N-CSR 1 d236081dncsr.htm IVY VIP Ivy VIP
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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 811-5017

————————————————

Ivy Variable Insurance Portfolios

———————————-

(Exact name of registrant as specified in charter)

100 Independence, 610 Market Street, Philadelphia, PA 19106-2354

—————————————————————

(Address of principal executive offices) (Zip code)

David F. Connor

100 Independence, 610 Market Street

Philadelphia, PA 19106-2354

———————————————

(Name and address of agent for service)

Registrant’s telephone number, including area code: (800) 523-1918

Date of fiscal year end: December 31

Date of reporting period: December 31, 2021

Table of Contents

ITEM 1.  REPORTS TO STOCKHOLDERS.

Table of Contents

LOGO

 

VARIABLE INSURANCE PORTFOLIOS

   

 

Annual Report

 

DECEMBER 31, 2021

 

 

 

IVY VARIABLE INSURANCE PORTFOLIOS*      
Delaware Ivy VIP Asset Strategy (formerly, Ivy VIP Asset Strategy)      Class I        Class II  
Delaware Ivy VIP Balanced (formerly, Ivy VIP Balanced)         Class II  
Delaware Ivy VIP Energy (formerly, Ivy VIP Energy)      Class I        Class II  
Delaware Ivy VIP Growth (formerly, Ivy VIP Growth)         Class II  
Delaware Ivy VIP High Income (formerly, Ivy VIP High Income)      Class I        Class II  
Delaware Ivy VIP International Core Equity (formerly Ivy VIP International Core Equity)         Class II  
Delaware Ivy VIP Mid Cap Growth (formerly Ivy VIP Mid Cap Growth)      Class I        Class II  
Delaware Ivy VIP Natural Resources (formerly, Ivy VIP Natural Resources)         Class II  
Delaware Ivy VIP Science and Technology (formerly, Ivy VIP Science and Technology)      Class I        Class II  
Delaware Ivy VIP Small Cap Growth (formerly, Ivy VIP Small Cap Growth)      Class I        Class II  
Delaware Ivy VIP Smid Cap Core (formerly, Ivy VIP Small Cap Core)         Class II  

 

*

Effective July 1, 2021, the name of each portfolio has been updated from Ivy VIP to Delaware Ivy VIP as indicated. In addition, effective November 15, 2021, the name of Delaware Ivy VIP Small Cap Core was updated to Delaware Ivy VIP Smid Cap Core.

 

IVY INVESTMENTS® refers to the investment management and investment advisory services offered by Macquarie Investment Management Business Trust (MIMBT) through its various series.

On December 2, 2020, Waddell & Reed Financial, Inc. (“WDR”), the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios (the “VIP Portfolios”), and Macquarie Management Holdings, Inc., the U.S. holding company for Macquarie Group Limited’s U.S. asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of WDR (the “Transaction”).

The Transaction closed on April 30, 2021. The VIP Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company, a series of Macquarie Investment Management Business Trust, and distributed by Delaware Distributors, L.P.

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CONTENTS   IVY VIP

 

 

 

Illustration of Portfolio Expenses

      4  

Management Discussion, Portfolio Highlights and Schedule of Investments:

         

Delaware Ivy VIP Asset Strategy (formerly, Ivy VIP Asset Strategy)

     7  

Delaware Ivy VIP Balanced (formerly, Ivy VIP Balanced)

     18  

Delaware Ivy VIP Energy (formerly, Ivy VIP Energy)

     28  

Delaware Ivy VIP Growth (formerly, Ivy VIP Growth)

     34  

Delaware Ivy VIP High Income (formerly, Ivy VIP High Income)

     41  

Delaware Ivy VIP International Core Equity (formerly, Ivy VIP International Core Equity)

     53  

Delaware Ivy VIP Mid Cap Growth (formerly, Ivy VIP Mid Cap Growth)

     61  

Delaware Ivy VIP Natural Resources (formerly, Ivy VIP Natural Resources)

     67  

Delaware Ivy VIP Science and Technology (formerly, Ivy VIP Science and Technology)

     75  

Delaware Ivy VIP Small Cap Growth (formerly, Ivy VIP Small Cap Growth)

     83  

Delaware Ivy VIP Smid Cap Core (formerly, Ivy VIP Small Cap Core)

     90  

Statements of Assets and Liabilities

     96  

Statements of Operations

      98  

Statements of Changes in Net Assets

      100  

Financial Highlights

      102  

Notes to Financial Statements

      106  

Report of Independent Registered Public Accounting Firm

      125  

Income Tax Information

      126  

Board of Trustees / Directors and Officers Addendum

      127  

Annual Privacy Notice

      132  

Proxy Voting Information

      134  

Quarterly Portfolio Schedule Information

     135  

Macquarie Investment Management (MIM) is a global asset manager with offices in the United States, Europe, Asia, and Australia. As active managers, we prioritize autonomy and accountability at the investment team level in pursuit of opportunities that matter for clients. Delaware Funds is one of the longest-standing mutual fund families, with more than 80 years in existence.

If you are interested in learning more about creating an investment plan, contact your financial advisor.

You can learn more about Delaware Funds or obtain a prospectus at www.ivyinvestments.com/reports/vip.

To view your shareholder statement online, go to www.ivyinvestments.com, log in to your account, and select “Statements,” or to view a mutual fund fee and expense calculator, visit https://tools.finra.org/fund_analyzer/.

Macquarie Asset Management (MAM) offers a diverse range of products including securities investment management, infrastructure and real asset management, and fund and equity-based structured products. MIM is the marketing name for certain companies comprising the asset management division of Macquarie Group. This includes the following investment advisers: Macquarie Investment Management Business Trust (MIMBT), Macquarie Funds Management Hong Kong Limited, Macquarie Investment Management Austria Kapitalanlage AG, Macquarie Investment Management Global Limited, Macquarie Investment Management Europe Limited, and Macquarie Investment Management Europe S.A.

The Portfolios are distributed by Delaware Distributors, L.P. (DDLP), an affiliate of MIMBT and Macquarie Group Limited.

 

2   ANNUAL REPORT   2021  

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CONTENTS   IVY VIP

 

 

 

None of the entities noted in this document is an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia) and the obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (Macquarie Bank). Macquarie Bank does not guarantee or otherwise provide assurance in respect of the obligations of these entities. In addition, if this document relates to an investment (a) each investor is subject to investment risk including possible delays in repayment and loss of income and principal invested and (b) none of Macquarie Bank or any other Macquarie Group company guarantees any particular rate of return on or the performance of the investment, nor do they guarantee repayment of capital in respect of the investment.

The Portfolios are governed by US laws and regulations. Unless otherwise noted, views expressed herein are current as of December 31, 2021, and subject to change for events occurring after such date. The Portfolios are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested.

Advisory services provided by Delaware Management Company, a series of MIMBT, a US registered investment advisor. All third-party marks cited are the property of their respective owners.

© 2022 Macquarie Management Holdings, Inc.

 

 

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ILLUSTRATION OF PORTFOLIO EXPENSES   IVY VIP

 

 

 

(UNAUDITED)

 

Expense Example

 

As a shareholder of a Portfolio, you incur ongoing costs, including management fees, distribution and service fees, and other Portfolio expenses. The following table is intended to help you understand your ongoing costs (in dollars) of investing in a Portfolio 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 six-month period ended December 31, 2021.

Actual Expenses

 

The first section in the following table provides information about actual investment values and actual expenses for each share class. You may use the information in this section, together with your initial investment in Portfolio shares, to estimate the expenses that you paid over the period. Simply divide the value of that investment by $1,000 (for example, a $7,500 initial investment divided by $1,000 = 7.5), 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 investment during this period. In addition, there are fees and expenses imposed under the variable annuity or variable life insurance contract through which shares of the Portfolio are held. Additional fees have the effect of reducing investment returns.

Hypothetical Example for Comparison Purposes

 

The second section in the following table provides information about hypothetical investment values and hypothetical expenses for each share class based on the Portfolio’s actual expense ratio and an assumed rate of return of five percent per year before expenses, which is not the Portfolio’s actual return. The hypothetical investment values and expenses may not be used to estimate the actual investment value at the end of the period or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this five percent hypothetical example with the five percent hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs as a shareholder of the Portfolio and do not reflect any fees and expenses imposed under the variable annuity or variable life insurance contract through which shares of the Portfolio are held.

Expenses paid may be impacted by expense reduction arrangements. If those arrangements had not been in place, expenses paid would have been higher. See Note 6 in Notes to Financial Statements for further information.

 

 

4   ANNUAL REPORT   2021  

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ILLUSTRATION OF PORTFOLIO EXPENSES   IVY VIP

 

 

 

(UNAUDITED)

 

     Actual(1)      Hypothetical(2)         
Portfolio    Beginning
Account
Value
6-30-21		      Ending
Account
Value
12-31-21		      Expenses
Paid During
Period*		      Beginning
Account
Value
6-30-21		      Ending
Account
Value
12-31-21		      Expenses
Paid During
Period*		      Annualized
Expense Ratio
Based on the
Six-Month
Period		  

Asset Strategy(a)

 

Class I

    $ 1,000      $ 1,038.30      $ 3.06      $ 1,000      $ 1,022.22      $ 3.03        0.60 % 

Class II

    $ 1,000      $ 1,037.00      $ 4.38      $ 1,000      $ 1,020.93      $ 4.35        0.85 % 

Balanced(b)

 

Class II

    $ 1,000      $ 1,048.20      $ 5.12      $ 1,000      $ 1,020.19      $ 5.05        0.99 % 

Energy(c)

 

Class I

    $ 1,000      $ 1,041.20      $ 4.90      $ 1,000      $ 1,020.45      $ 4.85        0.94 % 

Class II

    $ 1,000      $ 1,039.90      $ 6.12      $ 1,000      $ 1,019.19      $ 6.06        1.19 % 

Growth(d)

 

Class II

    $ 1,000      $ 1,130.70      $ 5.33      $ 1,000      $ 1,020.25      $ 5.05        0.99 % 

High Income(e)

 

Class I

    $ 1,000      $ 1,013.10      $ 3.32      $ 1,000      $ 1,021.88      $ 3.34        0.66 % 

Class II

    $ 1,000      $ 1,011.80      $ 4.63      $ 1,000      $ 1,020.63      $ 4.65        0.91 % 

International Core Equity(f)

 

Class II

    $ 1,000      $ 1,005.30      $ 5.82      $ 1,000      $ 1,019.40      $ 5.86        1.16 % 

Mid Cap Growth(g)

 

Class I

    $ 1,000      $ 1,047.40      $ 4.40      $ 1,000      $ 1,020.93      $ 4.34        0.85 % 

Class II

    $ 1,000      $ 1,046.00      $ 5.63      $ 1,000      $ 1,019.67      $ 5.55        1.10 % 

Natural Resources(h)

 

Class II

    $ 1,000      $ 1,068.60      $ 6.21      $ 1,000      $ 1,019.23      $ 6.06        1.19 % 

Science and Technology(i)

 

Class I

    $ 1,000      $ 1,035.10      $ 4.58      $ 1,000      $ 1,020.70      $ 4.55        0.89 % 

Class II

    $ 1,000      $ 1,033.80      $ 5.80      $ 1,000      $ 1,019.47      $ 5.76        1.14 % 

Small Cap Growth(j)

 

Class I

    $ 1,000      $ 944.50      $ 4.38      $ 1,000      $ 1,020.72      $ 4.55        0.89 % 

Class II

    $ 1,000      $ 943.30      $ 5.64      $ 1,000      $ 1,019.45      $ 5.86        1.14 % 

Smid Cap Core(k)

 

Class II

    $ 1,000      $ 1,014.10      $ 5.84      $ 1,000      $ 1,019.37      $ 5.86        1.16 % 

 

*

Portfolio expenses are equal to the Portfolio’s annualized expense ratio (provided in the table), multiplied by the average account value over the period, multiplied by 184 days in the six-month period ended December 31, 2021, and divided by 365.

 

(1)

This section uses the Portfolio’s actual total return and actual Portfolio expenses. It is a guide to the actual expenses paid by the Portfolio in the period. The “Ending Account Value” shown is computed using the Portfolio’s actual return and the “Expenses Paid During Period” column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Portfolio. A shareholder may use the information here, together with the dollar amount invested, to estimate the expenses that were paid over the period. For every thousand dollars a shareholder has invested, the expenses are listed in the last column of this section.

 

(2)

This section uses a hypothetical five percent annual return and actual Portfolio expenses. It helps to compare the Portfolio’s ongoing costs with other mutual funds. A shareholder can compare the Portfolio’s ongoing costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other Portfolios.

 

(a)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Asset Strategy to Delaware Ivy VIP Asset Strategy.

 

(b)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Balanced to Delaware Ivy VIP Balanced.

 

(c)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Energy to Delaware Ivy VIP Energy.

 

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ILLUSTRATION OF PORTFOLIO EXPENSES   IVY VIP

 

 

 

(UNAUDITED)

 

(d)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Growth to Delaware Ivy VIP Growth.

 

(e)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP High Income to Delaware Ivy VIP High Income.

 

(f)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP International Core Equity to Delaware Ivy VIP International Core Equity.

 

(g)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Mid Cap Growth to Delaware Ivy VIP Mid Cap Growth.

 

(h)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Natural Resources to Delaware Ivy VIP Natural Resources.

 

(i)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Science and Technology to Delaware Ivy VIP Science and Technology.

 

(j)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Small Cap Growth to Delaware Ivy VIP Small Cap Growth.

 

(k)

Effective July 1, 2021, the name of Ivy VIP Small Cap Core changed to Delaware Ivy VIP Small Cap Core. Effective November 15, 2021, the name of Delaware Ivy VIP Small Cap Core changed to Delaware Ivy VIP Smid Cap Core.

The above illustrations are based on ongoing costs only.

 

6   ANNUAL REPORT   2021  
     

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MANAGEMENT DISCUSSION   DELAWARE IVY VIP ASSET STRATEGY

 

 

 

(UNAUDITED)

 

On September 13, 2021, the Board of Trustees (Board) of the Ivy Variable Insurance Portfolios approved the appointment of Macquarie Investment Management Austria Kapitalanlage AG portfolio managers Stefan Löwenthal and Jürgen Wurzer and Aaron D. Young of Delaware Management Company (DMC) to join F. Chace Brundige of DMC as portfolio managers for the Portfolio. In connection with this change, the Board approved applicable revisions to the Portfolio’s investment strategies. All changes took effect on November 15, 2021

Below, F. Chace Brundige, Stefan Löwenthal, Jürgen Wurzer and Aaron Young, portfolio managers of Delaware Ivy VIP Asset Strategy, discuss positioning, performance and results for the fiscal year ended December 31, 2021.

Fiscal Year Performance

 

 

For the 12 Months Ended December 31, 2021

         

Delaware Ivy VIP Asset Strategy (Class II shares at net asset value)

      10.44%  

Benchmark

         

MSCI ACWI (All Country World Index) Index

      18.54%  

(generally reflects the performance of stocks in 46 developed and emerging markets)

         

Please note that the Portfolio returns include applicable investment fees and expense, whereas the index returns do not include any such fees. Also, the Portfolio’s performance data does not take into account any product expenses or charges associated with owning a variable life or annuity policy, which is invested in Ivy Variable Insurance Portfolios.

Risks abound, but the market shrugs

 

Nearly two years into one of history’s greatest human and economic shocks, we seem to be nearing the later and hopefully last phases of the COVID-19 pandemic. Yet, we are still faced with risks and lasting changes to the global corporate landscape. Some of these shifts are a direct result of the pandemic (the ultimate impact of hybrid work, sustainability of pandemic beneficiaries and recovery of losers, global travel, the supply chain, disappearance of workers in the consumer service sectors, etc.), while others have been percolating and are an indirect result of the pandemic such as the trajectory of inflation and US Federal Reserve (Fed) policy.

While these risks were well documented, by most accounts, markets were not concerned. Many major global equity indexes ended the year at or near all-time highs, fixed-income spreads remained historically tight, and volatility was generally at low levels. Much of this can be attributed to what has been impressive execution by many companies. Yes, certain service industries (airlines, hotels, restaurants, movie theatres, cruise lines, etc.) have struggled, and autos have been supply chain constrained, but many industries are thriving. Technology continues to proliferate as software companies, media, ecommerce, and semi-conductors have done well. Additionally, health care continues to advance, and industrials have been thriving as building products, machinery, and automation are in high demand. And after years of underinvestment, legacy energy businesses are experiencing a resurgence.

The year was not without challenges. Despite COVID-19 vaccine rollouts, the world was challenged with the Delta variant and the emergence of Omicron as the year ended. Areas of the emerging world were hit particularly hard, specifically India and Brazil, which faced real human crises during the Delta variant wave.

Chinese regulators took markets by surprise as they waged a battle with many of their corporate champions as they look to avoid monopolistic dynamics that could hurt small- and medium-sized businesses and consumers. The regulatory framework is still unclear, and valuations remain compressed. Inflationary pressure grew throughout the year, and the Fed became more hawkish. It appears monetary policy is shifting.

Performance review

 

The Portfolio posted a return in excess of 10% but underperformed its benchmark index for the fiscal year. The Portfolio had an average of roughly 62% in equities throughout the year, with equity holdings outperforming the global equity index. The strategy is run with a risk-managed approach specific to expected volatility.

Equity performance was primarily driven by stock selection in industrials and communication services, while stock selection in financials detracted from relative performance. From a country standpoint, an underweight to China and stock selection in Japan had an outsized positive impact on performance relative to the index. Conversely, an underweight allocation to the US was negative. On an individual stock basis, the top relative contributors were Intuit, Inc., Gartner Inc.,

 

     
    2021       ANNUAL REPORT       7  

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and Seagate Technology. The Portfolio no longer holds Gartner Inc. or Seagate Technology. Intuit has continued to execute as demand for their financial management software benefitted through the pandemic. The company has an aggressive growth strategy and has made some strategic acquisitions to gain additional market share. Gartner, which had been seen as a pandemic loser due to its large conference business, was able to transition to virtual and benefitted from significantly lower costs. Seagate is a US-based computer hardware company with a majority of sales in hard disk drives (HDD). While sales stalled for several years as HDD lost share to solid state drives (SSD), HDD growth has reaccelerated with sales into cloud servers. We thought the stock was relatively cheap and bought it at an attractive entry point.

Detracting from relative performance was Ping An Insurance Group Co. of China Ltd., Sarepta Therapeutics, Inc., and our exclusion of Nvidia Corp. The Portfolio no longer holds Ping An Insurance or Sarepta Therapeutics. Ping An Insurance, a Chinese insurance company, struggled as the pandemic-related border control with Hong Kong weighed on the company’s high-growth life insurance business. Sarepta, a biopharmaceutical company, has historically been volatile. While the company has a substantial revenue stream and promising future, investor sentiment has driven large price swings over the short term. Nvidia, which has a significant presence in the index, was up more than 125% over the course of the fiscal year. We have exposure to semiconductors but did not own Nvidia as we believe the stock carries a significant valuation premium that didn’t meet our investment criteria.

The diversification portion of the Portfolio finished the year roughly in-line with investment-grade credit indices. One of the key contributors was Frontier Communications Corp. The bonds, which were opportunistically purchased in a distressed situation were ultimately converted to equity. We continued to own the equities and feel there is significant upside. Other notable areas of fixed income were energy related credits. Gold, which comprises slightly more than 5% of Portfolio assets, finished the fiscal year down 3.8%.

Outlook

 

As we look ahead to the new fiscal year, we begin to search for more clarity on key issues such as the pandemic, inflation, and central bank policy, and how that will translate to corporate earnings and stock valuations. However, these environments can be particularly fruitful for active managers as overblown stock reactions and volatility may allow investors to capture these opportunities. Our mandate grants us the ability to capitalize on perceived dislocations across various types of businesses. We are hard pressed to make a prediction of how heated inflation will be or when the Fed and other central banks will take action to combat it. In fact, the unpredictability of these risks reiterates our confidence in focusing on stock selection, while neutralizing non-idiosyncratic risks to the extent our investment mandate allows.

We anticipate that certain inflationary pressures will alleviate while others will remain high. However, we are unsure we can handicap those impacts looking out several years. We will keep an eye on inflationary pressures, while gearing our focus on finding opportunities that may drive growth despite outside pressure and where we see perceived significant upside to valuation. One area we believe has opportunity is emerging markets, which was weak through most of 2021. Between harsh and unfortunate COVID-19 waves, particularly in India, Brazil, and South Africa, regulation in China, governmental volatility in Brazil, and the threat of inflation/higher global interest rates, there has been a lot of bad news in emerging markets. As such, we believe it has created an opportunity to invest in strong companies at a discount. We continue to assess the emerging-market landscape.

We believe we could begin to see answers to some of the many question marks hanging over the market. But in the meantime, volatility is creating opportunistic market dislocations and, regardless of what happens through the macro lens, we remain confident in the direction we are taking the Portfolio.

Effective July 1, 2021, the Portfolio name changed from Ivy VIP Asset Strategy.

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

Past performance is not a guarantee of future results. The value of the Portfolio’s shares will change, and you could lose money on your investment.

 

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Investing involves risk, including the possible loss of principal.

Risk is increased in a concentrated portfolio since it holds a limited number of securities with each investment having a greater effect on the overall performance.

International investments entail risks including fluctuation in currency values, differences in accounting principles, or economic or political instability. Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility, lower trading volume, and higher risk of market closures. In many emerging markets, there is substantially less publicly available information and the available information may be incomplete or misleading. Legal claims are generally more difficult to pursue.

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. 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 to obtain precise valuations of the high yield securities.

The Portfolio 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 fulfil their contractual obligations.

Exposure to the commodities markets may subject the Portfolio to greater volatility than investments in traditional securities.

IBOR risk is the risk that changes related to the use of the London interbank offered rate (LIBOR) or similar rates (such as EONIA) could have adverse impacts on financial instruments that reference these rates. The abandonment of these rates and transition to alternative rates could affect the value and liquidity of instruments that reference them and could affect investment strategy performance.

Natural or environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis, and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics, have been and can be highly disruptive to economies and markets, adversely impacting individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Portfolio’s investments. Given the increasing interdependence among global economies and markets, conditions in one country, market, or region are increasingly likely to adversely affect markets, issuers, and/or foreign exchange rates in other countries. These disruptions could prevent the Portfolio from executing advantageous investment decisions in a timely manner and could negatively impact the Portfolio’s ability to achieve its investment objective. Any such event(s) could have a significant adverse impact on the value and risk profile of the Portfolio.

These and other risks are more fully described in the Portfolio’s prospectus.

The opinions expressed in this report are those of the portfolio managers and are current only through the end of the period of the report as stated on the cover. The portfolio managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged and include reinvested dividends. One cannot invest directly in an index, nor is an index representative of Delaware Ivy VIP Asset Strategy.

 

     
    2021       ANNUAL REPORT       9  

Table of Contents
PORTFOLIO HIGHLIGHTS   DELAWARE IVY VIP ASSET STRATEGY(a)

 

 

 

ALL DATA IS AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Asset Allocation

 

Stocks

     61.7%  

Information Technology

     14.0%  

Industrials

     11.7%  

Financials

     8.9%  

Health Care

     8.0%  

Consumer Discretionary

     5.9%  

Communication Services

     5.3%  

Consumer Staples

     4.0%  

Energy

     2.8%  

Utilities

     0.7%  

Materials

     0.4%  

Bullion (Gold)

     5.1%  

Bonds

     32.3%  

Corporate Debt Securities

     23.6%  

United States Government and Government Agency Obligations

     7.8%  

Asset-Backed Securities

     0.6%  

Other Government Securities

     0.3%  

Mortgage-Backed Securities

     0.0%  

Cash and Other Assets (Net of Liabilities),
and Cash Equivalents+

     0.9%  

Country Weightings

 

North America

      59.1%  

United States

      50.2%  

Other North America

      3.8%  

Bullion (Gold)

      5.1%  

Europe

      24.3%  

France

      5.8%  

Germany

      5.1%  

United Kingdom

      5.0%  

Other Europe

      8.4%  

Pacific Basin

      12.6%  

South America

      1.4%  

Other

      0.7%  

Bahamas/Caribbean

      0.6%  

Middle East

      0.3%  

Africa

      0.1%  

Cash and Other Assets (Net of Liabilities),
and Cash Equivalents+

      0.9%  

 

 

 

Top 10 Equity Holdings

 

Company    Country      Sector      Industry

Microsoft Corp.

   

United States

     

Information Technology

     

Systems Software

Amazon.com, Inc.

   

United States

     

Consumer Discretionary

     

Internet & Direct Marketing Retail

Alphabet, Inc., Class A

   

United States

     

Communication Services

     

Interactive Media & Services

Intuit, Inc.

   

United States

     

Information Technology

     

Application Software

Ingersoll-Rand, Inc.

   

United States

     

Industrials

     

Industrial Machinery

Taiwan Semiconductor Manufacturing Co. Ltd.

   

Taiwan

     

Information Technology

     

Semiconductors

Reliance Industries Ltd.

   

India

     

Energy

     

Oil & Gas Refining & Marketing

ORIX Corp.

   

Japan

     

Financials

     

Other Diversified Financial Services

Union Pacific Corp.

   

United States

     

Industrials

     

Railroads

Ferguson plc

   

Switzerland

     

Industrials

     

Trading Companies & Distributors

See your advisor or www.ivyinvestments.com for more information on the Portfolio’s most recently published Top 10 Equity Holdings.

+Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

(a) Effective July 1, 2021, the name of Ivy VIP Asset Strategy changed to Delaware Ivy VIP Asset Strategy.

 

10   ANNUAL REPORT   2021  
     

Table of Contents
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT   DELAWARE IVY VIP ASSET STRATEGY(a)

 

 

 

(UNAUDITED)

 

LOGO

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class I      Class II  

1-year period ended 12-31-21

      10.72%        10.44%  

5-year period ended 12-31-21

      —        11.36%  

10-year period ended 12-31-21

      —        8.01%  

Since Inception of Class through 12-31-21(3)

      10.96%        —  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

 

(3)

4-28-17 (the date on which shares were first acquired by shareholders).

 

(a)

Effective July 1, 2021, the name of Ivy VIP Asset Strategy changed to Delaware Ivy VIP Asset Strategy.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

     
    2021       ANNUAL REPORT       11  

Table of Contents
CONSOLIDATED SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP ASSET STRATEGY (in thousands)

 

 

 

DECEMBER 31, 2021

 

COMMON STOCKS   Shares     Value  

Communication Services

 

 

Integrated Telecommunication Services – 2.0%

 

Deutsche Telekom AG, Registered Shares (A)

     485     $ 9,009  

Frontier Communications Corp. (B)

     201       5,914  
   

 

 

  
      14,923  
   

 

 

  
 

Interactive Media & Services – 2.9%

 

Alphabet, Inc., Class A (B)

     6       16,241  

Baidu.com, Inc. ADR (B)

     37       5,497  
   

 

 

  
      21,738  
   

 

 

  
 

Wireless Telecommunication Service – 0.4%

 

T-Mobile U.S., Inc. (B)

     26       2,961  
   

 

 

  
 

Total Communication Services – 5.3%

 

     39,622  

Consumer Discretionary

 

 

Apparel, Accessories & Luxury Goods – 0.8%

 

adidas AG (A)

     22       6,290  
   

 

 

  
 

Auto Parts & Equipment – 1.0%

 

Aptiv plc (B)

     44       7,324  
   

 

 

  
 

Automobile Manufacturers – 0.3%

 

Subaru Corp. (A)

     147       2,623  
   

 

 

  
 

Internet & Direct Marketing Retail – 3.1%

 

Amazon.com, Inc. (B)

     5       16,702  

HelloFresh SE (A)(B)

     81       6,260  
   

 

 

  
      22,962  
   

 

 

  
 

Leisure Facilities – 0.0%

 

COTA Racing & Entertainment LLC, Class B (B)

     — *      —  
   

 

 

  
 

Leisure Products – 0.0%

 

Media Group Holdings LLC, Series H (B)(C)(D)(E)

     32       — * 

Media Group Holdings LLC, Series T (B)(C)(D)(E)

     4       —  
   

 

 

  
      — * 
   

 

 

  
 

Total Consumer Discretionary – 5.2%

 

     39,199  

Consumer Staples

 

 

Household Products – 1.0%

 

Procter & Gamble Co. (The)

     45       7,414  
   

 

 

  
 

Hypermarkets & Super Centers – 0.8%

 

Wal-Mart Stores, Inc.

     42       6,117  
   

 

 

  
 

Packaged Foods & Meats – 1.5%

 

China Mengniu Dairy Co. Ltd. (A)

     852       4,831  

Nestle S.A., Registered Shares (A)

     45       6,297  
   

 

 

  
      11,128  
   

 

 

  
 

Personal Products – 0.7%

 

Unilever plc (A)

     103       5,495  
   

 

 

  
 

Total Consumer Staples – 4.0%

 

     30,154  
COMMON STOCKS (Continued)   Shares     Value  

Energy

 

 

Oil & Gas Exploration & Production – 1.1%

 

Canadian Natural Resources Ltd.

     198     $ 8,356  
   

 

 

  
 

Oil & Gas Refining & Marketing – 1.7%

 

Phillips 66

     27       1,967  

Reliance Industries Ltd. (A)

     356       11,349  
   

 

 

  
      13,316  
   

 

 

  
 

Total Energy – 2.8%

 

     21,672  

Financials

 

 

Diversified Banks – 1.8%

 

BNP Paribas S.A. (A)

     117       8,122  

UniCredit S.p.A. (A)

     331       5,086  
   

 

 

  
      13,208  
   

 

 

  
 

Financial Exchanges & Data – 0.7%

 

Intercontinental Exchange, Inc.

     38       5,137  
   

 

 

  
 

Investment Banking & Brokerage – 1.1%

 

Morgan Stanley

     83       8,148  
   

 

 

  
 

Life & Health Insurance – 0.8%

 

AIA Group Ltd. (A)

     573       5,777  
   

 

 

  
 

Mortgage REITs – 0.9%

 

AGNC Investment Corp.

     458       6,888  
   

 

 

  
 

Other Diversified Financial Services – 1.5%

 

ORIX Corp. (A)

     533       10,876  
   

 

 

  
 

Regional Banks – 1.2%

 

First Republic Bank

     41       8,467  
   

 

 

  
 

Thrifts & Mortgage Finance – 0.9%

 

Housing Development Finance Corp. Ltd. (A)

     196       6,807  
   

 

 

  
 

Total Financials – 8.9%

 

     65,308  

Health Care

 

 

Biotechnology – 2.0%

 

Genmab A.S. (A)(B)

     15       6,039  

Regeneron Pharmaceuticals, Inc. (B)

     14       9,057  
   

 

 

  
      15,096  
   

 

 

  
 

Health Care Equipment – 1.5%

 

Abbott Laboratories

     42       5,849  

Zimmer Holdings, Inc.

     44       5,590  
   

 

 

  
      11,439  
   

 

 

  
 

Managed Health Care – 1.1%

 

Anthem, Inc.

     17       7,902  
   

 

 

  
 

Pharmaceuticals – 3.4%

 

AstraZeneca plc (A)

     42       4,962  

Eli Lilly and Co.

     27       7,484  

GlaxoSmithKline plc (A)

     271       5,890  
COMMON STOCKS (Continued)   Shares     Value  

Pharmaceuticals (Continued)

 

Merck KGaA (A)

     27     $ 7,076  
   

 

 

  
      25,412  
   

 

 

  
 

Total Health Care – 8.0%

 

     59,849  

Industrials

 

 

Aerospace & Defense – 1.9%

 

Airbus SE (A)

     66       8,380  

Raytheon Technologies Corp.

     68       5,866  
   

 

 

  
      14,246  
   

 

 

  
 

Construction & Engineering – 1.8%

 

Larsen & Toubro Ltd. (A)

     287       7,323  

Vinci (A)

     57       6,043  
   

 

 

  
      13,366  
   

 

 

  
 

Construction Machinery & Heavy Trucks – 0.4%

 

Caterpillar, Inc.

     14       2,975  
   

 

 

  
 

Electrical Components & Equipment – 1.3%

 

Schneider Electric S.A. (A)

     49       9,527  
   

 

 

  
 

Environmental & Facilities Services – 0.8%

 

Waste Management, Inc.

     37       6,113  
   

 

 

  
 

Industrial Machinery – 1.7%

 

Ingersoll-Rand, Inc.

     208       12,838  
   

 

 

  
 

Railroads – 2.5%

 

Canadian Pacific Railway Ltd.

     111       8,009  

Union Pacific Corp.

     42       10,485  
   

 

 

  
      18,494  
   

 

 

  
 

Trading Companies & Distributors – 1.3%

 

Ferguson plc (A)

     55       9,807  
   

 

 

  
 

Total Industrials – 11.7%

 

     87,366  

Information Technology

 

 

Application Software – 3.0%

 

Adobe, Inc. (B)

     12       6,688  

Autodesk, Inc. (B)

     9       2,517  

Intuit, Inc.

     21       13,207  
   

 

 

  
      22,412  
   

 

 

  
 

Data Processing & Outsourced Services – 2.5%

 

Fiserv, Inc. (B)

     75       7,807  

MasterCard, Inc., Class A

     10       3,677  

Visa, Inc., Class A

     34       7,275  
   

 

 

  
      18,759  
   

 

 

  
 

Internet Services & Infrastructure – 0.9%

 

VeriSign, Inc. (B)

     27       6,737  
   

 

 

  
 

Semiconductor Equipment – 0.6%

 

ASML Holding N.V., Ordinary Shares (A)

     6       4,744  
   

 

 

  
 

 

12   ANNUAL REPORT   2021  
     

Table of Contents
CONSOLIDATED SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP ASSET STRATEGY (in thousands)

 

 

 

DECEMBER 31, 2021

 

COMMON STOCKS (Continued)   Shares     Value  

Semiconductors – 1.9%

 

Marvell Technology Group Ltd.

     36     $ 3,192  

Taiwan Semiconductor Manufacturing Co. Ltd. (A)

     517       11,446  
   

 

 

  
      14,638  
   

 

 

  
 

Systems Software – 2.9%

 

Microsoft Corp.

     66       22,033  
   

 

 

  
 

Technology Hardware, Storage & Peripherals – 2.2%

 

Apple, Inc.

     42       7,526  

Samsung Electronics Co. Ltd. (A)

     132       8,670  
   

 

 

  
      16,196  
   

 

 

  
 

Total Information Technology – 14.0%

 

     105,519  

Materials

 

 

Gold – 0.4%

 

Barrick Gold Corp.

     148       2,812  
   

 

 

  
 

Total Materials – 0.4%

 

     2,812  

Utilities

 

 

Multi-Utilities – 0.7%

 

E.ON AG (A)

     365       5,069  
   

 

 

  
 

Total Utilities – 0.7%

 

     5,069  
 

TOTAL COMMON STOCKS – 61.0%

 

   $ 456,570  

(Cost: $357,631)

 

 
PREFERRED STOCKS              

Consumer Discretionary

 

 

Automobile Manufacturers – 0.7%

 

Volkswagen AG, 2.260% (A)

     26       5,157  
   

 

 

  
 

Total Consumer Discretionary – 0.7%

 

     5,157  
 

TOTAL PREFERRED STOCKS – 0.7%

 

   $ 5,157  

(Cost: $5,032)

 

 
ASSET-BACKED SECURITIES   Principal         

AerCap Ireland Capital Ltd. and AerCap Global Aviation Trust,
2.450%, 10-29-26

   $ 2,500       2,522  

British Airways Pass-Through Trust, Series 2020-1A,
4.250%, 11-15-32 (F)

     230       244  

United Airlines Pass-Through Certificates, Series 2020-1B,
4.875%, 1-15-26

     1,796       1,870  
   

 

 

  
 

TOTAL ASSET-BACKED SECURITIES – 0.6%

 

   $ 4,636  

(Cost: $4,522)

 

CORPORATE DEBT SECURITIES   Principal     Value  

Communication Services

 

 

Cable & Satellite – 0.3%

 

Comcast Corp. (GTD by Comcast Cable Communications and NBCUniversal),
1.500%, 2-15-31

   $ 2,000     $ 1,890  
   

 

 

  
 

Integrated Telecommunication Services – 1.1%

 

AT&T, Inc.:

      

2.250%, 2-1-32

     1,500       1,451  

3.650%, 6-1-51

     2,653       2,754  

Empresa Nacional de Telecomunicaciones S.A.,
3.050%, 9-14-32 (F)(G)

     1,000       984  

Verizon Communications, Inc.,
1.500%, 9-18-30

     3,000       2,818  
   

 

 

  
      8,007  
   

 

 

  
 

Total Communication Services – 1.4%

 

     9,897  

Consumer Discretionary

 

 

Apparel Retail – 0.2%

 

Ross Stores, Inc.,
1.875%, 4-15-31

     1,500       1,440  
   

 

 

  
 

Apparel, Accessories & Luxury Goods – 0.4%

 

PVH Corp.,
4.625%, 7-10-25

     2,000       2,180  

VF Corp.,
2.800%, 4-23-27

     500       523  
   

 

 

  
      2,703  
   

 

 

  
 

Automobile Manufacturers – 0.3%

 

Nissan Motor Co. Ltd.:

      

4.345%, 9-17-27 (F)

     978       1,057  

4.810%, 9-17-30 (F)

     1,098       1,229  
   

 

 

  
      2,286  
   

 

 

  
 

Automotive Retail – 0.3%

 

7-Eleven, Inc.,
1.300%, 2-10-28 (F)

     2,000       1,906  
   

 

 

  
 

Casinos & Gaming – 0.3%

 

Genting New York LLC and Genny Capital, Inc.,
3.300%, 2-15-26 (F)

     1,250       1,239  

Sands China Ltd.,
2.300%, 3-8-27 (F)

     1,000       942  
   

 

 

  
      2,181  
   

 

 

  
 

General Merchandise Stores – 0.3%

 

Dollar General Corp.,
3.500%, 4-3-30

     2,000       2,164  
   

 

 

  
 

Home Improvement Retail – 0.1%

 

Home Depot, Inc. (The),
1.875%, 9-15-31

     1,000       985  
   

 

 

  
 

Hotels, Resorts & Cruise Lines – 0.3%

 

GENM Capital Labuan Ltd.,
3.882%, 4-19-31 (F)

     2,000       1,952  
   

 

 

  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Internet & Direct Marketing Retail – 1.1%

 

Alibaba Group Holding Ltd.,
2.125%, 2-9-31

   $ 2,000     $ 1,933  

Amazon.com, Inc.:

      

1.500%, 6-3-30

     654       634  

2.500%, 6-3-50

     218       208  

Expedia Group, Inc.,
3.800%, 2-15-28

     1,000       1,070  

Meituan,
2.125%, 10-28-25 (F)

     2,439       2,352  

Prosus N.V.,
3.832%, 2-8-51 (F)

     2,500       2,338  
   

 

 

  
      8,535  
   

 

 

  
 

Leisure Facilities – 0.1%

 

Circuit of the Americas LLC, Series D,
0.000%, 10-2-23 (H)

     3,642       637  
   

 

 

  
 

Total Consumer Discretionary – 3.4%

 

     24,789  

Consumer Staples

 

 

Brewers – 0.1%

 

Anheuser-Busch InBev Worldwide, Inc. (GTD by AB INBEV/BBR/COB),
3.500%, 6-1-30

     430       472  
   

 

 

  
 

Drug Retail – 0.3%

 

CVS Health Corp.,
1.300%, 8-21-27

     2,000       1,940  
   

 

 

  
 

Food Retail – 0.4%

 

Alimentation Couche-Tard, Inc.,
2.950%, 1-25-30 (F)

     3,000       3,102  
   

 

 

  
 

Packaged Foods & Meats – 0.4%

 

BRF GmbH,
2.277%, 1-20-32 (F)

     2,000       1,929  

Nestle Holdings, Inc.,
1.875%, 9-14-31 (F)

     1,000       984  
   

 

 

  
      2,913  
   

 

 

  
 

Tobacco – 0.4%

 

Altria Group, Inc. (GTD by Philip Morris USA, Inc.),
3.700%, 2-4-51

     3,000       2,802  
   

 

 

  
 

Total Consumer Staples – 1.6%

 

     11,229  

Energy

 

 

Integrated Oil & Gas – 0.1%

 

Petronas Capital Ltd.,
3.500%, 4-21-30 (F)

     432       468  
   

 

 

  
 

Oil & Gas Exploration & Production – 0.9%

 

Empresa Nacional del Petroleo,
3.450%, 9-16-31 (F)

     1,000       954  

Harvest Operations Corp.,
1.000%, 4-26-24 (F)

     1,000       994  

Qatar Petroleum,
3.125%, 7-12-41 (F)

     1,000       1,013  
 

 

     
    2021       ANNUAL REPORT       13  

Table of Contents
CONSOLIDATED SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP ASSET STRATEGY (in thousands)

 

 

 

DECEMBER 31, 2021

 

CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Oil & Gas Exploration & Production (Continued)

 

Santos Finance Ltd.,
3.649%, 4-29-31 (F)

   $ 1,000     $ 1,019  

Saudi Arabian Oil Co.:

      

1.625%, 11-24-25 (F)

     940       936  

2.250%, 11-24-30 (F)

     1,210       1,180  
   

 

 

  
      6,096  
   

 

 

  
 

Oil & Gas Refining & Marketing – 0.6%

 

Petroleos del Peru S.A.,
5.625%, 6-19-47

     2,000       1,983  

Valero Energy Corp.,
2.150%, 9-15-27

     2,102       2,096  
   

 

 

  
      4,079  
   

 

 

  
 

Oil & Gas Storage & Transportation – 0.7%

 

Galaxy Pipeline Assets BidCo Ltd.:

      

2.160%, 3-31-34 (F)

     2,000       1,965  

2.625%, 3-31-36 (F)

     1,500       1,469  

Williams Partners L.P.,
5.100%, 9-15-45

     1,500       1,848  
   

 

 

  
      5,282  
   

 

 

  
 

Total Energy – 2.3%

 

     15,925  

Financials

 

 

Asset Management & Custody Banks – 0.7%

 

Ares Capital Corp.,
2.150%, 7-15-26

     2,000       1,975  

Citadel Finance LLC,
3.375%, 3-9-26 (F)

     2,500       2,498  

Temasek Financial I Ltd.,
1.625%, 8-2-31 (F)

     1,000       970  
   

 

 

  
      5,443  
   

 

 

  
 

Diversified Banks – 6.5%

 

Australia and New Zealand Banking Group Ltd.,
2.570%, 11-25-35 (F)

     1,881       1,803  

Banco de Credito del Peru:

      

3.125%, 7-1-30 (F)

     1,938       1,917  

3.250%, 9-30-31 (F)(G)

     2,000       1,978  

Banco Santander S.A.:

      

5.375%, 4-17-25 (F)

     702       767  

1.849%, 3-25-26

     2,000       1,993  

1.722%, 9-14-27

     1,000       982  

BNP Paribas S.A.,
4.625%, 3-13-27 (F)

     3,610       4,004  

Credit Agricole S.A.:

      

1.907%, 6-16-26 (F)

     2,657       2,664  

8.125%, 3-23-69 (F)

     2,000       2,376  

DNB Bank ASA,
1.535%, 5-25-27 (F)

     1,500       1,480  

HSBC Holdings plc:

      

2.206%, 8-17-29

     1,000       981  

6.375%, 3-17-69

     2,000       2,148  

4.600%, 6-17-69

     1,101       1,103  

ING Groep N.V.:

      

6.875%, 12-29-49

     2,681       2,728  

3.875%, 11-16-69

     1,000       954  

4.250%, 11-16-69

     1,000       945  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Diversified Banks (Continued)

 

Intesa Sanpaolo S.p.A.:

      

3.250%, 9-23-24

   $ 700     $ 729  

3.875%, 7-14-27

     2,351       2,496  

Nordea Bank AB,
3.750%, 3-1-69 (F)

     1,000       950  

Societe Generale S.A.:

      

1.488%, 12-14-26 (F)

     2,000       1,949  

1.792%, 6-9-27 (F)

     1,000       979  

Standard Chartered plc,
4.300%, 2-19-27 (F)

     3,000       3,210  

Svenska Handelsbanken AB,
4.750%, 3-1-69

     2,000       2,080  

Swedbank AB,
5.625%, 3-17-69

     2,000       2,136  

UniCredit S.p.A.:

      

2.569%, 9-22-26 (F)

     2,200       2,198  

5.459%, 6-30-35 (F)

     1,000       1,090  

Wells Fargo & Co.,
3.900%, 3-15-69

     1,500       1,542  
   

 

 

  
      48,182  
   

 

 

  
 

Diversified Capital Markets – 0.8%

 

Africa Finance Corp.,
2.875%, 4-28-28 (F)

     1,000       994  

Credit Suisse Group AG,
2.193%, 6-5-26 (F)

     1,654       1,665  

Deutsche Bank AG,
2.129%, 11-24-26

     2,000       1,998  

UBS Group AG,
2.095%, 2-11-32 (F)

     1,500       1,453  
   

 

 

  
      6,110  
   

 

 

  
 

Investment Banking & Brokerage – 0.5%

 

Charles Schwab Corp. (The),
4.000%, 6-1-69

     2,000       2,043  

Macquarie Bank Ltd.,
3.624%, 6-3-30 (F)

     436       455  

Morgan Stanley,
2.484%, 9-16-36

     1,500       1,446  
   

 

 

  
      3,944  
   

 

 

  
 

Life & Health Insurance – 0.2%

 

AIA Group Ltd.:

      

3.375%, 4-7-30 (F)

     540       584  

3.200%, 9-16-40 (F)

     1,098       1,130  
   

 

 

  
      1,714  
   

 

 

  
 

Other Diversified Financial Services – 0.3%

 

Citigroup, Inc.,
1.122%, 1-28-27

     2,500       2,436  
   

 

 

  
 

Specialized Finance – 0.3%

 

LSEGA Financing plc,
1.375%, 4-6-26 (F)

     2,000       1,962  
   

 

 

  
 

Total Financials – 9.3%

 

     69,791  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Health Care

 

 

Pharmaceuticals – 0.5%

 

AbbVie, Inc.,
3.200%, 11-21-29

   $ 2,000     $ 2,141  

Fresenius Medical Care U.S. Finance III, Inc.,
1.875%, 12-1-26 (F)

     1,500       1,485  
   

 

 

  
      3,626  
   

 

 

  
 

Total Health Care – 0.5%

 

     3,626  

Industrials

 

 

Aerospace & Defense – 0.4%

 

Boeing Co. (The):

      

4.875%, 5-1-25

     1,083       1,186  

5.150%, 5-1-30

     758       884  

5.805%, 5-1-50

     429       582  

Leidos, Inc. (GTD by Leidos Holdings, Inc.),
3.625%, 5-15-25

     326       347  
   

 

 

  
      2,999  
   

 

 

  
 

Airlines – 0.4%

 

Aeropuerto Internacional de Tocumen,
4.000%, 8-11-41 (F)

     1,000       1,020  

Southwest Airlines Co.,
5.250%, 5-4-25

     2,042       2,270  
   

 

 

  
      3,290  
   

 

 

  
 

Airport Services – 0.3%

 

Airport Authority Hong Kong,
1.625%, 2-4-31 (F)

     2,000       1,931  
   

 

 

  
 

Highways & Railtracks – 0.1%

 

Transurban Finance Co. Pty Ltd.,
2.450%, 3-16-31 (F)

     611       606  
   

 

 

  
 

Total Industrials – 1.2%

 

     8,826  

Information Technology

 

 

Application Software – 0.0%

 

Autodesk, Inc.,
2.400%, 12-15-31

     95       95  
   

 

 

  
 

Data Processing & Outsourced Services – 0.3%

 

PayPal Holdings, Inc.,
2.300%, 6-1-30

     2,000       2,033  
   

 

 

  
 

Internet Services & Infrastructure – 0.3%

 

Baidu, Inc.,
1.720%, 4-9-26

     1,970       1,949  
   

 

 

  
 

Semiconductors – 0.4%

 

Broadcom, Inc.,
1.950%, 2-15-28 (F)

     1,500       1,484  

Taiwan Semiconductor Manufacturing Co. Ltd.,
1.375%, 9-28-30 (F)

     1,318       1,225  
   

 

 

  
      2,709  
   

 

 

  
 

 

14   ANNUAL REPORT   2021  
     

Table of Contents
CONSOLIDATED SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP ASSET STRATEGY (in thousands)

 

 

 

DECEMBER 31, 2021

 

CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Systems Software – 0.1%

 

VMware, Inc., 3.900%, 8-21-27

   $ 500     $ 545  
   

 

 

  
 

Technology Hardware, Storage & Peripherals – 0.4%

 

Apple, Inc.:

      

2.400%, 8-20-50

     878       827  

2.650%, 2-8-51

     2,000       1,972  
   

 

 

  
      2,799  
   

 

 

  
 

Total Information Technology – 1.5%

 

     10,130  

Materials

 

 

Commodity Chemicals – 0.2%

 

Orbia Advance Corp. S.A.B. de C.V.,
1.875%, 5-11-26 (F)

     1,600       1,578  
   

 

 

  
 

Diversified Metals & Mining – 0.4%

 

Glencore Funding LLC:

      

1.625%, 9-1-25 (F)

     659       653  

2.500%, 9-1-30 (F)

     1,537       1,490  

Teck Resources Ltd.,
3.900%, 7-15-30

     1,000       1,076  
   

 

 

  
      3,219  
   

 

 

  
 

Gold – 0.0%

 

Newmont Corp.,
2.600%, 7-15-32

     75       75  
   

 

 

  
 

Paper Products – 0.1%

 

Suzano Austria GmbH,
2.500%, 9-15-28

     600       580  
   

 

 

  
 

Total Materials – 0.7%

 

     5,452  

Real Estate

 

 

Industrial REITs – 0.6%

 

Aircastle Ltd.,
5.250%, 8-11-25 (F)

     1,466       1,613  

Avolon Holdings Funding Ltd., 2.750%, 2-21-28 (F)

     2,500       2,455  
   

 

 

  
      4,068  
   

 

 

  
 

Total Real Estate – 0.6%

 

     4,068  

Utilities

 

 

Electric Utilities – 1.0%

 

Chile Electricity PEC S.p.A.,
0.000%, 1-25-28 (F)(H)

     1,000       817  

Comision Federal de Electricidad,
3.875%, 7-26-33 (F)

     1,000       984  

FEL Energy VI S.a.r.l.,
5.750%, 12-1-40 (F)

     1,930       1,937  

NextEra Energy Capital Holdings, Inc. (GTD by NextEra Energy, Inc.),
3.000%, 1-15-52

     170       170  

NRG Energy, Inc.:

      

2.000%, 12-2-25 (F)

     1,100       1,108  

2.450%, 12-2-27 (F)

     110       109  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Electric Utilities (Continued)

 

Virginia Electric and Power Co., Series A,
2.450%, 12-15-50

   $ 2,500     $ 2,310  
   

 

 

  
      7,435  
   

 

 

  
 

Multi-Utilities – 0.1%

 

Pacific Gas and Electric Co.,
3.000%, 6-15-28

     1,154       1,163  
   

 

 

  
 

Total Utilities – 1.1%

 

     8,598  
 

TOTAL CORPORATE DEBT SECURITIES – 23.6%

 

   $ 172,331  

(Cost: $177,192)

 

 
MORTGAGE-BACKED SECURITIES              

Non-Agency REMIC/CMO – 0.0%

 

Merrill Lynch Mortgage Investors Trust, Series 1998-C1, Class F,
6.250%, 11-15-26 (I)

     126       127  
   

 

 

  
 

TOTAL MORTGAGE-BACKED SECURITIES – 0.0%

 

   $ 127  

(Cost: $127)

 

 
OTHER GOVERNMENT
SECURITIES (J)		              

Mexico – 0.2%

 

United Mexican States,
5.000%, 4-27-51

     1,500       1,706  
   

 

 

  
 

Peru – 0.1%

 

Republic of Peru,
3.000%, 1-15-34

     1,000       999  
   

 

 

  
 

TOTAL OTHER GOVERNMENT SECURITIES – 0.3%

 

   $ 2,705  

(Cost: $2,743)

 

 
UNITED STATES GOVERNMENT
AGENCY OBLIGATIONS		              

Mortgage-Backed Obligations – 6.3%

 

Federal Home Loan Mortgage Corp. Agency REMIC/CMO:

      

0.638%, 11-25-29 (K)

     2,022       92  

1.328%, 6-25-30 (K)

     1,795       176  

4.500%, 1-15-43 (K)

     2,828       446  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (1-Month U.S. LIBOR plus 615 bps),
6.040%, 11-15-47 (K)(L)

     1,426       229  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (Mortgage spread to 5-year U.S. Treasury index),
3.536%, 12-25-49 (F)(L)

     2,751       2,916  

UNITED STATES GOVERNMENT

AGENCY OBLIGATIONS

(Continued)

   Principal     Value  

Mortgage-Backed Obligations (Continued)

 

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (Mortgage spread to 7-year U.S. Treasury index),
3.852%, 2-25-51 (F)(L)

   $ 600     $ 646  

Federal Home Loan Mortgage Corp. Fixed Rate Participation Certificates:

      

1.500%, 11-1-50

     1,636       1,586  

2.500%, 1-1-51

     1,717       1,755  

Federal National Mortgage Association Agency REMIC/CMO:

      

4.500%, 10-25-40 (K)

     1,480       231  

4.500%, 5-25-47 (K)

     1,341       212  

5.000%, 3-25-49 (K)

     952       161  

Federal National Mortgage Association Agency REMIC/CMO (1-Month U.S. LIBOR plus 562 bps),
5.518%, 6-25-45 (K)(L)

     2,766       470  

Federal National Mortgage Association Agency REMIC/CMO (1-Month U.S. LIBOR plus 625 bps):

      

6.018%, 4-25-45 (K)(L)

     1,353       272  

5.998%, 4-25-46 (K)(L)

     3,200       513  

5.998%, 8-25-46 (K)(L)

     3,310       553  

6.148%, 6-25-48 (K)(L)

     6,585       1,108  

Federal National Mortgage Association Agency REMIC/CMO (Mortgage spread to 5-year U.S. Treasury index),
2.784%, 2-25-27 (L)

     1,885       1,992  

Federal National Mortgage Association Fixed Rate Pass-Through Certificates:

      

2.500%, 4-1-36

     2,585       2,679  

3.500%, 8-1-48

     4,953       5,267  

3.500%, 11-1-49

     5,133       5,487  

2.500%, 7-1-50

     4,063       4,179  

3.000%, 8-1-50

     888       934  

2.000%, 12-1-50

     3,471       3,466  

2.000%, 1-1-51

     2,737       2,742  

2.000%, 10-1-51

     3,575       3,568  

Government National Mortgage Association Fixed Rate Pass-Through Certificates,
3.500%, 6-20-50

     5,217       5,434  
   

 

 

  
      47,114  
   

 

 

  
 

TOTAL UNITED STATES GOVERNMENT AGENCY OBLIGATIONS – 6.3%

 

   $ 47,114  

(Cost: $47,951)

 

 
UNITED STATES GOVERNMENT
OBLIGATIONS		              

Treasury Obligations – 1.5%

 

U.S. Treasury Bonds,
0.875%, 11-15-30

     2,100       1,997  
 

 

     
    2021       ANNUAL REPORT       15  

Table of Contents
CONSOLIDATED SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP ASSET STRATEGY (in thousands)

 

 

 

DECEMBER 31, 2021

 

UNITED STATES GOVERNMENT
OBLIGATIONS (Continued)		   Principal     Value  

Treasury Obligations (Continued)

 

U.S. Treasury Notes:

      

0.750%, 12-31-23

   $ 230     $ 230  

1.000%, 12-15-24

     7,200       7,209  

1.125%, 2-15-31

     1,900       1,844  
   

 

 

  
      11,280  
   

 

 

  
 

TOTAL UNITED STATES GOVERNMENT OBLIGATIONS – 1.5%

 

   $ 11,280  

(Cost: $11,350)

      
BULLION – 5.1%   Troy
Ounces		         

Gold (D)

     21       37,831  
   

 

 

  

(Cost: $25,265)

      
SHORT-TERM SECURITIES   Shares     Value  

Money Market Funds (N) – 0.7%

 

Dreyfus Institutional Preferred Government Money Market Fund – Institutional Shares, 0.010% (M)

     303     $ 303  

State Street Institutional U.S. Government Money Market Fund – Premier Class, 0.030%

     4,611       4,611  
   

 

 

  
      4,914  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 0.7%

 

   $ 4,914  

(Cost: $4,914)

      
 

TOTAL INVESTMENT SECURITIES – 99.8%

  $ 742,665  

(Cost: $636,727)

      
 

CASH AND OTHER ASSETS, NET OF LIABILITIES – 0.2%

 

     1,411  
 

NET ASSETS – 100.0%

 

   $ 744,076  
 

 

Notes to Consolidated Schedule of Investments

 

*

Not shown due to rounding.

