864 | |||||
|
| |||||||
Total Agency Asset-Backed Security (cost $16,931) | 18,864 | |||||||
|
| |||||||
Agency Collateralized Mortgage Obligations – 1.01% | ||||||||
Fannie Mae Connecticut Avenue Securities Series 2015-C03 2M1 2.716% 7/25/25 • | 371,791 | 372,208 | ||||||
Series 2015-C04 2M1 2.916% 4/25/28 • | 445,097 | 446,228 | ||||||
Series 2016-C03 1M1 3.216% 10/25/28 • | 1,459,551 | 1,486,438 | ||||||
Series 2016-C04 1M1 2.666% 1/25/29 • | 932,717 | 944,354 | ||||||
Series 2017-C01 1M1 2.516% 7/25/29 • | 793,996 | 802,431 | ||||||
Fannie Mae Grantor Trust Series 2001-T5 A2 6.985% 6/19/41 • | 13,206 | 15,315 | ||||||
Fannie Mae REMICs Series 2002-90 A1 6.50% 6/25/42 | 406 | 472 | ||||||
Series 2003-52 NA 4.00% 6/25/23 | 38,651 | 39,948 | ||||||
Series 2003-120 BL 3.50% 12/25/18 | 32,666 | 33,142 | ||||||
Series 2004-49 EB 5.00% 7/25/24 | 8,683 | 9,351 | ||||||
Series 2005-66 FD 1.516% 7/25/35 • | 214,623 | 214,356 | ||||||
Series 2005-110 MB 5.50% 9/25/35 | 2,069 | 2,169 | ||||||
Series 2011-88 AB 2.50% 9/25/26 | 23,278 | 23,380 | ||||||
Series 2011-113 MC 4.00% 12/25/40 | 69,608 | 71,692 | ||||||
Freddie Mac REMICs Series 2326 ZQ 6.50% 6/15/31 | 12,887 | 14,567 | ||||||
Series 3016 FL 1.549% 8/15/35 • | 13,050 | 13,072 | ||||||
Series 3027 DE 5.00% 9/15/25 | 9,495 | 10,258 | ||||||
Series 3067 FA 1.509% 11/15/35 • | 840,212 | 839,227 | ||||||
Series 3232 KF 1.609% 10/15/36 • | 28,437 | 28,573 | ||||||
Series 3297 BF 1.399% 4/15/37 • | 327,342 | 326,218 | ||||||
Series 3737 NA 3.50% 6/15/25 | 46,352 | 47,740 | ||||||
Series 3780 LF 1.559% 3/15/29 • | 38,040 | 38,057 | ||||||
Series 3800 AF 1.659% 2/15/41 • | 1,730,688 | 1,740,847 | ||||||
Series 3803 TF 1.559% 11/15/28 • | 40,923 | 40,975 | ||||||
Series 4163 CW 3.50% 4/15/40 | 1,258,660 | 1,287,807 | ||||||
Freddie Mac Strips | 1,342 | 1,332 | ||||||
Freddie Mac Structured Agency Credit Risk Debt Notes | 837,405 | 867,343 | ||||||
Series 2015-HQA1 M2 3.866% 3/25/28 • | 568,913 | 583,284 |
Principal amount° | Value (US $) | |||||||
Agency Collateralized Mortgage Obligations (continued) | ||||||||
Freddie Mac Structured Agency Credit Risk Debt Notes | 674,187 | $ | 698,020 | |||||
Series 2016-DNA1 M2 4.116% 7/25/28 • | 470,000 | 489,302 | ||||||
Series 2016-DNA3 M2 3.216% 12/25/28 • | 410,000 | 420,241 | ||||||
Series 2016-DNA4 M2 2.516% 3/25/29 • | 500,000 | 505,642 | ||||||
Series 2016-HQA2 M2 3.466% 11/25/28 • | 480,000 | 493,254 | ||||||
Freddie Mac Structured Pass Through Certificates | 788 | 929 | ||||||
Series T-58 2A 6.50% 9/25/43 ◆ | 17,854 | 20,682 | ||||||
NCUA Guaranteed Notes Trust | 1,491,063 | 1,493,811 | ||||||
|
| |||||||
Total Agency Collateralized Mortgage Obligations (cost $14,279,089) | 14,422,665 | |||||||
|
| |||||||
Agency Commercial Mortgage-Backed Securities – 0.36% | ||||||||
FREMF Mortgage Trust | 125,000 | 135,977 | ||||||
Series 2012-K22 B 144A 3.811% 8/25/45 #• | 1,115,000 | 1,156,449 | ||||||
Series 2012-K708 B 144A 3.883% 2/25/45 #• | 1,170,000 | 1,196,570 | ||||||
Series 2013-K712 B 144A 3.48% 5/25/45 #• | 625,000 | 639,551 | ||||||
NCUA Guaranteed Notes Trust | 1,976,773 | 1,973,080 | ||||||
|
| |||||||
Total Agency Commercial Mortgage-Backed Securities (cost $5,097,357) | 5,101,627 | |||||||
|
| |||||||
Agency Mortgage-Backed Securities – 14.13% | ||||||||
Fannie Mae ARM | 184,799 | 190,452 | ||||||
2.744% 12/1/33 • | 6,039 | 6,406 | ||||||
2.833% 9/1/38 • | 378,040 | 405,517 | ||||||
2.885% 8/1/37 • | 78,403 | 82,588 | ||||||
2.963% 4/1/46 • | 4,176,737 | 4,264,913 | ||||||
2.982% 9/1/35 • | 87,285 | 92,187 | ||||||
3.002% 8/1/34 • | 8,530 | 8,945 | ||||||
3.03% 8/1/36 • | 7,532 | 8,006 | ||||||
3.091% 3/1/38 • | 2,124 | 2,226 |
Limited-Term Diversified Income Series-3
Table of Contents
|
Delaware VIP® Limited-Term Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Agency Mortgage-Backed Securities (continued) | ||||||||
Fannie Mae ARM 3.103% 8/1/35 • | 1,825 | $ | 1,928 | |||||
3.104% 11/1/35 • | 47,346 | 50,088 | ||||||
3.113% 7/1/36 • | 15,734 | 16,678 | ||||||
3.145% 6/1/36 • | 14,181 | 14,860 | ||||||
3.149% 7/1/36 • | 4,863 | 5,128 | ||||||
3.203% 4/1/44 • | 316,218 | 325,382 | ||||||
3.458% 4/1/36 • | 4,384 | 4,632 | ||||||
3.484% 1/1/41 • | 81,700 | 84,883 | ||||||
3.493% 6/1/34 • | 5,197 | 5,537 | ||||||
6.098% 8/1/37 • | 25,947 | 25,902 | ||||||
Fannie Mae FHAVA 4.50% 7/1/40 | 735,034 | 794,777 | ||||||
Fannie Mae S.F. 30 yr 4.00% 3/1/47 | 5,457,764 | 5,738,960 | ||||||
4.50% 9/1/39 | 207,768 | 225,391 | ||||||
4.50% 11/1/39 | 602,914 | 656,924 | ||||||
4.50% 1/1/40 | 585,234 | 635,093 | ||||||
4.50% 8/1/40 | 183,852 | 198,703 | ||||||
4.50% 8/1/41 | 1,694,570 | 1,847,351 | ||||||
4.50% 1/1/42 | 921,001 | 999,525 | ||||||
4.50% 8/1/42 | 305,739 | 331,665 | ||||||
4.50% 10/1/44 | 142,292 | 154,756 | ||||||
4.50% 2/1/46 | 51,915,657 | 56,119,210 | ||||||
4.50% 7/1/46 | 1,817,822 | 1,957,593 | ||||||
5.00% 4/1/33 | 100,066 | 109,771 | ||||||
5.00% 2/1/35 | 67,849 | 74,432 | ||||||
5.00% 10/1/35 | 86,955 | 95,231 | ||||||
5.00% 2/1/36 | 60,500 | 66,414 | ||||||
5.00% 8/1/37 | 266,388 | 292,566 | ||||||
5.00% 12/1/39 | 270,539 | 298,284 | ||||||
5.00% 1/1/40 | 61,539 | 67,907 | ||||||
5.00% 11/1/44 | 1,233,965 | 1,351,887 | ||||||
5.50% 3/1/35 | 47,788 | 53,071 | ||||||
5.50% 8/1/37 | 169,739 | 190,192 | ||||||
5.50% 3/1/38 | 636,090 | 713,978 | ||||||
5.50% 8/1/38 | 105,932 | 118,397 | ||||||
5.50% 6/1/39 | 487,263 | 544,743 | ||||||
5.50% 8/1/41 | 1,199,813 | 1,342,977 | ||||||
5.50% 9/1/41 | 792,065 | 896,699 | ||||||
5.50% 5/1/44 | 40,875,954 | 45,772,382 | ||||||
6.00% 11/1/34 | 876 | 985 | ||||||
6.00% 4/1/36 | 4,393 | 4,941 | ||||||
6.00% 9/1/36 | 209,723 | 241,763 | ||||||
6.00% 7/1/37 | 400,607 | 456,915 | ||||||
6.00% 8/1/37 | 154,962 | 175,007 | ||||||
6.00% 1/1/38 | 64,963 | 73,429 | ||||||
6.00% 5/1/38 | 665,403 | 753,121 | ||||||
6.00% 1/1/39 | 187,102 | 211,915 | ||||||
6.00% 2/1/39 | 231,777 | 261,451 | ||||||
6.00% 10/1/39 | 1,631,322 | 1,861,213 |
Principal amount° | Value (US $) | |||||||
Agency Mortgage-Backed Securities (continued) | ||||||||
Fannie Mae S.F. 30 yr 6.00% 5/1/41 | 363,978 | $ | 411,183 | |||||
6.00% 7/1/41 | 3,860,238 | 4,382,565 | ||||||
6.50% 1/1/34 | 529 | 598 | ||||||
6.50% 5/1/40 | 332,100 | 372,371 | ||||||
7.00% 12/1/34 | 290 | 318 | ||||||
7.00% 12/1/35 | 733 | 816 | ||||||
7.00% 12/1/37 | 1,283 | 1,367 | ||||||
7.50% 6/1/31 | 4,162 | 5,005 | ||||||
7.50% 4/1/32 | 174 | 195 | ||||||
7.50% 5/1/33 | 554 | 556 | ||||||
7.50% 6/1/34 | 262 | 299 | ||||||
Fannie Mae S.F. 30 yr TBA 4.50% 8/1/47 | 433,000 | 463,817 | ||||||
Freddie Mac ARM 2.554% 10/1/46 • | 1,164,933 | 1,169,914 | ||||||
2.684% 10/1/36 • | 3,105 | 3,278 | ||||||
2.93% 11/1/44 • | 209,607 | 215,459 | ||||||
3.069% 6/1/37 • | 147,614 | 154,129 | ||||||
3.105% 3/1/46 • | 967,805 | 992,031 | ||||||
3.135% 7/1/38 • | 343,483 | 364,147 | ||||||
3.275% 10/1/37 • | 36,404 | 38,246 | ||||||
5.00% 8/1/38 • | 5,067 | 5,316 | ||||||
Freddie Mac S.F. 30 yr 4.00% 6/1/45 | 11,854,673 | 12,593,591 | ||||||
4.50% 4/1/39 | 103,153 | 111,747 | ||||||
4.50% 5/1/40 | 4,082,934 | 4,441,320 | ||||||
4.50% 3/1/42 | 1,197,261 | 1,290,555 | ||||||
4.50% 8/1/42 | 11,904,257 | 12,895,454 | ||||||
4.50% 12/1/43 | 487,400 | 526,556 | ||||||
4.50% 8/1/44 | 361,245 | 388,162 | ||||||
4.50% 7/1/45 | 2,374,751 | 2,551,627 | ||||||
4.50% 12/1/45 | 2,811,556 | 3,010,734 | ||||||
5.00% 6/1/36 | 978,202 | 1,069,816 | ||||||
5.00% 5/1/41 | 750,903 | 828,325 | ||||||
5.00% 12/1/41 | 673,233 | 740,530 | ||||||
5.00% 4/1/44 | 2,625,961 | 2,889,558 | ||||||
5.50% 12/1/35 | 48,868 | 54,883 | ||||||
5.50% 5/1/37 | 246,152 | 275,548 | ||||||
5.50% 3/1/40 | 149,274 | 166,012 | ||||||
5.50% 8/1/40 | 506,786 | 564,063 | ||||||
5.50% 6/1/41 | 5,427,598 | 6,053,618 | ||||||
6.00% 2/1/36 | 395,514 | 447,973 | ||||||
6.00% 3/1/36 | 304,853 | 344,589 | ||||||
6.00% 1/1/38 | 56,373 | 63,456 | ||||||
6.00% 6/1/38 | 154,118 | 174,316 | ||||||
6.00% 8/1/38 | 683,862 | 777,513 | ||||||
6.00% 7/1/39 | 349,376 | 396,507 | ||||||
6.00% 5/1/40 | 429,686 | 483,168 | ||||||
6.00% 7/1/40 | 393,715 | 446,295 | ||||||
7.00% 11/1/33 | 3,378 | 3,887 |
Limited-Term Diversified Income Series-4
Table of Contents
|
Delaware VIP® Limited-Term Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Agency Mortgage-Backed Securities (continued) | ||||||||
GNMA I S.F. 30 yr 5.50% 2/15/41 | 413,829 | $ | 461,456 | |||||
7.00% 12/15/34 | 14,081 | 16,547 | ||||||
GNMA II S.F. 30 yr 5.00% 9/20/46 | 928,369 | 1,000,204 | ||||||
5.50% 5/20/37 | 311,392 | 345,586 | ||||||
5.50% 4/20/40 | 271,305 | 296,041 | ||||||
6.00% 2/20/39 | 343,497 | 381,787 | ||||||
6.00% 10/20/39 | 1,278,924 | 1,421,415 | ||||||
6.00% 2/20/40 | 1,340,533 | 1,497,520 | ||||||
6.00% 4/20/46 | 398,640 | 444,705 | ||||||
6.50% 6/20/39 | 994,063 | 1,125,544 | ||||||
6.50% 10/20/39 | 506,938 | 572,078 | ||||||
|
| |||||||
Total Agency Mortgage-Backed Securities (cost $202,658,274) | 201,020,173 | |||||||
|
| |||||||
Convertible Bond – 0.12% |
| |||||||
Jefferies Group 3.875% exercise price $43.72, maturity date 11/1/29 | 1,645,000 | 1,657,337 | ||||||
|
| |||||||
Total Convertible Bond (cost $1,752,953) | 1,657,337 | |||||||
|
| |||||||
Corporate Bonds – 40.92% |
| |||||||
Banking – 18.13% | ||||||||
ANZ New Zealand International 144A 2.60% 9/23/19 # | 7,290,000 | 7,348,094 | ||||||
Banco Santander 3.50% 4/11/22 | 3,800,000 | 3,893,035 | ||||||
Bank of America 2.503% 10/21/22 | 3,195,000 | 3,157,647 | ||||||
3.124% 1/20/23 • | 920,000 | 930,984 | ||||||
3.705% 4/24/28 • | 2,560,000 | 2,582,474 | ||||||
4.183% 11/25/27 | 11,860,000 | 12,087,178 | ||||||
Bank of New York Mellon 2.45% 11/27/20 | 5,100,000 | 5,151,755 | ||||||
2.50% 4/15/21 | 1,000,000 | 1,008,377 | ||||||
2.661% 5/16/23 • | 2,840,000 | 2,848,316 | ||||||
Barclays | 1,970,000 | 1,999,989 | ||||||
8.25% 12/29/49 • | 2,085,000 | 2,215,313 | ||||||
BB&T 2.45% 1/15/20 | 2,085,000 | 2,108,902 | ||||||
Branch Banking & Trust 2.85% 4/1/21 | 2,740,000 | 2,800,072 | ||||||
Citigroup 2.279% 5/17/24 • | 4,255,000 | 4,254,660 | ||||||
Citizens Bank 2.30% 12/3/18 | 5,285,000 | 5,305,902 | ||||||
2.45% 12/4/19 | 5,065,000 | 5,111,304 | ||||||
Commonwealth Bank of Australia 2.40% 11/2/20 | 8,600,000 | 8,618,920 | ||||||
Compass Bank 2.75% 9/29/19 | 9,170,000 | 9,246,212 | ||||||
Cooperatieve Rabobank 3.75% 7/21/26 | 1,775,000 | 1,778,266 | ||||||
Credit Suisse 2.30% 5/28/19 | 8,285,000 | 8,342,142 | ||||||
3.00% 10/29/21 | 925,000 | 943,088 |
Principal amount° | Value (US $) | |||||||
Corporate Bonds (continued) | ||||||||
Banking (continued) | ||||||||
Credit Suisse Group 144A 4.282% 1/9/28 # | 385,000 | $ | 398,474 | |||||
Credit Suisse Group Funding Guernsey 3.80% 6/9/23 | 2,640,000 | 2,724,958 | ||||||
Fifth Third Bancorp 2.875% 7/27/20 | 2,345,000 | 2,399,592 | ||||||
Fifth Third Bank 2.25% 6/14/21 | 240,000 | 239,411 | ||||||
2.30% 3/15/19 | 6,090,000 | 6,129,883 | ||||||
3.85% 3/15/26 | 1,190,000 | 1,213,909 | ||||||
Goldman Sachs Group 6.00% 6/15/20 | 5,450,000 | 6,016,206 | ||||||
Huntington Bancshares 2.30% 1/14/22 | 2,670,000 | 2,632,420 | ||||||
Huntington National Bank 2.375% 3/10/20 | 3,665,000 | 3,680,067 | ||||||
ING Groep 3.15% 3/29/22 | 2,260,000 | 2,305,315 | ||||||
JPMorgan Chase & Co. 2.776% 4/25/23 • | 12,245,000 | 12,273,837 | ||||||
4.25% 10/1/27 | 2,515,000 | 2,619,483 | ||||||
KeyBank | 4,160,000 | 4,188,167 | ||||||
2.40% 6/9/22 | 3,510,000 | 3,494,560 | ||||||
2.50% 11/22/21 | 4,565,000 | 4,581,927 | ||||||
3.18% 5/22/22 | 940,000 | 957,768 | ||||||
Manufacturers & Traders Trust 2.50% 5/18/22 | 1,445,000 | 1,442,801 | ||||||
Morgan Stanley 2.373% 5/8/24 • | 4,530,000 | 4,557,089 | ||||||
2.75% 5/19/22 | 260,000 | 260,091 | ||||||
3.625% 1/20/27 | 2,145,000 | 2,161,285 | ||||||
3.95% 4/23/27 | 3,770,000 | 3,801,766 | ||||||
6.25% 8/28/17 | 1,095,000 | 1,102,662 | ||||||
PNC Bank | 2,645,000 | 2,660,674 | ||||||
2.45% 11/5/20 | 2,985,000 | 3,011,540 | ||||||
PNC Financial Services Group | 1,900,000 | 1,893,116 | ||||||
5.00% 12/29/49 • | 2,705,000 | 2,792,913 | ||||||
Royal Bank of Canada 2.75% 2/1/22 | 4,095,000 | 4,166,724 | ||||||
Royal Bank of Scotland Group | 4,160,000 | 4,248,180 | ||||||
8.625% 12/29/49 • | 2,095,000 | 2,288,787 | ||||||
Santander UK 144A 5.00% 11/7/23 # | 2,050,000 | 2,204,607 | ||||||
Santander UK Group Holdings 3.125% 1/8/21 | 6,465,000 | 6,572,028 | ||||||
3.571% 1/10/23 | 1,625,000 | 1,663,529 | ||||||
Skandinaviska Enskilda Banken 144A 2.375% 3/25/19 # | 7,410,000 | 7,460,951 | ||||||
State Street 2.653% 5/15/23 • | 1,510,000 | 1,515,441 | ||||||
3.30% 12/16/24 | 1,945,000 | 2,002,311 | ||||||
SunTrust Banks 2.50% 5/1/19 | 7,305,000 | 7,376,896 | ||||||
SVB Financial Group 3.50% 1/29/25 | 2,430,000 | 2,389,254 | ||||||
Toronto-Dominion Bank 2.25% 11/5/19 | 6,935,000 | 6,989,128 |
Limited-Term Diversified Income Series-5
Table of Contents
|
Delaware VIP® Limited-Term Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Corporate Bonds (continued) | ||||||||
Banking (continued) | ||||||||
UBS Group Funding Switzerland 144A 2.65% 2/1/22 # | 1,795,000 | $ | 1,792,912 | |||||
144A 3.00% 4/15/21 # | 5,915,000 | 6,010,521 | ||||||
US Bancorp 2.35% 1/29/21 | 3,365,000 | 3,383,057 | ||||||
2.625% 1/24/22 | 4,340,000 | 4,387,310 | ||||||
US Bank 1.40% 4/26/19 | 3,500,000 | 3,479,476 | ||||||
USB Capital IX 3.50% 10/29/49 • | 2,220,000 | 1,973,913 | ||||||
Wells Fargo & Co. 3.069% 1/24/23 | 14,260,000 | 14,458,656 | ||||||
Zions Bancorporation 4.50% 6/13/23 | 2,195,000 | 2,312,487 | ||||||
|
| |||||||
257,948,712 | ||||||||
|
| |||||||
Basic Industry – 1.53% | ||||||||
Dow Chemical 8.55% 5/15/19 | 4,345,000 | 4,868,868 | ||||||
Georgia-Pacific 144A 2.539% 11/15/19 # | 4,000,000 | 4,037,980 | ||||||
144A 5.40% 11/1/20 # | 2,365,000 | 2,588,211 | ||||||
INVISTA Finance 144A 4.25% 10/15/19 # | 2,525,000 | 2,613,880 | ||||||
Sherwin-Williams 2.75% 6/1/22 | 3,400,000 | 3,401,455 | ||||||
3.45% 6/1/27 | 645,000 | 650,922 | ||||||
WestRock | 1,990,000 | 2,045,328 | ||||||
4.45% 3/1/19 | 1,510,000 | 1,566,781 | ||||||
|
| |||||||
21,773,425 | ||||||||
|
| |||||||
Brokerage – 0.24% | ||||||||
Jefferies Group 5.125% 1/20/23 | 3,115,000 | 3,395,799 | ||||||
|
| |||||||
3,395,799 | ||||||||
|
| |||||||
Capital Goods – 1.18% | ||||||||
Crane 2.75% 12/15/18 | 420,000 | 424,523 | ||||||
Fortive 1.80% 6/15/19 | 7,000,000 | 6,953,394 | ||||||
General Electric 1.551% 5/5/26 • | 305,000 | 299,829 | ||||||
Rockwell Collins 3.20% 3/15/24 | 1,375,000 | 1,395,464 | ||||||
3.50% 3/15/27 | 960,000 | 975,528 | ||||||
Roper Technologies 2.80% 12/15/21 | 2,635,000 | 2,659,874 | ||||||
United Technologies 2.80% 5/4/24 | 4,040,000 | 4,055,146 | ||||||
|
| |||||||
16,763,758 | ||||||||
|
| |||||||
Communications – 3.72% |
| |||||||
American Tower 2.25% 1/15/22 | 4,600,000 | 4,489,632 | ||||||
American Tower Trust I 144A 3.07% 3/15/23 # | 1,575,000 | 1,589,232 | ||||||
AT&T | 330,000 | 329,763 | ||||||
2.80% 2/17/21 | 160,000 | 161,819 | ||||||
4.25% 3/1/27 | 4,970,000 | 5,148,353 | ||||||
Crown Castle International 5.25% 1/15/23 | 2,095,000 | 2,329,738 | ||||||
Crown Castle Towers 144A 3.663% 5/15/25 # | 3,785,000 | 3,917,475 |
Principal amount° | Value (US $) | |||||||
Corporate Bonds (continued) | ||||||||
Communications (continued) | ||||||||
Deutsche Telekom International Finance | 6,675,000 | $ | 6,584,787 | |||||
144A 1.95% 9/19/21 # | 1,390,000 | 1,355,678 | ||||||
144A 2.485% 9/19/23 # | 2,690,000 | 2,614,669 | ||||||
GTP Acquisition Partners I 144A 2.35% 6/15/20 # | 1,080,000 | 1,068,482 | ||||||
Historic TW 6.875% 6/15/18 | 1,340,000 | 1,403,879 | ||||||
SBA Tower Trust 144A 2.24% 4/10/18 # | 1,660,000 | 1,659,524 | ||||||
144A 2.898% 10/8/19 # | 1,520,000 | 1,528,028 | ||||||
Time Warner Entertainment 8.375% 3/15/23 | 8,635,000 | 10,876,586 | ||||||
Verizon Communications 144A 2.946% 3/15/22 # | 3,990,000 | 4,021,665 | ||||||
4.50% 9/15/20 | 3,640,000 | 3,890,985 | ||||||
|
| |||||||
52,970,295 | ||||||||
|
| |||||||
Consumer Cyclical – 1.56% |
| |||||||
Daimler Finance North America 144A 2.20% 10/30/21 # | 2,350,000 | 2,322,726 | ||||||
Ford Motor Credit 3.096% 5/4/23 | 5,080,000 | 5,025,898 | ||||||
3.336% 3/18/21 | 720,000 | 734,474 | ||||||
General Motors Financial 3.15% 1/15/20 | 2,455,000 | 2,498,402 | ||||||
3.45% 1/14/22 | 6,420,000 | 6,532,883 | ||||||
Hyundai Capital America 144A 2.125% 10/2/17 # | 260,000 | 260,201 | ||||||
144A 2.55% 2/6/19 # | 3,000,000 | 3,012,513 | ||||||
144A 3.00% 3/18/21 # | 150,000 | 151,049 | ||||||
