Delaware VIP® High Yield Series

Objective

Delaware VIP High Yield Series seeks total return and, as a secondary objective, high current income.

Strategy

The Series primarily invests in high yield corporate bonds. The Series' portfolio management team engages thorough credit research to attempt to capture the high yield bond market's premium return potential.

Series information
Inception date05/01/2000
Dividends paid (if any)Annually
Capital gains paid (if any)Annually
Series identifier
CUSIP246493829

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 (05/31/2016)

as of quarter-end (03/31/2016)

YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)5.20%-5.83%0.46%3.74%6.15%5.87%05/01/2000
BofA Merrill Lynch U.S. High Yield Constrained Index8.15%-0.88%2.90%5.26%7.33%n/a
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)2.46%-6.73%-0.06%3.58%5.99%5.76%05/01/2000
BofA Merrill Lynch U.S. High Yield Constrained Index3.25%-3.96%1.77%4.71%6.88%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
Gross1.05%
Net0.99%

Net expense ratio reflects a contractual distribution fee waiver from April 29, 2016 to 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
20162.46%n/an/an/an/a
20152.30%-0.75%-5.84%-2.60%-6.87%
20142.76%2.45%-2.01%-3.58%-0.54%
20133.61%-1.47%2.59%4.05%8.98%
20126.70%1.31%4.81%3.57%17.35%
20114.15%0.68%-8.78%6.98%2.33%
20104.77%-0.71%6.42%3.79%14.91%
20095.33%18.44%12.84%5.60%48.65%
2008-2.65%0.94%-7.45%-16.90%-24.43%
20072.89%1.01%0.00%-1.33%2.55%
20063.13%0.70%3.32%4.56%12.19%
Portfolio characteristics - as of 05/31/2016
Number of holdings259
Effective maturity (weighted average) (view definition)5.96 years
Effective duration (weighted average) (view definition)4.41 years
Annualized standard deviation, 3 years (view definition)6.19
SEC 30-day yield with waiver (view definition)5.59%
SEC 30-day yield without waiver (view definition)5.52%
Portfolio turnover (last fiscal year)99%
Portfolio composition as of 05/31/2016Total may not equal 100% due to rounding.
Corporate bonds78.8%
Foreign bonds17.8%
Cash and cash equivalents3.4%
Top 10 holdings as of 05/31/2016
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Nexstar Broadcasting Inc. 8.500 1/27/20171.2%
First Data Corp. 7.000 12/1/20231.2%
Numericable-SFR S.A. 7.375 5/1/20261.0%
JPMorgan Chase & Co. 6.750 8/29/20491.0%
Bank of America Corp.1.0%
Mohegan Tribal Gaming Authority 9.750 9/1/20211.0%
TransDigm Inc. 6.375 6/15/20260.8%
HCA Inc. 5.375 2/1/20250.8%
IASIS Healthcare LLC / IASIS Capital Corp. 8.375 5/15/20190.8%
JBS USA LLC / JBS USA Finance Inc. 5.750 6/15/20250.8%
Total % Portfolio in Top 10 holdings9.6%

Top sectors as of 05/31/2016

List excludes cash and cash equivalents.

Sector% of portfolio
Healthcare11.3%
Basic industry11.2%
Media10.9%
Energy9.2%
Telecommunications7.2%
Banking6.6%
Capital goods6.0%
Technology & electric5.9%
Retail5.3%
Services4.9%
Leisure4.6%
Consumer goods4.6%
Emerging markets3.0%
Utility2.3%
Insurance1.7%
Transportation1.0%
Real estate0.7%
Automotive0.6%
Credit quality as of 05/31/2016
RatingFundBenchmark
AAA3.4%0.0%
BBB6.3%0.0%
BB40.2%49.6%
B40.0%36.8%
CCC10.2%12.6%

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.

Christopher Testa

Christopher M. Testa, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: June 2014

Years of industry experience: 29

(View bio)


Adam Brown

Adam H. Brown, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: November 2014

Years of industry experience: 17

(View bio)


Craig Dembeck

Craig C. Dembek, CFA

Senior Vice President, Co-Head of Credit Research, Senior Research Analyst

Start date on the Fund: December 2012

Years of industry experience: 21

(View bio)


Paul Matlack

Paul A. Matlack, CFA

Senior Vice President, Senior Portfolio Manager, Fixed Income Strategist

Start date on the Fund: December 2012

Years of industry experience: 30

(View bio)


John McCarthy

John P. McCarthy, CFA

Senior Vice President, Co-Head of Credit Research, Senior Research Analyst

Start date on the Fund: December 2012

Years of industry experience: 29

(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 fees0.65%
Distribution and service (12b-1) fees0.30%
Other expenses0.10%
Total annual series operating expenses1.05%
Fee waivers and expense reimbursements(0.06%)
Total annual series operating expenses after fee waivers and expense reimbursements0.99%

1The Series' investment manager, Delaware Management Company (Manager), has contractually agreed to waive all or a portion of its investment advisory fees and/or pay/reimburse expenses (excluding any 12b-1 fees, acquired fund fees and expenses, taxes, interest, short sale and dividend interest expenses, brokerage fees, certain insurance costs, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations) in order to prevent annual series operating expenses from exceeding 0.74% of the Series' average daily net assets from April 29, 2015 through April 29, 2016. The 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, 2015 through April 29, 2016. These waivers and reimbursements may only be terminated by agreement of the Manager or 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, noninvestment 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 Series to obtain precise valuations of the high yield securities in its portfolio.

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 derivative 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.

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

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

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.

Fund Finder

Daily pricing (as of 06/24/2016)

Service ClassPriceNet change
NAV$4.77-0.05
Max offer price$4.77n/a

Total net assets (as of 05/31/2016)

$280.8 million all share classes

Benchmark, peer group

BofA Merrill Lynch U.S. High Yield Constrained Index (view definition)

Lipper High Yield Funds Average (view definition)

Additional information