 

(A)

Listed on an exchange outside the United States.

 

(B)

No dividends were paid during the preceding 12 months.

 

(C)

Restricted securities. At December 31, 2021, the Portfolio owned the following restricted securities:

 

Security    Acquisition Date(s)      Shares      Cost      Value         

Media Group Holdings LLC, Series H

      8-29-13 to 10-31-13        32      $ 22,268      $ – *   

Media Group Holdings LLC, Series T

      7-2-13 to 1-23-15        4        8,413        –    
        

 

 

  
         $ 30,681      $ – *   
        

 

 

  

 

    

The total value of these securities represented 0.0% of net assets at December 31, 2021.

 

(D)

Investment is owned by an entity that is treated as a corporation for U.S. tax purposes and is owned by the Portfolio and consolidated as described in Note 5 of the Notes to Financial Statements.

 

(E)

Securities whose value was determined using significant unobservable inputs.

 

(F)

Securities were purchased pursuant to an exemption from registration available under Rule 144A under the Securities Act of 1933 and may only be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2021 the total value of these securities amounted to $93,389 or 12.6% of net assets.

 

(G)

All or a portion of securities with an aggregate value of $295 are on loan.

 

(H)

Zero coupon bond.

 

(I)

Variable rate security. Interest rate disclosed is that which is in effect at December 31, 2021. Date shown represents the date that the variable rate resets. Description of the reference rate and spread, if applicable, are included in the security description.

 

(J)

Other Government Securities may include emerging markets sovereign, quasi-sovereign, corporate and supranational agency and organization debt securities.

 

(K)

Interest-only security. Amount shown as principal represents notional amount for computation of interest.

 

(L)

Variable rate security. Interest rate disclosed is that which is in effect at December 31, 2021. Description of the reference rate and spread, if applicable, are included in the security description.

 

(M)

Investment made with cash collateral received from securities on loan.

 

(N)

Rate shown is the annualized 7-day yield at December 31, 2021.

 

16   ANNUAL REPORT   2021  
     

Table of Contents
CONSOLIDATED SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP ASSET STRATEGY (in thousands)

 

 

 

DECEMBER 31, 2021

 

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

        

Communication Services

   $ 30,613      $ 9,009      $ —  

Consumer Discretionary

     24,026        15,173        — * 

Consumer Staples

     23,857        6,297        —  

Energy

     21,672        —        —  

Financials

     49,346        15,962        —  

Health Care

     46,734        13,115        —  

Industrials

     87,366        —        —  

Information Technology

     85,403        20,116        —  

Materials

     2,812        —        —  

Utilities

     —        5,069        —  

Total Common Stocks

   $ 371,829      $ 84,741      $ — * 

Preferred Stocks

     —        5,157        —  

Asset-Backed Securities

     —        4,636        —  

Corporate Debt Securities

     —        172,331        —  

Mortgage-Backed Securities

     —        127        —  

Other Government Securities

     —        2,705        —  

United States Government Agency Obligations

     —        47,114        —  

United States Government Obligations

     —        11,280        —  

Bullion

     37,831        —        —  

Short-Term Securities

     4,914        —        —  

Total

   $ 414,574      $ 328,091      $ — * 

During the year ended December 31, 2021, there were no transfers in or out of Level 3.

The following acronyms are used throughout this schedule:

CMO = Collateralized Mortgage Obligation

GTD = Guaranteed

LIBOR = London Interbank Offered Rate

OTC = Over the Counter

REIT = Real Estate Investment Trust

REMIC = Real Estate Mortgage Investment Conduit

 

Country Diversification

 

 

(as a % of net assets)

        

United States

     50.2%  

France

     5.8%  

Germany

     5.1%  

United Kingdom

     5.0%  

India

     3.4%  

Canada

     3.2%  

Switzerland

     2.5%  

Japan

     2.2%  

Country Diversification (Continued)

 

China

     1.9%  

Italy

     1.6%  

Taiwan

     1.6%  

Netherlands

     1.5%  

Hong Kong

     1.3%  

South Korea

     1.2%  

Peru

     1.0%  

Other Countries

     6.5%  

Other+

     6.0%  
 

 

+Includes gold bullion, options, cash and other assets (net of liabilities), and cash equivalents

 

See Accompanying Notes to Financial Statements.

 

     
    2021       ANNUAL REPORT       17  

Table of Contents
MANAGEMENT DISCUSSION   DELAWARE IVY VIP BALANCED

 

 

 

(UNAUDITED)

 

On September 13, 2021, the Board of Trustees (Board) of the Ivy Variable Insurance Portfolios approved the appointment of Macquarie Investment Management Austria Kapitalanlage portfolio managers Stefan Löwenthal and Jürgen Wurzer, along with Aaron D. Young of Delaware Management Company, as new portfolio managers. In connection with this change, the Board approved applicable revisions to the Portfolio’s investment strategies and benchmark. All changes took effect on November 15, 2021.

As of November 15, 2021, the Portfolio changed its fixed-income primary broad-based securities index to the Bloomberg US Aggregate Bond Index from the Bloomberg US Government/Credit Index. The Portfolio elected to use the new index because it more closely reflects the Portfolio’s investment strategies.

Below, Stefan Löwenthal, Jürgen Wurzer, and Aaron D. Young, co-portfolio managers of Delaware Ivy VIP Balanced, discuss positioning, performance and results for the fiscal year ended December 31, 2021.

Fiscal Year Performance

 

 

For the 12 Months Ended December 31, 2021

         

Delaware Ivy VIP Balanced (Class II shares at net asset value)

      15.97%  

Benchmarks

         

S&P 500 Index

      28.71%  

(Generally reflects the performance of large- and medium-sized U.S. stocks)

         

Bloomberg US Aggregate Bond Index

      -1.54%  

(Generally reflects the performance of securities in the bond market)

         

Bloomberg US Government/Credit Index

      -1.75%  

(Generally reflects the performance of securities in the bond market)

         

Please note that the Portfolio returns include applicable fees and expenses, whereas the index returns do not include any such fees. Also, the Portfolio’s performance data does not take into account any product expenses or charges associated with owning a variable life or annuity policy, which is invested in Ivy Variable Insurance Portfolios.

Market review

 

Global economic activity continued its astounding rebound from the pandemic shock and exceeded expectations in the first half of the reporting year. However, it was not entirely a quiet ride. Equity volatility increased during the third quarter as growth slowed and fiscal stimulus expectations were disappointing. Amidst this growth slowdown, stagflation concerns grew as inflation increased, largely driven by supply chain issues, bottlenecks, and shortages. Despite this volatility, the market climbed higher through the fourth quarter of 2021 as growth remained robust and many potential risk factors were avoided. The US circumvented a debt crisis at the last moment, per the usual script, and simultaneously avoided significant tax hikes, which at one point seemed a quite likely threat to corporate profits and potentially consumption. And although the market did not get the entirety of the fiscal stimulus package once promised, that may have been a positive in terms of not creating additional inflationary pressures.

The evolution of the pandemic continues to have a significant influence on risk appetite in financial markets and despite worrying mutations in the virus and continued spread of cases, the vaccines remain a robust tool in response to the crisis. Vaccine approvals were recently extended to younger age groups and the rollout of booster shots enhanced protection for older demographics. Each subsequent wave of COVID-19 infections has inflicted less severe human, economic, and market damage as vaccines remain highly effective in reducing severe outcomes and populations have increasing resilience from both prior infections and inoculations. Following the dramatic surge in US economic activity from the depths of the crisis, monetary policy is now shifting, globally. Many central banks have already hiked policy interest rates and are either discussing or actively in the process of tapering quantitative easing (QE) purchases and discussing plans to actively reduce assets held on balance sheets. In the US, The Federal Reserve Bank (Fed) has begun tapering its QE program and although tapering is not tightening, per se, the Fed has guided market expectations for several interest rate hikes in 2022.

All said, US economic activity and corporate earnings have remained robust, inflationary pressures in supply chains have eased (although others like labor and housing are rising), and central banks are gradually normalizing monetary policy as the global economy pushes past the extreme shock of the pandemic and returns to a more normal regime where extreme policy stimulus is no longer prudent nor desirable.

 

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Equity markets vastly outperformed fixed-income markets with developed markets outperforming emerging markets and the US significantly outperforming other developed markets. China was a distinct outlier, with significant underperformance because of its stringent “zero COVID-19” policy and various disruptive regulatory actions in technology and property sectors. Energy along with other cyclical sectors outperformed defensive sectors such as consumer staples, utilities, and telecommunications. Fixed-income markets were more challenging. Investment grade returns were primarily driven by duration exposures as expectations for tighter central bank monetary policy lifted interest rates and credit spreads did little to offset that headwind. The high yield bond market outperformed investment grade due to lower interest-rate sensitivity and a more significant narrowing of credit spreads in these riskier assets. From a currency perspective, US dollar (USD) strength was the dominant theme with many non-USD linked emerging market (EM) currencies exhibiting significant weakness.

Contributors and detractors

 

The Portfolio finished the year with a strong, positive return. The Portfolio’s equity benchmark (S&P 500 Index) return exceeded 28.71% but the fixed-income benchmark (Bloomberg US Aggregate Bond Index) return declined -1.54% on the reporting year as interest rates rose. The performance of the Portfolio reflects the mix of returns in the underlying assets during the reporting period and the allocation weightings.

The Portfolio benefitted from an allocation overweight to equity securities during the reporting period. Within the equity portion of the Portfolio, the most significant contributors to relative performance were sector overweight allocations to financials and energy and positive security selection, which led to outperformance within the industrials and communication services sectors. The most significant detractors to relative performance were negative security selection in the information technology, healthcare, and consumer discretionary sectors.

The relative performance of the Portfolio also benefitted from an allocation underweight to fixed-income securities and outperformance within the fixed-income portion of the Portfolio.

Outlook

 

In the coming year, we think the global economy is likely to continue transitioning from unsustainably high growth to a slower and more sustainable level, supported by moderate corporate earnings growth and buffered by strong consumer and corporate balance sheets.

Inflationary forces are expected to be manageable as transitory pressures abate. However, the future path of inflation data and the Fed’s response to it will be critical to engineering a soft landing. We believe labor force participation rates and productivity dynamics will be pivotal in determining what level of growth can be sustained without forcing excessively tight monetary policy.

Of course, the pandemic remains a key risk factor. Although higher rates of vaccination and natural immunity may be approaching critical mass in many geographies, which hopefully mitigates the risk of overwhelming healthcare systems.

With tapering commencing and tightening soon on the way, we believe the market may be forced to reckon with higher discount rates, which have already proven to be a headwind for equity valuations. However, recessions and market corrections do not typically begin at the start of rate-hike cycles but rather generally when earnings decline. And although the rate of earnings growth is slowing, it remains positive. Additionally, the consensus currently expects the federal funds rate to remain lower than pre-crisis, 2019 levels for the next two years

We think equity valuations remain a risk factor as many measures significantly exceed historical averages and have likely peaked, given the shift in monetary policy. Equity multiples typically decline during tightening cycles, but we think the asset class can still produce positive returns if inflation remains moderate and interest rates stay relatively low.

Effective July 1, 2021, the Portfolio name changed from Ivy VIP Balanced.

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

 

     
    2021       ANNUAL REPORT       19  

Table of Contents
           

 

 

 

 

Past performance is not a guarantee of future results. The value of the Portfolio’s shares will change, and you could lose money on your investment.

Fixed-income securities are subject to interest rate risk and, as such, the net asset value of the Portfolio may fall as interest rates rise. The lower-rated securities in which the Portfolio may invest may carry greater risk of nonpayment of interest or principal then higher-rated bonds. In addition to the risks typically associated with fixed-income securities, loan participations in which the Portfolio may invest carry other risks, including the risk of insolvency of the lending bank or other intermediary.

The opinions expressed in this report are those of the Portfolio managers and are current only through the end of the period of the report as stated on the cover. The portfolio managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The indexes noted are unmanaged and include reinvested dividends. One cannot invest directly in an index, nor is an index representative of Delaware Ivy VIP Balanced.

 

20   ANNUAL REPORT   2021  
     

Table of Contents
PORTFOLIO HIGHLIGHTS   DELAWARE IVY VIP BALANCED(a)

 

 

 

ALL DATA IS AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Asset Allocation

 

Stocks

     68.0%  

Information Technology

     18.2%  

Financials

     14.5%  

Health Care

     8.8%  

Consumer Discretionary

     6.9%  

Industrials

     6.0%  

Communication Services

     5.0%  

Consumer Staples

     3.6%  

Materials

     2.4%  

Utilities

     1.6%  

Energy

     1.0%  

Bonds

     31.0%  

United States Government and Government Agency Obligations

     19.7%  

Corporate Debt Securities

     11.3%  

Liabilities (Net of Cash and Other Assets),
and Cash Equivalents+

     1.0%  

    

 

 

Top 10 Equity Holdings

 

Company    Sector   Industry

Microsoft Corp.

   

Information Technology

  

Systems Software

Apple, Inc.

   

Information Technology

  

Technology Hardware, Storage & Peripherals

UnitedHealth Group, Inc.

   

Health Care

  

Managed Health Care

Amazon.com, Inc.

   

Consumer Discretionary

  

Internet & Direct Marketing Retail

Costco Wholesale Corp.

   

Consumer Staples

  

Hypermarkets & Super Centers

Alphabet, Inc., Class A

   

Communication Services

  

Interactive Media & Services

MasterCard, Inc., Class A

   

Information Technology

  

Data Processing & Outsourced Services

TE Connectivity Ltd.

   

Information Technology

  

Electronic Manufacturing Services

CME Group, Inc.

   

Financials

  

Financial Exchanges & Data

Danaher Corp.

   

Health Care

  

Life Sciences Tools & Services

See your advisor or www.ivyinvestments.com for more information on the Portfolio’s most recently published Top 10 Equity Holdings.

+Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

(a)Effective July 1, 2021, the name of Ivy VIP Balanced changed to Delaware Ivy VIP Balanced.

 

     
    2021       ANNUAL REPORT       21  

Table of Contents
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT   DELAWARE IVY VIP BALANCED(a)

 

 

 

(UNAUDITED)

 

LOGO

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class II  

1-year period ended 12-31-21

      15.97%  

5-year period ended 12-31-21

      11.73%  

10-year period ended 12-31-21

      10.16%  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

 

(a)

Effective July 1, 2021, the name of Ivy VIP Balanced changed to Delaware Ivy VIP Balanced.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

+ As of November 15, 2021, the Portfolio changed its fixed-income primary broad-based securities index to the Bloomberg U.S. Aggregate Bond Index from theBloomberg U.S. Gov/Credit Index. The Portfolio elected to use the new index because it more closely reflects the Portfolio’s investment strategies. Both the new benchmark and the Portfolio’s previous benchmark noted above are included for comparison purposes.

 

22   ANNUAL REPORT   2021  
     

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP BALANCED (in thousands)

 

 

 

DECEMBER 31, 2021

 

COMMON STOCKS   Shares     Value  

Communication Services

 

 

Cable & Satellite – 0.7%

 

Charter Communications, Inc., Class A (A)

     3     $ 1,825  
   

 

 

  
 

Interactive Home Entertainment – 0.7%

 

Take-Two Interactive Software, Inc. (A)

     11       1,877  
   

 

 

  
 

Interactive Media & Services – 3.2%

 

Alphabet, Inc., Class A (A)

     2       5,383  

Alphabet, Inc., Class C (A)

     1       3,293  
   

 

 

  
      8,676  
   

 

 

  
 

Movies & Entertainment – 0.4%

 

Netflix, Inc. (A)

     2       1,218  
   

 

 

  
 

Total Communication Services – 5.0%

 

     13,596  

Consumer Discretionary

 

 

Auto Parts & Equipment – 1.5%

 

Aptiv plc (A)

     25       4,113  
   

 

 

  
 

Automotive Retail – 1.0%

 

AutoZone, Inc. (A)

     1       2,713  
   

 

 

  
 

Footwear – 1.1%

 

NIKE, Inc., Class B

     19       3,096  
   

 

 

  
 

Homebuilding – 1.1%

 

D.R. Horton, Inc.

     27       2,902  
   

 

 

  
 

Internet & Direct Marketing Retail – 2.2%

 

Amazon.com, Inc. (A)

     2       6,058  
   

 

 

  
 

Total Consumer Discretionary – 6.9%

 

     18,882  

Consumer Staples

 

 

Food Distributors – 1.6%

 

Sysco Corp.

     54       4,272  
   

 

 

  
 

Hypermarkets & Super Centers – 2.0%

 

Costco Wholesale Corp.

     9       5,385  
   

 

 

  
 

Total Consumer Staples – 3.6%

 

     9,657  

Financials

 

 

Asset Management & Custody Banks – 4.1%

 

Artisan Partners Asset Management, Inc.

     53       2,505  

Blackstone Group, Inc. (The), Class A

     32       4,188  

KKR & Co.

     62       4,592  
   

 

 

  
      11,285  
   

 

 

  
 

Consumer Finance – 1.3%

 

American Express Co.

     22       3,622  
   

 

 

  
 

Financial Exchanges & Data – 2.7%

 

CME Group, Inc.

     22       4,970  
COMMON STOCKS (Continued)   Shares     Value  

Financial Exchanges & Data (Continued)

 

Intercontinental Exchange, Inc.

     17     $ 2,281  
   

 

 

  
      7,251  
   

 

 

  
 

Insurance Brokers – 1.0%

 

Aon plc

     9       2,760  
   

 

 

  
 

Investment Banking & Brokerage – 2.2%

 

Charles Schwab Corp. (The)

     26       2,221  

Morgan Stanley

     38       3,685  
   

 

 

  
      5,906  
   

 

 

  
 

Other Diversified Financial Services – 1.6%

 

JPMorgan Chase & Co.

     27       4,322  
   

 

 

  
 

Property & Casualty Insurance – 0.7%

 

Progressive Corp. (The)

     18       1,841  
   

 

 

  
 

Total Financials – 13.6%

 

     36,987  

Health Care

 

 

Health Care Facilities – 1.0%

 

HCA Holdings, Inc.

     11       2,817  
   

 

 

  
 

Life Sciences Tools & Services – 1.8%

 

Danaher Corp.

     15       4,788  
   

 

 

  
 

Managed Health Care – 2.7%

 

UnitedHealth Group, Inc.

     15       7,424  
   

 

 

  
 

Pharmaceuticals – 3.3%

 

Eli Lilly and Co.

     17       4,631  

Zoetis, Inc.

     18       4,315  
   

 

 

  
      8,946  
   

 

 

  
 

Total Health Care – 8.8%

 

     23,975  

Industrials

 

 

Aerospace & Defense – 1.3%

 

Airbus SE ADR

     114       3,639  
   

 

 

  
 

Agricultural & Farm Machinery – 0.9%

 

Deere & Co.

     7       2,471  
   

 

 

  
 

Railroads – 1.5%

 

Union Pacific Corp.

     16       3,921  
   

 

 

  
 

Research & Consulting Services – 0.8%

 

TransUnion

     19       2,271  
   

 

 

  
 

Trading Companies & Distributors – 1.5%

 

United Rentals, Inc. (A)

     12       4,056  
   

 

 

  
 

Total Industrials – 6.0%

 

     16,358  

Information Technology

 

 

Application Software – 0.2%

 

Autodesk, Inc. (A)

     2       619  
   

 

 

  
 

Data Processing & Outsourced Services – 3.1%

 

Fiserv, Inc. (A)

     31       3,191  
COMMON STOCKS (Continued)   Shares     Value  

Data Processing & Outsourced Services (Continued)

 

MasterCard, Inc., Class A

     15     $ 5,262  
   

 

 

  
      8,453  
   

 

 

  

Electronic Manufacturing Services – 1.9%

 

TE Connectivity Ltd.

     32       5,140  
   

 

 

  
 

Internet Services & Infrastructure – 0.9%

 

VeriSign, Inc. (A)

     9       2,372  
   

 

 

  
 

Semiconductors – 3.0%

 

Marvell Technology Group Ltd.

     17       1,504  

Taiwan Semiconductor Manufacturing Co. Ltd. ADR

     27       3,285  

Texas Instruments, Inc.

     17       3,194  
   

 

 

  
      7,983  
   

 

 

  
 

Systems Software – 5.9%

 

Microsoft Corp.

     48       16,007  
   

 

 

  
 

Technology Hardware, Storage & Peripherals – 3.2%

 

Apple, Inc.

     49       8,653  
   

 

 

  
 

Total Information Technology – 18.2%

 

     49,227  

Materials

 

 

Industrial Gases – 1.3%

 

Linde plc

     10       3,511  
   

 

 

  
 

Specialty Chemicals – 1.1%

 

Sherwin-Williams Co. (The)

     8       2,890  
   

 

 

  
 

Total Materials – 2.4%

 

     6,401  

Utilities

 

 

Electric Utilities – 1.6%

 

NextEra Energy, Inc.

     46       4,328  
   

 

 

  
 

Total Utilities – 1.6%

 

     4,328  
 

TOTAL COMMON STOCKS – 66.1%

 

   $ 179,411  

(Cost: $154,772)

      
 

Registered Investment Companies – 0.9%

 

iShares Core S&P 500 ETF

     5       2,433  
   

 

 

  
 

TOTAL INVESTMENT FUNDS – 0.9%

 

   $ 2,433  

(Cost: $2,402)

      
 
PREFERRED STOCKS              

Energy

 

 

Oil & Gas Exploration & Production – 1.0%

 

Targa Resources Corp.,

      

9.500% (B)

     2       2,596  
   

 

 

  
 

Total Energy – 1.0%

 

     2,596  
 

TOTAL PREFERRED STOCKS – 1.0%

 

   $ 2,596  

(Cost: $2,580)

      
 

 

     
    2021       ANNUAL REPORT       23  

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP BALANCED (in thousands)

 

 

 

DECEMBER 31, 2021

 

CORPORATE DEBT SECURITIES   Principal     Value  

Communication Services

 

 

Alternative Carriers – 0.1%

 

Bell Canada (GTD by BCE, Inc.),

      

4.300%, 7-29-49

   $ 120     $ 146  
   

 

 

  
 

Cable & Satellite – 0.5%

 

Charter Communications Operating LLC and Charter Communications Operating Capital Corp.,

      

3.850%, 4-1-61

     225       213  

Comcast Corp. (GTD by Comcast Cable Communications and NBCUniversal),

      

4.250%, 10-15-30

     450       520  

Comcast Corp. (GTD by Comcast Cable Communications LLC and NBCUniversal Media LLC),

      

3.450%, 2-1-50

     675       723  
   

 

 

  
      1,456  
   

 

 

  
 

Integrated Telecommunication Services – 0.5%

 

AT&T, Inc.,

      

3.500%, 9-15-53

     500       505  

Sprint Corp.,

      

7.875%, 9-15-23

     315       347  

Verizon Communications, Inc.,

      

4.500%, 8-10-33

     500       589  
   

 

 

  
      1,441  
   

 

 

  
 

Movies & Entertainment – 0.2%

 

Walt Disney Co. (The),

      

2.750%, 9-1-49

     500       485  
   

 

 

  
 

Wireless Telecommunication Service – 0.1%

 

T-Mobile USA, Inc.,

      

3.875%, 4-15-30

     290       317  
   

 

 

  
 

Total Communication Services – 1.4%

 

     3,845  

Consumer Discretionary

 

 

Apparel, Accessories & Luxury Goods – 0.2%

 

PVH Corp.,

      

4.625%, 7-10-25

     350       382  
   

 

 

  
 

Automotive Retail – 0.1%

 

AutoNation, Inc.,

      

2.400%, 8-1-31

     300       289  
   

 

 

  
 

Footwear – 0.1%

 

NIKE, Inc.,

      

3.250%, 3-27-40

     120       131  
   

 

 

  
 

Home Improvement Retail – 0.3%

 

Home Depot, Inc. (The),

      

3.350%, 4-15-50

     700       765  
   

 

 

  
 

Homebuilding – 0.1%

 

NVR, Inc.,

      

3.000%, 5-15-30

     400       416  
   

 

 

  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Internet & Direct Marketing Retail – 0.1%

 

Expedia Group, Inc.,

      

6.250%, 5-1-25 (C)

   $ 159     $ 180  
   

 

 

  
 

Total Consumer Discretionary – 0.9%

 

     2,163  

Consumer Staples

 

 

Brewers – 0.0%

 

Anheuser-Busch Inbev Finance, Inc. (GTD by AB INBEV/BBR/COB),

      

4.700%, 2-1-36

     150       181  
   

 

 

  
 

Drug Retail – 0.1%

 

CVS Health Corp.,

      

5.050%, 3-25-48

     180       236  
   

 

 

  
 

Packaged Foods & Meats – 0.4%

 

Hormel Foods Corp.,

      

3.050%, 6-3-51

     535       570  

Nestle Holdings, Inc.,

      

4.000%, 9-24-48 (C)

     380       468  
   

 

 

  
      1,038  
   

 

 

  
 

Soft Drinks – 0.2%

 

Coca-Cola Co. (The),

      

2.250%, 1-5-32

     600       611  
   

 

 

  
 

Total Consumer Staples – 0.7%

 

     2,066  

Energy

 

 

Oil & Gas Exploration & Production – 0.2%

 

EQT Corp.,

      

6.625%, 2-1-25 (D)

     500       565  
   

 

 

  
 

Oil & Gas Storage & Transportation – 0.0%

 

Cheniere Energy Partners L.P.,

      

3.250%, 1-31-32 (C)

     120       121  
   

 

 

  
 

Total Energy – 0.2%

 

     686  

Financials

 

 

Asset Management & Custody Banks – 0.7%

 

Apollo Management Holdings L.P.,

      

2.650%, 6-5-30 (C)

     425       429  

Blackstone Holdings Finance Co. LLC,

      

2.000%, 1-30-32 (C)

     325       313  

KKR Group Finance Co. VIII LLC (GTD by KKR & Co., Inc. and KKR Group Partnership L.P.),

      

3.500%, 8-25-50 (C)

     350       367  

National Securities Clearing Corp.,

      

1.500%, 4-23-25 (C)

     350       353  

Owl Rock Capital Corp.,

      

4.250%, 1-15-26

     375       395  
   

 

 

  
      1,857  
   

 

 

  
 

Consumer Finance – 0.2%

 

General Motors Financial Co., Inc. (GTD by AmeriCredit Financial Services, Inc.):

      

3.450%, 4-10-22

     250       251  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Consumer Finance (Continued)

 

3.700%, 5-9-23

   $ 150     $ 154  
   

 

 

  
      405  
   

 

 

  
 

Diversified Banks – 0.3%

 

Bank of America Corp.,

      

2.482%, 9-21-36

     400       388  

Wells Fargo & Co.,

      

2.572%, 2-11-31

     290       296  
   

 

 

  
      684  
   

 

 

  
 

Financial Exchanges & Data – 0.1%

 

Intercontinental Exchange, Inc.,

      

2.100%, 6-15-30

     260       258  
   

 

 

  
 

Investment Banking & Brokerage – 0.2%

 

Goldman Sachs Group, Inc. (The),

      

1.992%, 1-27-32

     360       345  

Morgan Stanley,

      

2.484%, 9-16-36

     120       116  
   

 

 

  
      461  
   

 

 

  
 

Life & Health Insurance – 0.2%

 

Northwestern Mutual Life Insurance Co. (The),

      

3.850%, 9-30-47 (C)

     500       566  
   

 

 

  
 

Multi-Line Insurance – 0.2%

 

Aon Corp. (GTD by Aon plc),

      

2.800%, 5-15-30

     525       542  
   

 

 

  
 

Other Diversified Financial Services – 0.8%

 

Citigroup, Inc.,

      

6.250%, 12-29-49

     648       732  

JPMorgan Chase & Co.,

      

5.000%, 2-1-69

     337       347  

JPMorgan Chase & Co. (3-Month U.S. LIBOR plus 332 bps),

      

3.451%, 1-1-68 (E)(F)

     750       753  

JPMorgan Chase & Co. (3-Month U.S. LIBOR plus 347 bps),

      

3.599%, 4-29-49 (E)

     194       195  

JPMorgan Chase & Co. (3-Month U.S. LIBOR plus 380 bps),

      

3.932%, 11-1-68 (E)

     250       252  
   

 

 

  
      2,279  
   

 

 

  
 

Specialized Finance – 0.2%

 

AerCap Ireland Capital Ltd. and AerCap Global Aviation Trust,

      

6.500%, 7-15-25

     250       286  

LSEGA Financing plc,

      

2.500%, 4-6-31 (C)

     350       351  
   

 

 

  
      637  
   

 

 

  
 

Total Financials – 2.9%

 

     7,689  

Health Care

 

 

Biotechnology – 0.1%

 

Amgen, Inc.,

      

3.375%, 2-21-50

     350       365  
   

 

 

  
 

 

24   ANNUAL REPORT   2021  
     

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP BALANCED (in thousands)

 

 

 

DECEMBER 31, 2021

 

CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Health Care Supplies – 0.2%

 

Dentsply Sirona, Inc.,

      

3.250%, 6-1-30

   $ 365     $ 386  
   

 

 

  
 

Managed Health Care – 0.1%

 

UnitedHealth Group, Inc.,

      

3.050%, 5-15-41

     250       262  
   

 

 

  
 

Pharmaceuticals – 0.5%

 

Johnson & Johnson,

      

3.400%, 1-15-38

     1,000       1,128  

Merck & Co., Inc.,

      

2.450%, 6-24-50

     250       236  
   

 

 

  
      1,364  
   

 

 

  
 

Total Health Care – 0.9%

 

     2,377  

Industrials

 

 

Aerospace & Defense – 0.4%

 

Boeing Co. (The),

      

3.750%, 2-1-50

     265       276  

General Dynamics Corp.,

      

2.850%, 6-1-41

     240       247  

Raytheon Technologies Corp.:

      

2.250%, 7-1-30

     300       300  

3.125%, 7-1-50

     175       179  
   

 

 

  
      1,002  
   

 

 

  
 

Environmental & Facilities Services – 0.2%

 

Republic Services, Inc.:

      

2.300%, 3-1-30

     72       72  

1.450%, 2-15-31

     490       456  
   

 

 

  
      528  
   

 

 

  
 

Railroads – 0.1%

 

Kansas City Southern,

      

2.875%, 11-15-29

     350       363  
   

 

 

  
 

Research & Consulting Services – 0.2%

 

Thomson Reuters Corp.,

      

3.350%, 5-15-26

     425       452  
   

 

 

  
 

Total Industrials – 0.9%

 

     2,345  

Information Technology

 

 

Application Software – 0.6%

 

Autodesk, Inc.:

      

2.850%, 1-15-30

     500       517  

2.400%, 12-15-31

     35       35  

Infor, Inc.,

      

1.750%, 7-15-25 (C)

     125       124  

Nuance Communications, Inc.,

      

5.625%, 12-15-26

     500       517  

salesforce.com, Inc.:

      

2.700%, 7-15-41

     175       175  

2.900%, 7-15-51

     255       260  
   

 

 

  
      1,628  
   

 

 

  
 

Data Processing & Outsourced Services – 0.3%

 

PayPal Holdings, Inc.,

      

2.300%, 6-1-30

     230       234  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Data Processing & Outsourced Services (Continued)

 

Visa, Inc.,

      

2.700%, 4-15-40

   $ 440     $ 451  
   

 

 

  
      685  
   

 

 

  
 

Semiconductors – 0.4%

 

Broadcom, Inc.,

      

3.419%, 4-15-33 (C)

     300       315  

Intel Corp.,

      

3.250%, 11-15-49

     300       317  

TSMC Global Ltd.,

      

1.750%, 4-23-28 (C)

     600       590  
   

 

 

  
      1,222  
   

 

 

  
 

Systems Software – 0.4%

 

Fortinet, Inc.,

      

2.200%, 3-15-31

     350       343  

Microsoft Corp.,

      

3.450%, 8-8-36

     365       421  

ServiceNow, Inc.,

      

1.400%, 9-1-30

     435       405  
   

 

 

  
      1,169  
   

 

 

  
 

Technology Hardware, Storage & Peripherals – 0.2%

 

Apple, Inc.:

      

2.950%, 9-11-49

     500       517  

2.650%, 5-11-50

     175       172  
   

 

 

  
      689  
   

 

 

  
 

Total Information Technology – 1.9%

 

     5,393  

Materials

 

 

Gold – 0.0%

 

Newmont Corp.,

      

2.600%, 7-15-32

     25       25  
   

 

 

  
 

Total Materials – 0.0%

 

     25  

Real Estate

 

 

Specialized REITs – 0.3%

 

EPR Properties,

      

4.950%, 4-15-28

     265       286  

Extra Space Storage L.P.,

      

2.350%, 3-15-32

     600       584  
   

 

 

  
      870  
   

 

 

  
 

Total Real Estate – 0.3%

 

     870  

Utilities

 

 

Electric Utilities – 1.1%

 

Alabama Power Co.,

      

3.125%, 7-15-51 (F)

     375       383  

Commonwealth Edison Co.,

      

2.200%, 3-1-30

     350       351  

Duke Energy Corp.,

      

3.150%, 8-15-27

     500       526  

Duke Energy Indiana LLC,

      

3.750%, 5-15-46

     120       134  

Duke Energy Ohio, Inc.,

      

4.300%, 2-1-49

     115       138  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Electric Utilities (Continued)

 

Entergy Corp.:

      

2.800%, 6-15-30

   $ 235     $ 239  

3.750%, 6-15-50

     125       135  

Florida Power & Light Co.,

      

3.150%, 10-1-49

     425       453  

NextEra Energy Capital Holdings, Inc. (GTD by NextEra Energy, Inc.),

      

3.000%, 1-15-52

     65       65  

Oncor Electric Delivery Co. LLC,

      

2.750%, 5-15-30

     450       468  
   

 

 

  
      2,892  
   

 

 

  
 

Water Utilities – 0.1%

 

American Water Capital Corp.,

      

3.750%, 9-1-47

     375       419  
   

 

 

  
 

Total Utilities – 1.2%

 

     3,311  
 

TOTAL CORPORATE DEBT SECURITIES – 11.3%

 

   $ 30,770  

(Cost: $30,188)

      
 
UNITED STATES GOVERNMENT
AGENCY OBLIGATIONS		              

Mortgage-Backed Obligations – 0.8%

 

Federal Home Loan Mortgage Corp. Agency REMIC/CMO,

      

3.000%, 6-15-45

     398       409  

Federal National Mortgage Association Agency REMIC/CMO:

      

3.500%, 6-25-29

     375       391  

3.000%, 10-25-46

     500       519  

Federal National Mortgage Association Fixed Rate Pass-Through Certificates:

      

6.500%, 10-1-28

     37       42  

6.500%, 2-1-29

     15       17  

7.500%, 4-1-31

     13       14  

7.000%, 7-1-31

     24       28  

7.000%, 9-1-31

     40       46  

6.500%, 2-1-32

     94       107  

7.000%, 2-1-32

     51       58  

7.000%, 3-1-32

     22       25  

7.000%, 7-1-32

     45       51  

5.500%, 5-1-33

     17       19  

5.500%, 6-1-33

     20       23  

4.500%, 11-1-43

     267       296  

U.S. Department of Veterans Affairs, Guaranteed REMIC Pass-Through Certificates, Vendee Mortgage Trust, Series 1997-1, Class 3A,

      

8.293%, 12-15-26

     16       18  
   

 

 

  
      2,063  
   

 

 

  
 

TOTAL UNITED STATES GOVERNMENT AGENCY OBLIGATIONS – 0.8%

 

   $ 2,063  

(Cost: $2,021)

      
 

 

     
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SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP BALANCED (in thousands)

 

 

 

DECEMBER 31, 2021

 

UNITED STATES GOVERNMENT
OBLIGATIONS		   Principal     Value  

Treasury Obligations – 18.9%

 

U.S. Treasury Bonds,

      

1.750%, 8-15-41

   $ 2,235     $ 2,168  

U.S. Treasury Notes:

      

2.000%, 2-15-23

     2,220       2,259  

0.125%, 3-31-23

     1,390       1,384  

0.125%, 8-31-23

     1,850       1,834  

2.750%, 11-15-23

     500       519  

0.125%, 12-15-23

     4,205       4,157  

0.375%, 4-15-24

     4,885       4,837  

1.750%, 6-30-24

     1,400       1,431  

1.500%, 11-30-24

     1,700       1,727  

1.375%, 1-31-25

     1,485       1,502  

1.125%, 2-28-25

     640       642  

2.875%, 4-30-25

     500       530  

2.875%, 5-31-25

     8,795       9,326  

0.375%, 12-31-25

     55       53  

2.625%, 12-31-25

     800       846  

0.375%, 1-31-26

     2,440       2,361  

1.625%, 9-30-26

     1,915       1,948  

1.250%, 12-31-26

     2,700       2,697  

1.500%, 1-31-27

     545       551  

0.625%, 3-31-27

     2,205       2,132  

0.750%, 1-31-28

     345       332  

2.875%, 8-15-28

     737       805  

1.125%, 8-31-28

     850       834  

1.375%, 10-31-28

     3,880       3,865  

1.250%, 8-15-31

     2,640       2,582  
   

 

 

  
      51,322  
   

 

 

  
 

TOTAL UNITED STATES GOVERNMENT OBLIGATIONS – 18.9%

 

   $ 51,322  

(Cost: $51,664)

      
SHORT-TERM SECURITIES   Shares     Value  

Money Market Funds (H) – 1.1%

 

Dreyfus Institutional Preferred Government Money Market Fund – Institutional Shares,

      

0.010% (G)

     208     $ 208  

State Street Institutional U.S. Government Money Market Fund – Premier Class, 0.030%

     2,644       2,644  
   

 

 

  
      2,852  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 1.1%

 

   $ 2,852  

(Cost: $2,852)

      
 

TOTAL INVESTMENT SECURITIES – 100.1%

 

   $ 271,447  

(Cost: $246,479)

      
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (0.1)%

 

     (181 ) 
 

NET ASSETS – 100.0%

 

   $ 271,266  
 

 

Notes to Schedule of Investments

 

(A)

No dividends were paid during the preceding 12 months.

 

(B)

Restricted security. At December 31, 2021, the Portfolio owned the following restricted security:

 

Security    Acquisition Date(s)      Shares      Cost      Value         

Targa Resources Corp., 9.500%

      3-2-20        2      $ 2,580      $ 2,596    
        

 

 

  

 

    

The total value of this security represented 1.0% of net assets at December 31, 2021.

 

(C)

Securities were purchased pursuant to an exemption from registration available under Rule 144A under the Securities Act of 1933 and may only be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2021 the total value of these securities amounted to $4,177 or 1.5% of net assets.

 

(D)

Step bond that pays an initial coupon rate for the first period and then a higher or lower coupon rate for the following periods. Interest rate disclosed is that which is in effect at December 31, 2021.

 

(E)

Variable rate security. Interest rate disclosed is that which is in effect at December 31, 2021. Description of the reference rate and spread, if applicable, are included in the security description.

 

(F)

All or a portion of securities with an aggregate value of $510 are on loan.

 

(G)

Investment made with cash collateral received from securities on loan.

 

(H)

Rate shown is the annualized 7-day yield at December 31, 2021.

 

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SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP BALANCED (in thousands)

 

 

 

DECEMBER 31, 2021

 

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 179,411      $ —      $ —  

Investment Funds

     2,433        —        —  

Preferred Stocks

     —        2,596        —  

Corporate Debt Securities

     —        30,770        —  

United States Government Agency Obligations

     —        2,063        —  

United States Government Obligations

     —        51,322        —  

Short-Term Securities

     2,852        —        —  

Total

   $ 184,696      $ 86,751      $ —  

The following acronyms are used throughout this schedule:

ADR = American Depositary Receipts

CMO = Collateralized Mortgage Obligation

GTD = Guaranteed

LIBOR = London Interbank Offered Rate

REMIC = Real Estate Mortgage Investment Conduit

REIT = Real Estate Investment Trust

 

See Accompanying Notes to Financial Statements.

 

     
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Table of Contents
MANAGEMENT DISCUSSION   DELAWARE IVY VIP ENERGY

 

 

 

(UNAUDITED)

 

On September 13, 2021, the Board of Trustees (Board) of the Ivy Variable Insurance Portfolios approved the appointment of the portfolio manager team of Samuel Halpert and Geoffrey King of Delaware Management Company as new portfolio managers. In connection with this change, the Board approved applicable revisions to the Portfolio’s investment strategies. All changes took effect on November 15, 2021.

Below, Samuel Halpert and Geoffrey King, portfolio managers of Delaware Ivy VIP Energy, discuss positioning, performance and results for the fiscal year ended December 31, 2021.

Fiscal Year Performance

 

 

For the 12 Months Ended December 31, 2021

         

Delaware Ivy VIP Energy (Class II shares at net asset value)

      42.00%  

Benchmark

         

S&P 1500 Energy Sector Index

      55.15%  

(generally reflects the performance of stocks that represent the energy market)

         

Please note that Portfolio returns include applicable fees and expenses while index returns do not include any such fees. Also, the Portfolio’s performance data does not take into account any product expenses or charges associated with owning a variable life or annuity policy, which is invested in Ivy Variable Insurance Portfolios.

Key factors

 

Starting in September of 2020, we became more optimistic on the energy sector. Entering 2021, fundamentals continued to improve, which, in our opinion, was not being reflected in equity valuations. Oil supply balances were improving with a long list of supportive data: OPEC production recovered post pandemic collapse while the US production balanced out around 11 million barrels per day (bpd) off its peak of 13 million bpd. US crude oil and product inventories stood at the high end of the five-year range but were beginning to normalize. Finally, the Baker Hughes offshore rig count fell to 156 rigs from more than 250, and the US horizontal rig count fell to 232 rigs from 786 in 2019.

From an equity perspective, we expected several key themes to dominate the energy narrative in 2021. Capital discipline and better capital allocation strategies were finally adopted by exploration and production management teams in 2020 after several years of requests falling on deaf ears. To further enhance shareholder returns and financial wherewithal, consolidation was essential. As discipline, scale and better capital allocation strategies came together, these companies would achieve higher free cash flows, which ultimately would enable more shareholder friendly capital return strategies. Importantly, this would also lead to a more constrained and disciplined North American supply outlook for 2021.

The deployment of COVID-19 vaccines in early 2021 helped drive oil demand back to 2019 levels by year end. In the US, vehicle miles traveled recovered from weakness at the start of the calendar year to reach levels comparable to 2018 and 2019 in August. Globally, according to International Energy Agency (IEA) estimates, demand recovered from 93 million bpd to more than 97 million bpd by the third quarter of 2021. The lone remaining weak spot for demand remains air travel, particularly international and business travel.

Contributor and detractors

 

While the Portfolio had a strong return, it underperformed its S&P 1500 Energy Sector Index benchmark in the measurement period as both energy equities and commodities outperformed broader market indices. In comparison the S&P Oil and Gas Exploration and Production Index was up 67.58%, the S&P Integrated Oil and Gas Index was up 52.82%, the S&P Oil and Gas Refining and Marketing Index was up 34.71%, and the Philadelphia Oil Service Index was up 20.74%. From a commodity perspective, energy-related commodities were seven of the eight best performers in the Bloomberg Constant Maturity Commodity Index (a broad commodity index with 26 constituents) with returns ranging from 67.07% for reformulated blendstock for oxygenate blending (RBOB) gasoline to 53.07% for natural gas. Finally, the S&P 500 returned 28.71% in 2021, marking the only the second time since the financial crisis that energy broadly outperformed.

In the first quarter of the reporting period, both the Fund and its benchmark experienced strong positive returns. In the end, the Portfolio underperformed the index. During the period, the Portfolio’s allocation to the energy sectors was slightly changed as we decreased our alternative energy position due to valuation in the quarter.

In the second quarter of the reporting period, both the Portfolio and its benchmark experienced positive returns, with the Portfolio outperforming the index. During the quarter, the Portfolio’s allocation to the energy sectors was slightly changed as we decreased our utilities’ exposure.

 

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In the third quarter of the reporting period, both the Portfolio and its benchmark experienced negative returns; however, the Portfolio underperformed the index due to its exposure to alternative energy. The Portfolio’s allocation to the energy sectors remained steady from the prior quarter.

Outlook

 

We continue to believe the deprivation of capital and capital discipline amongst energy producers support a bullish supply outlook. In the short term, energy demand continues to rise as the world rapidly recovers from COVID-19 induced shutdowns. Longer term structural demand tailwinds persist as the world continues to seek commodity intensive lower carbon energy sources in the form of renewable energy and battery storage. Whilst investment in renewable energy for a lower carbon future remains inadequate to meet this demand, investment in traditional energy and natural resource commodities remains woefully inadequate. There are a multitude of reasons we don’t see this abating, including political/access issues, undesirable industry carbon footprints, lack of access to capital, higher cost of capital, degrading grade/productivity, and more shareholder friendly capital return strategies directing capital away from growth and to shareholders. We expect degrading supply outlooks in the face of rising demand to cause vicious inflationary pressures to continue across the commodity complex.

While we expect multiple years of solid energy performance, we also expect mini cycles within this overall inflationary environment. We feel the interconnection and ripple effects within commodities is vastly unappreciated. Each policy, or demand boost has ripple effects beyond the commodity it most obviously effects. For example, as the world continues to electrify its vehicle fleet and policies encourage more renewable energy, copper demand is set for a step change. This will undoubtedly cause upward pressure on copper and ultimately drive up pricing for one common substitute, aluminum. However, aluminum is an energy and carbon emission intensive commodity requiring vast amounts of power in the refining and smelting process. This will further press up power demand and carbon emissions, which will likely increase traditional energy demand in the form of natural gas and coal. Should there be a carbon market, this will further push up the price of carbon as more coal generation fires up to meet incremental power demand, which will further push up the price of cleaner burning natural gas. As natural gas prices become more expensive, we believe those with access to cheap natural gas in the US and Middle East will be natural advantaged across the industrial complex in the production of products such as fertilizers. As the cost curve in fertilizer production shifts with higher cost facilities in Europe and Asia being curtailed, food prices will be pushed higher. This will in turn affect the supply of agricultural products, which should drive up the costs of biofuels, while also affecting the overall cost of nutrition.

We believe effects like these will continue to ripple across the energy complex, until such time there is adequate investment to improve the supply outlook. Unfortunately, there is no solution for degrading productivity and political/access issues appear to only be worsening. The companies we are targeting for investment appear to be structurally advantaged, have low-cost assets and the balance sheets/cash flows to support development.

Effective July 1, 2021, the Portfolio name changed from Ivy VIP Energy.

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

Past performance is not a guarantee of future results. The value of the Portfolio’s shares will change, and you could lose money on your investment.

Investing in companies involved in one specified sector may be more risky and volatile than an investment with greater sector diversification. Investing in the energy sector can be riskier than other types of investment activities because of a range of factors, including price fluctuation caused by real and perceived inflationary trends and political developments, and the cost assumed by energy companies in complying with environmental safety regulations. These and other risks are more fully described in the Portfolio’s prospectus.

The opinions expressed in this report are those of the portfolio managers and are current only through the end of the period of the report as stated on the cover. The portfolio managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of Delaware Ivy VIP Energy.

 

     
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Table of Contents
PORTFOLIO HIGHLIGHTS   DELAWARE IVY VIP ENERGY(a)

 

 

 

ALL DATA IS AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Asset Allocation

 

Stocks

     97.7%  

Energy

     85.6%  

Utilities

     7.9%  

Industrials

     1.5%  

Materials

     1.2%  

Consumer Staples

     1.0%  

Financials

     0.5%  

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

     2.3%  

 

Country Weightings

 

North America

     85.3%  

United States

     79.9%  

Canada

     5.4%  

Europe

     12.4%  

Norway

     7.7%  

Other Europe

     4.7%  

Cash and Other Assets (Net of Liabilities),
and Cash Equivalents+

     2.3%  
 

 

Top 10 Equity Holdings

 

Company    Country      Sector    Industry

Chevron Corp.

   

United States

     

Energy

   

Integrated Oil & Gas

Equinor ASA

   

Norway

     

Energy

   

Integrated Oil & Gas

Devon Energy Corp.

   

United States

     

Energy

   

Oil & Gas Exploration & Production

ConocoPhillips

   

United States

     

Energy

   

Oil & Gas Exploration & Production

EOG Resources, Inc.

   

United States

     

Energy

   

Oil & Gas Exploration & Production

Chesapeake Energy Corp.

   

United States

     

Energy

   

Oil & Gas Exploration & Production

Denbury, Inc.

   

United States

     

Energy

   

Oil & Gas Exploration & Production

Valero Energy Corp.

   

United States

     

Energy

   

Oil & Gas Refining & Marketing

Equitable Resources, Inc.

   

United States

     

Energy

   

Oil & Gas Exploration & Production

Marathon Petroleum Corp.

   

United States

     

Energy

   

Oil & Gas Refining & Marketing

See your advisor or www.ivyinvestments.com for more information on the Portfolio’s most recently published Top 10 Equity Holdings.

+Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

(a)Effective July 1, 2021, the name of Ivy VIP Energy changed to Delaware Ivy VIP Energy.

 

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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT   DELAWARE IVY VIP ENERGY(a)

 

 

 

(UNAUDITED)

 

LOGO

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class I      Class II  

1-year period ended 12-31-21

      42.33%        42.00%  

5-year period ended 12-31-21

      —        -11.79%  

10-year period ended 12-31-21

      —        -4.25%  

Since Inception of Class through 12-31-21(3)

      -9.50%        —  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

 

(3)

4-28-17 (the date on which shares were first acquired by shareholders).

 

(a)

Effective July 1, 2021, the name of Ivy VIP Energy changed to Delaware Ivy VIP Energy.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

     
    2021       ANNUAL REPORT       31  

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP ENERGY (in thousands)

 

 

 

DECEMBER 31, 2021

 

COMMON STOCKS   Shares     Value  

Consumer Staples

 

 

Agricultural Products – 1.0%

 

Darling International, Inc. (A)

     10     $ 705  
   

 

 

  
 

Total Consumer Staples – 1.0%

 

     705  

Energy

 

 

Coal & Consumable Fuels – 2.2%

 

Enviva Partners L.P.

     23       1,614  
   

 

 

  
 

Integrated Oil & Gas – 15.5%

 

Chevron Corp.

