Delaware VIP® Diversified Income Series

Objective

Delaware VIP Diversified Income Series seeks maximum long-term total return, consistent with reasonable risk.

Strategy

The Series invests in four sectors — U.S. investment grade sector, U.S. high yield sector, international developed markets sector, and emerging markets sector.

Series information
Inception date05/16/2003
Dividends paid (if any)Annually
Capital gains paid (if any)Annually
Series identifier
CUSIP246493555

The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.

Total returns may reflect waivers and/or expense reimbursements by the manager and/or distributor for some or all of the periods shown. Performance would have been lower without such waivers and reimbursements.

Average annual total return

as of month-end (11/30/2016)

as of quarter-end (09/30/2016)

YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)2.98%2.08%2.21%2.68%5.23%5.33%05/16/2003
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)1.06%4.78%3.53%3.43%5.83%5.62%05/16/2003
Bloomberg Barclays U.S. Aggregate Index0.46%5.19%4.03%3.08%4.79%n/a

Returns for less than one year are not annualized.

Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.

Expense ratio
Gross0.97%
Net0.92%

Net expense ratio reflects a contractual distribution fee waiver from April 29, 2016 through May 1, 2017. Please see the fee table in the Series' prospectus for more information.

The performance and expense ratio information shown represent the performance and fees as they relate to actual shares of the Series. These examples do not include any fees or sales charges imposed by the variable insurance contract for which the Series is an investment option. If they were included, your costs would be higher and performance would be lower. Investors should consult the contract prospectus or disclosure documents for more information.

Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
20162.45%2.40%1.06%n/an/a
20151.86%-1.72%-0.29%-1.16%-1.34%
20142.29%2.44%-0.47%0.65%4.98%
20130.36%-3.47%0.68%1.06%-1.42%
20121.37%2.27%2.62%0.46%6.87%
20111.07%2.06%0.56%2.33%6.15%
20103.11%1.07%3.87%-0.36%7.87%
20090.65%10.74%9.99%3.31%26.66%
20082.44%-1.92%-4.11%-1.29%-4.90%
20072.67%0.10%2.67%1.80%7.41%
20060.54%0.33%3.70%2.84%7.57%
Portfolio characteristics - as of 10/31/2016
Number of holdings1,187
Effective maturity (weighted average) (view definition)8.12 years
Effective duration (weighted average) (view definition)4.86 years
Annualized standard deviation, 3 years (view definition)2.81
SEC 30-day yield with waiver (view definition)2.54%
SEC 30-day yield without waiver (view definition)2.49%
Portfolio turnover (last fiscal year)250%
Portfolio composition as of 10/31/2016Total may not equal 100% due to rounding.
High-grade securities76.2%
High yield securities14.1%
Emerging markets7.7%
International developed2.0%
Top 10 holdings as of 11/30/2016
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
FNCL JAN TBA2.6%
United States Treasury Note/Bond 1.500 8/15/20261.9%
FNCL AL91281.6%
United States Treasury Inflation Indexed Bonds 0.125 4/15/20191.0%
FNCL AL75870.8%
FNCL 9323870.7%
FNCL DEC TBA0.7%
Bank of America Corp. 4.450 3/3/20260.6%
United States Treasury Note/Bond 1.250 10/31/20210.6%
Anheuser-Busch InBev Finance Inc. 3.650 2/1/20260.5%
Total % Portfolio in Top 10 holdings11.0%

Top sectors as of 10/31/2016

List excludes cash and cash equivalents.

Sector% of portfolio
Investment grade credits39.6%
MBS and CMOs19.9%
High yield credits13.8%
Emerging markets7.7%
Commercial mortgage-backed securities6.5%
Asset-backed securities4.5%
U.S. Treasury securities2.5%
International developed2.0%
Municipal bonds0.5%
Credit quality as of 10/31/2016
RatingFundBenchmark
AAA35.0%70.7%
AA4.3%4.8%
A15.4%10.8%
BBB28.1%13.7%
BB9.4%0.0%
B7.0%0.0%
CCC0.9%0.0%

Total may not equal 100% due to rounding. The Series’ investment manager, Delaware Management Company (DMC), a series of Delaware Management Business Trust, receives “Credit Quality” ratings for the underlying securities held by the Fund from three “nationally recognized statistical rating organizations” (NRSROs): Standard & Poor’s (S&P), Moody’s Investors Service, and Fitch, Inc. The credit quality breakdown is calculated by DMC based on the NRSRO ratings. If two or more NRSROs have assigned a rating to a security the higher rating (lower value) is used. If only one NRSRO rates a security, that rating is used. For securities rated by an NRSRO other than S&P, that rating is converted to the equivalent S&P credit rating. Securities that are unrated by any of the three NRSROs are included in the “not rated” category when applicable. Unrated securities do not necessarily indicate low quality. More information about securities ratings is contained in the Series’ Statement of Additional Information.