Toyota Motor Credit 1.375% 1/10/18 | 200,000 | 200,125 | ||||||
Wyndham Worldwide 4.15% 4/1/24 | 1,450,000 | 1,491,115 | ||||||
|
| |||||||
22,229,386 | ||||||||
|
| |||||||
Consumer Non-Cyclical – 1.69% | ||||||||
Abbott Laboratories 2.90% 11/30/21 | 10,105,000 | 10,211,446 | ||||||
Anheuser-Busch InBev Finance 2.65% 2/1/21 | 3,455,000 | 3,503,937 | ||||||
Becton Dickinson 2.894% 6/6/22 | 1,795,000 | 1,799,249 | ||||||
3.363% 6/6/24 | 1,790,000 | 1,796,158 | ||||||
Molson Coors Brewing 2.10% 7/15/21 | 3,845,000 | 3,784,326 | ||||||
Reynolds American 4.00% 6/12/22 | 2,765,000 | 2,932,907 | ||||||
|
| |||||||
24,028,023 | ||||||||
|
| |||||||
Electric – 5.99% | ||||||||
Ameren 2.70% 11/15/20 | 7,615,000 | 7,711,155 | ||||||
Arizona Public Service 2.20% 1/15/20 | 8,255,000 | 8,278,205 | ||||||
CMS Energy 6.25% 2/1/20 | 2,945,000 | 3,243,623 | ||||||
Dominion Energy 2.00% 8/15/21 | 5,710,000 | 5,605,233 | ||||||
DTE Energy | 3,350,000 | 3,367,202 | ||||||
3.30% 6/15/22 | 2,145,000 | 2,203,136 | ||||||
Duke Energy 1.80% 9/1/21 | 5,640,000 | 5,510,551 |
Limited-Term Diversified Income Series-6
Table of Contents
|
Delaware VIP® Limited-Term Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Corporate Bonds (continued) | ||||||||
Electric (continued) | ||||||||
Enel Finance International 144A 2.875% 5/25/22 # | 7,275,000 | $ | 7,292,511 | |||||
Entergy 4.00% 7/15/22 | 6,555,000 | 6,934,915 | ||||||
Exelon | 3,500,000 | 3,557,921 | ||||||
3.497% 6/1/22 | 2,300,000 | 2,361,316 | ||||||
Exelon Generation 4.25% 6/15/22 | 1,675,000 | 1,764,113 | ||||||
Fortis 144A 2.10% 10/4/21 # | 6,715,000 | 6,582,929 | ||||||
Great Plains Energy 3.15% 4/1/22 | 7,625,000 | 7,713,061 | ||||||
IPALCO Enterprises 3.45% 7/15/20 | 4,765,000 | 4,848,387 | ||||||
Kansas City Power & Light 6.375% 3/1/18 | 3,715,000 | 3,822,746 | ||||||
LG&E & KU Energy 3.75% 11/15/20 | 470,000 | 490,399 | ||||||
National Rural Utilities Cooperative Finance 5.25% 4/20/46 • | 1,000,000 | 1,054,615 | ||||||
NV Energy 6.25% 11/15/20 | 2,350,000 | 2,645,524 | ||||||
Pacific Gas & Electric 3.50% 10/1/20 | 250,000 | 259,884 | ||||||
|
| |||||||
85,247,426 | ||||||||
|
| |||||||
Energy – 2.88% | ||||||||
BP Capital Markets 3.216% 11/28/23 | 3,170,000 | 3,221,604 | ||||||
3.224% 4/14/24 | 2,830,000 | 2,859,763 | ||||||
Kinder Morgan Energy Partners 9.00% 2/1/19 | 2,215,000 | 2,444,346 | ||||||
Plains All American Pipeline 2.85% 1/31/23 | 1,350,000 | 1,311,152 | ||||||
3.85% 10/15/23 | 3,330,000 | 3,356,214 | ||||||
Sabine Pass Liquefaction 5.625% 4/15/23 | 4,995,000 | 5,558,436 | ||||||
5.625% 3/1/25 | 1,380,000 | 1,526,110 | ||||||
5.75% 5/15/24 | 2,495,000 | 2,782,274 | ||||||
Shell International Finance 1.75% 9/12/21 | 5,530,000 | 5,429,105 | ||||||
2.375% 8/21/22 | 850,000 | 845,608 | ||||||
Spectra Energy Capital 3.30% 3/15/23 | 1,650,000 | 1,658,017 | ||||||
Tesoro 144A 4.75% 12/15/23 # | 2,785,000 | 3,013,092 | ||||||
TransCanada PipeLines 1.625% 11/9/17 | 2,130,000 | 2,131,078 | ||||||
Woodside Finance 144A 8.75% 3/1/19 # | 4,420,000 | 4,883,145 | ||||||
|
| |||||||
41,019,944 | ||||||||
|
| |||||||
Finance Companies – 1.23% |
| |||||||
AerCap Ireland Capital 3.50% 5/26/22 | 1,610,000 | 1,653,887 | ||||||
Air Lease 3.00% 9/15/23 | 2,375,000 | 2,364,317 | ||||||
Aviation Capital Group 144A 2.875% 1/20/22 # | 5,430,000 | 5,415,953 | ||||||
International Lease Finance 8.625% 1/15/22 | 5,230,000 | 6,445,666 | ||||||
SMBC Aviation Capital Finance 144A 2.65% 7/15/21 # | 1,660,000 | 1,631,295 | ||||||
|
| |||||||
17,511,118 | ||||||||
|
|
Principal amount° | Value (US $) | |||||||
Corporate Bonds (continued) | ||||||||
Insurance – 0.69% | ||||||||
Berkshire Hathaway Finance 2.90% 10/15/20 | 1,530,000 | $ | 1,579,650 | |||||
NUVEEN FINANCE 144A 2.95% 11/1/19 # | 1,910,000 | 1,938,470 | ||||||
144A 4.125% 11/1/24 # | 900,000 | 932,684 | ||||||
Pricoa Global Funding I 144A 1.60% 5/29/18 # | 920,000 | 919,880 | ||||||
Principal Life Global Funding II 144A 1.50% 4/18/19 # | 3,500,000 | 3,468,752 | ||||||
Willis North America 3.60% 5/15/24 | 885,000 | 895,011 | ||||||
|
| |||||||
9,734,447 | ||||||||
|
| |||||||
Natural Gas – 0.49% | ||||||||
Sempra Energy 1.625% 10/7/19 | 7,000,000 | 6,940,206 | ||||||
|
| |||||||
6,940,206 | ||||||||
|
| |||||||
Real Estate – 0.35% | ||||||||
Hospitality Properties Trust 4.50% 6/15/23 | 1,605,000 | 1,683,876 | ||||||
Host Hotels & Resorts 3.75% 10/15/23 | 635,000 | 648,282 | ||||||
3.875% 4/1/24 | 2,600,000 | 2,647,910 | ||||||
|
| |||||||
4,980,068 | ||||||||
|
| |||||||
Technology – 0.71% | ||||||||
Apple 3.20% 5/11/27 | 5,080,000 | 5,134,524 | ||||||
Cisco Systems 1.85% 9/20/21 | 2,315,000 | 2,287,611 | ||||||
NXP | 2,140,000 | 2,258,770 | ||||||
144A 4.625% 6/1/23 # | 385,000 | 416,281 | ||||||
|
| |||||||
10,097,186 | ||||||||
|
| |||||||
Transportation – 0.53% | ||||||||
Penske Truck Leasing 144A 3.30% 4/1/21 # | 1,130,000 | 1,161,765 | ||||||
144A 4.20% 4/1/27 # | 5,395,000 | 5,584,791 | ||||||
United Airlines 2015-1 Class AA Pass-Through Trust 3.45% 12/1/27 ◆ | 704,220 | 720,945 | ||||||
|
| |||||||
7,467,501 | ||||||||
|
| |||||||
Total Corporate Bonds (cost $579,919,421) | 582,107,294 | |||||||
|
| |||||||
Municipal Bonds – 0.35% |
| |||||||
Commonwealth of Massachusetts 5.00% 10/1/25 | 705,000 | 870,576 | ||||||
County of Baltimore, Maryland 5.00% 2/1/26 | 3,320,000 | 4,149,867 | ||||||
|
| |||||||
Total Municipal Bonds (cost $5,060,567) | 5,020,443 | |||||||
|
| |||||||
Non-Agency Asset-Backed Securities – 31.14% | ||||||||
AEP Texas Central Transition Funding II | 323,306 | 326,288 |
Limited-Term Diversified Income Series-7
Table of Contents
|
Delaware VIP® Limited-Term Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Non-Agency Asset-Backed Securities (continued) | ||||||||
Ally Master Owner Trust | 8,490,000 | $ | 8,491,681 | |||||
American Express Credit Account Master Trust | 3,290,000 | 3,303,406 | ||||||
Series 2014-1 A 1.529% 12/15/21 • | 10,735,000 | 10,781,099 | ||||||
ARI Fleet Lease Trust | 92,415 | 92,336 | ||||||
Series 2017-A A1 144A 1.25% 6/15/18 # | 2,500,000 | 2,498,468 | ||||||
Avis Budget Rental Car Funding AESOP | 8,750,000 | 8,839,143 | ||||||
BA Credit Card Trust | 13,559,000 | 13,615,978 | ||||||
Series 2014-A3 A 1.449% 1/15/20 • | 2,560,000 | 2,560,851 | ||||||
Series 2015-A1 A 1.489% 6/15/20 • | 2,000,000 | 2,003,189 | ||||||
Series 2017-A1 A1 1.95% 8/15/22 | 3,300,000 | 3,310,906 | ||||||
Barclays Dryrock Issuance Trust Series 2017-1 A 1.489% 3/15/23 • | 2,810,000 | 2,813,895 | ||||||
BMW Floorplan Master Owner Trust | 2,000,000 | 2,006,801 | ||||||
BMW Vehicle Lease Trust | 5,900,000 | 5,896,795 | ||||||
Series 2016-2 A3 1.43% 9/20/19 | 1,080,000 | 1,077,031 | ||||||
Cabela’s Credit Card Master Note Trust | 3,750,000 | 3,762,751 | ||||||
Series 2015-1A A1 2.26% 3/15/23 | 5,300,000 | 5,328,887 | ||||||
Capital One Multi-Asset Execution Trust | 3,850,000 | 3,866,492 | ||||||
Series 2016-A1 A1 1.609% 2/15/22 • | 10,997,000 | 11,061,694 | ||||||
Chase Issuance Trust | 1,250,000 | 1,250,000 | ||||||
Series 2012-A10 A10 1.419% 12/16/19 • | 16,750,000 | 16,768,021 | ||||||
Series 2013-A3 A3 1.439% 4/15/20 • | 6,110,000 | 6,118,772 | ||||||
Series 2013-A6 A6 1.579% 7/15/20 • | 983,000 | 986,130 | ||||||
Series 2013-A7 A 1.589% 9/15/20 • | 2,800,000 | 2,810,871 | ||||||
Series 2013-A9 A 1.579% 11/16/20 • | 10,225,000 | 10,268,454 | ||||||
Series 2014-A5 A5 1.529% 4/15/21 • | 7,882,000 | 7,911,251 | ||||||
Series 2016-A1 A 1.569% 5/17/21 • | 7,390,000 | 7,429,735 | ||||||
Series 2016-A3 A3 1.709% 6/15/23 • | 10,735,000 | 10,822,706 | ||||||
Series 2017-A1 A 1.459% 1/18/22 • | 9,460,000 | 9,491,223 | ||||||
Series 2017-A2 A 1.559% 3/15/24 • | 3,000,000 | 3,009,077 | ||||||
Chesapeake Funding II Series 2017-2A A2 144A 1.494% 5/15/29 #• | 3,500,000 | 3,500,127 |
Principal amount° | Value (US $) | |||||||
Non-Agency Asset-Backed Securities (continued) | ||||||||
Citibank Credit Card Issuance Trust | 694,000 | $ | 702,197 | |||||
Series 2013-A2 A2 1.496% 5/26/20 • | 5,647,000 | 5,657,136 | ||||||
Series 2013-A4 A4 1.636% 7/24/20 • | 18,985,000 | 19,054,077 | ||||||
Series 2013-A7 A7 1.654% 9/10/20 • | 6,632,000 | 6,656,811 | ||||||
Series 2016-A3 A3 1.713% 12/7/23 • | 10,295,000 | 10,381,283 | ||||||
Series 2017-A1 A1 1.459% 1/19/21 • | 5,255,000 | 5,266,013 | ||||||
Series 2017-A5 A5 1.836% 4/22/26 • | 830,000 | 834,312 | ||||||
CNH Equipment Trust | 140,747 | 140,929 | ||||||
Discover Card Execution Note Trust | 9,795,000 | 9,806,605 | ||||||
Series 2013-A6 A6 1.609% 4/15/21 • | 9,350,000 | 9,392,657 | ||||||
Series 2014-A1 A1 1.589% 7/15/21 • | 12,984,000 | 13,043,417 | ||||||
Series 2015-A1 A1 1.509% 8/17/20 • | 11,275,000 | 11,296,423 | ||||||
Series 2016-A4 A4 1.39% 3/15/22 | 1,585,000 | 1,571,727 | ||||||
Series 2017-A1 A1 1.649% 7/15/24 • | 11,445,000 | 11,506,683 | ||||||
Series 2017-A3 A3 1.389% 10/17/22 • | 9,025,000 | 9,044,799 | ||||||
Series 2017-A5 A5 1.816% 12/15/26 • | 1,510,000 | 1,518,026 | ||||||
Ford Credit Auto Owner Trust | 577,054 | 577,426 | ||||||
Series 2016-C A2B 1.299% 9/15/19 • | 1,350,615 | 1,351,203 | ||||||
Series 2017-1 A 144A 2.62% 8/15/28 # | 5,000,000 | 5,059,463 | ||||||
Ford Credit Floorplan Master Owner Trust A | 2,640,000 | 2,640,687 | ||||||
Series 2015-1 A2 1.559% 1/15/20 • | 16,307,000 | 16,330,520 | ||||||
Series 2015-2 A2 1.729% 1/15/22 • | 24,214,000 | 24,431,560 | ||||||
Series 2015-4 A2 1.759% 8/15/20 • | 4,000,000 | 4,018,711 | ||||||
Series 2017-1 A2 1.579% 5/15/22 • | 425,000 | 425,380 | ||||||
Golden Credit Card Trust | 8,195,000 | 8,216,680 | ||||||
GreatAmerica Leasing Receivables Funding | 1,675,000 | 1,674,059 | ||||||
Hertz Fleet Lease Funding | 526,146 | 526,025 | ||||||
HOA Funding | 344,925 | 326,223 | ||||||
Hyundai Auto Lease Securitization Trust Series 2016-A A2B 144A 1.709% 7/16/18 #• | 3,055,747 | 3,058,850 |
Limited-Term Diversified Income Series-8
Table of Contents
|
Delaware VIP® Limited-Term Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Non-Agency Asset-Backed Securities (continued) | ||||||||
Hyundai Auto Lease Securitization Trust | ||||||||
Series 2016-C A3 144A 1.49% 2/18/20 # | 3,345,000 | $ | 3,337,994 | |||||
Hyundai Auto Receivables Trust Series 2015-C A2B 1.529% 11/15/18 • | 225,373 | 225,304 | ||||||
Series 2016-A A2B 1.529% 6/17/19 • | 2,046,258 | 2,048,598 | ||||||
Mercedes-Benz Auto Lease Trust | 294,214 | 294,409 | ||||||
Mercedes-Benz Master Owner Trust | 16,600,000 | 16,628,794 | ||||||
Series 2016-AA A 144A 1.739% 5/15/20 #• | 4,155,000 | 4,170,355 | ||||||
Series 2016-BA A 144A 1.859% 5/17/21 #• | 2,280,000 | 2,299,066 | ||||||
Navistar Financial Dealer Note Master Owner Trust II | 715,000 | 718,816 | ||||||
Series 2017-1 A 144A 2.489% 6/27/22 #• | 1,900,000 | 1,899,629 | ||||||
NextGear Floorplan Master Owner Trust | 1,420,000 | 1,421,154 | ||||||
Nissan Auto Lease Trust | 866,886 | 867,639 | ||||||
Series 2016-B A2B 1.439% 12/17/18 • | 2,528,488 | 2,530,445 | ||||||
Series 2016-B A3 1.50% 7/15/19 | 1,300,000 | 1,297,141 | ||||||
Nissan Auto Receivables Owner Trust | 101,614 | 101,650 | ||||||
Series 2016-A A2B 1.509% 2/15/19 • | 1,403,781 | 1,404,990 | ||||||
Series 2016-B A2B 1.459% 4/15/19 • | 1,571,884 | 1,573,123 | ||||||
Nissan Master Owner Trust Receivables | 2,855,000 | 2,858,862 | ||||||
PFS Financing | 1,000,000 | 999,797 | ||||||
Series 2017-AA A 144A 1.739% 3/15/21 #• | 4,755,000 | 4,763,756 | ||||||
Popular ABS Mortgage Pass Through Trust | 1,268,821 | 1,246,846 | ||||||
Synchrony Credit Card Master Note Trust | 510,000 | 509,952 | ||||||
Series 2015-2 A 1.60% 4/15/21 | 1,120,000 | 1,120,204 |
Principal amount° | Value (US $) | |||||||
Non-Agency Asset-Backed Securities (continued) | ||||||||
Towd Point Mortgage Trust | 806,687 | $ | 812,898 | |||||
Series 2015-6 A1B 144A 2.75% 4/25/55 #• | 848,415 | 854,951 | ||||||
Toyota Auto Receivables Owner Trust | 459,950 | 460,098 | ||||||
Series 2017-A A2B 1.229% 9/16/19 • | 1,000,000 | 1,000,266 | ||||||
Trafigura Securitisation Finance | 7,415,000 | 7,415,000 | ||||||
Verizon Owner Trust | 4,780,000 | 4,797,356 | ||||||
Volkswagen Credit Auto Master Trust | 3,130,000 | 3,129,715 | ||||||
Volvo Financial Equipment | 1,045,000 | 1,044,579 | ||||||
Wells Fargo Dealer Floorplan Master Note Trust | 6,398,000 | 6,398,730 | ||||||
Series 2015-1 A 1.712% 1/20/20 • | 7,290,000 | 7,303,061 | ||||||
World Financial Network Credit Card Master Trust | 965,000 | 967,446 | ||||||
|
| |||||||
Total Non-Agency Asset-Backed Securities (cost $438,173,229) | 443,016,564 | |||||||
|
| |||||||
Non-Agency Collateralized Mortgage Obligations – 0.13% | ||||||||
American Home Mortgage Investment Trust | 8,552 | 8,442 | ||||||
Bank of America Alternative Loan Trust | 9,202 | 8,837 | ||||||
JPMorgan Mortgage Trust | 650,000 | 647,034 | ||||||
Sequoia Mortgage Trust | 532,816 | 541,120 | ||||||
Series 2017-4 A1 144A 3.50% 7/25/47 #• | 580,000 | 589,332 | ||||||
|
| |||||||
Total Non-Agency Collateralized Mortgage Obligations (cost $1,777,667) | 1,794,765 | |||||||
|
|
Limited-Term Diversified Income Series-9
Table of Contents
|
Delaware VIP® Limited-Term Diversified Income Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Non-Agency Commercial Mortgage-Backed Securities – 0.13% | ||||||||
Banc of America Commercial Mortgage Trust | 67,253 | $ | 67,275 | |||||
Citigroup Commercial Mortgage Trust | 760,000 | 760,508 | ||||||
LB-UBS Commercial Mortgage Trust | 1,194,924 | 1,040,308 | ||||||
|
| |||||||
Total Non-Agency Commercial Mortgage-Backed Securities (cost $2,151,262) | 1,868,091 | |||||||
|
| |||||||
US Treasury Obligation – 8.95% | ||||||||
US Treasury Notes 1.118% 4/30/19 • | 127,335,000 | 127,331,817 | ||||||
|
| |||||||
Total US Treasury Obligation (cost $127,377,364) | 127,331,817 | |||||||
|
| |||||||
Number of shares | ||||||||
Preferred Stock – 0.61% |
| |||||||
General Electric 5.00% • | 5,497,000 | 5,841,387 | ||||||
Morgan Stanley 5.55% • | 2,500,000 | 2,615,000 | ||||||
USB Realty 144A 2.305% #• | 200,000 | 175,500 | ||||||
|
| |||||||
Total Preferred Stock (cost $8,177,853) | 8,631,887 | |||||||
|
| |||||||
Principal amount° | ||||||||
Short-Term Investments – 1.90% | ||||||||
Discount Notes – 0.75% ≠ |
| |||||||
Federal Home Loan Bank 0.95% 7/10/17 | 6,462,424 | 6,461,177 |
Principal amount° | Value (US $) | |||||||
Short-Term Investments (continued) | ||||||||
Discount Notes≠ (continued) | ||||||||
US Treasury Bill 0.70% 7/13/17 | 4,175,362 | $ | 4,174,476 | |||||
|
| |||||||
10,635,653 | ||||||||
|
| |||||||
Repurchase Agreements – 1.15% | ||||||||
Bank of America Merrill Lynch 0.99%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $4,550,583 (collateralized by US government obligations 3.375% 5/15/44; market value $4,641,214) | 4,550,207 | 4,550,207 | ||||||
Bank of Montreal 0.93%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $7,584,267 (collateralized by US government obligations 0.625%-3.75% 7/31/17-2/15/45; market value $7,735,354) | 7,583,679 | 7,583,679 | ||||||
BNP Paribas 1.05%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $4,260,702 (collateralized by US government obligations 0.00%-2.00% 8/15/17-11/15/45; market value $4,345,538) | 4,260,329 | 4,260,329 | ||||||
|
| |||||||
16,394,215 | ||||||||
|
| |||||||
Total Short-Term Investments (cost $27,029,491) | 27,029,868 | |||||||
|
|
Total Value of Securities – 99.75% | $ | 1,419,021,395 | ||
|
|
# | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. At June 30, 2017, the aggregate value of Rule 144A securities was $205,215,545, which represents 14.43% of the Fund’s 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 US dollars unless noted that the security is denominated in another currency. |
• | Variable rate security. Each rate shown is as of June 30, 2017. 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, 2017. |
Limited-Term Diversified Income Series-10
Table of Contents
|
Delaware VIP® Limited-Term Diversified Income Series
Schedule of investments (continued)
The following futures contracts were outstanding at June 30, 2017:1
Futures Contracts
Contracts to Buy (Sell) | Notional Cost (Proceeds) | Notional Value | Expiration Date | Unrealized Appreciation (Depreciation) | ||||||||||
(491) US Treasury 10 yr Notes | $(61,801,478) | $(61,635,844) | 9/21/17 | $165,634 |
The use of futures contracts involves elements of market risk and risks in excess of the amounts disclosed in the financial statements. The notional value presented above represents 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.”