     49       5,778  

Equinor ASA (B)

     215       5,700  
   

 

 

  
      11,478  
   

 

 

  
 

Oil & Gas Drilling – 3.2%

 

Valaris Ltd. (A)

     66       2,376  
   

 

 

  
 

Oil & Gas Equipment & Services – 4.3%

 

Schlumberger Ltd.

     108       3,221  
   

 

 

  
 

Oil & Gas Exploration & Production – 47.2%

 

Black Stone Minerals L.P.

     67       695  

Chesapeake Energy Corp.

     55       3,577  

ConocoPhillips

     62       4,501  

Coterra Energy, Inc.

     152       2,888  

Denbury, Inc. (A)

     46       3,489  

Devon Energy Corp.

     107       4,701  

Diamondback Energy, Inc.

     27       2,941  

EOG Resources, Inc.

     50       4,462  

Equitable Resources, Inc. (A)

     156       3,402  

Kimbell Royalty Partners L.P.

     91       1,239  

Tourmaline Oil Corp. (B)

     95       3,076  
   

 

 

  
      34,971  
   

 

 

  
 

Oil & Gas Refining & Marketing – 11.9%

 

Archaea Energy, Inc.,
Class A (A)

     113       2,072  

Marathon Petroleum Corp.

     51       3,293  

Valero Energy Corp.

     46       3,461  
   

 

 

  
      8,826  
   

 

 

  
 

Oil & Gas Storage & Transportation – 1.3%

 

Ardmore Shipping Corp. (A)

     93       316  

Euronav N.V. (B)

     77       683  
   

 

 

  
      999  
   

 

 

  
 

Total Energy – 85.6%

 

     63,485  

Financials

 

 

Specialized Finance – 0.5%

 

Spring Valley Acquisition
Corp. (A)

     36       358  
   

 

 

  
 

Total Financials – 0.5%

 

     358  

Industrials

 

 

Electrical Components & Equipment – 0.8%

 

Sunrun, Inc. (A)

     17       575  
   

 

 

  
COMMON STOCKS (Continued)   Shares     Value  

Environmental & Facilities Services – 0.7%

 

Li-Cycle Holdings Corp. (A)

     57     $ 570  
   

 

 

  
 

Total Industrials – 1.5%

 

     1,145  

Materials

 

 

Fertilizers & Agricultural Chemicals – 1.2%

 

CF Industries Holdings, Inc.

     12       856  
   

 

 

  
 

Total Materials – 1.2%

 

     856  

Utilities

 

 

Electric Utilities – 5.9%

 

American Electric Power Co., Inc.

     4       363  

Iberdrola S.A. (B)

     33       391  

NextEra Energy, Inc.

     8       727  

Northland Power, Inc. (B)

     12       367  

Orsted A/S (B)

     3       351  

Southern Co. (The)

     5       364  

SSE plc (B)

     34       769  

Terna Rete Elettrica Nazionale S.p.A. (B)

     91       735  

Xcel Energy, Inc.

     5       353  
   

 

 

  
      4,420  
   

 

 

  
 

Independent Power Producers & Energy
Traders – 1.0%

 

AES Corp. (The)

     30       725  
   

 

 

  
 

Multi-Utilities – 1.0%

 

CMS Energy Corp.

     5       357  

RWE Aktiengesellschaft (B)

     9       369  
   

 

 

  
      726  
   

 

 

  
 

Total Utilities – 7.9%

 

     5,871  
 

TOTAL COMMON STOCKS – 97.7%

 

   $ 72,420  

(Cost: $74,718)

      
 
SHORT-TERM SECURITIES         
 

Money Market Funds (C) – 2.3%

 

State Street Institutional U.S. Government Money Market Fund – Premier Class,

      

0.030%

     1,725       1,725  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 2.3%

 

   $ 1,725  

(Cost: $1,725)

      
 

TOTAL INVESTMENT SECURITIES – 100.0%

 

   $ 74,145  

(Cost: $76,443)

      
 

CASH AND OTHER ASSETS, NET OF LIABILITIES – 0.0%

 

     1  
 

NET ASSETS – 100.0%

 

   $ 74,146  

    

 

 

32   ANNUAL REPORT   2021  
     

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SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP ENERGY (in thousands)

 

 

 

DECEMBER 31, 2021

 

Notes to Schedule of Investments

 

(A)

No dividends were paid during the preceding 12 months.

 

(B)

Listed on an exchange outside the United States.

 

(C)

Rate shown is the annualized 7-day yield at December 31, 2021.

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

        

Consumer Staples

   $ 705      $ —      $ —  

Energy

     57,785        5,700        —  

Financials

     358        —        —  

Industrials

     1,145        —        —  

Materials

     856        —        —  

Utilities

     4,025        1,846        —  

Total Common Stocks

   $ 64,874      $ 7,546      $ —  

Short-Term Securities

     1,725        —        —  

Total

   $ 66,599      $ 7,546      $ —  

The following acronym is used throughout this schedule:

ADR = American Depositary Receipts

Country Diversification

 

(as a % of net assets)

        

United States

     79.9%  

Norway

     7.7%  

Canada

     5.4%  

United Kingdom

     1.0%  

Italy

     1.0%  

Other Countries

     2.7%  

Other+

     2.3%  

    

 

 

+Includes cash and other assets (net of liabilities), and cash equivalents

 

See Accompanying Notes to Financial Statements.

 

     
    2021       ANNUAL REPORT       33  

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MANAGEMENT DISCUSSION   DELAWARE IVY VIP GROWTH

 

 

 

(UNAUDITED)

 

On October 1, 2021, Brad Angermeier was added as an additional portfolio manager for the Portfolio.

Below, Bradley M. Klapmeyer, CFA, and Bradley D. Angermeier, CFA, co-portfolio managers of Delaware Ivy VIP Growth, discusses positioning, performance and results for the fiscal year ended December 31, 2021. Mr. Klapmeyer has managed the Portfolio since 2016 and has 22 years of industry experience. Mr. Angermeier joined the Portfolio in 2021 and has 13 years of industry experience.

Fiscal Year Performance

 

 

For the 12 Months Ended December 31, 2021

         

Delaware Ivy VIP Growth (Class II shares at net asset value)

      30.03%  

Benchmark

         

Russell 1000 Growth Index

      27.60%  

(generally reflects the performance of securities that represent the large-cap growth market)

         

Please note that Portfolio returns include applicable fees and expenses while index returns do not include any such fees. Also, the Portfolio’s performance data does not take into account any product expenses or charges associated with owning a variable life or annuity policy, which is invested in Ivy Variable Insurance Portfolios.

Market conditions

 

The Russell 1000 Growth Index, the Portfolio’s benchmark, posted an exceptional gain of 27.6% during the 2021 calendar year. This marks another year of strong large capitalization growth style performance. For perspective, over the past three years the benchmark has been up a staggering 140% and over the past 10 years it has returned an unbelievable 508%. While there has been a long list of bumps and bruises that have occurred to global economies over the past decade, the most recent being the COVID-19 pandemic, growth investing has proved resilient through these volatile periods.

2021 was a very different market environment than the prior calendar year. During 2020 returns were generated by high-risk growth stocks that were considered pandemic safe havens and were riding a wave of pandemic-driven earnings revisions. Business quality — profitability, cash flow and competitive advantage — was an unnecessary consideration, and investors focused on upward stock price momentum and pandemic-fueled earnings momentum. In last year’s annual report we expressed our opinion that the market’s 2020 playbook did not appear to be a sustainable and repeatable investment strategy. Not surprisingly 2021 was characterized by the market’s renewed focus on business quality and relative valuation as the growth rates of many of the high-growth pandemic beneficiaries began to decelerate. As it turned out, 2021 reversed the gains in many, but not all, of the hyper-growth companies that we struggled to understand during the initial stages of the pandemic.

The growth stock universe moved higher in 2021, but the market began to express skepticism about high expectations embedded in many of the pandemic winners. As such, 2021 proved to be a volatile environment for many of the high-growth names in the benchmark. Stocks like DocuSign, Coupa Software, Okta, Peloton, Spotify, Grubhub, Wayfair and Roku saw significant relative drawdowns during 2021. We are not suggesting that all of these companies are bad businesses (although we are skeptical of some), we are simply highlighting the fact that unrealistic growth expectations needed to unwind. These market-level dynamics can be seen in 2021 factor returns. Quality factors (return on assets and return on equity) and value factors (price to free cash flow, free cash flow to enterprise value) both outperformed, while risk factors (beta) and momentum factors (price returns and relative strength) generally lagged.

In terms of macro observations, 2021 included notable action at the Federal Reserve (Fed), which began to forecast a more aggressive pace of interest rate hikes during 2022. The Fed’s forecast confirmed what we were already seeing in the data – inflationary pressures are widespread and creeping into wages. The Fed, along with investors, had been of the view that inflation was being driven by pandemic-related factors and was therefore transitory. Unfortunately, inflationary pressures broadened throughout the year leaving the Fed with no choice but to acknowledge the change and adjust its policy stance accordingly.

Outside of sustained inflationary pressure, overall economic indicators remained supportive of near-term growth. Housing data remained strong (although constrained by lack of available inventory), the labor market was robust, manufacturing orders and production remained near record levels bolstered by lean inventory and spending on services continued its path toward normalization after a significant decline in 2020.

From a sector perspective within the benchmark, energy, real estate, information technology, communication services and financials outperformed, although it is important to note significant dispersion of returns within each of those sectors.

 

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Notable relative sector underperformance within the benchmark was generated from industrials, consumer discretionary, consumer staples, and healthcare. All sectors within the index were positive during the period.    

Strategies employed, contributors and detractors

 

During the measurement period the Portfolio returned 30.0% and outperformed the benchmark return of 27.6%. Stock selection drove most of the outperformance in the calendar year. From a sector perspective, information technology was the largest contributor to outperformance followed by healthcare. Communication services and consumer discretionary were the largest negative contributors. We stuck to our discipline, which was rewarded as many of the pandemic-driven excesses of 2020 continued to unwind in 2021. We continue to maintain a focus on quality growth companies, which we believe should be rewarded through the cycle.

Information technology was the greatest positive contributor during the year. The portfolio was overweight the sector, but positive stock selection was far more impactful to performance than sector allocation. Overweight positions in Gartner (sold prior to December 31, 2021), Motorola Solutions, Intuit, and NVIDIA were the largest contributors to outperformance. Avoiding ownership of Mastercard, Zoom and Block (formerly known as Square) was also a positive contribution. The positive contributors were partially offset by underperformance from overweight positions in Visa and PayPal. We continue to believe Visa is a wide-moat business and the eventual acceleration of its profitable cross-border transactions should improve sentiment and put the stock back on its trajectory of long-term compounding.

Healthcare was another positive contributor, with all the performance coming from stock selection rather than sector allocation. The Portfolio’s overweight position in UnitedHealth Group was the largest positive contributor, and positions in Danaher and Zoetis also contributed positively. Overweight positions in Cooper Companies and Cerner Corp. were two of the greatest detractors, and the Portfolio’s avoidance of Eli Lilly also contributed negatively during the measurement period. Cerner’s stock performed better late in the year on news of Oracle’s proposed acquisition of the company.

Within communication services the Portfolio’s overweight position in Alphabet (parent company of Google) was a positive contributor. The Portfolio also benefited from avoiding underperforming internet businesses such as Netflix, Spotify, Roku, and Match as well as traditional telecommunications businesses such as Charter Communications and Altice, which underperformed during the fiscal year. The positive contributions were more than offset by underperformance from overweight positions in Electronic Arts and Pinterest, both of which suffered from the market’s rotation away from pandemic beneficiaries.

Consumer discretionary was also a meaningful negative contributor during the fiscal year. The Portfolio’s avoidance of Tesla was the largest negative contributor, and positions in Ferrari and Booking Holdings were also sources of underperformance. Those negative contributors were partially offset by strong performance from the Portfolio’s position in Home Depot and by the avoidance of Peloton, the latter of which was down significantly during the measurement period after artificially high pandemic demand began evaporating in the face of rising competitive intensity. The Portfolio’s position in Home Depot has been reduced after strong performance in 2021, and we continue to avoid Tesla given what we believe are unrealistic expectations priced into the stock.

Outlook

 

Global growth appears strong as worldwide economies continue to experience less impact during each successive pandemic wave, and true normalization feels closer than it has since COVID-19 began. Global manufacturing data suggests solid underlying growth for 2022, and consumers are entering the year on healthy footing. While we don’t intend to invest based on a specific economic backdrop, we do believe there are economic observations we can make that should have implications for growth stock investing. For starters, we believe market sentiment may be less buoyant than in the prior two years. 2022 will likely be characterized by multiple Fed interest rate hikes and a quick reduction of the Fed’s balance sheet; a reduction in federal outlays that juiced consumer spending in 2021; normalization of the frantic inventory and logistics situation; a slowdown in manufacturing growth from unsustainable post-pandemic, catch-up levels; and lingering inflationary pressures due to rising rental rates and sustained wage inflation. In summary, while solid underlying growth appears supported, the global economy will likely work through a period of counterbalancing and normalization as it finds a new supply/demand equilibrium. Hence, we believe a more balanced backdrop.

It causes us to pause when we consider the (unknown) implications of coming off record levels of monetary and fiscal stimulus with the equity market at an historically high valuation multiple. A cocktail of high multiples and decelerating growth could suggest the market needs to reassess its underlying assumptions, particularly in many high-growth stocks that remain richly valued. Rising interest rates would likely be another headwind to high-growth stocks — especially those without strong free cash flow — as market capitalizations of those companies are heavily dependent on earnings that are simply less valuable today when discounted at a higher rate. Irrespective of interest rates, we see continued risk to the

 

     
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growthiest cohort of companies, as our work suggests that normalized growth rates for those companies do not justify the relative valuations that are still elevated. Any future drawdown that occur from the overestimation of growth at those companies could be painful as the impact on the stocks is twofold – a normalization of growth expectations (negative estimate revisions) and a compression of the valuation multiple applied to those estimates. In short, while some of the high flyers of 2020 experienced significant drawdowns during 2021, we continue to believe the market is still overestimating the durability of growth for many stocks.

Conceptually, we welcome the possibility that the tailwinds supporting the market for the past decade — easy money and multiple expansion — are ebbing at the margin. That could potentially imply lower market and stock correlations and increased dispersion of returns. Such an environment should be favorable for investors engaging in rigorous and disciplined business model analysis, which is the cornerstone of our process. Over time, competitive moats and durability of growth are more important than macro fluctuations. We still see attractive opportunities for strong multi-year returns in many higher-quality growth businesses. These stocks saw relative strength in 2021, and we believe they remain well positioned to generate strong and sustainable growth and returns. Importantly, we believe secular growth prospects coupled with wide economic moats will help quality growth stocks sustain a premium relative valuation if market volatility increases. One of the pillars of our investment philosophy is that business quality is more persistent and predictable than growth. Therefore, we will continue to seek out high-quality businesses first, and then select the best growth and return prospects from that high-quality cohort. We believe this process will continue to be fruitful across economic cycles.

As of December 31, 2021, the Portfolio’s largest positions were Microsoft Corp., Apple, Inc., Amazon.com, Inc., Alphabet, Inc., NVIDIA Corp., Visa, Inc., Motorola Solutions, Inc., VeriSign, Inc., UnitedHealth Group. Inc., and Facebook, Inc. (Meta Platforms, Inc.). Thank you for your continued interest and support.

Effective July 1, 2021, the Portfolio name changed from Ivy VIP Growth.

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

Past performance is not a guarantee of future results. The value of the Portfolio’s shares will change, and you could lose money on your investment. Prices of growth stocks may be more sensitive to changes in current or expected earnings than the prices of other stocks. Growth stocks may not perform as well as value stocks or the stock market in general. These and other risks are more fully described in the Portfolio’s prospectus.

The opinions expressed in this report are those of the portfolio managers and are current only through the end of the period of the report as stated on the cover. The portfolio managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of Delaware Ivy VIP Growth.

 

36   ANNUAL REPORT   2021  
     

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PORTFOLIO HIGHLIGHTS   DELAWARE IVY VIP GROWTH(a)

 

 

 

ALL DATA IS AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Asset Allocation

 

Stocks

     99.8%  

Information Technology

     47.6%  

Communication Services

     12.6%  

Consumer Discretionary

     12.5%  

Health Care

     11.6%  

Industrials

     9.3%  

Financials

     3.6%  

Consumer Staples

     2.6%  

Liabilities (Net of Cash and Other Assets),
and Cash Equivalents+

     0.2%  

    

 

 

Top 10 Equity Holdings

 

Company    Sector      Industry

Microsoft Corp.

   

Information Technology

     

Systems Software

Apple, Inc.

   

Information Technology

     

Technology Hardware, Storage & Peripherals

Amazon.com, Inc.

   

Consumer Discretionary

     

Internet & Direct Marketing Retail

Alphabet, Inc., Class A

   

Communication Services

     

Interactive Media & Services

NVIDIA Corp.

   

Information Technology

     

Semiconductors

Visa, Inc., Class A

   

Information Technology

     

Data Processing & Outsourced Services

Motorola Solutions, Inc.

   

Information Technology

     

Communications Equipment

VeriSign, Inc.

   

Information Technology

     

Internet Services & Infrastructure

UnitedHealth Group, Inc.

   

Health Care

     

Managed Health Care

Facebook, Inc., Class A

   

Communication Services

     

Interactive Media & Services

See your advisor or www.ivyinvestments.com for more information on the Portfolio’s most recently published Top 10 Equity Holdings.

+Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

(a)Effective July 1, 2021, the name of Ivy VIP Growth changed to Delaware Ivy VIP Growth.

 

     
    2021       ANNUAL REPORT       37  

Table of Contents
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT   DELAWARE IVY VIP GROWTH(a)

 

 

 

(UNAUDITED)

 

LOGO

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class II  

1-year period ended 12-31-21

      30.03%  

5-year period ended 12-31-21

      25.13%  

10-year period ended 12-31-21

      19.06%  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

 

(a)

Effective July 1, 2021, the name of Ivy VIP Growth changed to Delaware Ivy VIP Growth.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

38   ANNUAL REPORT   2021  
     

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP GROWTH (in thousands)

 

 

 

DECEMBER 31, 2021

 

COMMON STOCKS   Shares     Value  

Communication Services

 

 

Interactive Home Entertainment – 2.6%

 

Electronic Arts, Inc.

     200     $ 26,409  
   

 

 

  
 

Interactive Media & Services – 10.0%

 

Alphabet, Inc., Class A (A)

     20       57,712  

Alphabet, Inc., Class C (A)

     3       8,826  

Facebook, Inc., Class A (A)

     87       29,104  

Pinterest, Inc., Class A (A)

     192       6,981  
   

 

 

  
      102,623  
   

 

 

  
 

Total Communication Services – 12.6%

 

     129,032  

Consumer Discretionary

 

 

Automobile Manufacturers – 2.0%

 

Ferrari N.V.

     80       20,713  
   

 

 

  
 

Footwear – 1.0%

 

NIKE, Inc., Class B

     62       10,308  
   

 

 

  
 

Home Improvement Retail – 1.8%

 

Home Depot, Inc. (The)

     44       18,197  
   

 

 

  
 

Hotels, Resorts & Cruise Lines – 1.2%

 

Booking Holdings, Inc. (A)

     5       12,402  
   

 

 

  
 

Internet & Direct Marketing Retail – 6.5%

 

Amazon.com, Inc. (A)

     20       66,503  
   

 

 

  
 

Total Consumer Discretionary – 12.5%

 

     128,123  

Consumer Staples

 

 

Personal Products – 0.3%

 

Estee Lauder Co., Inc. (The), Class A

     7       2,680  
   

 

 

  
 

Soft Drinks – 2.3%

 

Coca-Cola Co. (The)

     406       24,026  
   

 

 

  
 

Total Consumer Staples – 2.6%

 

     26,706  

Financials

 

 

Financial Exchanges & Data – 3.6%

 

Intercontinental Exchange, Inc.

     132       18,009  

S&P Global, Inc.

     39       18,416  
   

 

 

  
      36,425  
   

 

 

  
 

Total Financials – 3.6%

 

     36,425  

Health Care

 

 

Health Care Equipment – 1.4%

 

Intuitive Surgical, Inc. (A)

     41       14,607  
   

 

 

  
 

Health Care Supplies – 1.9%

 

Cooper Cos., Inc. (The)

     46       19,237  
   

 

 

  
 

Health Care Technology – 2.3%

 

Cerner Corp.

     253       23,477  
   

 

 

  
 

Life Sciences Tools & Services – 1.3%

 

Danaher Corp.

     39       12,848  
   

 

 

  
COMMON STOCKS (Continued)   Shares     Value  

Managed Health Care – 3.4%

 

UnitedHealth Group, Inc.

     69     $ 34,664  
   

 

 

  
 

Pharmaceuticals – 1.3%

 

Zoetis, Inc.

     56       13,749  
   

 

 

  
 

Total Health Care – 11.6%

 

     118,582  
 

Industrials

 

 

Industrial Machinery – 1.2%

 

Stanley Black & Decker, Inc.

     64       12,106  
   

 

 

  
 

Railroads – 1.0%

 

Union Pacific Corp.

     41       10,237  
   

 

 

  
 

Research & Consulting Services – 5.4%

 

CoStar Group, Inc. (A)

     344       27,147  

TransUnion

     153       18,159  

Verisk Analytics, Inc., Class A

     45       10,225  
   

 

 

  
      55,531  
   

 

 

  
 

Trucking – 1.7%

 

J.B. Hunt Transport Services, Inc.

     84       17,142  
   

 

 

  
 

Total Industrials – 9.3%

 

     95,016  

Information Technology

 

 

Application Software – 6.7%

 

Adobe, Inc. (A)

     35       19,580  

Autodesk, Inc. (A)

     25       7,014  

Intuit, Inc.

     37       24,001  

salesforce.com, Inc. (A)

     68       17,336  
   

 

 

  
      67,931  
   

 

 

  
 

Communications Equipment – 4.1%

 

Motorola Solutions, Inc.

     153       41,469  
   

 

 

  
 

Data Processing & Outsourced Services – 7.7%

 

Broadridge Financial Solutions, Inc.

     101       18,479  

PayPal, Inc. (A)

     97       18,311  

Visa, Inc., Class A

     195       42,316  
   

 

 

  
      79,106  
   

 

 

  
 

Internet Services & Infrastructure – 3.7%

 

VeriSign, Inc. (A)

     151       38,245  
   

 

 

  
 

Semiconductors – 4.3%

 

NVIDIA Corp.

     151       44,329  
   

 

 

  
 

Systems Software – 12.2%

 

Microsoft Corp.

     370       124,594  
   

 

 

  
COMMON STOCKS (Continued)   Shares     Value  

Technology Hardware, Storage & Peripherals – 8.9%

 

Apple, Inc.

     511     $ 90,733  
   

 

 

  
 

Total Information Technology – 47.6%

 

     486,407  
 

TOTAL COMMON STOCKS – 99.8%

 

   $ 1,020,291  

(Cost: $559,831)

      
 
SHORT-TERM SECURITIES              

Money Market Funds (B) – 0.3%

 

State Street Institutional U.S. Government Money Market Fund – Premier Class, 0.030%

     3,389       3,389  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 0.3%

 

   $ 3,389  

(Cost: $3,389)

      
 

TOTAL INVESTMENT SECURITIES – 100.1%

 

   $ 1,023,680  

(Cost: $563,220)

      
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (0.1)%

 

     (1,033 ) 
 

NET ASSETS – 100.0%

 

   $ 1,022,647  
 

 

     
    2021       ANNUAL REPORT       39  

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP GROWTH (in thousands)

 

 

 

DECEMBER 31, 2021

 

Notes to Schedule of Investments

 

(A)

No dividends were paid during the preceding 12 months.

 

(B)

Rate shown is the annualized 7-day yield at December 31, 2021.

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 1,020,291      $ —      $ —  

Short-Term Securities

     3,389        —        —  

Total

   $ 1,023,680      $ —      $ —  

 

See Accompanying Notes to Financial Statements.

 

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MANAGEMENT DISCUSSION   DELAWARE IVY VIP HIGH INCOME

 

 

 

(UNAUDITED)

 

On September 13, 2021, the Board of Trustees (Board) of Ivy Variable Insurance Portfolios approved the appointment of the portfolio manager team of Adam H. Brown and John P. McCarthy of Delaware Management Company (DMC) as new portfolio managers. In connection with this change, the Board approved applicable revisions to the Portfolio’s investment strategies and benchmark. All changes took effect on November 15, 2021.

Effective November 15, 2021, the Portfolio’s new benchmark index is the ICE BofA US High Yield Constrained Index. The Manager believes that this index is more consistent with the investment philosophy of the Portfolio and more reflective of the types of securities in which the Portfolio invests than the previous benchmark index. Both the new benchmark index and the Portfolio’s previous benchmark index are included for comparison purposes.

Below, Adam H. Brown and John P. McCarthy, portfolio managers of Delaware Ivy VIP High Income, discusses positioning, performance and results for the fiscal year ended December 31, 2021.

Fiscal Year Performance

 

 

For the 12 Months Ended December 31, 2021

         

Delaware Ivy VIP High Income (Class II shares at net asset value)

      6.06%  

Benchmark

         

ICE BofA US High Yield Constrained Index

     5.35%  

(generally reflects the performance of securities representing US dollar-denominated high yield corporate debt publicly issued in the US domestic market, but caps individual issuer exposure at 2% of the benchmark)

         

ICE BofA US High Yield Index

      5.36%  

(generally reflects the performance of securities representing the high-yield sector of the bond market)

         

Please note that the Portfolio returns include applicable fees and expenses, whereas the index returns do not include any such fees. Also, the Portfolio’s performance data does not take into account any product expenses or charges associated with owning a variable life or annuity policy, which is invested in Ivy Variable Insurance Portfolios.

Market review

 

Despite insistent headlines about rising interest rates, surging inflation, snarled supply chains, reduced monetary support, and soaring COVID-19 infections, the domestic high-yield bond market sailed through 2021 with few if any episodes of significant volatility. And for good reasons: The asset class itself was supported by healthy corporate balance sheets, corporate earnings that met or beat expectations, and continued solid demand in a world hungry for yield. It was that income advantage, along with about three quarters of a percentage point in spread compression, that allowed high-yield bond prices to offset some of the downward pressure exerted from a similar-sized rise in Treasury bond yields over the period.

Any mini-dramas of consequence for high yield were mostly confined toward the end of the Portfolio’s fiscal year, as worries about the economic impact of the fast-spreading Omicron variant mixed with the US Federal Reserve’s (Fed) acknowledgement that inflation was not “transitory.” This helped to push yields higher and called into question growth projections for the new year. Still, by historical standards, high-yield bonds enjoyed a stretch of unusual equilibrium, with benchmark yields finishing the period virtually unchanged from a year earlier. However, at only about three percentage points over equivalent-maturity Treasuries, high-yield credit spreads were well below historical averages and close to the scant levels last seen just before the global financial crisis more than a decade earlier.

Given the strength of the economic rebound from the COVID-19 recession, we were not surprised that high-yield leadership was concentrated in the CCC-rated credit bucket, which returned 10.25% for the fiscal year, versus 4.83% and 4.50% for B- and BB-rated bonds, respectively. Economically sensitive sectors, including commodities (especially energy), metals and mining (primarily steel, copper, and aluminum), and transportation (mostly airlines) also generated strong returns. In contrast, traditionally defensive, higher-quality, longer-duration sectors such as cable/satellite, healthcare, telecommunications, and utilities lagged well behind. Except for a few weeks in October and November 2021, when a more pronounced risk-off mindset temporarily took hold, the relative strength of those sectors remained fairly constant.

 

     
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Performance review

 

The Portfolio outperformed its benchmark index for the fiscal year. The Portfolio meaningfully outperformed during the first quarter. The high-yield bond portion of the Portfolio performed well. Contributors to performance were credit picks in telecommunications (both wireline and wireless), rentals and aerospace/defense. The biggest detractor from performance was driven by an underweight to the energy sector. Leverage loan investments outperformed the index as credits in the retail, manufacturing, and electronic sectors drove the outperformance. Detractors from performance were credits in the food and broadcasting sectors.

During the second quarter, the high-yield bond portion of the Portfolio outperformed the benchmark index. Contributors to performance were credit picks in telecommunications (both wireline and wireless) and retail as well as underweights in the cable and media industries. The biggest detractor from performance in the period was being underweight the energy sector relative to the benchmark and credit picks in the service sector. Leverage loan investments underperformed the benchmark. Credits in the mining and retail industries drove underperformance. Contributors to performance were credits in electronics and energy.

During the third quarter, the high-yield bond portion of the Fund performed in line with the benchmark. Contributors to performance were credit picks in advertising as well as underweights in the healthcare and automotive industries. The biggest detractor from performance in the period was being underweight the energy sector relative to the benchmark and credit picks in the aerospace/defense and satellite sectors. Leverage loan investments outperformed the benchmark. Credits in the energy and service industries drove outperformance.

For the fourth quarter of the fiscal year, the Portfolio outperformed its benchmark index. The Portfolio’s largest sector contributors were technology, financials, and telecommunications. All three sectors contributed to the Portfolio’s performance due to strong credit selection. The Portfolio’s largest sector detractors for the quarter were energy, automotive, and basic industry. The Portfolio underperformed within the energy sector due to both an underweight and poor credit selection. In the automotive and basic industry sectors, the Portfolio’s underweights versus the benchmark weighed on performance.

Outlook

 

It also should be noted, in our opinion, that the binary risk-on, risk-off sentiment that has held sway over financial markets during the two-plus years of the coronavirus pandemic inevitably rewards – and sometimes punishes on a relative basis – securities based largely on their industry affiliation. And while portfolio management teams by necessity tack carefully into those forceful sector headwinds, such maneuvers still leave some groups trailing others, and often by significant amounts. In the current environment, those laggards have been the most defensive sectors, a condition that we believe will prevail into the new fiscal year.

We think the third year of recovery from the 2020 recession is likely to resemble the second year – at least at the start – and have maintained the portfolio to reflect that possibility. Specifically, we remain overweight cyclically sensitive CCC-rated bonds, albeit with an emphasis on higher-quality issuers within that lower credit tier. As always, the Portfolio carries no significant sector under- or overweights. Finally, we will consider marginally adding risk – and therefore current yield – to the portfolio when we believe market conditions warrant.

We are mindful of the possibility that the Fed might have fallen far enough behind the inflationary curve that policymakers could choose to aggressively raise benchmark interest rates to bring cost pressures under control. Such a scenario would likely cause real and nominal yields to rise, credit spreads to widen, and corporate fundamentals to erode as the economy slowed. As such, we shall remain disciplined in our approach to adding risk.

We continue to construct the Portfolio on a bottom-up, bond-by-bond basis, at all times. It is our belief that this in-depth credit analysis is crucial to generating what we view as solid risk-adjusted returns.

Effective July 1, 2021, the Portfolio name changed from Ivy VIP High Income.

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

 

42   ANNUAL REPORT   2021  
     

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Past performance is not a guarantee of future results. As with any investment, the value of the Portfolio’s shares will change, and you could lose money on your investment.

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. 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 to obtain precise valuations of the high yield securities.

International investments entail risks including fluctuation in currency values, differences in accounting principles, or economic or political instability. Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility, lower trading volume, and higher risk of market closures. In many emerging markets, there is substantially less publicly available information and the available information may be incomplete or misleading. Legal claims are generally more difficult to pursue.

IBOR risk is the risk that changes related to the use of the London interbank offered rate (LIBOR) or similar rates (such as EONIA) could have adverse impacts on financial instruments that reference these rates. The abandonment of these rates and transition to alternative rates could affect the value and liquidity of instruments that reference them and could affect investment strategy performance.

Natural or environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis, and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics, have been and can be highly disruptive to economies and markets, adversely impacting individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Portfolio’s investments. Given the increasing interdependence among global economies and markets, conditions in one country, market, or region are increasingly likely to adversely affect markets, issuers, and/or foreign exchange rates in other countries. These disruptions could prevent the Portfolio from executing advantageous investment decisions in a timely manner and could negatively impact the Portfolio’s ability to achieve its investment objective. Any such event(s) could have a significant adverse impact on the value and risk profile of the Portfolio.

The opinions expressed in this report are those of the portfolio managers and are current only through the end of the period of the report as stated on the cover. The portfolio managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged, includes reinvested dividends, and does not include fees. One cannot invest directly in an index, nor is an index representative of the Delaware Ivy VIP High Income.

 

     
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Table of Contents
PORTFOLIO HIGHLIGHTS   DELAWARE IVY VIP HIGH INCOME(a)

 

 

 

ALL DATA IS AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Asset Allocation

 

Stocks

     8.0%  

Financials

     3.8%  

Energy

     1.7%  

Consumer Discretionary

     1.4%  

Communication Services

     1.1%  

Consumer Staples

     0.0%  

Industrials

     0.0%  

Warrants

     0.0%  

Bonds

     83.0%  

Corporate Debt Securities

     59.3%  

Loans

     22.8%  

Municipal Bonds

     0.9%  

Liabilities (Net of Cash and Other Assets),
and Cash Equivalents+

     9.0%  

Quality Weightings

 

Non-Investment Grade

     83.0%  

BB

     7.2%  

B

     44.6%  

CCC

     28.1%  

Below CCC

     0.3%  

Non-rated

     2.8%  

Liabilities (Net of Cash and Other Assets), Cash Equivalents+ and Equities

     17.0%  

Our preference is to always use ratings obtained from Standard & Poor’s, Moody’s, and Fitch. It is each Portfolio’s general policy to classify such security at the lower rating level if only two ratings are available. If more than two ratings are available and a median exists, the median is used. If more than two ratings exist without a median, the lower of the two middle ratings is used. We do not evaluate these ratings, but simply assign them to the appropriate credit quality category as determined by the rating agency.

 

 

+Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

(a)Effective July 1, 2021, the name of Ivy VIP High Income changed to Delaware Ivy VIP High Income.

 

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COMPARISON OF CHANGE IN VALUE IN $10,000 INVESTMENT   DELAWARE IVY VIP HIGH INCOME(a)

 

 

 

(UNAUDITED)

 

LOGO

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class I      Class II  

1-year period ended 12-31-21

      6.33%        6.06%  

5-year period ended 12-31-21

      —        5.48%  

10-year period ended 12-31-21

      —        6.60%  

Since Inception of Class through 12-31-21(3)

      5.40%        —  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

 

(3)

4-28-17 (the date on which shares were first acquired by shareholders).

 

(a)

Effective July 1, 2021, the name of Ivy VIP High Income changed to Delaware Ivy VIP High Income.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

(b)Effective November 15, 2021, the Portfolio’s new benchmark is the ICE BofA U.S. High Yield Constrained Index. DMC believes that this index is more reflective of the types of securities that the Portfolio invests in. Both the new benchmark and the Portfolio’s previous benchmark noted above are included for comparison purposes.

 

     
    2021       ANNUAL REPORT       45  

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP HIGH INCOME (in thousands)

 

 

 

DECEMBER 31, 2021

 

COMMON STOCKS   Shares     Value  

Communication Services

 

 

Integrated Telecommunication Services – 1.1%

 

Frontier Communications Corp. (A)

     325     $ 9,576  
   

 

 

  
 

Total Communication Services – 1.1%

 

     9,576  

Consumer Discretionary

 

 

Apparel Retail – 0.1%

 

True Religion Apparel, Inc. (A)(B)(C)(D)

     — *      556  
   

 

 

  
 

Casinos & Gaming – 0.7%

 

New Cotai Participation Corp., Class B (A)(B)(D)(E)

     3,073       3,930  

Studio City International Holdings Ltd. ADR (A)

     343       1,829  

Studio City International Holdings Ltd. ADR (A)(B)

     141       753  
   

 

 

  
      6,512  
   

 

 

  
 

Education Services – 0.6%

 

Laureate Education, Inc., Class A

     443       5,418  
   

 

 

  
 

Total Consumer Discretionary – 1.4%

 

     12,486  

Consumer Staples

 

 

Food Distributors – 0.0%

 

ASG Warrant Corp. (A)(B)(C)(D)

     1       —  
   

 

 

  
 

Total Consumer Staples – 0.0%

 

     —  

Energy

 

 

Coal & Consumable Fuels – 0.5%

 

Foresight Energy L.P. (A)(B)(D)

     186       4,283  

Westmoreland Coal Co. (A)(C)

     29       72  
   

 

 

  
      4,355  
   

 

 

  
 

Oil & Gas Drilling – 0.3%

 

KCA Deutag UK Finance plc (A)(C)

     27       2,378  

Vantage Drilling Co., Units (A)

     — *      3  
   

 

 

  
      2,381  
   

 

 

  

Oil & Gas Equipment & Services – 0.0%

 

Larchmont Resources LLC (A)(B)(C)(D)(E)

     1       92  
   

 

 

  
 

Oil & Gas Exploration & Production – 0.0%

 

Sabine Oil & Gas Corp. (A)(B)(C)

     — *      1  
   

 

 

  
 

Total Energy – 0.8%

 

     6,829  

Industrials

 

 

Air Freight & Logistics – 0.0%

 

BIS Industries Ltd. (B)(C)(D)

     1,605       — * 
   

 

 

  
 

Total Industrials – 0.0%

 

     — * 
 

TOTAL COMMON STOCKS – 3.3%

 

   $ 28,891  

(Cost: $56,705)

 

INVESTMENT FUNDS   Shares     Value  

Registered Investment Companies – 3.8%

 

Invesco Senior Loan ETF (F)

     424     $ 9,374  

iShares iBoxx $ High Yield Corporate Bond ETF (F)

     290       25,233  
   

 

 

  
      34,607  
   

 

 

  
 

TOTAL INVESTMENT FUNDS – 3.8%

 

   $ 34,607  

(Cost: $33,375)

 

 

PREFERRED STOCKS

                

Consumer Discretionary

 

 

Apparel Retail – 0.0%

 

True Religion Apparel, Inc. (A)(B)(C)

     — *      119  
   

 

 

  
 

Total Consumer Discretionary – 0.0%

 

     119  

Energy

 

 

Oil & Gas Exploration & Production – 0.9%

 

Targa Resources Corp., 9.500% (A)(B)

     8       8,128  
   

 

 

  
 

Total Energy – 0.9%

 

     8,128  
 

TOTAL PREFERRED STOCKS – 0.9%

 

   $ 8,247  

(Cost: $8,808)

 

 

WARRANTS

                

Oil & Gas Exploration & Production – 0.0%

 

California Resources Corp., expires 10-27-24 (G)

     8       96  
   

 

 

  
 

TOTAL WARRANTS – 0.0%

 

   $ 96  

(Cost: $674)

 

 
CORPORATE DEBT SECURITIES   Principal         

Communication Services

 

 

Advertising – 1.8%

 

Advantage Sales & Marketing, Inc., 6.500%, 11-15-28 (H)

   $ 5,940       6,232  

Centerfield Media Holdings LLC, 6.625%, 8-1-26 (H)

     1,634       1,640  

Midas OpCo Holdings LLC,
5.625%, 8-15-29 (H)

     8,171       8,378  
   

 

 

  
      16,250  
   

 

 

  
 

Broadcasting – 1.2%

 

Clear Channel International B.V., 6.625%, 8-1-25 (H)

     572       595  

Clear Channel Outdoor Holdings, Inc.:

      

5.125%, 8-15-27 (H)

     5,583       5,784  

7.750%, 4-15-28 (H)

     2,016       2,160  

7.500%, 6-1-29 (H)

     2,657       2,841  
   

 

 

  
      11,380  
   

 

 

  

CORPORATE DEBT SECURITIES

(Continued)

   Principal     Value  

Cable & Satellite – 6.6%

 

Altice Financing S.A.,
5.750%, 8-15-29 (H)

   $ 5,719     $ 5,670  

Altice France Holding S.A.:

      

10.500%, 5-15-27 (H)

     4,453       4,793  

6.000%, 2-15-28 (H)

     10,750       10,286  

Altice France S.A.:

      

5.125%, 7-15-29 (H)

     2,375       2,321  

5.500%, 10-15-29 (H)

     1,292       1,275  

CSC Holdings LLC:

      

5.750%, 1-15-30 (H)

     1,372       1,370  

4.500%, 11-15-31 (H)

     1,754       1,735  

5.000%, 11-15-31 (F)(H)

     2,381       2,298  

DIRECTV Holdings LLC and DIRECTV Financing Co., Inc.,
5.875%, 8-15-27 (H)

     3,307       3,390  

DISH DBS Corp.:

      

7.750%, 7-1-26

     2,868       3,029  

7.375%, 7-1-28

     751       762  

5.125%, 6-1-29

     3,322       3,028  

LCPR Senior Secured Financing Designated Activity Co.,
5.125%, 7-15-29 (H)

     913       919  

Ligado Networks LLC (15.500% Cash or 15.500% PIK),
15.500%, 11-1-23 (H)(I)

     7,689       6,041  

Ligado Networks LLC (17.500% Cash or 17.500% PIK),
17.500%, 5-1-24 (H)(I)

     599       264  

Telesat Canada and Telesat LLC:

      

5.625%, 12-6-26 (H)

     6,406       6,023  

6.500%, 10-15-27 (H)

     1,130       878  

VTR Comunicaciones S.p.A.,
4.375%, 4-15-29 (H)

     3,166       3,139  

VTR Finance B.V.,
6.375%, 7-15-28 (H)

     2,826       2,943  
   

 

 

  
      60,164  
   

 

 

  
 

Integrated Telecommunication Services – 4.4%

 

Cablevision Lightpath LLC,
5.625%, 9-15-28 (H)

     1,225       1,209  

Consolidated Communications, Inc.:

      

5.000%, 10-1-28 (H)

     1,129       1,142  

6.500%, 10-1-28 (H)

     2,423       2,575  

Frontier Communications Corp.:

      

5.875%, 10-15-27 (H)

     316       335  

6.750%, 5-1-29 (H)

     3,287       3,423  

5.875%, 11-1-29

     1,011       1,013  

Frontier Communications Holdings LLC,
6.000%, 1-15-30 (H)

     805       810  

Northwest Fiber LLC,
10.750%, 6-1-28 (H)

     1,327       1,448  

Northwest Fiber LLC and Northwest Fiber Finance Sub, Inc.,
6.000%, 2-15-28 (F)(H)

     1,703       1,672  

West Corp.,
8.500%, 10-15-25 (F)(H)

     19,709       19,434  

Windstream Escrow LLC, 7.750%, 8-15-28 (H)

     6,396       6,792  
   

 

 

  
      39,853  
   

 

 

  
 

 

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SCHEDULE OF INVESTMENTS  

DELAWARE IVY VIP HIGH INCOME (in  thousands)

 

 

 

DECEMBER 31, 2021

 

CORPORATE DEBT SECURITIES

(Continued)

   Principal     Value  

Interactive Media & Services – 0.3%

 

Cars.com, Inc.,
6.375%, 11-1-28 (H)

   $ 2,355     $ 2,511  
   

 

 

  
 

Movies & Entertainment – 1.3%

 

Premier Entertainment Sub LLC and Premier Entertainment Finance Corp.:

      

5.625%, 9-1-29 (H)

     7,330       7,283  

5.875%, 9-1-31 (H)

     4,385       4,407  
   

 

 

  
      11,690  
   

 

 

  
 

Wireless Telecommunication Service – 3.9%

 

Digicel Group Ltd.,
8.750%, 5-25-24 (H)

     1,651       1,696  

Digicel Group Ltd. (5.000% Cash and 3.000% PIK),
8.000%, 4-1-25 (H)(I)

     1,331       1,235  

Digicel Group Ltd. (7.000% Cash or 7.000% PIK),
7.000%, 10-1-68 (H)(I)

     582       507  

Digicel International Finance Ltd.:

      

8.750%, 5-25-24 (H)

     11,226       11,533  

8.000%, 12-31-26 (H)

     1,474       1,443  

Digicel International Finance Ltd. (6.000% Cash and 7.000% PIK),
13.000%, 12-31-25 (H)(I)

     767       791  

Digicel International Finance Ltd. (8.000% Cash and 2.000% PIK or 10.000% PIK),
10.000%, 4-1-24 (I)

     7,585       7,593  

Digicel Ltd.,
6.750%, 3-1-23 (H)

     10,833       10,481  
   

 

 

  
      35,279  
   

 

 

  
 

Total Communication Services – 19.5%

 

     177,127  

Consumer Discretionary

 

 

Apparel Retail – 0.5%

 

Victoria’s Secret & Co.,
4.625%, 7-15-29 (H)

     4,478       4,585  
   

 

 

  
 

Automotive Retail – 1.4%

 

Asbury Automotive Group, Inc.:

      

4.500%, 3-1-28

     2,577       2,632  

4.625%, 11-15-29 (H)

     85       87  

4.750%, 3-1-30

     4,451       4,530  

5.000%, 2-15-32 (H)

     85       88  

Ken Garff Automotive LLC, 4.875%, 9-15-28 (H)

     781       783  

Lithia Motors, Inc.:

      

3.875%, 6-1-29 (H)

     1,666       1,703  

4.375%, 1-15-31 (H)

     1,271       1,359  

Sonic Automotive, Inc.:

      

4.625%, 11-15-29 (H)

     837       846  

4.875%, 11-15-31 (H)

     837       847  
   

 

 

  
      12,875  
   

 

 

  
 

Casinos & Gaming – 0.7%

 

Everi Holdings, Inc.,
5.000%, 7-15-29 (H)

     1,625       1,644  

CORPORATE DEBT SECURITIES

(Continued)

   Principal     Value  

Casinos & Gaming (Continued)

 

Golden Nugget, Inc.,
6.750%, 10-15-24 (F)(H)

   $ 4,290     $ 4,296  
   

 

 

  
      5,940  
   

 

 

  
 

Education Services – 1.0%

 

Adtalem Global Education, Inc., 5.500%, 3-1-28 (H)

     9,502       9,302  
   

 

 

  

Hotels, Resorts & Cruise Lines – 1.9%

 

Boyne USA, Inc.,
4.750%, 5-15-29 (H)

     801       826  

Carnival Corp.:

      

10.500%, 2-1-26 (H)

     394       450  

7.625%, 3-1-26 (H)

     793       832  

5.750%, 3-1-27 (H)

     3,843       3,849  

9.875%, 8-1-27 (H)

     1,550       1,773  

NCL Corp. Ltd.:

      

12.250%, 5-15-24 (H)

     1,924       2,282  

10.250%, 2-1-26 (H)

     1,213       1,412  

5.875%, 3-15-26 (H)

     784       782  

Royal Caribbean Cruises Ltd., 5.500%, 4-1-28 (H)

     4,912       4,977  
   

 

 

  
      17,183  
   

 

 

  
 

Internet & Direct Marketing Retail – 1.0%

 

Arches Buyer, Inc.:

      

4.250%, 6-1-28 (H)

     4,746       4,752  

6.125%, 12-1-28 (H)

     3,964       3,995  
   

 

 

  
      8,747  
   

 

 

  
 

Leisure Facilities – 0.4%

 

Legends Hospitality Holding Co. LLC, 5.000%, 2-1-26 (H)

     479       482  

Live Nation Entertainment, Inc., 4.750%, 10-15-27 (H)

     2,724       2,803  
   

 

 

  
      3,285  
   

 

 

  
 

Leisure Products – 0.7%

 

MajorDrive Holdings IV LLC, 6.375%, 6-1-29 (H)

     6,450       6,249  
   

 

 

  
 

Specialized Consumer Services – 1.1%

 

Nielsen Finance LLC and Nielsen Finance Co.:

      

5.625%, 10-1-28 (H)

     2,343       2,423  

5.875%, 10-1-30 (H)

     1,926       2,037  

StoneMor, Inc.,
8.500%, 5-15-29 (F)(H)

     5,085       5,260  
   

 

 

  
      9,720  
   

 

 

  
 

Specialty Stores – 5.0%

 

Bed Bath & Beyond, Inc.,
5.165%, 8-1-44

     1,921       1,598  

Magic MergerCo, Inc.:

      

5.250%, 5-1-28 (H)

     2,801       2,807  

7.875%, 5-1-29 (H)

     6,793       6,703  

Party City Holdings, Inc.,
8.750%, 2-15-26 (H)

     1,105       1,142  

Party City Holdings, Inc. (5.000% Cash and 5.000% PIK), 10.000%, 8-15-26 (H)(I)

     226       236  

CORPORATE DEBT SECURITIES

(Continued)

   Principal     Value  

Specialty Stores (Continued)

 

PetSmart, Inc. and PetSmart Finance Corp.:

      

4.750%, 2-15-28 (H)

   $ 3,959     $ 4,070  

7.750%, 2-15-29 (H)

     868       944  

Staples, Inc.:

      

7.500%, 4-15-26 (H)

     20,079       20,657  

10.750%, 4-15-27 (H)

     8,805       8,308  
   

 

 

  
      46,465  
   

 

 

  
 

Total Consumer Discretionary – 13.7%

 

     124,351  

Consumer Staples

 

 

Food Distributors – 0.5%

 

Performance Food Group, Inc., 4.250%, 8-1-29 (H)

     5,216       5,183  
   

 

 

  
 

Packaged Foods & Meats – 0.8%

 

Pilgrim’s Pride Corp.,
4.250%, 4-15-31 (H)

     3,775       3,970  

Post Holdings, Inc.,
4.500%, 9-15-31 (H)

     1,618       1,608  

Simmons Foods, Inc.,
4.625%, 3-1-29 (H)

     1,590       1,569  
   

 

 

  
      7,147  
   

 

 

  
 

Total Consumer Staples – 1.3%

 

     12,330  

Energy

 

 

Oil & Gas Drilling – 0.2%

 

KCA Deutag UK Finance plc:

      

9.875%, 12-1-25

     1,654       1,789  
   

 

 

  
      1,789  
   

 

 

  
 

Oil & Gas Equipment & Services – 0.1%

 

Nine Energy Service, Inc., 8.750%, 11-1-23 (H)

     1,917       894  
   

 

 

  
 

Oil & Gas Exploration & Production – 2.8%

 

Antero Resources Corp.,
5.375%, 3-1-30 (H)

     666       713  

Ascent Resources Utica Holdings LLC and ARU Finance Corp.:

      

7.000%, 11-1-26 (H)

     1,898       1,926  

8.250%, 12-31-28 (H)

     157       164  

5.875%, 6-30-29 (H)

     809       780  

Bellatrix Exploration Ltd.,
8.500%, 9-11-23 (D)(J)

     1,022       — * 

Bellatrix Exploration Ltd. (3.000% Cash and 9.500% PIK),
9.500%, 12-15-23 (D)(I)(J)

     1,113       — * 

California Resources Corp.,
7.125%, 2-1-26 (H)

     481       500  

Chesapeake Escrow Issuer LLC:

      

5.500%, 2-1-26 (H)

     1,603       1,689  

5.875%, 2-1-29 (H)

     1,202       1,288  

Colgate Energy Partners III LLC, 5.875%, 7-1-29 (H)

     646       666  

Crownrock L.P.,
5.625%, 10-15-25 (H)

     5,764       5,900  
 

 

     
    2021       ANNUAL REPORT       47  

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP HIGH INCOME (in thousands)

 

 

 

DECEMBER 31, 2021

 

CORPORATE DEBT SECURITIES

(Continued)

   Principal     Value  

Oil & Gas Exploration & Production (Continued)

 

CrownRock L.P. and CrownRock Finance, Inc.,
5.000%, 5-1-29 (H)

   $ 792     $ 823  

Laredo Petroleum, Inc.:

      

9.500%, 1-15-25

     4,315       4,406  

10.125%, 1-15-28

     2,876       3,020  

Murphy Oil Corp.,
6.375%, 7-15-28

     643       684  

Range Resources Corp.,
8.250%, 1-15-29

     158       176  

Vine Energy Holdings LLC,
6.750%, 4-15-29

     3,165       3,440  
   

 

 

  
      26,175  
   

 

 

  
 

Oil & Gas Refining & Marketing – 1.7%

 

Callon Petroleum Co. (GTD by Callon Petroleum Operating Co.):

      

6.125%, 10-1-24

     1,081       1,066  

9.000%, 4-1-25 (F)(H)

     317       343  

Comstock Resources, Inc.:

      

6.750%, 3-1-29 (H)

     3,716       4,037  

5.875%, 1-15-30 (H)

     1,937       1,988  

CVR Energy, Inc.,
5.250%, 2-15-25 (H)

     1,531       1,479  

PBF Holding Co. LLC,
9.250%, 5-15-25 (H)

     7,266       6,920  
   

 

 

  
      15,833  
   

 

 

  
 

Oil & Gas Storage & Transportation – 1.4%

 

Crestwood Midstream Partners L.P.:

      

5.750%, 4-1-25

     801       820  

5.625%, 5-1-27 (H)

     1,636       1,668  

6.000%, 2-1-29 (H)

     320       333  

Genesis Energy L.P. and Genesis Energy Finance Corp.:

      

8.000%, 1-15-27

     4,735       4,885  

7.750%, 2-1-28

     3,030       3,057  

Hess Midstream Operations L.P., 4.250%, 2-15-30 (H)

     654       650  

Rattler Midstream L.P.,
5.625%, 7-15-25 (H)

     1,528       1,591  
   

 

 

  
      13,004  
   

 

 

  
 

Total Energy – 6.2%

 

     57,695  
 

Financials

 

 

Insurance Brokers – 2.8%

 

Ardonagh Midco 2 plc,
11.500%, 1-15-27 (H)

     7,105       7,945  

NFP Corp.,
6.875%, 8-15-28 (H)

     17,404       17,480  
   

 

 

  
      25,425  
   

 