Roger Early

Roger A. Early, CPA, CFA

Executive Director, Head of Fixed Income Investments, Executive Vice President, Co-Chief Investment Officer — Total Return Fixed Income Strategy

Start date on the Fund: May 2007

Years of industry experience: 40

(View bio)


Paul Grillo

Paul Grillo, CFA

Senior Vice President, Co-Chief Investment Officer — Total Return Fixed Income Strategy

Start date on the Fund: May 2003

Years of industry experience: 35

(View bio)


Adam Brown

Adam H. Brown, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: November 2015

Years of industry experience: 18

(View bio)


Wen-Dar Chen

Wen-Dar Chen, Ph.D.

Vice President, Senior Portfolio Manager — International Debt

Start date on the Fund: May 2007

Years of industry experience: 30

(View bio)


J. David Hillmeyer

J. David Hillmeyer, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: February 2011

Years of industry experience: 23

(View bio)


John McCarthy

John P. McCarthy, CFA

Senior Vice President, Senior Portfolio Manager, Co-Head of Credit Research

Start date on the Fund: July 2016

Years of industry experience: 29

(View bio)


Brian McDonnell

Brian C. McDonnell, CFA

Senior Vice President, Senior Portfolio Manager, Senior Structured Products Analyst, Trader

Start date on the Fund: February 2015

Years of industry experience: 27

(View bio)


The following table describes the fees and expenses that you may pay if you buy and hold shares of the Series. The fee table does not reflect any fees or sales charges imposed by variable insurance contracts. If it did, the expenses would be higher.

Annual series operating expenses
Management fees0.58%
Distribution and service (12b-1) fees0.30%
Other expenses0.09%
Total annual series operating expenses0.97%
Fee waivers and expense reimbursements(0.05%)
Total annual series operating expenses after fee waivers and expense reimbursements0.92%

1The Series' distributor, Delaware Distributors, L.P. (Distributor), has contracted to limit the 12b-1 fees to no more than 0.25% of average daily net assets from April 29, 2016 through May 1, 2017. This waiver may be terminated only by agreement of the Distributor and the Series.

Carefully consider the Series' investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Series' prospectus and its summary prospectus, which may be obtained by clicking the prospectus link located in the right-hand sidebar or by calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.

Investing involves risk, including the possible loss of principal.

Fixed income securities and bond portfolios can lose value, and investors can lose principal, as interest rates rise. They also may be affected by economic conditions that hinder an issuer’s ability to make interest and principal payments on its debt. The Series may also be subject to prepayment risk, the risk that the principal of a fixed income security that is held by the Series may be prepaid prior to maturity, potentially forcing the Series to reinvest that money at a lower interest rate.

High yielding, non-investment-grade bonds (junk bonds) involve higher risk than investment grade bonds. The high yield secondary market is particularly susceptible to liquidity problems when institutional investors, such as mutual funds and certain other financial institutions, temporarily stop buying bonds for regulatory, financial, or other reasons. In addition, a less liquid secondary market makes it more difficult for the Fund to obtain precise valuations of the high yield securities in its portfolio.

The high yield secondary market is particularly susceptible to liquidity problems when institutional investors, such as mutual funds and certain other financial institutions, temporarily stop buying bonds for regulatory, financial, or other reasons. In addition, a less liquid secondary market makes it more difficult for the Series to obtain precise valuations of the high yield securities in its portfolio.

If and when the Series invests in forward foreign currency contracts or use other investments to hedge against currency risks, the Series will be subject to special risks, including counterparty risk.

The Series may invest in derivatives, which may involve additional expenses and are subject to risk, including the risk that an underlying security or securities index moves in the opposite direction from what the portfolio manager anticipated. A derivatives transaction depends upon the counterparties’ ability to fulfill their contractual obligations.

International investments entail risks not ordinarily associated with U.S. investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations.

Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.

The Series may experience portfolio turnover in excess of 100%, which could result in higher transaction costs and tax liability.

All third-party marks cited are the property of their respective owners.

Delaware VIP Series refers to Delaware VIP Funds. Delaware VIP Funds are not available for direct investment except for issuers of variable insurance product contracts. They are only available through the purchase of certain variable insurance products.

The Series is distributed by Delaware Distributors L.P., an affiliate of Delaware Management Holdings, Inc., and Macquarie Group Limited.

Fund Finder

Daily pricing (as of 12/02/2016)

Service ClassPriceNet change
NAV$10.180.02
Max offer price$10.18n/a

Total net assets (as of 11/30/2016)

$2.2 billion all share classes

Benchmark, peer group

Bloomberg Barclays U.S. Aggregate Index (view definition)

Lipper Core Plus Bond Funds Average (view definition)

Additional information