Summary of abbreviations:
ARM – Adjustable Rate Mortgage
BA – Bank of America
FHAVA – Federal Housing Administration and Veterans Administration
FREMF – Freddie Mac Multifamily
GNMA – Government National Mortgage Association
LB – Lehman Brothers
NCUA – National Credit Union Administration
REMIC – Real Estate Mortgage Investment Conduit
S.F. – Single Family
TBA – To be announced
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 | ||
June 30, 2017 (Unaudited) |
Assets: | ||||
Investments, at value1 | $ | 1,391,991,527 | ||
Short-term investments, at value2 | 27,029,868 | |||
Cash | 676,365 | |||
Cash collateral due from broker | 639,000 | |||
Receivable for securities sold | 9,871,202 | |||
Interest receivable | 6,088,388 | |||
Variation margin due from broker on futures contracts | 165,634 | |||
Receivable for series shares sold | 16,713 | |||
|
| |||
Total assets | 1,436,478,697 | |||
|
| |||
Liabilities: | ||||
Payable for securities purchased | 11,803,299 | |||
Income distribution payable | 592,684 | |||
Investment management fees payable to affiliates | 557,250 | |||
Payable for series shares redeemed | 290,483 | |||
Distribution fees payable to affiliates | 273,093 | |||
Audit and tax fees payable | 24,140 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 8,774 | |||
Accounting and administration expenses payable to affiliates | 5,405 | |||
Trustees’ fees and expenses payable | 3,644 | |||
Legal fees payable to affiliates | 3,610 | |||
Reports and statements to shareholders expenses payable to affiliates | 931 | |||
Other accrued expenses | 299,997 | |||
|
| |||
Total liabilities | 13,863,310 | |||
|
| |||
Total Net Assets | $ | 1,422,615,387 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 1,434,567,006 | ||
Distributions in excess of net investment income | (3,363,226 | ) | ||
Accumulated net realized loss on investments | (14,303,964 | ) | ||
Net unrealized appreciation of investments | 5,549,937 | |||
Net unrealized appreciation of future contracts | 165,634 | |||
|
| |||
Total Net Assets | $ | 1,422,615,387 | ||
|
| |||
Net Asset Value | ||||
Standard Class: | ||||
Net assets | $ | 95,188,683 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 9,641,905 | |||
Net asset value per share | $ | 9.87 | ||
Service Class: | ||||
Net assets | $ | 1,327,426,704 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 135,358,606 | |||
Net asset value per share | $ | 9.81 | ||
1Investments, at cost | $ | 1,386,441,967 | ||
2Short-term investments, at cost | 27,029,491 |
See accompanying notes, which are an integral part of the financial statements.
Limited-Term Diversified Income Series-12
Table of Contents
|
Delaware VIP® Trust —
Delaware VIP Limited-Term Diversified Income Series
Six months ended June 30, 2017 (Unaudited)
Investment Income: | ||||
Interest | $ | 13,848,096 | ||
Expenses: | ||||
Management fees | 3,348,374 | |||
Distribution expenses – Service Class | 1,977,393 | |||
Accounting and administration expenses | 215,675 | |||
Reports and statements to shareholders expenses | 79,419 | |||
Dividend disbursing and transfer agent fees and expenses | 59,187 | |||
Legal fees | 45,015 | |||
Trustees’ fees and expenses | 35,460 | |||
Custodian fees | 29,255 | |||
Audit and tax fees | 24,773 | |||
Registration fees | 528 | |||
Other | 30,267 | |||
|
| |||
5,845,346 | ||||
Less waived distribution expenses – Service Class | (329,565 | ) | ||
Less expense paid indirectly | (1 | ) | ||
|
| |||
Total operating expenses | 5,515,780 | |||
|
| |||
Net Investment Income | 8,332,316 | |||
|
| |||
Net Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on: | ||||
Investments | 2,081,230 | |||
Futures contracts | (545,067 | ) | ||
|
| |||
Net realized gain | 1,536,163 | |||
|
| |||
Net change in unrealized appreciation (depreciation) of: | ||||
Investments | 10,102,159 | |||
Futures contracts | 165,634 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | 10,267,793 | |||
|
| |||
Net Realized and Unrealized Gain | 11,803,956 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 20,136,272 | ||
|
|
Delaware VIP Trust —
Delaware VIP Limited-Term Diversified Income Series
Statements of changes in net assets
Six months ended 6/30/17 (Unaudited) | Year ended 12/31/16 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 8,332,316 | $ | 13,021,507 | ||||
Net realized gain | 1,536,163 | 15,225,056 | ||||||
Net change in unrealized appreciation (depreciation) | 10,267,793 | (2,519,839 | ) | |||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 20,136,272 | 25,726,724 | ||||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Standard Class | (861,150 | ) | (1,186,027 | ) | ||||
|
|
|
| |||||
Service Class | (11,352,431 | ) | (19,144,703 | ) | ||||
|
|
|
| |||||
(12,213,581 | ) | (20,330,730 | ) | |||||
|
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|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Standard Class | 20,553,288 | 28,294,891 | ||||||
Service Class | 30,072,190 | 62,673,915 | ||||||
Net asset value of shares based upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 852,237 | 1,173,457 | ||||||
Service Class | 11,303,432 | 19,063,018 | ||||||
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| �� |
|
| ||||
62,781,147 | 111,205,281 | |||||||
|
|
|
| |||||
Cost of shares redeemed: | ||||||||
Standard Class | (8,097,623 | ) | (10,784,777 | ) | ||||
Service Class | (47,381,420 | ) | (131,971,405 | ) | ||||
|
|
|
| |||||
(55,479,043 | ) | (142,756,182 | ) | |||||
|
|
|
| |||||
Increase (decrease) in net assets derived from capital share transactions | 7,302,104 | (31,550,901 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | 15,224,795 | (26,154,907 | ) | |||||
Net Assets: | ||||||||
Beginning of period | 1,407,390,592 | 1,433,545,499 | ||||||
|
|
|
| |||||
End of period | $ | 1,422,615,387 | $ | 1,407,390,592 | ||||
|
|
|
| |||||
Undistributed (distributions in excess of) net investment income | $ | (3,363,226 | ) | $ | 518,039 | |||
|
|
|
|
See accompanying notes, which are an integral part of the financial statements.
Limited-Term Diversified Income Series-13
Table of Contents
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Delaware VIP® Trust — Delaware VIP Limited-Term Diversified Income Series
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 6/30/171 | Year ended | |||||||||||||||||||||||
(Unaudited) | 12/31/16 | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | |||||||||||||||||||
Net asset value, beginning of period | $ | 9.82 | $ | 9.78 | $ | 9.87 | $ | 9.86 | $ | 10.12 | $ | 10.09 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income2 | 0.07 | 0.11 | 0.13 | 0.12 | 0.09 | 0.10 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.08 | 0.09 | (0.05 | ) | 0.05 | (0.20 | ) | 0.18 | ||||||||||||||||
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| |||||||||||||
Total from investment operations | 0.15 | 0.20 | 0.08 | 0.17 | (0.11 | ) | 0.28 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||
Net investment income | (0.10 | ) | (0.16 | ) | (0.17 | ) | (0.16 | ) | (0.14 | ) | (0.17 | ) | ||||||||||||
Net realized gain | — | — | — | — | (0.01 | ) | (0.08 | ) | ||||||||||||||||
Return of capital | — | — | — | — | — | 3 | — | |||||||||||||||||
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| |||||||||||||
Total dividends and distributions | (0.10 | ) | (0.16 | ) | (0.17 | ) | (0.16 | ) | (0.15 | ) | (0.25 | ) | ||||||||||||
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| |||||||||||||
Net asset value, end of period | $ | 9.87 | $ | 9.82 | $ | 9.78 | $ | 9.87 | $ | 9.86 | $ | 10.12 | ||||||||||||
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Total return4 | 1.50% | 2.09% | 0.78% | 1.69% | (1.06% | ) | 2.78% | |||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 95,188 | $ | 81,412 | $ | 62,646 | $ | 59,362 | $ | 50,161 | $ | 51,194 | ||||||||||||
Ratio of expenses to average net assets | 0.55% | 0.55% | 0.56% | 0.56% | 0.56% | 0.57% | ||||||||||||||||||
Ratio of net investment income to average net assets | 1.42% | 1.15% | 1.36% | 1.22% | 0.92% | 0.93% | ||||||||||||||||||
Portfolio turnover | 75% | 143% | 128% | 113% | 236% | 284% |
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 | For the year ended Dec. 31, 2013, return of capital distributions of $18,022, was made by the Series’ Standard Class, which calculated to a de minimis amount of $0.004 per share. |
4 | 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 6/30/171 (Unaudited) | Year ended | |||||||||||||||||||||||
12/31/16 | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | ||||||||||||||||||||
Net asset value, beginning of period | $ | 9.75 | $ | 9.72 | $ | 9.80 | $ | 9.79 | $ | 10.05 | $ | 10.02 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income2 | 0.06 | 0.09 | 0.11 | 0.10 | 0.07 | 0.07 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.08 | 0.08 | (0.05 | ) | 0.04 | (0.20 | ) | 0.18 | ||||||||||||||||
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| |||||||||||||
Total from investment operations | 0.14 | 0.17 | 0.06 | 0.14 | (0.13 | ) | 0.25 | |||||||||||||||||
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| |||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||
Net investment income | (0.08 | ) | (0.14 | ) | (0.14 | ) | (0.13 | ) | (0.12 | ) | (0.14 | ) | ||||||||||||
Net realized gain | — | — | — | — | (0.01 | ) | (0.08 | ) | ||||||||||||||||
Return of capital | — | — | — | — | — | 3 | — | |||||||||||||||||
|
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|
|
|
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| |||||||||||||
Total dividends and distributions | (0.08 | ) | (0.14 | ) | (0.14 | ) | (0.13 | ) | (0.13 | ) | (0.22 | ) | ||||||||||||
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| |||||||||||||
Net asset value, end of period | $ | 9.81 | $ | 9.75 | $ | 9.72 | $ | 9.80 | $ | 9.79 | $ | 10.05 | ||||||||||||
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| |||||||||||||
Total return4 | 1.48% | 1.73% | 0.62% | 1.44% | (1.33% | ) | 2.53% | |||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 1,327,427 | $ | 1,325,979 | $ | 1,370,899 | $ | 1,405,542 | $ | 1,331,406 | $ | 1,127,086 | ||||||||||||
Ratio of expenses to average net assets | 0.80% | 0.80% | 0.81% | 0.81% | 0.81% | 0.82% | ||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 0.85% | 0.85% | 0.86% | 0.86% | 0.86% | 0.87% | ||||||||||||||||||
Ratio of net investment income to average net assets | 1.17% | 0.90% | 1.11% | 0.97% | 0.67% | 0.68% | ||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 1.12% | 0.85% | 1.06% | 0.92% | 0.62% | 0.63% | ||||||||||||||||||
Portfolio turnover | 75% | 143% | 128% | 113% | 236% | 284% |
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 | For the year ended Dec. 31, 2013, return of capital distributions of $481,548, was made by the Series’ Service Class, which calculated to a de minimis amount of $0.004 per share. |
4 | 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.
Limited-Term Diversified Income Series-15
Table of Contents
|
Delaware VIP® Trust — Delaware VIP Limited-Term Diversified Income Series
June 30, 2017 (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 Core Series (formerly, 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 (1940 Act), and offers Standard Class and Service Class shares. The Standard Class shares do not carry a distribution and service (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 US generally accepted accounting principles (US 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. US 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 US 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 on the Series’ federal income tax returns through the six months ended June 30, 2017, and for all open tax years (years end Dec. 31, 2013–Dec. 31, 2016), 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. If applicable, the Series recognizes interest accrued on unrecognized tax benefits in interest expense and penalties in other expenses on the “Statement of operations.” During the six months ended June 30, 2017, the Series did not incur any interest or tax penalties.
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 US 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, 2017, 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 US GAAP. Therefore, the Series follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with US 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.
Limited-Term Diversified Income Series-16
Table of Contents
|
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 FundsSM by Macquarie (Delaware Funds) are generally allocated among such funds on the basis of average net assets. Management fees and certain 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, 2017.
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 $1, 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, 2017, 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 Macquarie Investment Management Business Trust (formerly, Delaware Management Business Trust) and the investment manager, an annual fee which is calculated daily and paid monthly 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 daily and paid monthly based on the aggregate daily net assets of the Delaware 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 Funds on a relative net asset value (NAV) basis. For the six months ended June 30, 2017, the Series was charged $32,608 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 daily and paid monthly 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, 2017, the Series was charged $52,707 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 12b-1 fee of 0.30% of the average daily net assets of the Service Class shares. DDLP has contracted to waive 12b-1 fees from Jan. 1, 2017 through June 30, 2017* in order to limit 12b-1 fees of the Service Class shares to 0.25% of average daily net assets. Standard Class shares pay no 12b-1 fees.
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, 2017, the Series was charged $16,314 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.
Cross trades for the six months ended June 30, 2017 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, 2017, the Series engaged in securities sales of $2,156,928 which resulted in net realized gains of $55.
*The aggregate contractual waiver period covering this report is from April 29, 2016 through May 1, 2018.
Limited-Term Diversified Income Series-17
Table of Contents
|
Delaware VIP® Limited-Term Diversified Income Series
Notes to financial statements (continued)
3. Investments
For the six months ended June 30, 2017, the Series made purchases and sales of investment securities other than short-term investments as follows:
Purchases other than US government securities | $ | 577,412,216 | ||
Purchases of US government securities | 456,638,570 | |||
Sales other than US government securities | 589,044,105 | |||
Sales of US government securities | 450,720,544 |
At June 30, 2017, 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, 2017, 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 | |||
$1,417,450,857 | $7,898,478 | $(6,327,940) | $1,570,538 |
Under the Regulated Investment Company Modernization Act of 2010 (Act), net capital losses recognized for tax years beginning after Dec. 22, 2010 may be carried forward indefinitely and their character is retained as short-term and/or long-term losses.
The Series has capital loss carryforwards available to offset future realized capital gains as follows:
Loss carryforward character | ||||
Short-term | Long-term | |||
$ | 3,992,487 | $7,350,796 |
US 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.
Limited-Term Diversified Income Series-18
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Delaware VIP® Limited-Term Diversified Income 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, 2017:
Securities | Level 1 | Level 2 | Total | |||||||||
Assets: | ||||||||||||
Agency, asset-backed & mortgage-backed securities | $ | — | $ | 667,242,749 | $ | 667,242,749 | ||||||
Corporate debt | — | 583,764,631 | 583,764,631 | |||||||||
Municipal bonds | — | 5,020,443 | 5,020,443 | |||||||||
Preferred stock | — | 8,631,887 | 8,631,887 | |||||||||
Short-term investments | — | 27,029,868 | 27,029,868 | |||||||||
US Treasury obligation | — | 127,331,817 | 127,331,817 | |||||||||
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| |||||||
Total Value of Securities | $ | — | $ | 1,419,021,395 | $ | 1,419,021,395 | ||||||
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| |||||||
Derivatives: | ||||||||||||
Assets: | ||||||||||||
Futures contracts | $ | 165,634 | $ | — | $ | 165,634 | ||||||
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During the six months ended June 30, 2017, 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, 2017, there were no Level 3 investments.