 

  
 

Investment Banking & Brokerage – 0.5%

 

INTL FCStone, Inc.,
8.625%, 6-15-25 (H)

     3,835       4,078  
   

 

 

  

CORPORATE DEBT SECURITIES

(Continued)

   Principal     Value  

Property & Casualty Insurance – 1.0%

 

Highlands Holdings Bond Issuer Ltd. and Highlands Holdings Bond Co-Issuer, Inc.
(7.625% Cash or 8.375% PIK),
7.625%, 10-15-25 (H)(I)

   $ 4,059     $ 4,307  

Hub International Ltd.,
5.625%, 12-1-29 (H)

     4,195       4,328  
   

 

 

  
      8,635  
   

 

 

  
 

Specialized Finance – 1.6%

 

BCPE Cycle Merger Sub II, Inc., 10.625%, 7-15-27 (H)

     8,340       8,473  

Compass Group Diversified Holdings LLC,
5.250%, 4-15-29 (H)

     6,378       6,692  
   

 

 

  
      15,165  
   

 

 

  
 

Thrifts & Mortgage Finance – 0.7%

 

Provident Funding Associates L.P. and PFG Finance Corp.,
6.375%, 6-15-25 (H)

     6,187       6,305  
   

 

 

  
 

Total Financials – 6.6%

 

     59,608  

Health Care

 

 

Health Care Facilities – 0.4%

 

Tenet Healthcare Corp.,
4.375%, 1-15-30 (H)

     3,810       3,867  
   

 

 

  
 

Health Care Services – 0.5%

 

Heartland Dental LLC,
8.500%, 5-1-26 (H)

     509       526  

ModivCare Escrow Issuer, Inc., 5.000%, 10-1-29 (H)

     3,472       3,551  
   

 

 

  
      4,077  
   

 

 

  
 

Health Care Supplies – 0.6%

 

Mozart Debt Merger Sub, Inc.:

      

3.875%, 4-1-29 (H)

     4,981       4,974  

5.250%, 10-1-29 (H)

     884       898  
   

 

 

  
      5,872  
   

 

 

  
 

Pharmaceuticals – 0.9%

 

P&L Development LLC and PLD Finance Corp.,
7.750%, 11-15-25 (H)

     4,958       4,969  

Par Pharmaceutical, Inc.,
7.500%, 4-1-27 (H)

     2,936       3,005  
   

 

 

  
      7,974  
   

 

 

  
 

Total Health Care – 2.4%

 

     21,790  

Industrials

 

 

Aerospace & Defense – 3.1%

 

TransDigm, Inc. (GTD by TransDigm Group, Inc.):

      

7.500%, 3-15-27

     2,709       2,834  

5.500%, 11-15-27

     7,030       7,253  

4.625%, 1-15-29

     1,597       1,595  

CORPORATE DEBT SECURITIES

(Continued)

   Principal     Value  

Aerospace & Defense (Continued)

 

Wolverine Escrow LLC:

      

8.500%, 11-15-24 (F)(H)

   $ 7,126     $ 6,617  

9.000%, 11-15-26 (F)(H)

     9,546       9,079  

13.125%, 11-15-27 (F)(H)

     858       550  
   

 

 

  
      27,928  
   

 

 

  
 

Building Products – 0.1%

 

CP Atlas Buyer, Inc.,
7.000%, 12-1-28 (H)

     1,146       1,142  
   

 

 

  
 

Diversified Support Services – 1.3%

 

Ahern Rentals, Inc.,
7.375%, 5-15-23 (H)

     3,526       3,372  

Deluxe Corp.,
8.000%, 6-1-29 (H)

     2,083       2,180  

Nesco Holdings II, Inc.,
5.500%, 4-15-29 (H)

     4,712       4,873  

PECF USS Intermediate Holding III Corp., 8.000%, 11-15-29 (H)

     1,330       1,379  
   

 

 

  
      11,804  
   

 

 

  
 

Security & Alarm Services – 0.3%

 

Prime Security Services Borrower LLC and Prime Finance, Inc.,
6.250%, 1-15-28 (H)

     2,158       2,253  
   

 

 

  
 

Total Industrials – 4.8%

 

     43,127  

Information Technology

 

 

Application Software – 2.1%

 

J2 Global, Inc.,
4.625%, 10-15-30 (H)

     939       965  

Kronos Acquisition Holdings, Inc. and KIK Custom Products, Inc.:

      

5.000%, 12-31-26 (F)(H)

     2,411       2,384  

7.000%, 12-31-27 (H)

     1,757       1,659  

NCR Corp.:

      

5.750%, 9-1-27 (H)

     772       807  

5.000%, 10-1-28 (H)

     2,287       2,359  

5.125%, 4-15-29 (H)

     8,677       8,998  

6.125%, 9-1-29 (H)

     983       1,055  

5.250%, 10-1-30 (H)

     782       805  
   

 

 

  
      19,032  
   

 

 

  
 

Data Processing & Outsourced Services – 0.1%

 

MoneyGram International, Inc., 5.375%, 8-1-26 (H)

     815       828  
   

 

 

  
 

Internet Services & Infrastructure – 0.3%

 

Consensus Cloud Solutions, Inc.:

      

6.000%, 10-15-26 (H)

     830       864  

6.500%, 10-15-28 (H)

     1,992       2,085  
   

 

 

  
      2,949  
   

 

 

  
 

IT Consulting & Other Services – 0.1%

 

Sabre GLBL, Inc. (GTD by Sabre Holdings Corp.):

      

9.250%, 4-15-25 (H)

     756       855  

7.375%, 9-1-25 (H)

     313       327  
   

 

 

  
      1,182  
   

 

 

  
 

 

48   ANNUAL REPORT   2021  
     

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP HIGH INCOME (in thousands)

 

 

 

DECEMBER 31, 2021

 

CORPORATE DEBT SECURITIES

(Continued)

   Principal     Value  
 

Technology Hardware, Storage & Peripherals – 0.3%

 

Brightstar Escrow Corp.,
9.750%, 10-15-25 (H)

   $ 2,165     $ 2,324  
   

 

 

  
 

Total Information Technology – 2.9%

 

     26,315  

Materials

 

 

Commodity Chemicals – 0.8%

 

LSF9 Atlantis Holdings LLC and Victra Finance Corp.,
7.750%, 2-15-26 (H)

     4,013       4,063  

NOVA Chemicals Corp.:

      

5.250%, 6-1-27 (H)

     1,655       1,764  

4.250%, 5-15-29 (H)

     1,591       1,600  
   

 

 

  
      7,427  
   

 

 

  
 

Metal & Glass Containers – 0.3%

 

ARD Finance S.A. (6.500% Cash or 7.250% PIK),
6.500%, 6-30-27 (H)(I)

     2,463       2,539  
   

 

 

  
 

Total Materials – 1.1%

 

     9,966  

Real Estate

 

 

Specialized REITs – 0.0%

 

Uniti Group L.P., Uniti Group Finance 2019, Inc. and CSL Capital LLC (GTD by Uniti Group, Inc.), 4.750%, 4-15-28 (F)(H)

     394       391  
   

 

 

  
 

Total Real Estate – 0.0%

 

     391  

Utilities

 

 

Electric Utilities – 0.8%

 

Vistra Corp.:

      

8.000%, 4-15-70 (H)

     2,125       2,251  

7.000%, 6-15-70 (H)

     4,880       4,951  
   

 

 

  
      7,202  
   

 

 

  
 

Total Utilities – 0.8%

 

     7,202  
 

TOTAL CORPORATE DEBT SECURITIES – 59.3%

 

   $ 539,902  

(Cost: $531,228)

 

 

MUNICIPAL BONDS

                
 

Puerto Rico – 0.9%

 

Cmnwlth of PR, GO Bonds of 2014, Ser A, 8.000%, 7-1-35 (J)

     3,870       3,444  

Cmnwlth of PR, Pub Impvt Rfdg GO Bonds, Ser 2012A,
7.500%, 8-20-40

     4,675       4,465  
   

 

 

  
      7,909  
   

 

 

  
 

TOTAL MUNICIPAL BONDS – 0.9%

 

   $ 7,909  

(Cost: $7,890)

 

LOANS (K)   Principal     Value  

Communication Services

 

 

Advertising – 0.8%

 

Advantage Sales & Marketing, Inc. (1-Month U.S. LIBOR plus 450 bps), 5.250%, 10-28-27

   $ 7,327     $ 7,344  
   

 

 

  
 

Broadcasting – 0.7%

 

Clear Channel Outdoor Holdings, Inc. (ICE LIBOR plus 350 bps), 3.629%, 8-21-26

     6,465       6,384  
   

 

 

  
 

Cable & Satellite – 0.5%

 

DIRECTV Financing LLC (1-Month ICE LIBOR plus 500 bps),
5.750%, 7-22-27

     4,471       4,482  
   

 

 

  
 

Integrated Telecommunication Services – 1.6%

 

West Corp. (3-Month ICE LIBOR plus 400 bps), 5.000%, 10-10-24

     14,537       13,842  

Windstream Services LLC (ICE LIBOR plus 625 bps),
7.250%, 9-21-27

     1,268       1,275  
   

 

 

  
      15,117  
   

 

 

  
 

Wireless Telecommunication Service – 0.8%

 

Digicel International Finance Ltd. (ICE LIBOR plus 325 bps), 3.500%, 5-27-24

     7,766       7,569  
   

 

 

  
 

Total Communication Services – 4.4%

 

     40,896  
 

Consumer Discretionary

 

 

Apparel Retail – 0.6%

 

Torrid LLC (1-Month ICE LIBOR plus 550 bps), 6.250%, 6-14-28 (D)

     5,003       5,047  
   

 

 

  
 

Casinos & Gaming – 0.1%

 

New Cotai LLC (14.000% Cash or 14.000% PIK),
14.000%, 9-10-25 (B)(E)(I)

     960       935  
   

 

 

  
 

Internet & Direct Marketing Retail – 0.2%

 

CNT Holdings I Corp. (ICE LIBOR plus 675 bps), 7.500%, 11-6-28

     2,060       2,078  
   

 

 

  
 

Leisure Facilities – 0.5%

 

United PF Holdings LLC (ICE LIBOR plus 400 bps),
4.224%, 12-30-26

     4,199       4,055  

United PF Holdings LLC (ICE LIBOR plus 850 bps),
9.500%, 11-12-26 (D)

     931       933  
   

 

 

  
      4,988  
   

 

 

  
 

Leisure Products – 0.4%

 

MajorDrive Holdings IV LLC (1-Month ICE LIBOR plus 400 bps),
4.500%, 6-1-28

     3,848       3,853  
   

 

 

  
LOANS (K) (Continued)   Principal     Value  
 

Specialized Consumer Services – 0.2%

 

Pre-Paid Legal Services, Inc.,
0.000%, 12-7-29 (D)(L)

   $ 2,245     $ 2,242  
   

 

 

  
 

Specialty Stores – 2.5%

 

Jo-Ann Stores, Inc. (1-Month ICE LIBOR plus 475 bps),
5.500%, 6-30-28

     8,244       8,174  

Michaels Cos., Inc. (The) (1-Month ICE LIBOR plus 425 bps),
5.000%, 4-15-28

     2,641       2,620  

PetSmart, Inc. (ICE LIBOR plus 375 bps), 4.500%, 2-11-28

     7,192       7,216  

Staples, Inc. (ICE LIBOR plus 500 bps), 5.132%, 4-12-26

     4,244       4,110  
   

 

 

  
      22,120  
   

 

 

  
 

Total Consumer Discretionary – 4.5%

 

     41,263  

Energy

 

 

Coal & Consumable Fuels – 0.1%

 

Foresight Energy LLC (ICE LIBOR plus 800 bps),
9.500%, 6-29-27 (B)

     1,280       1,280  
   

 

 

  
 

Oil & Gas Exploration & Production – 0.2%

 

Ascent Resources Utica Holdings LLC, 0.000%, 11-1-25 (L)

     493       534  

Ascent Resources Utica Holdings LLC (1-Month ICE LIBOR plus 900 bps), 10.000%, 11-1-25

     740       802  
   

 

 

  
      1,336  
   

 

 

  
 

Oil & Gas Storage & Transportation – 0.5%

 

EPIC Crude Services L.P. (ICE LIBOR plus 500 bps), 5.180%, 3-1-26

     5,524       4,336  
   

 

 

  
 

Total Energy – 0.8%

 

     6,952  

Financials

 

 

Asset Management & Custody Banks – 0.7%

 

Edelman Financial Holdings II, Inc. (ICE LIBOR plus 675 bps),
6.854%, 7-20-26

     6,487       6,523  
   

 

 

  
 

Insurance Brokers – 0.8%

 

Navacord Corp. (1-Month Canadian Bankers Acceptances plus 425 bps), 5.000%, 3-16-28 (D)(M)

     1,162       926  

Navacord Corp. (1-Month CDOR plus 425 bps),
5.000%, 3-16-28 (D)(M)

     5,103       4,064  

Navacord Corp. (1-Month CDOR plus 750 bps),
8.000%, 3-16-29 (D)(M)

     2,586       2,044  
   

 

 

  
      7,034  
   

 

 

  
 

Property & Casualty Insurance – 0.9%

 

Amynta Agency Borrower, Inc. (ICE LIBOR plus 400 bps),
4.604%, 2-28-25

   $ 8,672       8,661  
   

 

 

  
 

 

     
    2021       ANNUAL REPORT       49  

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP HIGH INCOME (in thousands)

 

 

 

DECEMBER 31, 2021

 

LOANS (K) (Continued)   Principal     Value  
 

Specialized Finance – 0.7%

 

Gulf Finance LLC (1-Month U.S. LIBOR plus 675 bps),
7.750%, 8-25-26

   $ 4,760     $ 4,456  

Lealand Finance Co. B.V.,
0.000%, 6-30-24 (D)(L)

     23       14  

Lealand Finance Co. B.V. (ICE LIBOR plus 300 bps),
3.090%, 6-30-24 (D)

     72       43  

Sunset Debt Merger Sub, Inc., 0.000%, 9-17-28 (L)

     1,660       1,648  
   

 

 

  
      6,161  
   

 

 

  
 

Total Financials – 3.1%

 

     28,379  

Health Care

 

 

Health Care Facilities – 0.4%

 

Surgery Center Holdings, Inc. (1-Month ICE LIBOR plus 375 bps),
4.500%, 8-31-26

     3,221       3,223  
   

 

 

  
 

Health Care Services – 1.2%

 

Heartland Dental LLC (ICE LIBOR plus 375 bps),
3.604%, 4-30-25

     740       734  

U.S. Renal Care, Inc. (3-Month ICE LIBOR plus 500 bps),
5.030%, 7-26-26

     10,720       10,453  
   

 

 

  
      11,187  
   

 

 

  
 

Total Health Care – 1.6%

 

     14,410  

Industrials

 

 

Building Products – 0.5%

 

CP Atlas Buyer, Inc. (ICE LIBOR plus 375 bps), 4.250%, 11-23-27

     4,418       4,403  
   

 

 

  
 

Construction & Engineering – 0.2%

 

WaterBridge Midstream Operating LLC (3-Month ICE LIBOR plus 575 bps), 6.750%, 6-21-26

     1,993       1,948  
   

 

 

  
 

Industrial Conglomerates – 1.7%

 

PAE Holding Corp. (ICE LIBOR plus 450 bps), 5.250%, 10-19-27

     15,407       15,447  
   

 

 

  
 

Industrial Machinery – 1.3%

 

Form Technologies LLC (ICE LIBOR plus 475 bps),
5.750%, 7-22-25 (D)

     12,004       12,019  
   

 

 

  
 

Research & Consulting Services – 0.2%

 

Ankura Consulting Group LLC (ICE LIBOR plus 450 bps),
5.250%, 3-17-28 (D)

     1,567       1,575  
   

 

 

  
 

Total Industrials – 3.9%

 

     35,392  
LOANS (K) (Continued)   Principal     Value  

Information Technology

 

 

Application Software – 1.1%

 

Applied Systems, Inc. (ICE LIBOR plus 550 bps),
6.250%, 9-19-25

   $ 4,178     $ 4,224  

UKG, Inc., 0.000%, 5-3-27 (L)

     5,615       5,650  
   

 

 

  
      9,874  
   

 

 

  
 

Communications Equipment – 1.2%

 

MLN U.S. Holdco LLC (ICE LIBOR plus 450 bps),
4.603%, 11-30-25

     8,811       8,540  

MLN U.S. Holdco LLC (ICE LIBOR plus 875 bps),
8.853%, 11-30-26

     2,920       2,671  
   

 

 

  
      11,211  
   

 

 

  
 

Data Processing & Outsourced Services – 1.1%

 

CommerceHub, Inc. (1-Month ICE LIBOR plus 475 bps),
7.750%, 12-29-28 (D)

     3,112       3,050  

CommerceHub, Inc. (ICE LIBOR plus 400 bps), 4.750%, 12-29-27

     2,906       2,880  

Cyxtera DC Holdings, Inc. (ICE LIBOR plus 325 bps),
4.000%, 5-1-24

     3,378       3,347  

MoneyGram International, Inc. (1-Month U.S. LIBOR plus 425 bps), 5.000%, 7-21-26

     1,253       1,255  
   

 

 

  
      10,532  
   

 

 

  
 

IT Consulting & Other Services – 0.9%

 

Gainwell Acquisition Corp. (ICE LIBOR plus 400 bps),
4.750%, 10-1-27

     7,620       7,651  

Ivanti Software, Inc. (1-Month ICE LIBOR plus 400 bps),
4.750%, 12-1-27

     408       407  
   

 

 

  
      8,058  
   

 

 

  
 

Total Information Technology – 4.3%

 

     39,675  

Materials

 

 

Specialty Chemicals – 0.1%

 

NIC Acquisition Corp. (1-Month ICE LIBOR plus 375 bps),
4.500%, 12-29-27

     784       778  

NIC Acquisition Corp. (1-Month ICE LIBOR plus 775 bps),
8.500%, 12-29-28

     504       498  
   

 

 

  
      1,276  
   

 

 

  
 

Total Materials – 0.1%

 

     1,276  
 

TOTAL LOANS – 22.7%

 

   $ 208,243  

(Cost: $207,482)

 

SHORT-TERM SECURITIES   Shares     Value  

Money Market Funds (O) – 12.4%

 

Dreyfus Institutional Preferred Government Money Market Fund – Institutional Shares,
0.010% (N)

     44,639     $ 44,639  

State Street Institutional U.S. Government Money Market Fund – Premier Class, 0.030%

     68,388       68,388  
   

 

 

  
      113,027  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 12.4%

 

   $ 113,027  

(Cost: $113,027)

 

 

TOTAL INVESTMENT SECURITIES – 103.3%

 

   $ 940,922  

(Cost: $959,189)

 

 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (3.3)%

 

     (29,476 ) 
 

NET ASSETS – 100.0%

 

   $ 911,446  
 

 

50   ANNUAL REPORT   2021  
     

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP HIGH INCOME (in thousands)

 

 

 

DECEMBER 31, 2021

 

Notes to Schedule of Investments

 

*

Not shown due to rounding.

 

(A)

No dividends were paid during the preceding 12 months.

 

(B)

Restricted securities. At December 31, 2021, the Portfolio owned the following restricted securities:

 

Security      Acquisition Date(s)        Shares        Cost        Value         

ASG Warrant Corp.

        6-14-18          1        $ 72        $ – *   

BIS Industries Ltd.

        12-22-17          1,605          151          – *   

Foresight Energy L.P.

        6-30-20 to 9-8-20          186          3,639          4,284    

Larchmont Resources LLC

        12-8-16          1          70          92    

New Cotai Participation Corp., Class B

        9-29-20          3,073          28,520          3,930    

Sabine Oil & Gas Corp.

        12-7-16          – *         11          1    

Studio City International Holdings Ltd. ADR

        8-5-20          141          2,200          753    

True Religion Apparel, Inc.

        1-22-21          – *         1,039          556    

Targa Resources Corp., 9.500%

        10-24-17          8          8,416          8,128    

True Religion Apparel, Inc.

        1-22-21          – *         392          119    
                Principal                          

Foresight Energy LLC (ICE LIBOR plus 800 bps), 9.500%, 06-29-27

        6-29-20        $ 1,280          1,280          1,280    

New Cotai LLC (14.000% Cash or 14.000% PIK), 14.000%, 09-10-25

        9-10-20 to 3-16-21        $ 960          960          935    
              

 

 

  
               $ 46,750        $ 20,078    
              

 

 

  

 

    

The total value of these securities represented 2.2% of net assets at December 31, 2021.

 

(C)

Listed on an exchange outside the United States.

 

(D)

Securities whose value was determined using significant unobservable inputs.

 

(E)

Deemed to be an affiliate due to the Portfolio owning at least 5% of the voting securities.

 

(F)

All or a portion of securities with an aggregate value of $55,237 are on loan.

 

(G)

Warrants entitle the Portfolio to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any.

 

(H)

Securities were purchased pursuant to an exemption from registration available under Rule 144A under the Securities Act of 1933 and may only be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2021 the total value of these securities amounted to $481,033 or 52.8% of net assets.

 

(I)

Payment-in-kind bond which may pay interest in additional par and/or in cash. Rates shown are the current rate and possible payment rates.

 

(J)

Non-income producing as the issuer has either missed its most recent interest payment or declared bankruptcy.

 

(K)

Variable rate security. Interest rate disclosed is that which is in effect at December 31, 2021. Description of the reference rate and spread, if applicable, are included in the security description.

 

(L)

All or a portion of this position has not settled. Full contract rates do not take effect until settlement date.

 

(M)

Principal amounts are denominated in the indicated foreign currency, where applicable (CAD – Canadian Dollar).

 

(N)

Investment made with cash collateral received from securities on loan.

 

(O)

Rate shown is the annualized 7-day yield at December 31, 2021.

Unfunded Loan Commitments

The Portfolio may invest in floating rate loans. In connection with these investments, the Portfolio may also enter into unfunded corporate loan commitments (commitments). Commitments may obligate the Portfolio to furnish temporary financing to a borrower until permanent financing can be arranged. In connection with these commitments, the Portfolio earns a commitment fee, typically set as a percentage of the commitment amount. The following unfunded loan commitment was outstanding at December 31, 2021:

 

Borrower      Principal
Amount		        Commitment        Value        Unrealized
Appreciation		  

Navacord Corp. 0.000%, 3-16-29 (D) (L) (M)

      $ 260        $ 260        $ 206        $ 1  

The following forward foreign currency contracts were outstanding at December 31, 2021:

 

      Currency to be
Delivered		            Currency to be
Received		      Settlement
Date		      Counterparty    Unrealized
Appreciation		      Unrealized
Depreciation		  

Canadian Dollar

      9,060      U.S. Dollar      7,025        2-18-22      JPMorgan Securities LLC    $ —      $ 137  

 

     
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Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP HIGH INCOME (in thousands)

 

 

 

DECEMBER 31, 2021

 

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

        

Communication Services

   $ 9,576      $ —      $ —  

Consumer Discretionary

     8,000        —        4,486  

Energy

     —        2,454        4,375  

Industrials

     —        —        — * 

Total Common Stocks

   $ 17,576      $ 2,454      $ 8,861  

Investment Funds

     34,607        —        —  

Preferred Stocks

     —        8,247        —  

Warrants

     96        —        —  

Corporate Debt Securities

     —        539,902        — * 

Municipal Bonds

     —        7,909        —  

Loans

     —        176,286        31,957  

Short-Term Securities

     113,027        —        —  

Total

   $ 165,306      $ 734,798      $ 40,818  

Liabilities

        

Forward Foreign Currency Contracts

   $ —      $ 137      $ —  

The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

 

     Common
Stocks		     Corporate Debt
Securities		     Loans  

Beginning Balance 1-1-21

   $ 14,325     $ — *    $ 17,036  

Net realized gain (loss)

     (753 )      (2,217 )      (3,230 ) 

Net change in unrealized appreciation (depreciation)

     (4,378 )      2,217       5,990  

Purchases

     —       —       36,464  

Sales

     (270 )      —       (24,942 ) 

Amortization/Accretion of premium/discount

     —       —       (389 ) 

Transfers into Level 3 during the period

     1,039       — *      3,119  

Transfers out of Level 3 during the period

     (1,102 )      —       (2,091 ) 

Ending Balance 12-31-21

   $ 8,861     $ — *    $ 31,957  

Net change in unrealized appreciation (depreciation) for all Level 3 investments still held as of 12-31-21

   $ (5,131 )    $ 2,217     $ 199  

Transfers from Level 2 to Level 3 occurred primarily due to the lack of observable market data due to decreased market activity or information for these securities. Transfers from Level 3 to Level 2 occurred primarily due to the increased availability of observable market data due to increased market activity or information.

Information about Level 3 fair value measurements:

 

     

Fair Value at

12-31-21

      Valuation Technique(s)    Unobservable Input(s)    Input
value(s)		  

Assets

            

Common Stocks

    $ 556      Market approach    Revenue multiple      0.64x  
         Adjusted EBITDA multiple      4.43x  
     3,930      Market approach    Financials      N/A  
         Premium      20.00%  
     4,283      Market approach    Illquidity discount      30.00%  
     92      Market approach    Pending transaction      N/A  

Loans

      31,957      Third-party valuation pricing service    Broker quotes      N/A  

The following acronyms are used throughout this schedule:

ADR = American Depositary Receipts

GTD = Guaranteed

ICE = Intercontinental Exchange

LIBOR = London Interbank Offered Rate

PIK = Payment In Kind

REIT = Real Estate Investment Trust

 

 

See Accompanying Notes to Financial Statements.

 

52   ANNUAL REPORT   2021  
     

Table of Contents
MANAGEMENT DISCUSSION   DELAWARE IVY VIP INTERNATIONAL CORE EQUITY

 

 

 

(UNAUDITED)

 

On September 13, 2021, the Board of Trustees (Board) of the Ivy Variable Insurance Portfolios approved the appointment of the portfolio manager team of F. Chace Brundige and Aditya Kapoor of Delaware Management Company as new portfolio managers. In connection with this change, the Board approved applicable revisions to the Portfolio’s investment strategies and benchmark. In addition, on November 1, 2021, it was announced that Charles John was being added as an additional portfolio manager. All changes took effect on November 15, 2021.

Below, Chace Brundige, CFA, Aditya Kapoor, CFA, and Charles John, portfolio managers of Delaware Ivy VIP International Core Equity, discuss positioning, performance and results for the fiscal year ended December 31, 2021.

Fiscal Year Performance

 

 

For the 12 Months Ended December 31, 2021

         

Delaware Ivy VIP International Core Equity (Class II shares at net asset value)

      14.18%  

Benchmark

         

MSCI ACWI (All Country World Index) Ex USA Index

      7.82%  

(generally reflects the performance of large and mid-cap securities across 22 of 23 Developed Markets countries (excluding the US) and 24 Emerging Markets.

         

MSCI EAFE Index

      11.26%  

(generally reflects the performance of securities in Europe, Australasia and the Far East)

         

Please note that the Portfolio returns include applicable fees and expenses, whereas the index returns do not include any such fees. Also, the Portfolio’s performance data does not take into account any product expenses or charges associated with owning a variable life or annuity policy, which is invested in Ivy Variable Insurance Portfolios.

Effective November 15, 2021, the Portfolio’s new benchmark is the MSCI ACWI ex U.S.A. Index. DMC believes that this index is more reflective of the types of securities that the Portfolio invests in. Both the new benchmark and the Portfolio’s previous benchmark noted above are included for comparison purposes.

Risks abound, but the market shrugs

 

Nearly two years into one of history’s greatest human and economic shocks, we seem to be nearing the later and hopefully last phases of the COVID-19 pandemic. Yet, we are still faced with risks and lasting changes to the global corporate landscape. Some of these shifts are a direct result of the pandemic (the ultimate impact of hybrid work, sustainability of pandemic beneficiaries and recovery of losers, global travel, the supply chain, disappearance of workers in the consumer service sectors, etc.), while others have been percolating and are an indirect result of the pandemic such as the trajectory of inflation and US Federal Reserve (Fed) policy.

While these risks were well documented, by most accounts, markets were not concerned. Many major global equity indexes ended the year at or near all-time highs, fixed-income spreads remained historically tight, and volatility was generally at low levels. Much of this can be attributed to what has been impressive execution by many companies. Yes, certain service industries (airlines, hotels, restaurants, movie theatres, cruise lines, etc.) have struggled, and autos have been supply chain constrained, but many industries are thriving. Technology continues to proliferate as software companies, media, ecommerce, and semi-conductors have done well. Additionally, health care continues to advance, and industrials have been thriving as building products, machinery, and automation are in high demand. And after years of underinvestment, legacy energy businesses are experiencing a resurgence.

The year was not without challenges. Despite COVID-19 vaccine rollouts, the world was challenged with the Delta variant and the emergence of Omicron as the year ended. Areas of the emerging world were hit particularly hard, specifically India and Brazil, which faced real human crises during the Delta variant wave.

Chinese regulators took markets by surprise as they waged a battle with many of their corporate champions as they look to avoid monopolistic dynamics that could hurt small- and medium-sized businesses and consumers. The regulatory framework is still unclear, and valuations remain compressed. Inflationary pressure grew throughout the year, and the Fed became more hawkish. It appears that monetary policy is shifting.

 

     
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Table of Contents
           

 

 

 

 

Portfolio review

 

For the fiscal year ended December 31, 2021, the Portfolio posted positive performance and outperformed its benchmark index. The environment continued to shift toward ignored areas of the market where valuations were ultimately too cheap to ignore. Driving performance for the Portfolio was stock selection in health care, consumer discretionary, industrials, and communication services. Financials detracted from performance due to poor stock selection and an underweight allocation to the relatively well performing sector. Information technology was also a relative detractor.

On an individual stock basis, Merck KGaA, Teck Cominco Ltd., and Inpex Corp. performed well. Merck, a German pharmaceuticals and chemical company, had strong performance across business lines, continued to upgrade guidance, and was a beneficiary of COVID-19 related health care needs. Teck, a Canada-based mining company was strong, particularly late in the year, as coal prices held near record levels and the company’s copper business grew. Inpex, a Japanese oil and gas company, was up as energy prices climbed.

Large individual relative detractors were ASML Holding N.V., HelloFresh SE, and Largan Precision Co. Ltd. The Portfolio no longer holds ASML Holding or Largan Precision. The lack of exposure to ASML, the Dutch semiconductor equipment manufacturer, detracted from relative performance. HelloFresh, a German meal-kit business, pulled back significantly at the end of the year as work-from-home growth stocks struggled during the interest rate related sell-off. Largan, a Taiwan-based optical lens manufacturer, was down as headwinds emerged that we believe will have implications on its product pricing and margins. We sold Largan as we lost confidence in the company’s ability to maintain competitive advantages. The use of derivatives had no material impact on performance for the fiscal year.

Actions in the Portfolio during the year

 

Throughout the fiscal year, the Portfolio was largely tilted toward value, and the Portfolio lowered its exposure to China early in the year as it became clear that those holdings could be challenged for an extended period. Later in the year, we began to slowly add several growth companies as we felt the market environment was unfavorable for those companies and allowed us to purchase those stocks at a perceived discount. Also, we added to emerging markets as we felt valuations were attractive. We expect these two trends will continue, albeit at a slow and methodical pace.

Outlook

 

As we look ahead to the new fiscal year, we begin to search for more clarity on key issues such as the pandemic, inflation, and central bank policy, and how that will translate to corporate earnings and stock valuations. With that, as we have seen over the last year, there will be surprises. However, these environments can be particularly fruitful for active managers as overblown stock reactions and volatility may allow investors to capture these opportunities. Our core mandate grants us the ability to capitalize on perceived dislocations across various types of businesses.

We are hard pressed to make a prediction of how heated inflation will be or when the Fed and other central banks will take action to combat it. We anticipate that certain inflationary pressures will alleviate while others will remain high. However, we are unsure we can handicap those impacts as we look out several years. In fact, the unpredictability of these risks reiterates our confidence in focusing on stock selection, while neutralizing non-idiosyncratic risks to the extent our investment mandate allows. We will remain macro aware, while gearing our focus on finding companies that may drive growth despite these uncontrollable pressures.

One area that we believe has opportunity is emerging markets, which was weak through most of 2021. Between harsh and unfortunate COVID-19 waves, particularly in India, Brazil, and South Africa, regulation in China, governmental volatility in Brazil, and the threat of inflation/higher global interest rates, there has been a lot of bad news in emerging markets. As such, we believe it has created an opportunity to invest in strong companies at a discount. We continue to assess the emerging-market landscape and take a methodical approach toward investing in the region.

After a year that leaves us with many question marks, we believe that 2022 is shaping up to be a year where we begin to see answers emerge. The pandemic, we hope, shifts toward a more manageable endemic, inflationary pressures are sorted into those that are sustained versus transitory, China provides color on regulation and provides needed stimulus to their economy, and central banks are more definitive in the direction they plan to go with policy. Regardless of what happens through the macro lens, we remain confident in the direction we continue to take the Portfolio.

Effective July 1, 2021, the Portfolio name changed from Ivy VIP International Core Equity.

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management

 

54   ANNUAL REPORT   2021  
     

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business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

Past performance is not a guarantee of future results. The value of the Portfolio’s shares will change, and you could lose money on your investment.

Investing involves risk, including the possible loss of principal.

International investments entail risks including fluctuation in currency values, differences in accounting principles, or economic or political instability. Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility, lower trading volume, and higher risk of market closures. In many emerging markets, there is substantially less publicly available information and the available information may be incomplete or misleading. Legal claims are generally more difficult to pursue.

Natural or environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis, and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics, have been and can be highly disruptive to economies and markets, adversely impacting individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Portfolio’s investments. Given the increasing interdependence among global economies and markets, conditions in one country, market, or region are increasingly likely to adversely affect markets, issuers, and/or foreign exchange rates in other countries. These disruptions could prevent the Portfolio from executing advantageous investment decisions in a timely manner and could negatively impact the Portfolio’s ability to achieve its investment objective. Any such event(s) could have a significant adverse impact on the value and risk profile of the Portfolio. These and other risks are more fully described in the Portfolio’s prospectus.

The opinions expressed in this report are those of the portfolio managers and are current only through the end of the period of the report as stated on the cover. The portfolio managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged, and includes reinvested dividends and does not include fees. One cannot invest directly in an index, nor is an index representative of Delaware Ivy VIP International Core Equity.

 

     
    2021       ANNUAL REPORT       55  

Table of Contents
PORTFOLIO HIGHLIGHTS   DELAWARE IVY VIP INTERNATIONAL CORE EQUITY(a)

 

 

 

ALL DATA IS AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Asset Allocation

 

Stocks

     98.2%  

Consumer Discretionary

     19.0%  

Industrials

     17.0%  

Financials

     14.6%  

Health Care

     12.7%  

Energy

     8.7%  

Consumer Staples

     7.7%  

Information Technology

     6.9%  

Materials

     6.3%  

Communication Services

     2.9%  

Utilities

     2.4%  

Liabilities (Net of Cash and Other Assets), and Cash Equivalents+

     1.8%  

Country Weightings

 

Europe

     63.2%  

United Kingdom

     16.9%  

Germany

     16.1%  

France

     14.4%  

Netherlands

     5.7%  

Other Europe

     10.1%  

Pacific Basin

     23.1%  

Japan

     13.1%  

South Korea

     3.7%  

Other Pacific Basin

     6.3%  

North America

     9.5%  

Canada

     7.0%  

Other North America

     2.5%  

South America

     1.2%  

Other

     1.2%  

Liabilities (Net of Cash and Other Assets), and Cash Equivalents+

     1.8%  
 

 

Top 10 Equity Holdings

 

Company   Country    Sector   Industry

Merck KGaA

  

Germany

   

Health Care

  

Pharmaceuticals

Samsung Electronics Co. Ltd.

  

South Korea

   

Information Technology

  

Technology Hardware, Storage & Peripherals

GlaxoSmithKline plc

  

United Kingdom

   

Health Care

  

Pharmaceuticals

Airbus SE

  

France

   

Industrials

  

Aerospace & Defense

Schneider Electric S.A.

  

France

   

Industrials

  

Electrical Components & Equipment

Roche Holdings AG, Genusscheine

  

Switzerland

   

Health Care

  

Pharmaceuticals

TotalEnergies SE

  

France

   

Energy

  

Integrated Oil & Gas

WPP Group plc

  

United Kingdom

   

Communication Services

  

Advertising

Cap Gemini S.A.

  

France

   

Information Technology

  

IT Consulting & Other Services

Suncor Energy, Inc.

  

Canada

   

Energy

  

Integrated Oil & Gas

See your advisor or www.ivyinvestments.com for more information on the Portfolio’s most recently published Top 10 Equity Holdings.

+Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

(a)Effective July 1, 2021, the name of Ivy VIP International Core Equity changed to Delaware Ivy VIP International Core Equity.

 

56   ANNUAL REPORT   2021  
     

Table of Contents
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT   DELAWARE IVY VIP INTERNATIONAL CORE EQUITY(a)

 

 

 

(UNAUDITED)

 

LOGO

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class II  

1-year period ended 12-31-21

      14.18%  

5-year period ended 12-31-21

      8.01%  

10-year period ended 12-31-21

      7.77%  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

 

(a)

Effective July 1, 2021, the name of Ivy VIP International Core Equity changed to Delaware Ivy VIP International Core Equity.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

(b)Effective November 15, 2021, the Portfolio’s new benchmark is the MSCI ACWI ex U.S.A. Index. DMC believes that this index is more reflective of the types of securities that the Portfolio invests in. Both the new benchmark and the Portfolio’s previous benchmark noted above are included for comparison purposes.

 

     
    2021       ANNUAL REPORT       57  

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP INTERNATIONAL CORE EQUITY (in thousands)

 

 

 

DECEMBER 31, 2021

 

COMMON STOCKS   Shares     Value  

Australia

 

 

Materials – 1.4%

 

Newcrest Mining Ltd.

     484     $ 8,625  
   

 

 

  
 

Total Australia – 1.4%

 

   $ 8,625  

Brazil

 

 

Consumer Discretionary – 1.2%

 

MercadoLibre, Inc. (A)

     5       7,265  
   

 

 

  
 

Total Brazil – 1.2%

 

   $ 7,265  

Canada

 

 

Consumer Discretionary – 2.8%

 

Canada Goose Holdings, Inc. (A)

     255       9,434  

Dollarama, Inc.

     160       7,997  
   

 

 

  
      17,431  
   

 

 

  
 

Energy – 1.6%

 

Suncor Energy, Inc.

     388       9,703  
   

 

 

  
 

Industrials – 1.4%

 

Canadian Pacific Railway Ltd.

     123       8,846  
   

 

 

  
 

Materials – 1.2%

 

Teck Cominco Ltd.

     267       7,698  
   

 

 

  
 

Total Canada – 7.0%

 

   $ 43,678  

China

 

 

Consumer Discretionary – 2.0%

 

JD.com, Inc. ADR (A)

     87       6,102  

Li Ning Co. Ltd.

     580       6,343  
   

 

 

  
      12,445  
   

 

 

  
 

Financials – 0.5%

 

China International Capital Corp. Ltd., H Shares

     1,064       2,935  
   

 

 

  
 

Total China – 2.5%

 

   $ 15,380  

Denmark

 

 

Health Care – 1.3%

 

Genmab A.S. (A)

     20       8,110  
   

 

 

  
 

Industrials – 1.5%

 

A.P. Moller – Maersk A/S

     2       5,875  

A.P. Moller – Maersk A/S, Class A

     1       3,181  
   

 

 

  
      9,056  
   

 

 

  
 

Total Denmark – 2.8%

 

   $ 17,166  

France

 

 

Consumer Discretionary – 1.4%

 

Compagnie Generale des Etablissements Michelin, Class B

     52       8,494  
   

 

 

  
 

Consumer Staples – 0.5%

 

Carrefour S.A.

     153       2,806  
   

 

 

  
COMMON STOCKS (Continued)   Shares     Value  

Energy – 1.7%

 

TotalEnergies SE (B)

     214     $ 10,869  
   

 

 

  
 

Financials – 1.4%

 

BNP Paribas S.A.

     130       8,974  
   

 

 

  
 

Industrials – 6.6%

 

Airbus SE

     104       13,297  

Compagnie de Saint-Gobain

     105       7,363  

Schneider Electric S.A.

     59       11,678  

Vinci

     83       8,737  
   

 

 

  
      41,075  
   

 

 

  
 

Information Technology – 1.6%

 

Cap Gemini S.A.

     42       10,243  
   

 

 

  
 

Utilities – 1.2%

 

ENGIE S.A.

     497       7,361  
   

 

 

  
 

Total France – 14.4%

 

   $ 89,822  

Germany

 

 

Consumer Discretionary – 2.9%

 

Continental AG

     82       8,720  

HelloFresh SE (A)

     124       9,554  
   

 

 

  
      18,274  
   

 

 

  
 

Consumer Staples – 1.5%

 

Beiersdorf Aktiengesellschaft

     88       9,099  
   

 

 

  
 

Financials – 1.1%

 

Deutsche Boerse AG

     43       7,123  
   

 

 

  
 

Health Care – 4.1%

 

Bayer AG

     127       6,789  

Merck KGaA

     71       18,470  
   

 

 

  
      25,259  
   

 

 

  
 

Industrials – 1.6%

 

Siemens AG

     56       9,702  
   

 

 

  
 

Information Technology – 1.3%

 

SAP AG

     56       7,998  
   

 

 

  
 

Materials – 1.3%

 

HeidelbergCement AG

     114       7,707  
   

 

 

  
 

Utilities – 1.2%

 

RWE Aktiengesellschaft

     184       7,484  
   

 

 

  
 

Total Germany – 15.0%

 

   $ 92,646  

Hong Kong

 

 

Financials – 1.4%

 

AIA Group Ltd.

     847       8,534  
   

 

 

  
 

Total Hong Kong – 1.4%

 

   $ 8,534  
COMMON STOCKS (Continued)   Shares     Value  

India

 

 

Energy – 1.0%

 

Reliance Industries Ltd.

     202     $ 6,422  
   

 

 

  
 

Total India – 1.0%

 

   $ 6,422  

Japan

 

 

Consumer Discretionary – 3.8%

 

Honda Motor Co. Ltd.

     277       7,886  

Sekisui House Ltd.

     362       7,797  

Subaru Corp.

     464       8,286  
   

 

 

  
      23,969  
   

 

 

  
 

Consumer Staples – 1.5%

 

Seven & i Holdings Co. Ltd.

     208       9,163  
   

 

 

  
 

Energy – 1.4%

 

Inpex Corp. (B)

     965       8,392  
   

 

 

  
 

Financials – 2.7%

 

ORIX Corp.

     415       8,460  

Tokio Marine Holdings, Inc.

     144       8,000  
   

 

 

  
      16,460  
   

 

 

  
 

Health Care – 1.1%

 

Terumo Corp.

     169       7,129  
   

 

 

  
 

Industrials – 1.4%

 

SMC Corp.

     13       8,989  
   

 

 

  
 

Information Technology – 1.2%

 

Shimadzu Corp.

     181       7,658  
   

 

 

  
 

Total Japan – 13.1%

 

   $ 81,760  

Mexico

 

 

Consumer Staples – 1.3%

 

Fomento Economico Mexicano S.A.B. de C.V.

     106       8,207  
   

 

 

  
 

Materials – 1.2%

 

Fresnillo plc

     632       7,641  
   

 

 

  
 

Total Mexico – 2.5%

 

   $ 15,848  

Netherlands

 

 

Consumer Discretionary – 2.5%

 

Prosus N.V.

     106       8,837  

Stellantis N.V.

     357       6,785  
   

 

 

  
      15,622  
   

 

 

  
 

Energy – 1.2%

 

Royal Dutch Shell plc, Class A

     340       7,478  
   

 

 

  
 

Financials – 1.0%

 

ING Groep N.V., Certicaaten Van Aandelen

     458       6,379  
   

 

 

  
 

 

58   ANNUAL REPORT   2021  
     

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SCHEDULE OF INVESTMENTS  

DELAWARE IVY VIP INTERNATIONAL CORE EQUITY (in  thousands)

 

 

 

DECEMBER 31, 2021

 

COMMON STOCKS (Continued)   Shares     Value  

Industrials – 1.0%

 

Randstad Holding N.V.

     96     $ 6,531  
   

 

 

  
 

Total Netherlands – 5.7%

 

   $ 36,010  

Norway

 

 

Financials – 1.5%

 

DNB ASA

     395       9,030  
   

 

 

  
 

Total Norway – 1.5%

 

   $ 9,030  

South Africa

 

 

Materials – 1.2%

 

Mondi plc

     291       7,202  
   

 

 

  
 

Total South Africa – 1.2%

 

   $ 7,202  

South Korea

 

 

Industrials – 0.9%

 

LG Corp. (A)

     83       5,618  
   

 

 

  

Information Technology – 2.8%

 

Samsung Electronics Co. Ltd.

     261       17,111  
   

 

 

  
 

Total South Korea – 3.7%

 

   $ 22,729  

Spain

 

 

Financials – 1.1%

 

Banco Bilbao Vizcaya Argentaria S.A.

     1,194       7,083  
   

 

 

  
 

Total Spain – 1.1%

 

   $ 7,083  

Sweden

 

 

Consumer Staples – 0.3%

 

Svenska Cellulosa Aktiebolaget SCA (publ), Class B

     58       1,879  
   

 

 

  
 

Industrials – 1.2%

 

Epiroc AB, Class A

     208       5,266  

Epiroc AB, Class B

     91       1,928  
   

 

 

  
      7,194  
   

 

 

  
 

Total Sweden – 1.5%

 

   $ 9,073  

Switzerland

 

 

Health Care – 1.8%

 

Roche Holdings AG, Genusscheine

     27       11,052  
   

 

 

  

Industrials – 1.4%

 

Ferguson plc

     48       8,579  
   

 

 

  
 

Total Switzerland – 3.2%

 

   $ 19,631  

United Kingdom

 

 

Communication Services – 2.9%

 

BT Group plc

     3,452       7,921  

WPP Group plc

     676       10,247  
   

 

 

  
      18,168  
   

 

 

  
 

Consumer Discretionary – 1.3%

 

Persimmon plc

     202       7,814  
   

 

 

  
COMMON STOCKS (Continued)   Shares     Value  

Consumer Staples – 2.6%

 

Tesco plc

     2,439     $ 9,572  

Unilever plc

     129       6,881  
   

 

 

  
      16,453  
   

 

 

  
 

Energy – 1.8%

 

Technip-Coflexip (A)

     907       9,125  

TechnipFMC plc (A)

     371       2,199  
   

 

 

  
      11,324  
   

 

 

  

Financials – 3.9%

 

HSBC Holdings plc

     1,400       8,499  

Legal & General Group plc

     1,936       7,795  

Prudential plc

     452       7,795  
   

 

 

  
      24,089  
   

 

 

  
 

Health Care – 4.4%

 

AstraZeneca plc

     34       4,031  

AstraZeneca plc ADR

     116       6,761  

GlaxoSmithKline plc

     662       14,402  

GlaxoSmithKline plc ADR

     49       2,157  
   

 

 

  
      27,351  
   

 

 

  
 

Total United Kingdom – 16.9%

 

   $ 105,199  
 

TOTAL COMMON STOCKS – 97.1%

 

   $ 603,103  

(Cost: $538,630)

 

    
 

PREFERRED STOCKS

                

Germany

 

 

Consumer Discretionary – 1.1%

 

Volkswagen AG, 2.260%

     32       6,566  
   

 

 

  
 

Total Germany – 1.1%

 

   $ 6,566  
 

TOTAL PREFERRED STOCKS – 1.1%

 

   $ 6,566  

(Cost: $5,844)

 

    
 
SHORT-TERM SECURITIES              

Money Market Funds (C) – 2.4%

 

State Street Institutional U.S. Government Money Market Fund – Premier Class 0.030%

     5,901       5,901  

Dreyfus Institutional Preferred Government Money Market Fund – Institutional Shares 0.010% (D)

     8,814       8,814  
   

 

 

  
      14,715  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 2.4%

 

   $ 14,715  

(Cost: $14,715)

 

    
 

TOTAL INVESTMENT SECURITIES – 100.6%

 

   $ 624,384  

(Cost: $559,189)

 

    
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (0.6)%

 

     (3,878 ) 
 

NET ASSETS – 100.0%

 

   $ 620,506  

    

 

 

     
    2021       ANNUAL REPORT       59  

Table of Contents
SCHEDULE OF INVESTMENTS  

DELAWARE IVY VIP INTERNATIONAL CORE EQUITY (in  thousands)

 

 

 

DECEMBER 31, 2021

 

Notes to Schedule of Investments

 

(A)

No dividends were paid during the preceding 12 months.

 

(B)

All or a portion of securities with an aggregate value of $18,953 are on loan.

 

(C)

Rate shown is the annualized 7-day yield at December 31, 2021.

 

(D)

Investment made with cash collateral received from securities on loan.

 

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

        

Communication Services

   $ 18,168      $ —      $ —  

Consumer Discretionary

     69,071        42,243        —  

Consumer Staples

     27,466        20,141        —  

Energy

     45,796        8,392        —  

Financials

     50,911        39,696        —  

Health Care

     27,351        51,550        —  

Industrials

     65,031        40,559        —  

Information Technology

     10,243        32,767        —  

Materials

     31,166        7,707        —  

Utilities

     7,361        7,484        —  

Total Common Stocks

   $ 352,564      $ 250,539      $ —  

Preferred Stocks

     —        6,566        —  

Short-Term Securities

     14,715        —        —  

Total

   $ 367,279      $ 257,105      $ —  

The following acronym is used throughout this schedule:

ADR = American Depositary Receipts

 

Market Sector Diversification

 

(as a % of net assets)

 

Consumer Discretionary

     19.0%  

Industrials

     17.0%  

Financials

     14.6%  

Health Care

     12.7%  

Energy

     8.7%  

Consumer Staples

     7.7%  

Information Technology

     6.9%  

Materials

     6.3%  

Market Sector Diversification (Continued)

 

Communication Services

     2.9%  

Utilities

     2.4%  

Other+

     1.8%  

+ Includes liabilities (net of cash and other assets), and cash equivalents

 

 

 

See Accompanying Notes to Financial Statements.

 

60   ANNUAL REPORT   2021  
     

Table of Contents
MANAGEMENT DISCUSSION   DELAWARE IVY VIP MID CAP GROWTH

 

 

 

(UNAUDITED)

 

On November 15, 2021, Bradley P. Halverson was added as an additional portfolio manager for the Portfolio.

Below, Kimberly A. Scott, CFA, Nathan A. Brown, CFA, and Bradley P. Halverson, CFA, co-portfolio managers of Delaware Ivy VIP Mid Cap Growth, discuss positioning, performance and results for the fiscal year ended December 31, 2021. Ms. Scott has managed the Portfolio since its inception in 2005 and has 34 years of industry experience. Mr. Brown became co-portfolio manager in October 2016 and has 22 years of industry experience. Mr. Halverson joined the Portfolio in 2021 and has 20 years of industry experience.

Fiscal Year Performance

 

 

For the 12 Months Ended December 31, 2021

         

Delaware Ivy VIP Mid Cap Growth (Class II shares at net asset value)

      16.36%  

Benchmark

         

Russell Midcap Growth Index

      12.73%  

(generally reflects the performance of securities that represent the mid-cap sector of the stock market)

         

Please note that Portfolio returns include applicable fees and expenses while index returns do not include any such fees. Also, the Portfolio’s performance data does not take into account any product expenses or charges associated with owning a variable life or annuity policy, which is invested in Ivy Variable Insurance Portfolios.

Market conditions

 

The Russell Mid Cap Growth Index, the Portfolio’s benchmark, was up 12.73% for the measurement period, underperforming the mid-cap value index. It also underperformed the large-cap growth index but outperformed the small-cap growth index for the period. Sector performance in the benchmark was again mixed, with cyclicals outpacing defensive sectors by just under 1% during the period.

Calendar year 2021 was somewhat bumpy, with the overall tenor of the market remaining positive built on the foundation of continued economic and corporate earnings growth, accommodative interest rate policy, and elevated levels of government spending and support. Bumps came in the form of two new COVID-19 strains, a stalled infrastructure package, supply chain issues, and inflation that appears more long-lasting than transitory.

Contributors and detractors

 

For the year ended December 31, 2021, the Portfolio returned 16.36%, outperforming a 12.73% return for its benchmark.

Aside from communications services and materials, which experienced a bit of valuation retrenchment in the Portfolio from the pull-forward effect of COVID-19, all sectors in the Portfolio posted positive returns for the measurement period. The benchmark posted positive returns in all sectors but communication services and consumer staples during the reporting period. Sector overweight and underweight allocations compared to the benchmark were a slight detractor to the Portfolio’s relative performance while stock selection, as is expected from our bottom-up stock selection strategy, was the primary driver of overall outperformance compared to the benchmark.

The strongest contribution to relative outperformance where the Portfolio had exposure was in the healthcare sector, followed by the consumer discretionary, industrials, consumer staples, communication services, and information technology sectors. The Portfolio’s underexposure to the utilities sector contributed to relative performance, as did the cash position for the reporting period.

The information technology sector remained the largest allocation within the Portfolio for the reporting period, while healthcare, a relative underweight position to the benchmark, added the most significant relative outperformance during the year. The top relative contributors for the healthcare sector were Dexcom, Inc., Bio-Techne Corp., and Edwards Lifesciences Corp.