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 6/30/17 | Year ended 12/31/16 | |||||||
Shares sold: | ||||||||
Standard Class | 2,086,301 | 2,858,109 | ||||||
Service Class | 3,076,533 | 6,385,573 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 86,462 | 118,678 | ||||||
Service Class | 1,154,430 | 1,940,535 | ||||||
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| |||||
6,403,726 | 11,302,895 | |||||||
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| |||||
Shares redeemed: | ||||||||
Standard Class | (823,192 | ) | (1,089,539 | ) | ||||
Service Class | (4,839,980 | ) | (13,460,353 | ) | ||||
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(5,663,172 | ) | (14,549,892 | ) | |||||
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Net increase (decrease) | 740,554 | (3,246,997 | ) | |||||
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5. Line of Credit
The Series, along with certain other funds in the Delaware 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 0.15%, which is allocated across the Participants on the basis of relative net assets 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. 6, 2017.
The Series had no amounts outstanding as of June 30, 2017 or at any time during the period then ended.
Limited-Term Diversified Income Series-19
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Delaware VIP® Limited-Term Diversified Income Series
Notes to financial statements (continued)
6. Derivatives
US 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 US 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. At June 30, 2017, the Series posted cash collateral of $639,000 as margin for open futures contracts, which is included in “Cash collateral due from broker” on the “Statement of assets and liabilities.”
During the six months ended June 30, 2017, 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, 2017, the Series experienced net realized gain or losses attributable to interest risk, which is disclosed as “Variation margin due from broker on futures contracts” on the “Statement of assets and liabilities” and as “Net realized gain (loss) 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, 2017.
Long Derivative Volume | Short Derivative Volume | |||
Futures contracts (average notional value) | $— | $40,062,533 |
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.
Limited-Term Diversified Income Series-20
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Delaware VIP® Limited-Term Diversified Income Series
Notes to financial statements (continued)
7. Offsetting (continued)
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.”
Master Repurchase Agreements
Counterparty | Repurchase Agreements | Fair Value of Non-Cash Collateral Received(a) | Cash Collateral Received | Net Collateral Received | Net Exposure(b) | ||||||||||||||||||||
Bank of America Merrill Lynch | $4,550,207 | $(4,550,207 | ) | $— | $(4,550,207 | ) | $— | ||||||||||||||||||
Bank of Montreal | 7,583,679 | (7,583,679 | ) | — | (7,583,679 | ) | — | ||||||||||||||||||
BNP Paribas | 4,260,329 | (4,260,329 | ) | — | (4,260,329 | ) | — | ||||||||||||||||||
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Total | $16,394,215 | $(16,394,215 | ) | $— | $(16,394,215 | ) | $— | ||||||||||||||||||
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(a) The value of the related collateral received exceeded the value of the repurchase agreements as of June 30, 2017.
(b) 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 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 US securities and foreign securities that are denominated and payable in US 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.
Cash collateral received by each series of the Trust is generally invested in 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 US 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. A series can also accept US government securities and letters of credit (non-cash collateral) in connection with securities loans.
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, 2017, the Series had no securities out on loan.
9. 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 US 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
Limited-Term Diversified Income Series-21
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Delaware VIP® Limited-Term Diversified Income Series
Notes to financial statements (continued)
9. Credit and Market Risk (continued)
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 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. As of June 30, 2017, Rule 144A securities have been identified on the “Schedule of investments.”
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. Recent Accounting Pronouncements
On Oct. 13, 2016, the Securities and Exchange Commission amended existing rules intended to modernize reporting and disclosure of information. These amendments relate to Regulation S-X which sets forth the form and content of financial statements. At this time, management is evaluating the implications of adopting these amendments and their impact on the financial statements and accompanying notes.
12. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to June 30, 2017 that would require recognition or disclosure in the Series’ financial statements.
Limited-Term Diversified Income Series-22
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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 Series’ website at delawarefunds.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 Series’ website at delawarefunds.com/proxy; and (ii) on the Commission’s website at sec.gov.
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SA-VIPLTD 21597 (8/17) (235363) | Limited-Term Diversified Income Series-23 |
Table of Contents
Delaware VIP® Trust
Delaware VIP REIT Series
June 30, 2017
Table of Contents
1 | ||||||||
Security type / sector allocation and top 10 equity holdings | 2 | |||||||
3 | ||||||||
5 | ||||||||
6 | ||||||||
6 | ||||||||
7 | ||||||||
9 |
Other than Macquarie Bank Limited (MBL), none of the entities noted are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Series is governed by US laws and regulations.
Unless otherwise noted, views expressed herein are current as of June 30, 2017, 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.
Advisory services provided by Delaware Management Company, a series of Macquarie Investment Management Business Trust, a US registered investment advisor.
The Series is distributed by Delaware Distributors, L.P., an affiliate of Macquarie Investment Management Business Trust and Macquarie Group Limited. Macquarie Investment Management (MIM), a member of Macquarie Group, refers to the companies comprising the asset management division of 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.
© 2017 Macquarie Management Holdings, Inc. (formerly, 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
For the six-month period from January 1, 2017 to June 30, 2017 (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, 2017 to June 30, 2017.
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 | 1/1/17 to | |||||||||||||
1/1/17 | 6/30/17 | Ratio | 6/30/17* | |||||||||||||
Actual Series return† |
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Standard Class | $1,000.00 | $1,012.30 | 0.84% | $4.19 | ||||||||||||
Service Class | 1,000.00 | 1,011.10 | 1.09% | 5.44 | ||||||||||||
Hypothetical 5% return (5% return before expenses) |
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Standard Class | $1,000.00 | $1,020.63 | 0.84% | $4.21 | ||||||||||||
Service Class | 1,000.00 | 1,019.39 | 1.09% | 5.46 |
* | “Expenses Paid During Period” are equal to the Series’ annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (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
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Delaware VIP® Trust — Delaware VIP REIT Series
Security type / sector allocation and top 10 equity holdings
As of June 30, 2017 (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 | 97.29% | |||
Diversified REITs | 7.61% | |||
Healthcare REITs | 16.25% | |||
Hotel REITs | 4.05% | |||
Industrial REITs | 8.07% | |||
Information Technology REITs | 7.86% | |||
Mall REITs | 11.16% | |||
Manufactured Housing REIT | 1.84% | |||
Multifamily REITs | 16.86% | |||
Office REITs | 8.05% | |||
Self-Storage REITs | 2.71% | |||
Shopping Center REITs | 9.10% | |||
Single Tenant REITs | 3.73% | |||
Short-Term Investments | 2.53% | |||
Total Value of Securities | 99.82% | |||
Receivables and Other Assets Net of Liabilities | 0.18% | |||
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.
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Percentage | ||||
Top 10 equity holdings | of net assets | |||
Simon Property Group | 6.58% | |||
Prologis | 5.15% | |||
Welltower | 4.93% | |||
AvalonBay Communities | 4.78% | |||
Equinix | 4.69% | |||
HCP | 4.45% | |||
Equity Residential | 4.28% | |||
GGP | 4.21% | |||
Brookdale Senior Living | 3.70% | |||
UDR
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| 3.43%
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REIT Series-2
Table of Contents
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Delaware VIP® Trust — Delaware VIP REIT Series
June 30, 2017 (Unaudited)
Number of | Value | |||||||
shares | (US $) | |||||||
Common Stock – 97.29% | ||||||||
Diversified REITs – 7.61% | ||||||||
EPR Properties | 56,900 | $ | 4,089,403 | |||||
Forest City Realty Trust | 371,400 | 8,976,738 | ||||||
Gramercy Property Trust | 70,025 | 2,080,443 | ||||||
Lamar Advertising | 69,875 | 5,140,704 | ||||||
Vornado Realty Trust | 161,143 | 15,131,328 | ||||||
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35,418,616 | ||||||||
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Healthcare REITs – 16.25% | ||||||||
Brookdale Senior Living † | 1,170,400 | 17,216,584 | ||||||
HCP | 648,200 | 20,716,472 | ||||||
Healthcare Realty Trust | 244,975 | 8,365,896 | ||||||
National Health Investors | 80,500 | 6,375,600 | ||||||
Welltower | 306,295 | 22,926,181 | ||||||
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75,600,733 | ||||||||
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Hotel REITs – 4.05% | ||||||||
Host Hotels & Resorts | 474,668 | 8,672,184 | ||||||
MGM Growth Properties | 118,050 | 3,445,879 | ||||||
Sunstone Hotel Investors | 417,176 | 6,724,877 | ||||||
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18,842,940 | ||||||||
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Industrial REITs – 8.07% | ||||||||
DCT Industrial Trust | 215,416 | 11,511,831 | ||||||
First Industrial Realty Trust | 72,050 | 2,062,071 | ||||||
Prologis | 408,697 | 23,965,992 | ||||||
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37,539,894 | ||||||||
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Information Technology REITs – 7.86% |
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CoreSite Realty | 56,475 | 5,846,857 | ||||||
Crown Castle International | 88,950 | 8,911,011 | ||||||
Equinix | 50,900 | 21,844,244 | ||||||
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36,602,112 | ||||||||
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Mall REITs – 11.16% | ||||||||
CBL & Associates Properties | 207,484 | 1,749,090 | ||||||
GGP | 831,961 | 19,601,001 | ||||||
Simon Property Group | 189,203 | 30,605,477 | ||||||
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51,955,568 | ||||||||
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Manufactured Housing REIT – 1.84% |
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Equity LifeStyle Properties | 99,303 | 8,573,821 | ||||||
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8,573,821 | ||||||||
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Multifamily REITs – 16.86% | ||||||||
Apartment Investment & Management | 37,250 | 1,600,633 | ||||||
AvalonBay Communities | 115,864 | 22,265,585 | ||||||
Camden Property Trust | 63,750 | 5,451,263 | ||||||
Equity Residential | 302,200 | 19,893,826 | ||||||
Essex Property Trust | 31,545 | 8,115,582 | ||||||
Invitation Homes | 238,100 | 5,150,103 | ||||||
UDR | 409,750 | 15,967,957 | ||||||
|
| |||||||
78,444,949 | ||||||||
|
| |||||||
Office REITs – 8.05% | ||||||||
Boston Properties | 71,115 | 8,748,567 | ||||||
Columbia Property Trust | 316,950 | 7,093,341 | ||||||
Empire State Realty Trust | 242,250 | 5,031,533 | ||||||
Equity Commonwealth † | 194,725 | 6,153,310 |
Number of | Value | |||||||
shares | (US $) | |||||||
Common Stock (continued) | ||||||||
Office REITs (continued) | ||||||||
Kilroy Realty | 48,900 | $ | 3,674,835 | |||||
SL Green Realty | 63,843 | 6,754,589 | ||||||
|
| |||||||
37,456,175 | ||||||||
|
| |||||||
Self-Storage REITs – 2.71% | ||||||||
CubeSmart | 104,920 | 2,522,277 | ||||||
Public Storage | 48,411 | 10,095,146 | ||||||
|
| |||||||
12,617,423 | ||||||||
|
| |||||||
Shopping Center REITs – 9.10% | ||||||||
Brixmor Property Group | 356,800 | 6,379,584 | ||||||
Kimco Realty | 378,150 | 6,939,053 | ||||||
Regency Centers | 231,610 | 14,508,050 | ||||||
Retail Properties of America | 222,750 | 2,719,777 | ||||||
Urban Edge Properties | 174,555 | 4,142,190 | ||||||
Weingarten Realty Investors | 253,800 | 7,639,380 | ||||||
|
| |||||||
42,328,034 | ||||||||
|
| |||||||
Single Tenant REITs – 3.73% | ||||||||
Realty Income | 178,975 | 9,875,841 | ||||||
VEREIT | 918,025 | 7,472,723 | ||||||
|
| |||||||
17,348,564 | ||||||||
|
| |||||||
Total Common Stock (cost $443,513,426) | 452,728,829 | |||||||
|
| |||||||
Principal | ||||||||
amount° | ||||||||
Short-Term Investments – 2.53% | ||||||||
Discount Note – 0.23% ¹ | ||||||||
Federal Home Loan Bank 0.95% 7/10/17 | 1,048,535 | 1,048,333 | ||||||
|
| |||||||
1,048,333 | ||||||||
|
| |||||||
Repurchase Agreements – 1.83% | ||||||||
Bank of America Merrill Lynch 0.99%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $2,368,321 (collateralized by US government obligations 3.375% 5/15/44; market value $2,415,489) | 2,368,125 | 2,368,125 | ||||||
Bank of Montreal 0.93%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $3,947,182 (collateralized by US government obligations 0.625%–3.75% 7/31/17–2/15/45; market value $4,025,814) | 3,946,876 | 3,946,876 |
REIT Series-3
Table of Contents
|
Delaware VIP® REIT Series
Schedule of investments (continued)
Principal amount° | Value (US $) | |||||||
Short-Term Investments (continued) | ||||||||
Repurchase Agreements (continued) | ||||||||
BNP Paribas | 2,217,260 | $ | 2,217,260 | |||||
|
| |||||||
8,532,261 | ||||||||
|
|
Principal amount° | Value (US $) | |||||||
Short-Term Investments (continued) | ||||||||
US Treasury Obligation – 0.47% | ||||||||
US Treasury Bill 0.70% 7/13/17 | 2,173,039 | $ | 2,172,579 | |||||
|
| |||||||
2,172,579 | ||||||||
|
| |||||||
Total Short-Term Investments (cost $11,753,079) | 11,753,173 | |||||||
|
|
Total Value of Securities – 99.82% (cost $455,266,505) | $ | 464,482,002 | ||
|
|
¹ The rate shown is the effective yield at the time of purchase.
° Principal amount shown is stated in US 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
Statement of assets and liabilities | June 30, 2017 (Unaudited) |
Assets: | ||||
Investments, at value1 | $ | 452,728,829 | ||
Short-term investments, at value2 | 11,753,173 | |||
Cash | 1,016,298 | |||
Receivable for securities sold | 3,294,433 | |||
Dividends and interest receivable | 1,294,005 | |||
Receivable for series shares sold | 18,397 | |||
|
| |||
Total assets |
|
470,105,135 |
| |
|
| |||
Liabilities: | ||||
Payable for securities purchased | 4,091,216 | |||
Management fees payable to affiliates | 289,619 | |||
Payable for series shares redeemed | 185,391 | |||
Other accrued expenses | 132,465 | |||
Distribution fees payable to affiliates | 46,283 | |||
Audit and tax fees payable | 17,227 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 2,896 | |||
Accounting and administration expenses payable to affiliates | 1,784 | |||
Trustees’ fees and expenses payable to affiliates | 1,182 | |||
Legal fees payable to affiliates | 1,169 | |||
Reports and statements to shareholders expenses payable to affiliates | 305 | |||
|
| |||
Total liabilities |
|
4,769,537 |
| |
|
| |||
Total Net Assets | $ | 465,335,598 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 458,740,453 | ||
Undistributed net investment income | 5,549,495 | |||
Accumulated net realized loss on investments | (8,169,847 | ) | ||
Net unrealized appreciation of investments | 9,215,497 | |||
|
| |||
Total Net Assets |
$ |
465,335,598 |
| |
|
| |||
Net Asset Value | ||||
Standard Class: | ||||
Net assets | $ | 242,677,557 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 18,037,406 | |||
Net asset value per share | $ | 13.45 | ||
Service Class: | ||||
Net assets | $ | 222,658,041 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 16,566,869 | |||
Net asset value per share | $ | 13.44 | ||
1 Investments, at cost | $ | 443,513,426 | ||
2 Short-term investments, at cost | 11,753,079 |
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
Six months ended June 30, 2017 (Unaudited)
Investment Income: | ||||
Dividends | $ | 7,745,382 | ||
Interest | 43,559 | |||
|
| |||
7,788,941 | ||||
|
| |||
Expenses: | ||||
Management fees | 1,749,933 | |||
Distribution expenses – Service Class | 337,799 | |||
Accounting and administration expenses | 71,612 | |||
Reports and statements to shareholders expenses | 44,502 | |||
Dividend disbursing and transfer agent fees and expenses | 19,696 | |||
Legal fees | 17,351 | |||
Audit and tax fees | 17,226 | |||
Custodian fees | 16,614 | |||
Trustees’ fees and expenses | 11,829 | |||
Registration fees | 203 | |||
Other | 5,627 | |||
|
| |||
|
2,292,392 |
| ||
Less waived distribution expenses – Service Class | (56,300 | ) | ||
Less expense paid indirectly | (1 | ) | ||
|
| |||
Total operating expenses | 2,236,091 | |||
|
| |||
Net Investment Income | 5,552,850 | |||
|
| |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized loss on investments | (750,029 | ) | ||
Net change in unrealized appreciation (depreciation) of investments | 925,630 | |||
|
| |||
Net Realized and Unrealized Gain | 175,601 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 5,728,451 | ||
|
|
Delaware VIP Trust —
Delaware VIP REIT Series
Statements of changes in net assets
Six months | ||||||||
ended | Year | |||||||
6/30/17 | ended | |||||||
(Unaudited) | 12/31/16 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 5,552,850 | $ | 6,189,772 | ||||
Net realized gain (loss) | (750,029 | ) | 60,306,192 | |||||
Net change in unrealized appreciation (depreciation) | 925,630 | (39,477,985 | ) | |||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 5,728,451 | 27,017,979 | ||||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Standard Class | (3,825,327 | ) | (3,173,253 | ) | ||||
Service Class | (2,986,473 | ) | (2,494,399 | ) | ||||
Net realized gain: | ||||||||
Standard Class | (32,530,954 | ) | (15,210,259 | ) | ||||
Service Class | (30,228,934 | ) | (14,715,477 | ) | ||||
|
|
|
| |||||
|
(69,571,688 |
) |
|
(35,593,388 |
) | |||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Standard Class | 4,571,506 | 16,237,473 | ||||||
Service Class | 5,598,152 | 21,238,794 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 36,356,281 | 18,383,512 | ||||||
Service Class | 33,215,407 | 17,209,876 | ||||||
|
|
|
| |||||
|
79,741,346 |
|
|
73,069,655 |
| |||
|
|
|
| |||||
Cost of shares redeemed: | ||||||||
Standard Class | (16,114,738 | ) | (23,555,980 | ) | ||||
Service Class | (17,592,373 | ) | (40,514,599 | ) | ||||
|
|
|
| |||||
|
(33,707,111 |
) |
|
(64,070,579 |
) | |||
|
|
|
| |||||
Increase in net assets derived from capital share transactions | 46,034,235 | 8,999,076 | ||||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | (17,809,002 | ) | 423,667 | |||||
Net Assets: | ||||||||
Beginning of period | 483,144,600 | 482,720,933 | ||||||
|
|
|
| |||||
End of period |
$ |
465,335,598 |
|
$ |
483,144,600 |
| ||
|
|
|
| |||||
Undistributed net investment income |
$ |
5,549,495 |
|
$ |
6,808,445 |
| ||
|
|
|
|
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
Selected data for each share of the Series outstanding throughout each period were as follows:
Delaware VIP REIT Series Standard Class | ||||||||||||||||||||||||||||||||||
Six months | ||||||||||||||||||||||||||||||||||
ended | ||||||||||||||||||||||||||||||||||
6/30/171 | Year ended | |||||||||||||||||||||||||||||||||
(Unaudited) | 12/31/16 | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | |||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 15.57 | $ | 15.89 | $ | 15.50 | $ | 12.14 | $ | 12.06 | $ | 10.47 | ||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||||
Net investment income2 | 0.18 | 0.22 | 0.21 | 0.20 | 0.18 | 0.19 | ||||||||||||||||||||||||||||
Net realized and unrealized gain | 0.02 | 0.67 | 0.37 | 3.35 | 0.10 | 1.58 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total from investment operations | 0.20 | 0.89 | 0.58 | 3.55 | 0.28 | 1.77 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||||||||||||
Net investment income | (0.24 | ) | (0.21 | ) | (0.19 | ) | (0.19 | ) | (0.20 | ) | (0.18 | ) | ||||||||||||||||||||||
Net realized gain | (2.08 | ) | (1.00 | ) | — | — | — | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total dividends and distributions | (2.32 | ) | (1.21 | ) | (0.19 | ) | (0.19 | ) | (0.20 | ) | (0.18 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Net asset value, end of period | $ | 13.45 | $ | 15.57 | $ | 15.89 | $ | 15.50 | $ | 12.14 | $ | 12.06 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total return3 | 1.23% | 5.87% | 3.75% | 29.46% | 2.14% | 16.94% | ||||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $242,678 | $251,083 | $244,618 | $260,182 | $198,950 | $210,618 | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 0.84% | 0.83% | 0.85% | 0.84% | 0.84% | 0.84% | ||||||||||||||||||||||||||||
Ratio of net investment income to average net assets | 2.50% | 1.39% | 1.32% | 1.41% | 1.42% | 1.64% | ||||||||||||||||||||||||||||
Portfolio turnover | 88% | 130% | 75% | 84% | 97% | 91% |
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.
REIT Series-7
Table of Contents
|
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 | ||||||||||||||||||||||||||||||||||
6/30/171 | Year ended | |||||||||||||||||||||||||||||||||
(Unaudited) | 12/31/16 | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | |||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 15.54 | $ | 15.86 | $ | 15.47 | $ | 12.12 | $ | 12.04 | $ | 10.46 | ||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||||
Net investment income2 | 0.16 | 0.18 | 0.17 | 0.16 | 0.15 | 0.16 | ||||||||||||||||||||||||||||
Net realized and unrealized gain | 0.02 | 0.67 | 0.37 | 3.35 | 0.10 | 1.57 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total from investment operations | 0.18 | 0.85 | 0.54 | 3.51 | 0.25 | 1.73 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||||||||||||
Net investment income | (0.20 | ) | (0.17 | ) | (0.15 | ) | (0.16 | ) | (0.17 | ) | (0.15 | ) | ||||||||||||||||||||||
Net realized gain | (2.08 | ) | (1.00 | ) | — | — | — | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total dividends and distributions | (2.28 | ) | (1.17 | ) | (0.15 | ) | (0.16 | ) | (0.17 | ) | (0.15 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Net asset value, end of period | $ | 13.44 | $ | 15.54 | $ | 15.86 | $ | 15.47 | $ | 12.12 | $ | 12.04 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total return3 | 1.11% | 5.62% | 3.52% | 29.12% | 1.92% | 16.61% | ||||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $222,658 | $232,062 | $238,103 | $251,743 | $198,530 | $209,023 | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 1.09% | 1.08% | 1.10% | 1.09% | 1.09% | 1.09% | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 1.14% | 1.13% | 1.15% | 1.14% | 1.14% | 1.14% | ||||||||||||||||||||||||||||
Ratio of net investment income to average net assets | 2.25% | 1.14% | 1.07% | 1.16% | 1.17% | 1.39% | ||||||||||||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 2.20% | 1.09% | 1.02% | 1.11% | 1.12% | 1.34% | ||||||||||||||||||||||||||||
Portfolio turnover | 88% | 130% | 75% | 84% | 97% | 91% |
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
June 30, 2017 (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 Core Series (formerly, 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 (1940 Act), and offers Standard Class and Service Class shares. The Standard Class shares do not carry a distribution and service (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 US generally accepted accounting principles (US 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. US government and agency securities are valued at the mean between the bid and ask prices, which approximates fair value. Debt securities are valued based upon valuations provided by an independent pricing service and reviewed by management. 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 on the Series’ federal income tax returns through the six months ended June 30, 2017 and for all open tax years (years ended Dec. 31, 2013–Dec. 31, 2016), and has concluded that no provision for federal income tax is required in the Series’ financial statements. If applicable, the Series recognizes interest accrued on unrecognized tax benefits in interest expense and penalties in other expenses on the “Statement of operations.” During six months ended June 30, 2017, the Series did not incur any interest or tax penalties.
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 US 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, 2017, and matured on the next business day.
Use of Estimates — The Series is an investment company, whose financial statements are prepared in conformity with US GAAP. Therefore, the Series follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with US 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 FundsSM by Macquarie (Delaware Funds) are generally allocated among such funds on the basis of average net assets. Management fees and certain 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
REIT Series-9
Table of Contents
|
Delaware VIP® REIT Series
Notes to financial statements (continued)
1. Significant Accounting Policies (continued)
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, 2017.
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, 2017.
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 $1, 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, 2017, 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 Macquarie Investment Management Business Trust (formerly, Delaware Management Business Trust) and the investment manager, an annual fee which is calculated daily and paid monthly 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 daily and paid monthly based on the aggregate daily net assets of the Delaware 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 Funds on a relative net asset value (NAV) basis. For the six months ended June 30, 2017, the Series was charged $10,827 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 daily and paid monthly 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, 2017, the Series was charged $17,499 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 12b-1 fee of 0.30% of the average daily net assets of the Service Class shares. DDLP has contracted to waive 12b-1 fee from Jan. 1, 2017 to June 30, 2017,* in order to limit 12b-1 fees of the Service Class shares to 0.25% of average daily net assets. Standard Class shares pay no 12b-1 fee.
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, 2017, the Series was charged $5,449 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.
Cross trades for the six months ended June 30, 2017 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 series 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, 2017, the Series engaged in securities sales of $4,806,943, which resulted in net realized gain of $42.
*The aggregate contractual waiver period covering this report is from April 29, 2016 through May 1, 2018.
3. Investments
For the six months ended June 30, 2017, the Series made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $401,907,232 | |||
Sales | 413,135,998 |
REIT Series-10
Table of Contents
|
Delaware VIP® REIT Series
Notes to financial statements (continued)
3. Investments (continued)
At June 30, 2017, 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, 2017, 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 | |||||
$455,266,505 | $21,141,855 | $(11,926,358) | $9,215,497 |
US 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, 2017:
Securities | Level 1 | Level 2 | Total | |||||||||
Assets: | ||||||||||||
Common Stock | $ | 452,728,829 | $ | — | $ | 452,728,829 | ||||||
Short-Term Investments | — | 11,753,173 | 11,753,173 | |||||||||
|
|
|
|
|
| |||||||
Total Value of Securities | $ | 452,728,829 | $ | 11,753,173 | $ | 464,482,002 | ||||||
|
|
|
|
|
|
During the six months ended June 30, 2017, 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. During the six months ended June 30, 2017, there were no Level 3 investments.
REIT Series-11
Table of Contents
|
Delaware VIP® REIT Series
Notes to financial statements (continued)
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 6/30/17 | Year ended 12/31/16 | |||||||
Shares sold: | ||||||||
Standard Class | 309,592 | 1,018,352 | ||||||
Service Class | 379,299 | 1,350,012 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 2,695,054 | 1,227,204 | ||||||
Service Class | 2,464,051 | 1,149,624 | ||||||
|
|
|
| |||||
|
5,847,996 |
|
|
4,745,192 |
| |||
|
|
|
| |||||
Shares redeemed: | ||||||||
Standard Class | (1,094,268 | ) | (1,512,263 | ) | ||||
Service Class | (1,214,201 | ) | (2,576,127 | ) | ||||
|
|
|
| |||||
|
(2,308,469 |
) |
|
(4,088,390 |
) | |||
|
|
|
| |||||
Net increase |
|
3,539,527 |
|
|
656,802 |
| ||
|
|
|
|
5. Line of Credit
The Series, along with certain other funds in the Delaware 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 0.15%, which is allocated across the Participants on the basis of relative net assets 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 will expire on Nov. 6, 2017.
The Series had no amounts outstanding as of June 30, 2017, 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 derivative liabilities that are subject to netting arrangements on the “Statement of assets and liabilities.”
REIT Series-12
Table of Contents
|
Delaware VIP® REIT Series
Notes to financial statements (continued)
6. Offsetting (continued)
At June 30, 2017, 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 | Net Exposure(b) | |||||||||||||||||||||||||||||||||||
Bank of America Merrill Lynch | $ | 2,368,125 | $(2,368,125 | ) | $— | $(2,368,125 | ) | $ | — | |||||||||||||||||||||||||||||||
Bank of Montreal | 3,946,876 | (3,946,876 | ) | — | (3,946,876 | ) | — | |||||||||||||||||||||||||||||||||
BNP Paribas | 2,217,260 | (2,217,260 | ) | — | (2,217,260 | ) | — | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total | $ | 8,532,261 | $(8,532,261 | ) | $— | $(8,532,261 | ) | $ | — | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(a) The value of the related collateral received exceeded the value of the repurchase agreements of June 30, 2017.
(b) 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 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 US securities and foreign securities that are denominated and payable in US 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.
Cash collateral received by each series of the Trust is generally invested in 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 US 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. A Series can also accept US government securities and letters of credit (non-cash collateral) in connection with securities loans.
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, 2017, the Series had no securities out on loan.
8. 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.
REIT Series-13
Table of Contents
|
Delaware VIP® REIT Series
Notes to financial statements (continued)
8. Credit and Market Risk (continued)
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 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, 2017, there were no Rule 144A securities held by the Series.
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. Recent Accounting Pronouncements
On Oct. 13, 2016, the Securities and Exchange Commission amended existing rules intended to modernize reporting and disclosure of information. These amendments relate to Regulation S-X which sets forth the form and content of financial statements. At this time, management is evaluating the implications of adopting these amendments and their impact on the financial statements and accompanying notes.
11. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to June 30, 2017 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 Series’ website at delawarefunds.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 Series’ website at delawarefunds.com/proxy; and (ii) on the Commission’s website at sec.gov.
|
SA-VIPREIT 21598 (8/17) (235363) | REIT Series-14 |
Table of Contents
Delaware VIP® Trust
Delaware VIP Small Cap Value Series
June 30, 2017
Table of Contents
1 | ||||||||
Security type / sector allocation and top 10 equity holdings | 2 | |||||||
3 | ||||||||
5 | ||||||||
6 | ||||||||
6 | ||||||||
7 | ||||||||
9 |
Other than Macquarie Bank Limited (MBL), none of the entities noted are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Series is governed by US laws and regulations.
Unless otherwise noted, views expressed herein are current as of June 30, 2017, 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.
Advisory services provided by Delaware Management Company, a series of Macquarie Investment Management Business Trust, a US registered investment advisor.
The Series is distributed by Delaware Distributors, L.P., an affiliate of Macquarie Investment Management Business Trust and Macquarie Group Limited. Macquarie Investment Management (MIM), a member of Macquarie Group, refers to the companies comprising the asset management division of 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.
© 2017 Macquarie Management Holdings, Inc. (formerly, 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
For the six-month period from January 1, 2017 to June 30, 2017 (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, 2017 to June 30, 2017.
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 | 1/1/17 to | |||||||||
1/1/17 | 6/30/17 | Ratio | 6/30/17* | |||||||||
Actual Series return† | ||||||||||||
Standard Class | $1,000.00 | $1,029.50 | 0.78% | $3.92 | ||||||||
Service Class | 1,000.00 | 1,028.20 | 1.03% | 5.18 | ||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||
Standard Class | $1,000.00 | $1,020.93 | 0.78% | $3.91 | ||||||||
Service Class | 1,000.00 | 1,019.69 | 1.03% | 5.16 |
* | “Expenses Paid During Period” are equal to the Series’ annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (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, 2017 (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 | 99.02% | |||
Basic Industry | 8.93% | |||
Business Services | 1.11% | |||
Capital Spending | 7.31% | |||
Consumer Cyclical | 3.69% | |||
Consumer Services | 8.60% | |||
Consumer Staples | 2.70% | |||
Energy | 5.30% | |||
Financial Services1 | 29.27% | |||
Healthcare | 4.47% | |||
Real Estate | 8.16% | |||
Technology | 14.38% | |||
Transportation | 2.46% | |||
Utilities | 2.64% | |||
Short-Term Investments | 1.05% | |||
Total Value of Securities | 100.07% | |||
Liabilities Net of Receivables and Other Assets | (0.07% | ) | ||
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 Investment Company Act of 1940, as amended). The Financial Services sector consisted of diversified financial services, banks, insurance, and investment companies. As of June 30, 2017, such amounts, as percentage of total net assets, were 1.60%, 21.34%, 5.64%, and 0.69%, 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 | 3.55% | |||
Berry Global Group | 2.34% | |||
Webster Financial | 2.08% | |||
MasTec | 2.01% | |||
Hancock Holding | 1.93% | |||
Synopsys | 1.92% | |||
Selective Insurance Group | 1.84% | |||
Olin | 1.61% | |||
Trinseo | 1.53% | |||
Great Western Bancorp
|
| 1.44%
|
|
Small Cap Value Series-2
Table of Contents
Delaware VIP® Trust — Delaware VIP Small Cap Value Series
June 30, 2017 (Unaudited)
Number of shares | Value (US $) | |||||||
Common Stock – 99.02% ² |
| |||||||
Basic Industry – 8.93% |
| |||||||
Berry Global | 501,100 | $ | 28,567,711 | |||||
HB Fuller | 329,200 | 16,825,412 | ||||||
KapStone Paper and Packaging | 397,800 | 8,206,614 | ||||||
Minerals Technologies | 75,578 | 5,532,310 | ||||||
Olin | 650,200 | 19,688,056 | ||||||
Trinseo | 271,500 | 18,652,050 | ||||||
USG † | 402,700 | 11,686,354 | ||||||
|
| |||||||
109,158,507 | ||||||||
Business Services – 1.11% |
| |||||||
Deluxe | 116,300 | 8,050,286 | ||||||
WESCO International † | 96,000 | 5,500,800 | ||||||
|
| |||||||
13,551,086 | ||||||||
Capital Spending – 7.31% |
| |||||||
Altra Industrial Motion | 266,470 | 10,605,506 | ||||||
Atkore International Group † | 218,892 | 4,936,015 | ||||||
EnPro Industries | 93,600 | 6,680,232 | ||||||
H&E Equipment Services | 444,400 | 9,070,204 | ||||||
ITT | 415,500 | 16,694,790 | ||||||
MasTec † | 545,046 | 24,608,827 | ||||||
Primoris Services | 404,100 | 10,078,254 | ||||||
Regal Beloit | 81,900 | 6,678,945 | ||||||
|
| |||||||
89,352,773 | ||||||||
|
| |||||||
Consumer Cyclical – 3.69% |
| |||||||
Barnes Group | 191,500 | 11,208,495 | ||||||
Knoll | 289,793 | 5,810,350 | ||||||
Meritage Homes † | 338,000 | 14,263,600 | ||||||
Standard Motor Products | 112,501 | 5,874,802 | ||||||
Tenneco | 136,900 | 7,916,927 | ||||||
|
| |||||||
45,074,174 | ||||||||
|
| |||||||
Consumer Services – 8.60% |
| |||||||
Asbury Automotive Group † | 78,300 | 4,427,865 | ||||||
Cable One | 12,800 | 9,099,520 | ||||||
Cheesecake Factory | 170,200 | 8,561,060 | ||||||
Choice Hotels International | 170,000 | 10,922,500 | ||||||
Cinemark Holdings | 267,613 | 10,396,765 | ||||||
International Speedway Class A | 218,300 | 8,197,165 | ||||||
Meredith | 186,050 | 11,060,673 | ||||||
Sonic | 247,200 | 6,548,328 | ||||||
Steven Madden † | 236,200 | 9,436,190 | ||||||
Texas Roadhouse | 158,400 | 8,070,480 | ||||||
UniFirst | 61,600 | 8,667,120 | ||||||
Wolverine World Wide | 349,300 | 9,783,893 | ||||||
|
| |||||||
105,171,559 | ||||||||
|
| |||||||
Consumer Staples – 2.70% |
| |||||||
Core-Mark Holding Class A | 190,869 | 6,310,129 | ||||||
J&J Snack Foods | 80,200 | 10,592,014 | ||||||
Pinnacle Foods | 145,500 | 8,642,700 | ||||||
Scotts Miracle-Gro Class A | 83,600 | 7,478,856 | ||||||
|
| |||||||
33,023,699 | ||||||||
|
| |||||||
Energy – 5.30% | ||||||||
Dril-Quip † | 112,600 | 5,494,880 | ||||||
Helix Energy Solutions | 762,900 | 4,302,756 |
Number of shares | Value (US $) | |||||||
Common Stock ² (continued) |
| |||||||
Energy (continued) | ||||||||
Oasis Petroleum † | 823,300 | $ | 6,627,565 | |||||
Patterson-UTI Energy | 726,200 | 14,661,978 | ||||||
SM Energy | 502,100 | 8,299,713 | ||||||
Southwest Gas Holdings | 175,600 | 12,829,336 | ||||||
Tesoro | 105,721 | 9,895,486 | ||||||
Whiting Petroleum † | 485,700 | 2,676,207 | ||||||
|
| |||||||
64,787,921 | ||||||||
|
| |||||||
Financial Services – 29.27% |
| |||||||
American Equity Investment Life Holding | 530,300 | 13,936,284 | ||||||
Bank of Hawaii | 197,900 | 16,419,763 | ||||||
Boston Private Financial Holdings | 641,900 | 9,853,165 | ||||||
Community Bank System | 250,300 | 13,959,231 | ||||||
East West Bancorp | 741,536 | 43,439,179 | ||||||
First Financial Bancorp | 542,800 | 15,035,560 | ||||||
First Interstate | 208,000 | 7,737,600 | ||||||
First Midwest Bancorp | 504,500 | 11,759,895 | ||||||
Great Western Bancorp | 431,500 | 17,609,515 | ||||||
Hancock Holding | 482,400 | 23,637,600 | ||||||
Hanover Insurance Group | 147,700 | 13,090,651 | ||||||
Independent Bank | 86,400 | 5,758,560 | ||||||
Infinity Property & Casualty | 90,900 | 8,544,600 | ||||||
Legg Mason | 199,500 | 7,612,920 | ||||||
Main Street Capital | 217,800 | 8,376,588 | ||||||
NBT Bancorp | 352,400 | 13,021,180 | ||||||
Prosperity Bancshares | 180,200 | 11,576,048 | ||||||
S&T Bancorp | 227,642 | 8,163,242 | ||||||
Selective Insurance Group | 448,400 | 22,442,420 | ||||||
Stifel Financial † | 260,900 | 11,996,182 | ||||||
Umpqua Holdings | 648,400 | 11,904,624 | ||||||
Validus Holdings | 211,321 | 10,982,352 | ||||||
Valley National Bancorp | 1,162,100 | 13,724,401 | ||||||
Webster Financial | 486,000 | 25,378,920 | ||||||
WesBanco | 302,200 | 11,948,988 | ||||||
357,909,468 | ||||||||
|
| |||||||
Healthcare – 4.47% |
| |||||||
Catalent † | 97,200 | 3,411,720 | ||||||
Haemonetics † | 134,200 | 5,299,558 | ||||||
Owens & Minor | 273,850 | 8,815,231 | ||||||
Service Corp. International | 220,100 | 7,362,345 | ||||||
STERIS | 165,898 | 13,520,687 | ||||||
Teleflex | 39,600 | 8,227,296 | ||||||
VWR † | 244,520 | 8,071,605 | ||||||
|
| |||||||
54,708,442 | ||||||||
Real Estate – 8.16% |
| |||||||
Alexander & Baldwin | 192,171 | 7,952,036 | ||||||
Brandywine Realty Trust | 843,033 | 14,778,368 | ||||||
Education Realty Trust | 193,700 | 7,505,875 | ||||||
Healthcare Realty Trust | 322,600 | 11,016,790 | ||||||
Highwoods Properties | 271,500 | 13,767,765 | ||||||
Lexington Realty Trust | 1,052,100 | 10,426,311 | ||||||
Life Storage | 98,300 | 7,284,030 | ||||||
Ramco-Gershenson Properties Trust | 487,800 | 6,292,620 |
Small Cap Value Series-3
Table of Contents
Delaware VIP® Small Cap Value Series
Schedule of investments (continued)
Number of | Value | |||||||
shares | (US $) | |||||||
Common Stock ² (continued) |
| |||||||
Real Estate (continued) |
| |||||||
Summit Hotel Properties | 563,800 | $ | 10,514,870 | |||||
Washington Real Estate Investment Trust | 319,900 | 10,204,810 | ||||||
|
| |||||||
99,743,475 | ||||||||
|
| |||||||
Technology – 14.38% |
| |||||||
Brocade Communications Systems | 218,800 | 2,759,068 | ||||||
Cirrus Logic † | 150,700 | 9,451,904 | ||||||
CommScope Holding † | 420,645 | 15,997,129 | ||||||
Electronics For Imaging † | 271,300 | 12,854,194 | ||||||
MaxLinear | 308,500 | 8,604,065 | ||||||
NetScout Systems † | 302,963 | 10,421,927 | ||||||
ON Semiconductor † | 980,900 | 13,771,836 | ||||||
PTC † | 221,100 | 12,187,032 | ||||||
Super Micro Computer † | 287,800 | 7,094,270 | ||||||
Synopsys † | 321,700 | 23,461,581 | ||||||
Tech Data † | 119,929 | 12,112,829 | ||||||
Teradyne | 464,400 | 13,945,932 | ||||||
Tower Semiconductor | 333,600 | 7,956,360 | ||||||
TTM Technologies † | 425,900 | 7,393,624 | ||||||
Viavi Solutions † | 379,400 | 3,995,082 | ||||||
Vishay Intertechnology | 837,400 | 13,900,840 | ||||||
|
| |||||||
175,907,673 | ||||||||
|
| |||||||
Transportation – 2.46% |
| |||||||
Kirby † | 96,700 | 6,464,395 | ||||||
Matson | 165,400 | 4,968,616 | ||||||
Saia † | 133,550 | 6,851,115 | ||||||
Werner Enterprises | 402,200 | 11,804,570 | ||||||
|
| |||||||
30,088,696 | ||||||||
|
| |||||||
Utilities – 2.64% |
| |||||||
Black Hills | 203,100 | 13,703,157 | ||||||
El Paso Electric | 220,800 | 11,415,360 | ||||||
NorthWestern | 118,500 | 7,230,870 | ||||||
|
| |||||||
32,349,387 | ||||||||
|
| |||||||
Total Common Stock |
| 1,210,826,860 | ||||||
|
|
Principal | Value | |||||||
amount° | (US $) | |||||||
Short-Term Investments – 1.05% |
| |||||||
Discount Note – 0.12% ≠ |
| |||||||
Federal Home Loan Bank 0.95% 7/10/17 | 1,460,992 | $ | 1,460,710 | |||||
|
| |||||||
1,460,710 | ||||||||
|
| |||||||
Repurchase Agreements – 0.74% |
| |||||||
Bank of America Merrill Lynch | 2,515,456 | 2,515,456 | ||||||
Bank of Montreal | 4,192,426 | 4,192,426 | ||||||
BNP Paribas | 2,355,204 | 2,355,204 | ||||||
|
| |||||||
9,063,086 | ||||||||
|
| |||||||
US Treasury Obligation – 0.19% ≠ | ||||||||
US Treasury Bill 0.70% 7/13/17 | 2,308,233 | 2,307,743 | ||||||
|
| |||||||
2,307,743 | ||||||||
|
| |||||||
Total Short-Term Investments |
| 12,831,539 | ||||||
|
|
Total Value of Securities – 100.07% | $ | 1,223,658,399 | ||
|
|
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 US 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 | June 30, 2017 (Unaudited)
|
Assets: | ||||
Investments, at value1 | $ | 1,210,826,860 | ||
Short-term investments, at value2 | 12,831,539 | |||
Cash | 711,320 | |||
Dividends and interest receivable | 1,364,349 | |||
Receivable for Series shares sold | 558,711 | |||
Receivable for securities sold | 534,086 | |||
|
| |||
Total assets | 1,226,826,865 | |||
|
| |||
Liabilities: | ||||
Payable for securities purchased | 1,869,155 | |||
Payable for Series shares redeemed | 960,373 | |||
Investment management fees payable to affiliates | 716,541 | |||
Distribution fees payable to affiliates | 163,847 | |||
Audit and tax fees payable | 16,556 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 7,557 | |||
Accounting and administration expenses payable to affiliates | 4,655 | |||
Trustees’ fees and expenses payable | 3,089 | |||
Legal fees payable to affiliates | 3,053 | |||
Reports and statements to shareholders expenses payable to affiliates | 800 | |||
Other accrued expenses | 249,150 | |||
|
| |||
Total liabilities | 3,994,776 | |||
|
| |||
Total Net Assets | $ | 1,222,832,089 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 770,033,291 | ||
Undistributed net investment income | 4,131,400 | |||
Accumulated net realized gain on investments | 45,515,047 | |||
Net unrealized appreciation of investments | 403,152,351 | |||
|
| |||
Total Net Assets | $ | 1,222,832,089 | ||
|
| |||
Net Asset Value: | ||||
Standard Class: | ||||
Net assets | $ | 427,164,957 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 10,879,984 | |||
Net asset value per share | $ | 39.26 | ||
Service Class: | ||||
Net assets | $ | 795,667,132 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 20,341,517 | |||
Net asset value per share | $ | 39.12 | ||
1Investments, at cost | $ | 807,674,623 | ||
2Short-term investments, at cost | 12,831,425 |
See accompanying notes, which are an integral part of the financial statements.