Our exposure to the materials sector was the only relative detractor to performance for the reporting period where we had capital allocated. Other detractors to performance were generated from the rebounds in both the energy and real estate sectors by way of no exposure to the small allocations within the benchmark. Equity options detracted from performance by way of exposure throughout the reporting period to portfolio insurance in lieu of raising excess cash. While there was continued uncertainty throughout the reporting period due to macro disruptions, the market largely shrugged off seemingly stretched valuation levels and thus, the portfolio insurance was not needed.

 

     
    2021       ANNUAL REPORT       61  

Table of Contents
           

 

 

 

 

Outlook

 

The fourth quarter of 2021 was a fitting end to the calendar year, with a new COVID-19 variant producing the same effect as the previous two waves, albeit in a more condensed, less dramatic fashion relative to the market. The Omicron variant still provides uncertainties to the economic landscape, but it appears as though the market has gained a level of comfort with what we do know about this wave of the pandemic. With that as the primary global backdrop, we turn our attention back toward the fundamentals as we see them at both the macro and company-specific levels.

From a macro perspective, we are concerned with the confluence of inflationary pressures, the potential for slowing earnings growth, and the seemingly stretched valuations embedded in the current market. As inflation continues to prove to be more fundamental than transitory, we are trying to assess how, when and to what degree interest rates will rise in the US. Mid-cap stocks have historically performed well in a rising interest rate environment when there is above average gross domestic product (GDP) growth, much like what we are projected to face in 2022 in the US. However, a collision course appears to be imminent between rising real interest rates and slowing earnings growth, which the market could weather, were it not for the exuberant valuations levels that we are experiencing at present. As part of our overall strategy, we are mindful of the macro environment as it relates to portfolio construction and the current environment has us focusing much more intently on valuations of individual holdings, both in the portfolio presently and those we are looking to acquire.

As growth managers, we continue to look for opportunities to invest in companies that have sound capital structures and the ability to grow throughout the business and economic cycle, not because of the cycle. These business models appear to have a product and or service set that is durable, coupled with a capital structure and management team that should allow them to execute competitively in any market environment. We continue to seek opportunities in business and consumer technology, innovation in life sciences, the green energy revolution, and many other areas that we believe should continue to grow, regardless of the economic cycle.

Stock picking is always key to our process and performance but will be paramount in this environment as we seek to manage valuation risk in the portfolio, while investing in durable, secular growth companies.

Effective July 1, 2021, the Portfolio name changed from Ivy VIP Mid Cap Growth.

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

Past performance is not a guarantee of future results. The value of the Portfolio’s shares will change, and you could lose money on your investment.

Investing in mid-cap stocks may carry more risk than investing in stocks of larger, more-established companies. Prices of growth stocks may be more sensitive to changes in current or expected earnings than the prices of other stocks. Growth stocks may not perform as well as value stocks or the stock market in general. The use of derivatives presents several risks, including the risk that these instruments may change in value in a manner that adversely affects the Portfolio’s value and the risk that fluctuations in the value of the derivatives may not correlate exactly with the corresponding securities markets or the underlying asset upon which the derivative’s value is based. These and other risks are more fully described in the Portfolio’s prospectus.

The opinions expressed in this report are those of the portfolio managers and are current only through the end of the period of the report as stated on the cover. The portfolio managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of Delaware Ivy VIP Mid Cap Growth.

 

62   ANNUAL REPORT   2021  
     

Table of Contents
PORTFOLIO HIGHLIGHTS   DELAWARE IVY VIP MID CAP GROWTH(a)

 

 

 

ALL DATA IS AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Asset Allocation

 

Stocks

     99.5%  

Information Technology

     34.1%  

Health Care

     21.7%  

Industrials

     16.0%  

Consumer Discretionary

     13.3%  

Financials

     7.1%  

Communication Services

     3.4%  

Materials

     2.6%  

Consumer Staples

     1.3%  

Purchased Options

     0.0%  

Liabilities (Net of Cash and Other Assets), and Cash Equivalents+

     0.5%  
 

 

Top 10 Equity Holdings

 

Company    Sector    Industry

DexCom, Inc.

   

Health Care

   

Health Care Equipment

Arista Networks, Inc.

   

Information Technology

   

Communications Equipment

CoStar Group, Inc.

   

Industrials

   

Research & Consulting Services

Monolithic Power Systems, Inc.

   

Information Technology

   

Semiconductors

Chipotle Mexican Grill, Inc., Class A

   

Consumer Discretionary

   

Restaurants

Marvell Technology Group Ltd.

   

Information Technology

   

Semiconductors

Teradyne, Inc.

   

Information Technology

   

Semiconductor Equipment

MarketAxess Holdings, Inc.

   

Financials

   

Financial Exchanges & Data

Cerner Corp.

   

Health Care

   

Health Care Technology

Keysight Technologies, Inc.

   

Information Technology

   

Electronic Equipment & Instruments

See your advisor or www.ivyinvestments.com for more information on the Portfolio’s most recently published Top 10 Equity Holdings.

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

(a)Effective July 1, 2021, the name of Ivy VIP Mid Cap Growth changed to Delaware Ivy VIP Mid Cap Growth.

 

     
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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT   DELAWARE IVY VIP MID CAP GROWTH(a)

 

 

 

(UNAUDITED)

 

LOGO

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class I      Class II  

1-year period ended 12-31-21

      16.65%        16.36%  

5-year period ended 12-31-21

      —        24.85%  

10-year period ended 12-31-21

      —        17.05%  

Since Inception of Class through 12-31-21(3)

      24.73%        —  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

 

(3)

4-28-17 (the date on which shares were first acquired by shareholders).

 

(a)

Effective July 1, 2021, the name of Ivy VIP Mid Cap Growth changed to Delaware Ivy VIP Mid Cap Growth.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

64   ANNUAL REPORT   2021  
     

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SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP MID CAP GROWTH (in thousands)

 

 

 

DECEMBER 31, 2021

 

COMMON STOCKS   Shares     Value  

Communication Services

 

 

Interactive Home Entertainment – 1.5%

 

Electronic Arts, Inc.

     85     $ 11,158  
   

 

 

  
 

Interactive Media & Services – 1.9%

 

Pinterest, Inc., Class A (A)

     211       7,680  

Twitter, Inc. (A)

     145       6,258  
   

 

 

  
      13,938  
   

 

 

  
 

Total Communication Services – 3.4%

 

     25,096  

Consumer Discretionary

 

 

Apparel, Accessories & Luxury Goods – 3.3%

 

Canada Goose Holdings, Inc. (A)

     190       7,046  

Levi Strauss & Co., Class A

     334       8,354  

lululemon athletica, Inc. (A)

     22       8,777  
   

 

 

  
      24,177  
   

 

 

  
 

Auto Parts & Equipment – 1.7%

 

BorgWarner, Inc.

     277       12,499  
   

 

 

  
 

Footwear – 0.5%

 

On Holding AG, Class A (A)(B)

     89       3,352  
   

 

 

  
 

Internet & Direct Marketing Retail – 0.5%

 

Shutterstock, Inc.

     33       3,712  
   

 

 

  
 

Leisure Facilities – 1.2%

 

Vail Resorts, Inc.

     27       8,850  
   

 

 

  
 

Restaurants – 2.8%

 

Chipotle Mexican Grill, Inc., Class A (A)

     12       20,217  
   

 

 

  
 

Specialty Stores – 3.3%

 

National Vision Holdings, Inc. (A)

     173       8,303  

Ulta Beauty, Inc. (A)

     38       15,664  
   

 

 

  
      23,967  
   

 

 

  
 

Total Consumer Discretionary – 13.3%

 

     96,774  

Consumer Staples

 

 

Packaged Foods & Meats – 1.3%

 

Hershey Foods Corp.

     49       9,518  
   

 

 

  
 

Total Consumer Staples – 1.3%

 

     9,518  

Financials

 

 

Financial Exchanges & Data – 2.6%

 

MarketAxess Holdings, Inc.

     47       19,294  
   

 

 

  
 

Regional Banks – 4.5%

 

First Republic Bank

     67       13,792  

Pinnacle Financial Partners, Inc.

     61       5,842  

SVB Financial Group (A)

     19       12,876  
   

 

 

  
      32,510  
   

 

 

  
 

Total Financials – 7.1%

             51,804  
COMMON STOCKS (Continued)   Shares     Value  

Health Care

 

 

Biotechnology – 4.5%

 

Genmab A.S. ADR (A)

     249     $ 9,832  

Horizon Therapeutics plc (A)

     107       11,568  

Seattle Genetics, Inc. (A)

     72       11,200  
   

 

 

  
      32,600  
   

 

 

  
 

Health Care Equipment – 10.7%

 

Abiomed, Inc. (A)

     32       11,454  

DexCom, Inc. (A)

     46       24,805  

Edwards Lifesciences Corp. (A)

     90       11,639  

Envista Holdings Corp. (A)

     235       10,609  

Intuitive Surgical, Inc. (A)

     29       10,588  

Masimo Corp. (A)

     32       9,443  
   

 

 

  
      78,538  
   

 

 

  
 

Health Care Technology – 2.6%

 

Cerner Corp.

     204       18,911  
   

 

 

  
 

Life Sciences Tools & Services – 3.9%

 

Agilent Technologies, Inc.

     55       8,735  

Repligen Corp. (A)

     32       8,591  

TECHNE Corp.

     21       11,111  
   

 

 

  
      28,437  
   

 

 

  
 

Total Health Care – 21.7%

 

     158,486  

Industrials

 

 

Aerospace & Defense – 2.1%

 

CAE, Inc. (A)

     125       3,144  

HEICO Corp., Class A

     94       12,076  
   

 

 

  
      15,220  
   

 

 

  
 

Building Products – 4.0%

 

A. O. Smith Corp.

     154       13,211  

Trex Co., Inc. (A)

     121       16,333  
   

 

 

  
      29,544  
   

 

 

  
 

Industrial Machinery – 3.5%

 

IDEX Corp.

     45       10,706  

Middleby Corp. (A)

     74       14,464  
   

 

 

  
      25,170  
   

 

 

  
 

Research & Consulting Services – 4.3%

 

Clarivate plc (A)

     367       8,632  

CoStar Group, Inc. (A)

     289       22,803  
   

 

 

  
      31,435  
   

 

 

  
 

Trading Companies & Distributors – 2.1%

 

Fastenal Co.

     241       15,450  
   

 

 

  
 

Total Industrials – 16.0%

             116,819  

Information Technology

 

 

Application Software – 9.3%

 

DocuSign, Inc. (A)

     90       13,690  

Five9, Inc. (A)

     75       10,340  

Guidewire Software, Inc. (A)

     97       11,046  

Paycom Software, Inc. (A)

     33       13,785  

Q2 Holdings, Inc. (A)

     57       4,515  

Tyler Technologies, Inc. (A)

     27       14,332  
   

 

 

  
      67,708  
   

 

 

  
COMMON STOCKS (Continued)   Shares     Value  

Communications Equipment – 3.3%

 

Arista Networks, Inc. (A)

     166     $ 23,794  
   

 

 

  
 

Data Processing & Outsourced Services – 0.6%

 

Genpact Ltd.

     84       4,467  
   

 

 

  
 

Electronic Components – 2.0%

 

II-VI, Inc. (A)

     218       14,885  
   

 

 

  
 

Electronic Equipment & Instruments – 4.7%

 

Keysight Technologies, Inc. (A)

     81       16,809  

Novanta, Inc. (A)

     37       6,588  

Trimble Navigation Ltd. (A)

     126       10,950  
   

 

 

  
      34,347  
   

 

 

  
 

Semiconductor Equipment – 3.9%

 

Brooks Automation, Inc.

     83       8,609  

Teradyne, Inc.

     121       19,743  
   

 

 

  
      28,352  
   

 

 

  
 

Semiconductors – 8.8%

 

Marvell Technology Group Ltd.

     226       19,753  

Microchip Technology, Inc.

     178       15,510  

Monolithic Power Systems, Inc.

     41       20,254  

SkyWater Technology, Inc. (A)(B)

     64       1,041  

Universal Display Corp.

     48       7,972  
   

 

 

  
      64,530  
   

 

 

  
 

Systems Software – 1.5%

 

CrowdStrike Holdings, Inc., Class A (A)

     53       10,809  
   

 

 

  
 

Total Information Technology – 34.1%

 

     248,892  

Materials

 

 

Fertilizers & Agricultural Chemicals – 1.2%

 

Scotts Miracle-Gro Co. (The)

     57       9,098  
   

 

 

  
 

Specialty Chemicals – 1.4%

 

RPM International, Inc.

     101       10,184  
   

 

 

  
 

Total Materials – 2.6%

 

     19,282  
 

TOTAL COMMON STOCKS – 99.5%

 

   $ 726,671  

(Cost: $431,753)

      
 
PURCHASED OPTIONS   Number of
Contracts
(Unrounded)		     Notional
Amount		         

Pinterest, Inc., Class A,
Call $57.50, Expires 1-21-22, OTC (Ctrpty: JPMorgan Chase Bank N.A.)

     629       63       3  
     

 

 

  
 

TOTAL PURCHASED OPTIONS – 0.0%

 

   $ 3  

(Cost: $72)

 

 

 

     
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SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP MID CAP GROWTH (in thousands)

 

 

 

DECEMBER 31, 2021

 

SHORT-TERM SECURITIES   Shares     Value  

Money Market Funds (D) – 1.2%

 

Dreyfus Institutional Preferred Government Money Market Fund – Institutional Shares, 0.010% (C)

     4,194     $ 4,194  

State Street Institutional U.S. Government Money Market Fund – Premier Class, 0.030%

     4,853       4,853  
   

 

 

  
      9,047  
   

 

 

  
 
TOTAL SHORT-TERM SECURITIES – 1.2%     $9,047  

(Cost: $9,047)

      
 

TOTAL INVESTMENT SECURITIES – 100.7%

 

   $ 735,721  

(Cost: $440,872)

      
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (0.7)%

 

     (4,877 ) 
 

NET ASSETS – 100.0%

 

   $ 730,844  

    

    

 

 

Notes to Schedule of Investments

 

(A)

No dividends were paid during the preceding 12 months.

 

(B)

All or a portion of securities with an aggregate value of $3,892 are on loan.

 

(C)

Investment made with cash collateral received from securities on loan.

 

(D)

Rate shown is the annualized 7-day yield at December 31, 2021.

The following written options were outstanding at December 31, 2021 (contracts and exercise prices unrounded):

 

Underlying Security   Counterparty, if OTC   Type   Number of
Contracts		      Notional
Amount		      Expiration Month      Exercise Price      Premium
Received		      Value  

Pinterest, Inc., Class A

  

JPMorgan Chase Bank N.A.

   Put     1,014        101        January 2022      $ 47.50      $ 515      $ (1,143 ) 
 

JPMorgan Chase Bank N.A.

   Call     629        63        January 2022        80.00        26        (1 ) 

Shutterstock, Inc.

  

N/A

   Put     161        16        January 2022        110.00        124        (46 ) 
                 

 

 

  
                  $ 665      $ (1,190 ) 
                 

 

 

  

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

      Level 1      Level 2      Level 3  

Assets

         

Investments in Securities

         

Common Stocks

    $ 726,671      $ —      $ —  

Purchased Options

      —        3        —  

Short-Term Securities

      9,047        —        —  

Total

    $ 735,718      $ 3      $ —  

Liabilities

         

Written Options

    $ —      $ 1,190      $ —  

The following acronyms are used throughout this schedule:

ADR = American Depositary Receipts

OTC = Over the Counter

 

See Accompanying Notes to Financial Statements.

 

66   ANNUAL REPORT   2021  
     

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MANAGEMENT DISCUSSION   DELAWARE IVY VIP NATURAL RESOURCES

 

 

 

(UNAUDITED)

 

On September 13, 2021, the Board of Trustees (Board) of the Ivy Variable Insurance Portfolios approved the appointment of the portfolio manager team of Samuel Halpert and Geoffrey King of Delaware Management Company as new portfolio managers. In connection with this change, the Board approved applicable revisions to the Portfolio’s investment strategies. All changes took effect on November 15, 2021.

Below, Samuel Halpert and Geoffrey King, portfolio managers of Delaware Ivy VIP Natural Resources, discuss positioning, performance and results for the fiscal year ended December 31, 2021.

Fiscal Year Performance

 

 

For the 12 Months Ended December 31, 2021

         

Delaware Ivy VIP Natural Resources (Class II shares at net asset value)

      26.68%  

Benchmark

         

S&P North American Natural Resources Sector Index

      39.95%  

(generally reflects the performance of the energy and materials stocks in North America)

         

Please note that the Portfolio returns include applicable investment fees and expenses, whereas the index returns do not include any such fees. Also, the Portfolio’s performance data does not take into account any product expenses or charges associated with owning a variable life or annuity policy, which is invested in Ivy Variable Insurance Portfolios.

Market in review

 

Natural resources equities and commodities continued their strong performance starting in the first quarter of 2021. Rising demand for numerous commodities resulting from stimulus-spurred economic growth continued to be met with more disciplined supply outlooks. This manifested itself in some of the strongest relative and absolute performance for natural resource-related equities in years. Steel, copper, and energy producers all represented some of the strongest-performing subindices in the S&P 500 Index.

On the commodity front: Crude oil and refined product prices surged as increased vaccinations led to improved mobility trends, while supply remained constrained by OPEC prudency. China looked to reduce pollution by targeting aluminum smelters and steel blast furnaces, which led to facility curtailments and price support for both commodities. Copper prices continued to rise on a more optimistic demand outlook driven by renewable energy plans, as renewable energy is more copper-intensive than traditional conventional energy projects. Agricultural products, notably corn and soy, continued their strong performance as enthusiasm behind incremental demand from renewable fuels and Chinese demand supported prices. Wood products continued their strong upward momentum as supply remained disciplined while housing and remodeling demand remained elevated. Despite accommodative monetary policy, gold and silver prices fell in the first quarter as a stronger US dollar and higher Treasury yields weighed on performance. North American natural gas prices also fell during the quarter, outside of the notable mid-February southeast spot pricing surge caused by winter storm Uri, with warmer weather forecasts, weaker-than-expected power burns and strong production.

The post-COVID-19 “re-opening trade” on the back of rising vaccinations led to rising demand for crude oil during the first quarter of 2021. Meanwhile, OPEC remained disciplined, holding barrels off the market, leading to a surge of optimism and quickly rising oil prices.

Unprecedented monetary and fiscal stimulus globally drove this recovery and the investment landscape. While the numbers would suggest robust economic strength, the classic signs of speculative excess still accompanied this rebound. Based on enormous price changes and volatility, commodity markets could certainly fall into the category of speculative excess. We took a slightly nuanced view of the situation, believing that many of the big economic questions are better left answered by more knowledgeable folks. Instead, we look at a more micro level and see this past year mostly as a very pronounced inventory cycle within a secular bull market.

Expecting a significant economic slowdown, home builders, auto manufacturers, and other suppliers leaned out their inventories starting with the onset of the COVID-19 pandemic. They also took capacity offline and in more drastic cases reduced workforces. The rapid demand recovery was unable to be met by commodity producers, which led to a sharp runup in commodity prices. Speculative length in commodity futures contracts also increased materially, further supporting prices during the second quarter of 2021.

Crude oil, natural gas, copper, aluminum, iron ore, and agricultural commodities continued their climb higher during April and May 2021. By the end of the second quarter, it became clear that inventories were starting to rebuild for several commodities, notably lumber, iron ore, steel, and copper. In late May 2021, China also clamped down on commodity

 

     
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financial speculation and liquidated a portion of its state-owned stockpiles of several commodities. This further cooled base metal and steel sentiment. After a record-setting surge to all-time highs in May 2021, lumber prices fell 50% by the end of June as inventories were adequately replenished and sawmills maxed out production capacity.

Crude oil and refined product prices rose as increased vaccinations led to improved mobility trends, while supply remained constrained by OPEC prudency. Natural gas became the leading commodity performer as warm weather increased demand for natural gas fired power generation. Worldwide natural gas prices remained strong with an open arbitrage for US liquefied natural gas (LNG) exports, while US producers remained disciplined.

In the second quarter, precious metals prices performed modestly as real rates stayed low and monetary policy remained accommodative. Silver benefited from increasing industrial demand and a tight supply outlook. Agricultural commodities were mixed. Corn prices rose meaningfully as the World Agricultural Supply and Demand Estimates (WASDE) report on acres planted proved bullish. Protein prices were flat on balanced supply-demand fundamentals.

The fervor that gripped many high growth and speculative names unwound during the second half of 2021. In the natural resources space this was seen acutely in many of the renewable energy and clean tech equities, which fell during the quarter. Inflationary pressures, caused by continued supply constraints and strong good demand, continued to provide a tailwind for commodities, which advanced for the seventh straight quarter (as measured by the performance of the UBS Bloomberg CMCI Composite Index).

While we remain firm believers in finding climate solutions to mitigate the obvious and ever-present negative effects of climate change, we believe policies must be pragmatic and properly planned. The risks of poor policy decisions were witnessed in Europe, which is feeling the strains of the energy transition through sky high natural gas and power prices. While Europe has arguably led the world in renewable energy development, they have largely shut off all investment in clean-burning natural gas production and storage due to a distaste for fossil fuels. This led to the closure of storage facilities in the UK as well as the decommissioning of the Groningen field in the Netherlands. Moreover, exploration and development of additional gas resources largely came to a halt. This led to declining production of natural gas and further reliance on Russia and US liquefied natural gas (LNG) to meet European gas demand.

By year end 2021, European and US natural gas, copper, nickel aluminum, steel, fertilizer, coffee, corn, cotton, and wheat led commodity market gains while iron ore, gold, and silver declined. Soybeans were largely flat on the year. Notably, European natural gas surged on limited supplies and storage heading into winter. Meanwhile, during the fourth quarter of 2021, US natural gas prices fell considerably as US production hit an all-time high and early winter weather proved milder than expectations. This created a large arbitrage resulting in a convoy of US LNG cargoes headed to Europe, which helped ease European gas prices late in the fourth quarter of 2021. Fertilizer prices also surged as high European gas prices forced plant curtailments while demand remained firm.

Contributor and detractors

 

The Portfolio had a strong return for the measurement period but underperformed its benchmark, the S&P North American Natural Resources Sector Index. The energy and industrials sectors were the greatest areas of underperformance. Energy had positive performance but held an underweight position relative to the index. While industrials produced a negative single-digit return for the period, the benchmark had no exposure to the sector. Real estate was the greatest area of relative outperformance; however, the benchmark had no exposure to the sector for the period.

While the Portfolio posted a positive return in the first quarter of 2021, it underperformed the return of its benchmark. Underperformance was driven by an underweight position in the energy sector and overweight positions in various sectors within the materials space. The Portfolio’s exposure to the energy sector increased from the prior quarter, ending at about 39% of equity assets. The remaining sector exposure was composed of materials, solar, industrials, utilities and chemicals. The Portfolio’s gold mining position continued decreasing in the quarter to around 7% from 10% in the previous quarter.

The Portfolio posted a positive return in the second quarter of 2021 but underperformed the return of its benchmark. Underperformance was driven by an underweight position in the energy sector and overweight positions in various sectors in the materials space. The Portfolio’s exposure to the energy sector increased from the prior quarter, ending at about 42% of equity assets from 39% in the previous quarter. The remaining sector exposure was composed of materials, solar, industrials, utilities, and chemicals. The Portfolio’s gold mining position continued decreasing in the quarter to around 6% from 7% in the previous quarter.

The Portfolio posted a negative return in the third quarter of 2021, slightly underperforming the return of its benchmark. Underperformance was driven by an underweight position in the energy sector and overweight positions in various sectors in the materials space versus the benchmark. The Portfolio’s exposure to the energy sector increased from the prior quarter, ending at about 44% of equity assets from 42% in the previous quarter. The remaining sector exposure was composed of

 

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materials, solar, industrials, utilities, and chemicals. The Portfolio’s gold mining position continued decreasing in the quarter to around 5% from 6% in the previous quarter.

For the fourth quarter of 2021, the Portfolio outperformed its benchmark. (Mr. Halpert and Mr. King took over management of the Portfolio on November 15, 2021.)

Outlook

 

We continue to believe the deprivation of capital and capital discipline among natural resource companies underpin a bullish supply outlook across the commodity spectrum. In the short term, commodity demand continues to rise as the world rapidly recovers from COVID-induced shutdowns. Longer-term structural demand tailwinds persist as the world continues to seek commodity-intensive lower-carbon energy sources in the form of renewable energy and battery storage. While investment in renewable energy for a lower-carbon future remains inadequate to meet this demand, investment in traditional energy and natural resource commodities remains woefully inadequate. There are a multitude of reasons we don’t see this abating — political/access issues, undesirable industry carbon footprints, lack of access to capital, higher cost of capital, degrading grade/productivity, and more shareholder-friendly capital return strategies directing capital away from growth and to shareholders. We think that degrading supply outlooks in the face of rising demand are likely to cause vicious inflationary pressures to continue across the commodity complex.

While we anticipate a multiyear secular bull market for natural resource equities, we also expect mini cycles within this overall inflationary environment. We feel the interconnection and ripple effects within commodities are vastly unappreciated. Each policy or demand boost has ripple effects beyond the commodity it most obviously affects. For example, as the world continues to electrify its vehicle fleet and policies encourage more renewable energy, copper demand is set for a step change, causing upward pressure on copper and ultimately driving up pricing for a common substitute, aluminum. However, aluminum is an energy and carbon emission-intensive commodity, requiring vast amounts of power in the refining and smelting process. This will further press up power demand and carbon emissions, which will likely increase traditional energy demand in the form of natural gas and coal.

Should there be a carbon market, this will further push up the price of carbon as more coal generation fires up to meet incremental power demand, which would further boost the price of cleaner-burning natural gas. As natural gas prices become more expensive, those with access to cheap natural gas in the US and Middle East would have a natural advantage across the industrial complex in the production of products such as fertilizers. As the cost curve in fertilizer production shifts with higher-cost facilities in Europe and Asia being curtailed, food prices will be pushed higher. This, in turn, would affect the supply of agricultural products, driving up the costs of biofuels while also affecting the overall cost of nutrition.

We believe effects such as these will continue to ripple across the commodity complex until there is adequate investment in traditional energy and natural resources to improve the supply outlook. Unfortunately, there is no solution for the degrading grade/productivity and political/access issues, which appear only to be worsening. The companies we are targeting for investment are, in our view, structurally advantaged and have low-cost assets and the balance sheets and cash flows to support development. We plan to hold many of these companies through these mini cycles, as we believe the overall positive tailwinds outweigh any short-term volatility that we are prepared to experience. We look forward to a positive 2022.

Effective July 1, 2021, the Portfolio name changed from Ivy VIP Natural Resources.

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

Past performance is not a guarantee of future results. The value of the Portfolio’s shares will change, and you could lose money on your investment.

Investing in companies involved in one specified sector may be more risky and volatile than an investment with greater diversification. Investing in natural resources can be riskier than other types of investment activities because of a range of factors, including price fluctuation caused by real and perceived inflationary trends and political developments; and the cost assumed by natural resource companies in complying with environmental and safety regulations.

 

     
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International investing involves additional risks, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets.

Commodity trading, including trading in precious metals, is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising.

These and other risks are more fully described in the Portfolio’s prospectus.

The opinions expressed in this report are those of the portfolio managers and are current only through the end of the period of the report as stated on the cover. The portfolio managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of Delaware Ivy VIP Natural Resources.

 

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PORTFOLIO HIGHLIGHTS   DELAWARE IVY VIP NATURAL RESOURCES(a)

 

 

 

ALL DATA IS AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Asset Allocation

 

Stocks

     97.7%  

Energy

     39.7%  

Materials

     37.9%  

Industrials

     7.4%  

Consumer Staples

     6.1%  

Real Estate

     6.1%  

Financials

     0.5%  

Liabilities (Net of Cash and Other Assets), and Cash Equivalents+

     2.3%  

Country Weightings

 

North America

     87.6%  

United States

     69.6%  

Canada

     18.0%  

Europe

     6.3%  

Pacific Basin

     3.8%  

Australia

     3.6%  

Other Pacific Basin

     0.2%  

Liabilities (Net of Cash and Other Assets), and Cash Equivalents+

     2.3%  
 

 

Top 10 Equity Holdings

 

Company    Country    Sector    Industry

Weyerhaeuser Co.

   

United States

   

Real Estate

   

Specialized REITs

Newmont Corp.

   

United States

   

Materials

   

Gold

Nutrien Ltd.

   

Canada

   

Materials

   

Fertilizers & Agricultural Chemicals

Denbury, Inc.

   

United States

   

Energy

   

Oil & Gas Exploration & Production

Wheaton Precious Metals Corp.

   

Canada

   

Materials

   

Gold

Valero Energy Corp.

   

United States

   

Energy

   

Oil & Gas Refining & Marketing

Arcosa, Inc.

   

United States

   

Industrials

   

Construction & Engineering

Enviva Partners L.P.

   

United States

   

Energy

   

Coal & Consumable Fuels

Schlumberger Ltd.

   

United States

   

Energy

   

Oil & Gas Equipment & Services

CF Industries Holdings, Inc.

   

United States

   

Materials

   

Fertilizers & Agricultural Chemicals

See your advisor or www.ivyinvestments.com for more information on the Portfolio’s most recently published Top 10 Equity Holdings.

+Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

(a)Effective July 1, 2021, the name of Ivy VIP Natural Resources changed to Delaware Ivy VIP Natural Resources.

 

     
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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT   DELAWARE IVY VIP NATURAL RESOURCES(a)

 

 

 

(UNAUDITED)

 

LOGO

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class II  

1-year period ended 12-31-21

      26.68%  

5-year period ended 12-31-21

      -0.72%  

10-year period ended 12-31-21

      -1.21%  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

 

(a)

Effective July 1, 2021, the name of Ivy VIP Natural Resources changed to Delaware Ivy VIP Natural Resources.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

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SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP NATURAL RESOURCES (in thousands)

 

 

 

DECEMBER 31, 2021

 

COMMON STOCKS   Shares     Value  

Australia

 

 

Materials – 3.6%

 

BHP Group Ltd. (A)

     107     $ 3,228  
   

 

 

  
 

Total Australia – 3.6%

 

   $ 3,228  

Canada

 

 

Industrials – 2.0%

 

Li-Cycle Holdings Corp. (A)(B)

     179       1,779  
   

 

 

  
 

Materials – 16.0%

 

HudBay Minerals, Inc.

     276       1,998  

Nutrien Ltd.

     58       4,386  

Pan American Silver Corp.

     43       1,085  

Sprott Physical Uranium Trust (B)

     134       1,473  

West Fraser Timber Co. Ltd. (A)

     18       1,745  

Wheaton Precious Metals Corp.

     91       3,907  
   

 

 

  
      14,594  
   

 

 

  
 

Total Canada – 18.0%

 

   $ 16,373  

Hong Kong

 

 

Materials – 0.0%

 

China Metal Recycling (Holdings) Ltd. (B)(C)

     1,900       — * 
   

 

 

  
 

Total Hong Kong – 0.0%

 

   $ — * 

India

 

 

Energy – 0.2%

 

Reliance Industries Ltd.

     6       185  
   

 

 

  
 

Total India – 0.2%

 

   $ 185  

Ireland

 

 

Energy – 0.4%

 

Ardmore Shipping Corp. (B)

     110       371  
   

 

 

  
 

Total Ireland – 0.4%

 

   $ 371  
COMMON STOCKS (Continued)   Shares     Value  

Norway

 

 

Energy – 2.8%

 

Equinor ASA ADR (A)

     98     $ 2,579  
   

 

 

  
 

Total Norway – 2.8%

 

   $ 2,579  

United Kingdom

 

 

Materials – 3.1%

 

Anglo American plc

     69       2,812  
   

 

 

  
 

Total United Kingdom – 3.1%

 

   $ 2,812  

United States

 

 

Consumer Staples – 6.1%

 

Archer Daniels Midland Co.

     26       1,747  

Bunge Ltd.

     27       2,548  

Darling International, Inc. (B)

     18       1,216  
   

 

 

  
      5,511  
   

 

 

  
 

Energy – 36.3%

 

Archaea Energy, Inc., Class A (B)

     106       1,933  

Black Stone Minerals L.P.

     82       844  

Chesapeake Energy Corp.

     51       3,302  

Chevron Corp.

     24       2,856  

Denbury, Inc. (B)

     52       3,981  

Enviva Partners L.P.

     51       3,585  

EOG Resources, Inc.

     20       1,809  

Equitable Resources, Inc. (B)

     149       3,244  

Kimbell Royalty Partners L.P.

     204       2,774  

Schlumberger Ltd.

     116       3,468  

Valaris Ltd. (B)

     40       1,445  

Valero Energy Corp.

     49       3,708  
   

 

 

  
      32,949  
   

 

 

  
 

Financials – 0.5%

 

Spring Valley Acquisition Corp. (B)

     44       446  
   

 

 

  
 

Industrials – 5.4%

 

Arcosa, Inc. (B)

     68       3,598  

Sunrun, Inc. (B)

     38       1,314  
   

 

 

  
      4,912  
   

 

 

  
COMMON STOCKS (Continued)   Shares     Value  

Materials – 15.2%

 

Air Products and Chemicals, Inc.

     9     $ 2,666  

CF Industries Holdings, Inc.

     48       3,371  

Louisiana-Pacific Corp.

     24       1,874  

Newmont Corp.

     77       4,791  

Steel Dynamics, Inc.

     18       1,104  
   

 

 

  
      13,806  
   

 

 

  
 

Real Estate – 6.1%

 

Weyerhaeuser Co.

     136       5,583  
   

 

 

  
 

Total United States – 69.6%

 

   $ 63,207  
 

TOTAL COMMON STOCKS – 97.7%

 

   $ 88,755  

(Cost: $90,604)

      
 
SHORT-TERM SECURITIES              
 

Money Market Funds (D) – 8.4%

 

State Street Institutional U.S. Government Money Market Fund – Premier Class 0.030%

     2,135       2,135  

Dreyfus Institutional Preferred Government Money Market Fund – Institutional Shares 0.010% (E)

     5,476       5,476  
   

 

 

  
      7,611  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 8.4%

 

   $ 7,611  

(Cost: $7,611)

      
 

TOTAL INVESTMENT SECURITIES – 106.1%

 

   $ 96,366  

(Cost: $98,215)

      
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (6.1)%

 

     (5,512 ) 
 

NET ASSETS – 100.0%

 

   $ 90,854  
 

 

Notes to Schedule of Investments

 

*

Not shown due to rounding.

 

(A)

All or a portion of securities with an aggregate value of $8,486 are on loan.

 

(B)

No dividends were paid during the preceding 12 months.

 

(C)

Securities whose value was determined using significant unobservable inputs.

 

(D)

Rate shown is the annualized 7-day yield at December 31, 2021.

 

(E)

Investment made with cash collateral received from securities on loan.

 

     
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SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP NATURAL RESOURCES (in thousands)

 

 

 

DECEMBER 31, 2021

 

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 88,755      $ —      $   —* 

Short-Term Securities

     7,611        —        —  

Total

   $ 96,366      $ —      $   —* 

During the year ended December 31, 2021, there were no transfers in or out of Level 3.

The following acronym is used throughout this schedule:

ADR = American Depositary Receipts

 

Market Sector Diversification

 

(as a % of net assets)

 

Energy

     39.7%  

Materials

     37.9%  

Industrials

     7.4%  

Consumer Staples

     6.1%  

Real Estate

     6.1%  

Financials

     0.5%  

Other+

     2.3%  

+ Includes liabilities (net of cash and other assets), and cash equivalents

    

 

 

See Accompanying Notes to Financial Statements.

 

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MANAGEMENT DISCUSSION   DELAWARE IVY VIP SCIENCE AND TECHNOLOGY

 

 

 

(UNAUDITED)

 

On November 15, 2021, Gustaf C. Zinn was added as an additional portfolio manager for the Portfolio.

Below, Zachary Shafran, Bradley Warden, and Gus Zinn, portfolio managers of Delaware Ivy VIP Science and Technology, discuss positioning, performance and results for the fiscal year ended December 31, 2021. Mr. Shafran has managed the Portfolio since 2001 and has 33 years of industry experience. Mr. Warden was named portfolio manager in October 2016 and was previously an assistant portfolio manager on the Portfolio since 2014. He has 24 years of industry experience. Mr. Zinn has 23 years of industry experience.

Fiscal Year Performance

 

 

For the 12 Months Ended December 31, 2021

         

Delaware Ivy VIP Science and Technology (Class II shares at net asset value)

      15.17%  

Benchmark

         

S&P North American Technology Sector Index

      26.40%  

(generally reflects the performance of US science and technology stocks)

         

Please note that the Portfolio returns include applicable fees and expenses, whereas the index returns do not include any such fees. Also, the Portfolio’s performance data does not take into account any product expenses or charges associated with owning a variable life or annuity policy, which is invested in Ivy Variable Insurance Portfolios.

A step forward

 

Fiscal year 2021 may best be described as a transitional year in the COVID-19 era. After a dramatic calendar 2020 that included COVID-19 driven economic shutdowns, overwhelmed healthcare systems, massive job losses, and the most aggressive US Federal Reserve (Fed) policy actions in history, we entered 2021 with hopes of normalization as vaccines began mass production. Unfortunately, COVID-19 variants like Delta and Omicron became everyday terms, even as vaccination rates climbed during the year.

While COVID-19 was a pervasive topic during the year, the political events of the first week of January would capture the biggest headlines in early 2021. Following a political rally for President Trump in Washington DC, rioters marched and took control of the US Capitol for several hours. Despite the shocking nature of the event, the market showed relatively minimal concern, likely a result of the divisive politics we all grew accustomed to over the past several years. Questions around the legitimacy of Joe Biden’s election as the next President continued throughout the year and the political atmosphere in Washington remained extremely divisive.

Divisive politics are nothing new in Washington DC, but the razor-thin margin of Democrat Congressional majority created volatility in the policy making process throughout the year. A key tenet of President Biden’s campaign, the Infrastructure Bill, went through numerous iterations and delays, ultimately passing in November with a “reduced” price tag of $1.2 trillion. Initially, markets were concerned that corporate and capital gains tax rates would rise meaningfully to pay for the bill and other campaign priorities. Over the course of the year, it became less likely large tax increases would happen and the reconciliation bill, with many taxation provisions, was further delayed into 2022.

Internationally, China remained at the forefront of US government concerns. The year was a continuation of stricter policies around Chinese technology companies with a genuine focus on incentivizing semiconductor companies to produce more chips domestically on national security grounds. After China’s brazen push in Hong Kong, Taiwan began garnering attention as a potential next move by the Chinese government. Taiwan is a key technology hub and a clear rising concern for policymakers.

In economic terms, massive stimulus continued to prop up the domestic economy through much of the year, while tightening labor markets and global shortages became more acute. Wages began to rise, and it was difficult to go anywhere without seeing “Help Wanted” signs. Additionally, supply chains were stressed by a combination of COVID-19 related shutdowns and robust demand. These supply chain disruptions drove shortages in areas like autos and electronics, further exacerbating upward pricing pressures. It became extremely difficult to find an area of the economy not being impacted by these supply issues.

With the steep rise in prices across many categories, including housing and autos, and continued wage pressure, the conversation in markets shifted to speculation of when and how quickly the Fed would move to tighten monetary policy to ward off inflation. By the second half of the year and especially in the fourth quarter, the concern on higher interest rates and a decrease in the Fed’s balance sheet created volatility in the markets, especially for high-multiple, high-growth equities. On days of upward pressure on interest rates, the equity market sold off.

 

     
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The combination of a global pandemic, divisive politics, international risks, and rising inflationary pressures, would normally equate to pressured financial markets. But, the underlying health of the economy, consumer balance sheets, and corporate results speaks to strong fundamentals that were supportive throughout 2021.

During the fiscal year, information technology stocks performed well with the Portfolio’s benchmark advancing 26.4%. Within information technology, the semiconductor, hardware, interactive media and software subsectors made significant positive relative contributions to performance. In addition to these subsectors, other areas like communication equipment and information technology services added positively in an absolute sense, illustrating the broad market strength across the information technology sector that was a continuation of 2020. On the healthcare front, stocks struggled to keep up with the performance of technology names.

Semiconductors led the way again, but healthcare lagged

 

The Portfolio underperformed its technology-only benchmark during the fiscal year. The technology portion of the Portfolio performed well on an absolute basis but relatively trailed the benchmark. Positions in Universal Display Corp., Alibaba Group Holding Ltd., and ACI Worldwide, Inc. were key detractors, while underweight positions in NVIDIA Corp. and Qualcomm Inc. also hurt relative performance. The Portfolio no longer holds Universal Display Corp., Alibaba Group Holding Ltd. or Qualcomm Inc. Relative outperformers in the Portfolio’s technology exposure included ASML Holding N.V., NY Registry Shares, ON Semiconductor Corp., and GlobalFoundries Inc.

During the period, the Portfolio’s exposure to healthcare drove a portion of underperformance. Healthcare is not represented in the benchmark, so the Portfolio’s allocation to the sector is an important distinction when comparing performance metrics. Underperformance in both biotechnology and healthcare technology negatively impacted overall performance.

The Portfolio maintained a low single-digit average cash position during the fiscal year, which detracted from relative performance. Additionally, the Portfolio used derivatives over the reporting period, but the usage had no material impact on Portfolio performance.

Portfolio positioning

 

As we entered the second half of the fiscal year, we became increasingly concerned about the rising specter of inflation and tightening monetary policy. This backdrop suggested potential pressure on higher multiple stocks within our investment universe. With our disciplined valuation approach to investing in innovation, we made several focused trades in the Portfolio over this time period. Overall, we skewed our weightings upward in larger capitalization names in the Portfolio, while opportunistically adding a handful of attractive new stocks we believe position us for a more challenging growth stock environment.

The Portfolio had approximately 63.5% of its equity exposure in the information technology sector as of December 31, 2021. The overall exposure in information technology is more appropriately assessed by including the communication services sector, which includes many companies previously in the information technology sector. The Portfolio had approximately 13.5% of its equity assets in the communication services sector as of December 31, 2021, for a total of 77% of assets exposed to the information technology and communications services sectors.

As of fiscal year end, roughly 8% of the Portfolio’s equity assets were in the healthcare sector. Our lower healthcare exposure compared to historical averages is primarily a result of reducing our biotechnology weighting due to the anticipated market backdrop mentioned earlier. In developing markets, as the standard of living increases, we continue to believe the demand for quality healthcare should increase. In our view, biotechnology, healthcare information technology systems, and pharmaceuticals are among the greatest innovators and early adopters of new science and technology, so we continue to focus on companies in those areas.

The Portfolio’s “applied science and technology” holdings span several industries and sectors and, along with the consumer discretionary subsector (largely Amazon), make up the remainder of the Portfolio’s equity composition. At the end of the fiscal year, the Portfolio’s cash position was 3.8% of net assets. We almost always have some cash on hand to take advantage of opportunities that may present themselves.

Volatility ahead, but strong underlying fundamentals

 

As we look forward to fiscal 2022, we expect increased volatility in equity markets as a result of tightening monetary policy and reduced consumer stimulus. Innovative areas of the market are among the highest growth and appropriately receive higher valuations as compared to the rest of the market. These higher growth stocks often have proportionately more value in the anticipated future cash flows, leaving their stocks more susceptible to changes in underlying interest rates. While

 

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volatility creates near-term uncertainty, we use these times in the market to opportunistically add new names or adjust weightings to take advantage of what we believe are great long-term stories. Our long-term investment horizon and concentrated portfolio are compelling advantages during times of market uncertainty.

While tightening monetary policy concerns us relative to market valuations, strong economic fundamentals keep us optimistic. Consumer balance sheets are in great shape, corporate earnings continue to expand, and the job market hasn’t been this tight in a long time. It is a tricky balance that the Fed will have to play as it balances its mandates of pricing stability and long-term growth. The good news is that the Fed has shown willingness to react, almost real-time, to changing conditions.

Other supportive economic measures include fiscal spending, like the recently passed infrastructure bill, and investments that should see supply chains begin to normalize by the end of 2022. COVID-19 isn’t likely going anywhere soon, but we believe financial markets will continue to look through short-term disruptions of COVID-19 surges. We clearly don’t know how the virus will evolve over time, but what we do know is that the world is more prepared for dealing with its evolution.

Our optimism about the future is driven by the innovation acceleration we see across the economy. A crisis typically accelerates innovation as problem-solving kicks into high gear. We see innovation manifest everywhere, but examples like the changes brought about by the work-from-home trend, the early development of the metaverse, and the continued electrification of transportation are driving new investment opportunities. Additionally, the supply chain shortages over the past year clearly highlighted the increasing value and integral role of semiconductors in the global economy.

As always, we will continue to carefully examine the macro factors underlying our investment universe, especially current issues like the regulatory risks facing big technology and China’s restrictive technology policies. We will strive to be prudent in balancing growth with valuations and be opportunistic in adding what we believe are long-term innovators with strong management teams to the Portfolio. We have high conviction that our attention to bottom-up research, coupled with the innovation happening across the globe should continue to provide very attractive investment opportunities for the Portfolio.

Effective July 1, 2021, the Portfolio name changed from Ivy VIP Science and Technology.

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

Past performance is not a guarantee of future results. The value of the Portfolio’s shares will change, and you could lose money on your investment.

Investing involves risk, including the possible loss of principal.

Because the Portfolio invests more than 25% of its total assets in the science and technology industry, the Portfolio’s performance may be more susceptible to a single economic, regulatory or technological occurrence than a portfolio that does not concentrate its investments in this industry.

“Non-diversified” investments may allocate more of their net assets to investments in single securities than “diversified” investments. Resulting adverse effects may subject these investments to greater risks and volatility.

Investment risks associated with investing in science and technology securities, in addition to other risks, include: operating in rapidly changing fields, abrupt or erratic market movements, limited product lines, markets or financial resources, management that is dependent on a limited number of people, short product cycles, aggressive pricing of products and services, new market entrants and obsolescence of existing technology.

Natural or environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis, and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics, have been and can be highly disruptive to economies and markets, adversely impacting individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Portfolio’s investments. Given the increasing interdependence among global economies and markets, conditions in one country, market, or region are increasingly likely to adversely affect markets, issuers, and/or foreign exchange rates in other countries. These disruptions could prevent the Portfolio from executing advantageous investment decisions in a timely manner and could negatively impact the Portfolio’s

 

     
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ability to achieve its investment objective. Any such event(s) could have a significant adverse impact on the value and risk profile of the Portfolio.

The opinions expressed in this report are those of the portfolio managers and are current only through the end of the period of the report as stated on the cover. The portfolio managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged, and includes reinvested dividends and does not include fees. One cannot invest directly in an index, nor is an index representative of Delaware Ivy VIP Science and Technology.

 

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PORTFOLIO HIGHLIGHTS   DELAWARE IVY VIP SCIENCE AND TECHNOLOGY(a)

 

 

 

ALL DATA AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Asset Allocation

 

Stocks

     96.2%  

Information Technology

     63.5%  

Communication Services

     13.5%  

Consumer Discretionary

     8.3%  

Health Care

     8.1%  

Industrials

     2.1%  

Financials

     0.7%  

Bonds

     0.0%  

Corporate Debt Securities

     0.0%  

Liabilities (Net of Cash and Other Assets), and Cash Equivalents+

     3.8%  

Country Weightings

 

North America

     85.8%  

United States

     85.8%  

Europe

     5.9%  

Netherlands

     3.8%  

Other Europe

     2.1%  

Pacific Basin

     3.7%  

South America

     0.8%  

Liabilities (Net of Cash and Other Assets),
and Cash Equivalents+

     3.8%  
 

 

Top 10 Equity Holdings

 

Company    Country    Sector    Industry

Microsoft Corp.

   

United States

   

Information Technology

   

Systems Software

Apple, Inc.

   

United States

   

Information Technology

   

Technology Hardware, Storage & Peripherals

Amazon.com, Inc.

   

United States

   

Consumer Discretionary

   

Internet & Direct Marketing Retail

Alphabet, Inc., Class A

   

United States

   

Communication Services

   

Interactive Media & Services

MasterCard, Inc., Class A

   

United States

   

Information Technology

   

Data Processing & Outsourced Services

Alphabet, Inc., Class C

   

United States

   

Communication Services

   

Interactive Media & Services

ASML Holding N.V., NY Registry Shares

   

Netherlands

   

Information Technology

   

Semiconductor Equipment

ON Semiconductor Corp.

   

United States

   

Information Technology

   

Semiconductors

Microchip Technology, Inc.

   

United States

   

Information Technology

   

Semiconductors

Micron Technology, Inc.

   

United States

   

Information Technology

   

Semiconductors

See your advisor or www.ivyinvestments.com for more information on the Portfolio’s most recently published Top 10 Equity Holdings.

+Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

(a)Effective July 1, 2021, the name of Ivy VIP Science and Technology changed to Delaware Ivy VIP Science and Technology.

 

     
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COMPARISON OF CHANGE IN VALUE

OF $10,000 INVESTMENT

   DELAWARE IVY VIP SCIENCE AND TECHNOLOGY(a)

 

 

 

(UNAUDITED)

 

LOGO

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class I      Class II  

1-year period ended 12-31-21

      15.45%        15.17%  

5-year period ended 12-31-21

      —        23.88%  

10-year period ended 12-31-21

      —        19.46%  

Since Inception of Class through 12-31-21(3)

      22.82%        —  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

 

(3)

4-28-17 (the date on which shares were first acquired by shareholders).

 

(a)

Effective July 1, 2021, the name of Ivy VIP Science and Technology changed to Delaware Ivy VIP Science and Technology.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

80   ANNUAL REPORT   2021  
     

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP SCIENCE AND TECHNOLOGY (in thousands)

 

 

 

DECEMBER 31, 2021

 

COMMON STOCKS   Shares     Value  

Communication Services

 

 

Interactive Media & Services – 11.5%

 

Alphabet, Inc., Class A (A)

     11     $ 32,829  

Alphabet, Inc., Class C (A)

     9       27,026  

Pinterest, Inc., Class A (A)

     303       11,024  

Tencent Holdings Ltd. (B)

     116       6,807  

Vimeo, Inc. (A)

     201       3,618  
   

 

 

  
      81,304  
   

 

 

  
 

Wireless Telecommunication Service – 2.0%

 

T-Mobile U.S., Inc. (A)

     123       14,318  
   

 

 

  
 

Total Communication Services – 13.5%

 

     95,622  

Consumer Discretionary

 

 

Auto Parts & Equipment – 0.9%

 

Luminar Technologies, Inc.,
Class A (A)(C)

     376       6,357  
   

 

 

  
 

Internet & Direct Marketing Retail – 7.4%

 

Amazon.com, Inc. (A)

     12       41,015  

Chewy, Inc., Class A (A)(C)

     97       5,734  

MercadoLibre, Inc. (A)

     4       6,002  
   

 

 

  
      52,751  
   

 

 

  
 

Total Consumer Discretionary – 8.3%

 

     59,108  

Financials

 

 

Consumer Finance – 0.7%

 

SoFi Technologies, Inc. (A)(C)

     300       4,743  
   

 

 

  
 

Total Financials – 0.7%

 

     4,743  

Health Care

 

 

Biotechnology – 0.8%

 

Moderna, Inc. (A)

     23       5,829  
   

 

 

  
 

Health Care Equipment – 2.9%

 

DexCom, Inc. (A)

     17       9,120  

Intuitive Surgical, Inc. (A)

     31       11,081  
   

 

 

  
      20,201  
   

 

 

  
 

Health Care Technology – 2.3%

 

Cerner Corp.

     178       16,513  
   

 

 

  
 

Life Sciences Tools & Services – 1.0%

 

Repligen Corp. (A)

     28       7,354  
   

 

 

  
 

Pharmaceuticals – 1.1%

 

Eli Lilly and Co.

     27       7,516  
   

 

 

  
 

Total Health Care – 8.1%

 

     57,413  

Industrials

 

 

Trucking – 2.1%

 

Uber Technologies, Inc. (A)

     356       14,919  
   

 

 

  
 

Total Industrials – 2.1%

 

     14,919  
COMMON STOCKS (Continued)   Shares     Value  

Information Technology

 

 

Application Software – 7.7%

 

ACI Worldwide, Inc. (A)

     10     $ 358  

Aspen Technology, Inc. (A)

     58       8,794  

Autodesk, Inc. (A)

     39       11,104  

Cadence Design Systems, Inc. (A)

     38       7,113  

Intuit, Inc.

     21       13,539  

Workday, Inc., Class A (A)

     49       13,436  
   

 

 

  
      54,344  
   

 

 

  
 

Data Processing & Outsourced Services – 8.1%

 

MasterCard, Inc., Class A

     80       28,913  

PayPal, Inc. (A)

     79       14,898  

Shift4 Payments, Inc., Class A (A)

     102       5,938  

WNS (Holdings) Ltd. ADR (A)

     86       7,622  
   

 

 

  
      57,371  
   

 

 

  
 

Electronic Components – 2.3%

 

Amphenol Corp., Class A

     189       16,549  
   

 

 

  
 

Internet Services & Infrastructure – 2.2%

 

VeriSign, Inc. (A)

     61       15,426  
   

 

 

  
 

Semiconductor Equipment – 3.8%

 

ASML Holding N.V., NY Registry Shares

     34       27,021  
   

 

 

  
 

Semiconductors – 19.1%

 

Ambarella, Inc. (A)

     37       7,430  

Analog Devices, Inc.

     81       14,249  

GlobalFoundries, Inc. (A)

     183       11,886  

Infineon Technologies AG (B)

     323       14,976  

Microchip Technology, Inc.

     227       19,777  

Micron Technology, Inc.