Small Cap Value Series-5
Table of Contents
Delaware VIP® Trust —
Delaware VIP Small Cap Value Series
Statement of operations
Six months ended June 30, 2017 (Unaudited)
Investment Income: | ||||
Dividends | $ | 9,888,726 | ||
Interest | 26,975 | |||
|
| |||
9,915,701 | ||||
|
| |||
Expenses: | ||||
Management fees | 4,346,952 | |||
Distribution expenses – Service Class | 1,195,493 | |||
Accounting and administration expenses | 187,682 | |||
Reports and statements to shareholders expenses | 65,116 | |||
Dividends disbursing and transfer agent fees and expenses | 51,813 | |||
Legal fees | 43,342 | |||
Custodian fees | 31,893 | |||
Trustees’ fees and expenses | 30,703 | |||
Audit and tax fees | 16,593 | |||
Registration fees | 436 | |||
Other | 11,983 | |||
|
| |||
5,982,006 | ||||
Less waived distribution expenses – Service Class | (199,249 | ) | ||
Less expense paid indirectly | (2 | ) | ||
|
| |||
Total operating expenses | 5,782,755 | |||
|
| |||
Net Investment Income | 4,132,946 | |||
|
| |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain on investments | 46,055,155 | |||
Net change in unrealized appreciation (depreciation) of investments | (15,260,482 | ) | ||
|
| |||
Net Realized and Unrealized Gain | 30,794,673 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 34,927,619 | ||
|
|
Delaware VIP Trust —
Delaware VIP Small Cap Value Series
Statements of changes in net assets
Six months ended 6/30/17 (Unaudited) | Year ended 12/31/16 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 4,132,946 | $ | 9,174,033 | ||||
Net realized gain | 46,055,155 | 42,363,754 | ||||||
Net change in unrealized appreciation (depreciation) | (15,260,482 | ) | 241,773,912 | |||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 34,927,619 | 293,311,699 | ||||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Standard Class | (3,678,580 | ) | (3,599,852 | ) | ||||
Service Class | (5,192,798 | ) | (4,789,432 | ) | ||||
Net realized gain: | ||||||||
Standard Class | (14,799,128 | ) | (33,171,518 | ) | ||||
Service Class | (27,668,494 | ) | (59,630,251 | ) | ||||
|
|
|
| |||||
(51,339,000 | ) | (101,191,053 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Standard Class | 30,629,393 | 37,317,603 | ||||||
Service Class | 43,702,868 | 63,705,456 | ||||||
Net asset value of shares based upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 18,477,708 | 36,771,370 | ||||||
Service Class | 32,861,292 | 64,419,682 | ||||||
|
|
|
| |||||
125,671,261 | 202,214,111 | |||||||
|
|
|
| |||||
Cost of shares repurchased: | ||||||||
Standard Class | (45,209,040 | ) | (57,243,833 | ) | ||||
Service Class | (65,174,422 | ) | (78,004,472 | ) | ||||
|
|
|
| |||||
(110,383,462 | ) | (135,248,305 | ) | |||||
|
|
|
| |||||
Increase in net assets derived from capital share transactions | 15,287,799 | 66,965,806 | ||||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | (1,123,582 | ) | 259,086,452 | |||||
Net Assets: | ||||||||
Beginning of period | 1,223,955,671 | 964,869,219 | ||||||
|
|
|
| |||||
End of period | $ | 1,222,832,089 | $ | 1,223,955,671 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 4,131,400 | $ | 8,869,832 | ||||
|
|
|
|
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
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 6/30/171 (unaudited) | 12/31/16 | 12/31/15 | Year ended 12/31/14 | 12/31/13 | 12/31/12 | |||||||||||||||||||||
Net asset value, beginning of period | $ | 39.84 | $ | 33.72 | $ | 40.23 | $ | 41.72 | $ | 33.14 | $ | 31.39 | ||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||
Net investment income2 | 0.17 | 0.36 | 0.33 | 0.27 | 0.24 | 0.26 | ||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.99 | 9.38 | (2.43 | ) | 2.06 | 10.37 | 3.98 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 1.16 | 9.74 | (2.10 | ) | 2.33 | 10.61 | 4.25 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||||
Net investment income | (0.35 | ) | (0.35 | ) | (0.28 | ) | (0.23 | ) | (0.28 | ) | (0.20 | ) | ||||||||||||||
Net realized gain | (1.40 | ) | (3.26 | ) | (4.13 | ) | (3.59 | ) | (1.75 | ) | (2.30 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total dividends and distributions | (1.74 | ) | (3.62 | ) | (4.41 | ) | (3.82 | ) | (2.03 | ) | (2.50 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value, end of period | $ | 39.26 | $ | 39.84 | $ | 33.72 | $ | 40.23 | $ | 41.72 | $ | 33.14 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total return3 | 2.95% | 31.41% | (6.22% | ) | 5.86% | 33.50% | 13.90% | |||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 427,165 | $ | 429,275 | $ | 343,847 | $ | 379,542 | $ | 354,211 | $ | 271,272 | ||||||||||||||
Ratio of expenses to average net assets | 0.78% | 0.79% | 0.80% | 0.80% | 0.80% | 0.81% | ||||||||||||||||||||
Ratio of net investment income to average net assets | 0.84% | 1.05% | 0.90% | 0.68% | 0.64% | 0.82% | ||||||||||||||||||||
Portfolio turnover | 8% | 11% | 18% | 16% | 23% | 14% |
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 | ||||||||||||||||||||||||
6/30/171 | Year ended | |||||||||||||||||||||||
(unaudited) | 12/31/16 | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | |||||||||||||||||||
Net asset value, beginning of period | $ | 39.67 | $ | 33.58 | $ | 40.08 | $ | 41.58 | $ | 33.04 | $ | 31.30 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income2 | 0.12 | 0.27 | 0.24 | 0.17 | 0.14 | 0.18 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.99 | 9.34 | (2.43 | ) | 2.06 | 10.34 | 3.97 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 1.11 | 9.61 | (2.19 | ) | 2.23 | 10.48 | 4.16 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||
Net investment income | (0.26 | ) | (0.26 | ) | (0.18 | ) | (0.14 | ) | (0.20 | ) | (0.12 | ) | ||||||||||||
Net realized gain | (1.40 | ) | (3.26 | ) | (4.13 | ) | (3.59 | ) | (1.75 | ) | (2.30 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (1.66 | ) | (3.52 | ) | (4.31 | ) | (3.73 | ) | (1.94 | ) | (2.42 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 39.12 | $ | 39.67 | $ | 33.58 | $ | 40.08 | $ | 41.58 | $ | 33.04 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return3 | 2.82% | 31.09% | (6.46% | ) | 5.62% | 33.17% | 13.63% | |||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 795,667 | $ | 794,681 | $ | 621,022 | $ | 719,263 | $ | 722,548 | $ | 593,021 | ||||||||||||
Ratio of expenses to average net assets | 1.03% | 1.04% | 1.05% | 1.05% | 1.05% | 1.06% | ||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 1.08% | 1.09% | 1.10% | 1.10% | 1.10% | 1.11% | ||||||||||||||||||
Ratio of net investment income to average net assets | 0.59% | 0.80% | 0.65% | 0.43% | 0.39% | 0.57% | ||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 0.54% | 0.75% | 0.60% | 0.38% | 0.34% | 0.52% | ||||||||||||||||||
Portfolio turnover | 8% | 11% | 18% | 16% | 23% | 14% |
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
June 30, 2017 (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 Core Series (formerly, 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 (1940 Act), and offers Standard Class and Service Class shares. The Standard Class shares do not carry a distribution and/or service (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 US generally accepted accounting principles (US 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. US 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 on the Series’ federal income tax returns through the six months ended June 30, 2017 and for all open tax years (years ended Dec. 31, 2013–Dec. 31, 2016), and has concluded that no provision for federal income tax is required in the Series’ financial statements. If applicable, the Series recognizes interest accrued on unrecognized tax benefits in interest expense and penalties in other expenses on the “Statement of operations.” During the six months ended June 30, 2017, the Series did not incur any interest or tax penalties.
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 US 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, 2017, and matured on the next business day.
Use of Estimates — The Series is an investment company, whose financial statements are prepared in conformity with US GAAP. Therefore, the Series follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with US 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 FundsSM by Macquarie (Delaware Funds) are generally allocated among such funds on the basis of average net assets. Management fees and certain 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, 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, 2017.
Small Cap Value Series-9
Table of Contents
Delaware VIP® Small Cap 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, 2017.
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 $1, 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, 2017, 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 Macquarie investments Management Business Trust (formerly, Delaware Management Business Trust) and the investment manager, an annual fee which is calculated daily and paid monthly 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 daily and paid monthly based on the aggregate daily net assets of the Delaware 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 Funds on a relative net asset value (NAV) basis. For the six months ended June 30, 2017, the Series was charged $28,375 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 daily and paid monthly 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, 2017, the Series was charged $45,866 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 12b-1 fee of 0.30% of the average daily net assets of the Service Class shares. DDLP has contracted to waive 12b-1 fee from Jan. 1, 2017 through June 30, 2017* in order to limit 12b-1 fee of the Service Class shares to 0.25% of average daily net assets. Standard Class shares pay no 12b-1 fee.
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, 2017, the Series was charged $14,199 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.
Cross trades for the six months ended June 30, 2017 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, 2017, the Series engaged in securities sales of $10,954,555 which resulted in net realized gain of $27.
*The aggregate contractual waiver period covering this report is from April 29, 2016 through May 1, 2018.
3. Investments
For the six months ended June 30, 2017, the Series made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 94,193,195 | ||
Sales | 133,575,222 |
Small Cap Value Series-10
Table of Contents
Delaware VIP® Small Cap Value Series
Notes to financial statements (continued)
3. Investments (continued)
At June 30, 2017, 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, 2017, the cost and unrealized appreciation (depreciation) of investments for the Series were as follows:
Cost of | Aggregate Unrealized Appreciation of Investments | Aggregate Unrealized Depreciation of Investments | Net Unrealized Appreciation of Investments | |||||||||||
$820,506,048 | $445,478,337 | $(42,325,986) | $403,152,351 | |||||||||||
US 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, 2017:
Securities | Level 1 | Level 2 | Total | |||||||||
Assets: | ||||||||||||
Common Stock | $ | 1,210,826,860 | $ | — | $ | 1,210,826,860 | ||||||
Short-Term Investments | — | 12,831,539 | 12,831,539 | |||||||||
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Total Value of Securities | $ | 1,210,826,860 | $ | 12,831,539 | $ | 1,223,658,399 | ||||||
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During the six months ended June 30, 2017, 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. During the six months ended June 30, 2017, there were no Level 3 investments.
Small Cap Value Series-11
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Delaware VIP® Small Cap Value Series
Notes to financial statements (continued)
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 6/30/17 | Year ended 12/31/16 | |||||||||||
Shares sold: | ||||||||||||
Standard Class | 770,292 | 1,094,235 | ||||||||||
Service Class | 1,092,583 | 1,812,728 | ||||||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||||||
Standard Class | 474,030 | 1,140,905 | ||||||||||
Service Class | 845,633 | 2,003,723 | ||||||||||
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3,182,538 | 6,051,591 | |||||||||||
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Shares redeemed: | ||||||||||||
Standard Class | (1,138,643 | ) | (1,656,790 | ) | ||||||||
Service Class | (1,631,248 | ) | (2,275,828 | ) | ||||||||
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(2,769,891 | ) | (3,932,618 | ) | |||||||||
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Net increase | 412,647 | 2,118,973 | ||||||||||
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5. Line of Credit
The Series, along with certain other funds in the Delaware 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 0.15%, which is allocated across the Participants on the basis of relative net assets 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. 6, 2017.
The Series had no amounts outstanding as of June 30, 2017 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 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.”
Small Cap Value Series-12
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Delaware VIP® Small Cap Value Series
Notes to financial statements (continued)
6. Offsetting (continued)
At June 30, 2017, 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(a) | Received | Received | Net Exposure(b) | ||||||||||||||||||||||
Bank of America | $ | 2,515,456 | $ | (2,515,456 | ) | $ | — | $ | (2,515,456 | ) | $ | — | |||||||||||||||
Bank of Montreal | 4,192,426 | (4,192,426 | ) | — | (4,192,426 | ) | — | ||||||||||||||||||||
BNP Paribas | 2,355,204 | (2,355,204 | ) | — | (2,355,204 | ) | — | ||||||||||||||||||||
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Total | $ | 9,063,086 | $ | (9,063,086 | ) | $ | — | $ | (9,063,086 | ) | $ | — | |||||||||||||||
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(a) The value of the related collateral received exceeded the value of the repurchase agreements as of June 30, 2017.
(b) 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 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 US securities and foreign securities that are denominated and payable in US 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.
Cash collateral received by each series of the Trust is generally invested in 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 US 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. A Series can also accept US government securities and letters of credit (non - cash collateral) in connection with securities loans.
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, 2017, 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.
Small Cap Value Series-13
Table of Contents
Delaware VIP® Small Cap Value Series
Notes to financial statements (continued)
8. Credit and Market Risk (continued)
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, 2017. 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, 2017, there were no Rule 144A securities held by the Series.
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. Recent Accounting Pronouncements
On Oct. 13, 2016, the Securities and Exchange Commission amended existing rules intended to modernize reporting and disclosure of information. These amendments relate to Regulation S-X which sets forth the form and content of financial statements. At this time, management is evaluating the implications of adopting these amendments and their impact on the financial statements and accompanying notes.
11. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to June 30, 2017 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 Series’ website at delawarefunds.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 Series’ website at delawarefunds.com/proxy; and (ii) on the Commission’s website at sec.gov.
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SA-VIPSCV 21599 (8/17) (235363) | Small Cap Value Series-14 |
Table of Contents
Delaware VIP® Trust
Delaware VIP U.S. Growth Series
June 30, 2017
Table of Contents
1 | ||||||
Security type / sector allocation and top 10 equity holdings | 2 | |||||
3 | ||||||
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6 | ||||||
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9 | ||||||
Other than Macquarie Bank Limited (MBL), none of the entities noted are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Series is governed by US laws and regulations.
Unless otherwise noted, views expressed herein are current as of June 30, 2017, 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.
Advisory services provided by Delaware Management Company, a series of Macquarie Investment Management Business Trust, a US registered investment advisor.
The Series is distributed by Delaware Distributors, L.P., an affiliate of Macquarie Investment Management Business Trust and Macquarie Group Limited. Macquarie Investment Management (MIM), a member of Macquarie Group, refers to the companies comprising the asset management division of 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.
© 2017 Macquarie Management Holdings, Inc. (formerly, Delaware Management Holdings, Inc.)
All third-party marks cited are the property of their respective owners. |
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Table of Contents
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Delaware VIP® Trust — Delaware VIP U.S. Growth Series
For the six-month period from January 1, 2017 to June 30, 2017 (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, 2017 to June 30, 2017.
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 1/1/17 | Ending Account Value 6/30/17 | Annualized Expense Ratio | Expenses During | |||||||||
Actual Series return† | ||||||||||||
Standard Class | $ | 1,000.00 | $ | 1,142.10 | 0.74% | $3.93 | ||||||
Service Class | 1,000.00 | 1,142.50 | 0.99% | 5.26 | ||||||||
Hypothetical 5% return (5% return before expenses) | ||||||||||||
Standard Class | $ | 1,000.00 | $ | 1,021.12 | 0.74% | $3.71 | ||||||
Service Class | 1,000.00 | 1,019.89 | 0.99% | 4.96 |
* | “Expenses Paid During Period” are equal to the Series’ annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (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
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Delaware VIP® Trust — Delaware VIP U.S. Growth Series
Security type / sector allocation and top 10 equity holdings
As of June 30, 2017 (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 | 98.82 | % | |||
Consumer Discretionary | 21.45 | % | |||
Financial Services1 | 30.69 | % | |||
Healthcare | 14.43 | % | |||
Industrials | 3.73 | % | |||
Technology1 | 28.52 | % | |||
Short-Term Investments | 0.40 | % | |||
Total Value of Securities | 99.22 | % | |||
Receivables and Other Assets Net of Liabilities | 0.78 | % | |||
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) are subdivided into a variety of “industries” (in accordance with the requirements of the Investment Company Act of 1940, as amended). The Financial Services sector consisted of commercial services, diversified financial services, and real estate investment trusts. As of June 30, 2017, such amounts, as a percentage of total net assets, were 6.54%, 17.20%, and 6.95%, respectively. The Technology sector consisted of Internet, semiconductors, and software. As of June 30, 2017, such amounts, as a percentage of total net assets, were 14.00%, 3.11%, and 11.41%, 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 | ||||
Alphabet Class A & Class C | 6.82 | % | |||
PayPal Holdings | 6.54 | % | |||
Visa Class A | 5.71 | % | |||
Microsoft | 5.61 | % | |||
Celgene | 5.60 | % | |||
Mastercard Class A | 4.65 | % | |||
Crown Castle International | 4.45 | % | |||
eBay | 4.31 | % | |||
Liberty Interactive Corp. QVC Group Class A | 4.24 | % | |||
Intercontinental Exchange
| 3.87 | % |
U.S. Growth Series-2
Table of Contents
|
Delaware VIP® Trust — Delaware VIP U.S. Growth Series
June 30, 2017 (Unaudited)
Number of shares | Value (US $) | |||||||
Common Stock – 98.82%² |
| |||||||
Consumer Discretionary – 21.45% |
| |||||||
Dollar General | 95,332 | $ | 6,872,484 | |||||
eBay † | 471,384 | 16,460,729 | ||||||
Liberty Global Class A † | 93,084 | 2,989,858 | ||||||
Liberty Global Class C † | 346,728 | 10,810,979 | ||||||
Liberty Interactive Corp. QVC Group Class A † | 660,138 | 16,199,787 | ||||||
Nielsen Holdings | 199,106 | 7,697,438 | ||||||
Quintiles IMS Holdings † | 144,610 | 12,942,595 | ||||||
TripAdvisor † | 210,273 | 8,032,429 | ||||||
|
| |||||||
82,006,299 | ||||||||
|
| |||||||
Financial Services – 30.69% |
| |||||||
Charles Schwab | 263,649 | 11,326,361 | ||||||
Crown Castle International | 169,939 | 17,024,489 | ||||||
Equinix | 22,243 | 9,545,806 | ||||||
Intercontinental Exchange | 224,538 | 14,801,545 | ||||||
Mastercard Class A | 146,491 | 17,791,332 | ||||||
PayPal Holdings † | 465,879 | 25,003,726 | ||||||
Visa Class A | 232,620 | 21,815,104 | ||||||
|
| |||||||
117,308,363 | ||||||||
|
| |||||||
Healthcare – 14.43% | ||||||||
Allergan | 45,358 | 11,026,076 | ||||||
Biogen † | 46,971 | 12,746,051 | ||||||
Celgene † | 164,990 | 21,427,251 | ||||||
DENTSPLY SIRONA | 153,785 | 9,971,419 | ||||||
|
| |||||||
55,170,797 | ||||||||
|
| |||||||
Industrials – 3.73% | ||||||||
FedEx | 65,618 | 14,260,760 | ||||||
|
| |||||||
14,260,760 | ||||||||
|
| |||||||
Technology – 28.52% | ||||||||
Alphabet Class A † | 16,377 | 15,225,369 | ||||||
Alphabet Class C † | 11,943 | 10,852,962 | ||||||
ASML Holding (New York Shares) | 42,235 | 5,503,643 | ||||||
Electronic Arts † | 103,874 | 10,981,559 | ||||||
Facebook Class A † | 96,739 | 14,605,654 | ||||||
Intuit | 61,271 | 8,137,402 | ||||||
Microsoft | 311,003 | 21,437,437 | ||||||
NVIDIA | 44,246 | 6,396,202 | ||||||
Symantec | 454,071 | 12,827,506 | ||||||
Take-Two Interactive | 41,951 | 3,078,364 | ||||||
|
| |||||||
109,046,098 | ||||||||
|
| |||||||
Total Common Stock | 377,792,317 | |||||||
|
|
Principal amount° | Value (US $) | |||||||
Short-Term Investments – 0.40% |
| |||||||
Discount Note – 0.06% ≠ | ||||||||
Federal Home Loan Bank | 249,657 | $ | 249,608 | |||||
|
| |||||||
249,608 | ||||||||
|
| |||||||
Repurchase Agreements – 0.27% |
| |||||||
Bank of America Merrill Lynch | 282,051 | 282,051 | ||||||
Bank of Montreal | 470,086 | 470,086 | ||||||
BNP Paribas | 264,083 | 264,083 | ||||||
|
| |||||||
1,016,220 | ||||||||
|
| |||||||
US Treasury Obligation – 0.07% |
| |||||||
US Treasury Bill 0.70% 7/13/17 | 258,816 | 258,761 | ||||||
|
| |||||||
258,761 | ||||||||
|
| |||||||
Total Short-Term Investments |
| 1,524,589 | ||||||
|
|
U.S. Growth Series-3
Table of Contents
|
Delaware VIP® U.S. Growth Series
Schedule of investments (continued)
Total Value of Securities – 99.22% | $379,316,906 | |||
|
|
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 US 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.