     189       17,638  

NVIDIA Corp.

     44       13,070  

ON Semiconductor Corp. (A)

     368       25,020  

Taiwan Semiconductor Manufacturing Co. Ltd. ADR

     92       11,106  
   

 

 

  
      135,152  
   

 

 

  
 

Systems Software – 14.3%

 

Microsoft Corp.

     260       87,296  

ServiceNow, Inc. (A)

     22       14,440  
   

 

 

  
      101,736  
   

 

 

  
 

Technology Hardware, Storage & Peripherals – 6.0%

 

Apple, Inc.

     241       42,738  
   

 

 

  
 

Total Information Technology – 63.5%

 

     450,337  
 

TOTAL COMMON STOCKS – 96.2%

 

   $ 682,142  

(Cost: $444,987)

      
CORPORATE DEBT SECURITIES   Principal     Value  

Materials

 

 

Fertilizers & Agricultural Chemicals – 0.0%

 

Marrone Bio Innovations, Inc., 8.000%, 12-31-22 (D)

   $ 288     $ 291  
   

 

 

  
 

Total Materials – 0.0%

 

     291  
 

TOTAL CORPORATE DEBT SECURITIES – 0.0%

 

   $ 291  

(Cost: $288)

      
 
SHORT-TERM SECURITIES   Shares         

Money Market Funds (F) – 4.1%

 

Dreyfus Institutional Preferred Government Money Market Fund – Institutional Shares, 0.010% (E)

     2,038       2,038  

State Street Institutional U.S. Government Money Market Fund – Premier Class, 0.030%

     27,048       27,048  
   

 

 

  
      29,086  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 4.1%

 

   $ 29,086  

(Cost: $29,086)

      
 

TOTAL INVESTMENT SECURITIES – 100.3%

 

   $ 711,519  

(Cost: $474,361)

      
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (0.3)%

 

     (2,245 ) 
 

NET ASSETS – 100.0%

 

   $ 709,274  
 

 

     
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Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP SCIENCE AND TECHNOLOGY (in thousands)

 

 

 

DECEMBER 31, 2021

 

Notes to Schedule of Investments

 

(A)

No dividends were paid during the preceding 12 months.

 

(B)

Listed on an exchange outside the United States.

 

(C)

All or a portion of securities with an aggregate value of $11,909 are on loan.

 

(D)

Restricted security. At December 31, 2021, the Portfolio owned the following restricted security:

 

Security    Acquisition Date(s)      Principal      Cost      Value  

Marrone Bio Innovations, Inc., 8.000%, 12-31-22

      8-20-15      $ 288      $ 287      $ 291  
        

 

 

  

 

    

The total value of this security represented 0.0% of net assets at December 31, 2021.

 

(E)

Investment made with cash collateral received from securities on loan.

 

(F)

Rate shown is the annualized 7-day yield at December 31, 2021.

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

        

Communication Services

   $ 95,622      $ —      $ —  

Consumer Discretionary

     59,108        —        —  

Financials

     4,743        —        —  

Health Care

     57,413        —        —  

Industrials

     14,919        —        —  

Information Technology

     435,361        14,976        —  

Total Common Stocks

   $ 667,166      $ 14,976      $ —  

Corporate Debt Securities

     —        291        —  

Short-Term Securities

     29,086        —        —  

Total

   $ 696,252      $ 15,267      $ —  

The following acronyms are used throughout this schedule:

ADR = American Depositary Receipts

REIT = Real Estate Investment Trust

 

Country Diversification

 

(as a % of net assets)

 

United States

     85.8%  

Netherlands

     3.8%  

Germany

     2.1%  

Taiwan

     1.6%  

India

     1.1%  

China

     1.0%  

Other Countries

     0.8%  

Other+

     3.8%  

+Includes liabilities (net of cash and other assets), and cash equivalents

    

 

 

See Accompanying Notes to Financial Statements.

 

82   ANNUAL REPORT   2021  
     

Table of Contents
MANAGEMENT DISCUSSION   DELAWARE IVY VIP SMALL CAP GROWTH

 

 

 

(UNAUDITED)

 

Below, Kenneth G. McQuade and Timothy J. Miller, CFA, co-portfolio managers of Delaware Ivy VIP Small Cap Growth, discuss positioning, performance and results for the fiscal year ended December 31, 2021.

Mr. McQuade has managed the Portfolio since 2006 and has 26 years of industry experience. Mr. Miller, who has managed the Delaware Ivy Small Cap Growth Fund since 2010, assumed co-manager responsibilities of the Portfolio in 2016. He has 43 years of investment experience. On November 15, 2021, Bradley P. Halverson, CFA, another co-portfolio manager, left the Portfolio to join the Delaware Ivy mid-cap strategy management team.

Fiscal Year Performance

 

 

For the 12 Months Ended December 31, 2021

         

Delaware Ivy VIP Small Cap Growth (Class II shares at net asset value)

      3.99%  

Benchmark

         

Russell 2000 Growth Index

      2.83%  

(generally reflects the performance of small-company stocks)

         

Please note that Portfolio returns include applicable fees and expenses while index returns do not include any such fees. Also, the Portfolio’s performance data does not take into account any product expenses or charges associated with owning a variable life or annuity policy, which is invested in Ivy Variable Insurance Portfolios.

Market review

 

Fiscal year 2021 was a period that did not call for celebration by small-cap growth managers. After posting exceptional gains in fiscal year 2020 amidst that period’s COVID-19 pandemic volatility, small-cap growth stocks took a pause in 2021 and could only muster a 2.8% gain for the year. Small-cap growth was the category laggard among the Russell benchmarks in fiscal year 2021 after being the category leader in 2020. The Russell 1000 Growth Index led the measurement period driven by mega-cap growth stocks, followed by the Russell Value Indexes (small-cap value, mid cap value, and large cap value in order of returns). The gap in performance between small-cap growth and small-cap value was wide – a 2.8% return for growth versus a 28% return for value — reversing a similar gap in favor of growth in 2020. Earnings growth was a major driver of performance in the 2021 measurement period. While small-cap growth companies generated a healthy 40% gain in earnings for the fiscal year, earnings growth for small-cap value companies more than doubled for the same period.

The sectors leading the earnings growth move in the measurement period included consumer discretionary, industrials, materials, energy, and financials. Macroeconomic stimulus, both monetary and fiscal, helped drive the surge in demand for goods and services that suppliers often struggled to provide. The result was an alarming rise in inflationary pressures, which in many cases, provided a boost to cyclical companies’ earnings growth. On the flip side, this situation raised concern about rising interest rates, putting downward pressure on the price-to-earnings (P/E) ratios of growth companies.

Contributors and detractors

 

The Portfolio outperformed its benchmark for the fiscal year by slightly more than one percentage point. A larger gain generated through mid-year was diminished in the second half as pressure from the rotation to value stocks hurt the Portfolio performance. For the measurement period, the sectors contributing to positive performance included healthcare, consumer discretionary, and communication services. On the downside, industrials, information technology, and real estate were the primary drags on performance.

Healthcare was the largest weighted sector in the benchmark while also the worst performing sector, down greater than 20% for the fiscal year. COVID-19 was the obvious key focal point that created many direct impacts such as minimal capacity for many medical procedures, lower private pay from higher unemployment, lack of capacity for clinical trials, and significant stress on healthcare staffing. The result was slower volumes, lower profitability, and less visibility along most of the sector. Biotechnology was the worst performing segment due to the mentioned fundamental issues along with rising interest rates affecting speculative valuations. The Portfolio remained underweight healthcare due to an underweight position in biotechnology, which was the primary reason for relative outperformance. In addition, the Portfolio had exposure across the risk spectrum including exposure to medical staffing and more efficient healthcare delivery, which contributed to positive stock selection. Looking forward, we believe the demand for more efficiency and individualized treatments, along with expected pandemic relief on healthcare systems, should make the fundamental outlook bright for the more novel niches in healthcare as long as those names have available capital for development. As a result, we continue to gravitate toward innovation and services that facilitate value-based healthcare in more cost-effective settings.

 

     
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Table of Contents
           

 

 

 

 

Information technology is the other large weighting in the Portfolio and it was impacted primarily by the macro factors mentioned above. While the fundamental picture for the sector appears to remain healthy, the combination of lower relative earnings growth and higher interest rates have impacted these stocks. Information technology has been a stellar performer over the past few years with valuations reaching record levels, which has made the group vulnerable to these trends. The Portfolio had reduced exposure to the most extremely valued software names throughout the fiscal year but nevertheless maintained an above-average weighting in the group, which impacted performance. Within the information technology sector, the principal drag was from the software industry whereas the Portfolio’s semiconductor and information technology services industry holdings were positive contributors. Looking ahead into 2022, we think macro pressures will remain for a period of time, but the ultimate growth opportunities in the software/semiconductor/technology services segments remain too attractive to avoid. Cyclical rotations akin to this one have been experienced in the past and have generally become attractive opportunities to make a few upgrades in the Portfolio. Cybersecurity remains an area of strong interest as does the general enterprise software segment.

Consumer discretionary and industrials were the next two greatest sector weightings during the measurement period. Positive returns were generated in consumer discretionary led primarily by the hotel, gaming, and restaurant industries. Companies such as Marriott Vacations, Churchill Downs, and Wyndham Hotels were beneficiaries of the healthy consumer spending trends. The industrials sector was a meaningful outperformer for the benchmark during the measurement period. Sector performance was quite volatile throughout the fiscal year based on investors’ reactions to economic measures. The more cyclical segments performed better overall with the strongest being road and rail, building products, and construction and engineering. The more unestablished growthier segments such as alternative energy and services were underperformers. The Portfolio had some exposure to cyclical names but maintained greater exposure to secular growth names, which were a relative detractor for the fiscal year. The aerospace and defense segment was also a negative contributor as it is considered a more defensive segment. It was also impacted by concerns of federal budget constraints and manufacturer operating issues. The Portfolio’s higher exposure to defense was also a detractor. We will continue to monitor the cyclical dynamics the US economy presents but will continue to seek transformational companies that appear poised for longer-term sustainable success.

Outlook

 

The fundamental macroeconomic outlook for 2022 appears to be quite healthy, which has the potential to provide a foundation for another year of solid earnings growth for small-cap growth companies. We don’t think the discrepancy between value and growth earnings in 2022 will be as pronounced as it was in 2021 since cyclical companies will be facing difficult comparisons. The Portfolio remains focused on seeking high-quality, small-cap growth companies across multiple sectors.

Effective July 1, 2021, the Portfolio name changed from Ivy VIP Small Cap Growth.

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

Past performance is not a guarantee of future results. The value of the Portfolio’s shares will change, and you could lose money on your investment.

The Portfolio may invest in derivative instruments, primarily total return swaps, futures on domestic equity indexes and options, both written and purchased, in an attempt to increase exposure to various equity sectors and markets or to hedge market risk on individual equity securities.

Investing in small-cap stocks may carry more risk than investing in stocks of larger more well-established companies. Prices of growth stocks may be more sensitive to changes in current and expected earnings than the prices of other stocks. Growth stocks may not perform as well as value stocks or the stock market in general. The Portfolio may invest in Initial Public Offerings (IPOs), which can have a significant positive impact on the Portfolio’s performance that may not be replicated in the future. These and other risks are more fully described in the Portfolio’s prospectus.

 

84   ANNUAL REPORT   2021  
     

Table of Contents
           

 

 

 

 

The opinions expressed in this report are those of the Portfolio managers and are current only through the end of the period of the report as stated on the cover. The portfolio managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of Delaware Ivy VIP Small Cap Growth.

 

     
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Table of Contents
PORTFOLIO HIGHLIGHTS   DELAWARE IVY VIP SMALL CAP GROWTH(a)

 

 

 

ALL DATA AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Asset Allocation

 

 

Stocks

     98.4%  

Information Technology

     29.9%  

Health Care

     24.5%  

Consumer Discretionary

     17.3%  

Industrials

     14.6%  

Financials

     5.0%  

Consumer Staples

     3.1%  

Communication Services

     2.4%  

Energy

     1.6%  

Liabilities (Net of Cash and Other Assets),
and Cash Equivalents+

     1.6%  

 

Top 10 Equity Holdings

 

Company    Sector      Industry

Globant S.A.

   

Information Technology

     

IT Consulting & Other Services

SiTime Corp.

   

Information Technology

     

Semiconductors

Knight Transportation, Inc.

   

Industrials

     

Trucking

Tandem Diabetes Care, Inc.

   

Health Care

     

Health Care Equipment

Omnicell, Inc.

   

Health Care

     

Health Care Technology

Vocera Communications, Inc.

   

Health Care

     

Health Care Technology

Marriott Vacations Worldwide Corp.

   

Consumer Discretionary

     

Hotels, Resorts & Cruise Lines

Varonis Systems, Inc.

   

Information Technology

     

Systems Software

Cryoport, Inc.

   

Health Care

     

Health Care Equipment

Pinnacle Financial Partners, Inc.

   

Financials

     

Regional Banks

See your advisor or www.ivyinvestments.com for more information on the Portfolio’s most recently published Top 10 Equity Holdings.

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

(a)Effective July 1, 2021, the name of Ivy VIP Small Cap Growth changed to Delaware Ivy VIP Small Cap Growth.

 

86   ANNUAL REPORT   2021  
     

Table of Contents
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT   DELAWARE IVY VIP SMALL CAP GROWTH(a)

 

 

 

(UNAUDITED)

 

LOGO

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class I      Class II  

1-year period ended 12-31-21

      4.25%        3.99%  

5-year period ended 12-31-21

      —        15.83%  

10-year period ended 12-31-21

      —        12.85%  

Since Inception of Class through 12-31-21(3)

      15.14%        —  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

 

(3)

11-5-18 (the date on which shares were first acquired by shareholders).

 

(a)

Effective July 1, 2021, the name of Ivy VIP Small Cap Growth changed to Delaware Ivy VIP Small Cap Growth.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

     
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Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP SMALL CAP GROWTH (in thousands)

 

 

 

DECEMBER 31, 2021

 

COMMON STOCKS   Shares     Value  

Communication Services

 

 

Broadcasting – 2.4%

 

Gray Television, Inc.

     124     $ 2,495  

Nexstar Broadcasting Group, Inc.

     51       7,740  
   

 

 

  
      10,235  
   

 

 

  
 

Total Communication Services – 2.4%

 

     10,235  

Consumer Discretionary

 

 

Auto Parts & Equipment – 2.8%

 

Fox Factory Holding Corp. (A)

     50       8,548  

Visteon Corp. (A)

     34       3,796  
   

 

 

  
      12,344  
   

 

 

  
 

Automotive Retail – 0.4%

 

EVgo, Inc., Class A (A)(B)

     171       1,701  
   

 

 

  
 

Casinos & Gaming – 4.8%

 

Churchill Downs, Inc.

     33       7,848  

Monarch Casino & Resort, Inc. (A)

     67       4,973  

Red Rock Resorts, Inc., Class A

     151       8,299  
   

 

 

  
      21,120  
   

 

 

  
 

Footwear – 1.9%

 

Deckers Outdoor Corp. (A)

     23       8,254  
   

 

 

  
 

Homebuilding – 0.6%

 

TopBuild Corp. (A)

     10       2,819  
   

 

 

  
 

Hotels, Resorts & Cruise Lines – 3.7%

 

Marriott Vacations Worldwide Corp.

     56       9,471  

Wyndham Destinations, Inc.

     77       6,906  
   

 

 

  
      16,377  
   

 

 

  
 

Leisure Products – 1.4%

 

Malibu Boats, Inc., Class A (A)

     87       5,998  
   

 

 

  
 

Restaurants – 1.7%

 

Portillo’s, Inc., Class A (A)(B)

     23       859  

Sweetgreen, Inc., Class A (A)(B)

     14       434  

Texas Roadhouse, Inc., Class A

     67       5,973  
   

 

 

  
      7,266  
   

 

 

  
 

Total Consumer Discretionary – 17.3%

 

     75,879  

Consumer Staples

 

 

Distillers & Vintners – 1.2%

 

Duckhorn Portfolio, Inc. (The) (A)

     140       3,270  

MGP Ingredients, Inc.

     25       2,165  
   

 

 

  
      5,435  
   

 

 

  
 

Hypermarkets & Super Centers – 1.6%

 

BJ’s Wholesale Club, Inc. (A)

     102       6,835  
   

 

 

  
 

Packaged Foods & Meats – 0.3%

 

Sovos Brands, Inc. (A)

     74       1,116  
   

 

 

  
 

Total Consumer Staples – 3.1%

 

     13,386  
COMMON STOCKS (Continued)   Shares     Value  

Energy

 

 

Oil & Gas Equipment & Services – 1.2%

 

Cactus, Inc., Class A

     105     $ 3,998  

Liberty Oilfield Services, Inc., Class A (A)

     123       1,190  
   

 

 

  
      5,188  
   

 

 

  
 

Oil & Gas Exploration & Production – 0.4%

 

SM Energy Co.

     65       1,908  
   

 

 

  
 

Total Energy – 1.6%

 

     7,096  

Financials

 

 

Asset Management & Custody Banks – 0.9%

 

Focus Financial Partners, Inc., Class A (A)

     52       3,076  

Hamilton Lane, Inc., Class A

     7       756  
   

 

 

  
      3,832  
   

 

 

  
 

Financial Exchanges & Data – 0.4%

 

Open Lending Corp., Class A (A)

     91       2,055  
   

 

 

  
 

Regional Banks – 3.7%

 

Pinnacle Financial Partners, Inc.

     91       8,652  

Seacoast Banking Corp. of Florida

     95       3,371  

Veritex Holdings, Inc.

     103       4,113  
   

 

 

  
      16,136  
   

 

 

  
 

Total Financials – 5.0%

 

     22,023  

Health Care

 

 

Biotechnology – 6.6%

 

Blueprint Medicines Corp. (A)

     16       1,730  

CareDx, Inc. (A)

     185       8,432  

Insmed, Inc. (A)

     78       2,121  

Organogenesis Holdings, Inc. (A)

     263       2,434  

PTC Therapeutics, Inc. (A)

     38       1,495  

Twist Bioscience Corp. (A)

     16       1,258  

Veracyte, Inc. (A)

     67       2,751  

Vericel Corp. (A)

     220       8,632  
   

 

 

  
      28,853  
   

 

 

  
 

Health Care Distributors – 1.7%

 

PetIQ, Inc. (A)

     326       7,399  
   

 

 

  
 

Health Care Equipment – 6.2%

 

Axonics, Inc. (A)

     109       6,130  

Cryoport, Inc. (A)

     152       8,969  

Tactile Systems Technology, Inc. (A)

     58       1,110  

Tandem Diabetes Care, Inc. (A)

     71       10,755  
   

 

 

  
      26,964  
   

 

 

  
 

Health Care Facilities – 0.6%

 

Joint Corp. (The) (A)

     42       2,788  
   

 

 

  
 

Health Care Services – 2.5%

 

AMN Healthcare Services, Inc. (A)

     64       7,794  

Castle Biosciences, Inc. (A)

     76       3,249  
   

 

 

  
      11,043  
   

 

 

  
COMMON STOCKS (Continued)   Shares     Value  

Health Care Technology – 4.4%

 

Omnicell, Inc. (A)

     53     $ 9,648  

Vocera Communications, Inc. (A)

     147       9,544  
   

 

 

  
      19,192  
   

 

 

  
 

Life Sciences Tools & Services – 0.6%

 

Quanterix Corp. (A)

     62       2,618  
   

 

 

  
 

Managed Health Care – 1.5%

 

Progyny, Inc. (A)

     131       6,613  
   

 

 

  
 

Pharmaceuticals – 0.4%

 

Pacira Pharmaceuticals, Inc. (A)

     31       1,847  
   

 

 

  
 

Total Health Care – 24.5%

 

     107,317  

Industrials

 

 

Air Freight & Logistics – 1.0%

 

Air Transport Services Group, Inc. (A)

     142       4,187  
   

 

 

  
 

Construction & Engineering – 1.6%

 

Valmont Industries, Inc.

     29       7,206  
   

 

 

  
 

Electrical Components & Equipment – 2.2%

 

EnerSys

     52       4,110  

Regal Rexnord Corp.

     33       5,600  
   

 

 

  
      9,710  
   

 

 

  
 

Environmental & Facilities Services – 1.5%

 

Clean Harbors, Inc. (A)

     67       6,687  
   

 

 

  
 

Industrial Machinery – 3.6%

 

Altra Industrial Motion Corp.

     42       2,159  

John Bean Technologies Corp.

     36       5,464  

Kornit Digital Ltd. (A)

     30       4,575  

RBC Bearings, Inc. (A)

     17       3,360  
   

 

 

  
      15,558  
   

 

 

  
 

Security & Alarm Services – 1.1%

 

Brink’s Co. (The)

     71       4,674  
   

 

 

  
 

Trading Companies & Distributors – 1.1%

 

Herc Holdings, Inc.

     32       5,044  
   

 

 

  
 

Trucking – 2.5%

 

Knight Transportation, Inc.

     180       10,969  
   

 

 

  
 

Total Industrials – 14.6%

 

     64,035  

Information Technology

 

 

Application Software – 12.0%

 

BTRS Holdings, Inc. (A)

     328       2,563  

Domo, Inc., Class B (A)

     108       5,352  

Five9, Inc. (A)

     47       6,470  

ForgeRock, Inc., Class A (A)(B)

     37       995  

LivePerson, Inc. (A)

     114       4,073  

Mimecast Ltd. (A)

     98       7,831  

NCR Corp. (A)

     185       7,453  

Paycor HCM, Inc. (A)

     160       4,611  

Q2 Holdings, Inc. (A)

     77       6,110  
 

 

88   ANNUAL REPORT   2021  
     

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP SMALL CAP GROWTH (in thousands)

 

 

 

DECEMBER 31, 2021

 

COMMON STOCKS (Continued)   Shares     Value  

Application Software (Continued)

 

SimilarWeb Ltd. (A)(B)

     69     $ 1,241  

Smartsheet, Inc., Class A (A)

     78       6,064  
   

 

 

  
      52,763  
   

 

 

  
 

Communications Equipment – 1.7%

 

Viavi Solutions, Inc. (A)

     412       7,252  
   

 

 

  
 

Data Processing & Outsourced Services – 1.8%

 

Shift4 Payments, Inc., Class A (A)

     137       7,929  
   

 

 

  
 

Internet Services & Infrastructure – 1.9%

 

Switch, Inc., Class A

     284       8,140  
   

 

 

  
 

IT Consulting & Other Services – 2.7%

 

Globant S.A. (A)

     37       11,670  
   

 

 

  
COMMON STOCKS (Continued)   Shares     Value  

Semiconductors – 6.4%

 

Allegro MicroSystems, Inc. (A)

     236     $ 8,535  

Monolithic Power Systems, Inc.

     17       8,264  

SiTime Corp. (A)

     39       11,326  
   

 

 

  
      28,125  
   

 

 

  
 

Systems Software – 3.4%

 

CyberArk Software Ltd. (A)

     6       1,093  

SailPoint Technologies Holdings, Inc. (A)

     90       4,356  

Varonis Systems, Inc. (A)

     194       9,446  
   

 

 

  
      14,895  
   

 

 

  
 

Total Information Technology – 29.9%

 

     130,774  
 

TOTAL COMMON STOCKS – 98.4%

 

   $ 430,745  

(Cost: $325,284)

 

SHORT-TERM SECURITIES   Shares     Value  

Money Market Funds (D) – 2.6%

 

Dreyfus Institutional Preferred Government Money Market Fund – Institutional Shares, 0.010% (C)

     4,238     $ 4,238  

State Street Institutional U.S. Government Money Market Fund – Premier Class, 0.030%

     6,999       6,999  
   

 

 

  
      11,237  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 2.6%

 

   $ 11,237  

(Cost: $11,237)

      
 

TOTAL INVESTMENT SECURITIES – 101.0%

 

   $ 441,982  

(Cost: $336,521)

      
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (1.0)%

 

     (4,202 ) 
 

NET ASSETS – 100.0%

           $ 437,780  
 

 

Notes to Schedule of Investments

 

*

Not shown due to rounding.

 

(A)

No dividends were paid during the preceding 12 months.

 

(B)

All or a portion of securities with an aggregate value of $4,105 are on loan.

 

(C)

Investment made with cash collateral received from securities on loan.

 

(D)

Rate shown is the annualized 7-day yield at December 31, 2021.

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

      Level 1      Level 2      Level 3  

Assets

         

Investments in Securities

         

Common Stocks

    $ 430,745      $ —      $ —  

Short-Term Securities

      11,237        —        —  

Total

    $ 441,982      $ —      $ —  

 

See Accompanying Notes to Financial Statements.

 

     
    2021       ANNUAL REPORT       89  

Table of Contents
MANAGEMENT DISCUSSION   DELAWARE IVY VIP SMID CAP CORE

 

 

 

(UNAUDITED)

 

On September 13, 2021, the Board of Trustees (Board) of the Ivy Variable Insurance Portfolios approved the Portfolio name change to “Delaware Ivy VIP Smid Cap Core” (formerly, Delaware Ivy VIP Small Cap Core, and before that, Ivy VIP Small Cap Core) and the appointment of the portfolio manager team of Francis X. Morris, Christopher S. Adams, CFA, Michael S. Morris, CFA, Donald G. Padilla, CFA, and David E. Reidinger of Delaware Management Company as new portfolio managers. In connection with this change, the board approved applicable revisions to the Portfolio’s investment strategies and benchmark. All changes took effect on November 15, 2021.

Effective November 15, 2021, the Portfolio’s new benchmark index is the Russell 2500 Index. The portfolio managers believe that this index is more consistent with the investment philosophy of the Portfolio and more reflective of the types of securities in which the Portfolio invests than the previous benchmark index. Both the new benchmark index and the Portfolio’s previous benchmark index are included for comparison purposes.

Below, Francis X. Morris, Christopher S. Adams, CFA, Michael S. Morris, CFA, Donald G. Padilla, CFA, and David E. Reidinger, managers of Delaware Ivy VIP Smid Cap Core, discuss positioning, performance and results for the fiscal year ended December 31, 2021.

Fiscal Year Performance

 

 

For the 12 Months Ended December 31, 2021

         

Delaware Ivy VIP Smid Cap Core (Class II shares at net asset value)

      20.78%  

Benchmark(s)

         

Russell 2500 Index

     18.18%  

(Generally reflects the performance of small- and mid-cap company stocks)

         

Russell 2000 Index

     14.82%  

(Generally reflects the performance of small-cap company stocks)

         

Please note that Portfolio returns include applicable fees and expenses while index returns do not include any such fees. Also, the Portfolio’s performance data does not take into account any product expenses or charges associated with owning a variable life or annuity policy, which is invested in Ivy Variable Insurance Portfolios.

Market review

 

Over the year, mid-cap stocks outperformed small-cap stocks. The smaller-cap Russell 2000 Index gained 14.82% for the year while the Russell Midcap Index gained 22.58%. Value companies outperformed growth companies during the year as the Russell 2500 Value Index appreciated 27.78% versus a 5.04% gain for the Russell 2500 Growth Index. Sector-level performance within the Russell 2500 Index, the Portfolio’s benchmark, was mostly positive with only one sector, healthcare, declining and 15 advancing. Companies in the technology, utilities, and consumer staples sectors were relative laggards for the year. The strongest performing sectors in the benchmark were energy, transportation, and real estate investment trusts (REITs).

US gross domestic product (GDP) growth was strong in 2021, with the initial read for fourth quarter GDP of 6.9%, topping consensus of 5.3%. The quarter was the fastest rise since the third quarter of 2020. An increase in private inventory investment was notable. For calendar year 2021, output grew 5.5%, which is the fastest pace since 1984. The US has learned to adapt to the new world, living with COVID-19, and continuing to produce.

The National Federation of Independent Business (NFIB) Small Business Optimism Index level stayed below 100 in December 2021 at 98.9. Small business owners continued to have a difficult time finding qualified workers to fill open positions. Inflation was quoted in the report as the single most important operational problem small business owners currently have in managing their business. The unemployment rate continued to decline, settling at 3.9% in December 2021, further tightening the labor market. The Conference Board Consumer Confidence Index increased during the quarter, with a December 2021 reading of 115.2 whereas in September 2021 the index stood at 109.8 (1985=100). Inflation has become more sticky than transitory as personal consumption expenditures (PCE) increased to a 3.3% seasonally adjusted annual rate in the fourth quarter of 2021, an upturn from the third of quarter 2021’s 2.0% pace.

Performance

 

The Portfolio outperformed both of its new and old benchmarks over the annual reporting period. The Russell 2500 Index is the Portfolio’s only benchmark as of November 15, 2021.

 

90   ANNUAL REPORT   2021  
     

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For the first quarter of 2021, the Portfolio produced a positive return and exceeded its benchmark, the Russell 2000 Index. Performance for the quarter was driven nearly equally between stock selection and allocation.

For the second quarter of 2021, the Portfolio produced a positive return but trailed its benchmark, the Russell 2000 Index, for the period. Underperformance for the quarter was driven almost entirely by stock selection.

For the third quarter of 2021, the Portfolio had a negative return but performed better than its benchmark, the Russell 2000 Index for the period. Portfolio performance was mainly attributable to stock selection.

For the fourth quarter of 2021, the Portfolio produced a positive return, outperforming its Russell 2500 Index benchmark for the period. Performance for the quarter was driven almost entirely by stock selection and allocation.

Outlook

 

A recovery in corporate earnings and the improving US economic situation has been a tailwind for active management. Companies are pushing forward pricing where they can in order to offset the supply and demand imbalance. Wage inflation is likely to be sticky given the strong employment situation. With respect to company-specific fundamentals, we continue to believe that companies’ abilities to meet or beat earnings and revenue expectations are critically important. Valuations ended the year at premiums across the small-, mid-, and large-cap segments of the US market, relative to their own history, though multiples contracted over calendar year 2021 with earnings contributing as the street increased expectations throughout the year. We think consensus estimates for 2022 earnings growth look reasonably healthy, though we will be keenly focused on management’s expectations when companies report earnings in the first half of 2022.

On balance, we believe the market volatility and macroeconomic environment favor active managers that can apply thorough company-level analysis when making investment decisions. We continue to maintain our strategy of investing in companies that, in our view, have strong balance sheets and cash flow, sustainable competitive advantages, and high-quality management teams with the potential to deliver value to shareholders.

On September 13, 2021, the Board of Trustees (Board) of the Ivy Variable Insurance Portfolios approved the Portfolio name change to Delaware Ivy VIP Smid Cap Core (formerly, Delaware Ivy VIP Small Cap Core). Effective July 1, 2021, the Portfolio name changed from Ivy VIP Small Cap Core.

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

Past performance is not a guarantee of future results. The value of the Portfolio’s shares will change, and you could lose money on your investment.

Investing in small- and mid-cap growth and value stocks may carry more risk than investing in stocks of larger, more well-established companies. Growth stocks may be more volatile or not perform as well as value stocks or the stock market in general. Value stocks are stocks of companies that may have experienced adverse developments or may be subject to special risks that have caused the stocks to be out of favor and, in the opinion of the Portfolios’ managers, undervalued. Such security may never reach what the manager believes to be its full value, or such security’s value may decrease. These and other risks are more fully described in the Portfolio’s prospectus.

The opinions expressed in this report are those of the Portfolio managers and are current only through the end of the period of the report as stated on the cover. The managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The indexes noted are unmanaged and include reinvested dividends. One cannot invest directly in an index, nor is an index representative of Delaware Ivy VIP Smid Cap Core.

 

     
    2021       ANNUAL REPORT       91  

Table of Contents
PORTFOLIO HIGHLIGHTS   DELAWARE IVY VIP SMID CAP CORE(a)

 

 

 

ALL DATA AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Asset Allocation

 

Stocks

     98.6%  

Industrials

     24.3%  

Financials

     16.7%  

Consumer Discretionary

     15.7%  

Information Technology

     12.4%  

Health Care

     11.9%  

Materials

     7.6%  

Energy

     4.6%  

Real Estate

     2.7%  

Communication Services

     1.5%  

Consumer Staples

     1.2%  

Liabilities (Net of Cash and Other Assets), and Cash Equivalents+

     1.4%  
 

 

Top 10 Equity Holdings

 

Company    Sector      Industry

Regal Rexnord Corp.

   

Industrials

     

Electrical Components & Equipment

Pinnacle Financial Partners, Inc.

   

Financials

     

Regional Banks

LPL Investment Holdings, Inc.

   

Financials

     

Investment Banking & Brokerage

Skechers USA, Inc.

   

Consumer Discretionary

     

Footwear

Murphy USA, Inc.

   

Consumer Discretionary

     

Automotive Retail

Valmont Industries, Inc.

   

Industrials

     

Construction & Engineering

Element Solutions, Inc.

   

Materials

     

Specialty Chemicals

TopBuild Corp.

   

Consumer Discretionary

     

Homebuilding

Kornit Digital Ltd.

   

Industrials

     

Industrial Machinery

National Storage Affiliates Trust

   

Real Estate

     

Specialized REITs

See your advisor or www.ivyinvestments.com for more information on the Portfolio’s most recently published Top 10 Equity Holdings.

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

(a)Effective July 1, 2021, the name of Ivy VIP Small Cap Core changed to Delaware Ivy VIP Small Cap Core. Effective November 15, 2021, the name of Delaware Ivy VIP Small Cap Core changed to Delaware Ivy VIP Smid Cap Core.

 

92   ANNUAL REPORT   2021  
     

Table of Contents
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT   DELAWARE IVY VIP SMID CAP CORE(a)

 

 

 

(UNAUDITED)

 

LOGO

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class II  

1-year period ended 12-31-21

      20.78%  

5-year period ended 12-31-21

      10.35%  

10-year period ended 12-31-21

      12.94%  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

 

(a)

Effective July 1, 2021, the name of Ivy VIP Small Cap Core changed to Delaware Ivy VIP Small Cap Core. Effective November 15, 2021, the name of Delaware Ivy VIP Small Cap Core changed to Delaware Ivy VIP Smid Cap Core.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

(b)

Effective November 15, 2021, the Portfolio’s new benchmark is the Russell 2500 Index. DMC believes that this index is more reflective of the types of securities that the Portfolio invests in. Both the new benchmark and the Portfolio’s previous benchmark noted above are included for comparison purposes.

 

     
    2021       ANNUAL REPORT       93  

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP SMID CAP CORE (in thousands)

 

 

 

DECEMBER 31, 2021

 

COMMON STOCKS   Shares     Value  

Communication Services

 

 

Interactive Media & Services – 1.5%

 

TripAdvisor, Inc. (A)

     101     $ 2,764  
   

 

 

  
 

Total Communication Services – 1.5%

 

     2,764  

Consumer Discretionary

 

 

Apparel Retail – 1.5%

 

Boot Barn Holdings, Inc. (A)

     22       2,734  
   

 

 

  
 

Auto Parts & Equipment – 1.7%

 

Dana Holding Corp.

     73       1,677  

Visteon Corp. (A)

     12       1,376  
   

 

 

  
      3,053  
   

 

 

  
 

Automotive Retail – 3.4%

 

Murphy USA, Inc.

     32       6,277  
   

 

 

  
 

Footwear – 3.9%

 

Skechers USA, Inc. (A)

     163       7,073  
   

 

 

  
 

Homebuilding – 2.8%

 

TopBuild Corp. (A)

     18       5,060  
   

 

 

  
 

Internet & Direct Marketing Retail – 2.4%

 

Shutterstock, Inc.

     40       4,438  
   

 

 

  
 

Total Consumer Discretionary – 15.7%

 

     28,635  

Consumer Staples

 

 

Personal Products – 1.2%

 

BellRing Brands, Inc., Class A (A)

     74       2,124  
   

 

 

  
 

Total Consumer Staples – 1.2%

 

     2,124  

Energy

 

 

Oil & Gas Equipment & Services – 0.7%

 

Liberty Oilfield Services, Inc., Class A (A)

     128       1,238  
   

 

 

  
 

Oil & Gas Exploration & Production – 3.5%

 

Chesapeake Energy Corp.

     41       2,655  

Coterra Energy, Inc.

     166       3,149  

Diamondback Energy, Inc.

     5       529  
   

 

 

  
      6,333  
   

 

 

  
 

Oil & Gas Refining & Marketing – 0.4%

 

Green Plains, Inc. (A)

     24       844  
   

 

 

  
 

Total Energy – 4.6%

 

     8,415  

Financials

 

 

Investment Banking & Brokerage – 4.0%

 

LPL Investment Holdings, Inc.

     46       7,310  
   

 

 

  

Regional Banks – 10.2%

 

BankUnited, Inc.

     102       4,319  

Pinnacle Financial Partners, Inc.

     98       9,320  

United Community Banks, Inc.

     119       4,267  

Webster Financial Corp.

     10       541  
   

 

 

  
      18,447  
   

 

 

  
COMMON STOCKS (Continued)   Shares     Value  

Thrifts & Mortgage Finance – 2.5%

 

Essent Group Ltd.

     100     $ 4,573  
   

 

 

  
 

Total Financials—16.7%

 

     30,330  

Health Care

 

 

Biotechnology – 3.3%

 

Biohaven Pharmaceutical Holding Co. Ltd. (A)

     10       1,343  

Halozyme Therapeutics, Inc. (A)

     114       4,583  
   

 

 

  
      5,926  
   

 

 

  
 

Health Care Equipment – 4.5%

 

Cryoport, Inc. (A)

     46       2,720  

Envista Holdings Corp. (A)

     107       4,837  

Shockwave Medical, Inc. (A)

     4       703  
   

 

 

  
      8,260  
   

 

 

  
 

Health Care Facilities – 1.0%

 

Encompass Health Corp.

     29       1,892  
   

 

 

  
 

Health Care Supplies – 0.7%

 

Sientra, Inc. (A)

     342       1,256  
   

 

 

  
 

Health Care Technology – 0.7%

 

Tabula Rasa HealthCare, Inc. (A)(B)

     84       1,263  
   

 

 

  
 

Life Sciences Tools & Services – 0.4%

 

Maravai LifeSciences Holdings, Inc., Class A (A)

     19       797  
   

 

 

  
 

Pharmaceuticals – 1.3%

 

Pacira Pharmaceuticals, Inc. (A)

     38       2,282  
   

 

 

  
 

Total Health Care – 11.9%

 

     21,676  

Industrials

 

 

Agricultural & Farm Machinery – 1.6%

 

AGCO Corp.

     25       2,868  
   

 

 

  
 

Construction & Engineering – 3.1%

 

Valmont Industries, Inc.

     23       5,662  
   

 

 

  
 

Construction Machinery & Heavy Trucks – 0.4%

 

Federal Signal Corp. (A)

     17       735  
   

 

 

  
 

Electrical Components & Equipment – 5.4%

 

Regal Rexnord Corp.

     58       9,814  
   

 

 

  
 

Environmental & Facilities Services – 1.0%

 

Clean Harbors, Inc. (A)

     18       1,760  
   

 

 

  
 

Industrial Machinery – 2.8%

 

Kornit Digital Ltd. (A)

     33       5,056  
   

 

 

  
 

Marine – 1.7%

 

Kirby Corp. (A)

     53       3,171  
   

 

 

  
 

Research & Consulting Services – 2.6%

 

ICF International, Inc.

     47       4,778  
   

 

 

  
COMMON STOCKS (Continued)   Shares     Value  

Trading Companies & Distributors – 3.5%

 

Beacon Roofing Supply, Inc. (A)

     53     $ 3,059  

Triton International Ltd.

     56       3,375  
   

 

 

  
      6,434  
   

 

 

  
 

Trucking – 2.2%

 

Knight Transportation, Inc.

     65       3,943  
   

 

 

  
 

Total Industrials – 24.3%

 

     44,221  

Information Technology

 

 

Application Software – 1.7%

 

Q2 Holdings, Inc. (A)

     32       2,548  

Sprout Social, Inc., Class A (A)

     6       508  
   

 

 

  
      3,056  
   

 

 

  
 

Data Processing & Outsourced Services – 2.6%

 

EVERTEC, Inc.

     93       4,645  
   

 

 

  
 

Electronic Components – 1.2%

 

Knowles Corp. (A)

     90       2,104  
   

 

 

  
 

Internet Services & Infrastructure – 1.4%

 

Switch, Inc., Class A

     89       2,553  
   

 

 

  
 

Semiconductor Equipment – 1.4%

 

Brooks Automation, Inc.

     25       2,564  
   

 

 

  
 

Semiconductors – 1.6%

 

Allegro MicroSystems, Inc. (A)

     82       2,969  
   

 

 

  
 

Systems Software – 2.5%

 

Varonis Systems, Inc. (A)

     95       4,635  
   

 

 

  
 

Total Information Technology – 12.4%

 

     22,526  

Materials

 

 

Commodity Chemicals – 2.4%

 

Cabot Corp.

     77       4,329  
   

 

 

  
 

Diversified Chemicals – 1.3%

 

Huntsman Corp.

     69       2,409  
   

 

 

  

Specialty Chemicals – 3.9%

 

Element Solutions, Inc.

     233       5,659  

Minerals Technologies, Inc. (A)

     19       1,373  
   

 

 

  
      7,032  
   

 

 

  
 

Total Materials – 7.6%

 

     13,770  

Real Estate

 

 

Specialized REITs – 2.7%

 

National Storage Affiliates Trust

     70       4,839  
   

 

 

  
 

Total Real Estate – 2.7%

 

     4,839  
 

TOTAL COMMON STOCKS – 98.6%

 

   $ 179,300  

(Cost: $148,131)

 

    
 

 

94   ANNUAL REPORT   2021  
     

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP SMID CAP CORE (in thousands)

 

 

 

DECEMBER 31, 2021

 

SHORT-TERM SECURITIES   Shares     Value  

Money Market Funds (C) – 1.4%

 

State Street Institutional U.S. Government Money Market Fund – Premier Class, 0.030%

     2,528     $ 2,528  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 1.4%

 

   $ 2,528  

(Cost: $2,528)

 

    
 

TOTAL INVESTMENT SECURITIES – 100.0%

 

   $ 181,828  

(Cost: $150,659)

 

    
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – 0.0%

 

     (69 ) 
 

NET ASSETS – 100.0%

 

   $ 181,759  

    

    

 

 

Notes to Schedule of Investments

 

(A)

No dividends were paid during the preceding 12 months.

 

(B)

All or a portion of securities with an aggregate value of $1,228 are on loan.

 

(C)

Rate shown is the annualized 7-day yield at December 31, 2021.

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 179,300      $ —      $ —  

Short-Term Securities

     2,528        —        —  

Total

   $ 181,828      $ —      $ —  

The following acronym is used throughout this schedule:

REIT = Real Estate Investment Trust

 

See Accompanying Notes to Financial Statements.

 

     
    2021       ANNUAL REPORT       95  

Table of Contents
STATEMENTS OF ASSETS AND LIABILITIES   IVY VIP

 

 

 

AS OF DECEMBER 31, 2021

 

(In thousands, except per share amounts)   Asset
Strategy(1)(2)		   Balanced(3)   Energy(4)   Growth(5)   High
Income(6)		   International
Core Equity(7)		   Mid Cap
Growth(8)

ASSETS

 

Investments in unaffiliated securities at value+^

     $ 704,834     $ 271,447     $ 74,145     $ 1,023,680     $ 935,965     $ 624,384     $ 735,721

Investments in affiliated securities at value+

       —       —       —       —       4,957       —       —

Bullion at value+

       37,831       —       —       —       —       —       —

Investments at Value

       742,665       271,447       74,145       1,023,680       940,922       624,384       735,721

Cash

       170       —       34       —       103       2       —

Cash denominated in foreign currencies at value+

       —       —       — *       —       113       1,118       —

Due from broker

       —       —       —       —       —       —       1,060

Investment securities sold receivable

       10       —       —       —       15,148       2,795       —

Dividends and interest receivable

       2,345       526       33       288       10,470       1,830       103

Capital shares sold receivable

       107       11       76       63       362       67       165

Receivable from affiliates

       —       —       —       —       —       —       136

Receivable from securities lending income — net

       3       — *       — *       —       70       4       1

Prepaid and other assets

       1       1       — *       2       2       1       1

Total Assets

       745,301       271,985       74,288       1,024,033       967,190       630,201       737,187

LIABILITIES

                            

Cash collateral on securities loaned at value

       303       208       —       —       44,639       8,814       4,194

Investment securities purchased payable

       —       —       33       —       10,064       —       —

Capital shares redeemed payable

       211       200       26       343       145       113       275

Independent Trustees and Chief Compliance Officer fees payable

       175       85       9       199       73       102       38

Distribution and service fees payable

       5       2       — *       7       6       4       4

Investment management fee payable

       11       5       2       20       15       15       17

Accounting services fee payable

       17       3       4       21       18       13       14

Unrealized depreciation on forward foreign currency contracts

       —       —       —       —       137       —       —

Written options at value+

       —       —       —       —       —       —       1,190

Other liabilities

       503       216       68       796       647       634       611

Total Liabilities

       1,225       719       142       1,386       55,744       9,695       6,343

Total Net Assets

     $ 744,076     $ 271,266     $ 74,146     $ 1,022,647     $ 911,446     $ 620,506     $ 730,844

NET ASSETS

                            

Capital paid in (shares authorized — unlimited)

     $ 619,382     $ 157,378     $ 117,852     $ 382,498     $ 980,230     $ 504,204     $ 326,390

Total Distributable Earnings (Loss)

       124,694       113,888       (43,706 )       640,149       (68,784 )       116,302       404,454

Total Net Assets

     $ 744,076     $ 271,266     $ 74,146     $ 1,022,647     $ 911,446     $ 620,506     $ 730,844

CAPITAL SHARES OUTSTANDING:

                            

Class I

       114       N/A       48       N/A       5,549       N/A       11,778

Class II

       72,914       28,893       21,305       68,861       263,097       33,591       29,086

NET ASSET VALUE PER SHARE:

                            

Class I

     $ 10.20       N/A     $ 3.48       N/A     $ 3.40       N/A     $ 17.99

Class II

     $ 10.19     $ 9.39     $ 3.47     $ 14.85     $ 3.39     $ 18.47     $ 17.84

+COST

                            

Investments in unaffiliated securities at cost

     $ 611,462     $ 246,479     $ 76,443     $ 563,220     $ 929,639     $ 559,189     $ 440,872

Investments in affiliated securities at cost

       —       —       —       —       29,550       —       —

Bullion at cost

       25,265       —       —       —       —       —       —

Cash denominated in foreign currencies at cost

       —       —       —       —       115       1,101       —

Written options premiums received

       —       —       —       —       —       —       665

^Securities loaned at value

       295       510       —       —       55,237       18,953       3,892

 

*

 Not shown due to rounding.

 

(1)

 Consolidated Statement of Assets and Liabilities (See Note 5 in Notes to Financial Statements).

 

(2)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Asset Strategy to Delaware Ivy VIP Asset Strategy.

 

(3)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Balanced to Delaware Ivy VIP Balanced.

 

(4)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Energy to Delaware Ivy VIP Energy.

 

(5)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Growth to Delaware Ivy VIP Growth.

 

(6)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP High Income to Delaware Ivy VIP High Income.

 

(7)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP International Core Equity to Delaware Ivy VIP International Core Equity.

 

(8)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Mid Cap Growth to Delaware Ivy VIP Mid Cap Growth.

 

See Accompanying Notes to Financial Statements.

 

96   ANNUAL REPORT   2021  
     

Table of Contents
STATEMENTS OF ASSETS AND LIABILITIES   IVY VIP

 

 

 

AS OF DECEMBER 31, 2021

 

(In thousands, except per share amounts)   Natural
Resources(1)		   Science and
Technology(2)		   Small Cap
Growth(3)		   Smid Cap
Core(4)

Investments in unaffiliated securities at value+^

     $ 96,366     $ 711,519     $ 441,982     $ 181,828

Investments at Value

       96,366       711,519       441,982       181,828

Cash

       42       —       —       —

Cash held for securities loaned at value

       —         2,076         —         —  

Investment securities sold receivable

       —       466       461       106

Dividends and interest receivable

       88       280       99       69

Capital shares sold receivable

       38       181       135       9

Receivable from affiliates

       —       —       2       —

Receivable from securities lending income — net

       4       5       5       — *

Prepaid and other assets

       — *       1       1       — *

Total Assets

       96,538       714,528       442,685       182,012

LIABILITIES

                

Cash collateral on securities loaned at value

       5,476       4,114       4,238       —

Investment securities purchased payable

       42       —       —       —

Capital shares redeemed payable

       46       388       162       33

Independent Trustees and Chief Compliance Officer fees payable

       22       75       97       40

Distribution and service fees payable

       1       5       3       1

Investment management fee payable

       2       16       10       4

Accounting services fee payable

       4       15       11       6

Other liabilities

       91       641       384       169

Total Liabilities

       5,684       5,254       4,905       253

Total Net Assets

     $ 90,854     $ 709,274     $ 437,780     $ 181,759

NET ASSETS

                

Capital paid in (shares authorized — unlimited)

     $ 144,216     $ 407,862     $ 256,751     $ 116,091

Total Distributable Earnings (Loss)

       (53,362 )       301,412       181,029       65,668

Total Net Assets

     $ 90,854     $ 709,274     $ 437,780     $ 181,759

CAPITAL SHARES OUTSTANDING:

                

Class I

       N/A       72       4,252       N/A

Class II

       22,077       23,965       35,744       10,866

NET ASSET VALUE PER SHARE:

                

Class I

       N/A     $ 29.81     $ 11.01       N/A

Class II

     $ 4.12     $ 29.51     $ 10.94     $ 16.73

+COST

                

Investments in unaffiliated securities at cost

     $ 98,215     $ 474,361     $ 336,521     $ 150,659

^ Securities loaned at value

       8,486       11,909       4,105       1,228

 

*

 Not shown due to rounding.

 

(1)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Natural Resources to Delaware Ivy VIP Natural Resources.

 

(2)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Science and Technology to Delaware Ivy VIP Science and Technology.

 

(3)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Small Cap Growth to Delaware Ivy VIP Small Cap Growth.

 

(4)

 Effective July 1, 2021, the name of Ivy VIP Small Cap Core changed to Delaware Ivy VIP Small Cap Core. Effective November 15, 2021, the name of Delaware Ivy VIP Small Cap Core changed to Delaware Ivy VIP Smid Cap Core.

 

See Accompanying Notes to Financial Statements.

 

     
    2021       ANNUAL REPORT       97  

Table of Contents
STATEMENTS OF OPERATIONS   IVY VIP

 

 

 

FOR THE YEAR ENDED DECEMBER 31, 2021

 

(In thousands)   Asset
Strategy(1)(2)		   Balanced(3)   Energy(4)   Growth(5)   High
Income(6)		   International
Core Equity(7)		   Mid Cap
Growth(8)

INVESTMENT INCOME

 

Dividends from unaffiliated securities

     $ 7,258     $ 3,129     $ 1,695     $ 5,690     $ 5,398     $ 18,573     $ 2,442

Foreign dividend withholding tax

       (573 )       (36 )       (24 )       (13 )       —       (1,751 )       —

Interest and amortization from unaffiliated securities

       4,981       2,112       —       —       55,799       487       —

Interest and amortization from affiliated securities

       —       —       —       —       206       —       —

Foreign interest withholding tax

       (2 )       —       —       —       —       —       —

Securities lending income — net

       23       5       2       —       441       136       5

Total Investment Income

       11,687       5,210       1,673       5,677       61,844       17,445       2,447

EXPENSES

                            

Investment management fee

       5,295       2,415       542       6,996       5,605       5,595       6,182

Distribution and service fees:

                            

Class II

       1,889       862       159       2,504       2,231       1,645       1,215

Custodian fees

       53       6       4       11       17       85       16

Independent Trustees and Chief Compliance Officer fees

       83       40       6       94       64       57       43

Accounting services fee

       198       104       41       237       216       162       171

Professional fees

       29       9       9       7       93       11       9

Third-party valuation service fees

       9       —       —       —       —       12       —

Commitment and interest expense for borrowing

       —       —       —       —       49       —       —

Other

       73       20       14       32       45       38       26

Total Expenses

       7,629       3,456       775       9,881       8,320       7,605       7,662

Less:

                            

Expenses in excess of limit

       (762 )       —       —       —       —       —       (274 )

Total Net Expenses

       6,867       3,456       775       9,881       8,320       7,605       7,388

Net Investment Income (Loss)

       4,820       1,754       898       (4,204 )       53,524       9,840       (4,941 )

REALIZED AND UNREALIZED GAIN (LOSS)

                            

Net realized gain (loss) on:

                            

Investments in unaffiliated securities

       90,443       86,697       10,417       184,089       (8,879 )       81,684       114,918

Investments in affiliated securities

       —       —       —       —       5       —       —

Futures contracts

       —       169       —       —       (112 )       —       —

Written options

       1,687       38       —       —       —       —       634

Swap agreements

       336       —       —       —       —       —       —

Forward foreign currency contracts

       —       —       —       —       62       631       —

Foreign currency exchange transactions

       (131 )       —       7       —       8       (245 )       —

Net change in unrealized appreciation (depreciation) on:

                            

Investments in unaffiliated securities

       (21,691 )       (36,223 )       7,866       89,387       19,165       (2,360 )       1,024

Investments in affiliated securities

       —       —       —       —       (10,654 )       —       —

Written options

       (4 )       —       —       —       —       —       (858 )

Swap agreements

       (302 )       —       —       —       —       —       —

Forward foreign currency contracts

       —       —       —       —       (137 )       (685 )       —

Foreign currency exchange transactions

       (21 )       —       — *       —       2       (135 )       —

Net Realized and Unrealized Gain (Loss)

       70,317       50,681       18,290       273,476       (540 )       78,890       115,718

Net Increase in Net Assets Resulting from Operations

     $ 75,137     $ 52,435     $ 19,188     $ 269,272     $ 52,984     $ 88,730     $ 110,777

 

*

 Not shown due to rounding.