U.S. Growth Series-4
Table of Contents
|
Delaware VIP® Trust — Delaware VIP U.S. Growth Series | ||
Statement of assets and liabilities | June 30, 2017 (Unaudited) |
Assets: | ||||
Investments, at value1 | $ | 377,792,317 | ||
Short-term investments, at value2 | 1,524,589 | |||
Cash | 214,055 | |||
Receivable for securities sold | 6,710,741 | |||
Dividends and interest receivable | 46,644 | |||
Foreign tax reclaims receivable | 37,096 | |||
|
| |||
Total assets | 386,325,442 | |||
|
| |||
Liabilities: | ||||
Payable for securities purchased | 3,491,576 | |||
Payable for series shares redeemed | 103,147 | |||
Investment management fees payable to affiliates | 207,025 | |||
Other accrued expenses | 122,531 | |||
Distribution fees payable to affiliates | 69,249 | |||
Audit and tax fees payable to affiliates | 16,556 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 2,389 | |||
Accounting and administration expenses payable to affiliates | 1,472 | |||
Trustees’ fees and expenses payable | 992 | |||
Legal fees payable to affiliates | 986 | |||
Reports and statements to shareholders expense payable to affiliates | 250 | |||
|
| |||
Total liabilities | 4,016,173 | |||
|
| |||
Total Net Assets | $ | 382,309,269 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 262,530,185 | ||
Distributions in excess of net investment income | (335,867 | ) | ||
Accumulated net realized gain | 13,160,137 | |||
Net unrealized appreciation of investments | 106,954,814 | |||
|
| |||
Total Net Assets | $ | 382,309,269 | ||
|
| |||
Standard Class: | ||||
Net assets | $ | 49,061,212 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 4,869,878 | |||
Net asset value per share | $ | 10.07 | ||
Service Class: | ||||
Net assets | $ | 333,248,057 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 33,974,394 | |||
Net asset value per share | $ | 9.81 | ||
1 Investments, at cost | $ | 270,837,519 | ||
2 Short-term investments, at cost | 1,524,573 |
See accompanying notes, which are an integral part of the financial statements.
U.S. Growth Series-5
Table of Contents
|
Delaware VIP® Trust —
Delaware VIP U.S. Growth Series
Six months ended June 30, 2017
Investment Income: | ||||
Dividends | $ | 1,465,118 | ||
Interest | 13,476 | |||
Foreign tax withheld | (8,723 | ) | ||
|
| |||
1,469,871 | ||||
|
| |||
Expenses: | ||||
Management fees | 1,224,659 | |||
Distribution expenses – Service Class | 489,156 | |||
Accounting and administration expenses | 57,819 | |||
Reports and statements to shareholders | 37,364 | |||
Audit and tax fees | 16,571 | |||
Dividend disbursing and transfer agent fees and expenses | 15,869 | |||
Custodian fees | 15,815 | |||
Legal fees | 15,450 | |||
Trustees’ fees and expenses | 9,448 | |||
Registration fees | 516 | |||
Other | 4,597 | |||
|
| |||
1,887,264 | ||||
Less waived distribution expenses - Service Class | (81,526 | ) | ||
|
| |||
Total operating expenses | 1,805,738 | |||
|
| |||
Net Investment Loss | (335,867 | ) | ||
|
| |||
Net Realized and Unrealized Gain: | ||||
Net realized gain | 14,187,237 | |||
Net change in unrealized appreciation (depreciation) of investments | 36,456,732 | |||
|
| |||
Net Realized and Unrealized Gain | 50,643,969 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 50,308,102 | ||
|
|
Delaware VIP Trust —
Delaware VIP U.S. Growth Series
Statements of changes in net assets
Six months ended 6/30/17 (Unaudited) | Year ended 12/31/16 | |||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (335,867 | ) | $ | (3,606 | ) | ||
Net realized gain | 14,187,237 | 5,300,020 | ||||||
Net change in unrealized appreciation (depreciation) | 36,456,732 | (26,965,270 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 50,308,102 | (21,668,856 | ) | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Standard Class | — | (315,595 | ) | |||||
Service Class | — | (1,361,730 | ) | |||||
Net realized gain: | ||||||||
Standard Class | (539,552 | ) | (13,642,821 | ) | ||||
Service Class | (3,478,091 | ) | (97,717,762 | ) | ||||
|
|
|
| |||||
(4,017,643 | ) | (113,037,908 | ) | |||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Standard Class | 2,357,349 | 6,951,016 | ||||||
Service Class | 1,177,047 | 11,860,309 | ||||||
Net asset value of shares based upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 539,552 | 13,958,416 | ||||||
Service Class | 3,478,091 | 99,079,492 | ||||||
|
|
|
| |||||
7,552,039 | 131,849,233 | |||||||
|
|
|
| |||||
Cost of shares redeemed: | ||||||||
Standard Class | (7,909,940 | ) | (6,700,046 | ) | ||||
Service Class | (27,590,015 | ) | (38,221,680 | ) | ||||
|
|
|
| |||||
(35,499,955 | ) | (44,921,726 | ) | |||||
|
|
|
| |||||
Increase (decrease) in net assets derived from capital share transactions | (27,947,916 | ) | 86,927,507 | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | 18,342,543 | (47,779,257 | ) | |||||
Net Assets: | ||||||||
Beginning of period | 363,966,726 | 411,745,983 | ||||||
|
|
|
| |||||
End of period | $ | 382,309,269 | $ | 363,966,726 | ||||
|
|
|
| |||||
Distributions in excess of net investment income | $ | (335,867 | ) | $ | — | |||
|
|
|
|
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
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 6/30/171 (Unaudited) | 12/31/16 | 12/31/15 | Year ended 12/31/14 | 12/31/13 | 12/31/12 | |||||||||||||||||||
Net asset value, beginning of period | $ | 8.91 | $ | 13.31 | $ | 13.75 | $ | 13.14 | $ | 10.17 | $ | 8.75 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income2 | — | 3 | 0.02 | 0.08 | 0.08 | 0.03 | 0.04 | |||||||||||||||||
Net realized and unrealized gain (loss) | 1.26 | (0.75 | ) | 0.66 | 1.49 | 3.40 | 1.38 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 1.26 | (0.73 | ) | 0.74 | 1.57 | 3.43 | 1.42 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||
Net investment income | — | (0.08 | ) | (0.08 | ) | (0.03 | ) | (0.04 | ) | — | ||||||||||||||
Net realized gain | (0.10 | ) | (3.59 | ) | (1.10 | ) | (0.93 | ) | (0.42 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.10 | ) | (3.67 | ) | (1.18 | ) | (0.96 | ) | (0.46 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 10.07 | $ | 8.91 | $ | 13.31 | $ | 13.75 | $ | 13.14 | $ | 10.17 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return4 | 14.21% | (5.17% | ) | 5.39% | 12.78% | 34.75% | 16.23% | |||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 49,061 | $ | 47,773 | $ | 50,055 | $ | 160,730 | $ | 145,086 | $ | 106,069 | ||||||||||||
Ratio of expenses to average net assets | 0.74% | 0.74% | 0.75% | 0.74% | 0.74% | 0.74% | ||||||||||||||||||
Ratio of net investment income to average net assets | 0.04% | 0.22% | 0.56% | 0.58% | 0.27% | 0.40% | ||||||||||||||||||
Portfolio turnover | 13% | 22% | 39% | 26% | 20% | 35% |
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 | Amount is less than $0.005 per share. |
4 | 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 | 12/31/16 | 12/31/15 | Year ended 12/31/14 | 12/31/13 | 12/31/12 | |||||||||||||||||||
Net asset value, beginning of period | $ | 8.68 | $ | 13.07 | $ | 13.53 | $ | 12.94 | $ | 10.03 | $ | 8.65 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income (loss)2 | (0.01 | ) | — | 3 | 0.04 | 0.04 | — | 3 | 0.01 | |||||||||||||||
Net realized and unrealized gain (loss) | 1.24 | (0.75 | ) | 0.65 | 1.48 | 3.34 | 1.37 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 1.23 | (0.75 | ) | 0.69 | 1.52 | 3.34 | 1.38 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||
Net investment income | — | (0.05 | ) | (0.05 | ) | — | 3 | (0.01 | ) | — | ||||||||||||||
Net realized gain | (0.10 | ) | (3.59 | ) | (1.10 | ) | (0.93 | ) | (0.42 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.10 | ) | (3.64 | ) | (1.15 | ) | (0.93 | ) | (0.43 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 9.81 | $ | 8.68 | $ | 13.07 | $ | 13.53 | $ | 12.94 | $ | 10.03 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return4 | 14.25% | (5.50% | ) | 5.08% | 12.48% | 34.44% | 15.95% | |||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $ | 333,248 | $ | 316,194 | $ | 361,691 | $ | 365,985 | $ | 343,295 | $ | 281,973 | ||||||||||||
Ratio of expenses to average net assets | 0.99% | 0.99% | 1.00% | 0.99% | 0.99% | 0.99% | ||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 1.04% | 1.04% | 1.05% | 1.04% | 1.04% | 1.04% | ||||||||||||||||||
Ratio of net investment income (loss) to average net assets | (0.21% | ) | (0.03% | ) | 0.31% | 0.33% | 0.02% | 0.15% | ||||||||||||||||
Ratio of net investment income (loss) to average net assets prior to fees waived | (0.26% | ) | (0.08% | ) | 0.26% | 0.28% | (0.03% | ) | 0.10% | |||||||||||||||
Portfolio turnover | 13% | 22% | 39% | 26% | 20% | 35% |
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 | Amount is less than $0.005 per share. |
4 | 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
June 30, 2017 (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 Core Series (formerly, 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 (1940 Act), and offers Standard Class and Service Class shares. The Standard Class shares do not carry a distribution and/or service (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 US generally accepted accounting principles (US 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. US 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-US markets because, among other things, most foreign markets close well before the Series values its securities, generally as of 4:00pm 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 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 on the Series’ federal income tax returns through the six months ended June 30, 2017 and for all open tax years (years ended Dec. 31, 2013–Dec. 31, 2016), and has concluded that no provision for federal income tax is required in the Series’ financial statements. If applicable, the Series recognizes interest accrued on unrecognized tax benefits in interest expense and penalties in other expenses on the “Statement of operations.” During the six months ended June 30, 2017, the Series did not incur any interest or tax penalties.
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 US 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, 2017 and matured on the next business day.
Use of Estimates — The Series is an investment company, whose financial statements are prepared in conformity with US GAAP. Therefore, the Series follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with US 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 FundsSM by Macquarie (Delaware Funds) are generally allocated among such funds on the basis of average net assets. Management fees and certain 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. 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, 2017.
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, 2017.
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 $1, 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, 2017, 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 Macquarie Investment Management Business Trust (formerly, Delaware Management Business Trust) and the investment manager, an annual fee which is calculated daily and paid monthly 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. 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.
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 daily and paid monthly based on the aggregate daily net assets of the Delaware 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 Funds on a relative net asset value (NAV) basis. For the six months ended June 30, 2017, the Series was charged $8,742 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 daily and paid monthly 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, 2017, the Series was charged $14,131 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 12b-1 fee of 0.30% of the average daily net assets of the Service Class shares. DDLP has contracted to waive the 12b-1 fee from Jan. 1, 2017 through June 30, 2017* in order to limit the 12b-1 fee of the Service Class shares to 0.25% of average daily net assets. Standard Class shares pay no 12b-1 fee.
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, 2017, the Series was charged $4,366 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.
Cross trades for the six months ended June 30, 2017 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 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, 2017, the Series engaged in securities sales of $769,080, which resulted in net realized gains of $7.
*The aggregate contractual waiver period covering this report is from April 29, 2016 through May 1, 2018.
U.S. Growth Series-10
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Delaware VIP® U.S. Growth Series
Notes to financial statements (continued)
3. Investments
For the six months ended June 30, 2017, the Series made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $ | 47,182,522 | ||
Sales | 74,144,047 |
At June 30, 2017, 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, 2017, the cost and unrealized appreciation (depreciation) of investments for the Series were as follows:
Cost of | Aggregate Unrealized Appreciation of Investments | Aggregate Unrealized Depreciation of Investments | Net Unrealized Appreciation of Investments | |||
$272,362,092 | $120,536,635 | $(13,581,821) | $106,954,814 |
US 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, 2017:
Securities | Level 1 | Level 2 | Total | |||||||||
Assets: | ||||||||||||
Common Stock | $ | 377,792,317 | $ | — | $ | 377,792,317 | ||||||
Short-Term Investments | — | 1,524,589 | 1,524,589 | |||||||||
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Total Value of Securities | $ | 377,792,317 | $ | 1,524,589 | $ | 379,316,906 | ||||||
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During the six months ended June 30, 2017, 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. During the six months ended June 30, 2017, there were no Level 3 investments.
U.S. Growth Series-11
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Delaware VIP® U.S. Growth Series
Notes to financial statements (continued)
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 6/30/17 | Year ended 12/31/16 | |||||||
Shares sold: | ||||||||
Standard Class | 248,681 | 685,041 | ||||||
Service Class | 127,664 | 1,157,900 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 57,035 | 1,584,383 | ||||||
Service Class | 377,643 | 11,520,871 | ||||||
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811,023 | 14,948,195 | |||||||
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Shares redeemed: | ||||||||
Standard Class | (799,775 | ) | (666,128 | ) | ||||
Service Class | (2,937,966 | ) | (3,950,305 | ) | ||||
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(3,737,741 | ) | (4,616,433 | ) | |||||
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Net increase (decrease) | (2,926,718 | ) | 10,331,762 | |||||
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5. Line of Credit
The Series, along with certain other funds in the Delaware 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 0.15%, which is allocated across the Participants on the basis of relative net assets 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 will expire on Nov. 6, 2017.
The Series had no amounts outstanding as of June 30, 2017 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 derivative liabilities that are subject to netting arrangements on the “Statement of assets and liabilities.”
U.S. Growth Series-12
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Delaware VIP® U.S. Growth Series
Notes to financial statements (continued)
6. Offsetting (continued)
At June 30, 2017, 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(a) | Cash Collateral Received | Net Collateral Received | Net Exposure(b) | ||||||||||||||||||||
Bank of America Merrill Lynch | $ | 282,051 | $ | (282,051 | ) | $ | — | $ | (282,051 | ) | $ | — | |||||||||||||
Bank of Montreal | 470,086 | (470,086 | ) | — | $ | (470,086 | ) | — | |||||||||||||||||
BNP Paribas | 264,083 | (264,083 | ) | — | $ | (264,083 | ) | — | |||||||||||||||||
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Total | $ | 1,016,220 | $ | (1,016,220 | ) | $ | — | $ | (1,016,220 | ) | $ | — | |||||||||||||
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(a)The value of the related collateral received exceeded the value of the repurchase agreements as of June 30, 2017.
(b)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 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 US securities and foreign securities that are denominated and payable in US 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.
Cash collateral received by each Series of the Trust is generally invested in 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 US 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 as disclosed on the “Schedule of investments.” Securities purchased with cash collateral are valued at the market value. A Series can also accept US government securities and letters of credit (non-cash collateral) in connection with securities loans.
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, 2017, 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 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
U.S. Growth Series-13
Table of Contents
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Delaware VIP® U.S. Growth Series
Notes to financial statements (continued)
8. Credit and Market Risk (continued)
resale pursuant 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, 2017, there were no Rule 144A securities held by the Series.
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. Recent Accounting Pronouncements
On Oct. 13, 2016, the Securities and Exchange Commission amended existing rules intended to modernize reporting and disclosure of information. These amendments relate to Regulation S-X which sets forth the form and content of financial statements. At this time, management is evaluating the implications of adopting these amendments and their impact on the financial statements and accompanying notes.
11. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to June 30, 2017 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 Series’ website at delawarefunds.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 Series’ website at delawarefunds.com/proxy; and (ii) on the Commission’s website at sec.gov.
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SA-VIPUSG 21601 (8/17) (235363) | U.S. Growth Series-14 |
Table of Contents
Delaware VIP® Trust
Delaware VIP Value Series
June 30, 2017
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Table of Contents
1 | ||||||||
Security type / sector allocation and top 10 equity holdings | 2 | |||||||
3 | ||||||||
5 | ||||||||
6 | ||||||||
6 | ||||||||
7 | ||||||||
9 |
Other than Macquarie Bank Limited (MBL), none of the entities noted are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. The Series is governed by US laws and regulations.
Unless otherwise noted, views expressed herein are current as of June 30, 2017, 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.
Advisory services provided by Delaware Management Company, a series of Macquarie Investment Management Business Trust, a US registered investment advisor.
The Series is distributed by Delaware Distributors, L.P., an affiliate of Macquarie Investment Management Business Trust and Macquarie Group Limited. Macquarie Investment Management (MIM), a member of Macquarie Group, refers to the companies comprising the asset management division of 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.
© 2017 Macquarie Management Holdings, Inc. (formerly, Delaware Management Holdings, Inc.)
All third-party marks cited are the property of their respective owners.
Table of Contents
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Delaware VIP® Trust — Delaware VIP Value Series
Disclosure of Series expenses
For the six-month period from January 1, 2017 to June 30, 2017 (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, 2017 to June 30, 2017.
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 1/1/17 | Ending Account Value 6/30/17 | Annualized Expense Ratio | Expenses Paid During Period 1/1/17 to 6/30/17* | |||||||||||||
Actual Series return† |
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Standard Class | $1,000.00 | $ | 1,028.40 | 0.70% | $3.52 | |||||||||||
Service Class | 1,000.00 | 1,027.40 | 0.95% | 4.78 | ||||||||||||
Hypothetical 5% return (5% return before expenses) |
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Standard Class | $1,000.00 | $ | 1,021.32 | 0.70% | $3.51 | |||||||||||
Service Class | 1,000.00 | 1,020.08 | 0.95% | 4.76 |
* | “Expenses Paid During Period” are equal to the Series’ annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (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
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Delaware VIP® Trust — Delaware VIP Value Series
Security type / sector allocation and top 10 equity holdings
As of June 30, 2017 (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 | 99.40% | |||
Consumer Discretionary | 2.91% | |||
Consumer Staples | 11.86% | |||
Energy | 13.99% | |||
Financials | 12.43% | |||
Healthcare | 21.56% | |||
Industrials | 9.47% | |||
Information Technology | 12.55% | |||
Materials | 3.12% | |||
Real Estate | 2.96% | |||
Telecommunications | 5.54% | |||
Utilities | 3.01% | |||
Short-Term Investments | 0.58% | |||
Total Value of Securities | 99.98% | |||
Receivables and Other Assets Net of Liabilities | 0.02% | |||
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 | | |
Oracle | 3.46% | |||
CA | 3.28% | |||
Raytheon | 3.27% | |||
Bank of New York Mellon | 3.25% | |||
Pfizer | 3.16% | |||
Marsh & McLennan | 3.15% | |||
Waste Management | 3.14% | |||
Johnson & Johnson | 3.14% | |||
EI du Pont de Nemours & Co. | 3.12% | |||
Merck & Co.