 

(1)

 Consolidated Statement of Operations (See Note 5 in Notes to Financial Statements).

 

(2)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Asset Strategy to Delaware Ivy VIP Asset Strategy.

 

(3)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Balanced to Delaware Ivy VIP Balanced.

 

(4)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Energy to Delaware Ivy VIP Energy.

 

(5)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Growth to Delaware Ivy VIP Growth.

 

(6)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP High Income to Delaware Ivy VIP High Income.

 

(7)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP International Core Equity to Delaware Ivy VIP International Core Equity.

 

(8)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Mid Cap Growth to Delaware Ivy VIP Mid Cap Growth.

 

See Accompanying Notes to Financial Statements.

 

98   ANNUAL REPORT   2021  
     

Table of Contents
STATEMENTS OF OPERATIONS   IVY VIP

 

 

 

FOR THE YEAR ENDED DECEMBER 31, 2021

 

(In thousands)   Natural
Resources(1)		   Science and
Technology(2)		   Small Cap
Growth(3)		   Smid Cap
Core(4)

Dividends from unaffiliated securities

     $ 2,756     $ 2,504     $ 1,506     $ 2,053

Foreign dividend withholding tax

       (61 )       (129 )       —       —

Interest and amortization from unaffiliated securities

       —       23       —       —

Securities lending income — net

       15       40       72       8

Total Investment Income

       2,710       2,438       1,578       2,061

EXPENSES

                

Investment management fee

       744       5,958       4,016       1,648

Distribution and service fees:

                

Class II

       219       1,747       1,042       485

Custodian fees

       8       15       10       14

Independent Trustees and Chief Compliance Officer fees

       10       51       47       20

Accounting services fee

       44       169       131       72

Professional fees

       8       11       10       8

Third-party valuation service fees

       2       — *       —       —

Other

       24       35       27       15

Total Expenses

       1,059       7,986       5,283       2,262

Less:

                

Expenses in excess of limit

       —       —       (28 )       —

Total Net Expenses

       1,059       7,986       5,255       2,262

Net Investment Income (Loss)

       1,651       (5,548 )       (3,677 )       (201 )

REALIZED AND UNREALIZED GAIN (LOSS)

                

Net realized gain (loss) on:

                

Investments in unaffiliated securities

       16,541       263,267       81,273       36,031

Written options

       —       1,223       70       —

Swap agreements

       —       —       (1,784 )       —

Forward foreign currency contracts

       (339 )       —       —       —

Foreign currency exchange transactions

       9       (25 )       —       —

Net change in unrealized appreciation (depreciation) on:

                

Investments in unaffiliated securities

       1,692       (159,653 )       (55,962 )       1,327

Written options

       —       (344 )       29       —

Swap agreements

       —       —       155       —

Forward foreign currency contracts

       472       —       —       —

Foreign currency exchange transactions

       — *       (2 )       —       —

Net Realized and Unrealized Gain

       18,375       104,466       23,781       37,358

Net Increase in Net Assets Resulting from Operations

     $ 20,026     $ 98,918     $ 20,104     $ 37,157

 

*

 Not shown due to rounding.

 

(1)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Natural Resources to Delaware Ivy VIP Natural Resources.

 

(2)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Science and Technology to Delaware Ivy VIP Science and Technology.

 

(3)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Small Cap Growth to Delaware Ivy VIP Small Cap Growth.

 

(4)

 Effective July 1, 2021, the name of Ivy VIP Small Cap Core changed to Delaware Ivy VIP Small Cap Core. Effective November 15, 2021, the name of Delaware Ivy VIP Small Cap Core changed to Delaware Ivy VIP Smid Cap Core.

 

See Accompanying Notes to Financial Statements.

 

     
    2021       ANNUAL REPORT       99  

Table of Contents
STATEMENTS OF CHANGES IN NET ASSETS   IVY VIP

 

 

 

 

    Asset Strategy(1)(2)   Balanced(3)   Energy(4)
(In thousands)   Year ended
12-31-21		   Year ended
12-31-20		   Year ended
12-31-21		   Year ended
12-31-20		   Year ended
12-31-21		   Year ended
12-31-20

INCREASE (DECREASE) IN NET ASSETS

                        

Operations:

                        

Net investment income

     $ 4,820     $ 11,364     $ 1,754     $ 3,578     $ 898     $ 528

Net realized gain (loss) on investments

       92,335       24,934       86,904       21,733       10,424       (13,526 )

Net change in unrealized appreciation (depreciation)

       (22,018 )       56,099       (36,223 )       16,478       7,866       2,711

Net Increase (Decrease) in Net Assets Resulting from Operations

       75,137       92,397       52,435       41,789       19,188       (10,287 )

Distributions to Shareholders From:

                        

Accumulated earnings:

                        

(combined net investment income and net realized gains)

                        

Class I

       (123 )       (14 )       N/A       N/A       (2 )       (4 )

Class II

       (87,213 )       (25,939 )       (25,006 )       (21,608 )       (1,018 )       (710 )

Total Distributions to Shareholders

       (87,336 )       (25,953 )       (25,006 )       (21,608 )       (1,020 )       (714 )

Capital Share Transactions

       (8,299 )       (74,478 )       (99,889 )       (17,294 )       12,436       12,886

Net Increase (Decrease) in Net Assets

       (20,498 )       (8,034 )       (72,460 )       2,887       30,604       1,885

Net Assets, Beginning of Period

       764,574       772,608       343,726       340,839       43,542       41,657

Net Assets, End of Period

     $ 744,076     $ 764,574     $ 271,266     $ 343,726     $ 74,146     $ 43,542
    Growth(5)   High Income(6)   International Core Equity(7)
(In thousands)   Year ended
12-31-21		   Year ended
12-31-20		   Year ended
12-31-21		   Year ended
12-31-20		   Year ended
12-31-21		   Year ended
12-31-20

INCREASE (DECREASE) IN NET ASSETS

                        

Operations:

                        

Net investment income (loss)

     $ (4,204 )     $ (1,655 )     $ 53,524     $ 51,672     $ 9,840     $ 6,627

Net realized gain (loss) on investments

       184,089       100,050       (8,916 )       (18,616 )       82,070       (40,116 )

Net change in unrealized appreciation (depreciation)

       89,387       124,851       8,376       14,461       (3,180 )       74,661

Net Increase in Net Assets Resulting from Operations

       269,272       223,246       52,984       47,517       88,730       41,172

Distributions to Shareholders From:

                        

Accumulated earnings:

                        

(combined net investment income and net realized gains)

                        

Class I

       N/A       N/A       (1,264 )       (1,439 )       N/A       N/A

Class II

       (98,262 )       (112,472 )       (52,760 )       (57,105 )       (6,912 )       (14,682 )

Total Distributions to Shareholders

       (98,262 )       (112,472 )       (54,024 )       (58,544 )       (6,912 )       (14,682 )

Capital Share Transactions

       (44,544 )       (5,293 )       33,017       4,623       (110,730 )       (76,149 )

Net Increase (Decrease) in Net Assets

       126,466       105,481       31,977       (6,404 )       (28,912 )       (49,659 )

Net Assets, Beginning of Period

       896,181       790,700       879,469       885,873       649,418       699,077

Net Assets, End of Period

     $ 1,022,647     $ 896,181     $ 911,446     $ 879,469     $ 620,506     $ 649,418

 

(1)

 Consolidated Statements of Changes in Net Assets (See Note 5 in Notes to Financial Statements).

 

(2)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Asset Strategy to Delaware Ivy VIP Asset Strategy.

 

(3)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Balanced to Delaware Ivy VIP Balanced.

 

(4)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Energy to Delaware Ivy VIP Energy.

 

(5)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Growth to Delaware Ivy VIP Growth.

 

(6)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP High Income to Delaware Ivy VIP High Income.

 

(7)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP International Core Equity to Delaware Ivy VIP International Core Equity.

 

See Accompanying Notes to Financial Statements.

 

100   ANNUAL REPORT   2021  
     

Table of Contents
STATEMENTS OF CHANGES IN NET ASSETS   IVY VIP

 

 

 

 

    Mid Cap Growth(1)   Natural Resources(2)   Science and Technology(3)
(In thousands)   Year ended
12-31-21		   Year ended
12-31-20		   Year ended
12-31-21		   Year ended
12-31-20		   Year ended
12-31-21		   Year ended
12-31-20

INCREASE (DECREASE) IN NET ASSETS

                        

Operations:

                        

Net investment income (loss)

     $ (4,941 )     $ (2,369 )     $ 1,651     $ 992     $ (5,548 )     $ (3,854 )

Net realized gain (loss) on investments

       115,552       84,758       16,211       (17,286 )       264,465       56,593

Net change in unrealized appreciation (depreciation)

       166       149,625       2,164       6,453       (159,999 )       132,028

Net Increase (Decrease) in Net Assets Resulting from Operations

       110,777       232,014       20,026       (9,841 )       98,918       184,767

Distributions to Shareholders From:

                        

Accumulated earnings:

                        

(combined net investment income and net realized gains)

                        

Class I

       (28,372 )       (16,218 )       N/A       N/A       (630 )       (191 )

Class II

       (54,305 )       (23,025 )       (1,378 )       (1,678 )       (201,468 )       (71,179 )

Total Distributions to Shareholders

       (82,677 )       (39,243 )       (1,378 )       (1,678 )       (202,098 )       (71,370 )

Capital Share Transactions

       13,185       (50,778 )       (2,616 )       (1,267 )       134,087       (15,453 )

Net Increase (Decrease) in Net Assets

       41,285       141,993       16,032       (12,786 )       30,907       97,944

Net Assets, Beginning of Period

       689,559       547,566       74,822       87,608       678,367       580,423

Net Assets, End of Period

     $ 730,844     $ 689,559     $ 90,854     $ 74,822     $ 709,274     $ 678,367
    Small Cap Growth(4)   Smid Cap Core(5)    
(In thousands)   Year ended
12-31-21		   Year ended
12-31-20		   Year ended
12-31-21		   Year ended
12-31-20		        

INCREASE (DECREASE) IN NET ASSETS

                        

Operations:

                        

Net investment loss

     $ (3,677 )     $ (2,550 )     $ (201 )     $ (231 )        

Net realized gain (loss) on investments

       79,559       61,996       36,031       (1,117 )        

Net change in unrealized appreciation (depreciation)

       (55,778 )       72,583       1,327       12,595        

Net Increase in Net Assets Resulting from Operations

       20,104       132,029       37,157       11,247        

Distributions to Shareholders From:

                        

Accumulated earnings:

                        

(combined net investment income and net realized gains)

                        

Class I

       (6,960 )       —       N/A       N/A        

Class II

       (51,659 )       —       —       (8,738 )        

Total Distributions to Shareholders

       (58,619 )       —       —       (8,738 )        

Capital Share Transactions

       11,758       (56,435 )       (38,268 )       (7,655 )        

Net Increase (Decrease) in Net Assets

       (26,757 )       75,594       (1,111 )       (5,146 )        

Net Assets, Beginning of Period

       464,537       388,943       182,870       188,016        

Net Assets, End of Period

     $ 437,780     $ 464,537     $ 181,759     $ 182,870        

 

(1)

  Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Mid Cap Growth to Delaware Ivy VIP Mid Cap Growth.

 

(2)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Natural Resources to Delaware Ivy VIP Natural Resources.

 

(3)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Science and Technology to Delaware Ivy VIP Science and Technology.

 

(4)

 Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Small Cap Growth to Delaware Ivy VIP Small Cap Growth.

 

(5)

 Effective July 1, 2021, the name of Ivy VIP Small Cap Core changed to Delaware Ivy VIP Small Cap Core. Effective November 15, 2021, the name of Delaware Ivy VIP Small Cap Core changed to Delaware Ivy VIP Smid Cap Core.

 

See Accompanying Notes to Financial Statements.

 

     
    2021       ANNUAL REPORT       101  

Table of Contents
FINANCIAL HIGHLIGHTS   IVY VIP

 

 

 

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

     Net Asset
Value,
Beginning
of Period		   Net
Investment
Income
(Loss)(1)		   Net Realized
and Unrealized
Gain (Loss) on
Investments		   Total from
Investment
Operations		   Distributions From
Net Investment
Income		   Distributions
From Net
Realized
Gains		   Total
Distributions

Asset Strategy

                            

Class I Shares

                            

Year ended 12-31-2021

     $ 10.45     $ 0.08     $ 1.01     $ 1.09     $ (0.20 )     $ (1.14 )     $ (1.34 )

Year ended 12-31-2020

       9.50       0.17       1.16       1.33       (0.22 )       (0.16 )       (0.38 )

Year ended 12-31-2019

       8.29       0.20       1.63       1.83       (0.23 )       (0.39 )       (0.62 )

Year ended 12-31-2018

       9.37       0.18       (0.67 )       (0.49 )       (0.20 )       (0.39 )       (0.59 )

Year ended 12-31-2017(4)

       8.57       0.08       0.88       0.96       (0.16 )       —       (0.16 )

Class II Shares

                            

Year ended 12-31-2021

       10.44       0.07       1.00       1.07       (0.18 )       (1.14 )       (1.32 )

Year ended 12-31-2020

       9.50       0.15       1.15       1.30       (0.20 )       (0.16 )       (0.36 )

Year ended 12-31-2019

       8.29       0.18       1.62       1.80       (0.20 )       (0.39 )       (0.59 )

Year ended 12-31-2018

       9.37       0.16       (0.67 )       (0.51 )       (0.18 )       (0.39 )       (0.57 )

Year ended 12-31-2017

       8.04       0.03       1.44       1.47       (0.14 )       —       (0.14 )

Balanced

                            

Class II Shares

                            

Year ended 12-31-2021

       8.71       0.05       1.29       1.34       (0.09 )       (0.57 )       (0.66 )

Year ended 12-31-2020

       8.22       0.09       0.94       1.03       (0.11 )       (0.43 )       (0.54 )

Year ended 12-31-2019

       7.46       0.11       1.44       1.55       (0.14 )       (0.65 )       (0.79 )

Year ended 12-31-2018

       7.95       0.12       (0.36 )       (0.24 )       (0.13 )       (0.12 )       (0.25 )

Year ended 12-31-2017

       7.47       0.12       0.70       0.82       (0.12 )       (0.22 )       (0.34 )

Energy

                            

Class I Shares

                            

Year ended 12-31-2021

       2.48       0.04       1.02       1.06       (0.06 )       —       (0.06 )

Year ended 12-31-2020

       4.02       0.04       (1.52 )       (1.48 )       (0.06 )       —       (0.06 )

Year ended 12-31-2019

       3.88       0.03       0.11       0.14       —       —       —

Year ended 12-31-2018

       5.87       0.00 *        (1.99 )       (1.99 )       —       —       —

Year ended 12-31-2017(4)

       5.84       0.06       0.02       0.08       (0.05 )       —       (0.05 )

Class II Shares

                            

Year ended 12-31-2021

       2.48       0.04       1.00       1.04       (0.05 )       —       (0.05 )

Year ended 12-31-2020

       4.00       0.04       (1.52 )       (1.48 )       (0.04 )       —       (0.04 )

Year ended 12-31-2019

       3.87       0.02       0.11       0.13       —       —       —

Year ended 12-31-2018

       5.87       (0.02 )       (1.98 )       (2.00 )       —       —       —

Year ended 12-31-2017

       6.77       0.04       (0.90 )       (0.86 )       (0.04 )       —       (0.04 )

Growth

                            

Class II Shares

                            

Year ended 12-31-2021

       12.70       (0.06 )       3.57       3.51       —       (1.36 )       (1.36 )

Year ended 12-31-2020

       11.33       (0.02 )       3.03       3.01       —       (1.64 )       (1.64 )

Year ended 12-31-2019

       11.02       (0.01 )       3.58       3.57       —       (3.26 )       (3.26 )

Year ended 12-31-2018

       12.09       0.00 *        0.36       0.36       — *        (1.43 )       (1.43 )

Year ended 12-31-2017

       10.30       0.01       2.84       2.85       (0.03 )       (1.03 )       (1.06 )

High Income

                            

Class I Shares

                            

Year ended 12-31-2021

       3.41       0.21       (0.01 )       0.20       (0.21 )       —       (0.21 )

Year ended 12-31-2020

       3.48       0.21       (0.03 )       0.18       (0.25 )       —       (0.25 )

Year ended 12-31-2019

       3.35       0.24       0.13       0.37       (0.24 )       —       (0.24 )

Year ended 12-31-2018

       3.65       0.23       (0.29 )       (0.06 )       (0.24 )       —       (0.24 )

Year ended 12-31-2017(4)

       3.73       0.16       (0.03 )       0.13       (0.21 )       —       (0.21 )

Class II Shares

                            

Year ended 12-31-2021

       3.40       0.20       0.00 *        0.20       (0.21 )       —       (0.21 )

Year ended 12-31-2020

       3.47       0.20       (0.03 )       0.17       (0.24 )       —       (0.24 )

Year ended 12-31-2019

       3.34       0.23       0.13       0.36       (0.23 )       —       (0.23 )

Year ended 12-31-2018

       3.64       0.22       (0.29 )       (0.07 )       (0.23 )       —       (0.23 )

Year ended 12-31-2017

       3.61       0.23       0.01       0.24       (0.21 )       —       (0.21 )

International Core Equity

                            

Class II Shares

                            

Year ended 12-31-2021

       16.35       0.27       2.04       2.31       (0.19 )       —       (0.19 )

Year ended 12-31-2020

       15.65       0.16       0.88       1.04       (0.34 )       — *        (0.34 )

Year ended 12-31-2019

       14.66       0.29       2.28       2.57       (0.25 )       (1.33 )       (1.58 )

Year ended 12-31-2018

       18.58       0.30       (3.45 )       (3.15 )       (0.28 )       (0.49 )       (0.77 )

Year ended 12-31-2017

       15.30       0.23       3.29       3.52       (0.24 )       —       (0.24 )

 

*

Not shown due to rounding.

 

(1)

Based on average weekly shares outstanding.

 

(2)

Based on net asset value. Total returns do not reflect a sales charge or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3)

Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4)

For the period from April 28, 2017 (commencement of operations of the class) through December 31, 2017.

 

(5)

Annualized.

 

(6)

Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the period ended December 31, 2017.

 

102   ANNUAL REPORT   2021  
     

Table of Contents
           

 

 

 

 

     Net Asset
Value,
End of Period		   Total
Return(2)		   Net Assets,
End of Period
(in millions)		   Ratio of Expenses
to Average Net
Assets Including
Expense Waiver		   Ratio of Net
Investment
Income
(Loss) to
Average
Net Assets
Including
Expense
Waiver		   Ratio of
Expenses to
Average
Net Assets
Excluding
Expense
Waiver(3)		   Ratio of Net
Investment
Income
(Loss) to
Average
Net Assets
Excluding
Expense
Waiver(3)		   Portfolio
Turnover
Rate

Asset Strategy

 

Class I Shares

 

Year ended 12-31-2021

     $ 10.20       10.72 %     $ 1       0.65 %       0.76 %       0.75 %       0.66 %       56 %

Year ended 12-31-2020

       10.45       14.16       — *        0.77       1.83       —       —       44

Year ended 12-31-2019

       9.50       22.08       1       0.77       2.19       0.77       2.19       46

Year ended 12-31-2018

       8.29       -5.20       — *        0.78       1.91       0.78       1.91       58

Year ended 12-31-2017(4)

       9.37       11.16       — *        0.74 (5)        1.30 (5)        —       —       39 (6) 
 

Class II Shares

 

Year ended 12-31-2021

       10.19       10.44       743       0.90       0.64       1.01       0.53       56

Year ended 12-31-2020

       10.44       13.88       764       1.02       1.60       —       —       44

Year ended 12-31-2019

       9.50       21.78       772       1.02       1.94       —       —       46

Year ended 12-31-2018

       8.29       -5.44       753       1.03       1.65       —       —       58

Year ended 12-31-2017

       9.37       18.27       936       1.02       0.35       —       —       39

Balanced

 

Class II Shares

 

Year ended 12-31-2021

       9.39       15.97       271       1.00       0.51       —       —       79

Year ended 12-31-2020

       8.71       14.11       344       1.02       1.13       —       —       61

Year ended 12-31-2019

       8.22       22.09       341       1.01       1.38       —       —       44

Year ended 12-31-2018

       7.46       -3.24       310       1.01       1.55       —       —       54

Year ended 12-31-2017

       7.95       11.37       362       1.01       1.54       —       —       48

Energy

 

Class I Shares

 

Year ended 12-31-2021

       3.48       42.33       — *        0.97       1.20       —       —       119

Year ended 12-31-2020

       2.48       -36.67       — *        1.06       1.89       1.12       1.83       54

Year ended 12-31-2019

       4.02       3.74       — *        1.04       0.64       —       —       21

Year ended 12-31-2018

       3.88       -33.96       — *        0.94       -0.09       0.94       -0.09       37

Year ended 12-31-2017(4)

       5.87       1.55       — *        0.92 (5)        1.70 (5)        —       —       22 (6) 
 

Class II Shares

 

Year ended 12-31-2021

       3.47       42.00       74       1.22       1.41       —       —       119

Year ended 12-31-2020

       2.48       -36.83       44       1.31       1.62       1.37       1.56       54

Year ended 12-31-2019

       4.00       3.48       42       1.29       0.42       —       —       21

Year ended 12-31-2018

       3.87       -34.14       39       1.19       -0.41       —       —       37

Year ended 12-31-2017

       5.87       -12.64       169       1.19       0.75       —       —       22

Growth

 

Class II Shares

 

Year ended 12-31-2021

       14.85       30.03       1,023       0.99       -0.42       —       —       22

Year ended 12-31-2020

       12.70       30.55       896       1.01       -0.20       —       —       29

Year ended 12-31-2019

       11.33       36.59       791       1.00       -0.05       —       —       30

Year ended 12-31-2018

       11.02       2.28       669       1.00       -0.02       —       —       37

Year ended 12-31-2017

       12.09       29.34       883       0.99       0.05       —       —       41

High Income

 

Class I Shares

 

Year ended 12-31-2021

       3.40       6.33       19       0.67       6.11       —       —       54

Year ended 12-31-2020

       3.41       6.30       20       0.69       6.54       —       —       52

Year ended 12-31-2019

       3.48       11.49       27       0.67       6.82       —       —       35

Year ended 12-31-2018

       3.35       -1.86       44       0.66       6.50       0.66       6.50       42

Year ended 12-31-2017(4)

       3.65       3.42       56       0.66 (5)        6.53 (5)        —       —       52 (6) 
 

Class II Shares

 

Year ended 12-31-2021

       3.39       6.06       892       0.92       5.85       —       —       54

Year ended 12-31-2020

       3.40       6.03       859       0.94       6.28       —       —       52

Year ended 12-31-2019

       3.47       11.19       859       0.92       6.57       —       —       35

Year ended 12-31-2018

       3.34       -2.11       803       0.91       6.27       —       —       42

Year ended 12-31-2017

       3.64       6.68       887       0.91       6.22       —       —       52

International Core Equity

 

Class II Shares

 

Year ended 12-31-2021

       18.47       14.18       621       1.16       1.49       —       —       81

Year ended 12-31-2020

       16.35       7.19       649       1.17       1.10       —       —       82

Year ended 12-31-2019

       15.65       18.69       699       1.16       1.93       —       —       69

Year ended 12-31-2018

       14.66       -17.81       676       1.16       1.70       —       —       51

Year ended 12-31-2017

       18.58       23.16       835       1.16       1.33       —       —       59

 

See Accompanying Notes to Financial Statements.

 

     
    2021       ANNUAL REPORT       103  

Table of Contents
FINANCIAL HIGHLIGHTS   IVY VIP

 

 

 

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

     Net Asset
Value,
Beginning
of Period		   Net
Investment
Income
(Loss)(1)		   Net Realized
and Unrealized
Gain (Loss) on
Investments		   Total from
Investment
Operations		   Distributions From
Net Investment
Income		   Distributions
From Net
Realized
Gains		   Total
Distributions

Mid Cap Growth

 

Class I Shares

 

Year ended 12-31-2021

     $ 17.60     $ (0.09 )     $ 2.71     $ 2.62     $ —     $ (2.23 )     $ (2.23 )

Year ended 12-31-2020

       12.77       (0.04 )       5.89       5.85       —       (1.02 )       (1.02 )

Year ended 12-31-2019

       11.10       (0.02 )       3.95       3.93       —       (2.26 )       (2.26 )

Year ended 12-31-2018

       11.63       (0.02 )       0.09       0.07       —       (0.60 )       (0.60 )

Year ended 12-31-2017(4)

       10.30       0.00 *        1.64       1.64       —       (0.31 )       (0.31 )

Class II Shares

 

Year ended 12-31-2021

       17.48       (0.13 )       2.68       2.55       —       (2.19 )       (2.19 )

Year ended 12-31-2020

       12.69       (0.07 )       5.85       5.78       —       (0.99 )       (0.99 )

Year ended 12-31-2019

       11.07       (0.06 )       3.94       3.88       —       (2.26 )       (2.26 )

Year ended 12-31-2018

       11.61       (0.05 )       0.09       0.04       —       (0.58 )       (0.58 )

Year ended 12-31-2017

       9.44       (0.04 )       2.52       2.48       —       (0.31 )       (0.31 )

Natural Resources

 

Class II Shares

 

Year ended 12-31-2021

       3.30       0.07       0.81       0.88       (0.06 )       —       (0.06 )

Year ended 12-31-2020

       3.84       0.04       (0.51 )       (0.47 )       (0.07 )       —       (0.07 )

Year ended 12-31-2019

       3.55       0.07       0.26       0.33       (0.04 )       —       (0.04 )

Year ended 12-31-2018

       4.63       0.03       (1.10 )       (1.07 )       (0.01 )       —       (0.01 )

Year ended 12-31-2017

       4.50       0.00 *        0.14       0.14       (0.01 )       —       (0.01 )

Science and Technology

 

Class I Shares

 

Year ended 12-31-2021

       36.13       (0.22 )       5.56       5.34       —       (11.66 )       (11.66 )

Year ended 12-31-2020

       29.94       (0.14 )       10.31       10.17       —       (3.98 )       (3.98 )

Year ended 12-31-2019

       21.91       (0.06 )       10.95       10.89       —       (2.86 )       (2.86 )

Year ended 12-31-2018

       27.04       (0.03 )       (1.24 )       (1.27 )       —       (3.86 )       (3.86 )

Year ended 12-31-2017(4)

       25.22       (0.04 )       4.16       4.12       —       (2.30 )       (2.30 )

Class II Shares

 

Year ended 12-31-2021

       35.87       (0.30 )       5.51       5.21       —       (11.57 )       (11.57 )

Year ended 12-31-2020

       29.82       (0.21 )       10.24       10.03       —       (3.98 )       (3.98 )

Year ended 12-31-2019

       21.84       (0.13 )       10.90       10.77       —       (2.79 )       (2.79 )

Year ended 12-31-2018

       27.04       (0.11 )       (1.23 )       (1.34 )       —       (3.86 )       (3.86 )

Year ended 12-31-2017

       22.34       (0.13 )       7.08       6.95       —       (2.25 )       (2.25 )

Small Cap Growth

 

Class I Shares

 

Year ended 12-31-2021

       12.15       (0.07 )       0.55       0.48       (0.14 )       (1.48 )       (1.62 )

Year ended 12-31-2020

       8.80       (0.04 )       3.39       3.35       —       —       —

Year ended 12-31-2019

       7.69       (0.05 )       1.85       1.80       —       (0.69 )       (0.69 )

Year ended 12-31-2018(5)

       8.76       0.00 *        (1.07 )       (1.07 )       —       —       —

Class II Shares

 

Year ended 12-31-2021

       12.08       (0.10 )       0.56       0.46       (0.12 )       (1.48 )       (1.60 )

Year ended 12-31-2020

       8.77       (0.06 )       3.37       3.31       —       —       —

Year ended 12-31-2019

       7.68       (0.07 )       1.85       1.78       —       (0.69 )       (0.69 )

Year ended 12-31-2018

       11.63       (0.06 )       0.03       (0.03 )       (0.05 )       (3.87 )       (3.92 )

Year ended 12-31-2017

       9.69       (0.07 )       2.27       2.20       —       (0.26 )       (0.26 )

Smid Cap Core

 

Class II Shares

 

Year ended 12-31-2021

       13.85       (0.02 )       2.90       2.88       —       —       —

Year ended 12-31-2020

       13.71       (0.02 )       0.80       0.78       —       (0.64 )       (0.64 )

Year ended 12-31-2019

       13.51       0.00 *        3.12       3.12       —       (2.92 )       (2.92 )

Year ended 12-31-2018

       18.32       (0.06 )       (1.37 )       (1.43 )       (0.02 )       (3.36 )       (3.38 )

Year ended 12-31-2017

       18.34       0.00 *        2.21       2.21       —       (2.23 )       (2.23 )

 

*

Not shown due to rounding.

 

(1)

Based on average weekly shares outstanding.

 

(2)

Based on net asset value. Total returns do not reflect a sales charge or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3)

Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4)

For the period from April 28, 2017 (commencement of operations of the class) through December 31, 2017.

 

(5)

For the period from November 5, 2018 (commencement of operations of the class) through December 31, 2018.

 

(6)

Annualized.

 

(7)

Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the period ended December 31, 2017.

 

(8)

Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the period ended December 31, 2018.

 

(9)

Expense ratio based on the period excluding reorganization expenses was 0.89%.

 

(10)

Expense ratio based on the period excluding reorganization expenses was 1.14%.

 

104   ANNUAL REPORT   2021  
     

Table of Contents
           

 

 

 

 

     Net Asset
Value,
End of Period		   Total
Return(2)		   Net Assets,
End of Period
(in millions)		   Ratio of Expenses
to Average Net
Assets Including
Expense Waiver		   Ratio of Net
Investment
Income
(Loss) to
Average
Net Assets
Including
Expense
Waiver		   Ratio of
Expenses to
Average
Net Assets
Excluding
Expense
Waiver(3)		   Ratio of Net
Investment
Income
(Loss) to
Average
Net Assets
Excluding
Expense
Waiver(3)		   Portfolio
Turnover
Rate

Mid Cap Growth

 

Class I Shares

 

Year ended 12-31-2021

     $ 17.99       16.65 %     $ 212       0.85 %       -0.51 %       0.89 %       -0.55 %       27 %

Year ended 12-31-2020

       17.60       49.37       246       0.85       -0.27       0.90       -0.32       25

Year ended 12-31-2019

       12.77       38.28       233       0.85       -0.20       0.90       -0.25       20

Year ended 12-31-2018

       11.10       0.20       184       0.85       -0.14       0.90       -0.19       53

Year ended 12-31-2017(4)

       11.63       16.44       131       0.85 (6)        0.05 (6)        0.89 (6)        0.01 (6)        25 (7) 
 

Class II Shares

 

Year ended 12-31-2021

       17.84       16.36       519       1.10       -0.76       1.14       -0.80       27

Year ended 12-31-2020

       17.48       49.00       444       1.10       -0.53       1.15       -0.58       25

Year ended 12-31-2019

       12.69       37.94       315       1.10       -0.45       1.15       -0.50       20

Year ended 12-31-2018

       11.07       -0.06       230       1.10       -0.42       1.15       -0.47       53

Year ended 12-31-2017

       11.61       26.89       585       1.11       -0.39       1.15       -0.43       25

Natural Resources

 

Class II Shares

 

Year ended 12-31-2021

       4.12       26.68       91       1.21       1.89       —       —       121

Year ended 12-31-2020

       3.30       -11.99       75       1.31       1.40       —       —       71

Year ended 12-31-2019

       3.84       9.46       88       1.24       1.88       —       —       36

Year ended 12-31-2018

       3.55       -23.23       88       1.21       0.72       —       —       33

Year ended 12-31-2017

       4.63       2.97       131       1.36       0.11       —       —       44

Science and Technology

 

Class I Shares

 

Year ended 12-31-2021

       29.81       15.45       2       0.89       -0.57       —       —       55

Year ended 12-31-2020

       36.13       35.70       2       0.91       -0.44       —       —       8

Year ended 12-31-2019

       29.94       49.86       1       0.90       -0.23       —       —       31

Year ended 12-31-2018

       21.91       -5.00       1       0.91       -0.11       0.91       -0.11       17

Year ended 12-31-2017(4)

       27.04       17.24       — *        0.90 (6)        -0.25  (6)        —       —       27 (7) 
 

Class II Shares

 

Year ended 12-31-2021

       29.51       15.17       707       1.14       -0.79       —       —       55

Year ended 12-31-2020

       35.87       35.36       676       1.16       -0.67       —       —       8

Year ended 12-31-2019

       29.82       49.48       579       1.15       -0.48       —       —       31

Year ended 12-31-2018

       21.84       -5.23       429       1.16       -0.38       —       —       17

Year ended 12-31-2017

       27.04       32.12       645       1.15       -0.51       —       —       27

Small Cap Growth

 

Class I Shares

 

Year ended 12-31-2021

       11.01       4.25       47       0.89       -0.56       0.90       -0.57       48

Year ended 12-31-2020

       12.15       38.01       59       0.89       -0.46       0.92       -0.49       50

Year ended 12-31-2019

       8.80       23.68       58       0.89       -0.60       0.91       -0.62       41

Year ended 12-31-2018(5)

       7.69       -12.24       52       1.05 (6)(9)        0.15 (6)        1.07 (6)        0.13 (6)        52 (8) 
 

Class II Shares

 

Year ended 12-31-2021

       10.94       3.99       391       1.14       -0.80       1.15       -0.81       48

Year ended 12-31-2020

       12.08       37.66       406       1.14       -0.71       1.17       -0.74       50

Year ended 12-31-2019

       8.77       23.37       331       1.14       -0.84       1.17       -0.87       41

Year ended 12-31-2018

       7.68       -4.11       300       1.16 (10)        -0.52       1.18       -0.54       52

Year ended 12-31-2017

       11.63       23.12       377       1.15       -0.69       1.17       -0.71       55

Smid Cap Core

 

Class II Shares

 

Year ended 12-31-2021

       16.73       20.78       182       1.17       -0.10       —       —       79

Year ended 12-31-2020

       13.85       7.03       183       1.20       -0.14       —       —       145

Year ended 12-31-2019

       13.71       24.33       188       1.18       -0.05       —       —       126

Year ended 12-31-2018

       13.51       -10.49       175       1.17       -0.34       —       —       112

Year ended 12-31-2017

       18.32       13.73       316       1.15       0.01       —       —       112

 

See Accompanying Notes to Financial Statements.

 

     
    2021       ANNUAL REPORT       105  

Table of Contents
NOTES TO FINANCIAL STATEMENTS   IVY VIP

 

 

 

DECEMBER 31, 2021

 

1.   ORGANIZATION

Ivy Variable Insurance Portfolios, a Delaware statutory trust (the “Trust”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. Delaware Ivy VIP Asset Strategy (formerly known as Ivy VIP Asset Strategy), Delaware Ivy VIP Balanced (formerly known as Ivy VIP Balanced), Delaware Ivy VIP Energy (formerly known as Ivy VIP Energy), Delaware Ivy VIP Growth (formerly known as Ivy VIP Growth), Delaware Ivy VIP High Income (formerly known as Ivy VIP High Income), Delaware Ivy VIP International Core Equity (formerly known as Ivy VIP International Core Equity), Delaware Ivy VIP Mid Cap Growth (formerly known as Ivy VIP Mid Cap Growth), Delaware Ivy VIP Natural Resources (formerly known as Ivy VIP Natural Resources), Delaware Ivy VIP Science and Technology (formerly known as Ivy VIP Science and Technology), Delaware Ivy VIP Small Cap Growth (formerly known as Ivy VIP Small Cap Growth) and Delaware Ivy VIP Smid Cap Core (formerly known as Ivy VIP Small Cap Core) (each, a “Portfolio”) are eleven series of the Trust and are the only series of the Trust included in these financial statements. The assets belonging to each Portfolio are held separately by the custodian. The investment objective, policies and risk factors of each Portfolio are described more fully in the Prospectus and Statement of Additional Information (“SAI”). Each Portfolio’s investment adviser was Ivy Investment Management Company (“IICO”) through April 30, 2021. Effective April 30, 2021, Delaware Management Company (“DMC”) is each Portfolio’s investment adviser.

Each Portfolio offers Class II shares. Asset Strategy, Energy, High Income, Mid Cap Growth, Science and Technology and Small Cap Growth also offer Class I shares. All classes of shares have identical rights and voting privileges with respect to the Portfolio in general and exclusive voting rights on matters that affect that class alone. Net investment income, net assets and net asset value per share (“NAV”) may differ due to each class having its own expenses, such as transfer agent and shareholder servicing fees, directly attributable to that class. Class II shares have a distribution and service plan. Class I shares are not included in the plan.

 

2.   SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by each Portfolio.

Security Transactions and Related Investment Income. Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses are calculated on the identified cost basis. Interest income is recorded on the accrual basis and includes paydown gain (loss) and accretion of discounts and amortization of premiums. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Portfolio is informed of the ex-dividend date. All or a portion of the distributions received from a real estate investment trust or publicly traded partnership may be designated as a reduction of cost of the related investment or realized gain. The financial statements reflect an estimate of the reclassification of the distribution character.

Foreign Currency Translation. Each Portfolio’s accounting records are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars daily, using foreign exchange rates obtained from an independent pricing service approved by the Board of Trustees of the Trust (the “Board”). Purchases and sales of investment securities and accruals of income and expenses are translated at the rate of exchange prevailing on the date of the transaction. For assets and liabilities other than investments in securities, net realized and unrealized gains and losses from foreign currency translation arise from changes in currency exchange rates. Each Portfolio combines fluctuations from currency exchange rates and fluctuations in value when computing net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments. Foreign exchange rates are typically valued as of the close of the New York Stock Exchange (“NYSE”), normally 4:00 P.M. Eastern time, on each day the NYSE is open for trading.

Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.

Dividends and Distributions to Shareholders. Dividends and distributions to shareholders are recorded by each Portfolio on the business day following record date. Net investment income dividends and capital gains distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America (“U.S. GAAP”). If the total dividends and distributions made in any tax year exceeds net investment income and accumulated realized capital gains, a portion of the total distribution may be treated as a tax return of capital.

Income Taxes. It is the policy of each Portfolio to distribute all of its taxable income and capital gains to its shareholders and to otherwise qualify as a regulated investment company under Subchapter M of the Internal Revenue Code. In addition, each Portfolio intends to pay distributions as required to avoid imposition of excise tax. Accordingly, no provision has been made for Federal income taxes. The Portfolios file income tax returns in U.S. federal and applicable state jurisdictions. The

 

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Portfolios’ tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax returns. Management of the Trust periodically reviews all tax positions to assess whether it is more likely than not that the position would be sustained upon examination by the relevant tax authority based on the technical merits of each position. As of the date of these financial statements, management believes that no liability for unrecognized tax positions is required.

Segregation and Collateralization. In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”), the Dodd Frank Wall Street Reform and Consumer Protection Act, or the interpretive rules and regulations of the U.S. Commodities Futures Trading Commission require that a Portfolio either deliver collateral or segregate assets in connection with certain investments (e.g., dollar rolls, financial futures contracts, foreign currency exchange contracts, options written, securities with extended settlement periods, and swaps), the Portfolio will segregate collateral or designate on its books and records, cash or other liquid securities having a value at least equal to the amount that is required to be physically segregated for the benefit of the counterparty. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, each party has requirements to deliver/deposit cash or securities as collateral for certain investments. Certain countries require that cash reserves be held while investing in companies incorporated in that country. These cash reserves and cash collateral that has been pledged to cover obligations of the Portfolios under derivative contracts, if any, will be reported separately on the Statements of Assets and Liabilities as “Due from broker”. Securities collateral pledged for the same purpose, if any, is noted on the Schedule of Investments.

Concentration of Market and Credit Risk. In the normal course of business, the Portfolios invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Portfolios may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Portfolios; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Portfolios may be exposed to counterparty credit risk, or the risk that an entity with which the Portfolios have unsettled or open transactions may fail to or be unable to perform on its commitments. The Portfolios manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Portfolios to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Portfolios’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded on the Portfolios’ Statements of Assets and Liabilities, less any collateral held by the Portfolios.

Certain Portfolios may hold high-yield or non-investment-grade bonds, that may be subject to a greater degree of credit risk. Credit risk relates to the ability of the issuer to meet interest or principal payments or both as they become due. The Portfolios may acquire securities in default and are not obligated to dispose of securities whose issuers subsequently default.

Certain Portfolios may enter into financial instrument transactions (such as swaps, futures, options and other derivatives) that may have off-balance sheet market risk. Off-balance sheet market risk exists when the maximum potential loss on a particular financial instrument is greater than the value of such financial instrument, as reflected on the Statements of Assets and Liabilities.

If a Portfolio invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in financial derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Portfolio, or, in the case of hedging positions, that the Portfolio’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad.

There is a risk that changes related to the use of the London Interbank Offered Rate (“LIBOR”) or similar interbank offered rates (“IBORs,” such as the Euro Overnight Index Average (“EONIA”)) could have adverse impacts on financial instruments that reference LIBOR or a similar rate. While some instruments may contemplate a scenario where LIBOR or a similar rate is no longer available by providing for an alternative rate setting methodology, not all instruments have such fallback provisions and the effectiveness of replacement rates is uncertain. The abandonment of LIBOR and similar rates could affect the value and liquidity of instruments that reference such rates, especially those that do not have fallback provisions. The use of alternative reference rate products may impact investment strategy performance.

The global outbreak of COVID-19 (commonly referred to as “coronavirus”) has disrupted economic markets and resulted in travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, prolonged quarantines, cancellations, supply chain disruptions, and lower consumer demand, as well as general concern and uncertainty. The impact of COVID-19, and other infectious

 

     
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illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.

Inflation-Indexed Bonds. Certain Portfolios may invest in inflation-indexed bonds. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted to the rate of inflation. The interest rate on these bonds is generally fixed at issuance at a rate lower than typical bonds. Over the life of an inflation-indexed bond, however, interest will be paid based on a principal value, which is adjusted for inflation. Any increase or decrease in the principal amount of an inflation-indexed bond will be included as interest income on the Statements of Operations, even though investors do not receive their principal until maturity.

Interest Only Obligations. These securities entitle the owner to receive only the interest portion from a bond, Treasury note or pool of mortgages. These securities are generally created by a third party separating a bond or pool of mortgages into distinct interest-only and principal-only securities. As the principal (par) amount of a bond or pool of mortgages is paid down, the amount of interest income earned by the owner will decline as well.

Loans. Certain Portfolios may invest in loans, the interest rates of which float or adjust periodically based upon a specified adjustment schedule, benchmark indicator, or prevailing interest rates, the debtor of which may be a domestic or foreign corporation, partnership or other entity (“Borrower”). Loans generally pay interest at rates which are periodically redetermined by reference to a base lending rate plus a premium. These base lending rates generally include prime rates of one or more major U.S. banks, the LIBOR or certificates of deposit rates. Loans often require prepayments from excess cash flow or permit the Borrower to repay at its election. The degree to which Borrowers repay cannot be predicted with accuracy. As a result, the actual maturity may be substantially less than the stated maturities. Loans are exempt from registration under the Securities Act of 1933, as amended, may contain certain restrictions on resale, and cannot be sold publicly. A Portfolio’s investments in loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties.

When a Portfolio purchases assignments, it acquires all the rights and obligations under the loan agreement of the assigning lender. Assignments may, however, be arranged through private negotiations between potential assignees and potential assignors, and the rights and obligations acquired by the purchaser of an assignment may differ from, and be more limited than those held by the assigning lender. When a Portfolio purchases a participation of a loan interest, the Portfolio typically enters into a contractual agreement with the lender or other third party selling the participation. A participation interest in loans includes the right to receive payments of principal, interest and any fees to which it is entitled from the lender and only upon receipt by the lender of payments from the Borrower, but not from the Borrower directly. When investing in a participation interest, if a Borrower is unable to meet its obligations under a loan agreement, a Portfolio generally has no direct right to enforce compliance with the terms of the loan agreement. As a result, the Portfolio assumes the credit risk of the Borrower, the selling participant, and any other persons that are interpositioned between the Portfolio and the Borrower. If the lead lender in a typical lending syndicate becomes insolvent, enters Federal Deposit Insurance Corporation (“FDIC”) receivership or, if not FDIC insured, enters into bankruptcy, the Portfolio may incur certain costs and delays in receiving payment or may suffer a loss of principal and interest.

Payment In-Kind Securities. Certain Portfolios may invest in payment in-kind securities (“PIKs”). PIKs give the issuer the option at each interest payment date of making interest payments in cash or in additional debt securities. Those additional debt securities usually have the same terms, including maturity dates and interest rates, and associated risks as the original bonds. The daily market quotations of the original bonds may include the accrued interest (referred to as a dirty price) and require a pro-rata adjustment from the unrealized appreciation or depreciation on investments to interest receivable on the Statements of Assets and Liabilities.

Securities on a When-Issued or Delayed Delivery Basis. Certain Portfolios may purchase securities on a “when-issued” basis, and may purchase or sell securities on a “delayed delivery” basis. “When-issued” or “delayed delivery” refers to securities whose terms and indenture are available and for which a market exists, but which are not available for immediate delivery. Delivery and payment for securities that have been purchased by a Portfolio on a when-issued basis normally take place within six months and possibly as long as two years or more after the trade date. During this period, such securities do not earn interest, are subject to market fluctuation and may increase or decrease in value prior to their delivery. The purchase of securities on a when-issued basis may increase the volatility of a Portfolio’s NAV to the extent the Portfolio executes such transactions while remaining substantially fully invested. When a Portfolio engages in when-issued or delayed delivery transactions, it relies on the buyer or seller, as the case may be, to complete the transaction. Their failure to do so may cause the Portfolio to lose the opportunity to obtain or dispose of the security at a price and yield DMC, or the Portfolio’s investment subadviser, as applicable, consider advantageous. The Portfolio maintains internally designated assets with a value equal to or greater than the amount of its purchase commitments. The Portfolio may also sell securities that it purchased on a when-issued or delayed delivery basis prior to settlement of the original purchase.

 

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Custodian Fees. “Custodian fees” on the Statements of Operations may include interest expense incurred by a Portfolio on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. A Portfolio pays interest to its custodian on such cash overdrafts, to the extent they are not offset by positive cash balances maintained by that Portfolio. The “Earnings credit” line item, if shown, represents earnings on cash balances maintained by that Portfolio during the period. Such interest expense and other custodian fees may be paid with these earnings.

Indemnification. The Trust’s organizational documents provide current and former Trustees and Officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Trust. In the normal course of business, the Trust may also enter into contracts that provide general indemnification. The Trust’s maximum exposure under these arrangements is unknown and is dependent on future claims that may be made against the Trust. The risk of material loss from such claims is considered remote.

Basis of Preparation. Each Portfolio is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 (“ASC 946”). The accompanying financial statements were prepared in accordance with U.S. GAAP, including but not limited to ASC 946. U.S. GAAP requires the use of estimates made by management. Management believes that estimates and valuations are appropriate; however, actual results may differ from those estimates, and the valuations reflected in the accompanying financial statements may differ from the value ultimately realized upon sale or maturity.

Subsequent Events. Management has determined that no material events or transactions occurred subsequent to December 31, 2021, that would require recognition or disclosure in the Portfolios’ financial statements.

 

3.   INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Each Portfolio’s investments are reported at fair value. Fair value is defined as the price that each Portfolio would receive upon selling an asset or would pay upon satisfying a liability in an orderly transaction between market participants at the measurement date. Each Portfolio calculates the NAV of its shares as of the close of the NYSE, normally 4:00 P.M. Eastern time, on each day the NYSE is open for trading.

For purposes of calculating the NAV, the portfolio securities and financial instruments are valued on each business day using pricing and valuation methods as adopted by the Board. Where market quotes are readily available, fair value is generally determined on the basis of the last reported sales price, or if no sales are reported, based on quotes obtained from a quotation reporting system, established market makers, or pricing services.

Prices for fixed-income securities are typically based on quotes that are obtained from an independent pricing service approved by the Board. To determine values of fixed-income securities, the independent pricing service utilizes such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Securities that cannot be valued by the independent pricing service may be valued using quotes obtained from dealers that make markets in the securities.

Short-term securities with maturities of 60 days or less are valued based on quotes that are obtained from an independent pricing service approved by the Board as described in the preceding paragraph above.

Because many foreign markets close before the NYSE, events may occur between the close of the foreign market and the close of the NYSE that could have a material impact on the valuation of foreign securities. Waddell & Reed Services Company (“WRSCO”), pursuant to procedures adopted by the Board, evaluates the impact of these events and may adjust the valuation of foreign securities to reflect the fair value as of the close of the NYSE. In addition, all securities for which values are not readily available or are deemed unreliable are appraised at fair value as determined in good faith under the supervision of the Board.

Where market quotes are not readily available, portfolio securities or financial instruments are valued at fair value, as determined in good faith by the Board or Valuation Committee pursuant to procedures approved by the Board.

Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information or broker quotes), including where events occur after the close of the relevant market, but prior to the NYSE close, that materially affect the values of a Portfolio’s securities or financial instruments. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the securities trade do not open for trading for the entire day and no other market prices are available.

The Board has delegated to WRSCO the responsibility for monitoring significant events that may materially affect the values of a Portfolio’s securities or financial instruments and for determining whether the value of the applicable securities or financial instruments should be re-evaluated in light of such significant events. DMC, pursuant to authority delegated by the Board, has established a Valuation Committee to administer and oversee the valuation process, including the use of third party pricing vendors.

 

     
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The Board has adopted methods for valuing securities and financial instruments in circumstances where market quotes are not readily available. For instances in which daily market quotes are not readily available, investments may be valued, pursuant to procedures established by the Board, with reference to other securities or indices. In the event that the security or financial instrument cannot be valued pursuant to one of the valuation methods established by the Board, the value of the security or financial instrument will be determined in good faith by the Valuation Committee in accordance with the procedures adopted by the Board.

When a Portfolio uses these fair valuation methods applied by WRSCO that use significant unobservable inputs to determine its NAV, securities will be priced by a method that the Board or persons acting at its direction believe accurately reflects fair value and are categorized as Level 3 of the fair value hierarchy. These methods may require subjective determinations about the value of a security. The prices used by a Portfolio may differ from the value that will ultimately be realized at the time the securities are sold.

WRSCO is responsible for monitoring the implementation of the pricing and valuation policies through a series of activities to provide reasonable comfort of the accuracy of prices including: 1) periodic vendor due diligence meetings to review methodologies, new developments, and process at vendors, 2) daily and monthly multi-source pricing comparisons reviewed and submitted to the Valuation Committee, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by management and the Valuation Committee.

Accounting standards establish a framework for measuring fair value and a three-level hierarchy for fair value measurements 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 factors that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

An individual investment’s fair value measurement is assigned a level based upon the observability of the inputs which are significant to the overall valuation.

The three-tier hierarchy of inputs is summarized as follows:

 

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Level 1 – Observable inputs such as quoted prices, available in active markets, for identical assets or liabilities.

 

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Level 2 – Significant other observable inputs, which may include, but are 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.

 

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Level 3 – Significant unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available, which may include assumptions made by the Board or persons acting at its direction that are used in determining the fair value of investments.

A description of the valuation techniques applied to the Portfolios’ major classes of assets and liabilities measured at fair value on a recurring basis follows:

Asset-Backed Securities and Mortgage-Backed Securities. The fair value of asset-backed securities and mortgage-backed securities are estimated using recently executed transactions and based on models that consider the estimated cash flows of each debt tranche of the issuer, establish a benchmark yield, and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche including, but not limited to, the prepayment speed assumptions and attributes of the collateral. To the extent the inputs are observable and timely, the values would be categorized in Level 2 of the fair value hierarchy, and otherwise they would be categorized as Level 3.

Bullion. The fair value of bullion is at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded and are categorized in Level 1 of the fair value hierarchy.

Corporate Bonds. The fair value of corporate bonds, as obtained from an independent pricing service, is estimated using various techniques, which consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, fundamental data relating to the issuer, and credit default swap spreads adjusted for any basis difference between cash and derivative instruments. While most corporate bonds are categorized in Level 2 of the fair value hierarchy, in instances where lower relative weight is placed on transaction prices, quotations, or similar observable inputs, they are categorized in Level 3 of the fair value hierarchy.

Derivative Instruments. Forward foreign currency contracts are valued based upon the closing prices of the forward currency rates determined at the close of the NYSE, which are provided by an independent pricing service. Swaps derive their value from underlying asset prices, indices, reference rates and other inputs or a combination of these factors. Swaps

 

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are valued by an independent pricing service unless the price is unavailable, in which case they are valued at the price provided by a dealer in that security. Exchange-traded futures contracts are generally valued at the settlement price. Listed options are ordinarily valued at the mean of the last bid and ask price provided by an independent pricing service unless the price is unavailable, in which case they are valued at a quotation obtained from a broker-dealer. Over the counter (“OTC”) options are ordinarily valued at the mean of the last bid and ask price for a comparable listed option provided by an independent pricing service unless such a price is unavailable, in which case they are valued at a quotation obtained from a broker-dealer.