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Value Series-2
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Delaware VIP® Trust — Delaware VIP Value Series
Schedule of investments
June 30, 2017 (Unaudited)
Number of shares | Value (US $) | |||||||
Common Stock – 99.40% | ||||||||
Consumer Discretionary – 2.91% |
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Lowe’s | 299,100 | $ | 23,189,223 | |||||
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23,189,223 | ||||||||
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Consumer Staples – 11.86% | ||||||||
Archer-Daniels-Midland | 550,200 | 22,767,276 | ||||||
CVS Health | 306,600 | 24,669,036 | ||||||
Kraft Heinz | 275,833 | 23,622,338 | ||||||
Mondelez International | 545,200 | 23,547,188 | ||||||
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94,605,838 | ||||||||
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Energy – 13.99% | ||||||||
Chevron | 232,000 | 24,204,560 | ||||||
ConocoPhillips | 477,300 | 20,982,108 | ||||||
Halliburton | 497,900 | 21,265,309 | ||||||
Marathon Oil | 1,863,357 | 22,080,780 | ||||||
Occidental Petroleum | 384,900 | 23,043,963 | ||||||
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111,576,720 | ||||||||
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Financials – 12.43% | ||||||||
Allstate | 279,700 | 24,736,668 | ||||||
Bank of New York Mellon | 508,600 | 25,948,772 | ||||||
BB&T | 513,400 | 23,313,494 | ||||||
Marsh & McLennan | 322,200 | 25,118,712 | ||||||
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99,117,646 | ||||||||
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Healthcare – 21.56% | ||||||||
Abbott Laboratories | 502,200 | 24,411,942 | ||||||
Cardinal Health | 303,100 | 23,617,552 | ||||||
Express Scripts Holding † | 384,250 | 24,530,520 | ||||||
Johnson & Johnson | 189,200 | 25,029,268 | ||||||
Merck & Co. | 386,600 | 24,777,194 | ||||||
Pfizer | 749,141 | 25,163,646 | ||||||
Quest Diagnostics | 219,900 | 24,444,084 | ||||||
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171,974,206 | ||||||||
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Industrials – 9.47% | ||||||||
Northrop Grumman | 94,800 | 24,336,108 | ||||||
Raytheon | 161,700 | 26,111,316 | ||||||
Waste Management | 341,500 | 25,049,025 | ||||||
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75,496,449 | ||||||||
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| |||||||
Information Technology – 12.55% |
| |||||||
CA | 758,016 | 26,128,811 | ||||||
Cisco Systems | 750,600 | 23,493,780 | ||||||
Intel | 678,600 | 22,895,964 | ||||||
Oracle | 550,000 | 27,577,000 | ||||||
|
| |||||||
100,095,555 | ||||||||
|
|
Number of shares | Value (US $) | |||||||
Common Stock (continued) | ||||||||
Materials – 3.12% | ||||||||
EI du Pont de Nemours & Co. | 308,000 | $ | 24,858,680 | |||||
|
| |||||||
24,858,680 | ||||||||
|
| |||||||
Real Estate – 2.96% | ||||||||
Equity Residential | 358,708 | 23,613,748 | ||||||
|
| |||||||
23,613,748 | ||||||||
|
| |||||||
Telecommunications – 5.54% | ||||||||
AT&T | 580,624 | 21,906,943 | ||||||
Verizon Communications | 498,900 | 22,280,874 | ||||||
|
| |||||||
44,187,817 | ||||||||
|
| |||||||
Utilities – 3.01% | ||||||||
Edison International | 306,900 | 23,996,511 | ||||||
|
| |||||||
23,996,511 | ||||||||
|
| |||||||
Total Common Stock | ||||||||
(cost $505,116,596) | 792,712,393 | |||||||
|
| |||||||
Principal | ||||||||
amount° | ||||||||
Short-Term Investments – 0.58% |
| |||||||
Discount Note – 0.08% ¹ | ||||||||
Federal Home Loan Bank 0.95% 7/10/17 | 599,585 | 599,470 | ||||||
|
| |||||||
599,470 | ||||||||
|
| |||||||
Repurchase Agreements – 0.40% |
| |||||||
Bank of America Merrill Lynch 0.99%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $880,737 (collateralized by US government obligations 3.375% 5/15/44; market value $898,278) | 880,664 | 880,664 | ||||||
Bank of Montreal 0.93%, dated 6/30/17, to be repurchased on 7/3/17, repurchase price $1,467,887 (collateralized by US government obligations 0.625%–3.75% 7/31/17–2/15/45; market value $1,497,129) | 1,467,773 | 1,467,773 |
Value Series-3
Table of Contents
|
Delaware VIP® Value Series
Schedule of investments (continued)
Principal | Value | |||||||
amount° | (US $) | |||||||
Short-Term Investments (continued) | ||||||||
Repurchase Agreements (continued) | ||||||||
BNP Paribas | 824,560 | $ | 824,560 | |||||
|
| |||||||
3,172,997 | ||||||||
|
|
Principal | Value | |||||||
amount° | (US $) | |||||||
Short-Term Investments (continued) | ||||||||
US Treasury Obligation – 0.10% ¹ | ||||||||
US Treasury Bill 0.70% 7/13/17 | 808,115 | $ | 807,944 | |||||
|
| |||||||
807,944 | ||||||||
|
| |||||||
Total Short-Term Investments | 4,580,411 | |||||||
|
|
Total Value of Securities – 99.98% | $ | 797,292,804 | ||
|
|
¹ The rate shown is the effective yield at the time of purchase.
° Principal amount shown is stated in US 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, 2017 (Unaudited) |
Assets: | ||||
Investments, at value1 | $ | 792,712,393 | ||
Short-term investments, at value2 | 4,580,411 | |||
Cash | 1,153 | |||
Dividends and interest receivable | 1,307,718 | |||
Receivable for series shares sold | 33,504 | |||
|
| |||
Total assets |
|
798,635,179 |
| |
|
| |||
Liabilities: | ||||
Payable for series shares redeemed | 481,398 | |||
Investment management fees payable to affiliates | 417,026 | |||
Other accrued expenses | 152,798 | |||
Distribution fees payable to affiliates | 75,090 | |||
Audit and tax fees payable | 16,556 | |||
Dividend disbursing and transfer agent fees and expenses payable to affiliates | 4,956 | |||
Accounting and administration expenses payable to affiliates | 3,053 | |||
Trustees’ fees and expenses payable | 2,043 | |||
Legal fees payable to affiliates | 2,026 | |||
Reports and statements to shareholders expenses payable to affiliates | 522 | |||
|
| |||
Total liabilities |
|
1,155,468 |
| |
|
| |||
Total Net Assets | $ | 797,479,711 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 490,608,034 | ||
Undistributed net investment income | 6,697,293 | |||
Accumulated net realized gain on investments | 12,578,542 | |||
Net unrealized appreciation of investments | 287,595,842 | |||
|
| |||
Total Net Assets |
$ |
797,479,711 |
| |
|
| |||
Net Asset Value: | ||||
Standard Class: | ||||
Net assets | $ | 433,874,054 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 15,205,131 | |||
Net asset value per share | $ | 28.53 | ||
Service Class: | ||||
Net assets | $ | 363,605,657 | ||
Shares of beneficial interest outstanding, unlimited authorization, no par | 12,770,196 | |||
Net asset value per share | $ | 28.47 | ||
1Investments, at cost | $ | 505,116,596 | ||
2Short-term investments, at cost | 4,580,366 |
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, 2017 (Unaudited)
Investment Income: | ||||
Dividends | $ | 9,961,313 | ||
Interest | 29,641 | |||
|
| |||
|
9,990,954 |
| ||
|
| |||
Expenses: | ||||
Management fees | 2,536,980 | |||
Distribution expenses – Service Class | 548,375 | |||
Accounting and administration expenses | 123,358 | |||
Dividend disbursing and transfer agent fees and expenses | 33,950 | |||
Legal fees | 32,286 | |||
Reports and statements to shareholders expenses | 31,209 | |||
Custodian fees | 25,978 | |||
Trustees’ fees and expenses | 20,264 | |||
Audit and tax fees | 16,556 | |||
Registration fees | 848 | |||
Other | 9,787 | |||
|
| |||
|
3,379,591 |
| ||
Less waived distribution expenses – Service Class | (91,396 | ) | ||
Less expense paid indirectly | (1 | ) | ||
|
| |||
Total operating expenses |
|
3,288,194 |
| |
|
| |||
Net Investment Income |
|
6,702,760 |
| |
|
| |||
Net Realized and Unrealized Gain: | ||||
Net realized gain on investments | 15,078,866 | |||
Net change in unrealized appreciation (depreciation) of investments | 813,984 | |||
|
| |||
Net Realized and Unrealized Gain | 15,892,850 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 22,595,610 | ||
|
|
Delaware VIP Value Series
Statements of changes in net assets
Six months ended 6/30/17 (Unaudited) | Year ended 12/31/16 | |||||||
Increase in Net Assets from Operations: | ||||||||
Net investment income | $ | 6,702,760 | $ | 13,035,042 | ||||
Net realized gain | 15,078,866 | 28,752,645 | ||||||
Net change in unrealized appreciation (depreciation) | 813,984 | 59,053,056 | ||||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 22,595,610 | 100,840,743 | ||||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income: | ||||||||
Standard Class | (7,573,948 | ) | (7,928,234 | ) | ||||
Service Class | (5,452,064 | ) | (5,649,583 | ) | ||||
Net realized gain: | ||||||||
Standard Class | (15,221,860 | ) | (36,394,752 | ) | ||||
Service Class | (12,692,702 | ) | (29,532,407 | ) | ||||
|
|
|
| |||||
|
(40,940,574 |
) |
|
(79,504,976 |
) | |||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from shares sold: | ||||||||
Standard Class | 7,139,436 | 24,409,045 | ||||||
Service Class | 13,146,633 | 49,349,702 | ||||||
Net asset value of shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 22,795,808 | 44,322,986 | ||||||
Service Class | 18,144,766 | 35,181,990 | ||||||
|
|
|
| |||||
|
61,226,643 |
|
|
153,263,723 |
| |||
|
|
|
| |||||
Cost of shares redeemed: | ||||||||
Standard Class | (25,045,594 | ) | (30,744,407 | ) | ||||
Service Class | (25,476,697 | ) | (32,874,550 | ) | ||||
|
|
|
| |||||
|
(50,522,291 |
) |
|
(63,618,957 |
) | |||
|
|
|
| |||||
Increase in net assets derived from capital share transactions | 10,704,352 | 89,644,766 | ||||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets: | (7,640,612 | ) | 110,980,533 | |||||
Net Assets: | ||||||||
Beginning of period | 805,120,323 | 694,139,790 | ||||||
|
|
|
| |||||
End of period |
$ |
797,479,711 |
|
$ |
805,120,323 |
| ||
|
|
|
| |||||
Undistributed net investment income |
$ |
6,697,293 |
|
$ |
13,020,545 |
| ||
|
|
|
|
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 | ||||||||||||||||||||||||||||||||||
6/30/171 | Year ended | |||||||||||||||||||||||||||||||||
(Unaudited) | 12/31/16 | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | |||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 29.25 | $ | 28.64 | $ | 29.24 | $ | 26.09 | $ | 19.88 | $ | 17.73 | ||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||||
Net investment income2 | 0.26 | 0.52 | 0.55 | 0.48 | 0.45 | 0.42 | ||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.56 | 3.39 | (0.65 | ) | 3.12 | 6.17 | 2.16 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total from investment operations | 0.82 | 3.91 | (0.10 | ) | 3.60 | 6.62 | 2.58 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||||||||||||
Net investment income | (0.51 | ) | (0.59 | ) | (0.50 | ) | (0.45 | ) | (0.41 | ) | (0.43 | ) | ||||||||||||||||||||||
Net realized gain | (1.03 | ) | (2.71 | ) | — | — | — | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total dividends and distributions | (1.54 | ) | (3.30 | ) | (0.50 | ) | (0.45 | ) | (0.41 | ) | (0.43 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Net asset value, end of period | $ | 28.53 | $ | 29.25 | $ | 28.64 | $ | 29.24 | $ | 26.09 | $ | 19.88 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total return3 | 2.84% | 14.65% | (0.41% | ) | 14.00% | 33.69% | 14.73% | |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $433,874 | $439,265 | $389,570 | $523,240 | $473,403 | $350,444 | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 0.70% | 0.70% | 0.71% | 0.71% | 0.71% | 0.73% | ||||||||||||||||||||||||||||
Ratio of net investment income to average net assets | 1.78% | 1.87% | 1.88% | 1.74% | 1.94% | 2.21% | ||||||||||||||||||||||||||||
Portfolio turnover | 6% | 17% | 17% | 12% | 14% | 21% |
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 | ||||||||||||||||||||||||||||||||||
6/30/171 | Year ended | |||||||||||||||||||||||||||||||||
(Unaudited) | 12/31/16 | 12/31/15 | 12/31/14 | 12/31/13 | 12/31/12 | |||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 29.15 | $ | 28.56 | $ | 29.16 | $ | 26.03 | $ | 19.84 | $ | 17.70 | ||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||||
Net investment income2 | 0.22 | 0.45 | 0.47 | 0.41 | 0.39 | 0.37 | ||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.57 | 3.37 | (0.64 | ) | 3.12 | 6.16 | 2.16 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total from investment operations | 0.79 | 3.82 | (0.17 | ) | 3.53 | 6.55 | 2.53 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Less dividends and distributions from: | ||||||||||||||||||||||||||||||||||
Net investment income | (0.44 | ) | (0.52 | ) | (0.43 | ) | (0.40 | ) | (0.36 | ) | (0.39 | ) | ||||||||||||||||||||||
Net realized gain | (1.03 | ) | (2.71 | ) | — | — | — | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total dividends and distributions | (1.47 | ) | (3.23 | ) | (0.43 | ) | (0.40 | ) | (0.36 | ) | (0.39 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Net asset value, end of period | $ | 28.47 | $ | 29.15 | $ | 28.56 | $ | 29.16 | $ | 26.03 | $ | 19.84 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total return3 | 2.74% | 14.32% | (0.64% | ) | 13.70% | 33.37% | 14.44% | |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||
Net assets, end of period (000 omitted) | $363,606 | $365,855 | $304,570 | $330,528 | $285,695 | $210,804 | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 0.95% | 0.95% | 0.96% | 0.96% | 0.96% | 0.98% | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets prior to fees waived | 1.00% | 1.00% | 1.01% | 1.01% | 1.01% | 1.03% | ||||||||||||||||||||||||||||
Ratio of net investment income to average net assets | 1.53% | 1.62% | 1.63% | 1.49% | 1.69% | 1.96% | ||||||||||||||||||||||||||||
Ratio of net investment income to average net assets prior to fees waived | 1.48% | 1.57% | 1.58% | 1.44% | 1.64% | 1.91% | ||||||||||||||||||||||||||||
Portfolio turnover | 6% | 17% | 17% | 12% | 14% | 21% |
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, 2017 (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 Core Series (formerly, 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 (1940 Act), and offers Standard Class and Service Class shares. The Standard Class shares do not carry a distribution and/or service (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 US generally accepted accounting principles (US 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. US 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 on the Series’ federal income tax returns through the six months ended June 30, 2017 and for all open tax years (years ended Dec. 31, 2013–Dec. 31, 2016), and has concluded that no provision for federal income tax is required in the Series’ financial statements. If applicable, the Series recognizes interest accrued on unrecognized tax benefits in interest expense and penalties in other expenses on the “Statement of operations.” During the six months ended June 30, 2017, the Series did not incur any interest or tax penalties.
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 US 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, 2017, and matured on the next business day.
Use of Estimates — The Series is an investment company, whose financial statements are prepared in conformity with US GAAP. Therefore, the Series follows the accounting and reporting guidelines for investment companies. The preparation of financial statements in conformity with US 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 FundsSM by Macquarie (Delaware Funds) are generally allocated among such funds on the basis of average net assets. Management fees and certain 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, 2017.
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, 2017.
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 $1, 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, 2017, 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 Macquarie Investment Management Business Trust (formerly, Delaware Management Business Trust) and the investment manager, an annual fee which is calculated daily and paid monthly 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 daily and paid monthly based on the aggregate daily net assets of the Delaware 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 Funds on a relative net asset value (NAV) basis. For the six months ended June 30, 2017, the Series was charged 18,661 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 daily and paid monthly 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, 2017, the Series was charged $30,163 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 12b-1 fee of 0.30% of the average daily net assets of the Service Class shares. DDLP has contracted to waive 12b-1 fee from Jan. 1, 2017 through June 30, 2017,* in order to limit 12b-1 fee of the Service Class shares to 0.25% of average daily net assets. Standard Class shares pay no 12b-1 fee.
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, 2017, the Series was charged $9,338 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.
Cross trades for the six months ended June 30, 2017 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, 2017, the Series engaged in securities sales of $6,003,882, which resulted in net realized gain of $76.
*The aggregate contractual waiver period covering this report is from April 29, 2016 through May 1, 2018.
3. Investments
For the six months ended June 30, 2017, the Series made purchases and sales of investment securities other than short-term investments as follows:
Purchases | $53,763,292 | |||
Sales | 48,643,607 |
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Notes to financial statements (continued)
3. Investments (continued)
At June 30, 2017, 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, 2017, the cost and unrealized appreciation (depreciation) of investments for the Series were as follows:
Cost of | Aggregate | Aggregate | Net Unrealized | |||
$509,696,962 | $315,042,786 | $(27,446,944) | $287,595,842 |
US 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, 2017:
Securities | Level 1 | Level 2 | Total | |||||||||
Assets: | ||||||||||||
Common Stock | $ | 792,712,393 | $ | — | $ | 792,712,393 | ||||||
Short-Term Investments | — | 4,580,411 | 4,580,411 | |||||||||
|
|
|
|
|
| |||||||
Total Value of Securities | $ | 792,712,393 | $ | 4,580,411 | $ | 797,292,804 | ||||||
|
|
|
|
|
|
During the six months ended June 30, 2017, 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. During the six months ended June 30, 2017, there were no Level 3 investments.
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Notes to financial statements (continued)
4. Capital Shares
Transactions in capital shares were as follows:
Six months ended 6/30/17 | Year ended 12/31/16 | |||||||
Shares sold: | ||||||||
Standard Class | 240,776 | 871,243 | ||||||
Service Class | 451,313 | 1,755,795 | ||||||
Shares issued upon reinvestment of dividends and distributions: | ||||||||
Standard Class | 804,085 | 1,644,028 | ||||||
Service Class | 641,158 | 1,306,909 | ||||||
|
|
|
| |||||
|
2,137,332 |
|
|
5,577,975 |
| |||
|
|
|
| |||||
Shares redeemed: | ||||||||
Standard Class | (858,687 | ) | (1,098,047 | ) | ||||
Service Class | (871,165 | ) | (1,178,740 | ) | ||||
|
|
|
| |||||
|
(1,729,852 |
) |
|
(2,276,787 |
) | |||
|
|
|
| |||||
Net increase |
|
407,480 |
|
|
3,301,188 |
| ||
|
|
|
|
5. Line of Credit
The Series, along with certain other funds in the Delaware 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 0.15%, which is allocated across the Participants on the basis of relative net assets 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. 6, 2017.
The Series had no amounts outstanding as of June 30, 2017 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 derivatives liabilities that are subject to netting arrangements on the “Statement of assets and liabilities.”
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Notes to financial statements (continued)
6. Offsetting (continued)
At June 30, 2017, 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(a) | Cash Collateral Received | Net Collateral Received | Net Exposure(b) | |||||
Bank of America Merrill Lynch | $ 880,664 | $ (880,664) | $ — | $ (880,664) | $ — | |||||
Bank of Montreal | 1,467,773 | (1,467,773) | — | (1,467,773) | — | |||||
BNP Paribas | 824,560 | (824,560) | — | (824,560) | — | |||||
Total |
$3,172,997 |
$ (3,172,997) |
$ — |
$ (3,172,997) |
$ — |
(a)The value of the related collateral received exceeded the value of the repurchase agreements as of June 30, 2017.
(b)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 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 US securities and foreign securities that are denominated and payable in US 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.
Cash collateral received by each series of the Trust is generally invested in 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 US 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. A Series can also accept US government securities and letters of credit (non-cash collateral) in connection with securities loans.
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, 2017, 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, 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, 2017, there were no Rule 144A securities held by the Series.
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Notes to financial statements (continued)
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. Recent Accounting Pronouncements
On Oct. 13, 2016, the Securities and Exchange Commission amended existing rules intended to modernize reporting and disclosure of information. These amendments relate to Regulation S-X which sets forth the form and content of financial statements. At this time, management is evaluating the implications of adopting these amendments and their impact on the financial statements and accompanying notes.
11. Subsequent Events
Management has determined that no material events or transactions occurred subsequent to June30, 2017 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 Series’ website at delawarefunds.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 Series’ website at delawarefunds.com/proxy; and (ii) on the Commission’s website at sec.gov.
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SA-VIPV 21602 (8/17) (235363) | 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 K. LYTLE | |
By: | Shawn K. Lytle |
Title: | President and Chief Executive Officer |
Date: | September 5, 2017 |
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 K. LYTLE | |
By: | Shawn K. Lytle |
Title: | President and Chief Executive Officer |
Date: | September 5, 2017 |
/s/ RICHARD SALUS | |
By: | Richard Salus |
Title: | Chief Financial Officer |
Date: | September 5, 2017 |