Listed derivatives that are actively traded are valued based on quoted prices from the exchange and are categorized in Level 1 of the fair value hierarchy. OTC derivative contracts include forward foreign currency contracts, swap agreements, and option contracts related to interest rates, foreign currencies, credit standing of reference entities, equity prices, or commodity prices. Depending on the product and the terms of the transaction, the fair value of the OTC derivative products are modeled taking into account the counterparties’ creditworthiness and using a series of techniques, including simulation models. Many pricing models do not entail material subjectivity because the methodologies employed do not necessitate significant judgments and the pricing inputs are observed from actively quoted markets, as is the case with interest rate swap and option contracts. OTC derivative products valued using pricing models with significant observable inputs are categorized within Level 2 of the fair value hierarchy.

Equity Securities. Equity securities traded on U.S. or foreign securities exchanges or included in a national market system are valued at the official closing price at the close of each business day unless otherwise stated below. OTC equity securities and listed securities for which no price is readily available are valued at the average of the last bid and ask prices.

Mutual funds, including investment funds, typically are valued at the NAV reported as of the valuation date.

Securities that are stated at the last reported sales price or closing price on the day of valuation taken from the primary exchange where the security is principally traded and to the extent these securities are actively traded and valuation adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy.

Foreign securities, for which the primary trading market closes at the same time or after the NYSE, are valued based on quotations from the primary market in which they are traded and categorized in Level 1. Because many foreign securities markets and exchanges close prior to the close of the NYSE, closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after that close. Certain foreign securities may be fair valued using a pricing service that considers the correlation of the trading patterns of the foreign security to the intra-day trading in the U.S. markets for investments such as American Depositary Receipts, financial futures, exchange-traded funds, and the movement of certain indices of securities based on a statistical analysis of their historical relationship; such valuations generally are categorized in Level 2.

Preferred stock, repurchase agreements, and other equities traded on inactive markets or valued by reference to similar instruments are also generally categorized in Level 2.

Loans. Loans are valued using a price or composite price from one or more brokers or dealers as obtained from an independent pricing service. The fair value of loans is estimated using recently executed transactions, market price quotations, credit/market events, and cross-asset pricing. Inputs are generally observable market inputs obtained from independent sources. Loans are generally categorized in Level 2 of the fair value hierarchy, unless key inputs are unobservable in which case they would be categorized as Level 3.

Municipal Bonds. Municipal bonds are fair valued based on pricing models used by and obtained from an independent pricing service that take into account, among other factors, information received from market makers and broker-dealers, current trades, bid-wants lists, offerings, market movements, the callability of the bond, state of issuance, benchmark yield curves, and bond insurance. To the extent that these inputs are observable and timely, the fair values of municipal bonds would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.

Restricted Securities. Restricted securities that are deemed to be Rule 144A securities and illiquid, as well as restricted securities held in non-public entities, are included in Level 3 of the fair value hierarchy to the extent that significant inputs to valuation are unobservable, because they trade infrequently, if at all and, therefore, the inputs are unobservable. Restricted securities that are valued at a discount to similar publicly traded securities may be categorized as Level 2 of the fair value hierarchy to the extent that the discount is considered to be insignificant to the fair value measurement in its entirety; otherwise they may be categorized as Level 3.

U.S. Government and Agency Securities. U.S. government and agency securities are normally valued using a model that incorporates market observable data such as reported sales of similar securities, broker quotes, yields, bids, offers, quoted market prices, and reference data. Accordingly, U.S. government and agency securities are normally categorized in Level 2 of the fair value hierarchy depending on the liquidity and transparency of the market.

 

     
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Transfers from Level 2 to Level 3, if any, occurred primarily due to the lack of observable market data due to decreased market activity or information for these securities. Transfers from Level 3 to Level 2, if any, occurred primarily due to the increased availability of observable market data due to increased market activity or information.

For fair valuations using unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances for reported fair values that presents changes attributable to total realized and unrealized gains or losses, purchases and sales, and transfers in or out of the Level 3 category during the period. In accordance with the requirements of U.S. GAAP, a fair value hierarchy and Level 3 reconciliation, if any, have been included in the Notes to the Schedule of Investments for each respective Portfolio.

Net realized gain (loss) and net unrealized appreciation (depreciation), shown on the reconciliation of Level 3 investments, if applicable, are included on the Statements of Operations in net realized gain (loss) on investments in unaffiliated and/or affiliated securities and in net change in unrealized appreciation (depreciation) on investments in unaffiliated and/or affiliated securities, respectively.

 

4.   DERIVATIVE INSTRUMENTS ($ amounts in thousands unless indicated otherwise)

The following disclosures contain information on why and how the Portfolios use derivative instruments, the associated risks of investing in derivative instruments, and how derivative instruments affect the Portfolios’ financial positions and results of operations.

Forward Foreign Currency Contracts. Each Portfolio is authorized to enter into forward foreign currency contracts (“forward contracts”) for the purchase or sale of a foreign currency at a negotiated rate at a future date. Forward contracts are reported on a schedule following the Schedule of Investments. Forward contracts are valued daily based upon the closing prices of the forward currency rates provided by an independent pricing service determined at the close of the NYSE. The resulting unrealized appreciation and depreciation is reported on the Statements of Assets and Liabilities as a receivable or payable and on the Statements of Operations within the change in unrealized appreciation (depreciation). At contract close, the difference between the original cost of the contract and the value at the close date is recorded as a realized gain (loss) on the Statements of Operations.

Risks to a Portfolio related to the use of such contracts include both market and credit risk. Market risk is the risk that the value of the forward contract will depreciate due to unfavorable changes in the exchange rates. Credit risk arises from the possibility that the counterparty will default. If the counterparty defaults, a Portfolio’s maximum loss will consist of the aggregate unrealized gain on appreciated contracts that is not collateralized.

High Income, International Core Equity and Natural Resources enter into forward foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to, or hedge exposure away from foreign currencies (foreign currency exchange rate risk).

Futures Contracts. Each Portfolio is authorized to engage in buying and selling futures contracts. Upon entering into a futures contract, a Portfolio is required to deposit, in a segregated account, an amount equal to a varying specified percentage of the contract amount. This amount is known as the initial margin. Subsequent amounts, known as variation margin, are paid or received by the Portfolio each day, dependent on the daily fluctuations in the value of the underlying debt security or index. Options on futures contracts may also be purchased or sold by a Portfolio.

Futures contracts are reported on a schedule following the Schedule of Investments. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are identified on the Schedule of Investments. Cash held by the broker to cover initial margin requirements on open futures contracts and the receivable and/or payable for the daily mark to market for the variation margin are noted on the Statements of Assets and Liabilities. The net change in unrealized appreciation (depreciation) is reported on the Statements of Operations. Realized gains (losses) are reported on the Statements of Operations at the closing or expiration of futures contracts.

Risks of entering into futures contracts include the possibility of loss of securities or cash held as collateral, that there may be an illiquid market where the Portfolio is unable to close the contract or enter into an offsetting position and, if used for hedging purposes, the risk that the price of the contract will correlate imperfectly with the prices of the Portfolio’s securities.

Balanced and High Income invest in long and/or short positions in futures contracts to gain exposure to, or economically hedge against, changes in interest rates (interest rate risk).

Option Contracts. Options purchased by a Portfolio are accounted for in the same manner as portfolio securities. The cost of the underlying instruments acquired through the exercise of call options is increased by the premium paid to purchase the call. The proceeds from instruments sold through the exercise of put options are decreased by the premium paid to purchase the put.

 

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When a Portfolio writes (sells) an option, an amount equal to the premium received by the Portfolio is recorded as a liability. The amount of the liability is subsequently adjusted to reflect the current value of the option written. When an option expires on its stipulated expiration date or a Portfolio enters into a closing purchase transaction, the Portfolio realizes a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the call option was sold), and the liability related to such option is extinguished. When a written call option is exercised, the premium is added to the proceeds from the sale of the underlying instrument in determining whether a Portfolio has realized a gain or loss. When a written put is exercised, the cost basis of the instruments purchased by a Portfolio is reduced by the amount of the premium received.

Investments in options, whether purchased or written, involve certain risks. Writing put options and purchasing call options may increase a Portfolio’s exposure to the underlying instrument. With written options, there may be times when a Portfolio will be required to purchase or sell instruments to meet its obligation under the option contract where the required action is not beneficial to the Portfolio, due to unfavorable movement of the market price of the underlying instrument.

Option contracts can be traded on a regulated exchange or traded OTC. Unlike the trades on a regulated exchange where the clearinghouse guarantees the performances of both the buyer and the seller, to the extent a Portfolio enters into OTC option transactions with counterparties, the Portfolio will be exposed to the risk that counterparties to these OTC transactions will be unable to meet their obligations under the terms of the transaction.

Asset Strategy, Balanced, Mid Cap Growth, Science and Technology and Small Cap Growth purchase and write call and put options to increase or decrease hedging exposure to underlying instruments (which include credit risk, equity risk, foreign currency exchange rate risk, event risk and/or interest rate risk), increase exposure to various equity markets or certain sectors, gain exposure to or facilitate trading in certain securities and/or, in the case of options written, to generate returns from options premiums.

Swap Agreements. Each Portfolio is authorized to invest in swap agreements. Swap agreements are bilaterally negotiated agreements between a Portfolio and counterparty to exchange or swap investment cash flows, assets, foreign currencies or market-linked returns at specified, future intervals. Swap agreements are privately negotiated in the over-the-counter market (“OTC swaps”). If the OTC swap entered is one of the swaps identified by a relevant regulator as a swap that is required to be cleared, then it will be cleared through a third party, known as a central counterparty or derivatives clearing organization (“centrally cleared swaps”).

Swaps are marked to market daily and changes in value are recorded as unrealized appreciation (depreciation) on the Statements of Operations. Payments received or made by the Portfolio are recorded as realized gain or loss on the Statements of Operations. Any upfront premiums paid are recorded as assets and any upfront fees received are recorded as liabilities and are shown as swap premiums paid and swap premiums received, respectively, if any, on the Statements of Assets and Liabilities and amortized over the term of the swap. An early termination payment received or made at an early termination or a final payment made at the maturity of the swap is recorded as realized gain or loss on the Statements of Operations.

After a centrally cleared swap is accepted for clearing, a Portfolio may be required to deposit initial margin with a Clearing Member in the form of cash or securities. Securities deposited as initial margin, if any, are designated on the Schedule of Investments. Cash deposited as initial margin is identified on the Schedule of Investments and is recorded as restricted cash on the Statements of Assets and Liabilities.

Total return swaps involve a commitment of one party to pay periodic interest payments in exchange for a market-linked return based on a security or a basket of securities including a variety of securities or representing a particular index. To the extent the total return of the security, a basket of securities, or an index exceeds or falls short of the offsetting interest rate obligation, the Portfolio will receive a payment from or make a payment to the counterparty.

Asset Strategy and Small Cap Growth enter into total return swaps to hedge exposure to a security or market.

The creditworthiness of the counterparty with which a Portfolio enters into a swap agreement is monitored by DMC. If a counterparty creditworthiness declines, the value of the agreement would likely decline, potentially resulting in losses. If a default occurs by the counterparty to such a transaction, the Portfolio will have contractual remedies pursuant to the agreement related to the transaction. The maximum loss a Portfolio may incur consists of the aggregate unrealized gain on appreciated contracts that is not collateralized due to facts specific to certain situations (i.e., collateral may not have been posted by the counterparty due to the required collateral amount being less than the pre-agreed thresholds. Additionally, regulatory developments called stay resolutions and the ensuing required contractual amendments to the transactional documentation, including derivatives, permit the relevant regulators to preclude parties to a transaction from terminating trades, among other rights it may have in the trade agreements should a counterparty that it regulates experience financial distress. A relevant regulator also has the authority to reduce the value of certain liabilities owed by the counterparty to a Fund and/or convert cash liabilities of a regulated entity into equity holdings. The power given to the relevant regulators includes the ability to amend transactional agreements unilaterally, modify the maturity of eligible liabilities, reduce the amount of interest payable or change the date on which interest becomes payable, among other powers.

 

     
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To prevent incurring losses due to the counterparty credit risk, DMC actively monitors the creditworthiness of the counterparties with which it has entered financial transactions. DMC consistently and frequently risk manages the credit risk of the counterparties it faces in transactions.

Collateral and rights of offset. A Portfolio mitigates credit risk with respect to OTC derivative counterparties through credit support annexes (“CSA”) included with an International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreement which is the standard contract governing all OTC derivative transactions between the Portfolio and each of its counterparties. Although it is not possible to eliminate credit risk entirely, the CSA allows the Portfolio and its counterparty to reduce their exposure to the risk of payment default by the other party by holding an amount in collateral equivalent to the realized and unrealized amount of exposure to the counterparty, which is generally held by the Portfolio’s custodian. An amount of collateral is moved to/from applicable counterparties only if the amount of collateral required to be posted surpasses both the threshold and the minimum transfer amount pre-agreed in the CSA between the Portfolio and the counterparty. See Note 2 “Segregation and Collateralization” for additional information with respect to collateral practices.

Offsetting of Assets and Liabilities. The following tables present financial instruments that are either (1) offset or (2) subject to an enforceable master netting arrangement or similar agreement as of December 31, 2021:

Assets

 

                    Gross Amounts Not Offset on the
Statements of Assets and Liabilities		  
Portfolio   Counterparty  

Gross

Amounts of

Recognized
Assets

    

Gross

Amounts

Offset on the

Statements of

Assets and

Liabilities

    

Net Amounts

of Assets
Presented on

the Statements

of Assets and

Liabilities

     Financial
Instruments
and
Derivatives
Available
for Offset		     Non-Cash
Collateral
Received		     Cash
Collateral
Received		     Net
Amount
Receivable		  

Mid Cap Growth

 

          

Investments in unaffiliated securities at value*

   JPMorgan Chase
Bank N.A.		   $ 3     $ —     $ 3     $ (3 )    $ —     $ —     $ —  

 

*

Purchased options are reported as investments in unaffiliated securities on the Statements of Assets and Liabilities.

Liabilities

 

                      Gross Amounts Not Offset on the
Statements of Assets and Liabilities		  
Portfolio   Counterparty     Gross
Amounts of
Recognized
Liabilities		     Gross
Amounts
Offset on the
Statements of
Assets and
Liabilities		    

Net Amounts
of Liabilities
Presented on
the Statements
of Assets and

Liabilities

     Financial
Instruments
and
Derivatives
Available
for Offset		     Non-Cash
Collateral
Pledged		     Cash
Collateral
Pledged		     Net
Amount
Payable		  

High Income

                

Unrealized appreciation on forward foreign currency contracts

    
 JPMorgan Securities
LLC		  
 		   $ 137     $ —     $ 137     $ —     $ —     $ —     $ 137  

Mid Cap Growth

                

Written options at value

    
 JPMorgan Chase
Bank N.A.		  
 		   $ 1,144     $ —     $ 1,144     $ (3 )    $ —     $ (1,060 )    $ 81  

Additional Disclosure Related to Derivative Instruments

Fair values of derivative instruments as of December 31, 2021:

 

       

Assets

          

Liabilities

  
Portfolio   Type of Risk
Exposure		   Statements of Assets & Liabilities
Location		   Value            Statements of Assets & Liabilities
Location		   Value  
High Income   Foreign currency       $ —             Unrealized depreciation on forward foreign currency contracts   $ 137  
Mid Cap Growth   Equity   Investments in unaffiliated securities at value*     3             Written options at value     1,190  

* Purchased options are reported as investments in unaffiliated securities and are reflected on the accompanying Schedule of Investments.

 

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Amount of realized gain (loss) on derivatives recognized on the Statements of Operations for the year ended December 31, 2021:

 

         Net realized gain (loss) on:         
Portfolio  

Type of Risk

Exposure

   

Investments in

unaffiliated
securities*

      Swap
agreements		      Futures
contracts		      Written
options		      Forward
foreign
currency
contracts		      Total  
Asset Strategy   Equity    $ (239 )     $ 336      $ —      $ 1,687      $ —      $ 1,784  
Balanced   Equity      —        —        —        38        —        38  
    Interest rate      —        —        169        —        —        169  
High Income   Foreign currency      —        —        —        —        62        62  
    Interest rate      —        —        (112 )       —        —        (112 ) 
International Core Equity   Foreign currency      —        —        —        —        631        631  
Mid Cap Growth   Equity      (4,849 )       —        —        634        —        (4,215 ) 
Natural Resources   Foreign currency      —        —        —        —        (339 )       (339 ) 
Science and Technology   Equity      (1,190 )       —        —        1,223        —        33  
Small Cap Growth   Equity      (204 )       (1,784 )       —        70        —        (1,918 ) 

* Purchased options are reported as investments in unaffiliated securities and are reflected on the accompanying Schedule of Investments.

Change in unrealized appreciation (depreciation) on derivatives recognized on the Statements of Operations for the year ended December 31, 2021:

 

         Net change in unrealized appreciation (depreciation) on:         
Portfolio  

Type of Risk

Exposure

    Investments in
unaffiliated
securities*		      Swap
agreements		      Futures
contracts		      Written
options		      Forward
foreign
currency
contracts		      Total  
Asset Strategy   Equity    $ (28 )     $ (302 )     $ —      $ (4 )     $ —      $ (334 ) 
High Income   Foreign currency      —        —        —        —        (137 )       (137 ) 
International Core Equity   Foreign currency      —        —        —        —        (685 )       (685 ) 
Mid Cap Growth   Equity      948        —        —        (858 )       —        90  
Natural Resources   Foreign currency      —        —        —        —        472        472  
Science and Technology   Equity      —        —        —        (344 )       —        (344 ) 
Small Cap Growth   Equity      240        155        —        29        —        424  

* Purchased options are reported as investments in unaffiliated securities and are reflected on the accompanying Schedule of Investments.

During the year ended December 31, 2021, the average derivative volume was as follows:

 

Portfolio   Forward foreign
currency contracts(1)		   Long futures
contracts(2) 		  Short futures
contracts(2) 		  Swap
agreements(3)		   Purchased
options(2) 		  Written
options(2)

Asset Strategy

     $ —     $ —     $ —     $ 3,878     $ 720     $ 493

Balanced

       —       —       2,096       —       —       4

High Income

       5       —       795       —       —       —

International Core Equity

       53       —       —       —       —       —

Mid Cap Growth

       —       —       —       —       314       247

Natural Resources

       36       —       —       —       —       —

Science and Technology

       —       —       —       —       103       127

Small Cap Growth

       —       —       —       7,205       7       18

 

(1)

 Average absolute value of unrealized appreciation/depreciation during the period.

(2)

 Average value outstanding during the period.

(3)

 Average notional amount outstanding during the period.

 

     
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5.   BASIS OF CONSOLIDATION FOR THE ASSET STRATEGY PORTFOLIO

Ivy VIP ASF II, Ltd. (the “Subsidiary”), a Cayman Islands exempted company, was incorporated as a wholly owned subsidiary acting as an investment vehicle for Asset Strategy (referred to as “the Portfolio” in this subsection). VIP ASF III (SBP), LLC (the “Company”), a Delaware limited liability company, was incorporated as a wholly owned company acting as an investment vehicle for the Portfolio. The Subsidiary and the Company act as investment vehicles for the Portfolio, in order to affect certain investments for the Portfolio consistent with the Portfolio’s investment objectives and policies as specified in its prospectus and SAI.

The Portfolio’s investment portfolio has been consolidated and includes the portfolio holdings of the Portfolio, its Subsidiary and the Company. The consolidated financial statements include the accounts of the Portfolio, its Subsidiary and the Company. All inter-company transactions and balances have been eliminated. A subscription agreement was entered into between the Portfolio and its Subsidiary and the Company comprising the entire issued share capital of the Subsidiary and the Company with the intent that the Portfolio will remain the sole shareholder and retain all rights. Under the Articles of Association, shares issued by the Subsidiary and the Company confer upon a shareholder the right to receive notice of, to attend and to vote at general meetings of the Subsidiary and the Company and shall confer upon the shareholder rights in a winding-up or repayment of capital and the right to participate in the profits or assets of the Subsidiary and the Company.

See the table below for details regarding the structure, incorporation and relationship as of December 31, 2021 of the Subsidiary and the Company to the Portfolio (amounts in thousands).

 

Subsidiary/Company   Date of
Incorporation		   Subscription
Agreement		  

Portfolio Net

Assets

   Subsidiary/
Company
Net Assets		   Percentage
of Portfolio
Net Assets

Ivy VIP ASF II, Ltd.

       1-31-13       4-10-13     $ 744,076     $ 37,986       5.11 %

VIP ASF III (SBP), LLC

       4-9-13       4-23-13       744,076       15       0.00

 

6.   INVESTMENT MANAGEMENT AND PAYMENTS TO AFFILIATED PERSONS ($ amounts in thousands unless indicated otherwise)

Management Fees. IICO served as each Portfolio’s investment adviser through April 30, 2021. Effective April 30, 2021, DMC serves as each Portfolio’s investment adviser. The management fee is accrued daily by each Portfolio at the following annual rates as a percentage of average daily net assets:

 

Portfolio (M – Millions)    $0 to
$500M		      $500 to
$1,000M		      $1,000 to
$1,500M		      $1,500 to
$2,000M		      $2,000 to
$3,000M		      $3,000 to
$5,000M		      $5,000 to
$10,000M		      Over
$10,000M		  

Asset Strategy

      0.700        0.700        0.650        0.650        0.600        0.550        0.550        0.550  

Balanced

      0.700        0.700        0.650        0.650        0.600        0.550        0.550        0.550  

Energy

      0.850        0.850        0.830        0.830        0.800        0.760        0.760        0.760  

Growth

      0.700        0.700        0.650        0.650        0.600        0.550        0.550        0.550  

High Income

      0.625        0.600        0.550        0.500        0.500        0.500        0.500        0.500  

International Core Equity

      0.850        0.850        0.830        0.830        0.800        0.760        0.760        0.760  

Mid Cap Growth

      0.850        0.850        0.830        0.830        0.800        0.760        0.760        0.760  

Natural Resources

      0.850        0.850        0.830        0.830        0.800        0.760        0.730        0.700  

Science and Technology

      0.850        0.850        0.830        0.830        0.800        0.760        0.760        0.760  

Small Cap Growth

      0.850        0.850        0.830        0.830        0.800        0.760        0.760        0.760  

Smid Cap Core

      0.850        0.850        0.830        0.830        0.800        0.760        0.760        0.760  

DMC may seek investment advice and recommendations from its affiliates: Macquarie Investment Management Europe Limited, Macquarie Investment Management Austria Kapitalanlage AG, and Macquarie Investment Management Global Limited (together, the “Affiliated Sub-Advisors”). DMC may also permit these Affiliated Sub-Advisors to execute Portfolio security trades on behalf of DMC and exercise investment discretion for securities in certain markets where DMC believes it will be beneficial to utilize an Affiliated Sub-Advisor’s specialized market knowledge. Although the Affiliated Sub-Advisors serve as sub-advisors, DMC has ultimate responsibility for all investment advisory services. For these services, DMC, not a Portfolio, pays each Affiliated Sub-Advisor a portion of its investment management fee.

DMC may permit its affiliates, Macquarie Investment Management Global Limited (MIMGL) and Macquarie Funds Management Hong Kong Limited (together, the “Affiliated Sub-Advisors”), to execute Portfolio equity security trades on its behalf. DMC may also seek quantitative support from MIMGL. Although the Affiliated Sub-Advisors serve as sub-advisors, DMC has ultimate responsibility for all investment advisory services. For these services, DMC, not the Portfolio, may pay each Affiliated Sub-Advisor a portion of its investment management fee.

 

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Independent Trustees and Chief Compliance Officer Fees. Through April 30, 2021, fees paid to the Independent Trustees could be paid in cash or deferred to a later date, at the election of the Trustees according to the Deferred Fee Agreement entered into between the Trust and the Trustee(s). Each Portfolio recorded its portion of the deferred fees as a liability on the Statement of Assets and Liabilities. All fees paid in cash plus any appreciation (depreciation) in the underlying deferred plan are shown on the Statement of Operations. Additionally, fees paid to the Chief Compliance Officer of the Portfolios are shown on the Statement of Operations.

Accounting Services Fees. The Trust has an Accounting and Administrative Services Agreement with WRSCO, doing business as WI Services Company (“WISC”). Under the agreement, WISC acts as the agent in providing bookkeeping and accounting services and assistance to the Trust, including maintenance of Portfolio records, pricing of Portfolio shares and preparation of certain shareholder reports. For these services, each Portfolio pays WISC a monthly fee of one-twelfth of the annual fee based on the average net asset levels shown in the following table:

 

(M – Millions)    $0 to
$10M		      $10 to
$25M		      $25 to
$50M		      $50 to
$100M		      $100 to
$200M		      $200 to
$350M		      $350 to
$550M		      $550 to
$750M		      $750 to
$1,000M		      Over
$1,000M		  

Annual Fee Rate

    $ 0.00      $ 11.50      $ 23.10      $ 35.50      $ 48.40      $ 63.20      $ 82.50      $ 96.30      $ 121.60      $ 148.50  

Each Portfolio also pays WISC a monthly administrative fee at the annual rate of 0.01%, or one basis point, for the first $1 billion of net assets with no fee charged for net assets in excess of $1 billion. This fee is voluntarily waived by WISC until a Portfolio’s net assets are at least $10 million and is included in “Accounting services fee” on the Statements of Operations.

Shareholder Servicing. Under the Transfer Agency Agreement between the Trust and WISC, each Portfolio reimburses WISC for certain out-of-pocket costs.

Service Plan. Class II. Under a Service Plan adopted by the Trust pursuant to Rule 12b–1 under the 1940 Act, each Portfolio may pay a service fee to Ivy Distributors, Inc. (“IDI”) through April 30, 2021 and Delaware Distributors, L.P. (“DDLP”) effective April 30, 2021 for Class II shares in an amount not to exceed 0.25% of the Portfolio’s average annual net assets. The fee is to be paid to compensate IDI/DDLP for amounts it expends in connection with the provision of personal services to Policyowners and/or maintenance of Policyowner accounts.

Expense Reimbursements and/or Waivers. DMC, the Portfolios’ investment manager, DDLP, the Portfolios’ distributor, and/or WRSCO, doing business as WISC, the Portfolios’ transfer agent, have contractually agreed to reimburse sufficient management fees, 12b-1 fees and/or shareholder servicing fees to cap the total annual ordinary fund operating expenses (which would exclude interest, taxes, brokerage commissions, acquired fund fees and expenses, and extraordinary expenses, if any). Portfolio and class expense limitations and related waivers/reimbursements for the year ended December 31, 2021 were as follows:

 

Portfolio Name   Share
Class Name		   Type of
Expense Limit		   Commencement
Date		     End Date     Expense Limit   Amount of
Expense Waiver/
Reimbursement		     Expense
Reduced
Asset Strategy   All Classes   Contractual     5-1-2021       4-30-2022     N/A   $ 762 (1)    Investment
Management
Fee
  Class I   Contractual     11-23-2021       11-23-2022     0.62%   $ —     N/A
    Class II   Contractual     11-23-2021       11-23-2022     0.87%   $ —     N/A
Energy   Class I   Contractual     4-28-2017       4-30-2022     Class II less 0.25%   $ —     N/A
High Income   Class I   Contractual     4-28-2017       4-30-2022     Class II less 0.25%   $ —     N/A
Mid Cap Growth   All Classes   Contractual     4-28-2017       4-30-2022     N/A   $ 272 (2)    Investment
Management
Fee
  Class I   Contractual     4-28-2017       4-30-2022     0.85%   $ —     N/A
  Class I   Contractual     4-28-2017       4-30-2022     Class II less 0.25%   $ —     N/A
    Class II   Contractual     5-1-2012       4-30-2022     1.10%   $ 2     12b-1 Fees
and/or
Shareholder
Servicing
Science and Technology   Class I   Contractual     4-28-2017       4-30-2022     Class II less 0.25%   $ —     N/A
Small Cap Growth   All Classes   Contractual     4-28-2017       4-30-2022     N/A   $ 27 (1)    Investment
Management
Fee
  Class I   Contractual     11-5-2018       4-30-2022     Class II less 0.25%   $ —     N/A
  Class II   Contractual     10-1-2016       4-30-2022     1.14%   $ 1     12b-1 Fees
and/or
Shareholder
Servicing

 

(1)

 Due to Class I and/or Class II contractual expense limits, investment management fees were waived for all share classes.

 

     
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Any amounts due to the Portfolios as a reimbursement but not paid as of December 31, 2021 are shown as a receivable from affiliates on the Statements of Assets and Liabilities.

 

7.   INTERFUND LENDING PROGRAM

Pursuant to an exemptive order issued by the SEC (“Order”), the Delaware Ivy Funds, Delaware Ivy Variable Insurance Portfolios and InvestEd Portfolios (collectively, the “Funds” only for purposes of this footnote 7) have the ability to lend money to, and borrow money from, each other pursuant to a master interfund lending agreement (“Interfund Lending Program”). Under the Interfund Lending Program, the Funds may lend or borrow money for temporary purposes directly to or from one another (each an “Interfund Loan”), subject to meeting the conditions of the Order. The interest rate to be charged on an Interfund Loan is the average of the overnight repurchase agreement rate and the short-term bank loan rate. The Funds have not utilized the Interfund Lending Program from the period January 1, 2021 to December 31, 2021. Additionally, no interfund loans are outstanding as of December 31, 2021.

 

8.   AFFILIATED COMPANY TRANSACTIONS (All amounts in thousands)

A summary of the transactions in affiliated companies during the year ended December 31, 2021 follows:

 

    

12-31-20

Value

   Gross
Additions		   Gross
Reductions		   Realized
Gain/(Loss)		  

Net Change

in Unrealized

Appreciation/

(Depreciation)

   12-31-21
Value		   Distributions
Received		  

Capital Gain

Distributions

High Income

                                

Larchmont Resources LLC(1)(2)(3)

     $ 40     $ —     $ —     $ —     $ 52     $ 92     $ —     $ —

New Cotai Participation Corp., Class B(1)(2)(3)

       15,029       —       —       —       (11,099 )       3,930       —       —
   

 

 

              

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  
    $ 15,069             $ —     $ (11,047 )     $ 4,022     $ —     $ —
   

 

 

              

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  
     12-31-20
Value		                            Interest
Received		     

Larchmont Resources LLC (8.000% Cash or 8.000% PIK), 8.000%, 8-9-21(4)

     $ 312       —       743       5     $ 426     $ —     $ 77     $ —

New Cotai LLC (14.000% Cash or 14.000% PIK), 14.000%, 9-10-25(2)(4)

       839       129       —       —       (33 )       935       129       —
   

 

 

              

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  
    $ 1,151             $ 5     $ 393     $ 935     $ 206     $ —
   

 

 

              

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

 

(1)

 No dividends were paid during the preceding 12 months.

(2)

 Restricted security.

(3)

 Securities whose value was determined using significant unobservable inputs.

(4)

 Payment-in-kind bond.

 

9.   INVESTMENT SECURITIES TRANSACTIONS ($ amounts in thousands)

The cost of purchases and the proceeds from maturities and sales of investment securities (excluding short-term securities) for the year ended December 31, 2021, were as follows:

 

    Purchases   Sales
     U.S. Government   Other Issuers   U.S. Government   Other Issuers

Asset Strategy

     $ 82,413     $ 307,782     $ 39,494     $ 427,962

Balanced

       81,820       186,511       79,847       311,278

Energy

       —       84,044       —       72,310

Growth

       —       216,543       —       363,523

High Income

       —       458,200       —       492,447

International Core Equity

       —       513,916       —       619,621

Mid Cap Growth

       —       192,062       —       248,046

Natural Resources

       —       101,622       —       104,841

Science and Technology

       —       373,154       —       472,026

Small Cap Growth

       —       215,811       —       254,668

Smid Cap Core

       —       149,462       —       189,498

 

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10.   LOANS OF PORTFOLIO SECURITIES ($ amounts in thousands)

Each Portfolio may lend their portfolio securities only to borrowers that are approved by the Portfolio’s securities lending agent, The Bank of New York Mellon (“BNYM”). The borrower pledges and maintains with the Portfolio collateral consisting of cash or securities issued or guaranteed by the U.S. government. The collateral received by the Portfolio is required to have a value of at least 102% of the market value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% of the market value for all other securities, except in the case of loans of foreign securities which are denominated and payable in U.S. dollars, in which case the collateral is required to have a value of at least 102% of the market value of the loaned securities. The market value of the loaned securities is determined at the close of each business day and any additional required collateral is delivered to the Portfolio and any excess collateral is returned by the Portfolio on the next business day. During the term of the loan, the Portfolio is entitled to all distributions made on or in respect of the loaned securities but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

Cash received as collateral for securities on loan may be reinvested in the Dreyfus Institutional Preferred Government Money Market Fund—Institutional Shares or certain other registered money market funds and are disclosed in the Portfolio’s Schedule of Investments and are reflected in the Statements of Assets and Liabilities as cash collateral on securities loaned at value. Non-cash collateral, in the form of securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, is not disclosed in the Portfolio’s Statements of Assets and Liabilities as it is held by the lending agent on behalf of the Portfolio and the Portfolio does not have the ability to re-hypothecate these securities. The securities on loan for each Portfolio are also disclosed in its Schedule of Investments. The total value of any securities on loan as of December 31, 2021 and the total value of the related cash collateral are disclosed in the Statements of Assets and Liabilities. Income earned by the Portfolios from securities lending activity is disclosed in the Statements of Operations.

The following is a summary of each Portfolio’s securities lending positions and related cash and non-cash collateral received as of December 31, 2021:

 

Portfolio  

Value of

Securities on
Loan

   Cash Collateral
Received		   Non-Cash Collateral
Received		  

Total Collateral

Received

Asset Strategy

     $ 295     $ 303     $ —     $ 303

Balanced

       510       208       317       525

High Income

       55,237       44,639       11,979       56,618

International Core Equity

       18,953       8,814       11,172       19,986

Mid Cap Growth

       3,892       4,194       —       4,194

Natural Resources

       8,486       5,476       3,346       8,822

Science and Technology

       11,909       4,114       8,074       12,188

Small Cap Growth

       4,105       4,238       88       4,326

Smid Cap Core

       1,228       —       1,254       1,254

The cash collateral received amounts presented in the table above are transactions accounted for as secured borrowings and have an overnight and continuous maturity. The proceeds from the cash collateral received is invested in registered money market funds.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Portfolios benefit from a borrower indemnity provided by BNYM. BNYM’s indemnity allows for full replacement of securities lent wherein BNYM will purchase the unreturned loaned securities on the open market by applying the proceeds of the collateral or to the extent such proceeds are insufficient or the collateral is unavailable, BNYM will purchase the unreturned loan securities at BNYM’s expense. However, the Portfolio could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.

 

11.   BORROWINGS

On July 1, 2019 the Trust, on behalf of High Income, along with certain other funds managed by the investment adviser (“Participating Funds”), entered into a 364-day senior unsecured revolving credit facility with Bank of New York Mellon and a group of financial institutions to be utilized to temporarily finance the repurchase or redemption of Fund shares and for other temporary or emergency purposes. The agreement was amended on June 28, 2021. The Participating Funds can borrow up to an aggregate commitment amount of $130 million at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit facility has the following terms: a commitment fee of 0.15% per annum of the daily amount of unused commitment amounts and interest at a rate equal to the higher of (a) the federal funds effective rate (but not below 0.0%) plus 1.25% per annum or (b) the one-month LIBOR rate (but not below 0.0%) plus 1.25%

 

     
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per annum on amounts borrowed. The agreement was terminated on November 1, 2021. Commitment and interest fees, if any, paid by the Participating Funds are disclosed as part of commitment and interest expense for borrowing on the Statements of Operations. During the year ended December 31, 2021, the Participating Funds did not borrow under the credit facility.

On November 1, 2021, the Portfolios were added (by way of amendment) as additional participants to a $355,000,000 revolving line of credit (Agreement). The Agreement also includes certain other funds in the Delaware Funds (together with the Portfolios, the Participants) and is intended to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the amendment to the Agreement, the Participants are charged an annual commitment fee of 0.15%, with the addition of an upfront fee of 0.05%, which is allocated across the Participants based on a weighted average of the respective net assets of each Participant. 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 October 31, 2022. The Portfolios had no amounts outstanding as of December 31, 2021, or at any time during the year then ended.

 

12.   CAPITAL SHARE TRANSACTIONS (All amounts in thousands)

The Trust has authorized an unlimited number of no par value shares of beneficial interest. Transactions in shares of beneficial interest were as follows:

 

    Asset Strategy           Balanced  
    Year ended
12-31-21		     Year ended
12-31-20		           Year ended
12-31-21		     Year ended
12-31-20		  
    Shares     Value     Shares     Value           Shares     Value     Shares     Value  

Shares issued from sale of shares:

                  

Class I

     86     $ 930       2     $ 18         N/A       N/A       N/A       N/A  

Class II

     2,527       27,513       2,297       20,591         1,286     $ 11,705       1,388     $ 10,666  

Shares issued in reinvestment of distributions to shareholders:

                  

Class I

     12       124       1       14         N/A       N/A       N/A       N/A  

Class II

     8,611       87,213       2,592       25,939         2,865       25,006       3,038       21,608  

Shares redeemed:

                  

Class I

     (20 )      (229 )      (1 )      (10 )        N/A       N/A       N/A       N/A  

Class II

     (11,407 )      (123,850 )      (12,999 )      (121,030 )        (14,724 )      (136,600 )      (6,423 )      (49,568 ) 
 

 

 

      

 

 

  

Net decrease

     (191 )    $ (8,299 )      (8,108 )    $ (74,478 )        (10,573 )    $ (99,889 )      (1,997 )    $ (17,294 ) 
 

 

 

      

 

 

  
    Energy           Growth  
    Year ended
12-31-21		     Year ended
12-31-20		           Year ended
12-31-21		     Year ended
12-31-20		  
    Shares     Value     Shares     Value           Shares     Value     Shares     Value  

Shares issued from sale of shares:

                  

Class I

     40     $ 127       42     $ 90         N/A       N/A       N/A       N/A  

Class II

     16,000       50,732       17,805       36,300         8,072     $ 103,904       6,048     $ 65,529  

Shares issued in reinvestment of distributions to shareholders:

                  

Class I

     1       3       2       4         N/A       N/A       N/A       N/A  

Class II

     302       1,017       297       710         8,105       98,262       11,225       112,472  

Shares redeemed:

                  

Class I

     (74 )      (235 )      (10 )      (21 )        N/A       N/A       N/A       N/A  

Class II

     (12,467 )      (39,208 )      (11,000 )      (24,197 )        (17,870 )      (246,710 )      (16,529 )      (183,294 ) 
 

 

 

      

 

 

  

Net increase (decrease)

     3,802     $ 12,436       7,136     $ 12,886         (1,693 )    $ (44,544 )      744     $ (5,293 ) 
 

 

 

      

 

 

  

 

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    High Income           International Core Equity  
    Year ended
12-31-21		     Year ended
12-31-20		           Year ended
12-31-21		     Year ended
12-31-20		  
    Shares     Value     Shares     Value           Shares     Value     Shares     Value  

Shares issued from sale of shares:

                  

Class I

     871     $ 2,988       1,120     $ 3,427         N/A       N/A       N/A       N/A  

Class II

     33,528       115,231       34,522       108,828         1,662     $ 30,337       5,497     $ 68,946  

Shares issued in reinvestment of distributions to shareholders:

                  

Class I

     376       1,264       501       1,439         N/A       N/A       N/A       N/A  

Class II

     15,740       52,760       19,910       57,105         381       6,911       1,149       14,682  

Shares redeemed:

                  

Class I

     (1,638 )      (5,598 )      (3,508 )      (11,691 )        N/A       N/A       N/A       N/A  

Class II

     (39,247 )      (133,628 )      (48,887 )      (154,485 )        (8,182 )      (147,978 )      (11,578 )      (159,777 ) 
 

 

 

      

 

 

  

Net increase (decrease)

     9,630     $ 33,017       3,658     $ 4,623         (6,139 )    $ (110,730 )      (4,932 )    $ (76,149 ) 
 

 

 

      

 

 

  
    Mid Cap Growth           Natural Resources  
    Year ended
12-31-21		     Year ended
12-31-20		           Year ended
12-31-21		     Year ended
12-31-20		  
    Shares     Value     Shares     Value           Shares     Value     Shares     Value  

Shares issued from sale of shares:

                  

Class I

     1,459     $ 25,638       2,196     $ 24,761         N/A       N/A       N/A       N/A  

Class II

     5,831       102,814       5,890       83,518         5,419     $ 20,233       4,623     $ 13,178  

Shares issued in reinvestment of distributions to shareholders:

                  

Class I

     1,803       28,372       1,323       16,218         N/A       N/A       N/A       N/A  

Class II

     3,474       54,305       1,888       23,025         358       1,378       586       1,678  

Shares redeemed:

                  

Class I

     (5,429 )      (98,591 )      (7,828 )      (102,324 )        N/A       N/A       N/A       N/A  

Class II

     (5,617 )      (99,353 )      (7,174 )      (95,976 )        (6,371 )      (24,227 )      (5,335 )      (16,123 ) 
 

 

 

      

 

 

  

Net increase (decrease)

     1,521     $ 13,185       (3,705 )    $ (50,778 )        (594 )    $ (2,616 )      (126 )    $ (1,267 ) 
 

 

 

      

 

 

  
    Science and Technology           Small Cap Growth  
    Year ended
12-31-21		     Year ended
12-31-20		           Year ended
12-31-21		     Year ended
12-31-20		  
    Shares     Value     Shares     Value           Shares     Value     Shares     Value  

Shares issued from sale of shares:

                  

Class I

     48     $ 1,858       44     $ 1,383         478     $ 5,806       1,175     $ 8,471  

Class II

     1,478       56,146       2,488       74,399         2,086       24,885       1,993       17,717  

Shares issued in reinvestment of distributions to shareholders:

                  

Class I

     21       630       6       191         642       6,960       —       —  

Class II

     6,875       201,468       2,181       71,179         4,789       51,659       —       —  

Shares redeemed:

                  

Class I

     (56 )      (2,165 )      (24 )      (802 )        (1,690 )      (20,491 )      (2,900 )      (26,285 ) 

Class II

     (3,239 )      (123,850 )      (5,252 )      (161,803 )        (4,737 )      (57,061 )      (6,144 )      (56,338 ) 
 

 

 

      

 

 

  

Net increase (decrease)

     5,127     $ 134,087       (557 )    $ (15,453 )        1,568     $ 11,758       (5,876 )    $ (56,435 ) 
 

 

 

      

 

 

  

 

     
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    Smid Cap Core              
    Year ended
12-31-21		     Year ended
12-31-20		                     
    Shares     Value     Shares     Value                                   

Shares issued from sale of shares:

                     

Class II

     1,200     $ 18,955       1,325     $ 14,216               

Shares issued in reinvestment of distributions to shareholders:

                     

Class II

     —       —       823       8,738               

Shares redeemed:

                     

Class II

     (3,538 )      (57,223 )      (2,654 )      (30,609 )              
 

 

 

               

Net increase (decrease)

     (2,338 )    $ (38,268 )      (506 )    $ (7,655 )              
 

 

 

               

 

13.   COMMITMENTS ($ amounts in thousands)

Bridge loan commitments may obligate a Portfolio to furnish temporary financing to a borrower until permanent financing can be arranged. In connection with these commitments, the Portfolio earns a commitment fee, typically set as a percentage of the commitment amount. Such fee income is included in interest income on the Statements of Operations. At year ended December 31, 2021, High Income had outstanding bridge loan commitments of $206.

 

14.   OTHER FUND INFORMATION

At a meeting held on January 12, 2021, the Trustees, upon recommendation of the Audit Committee, selected PricewaterhouseCoopers LLP (“PwC”), contingent on PwC finalizing their independence assessment, to serve as the independent registered public accounting firm for the Trust for the fiscal year ending December 31, 2021. PwC affirmed their independence as an independent registered public accounting firm on February 18, 2021. During the fiscal year ended December 31, 2020, Deloitte & Touche LLP’s (“Deloitte”) audit report on the financial statements of each Portfolio in the Trust did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. In addition, there were no disagreements between the Trust and Deloitte on accounting principles, financial statements disclosures or audit scope, which, if not resolved to the satisfaction of Deloitte, would have caused them to make reference to the disagreement in their reports. Neither the Trust nor anyone on its behalf has consulted with PwC at any time prior to their selection with respect to the application of accounting principles to a specified transaction, either completed or proposed or the type of audit opinion that might be rendered on each Portfolio’s financial statements.

 

15.   OTHER AFFILIATED TRANSACTIONS

During the year ended December 31, 2021, affiliated parties reimbursed High Income $4,278 for losses resulting from a NAV error, a portion of which was related to the prior year. The impact of the error to prior year and the correction of the error in the current year financial statements are not material. If the prior year error was not corrected in current year financial statements, total returns would have been higher than as disclosed in the financial highlights as follows: Class I 0.54% and Class II 0.54%.

 

16.   FEDERAL INCOME TAX MATTERS ($ amounts in thousands)

For Federal income tax purposes, cost of investments owned at December 31, 2021 and the related unrealized appreciation (depreciation) were as follows:

 

Portfolio    Cost of Investments      Gross Appreciation      Gross Depreciation      Net Unrealized
Appreciation
(Depreciation)		  

Asset Strategy

    $ 668,958      $ 136,511      $ 62,633      $ 73,878  

Balanced

      246,517        28,184        3,254        24,930  

Energy

      76,485        2,551        4,891        (2,340 ) 

Growth

      563,235        467,432        6,987        460,445  

High Income

      958,234        23,118        40,430        (17,312 ) 

International Core Equity

      560,940        88,766        25,322        63,444  

Mid Cap Growth

      440,259        305,801        11,529        294,272  

Natural Resources

      98,331        5,001        6,966        (1,965 ) 

Science and Technology

      474,679        265,415        28,575        236,840  

Small Cap Growth

      336,662        125,970        20,650        105,320  

Smid Cap Core

      150,699        37,900        6,771        31,129  

 

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For Federal income tax purposes, the Portfolios’ undistributed earnings and profit for the year ended December 31, 2021 and the post-October and late-year ordinary activity updated with information available through the date of this report were as follows:

 

Portfolio    Undistributed
Ordinary
Income		      Undistributed
Long-Term
Capital Gains		      Tax Return
of Capital		      Post-
October
Capital
Losses
Deferred		      Late-Year
Ordinary
Losses
Deferred		  

Asset Strategy

    $ 3,246      $ 23,004      $ —      $ —      $ 320  

Balanced

      7,909        81,134        —        —        —  

Energy

      —        —        —        —        354  

Growth

      25,682        154,221        —        —        —  

High Income

      52,096        —        —        —        —  

International Core Equity

      52,999        —        —        —        —  

Mid Cap Growth

      369        109,852        —        —        —  

Natural Resources

      899        —        —        —        —  

Science and Technology

      566        64,081        —        —        —  

Small Cap Growth

      3,135        72,671        —        —        —  

Smid Cap Core

      22,358        12,221        —        —        —  

Internal Revenue Code regulations permit each Portfolio to elect to defer into its next fiscal year capital losses and certain specified ordinary items incurred between each November 1 and the end of its fiscal year. Each Portfolio is also permitted to defer into its next fiscal certain ordinary losses that are generated between January 1 and the end of its fiscal year.

The tax character of dividends and distributions paid during the two fiscal years ended December 31, 2021 and 2020 were as follows:

 

     December 31, 2021              December 31, 2020  
Portfolio    Distributed
Ordinary
Income(1)		      Distributed
Long-Term
Capital Gains		              Distributed
Ordinary
Income(1)		      Distributed
Long-Term
Capital Gains		  

Asset Strategy

    $ 20,616      $ 66,720         $ 15,087      $ 10,866  

Balanced

      4,024        20,982           4,491        17,117  

Energy

      1,020        —           714        —  

Growth

      14,995        83,267           13,693        98,779  

High Income

      54,024        —           58,544        —  

International Core Equity

      6,912        —           14,571        111  

Mid Cap Growth

      8,454        74,223           5,368        33,875  

Natural Resources

      1,378        —           1,678        —  

Science and Technology

      6,941        195,157           992        70,378  

Small Cap Growth

      7,138        51,481           —        —  

Smid Cap Core

      —        —           2,001        6,737  

 

(1)

Includes short-term capital gains, if any

Dividends from net investment income and short-term capital gains are treated as ordinary income dividends for federal income tax purposes.

 

     
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Accumulated capital losses represent net capital loss carryovers as of December 31, 2021 that may be available to offset future realized capital gains and thereby reduce future capital gains distributions. As of December 31, 2021, the capital loss carryovers were as follows:

 

Portfolio    Short-Term
Capital Loss
Carryover		     Long-Term
Capital Loss
Carryover		  

Asset Strategy

    $ —     $ —  

Balanced

      —       —  

Energy

      4,962 (1)      36,041 (1) 

Growth

      —       —  

High Income

      1,064       99,303  

International Core Equity

      —       —  

Mid Cap Growth

      —       —  

Natural Resources

      2,591       49,676  

Science and Technology

      —       —  

Small Cap Growth

      —       —  

Smid Cap Core

      —       —  

 

(1)

$18,654 of these Capital Loss Carryovers are subject to an annual limitations of $3,709 plus any unused limitation from prior years.

Net investment income dividends and capital gains distributions are determined in accordance with income tax regulations which may differ from U.S. GAAP. These differences are due to differing treatments for items such as deferral of wash sales, post- October losses, late-year ordinary losses, foreign currency transactions, net operating losses, income from passive foreign investment companies (PFICs), investments held within the wholly-owned subsidiary and companies and partnership transactions. At December 31, 2021, the following reclassifications were made:

 

Portfolio    Accumulated
Earnings
Gain (Loss)		     Paid -In Capital  

Asset Strategy

    $ — *    $ — * 

Balanced

      — *      — * 

Energy

      — *      — * 

Growth

      —       —  

High Income

      — *      — * 

International Core Equity

      —       —  

Mid Cap Growth

      —       —  

Natural Resources

      — *      — * 

Science and Technology

      —       —  

Small Cap Growth

      —       —  

Smid Cap Core

      —       —  

* Not shown due to rounding.

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   IVY VIP

 

 

 

To the Board of Trustees of Ivy Variable Insurance Portfolios and Shareholders of Delaware Ivy VIP Asset Strategy, Delaware Ivy VIP Balanced, Delaware Ivy VIP Energy, Delaware Ivy VIP Growth, Delaware Ivy VIP High Income, Delaware Ivy VIP International Core Equity, Delaware Ivy VIP Mid Cap Growth, Delaware Ivy VIP Natural Resources, Delaware Ivy VIP Science and Technology, Delaware Ivy VIP Small Cap Growth and Delaware Ivy VIP Smid Cap Core

Opinions on the Financial Statements

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Delaware Ivy VIP Asset Strategy, Delaware Ivy VIP Balanced, Delaware Ivy VIP Energy, Delaware Ivy VIP Growth, Delaware Ivy VIP High Income, Delaware Ivy VIP International Core Equity, Delaware Ivy VIP Mid Cap Growth, Delaware Ivy VIP Natural Resources, Delaware Ivy VIP Science and Technology, Delaware Ivy VIP Small Cap Growth and Delaware Ivy VIP Smid Cap Core (formerly known as Ivy VIP Asset Strategy, Ivy VIP Balanced, Ivy VIP Energy, Ivy VIP Growth, Ivy VIP High Income, Ivy VIP International Core Equity, Ivy VIP Mid Cap Growth, Ivy VIP Natural Resources, Ivy VIP Science and Technology, Ivy VIP Small Cap Growth and Ivy VIP Small Cap Core, respectively) (eleven of the series constituting Ivy Variable Insurance Portfolios, hereafter collectively referred to as the “Portfolios”) as of December 31, 2021, and the related statements of operations and of changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2021 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Portfolios as of December 31, 2021, and the results of each of their operations, changes in each of their net assets, and each of the financial highlights for the year ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

The financial statements of the Portfolios as of and for the year ended December 31, 2020 and the financial highlights for each of the periods ended on or prior to December 31, 2020 (not presented herein, other than the statements of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 12, 2021 expressed an unqualified opinion on those financial statements and financial highlights.

Basis for Opinions

These financial statements are the responsibility of the Portfolios’ management. Our responsibility is to express an opinion on the Portfolios’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Portfolios in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian, transfer agents, portfolio company investees, agent banks and brokers; when replies were not received from agent banks and brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 17, 2022

We have served as the auditor of one or more investment companies in Delaware Funds by Macquarie® since 2010.

 

     
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INCOME TAX INFORMATION   IVY VIP

 

 

 

AMOUNTS NOT ROUNDED (UNAUDITED)

 

The Portfolios hereby designate the following amounts of dividends paid from net ordinary income as dividends qualifying for the 70% dividends received deduction and Section 163(j) interest dividends eligible to be treated as interest income for purposes of Section 163(j) for corporations for the tax period ended December 31, 2021:

 

      Dividends
Received
Deduction for
Corporations		      Section 163(j)
Interest
Dividends for
Corporations		  

Asset Strategy

    $ 1,881,059      $ 2,983,779  

Balanced

      3,024,658        156  

Energy

      1,019,619        —  

Growth

      6,309,008        —  

High Income

      —        1,261,146  

International Core Equity

      —        —  

Mid Cap Growth

      2,976,849        —  

Natural Resources

      1,188,902        —  

Science and Technology

      1,656,210        —  

Small Cap Growth

      1,481,461        —  

Smid Cap Core

      —        —  

The Portfolios hereby designate the following amounts as distributions of long-term capital gains:

 

Asset Strategy

    $ 66,720,613  

Balanced

      20,982,152  

Energy

      —  

Growth

      83,267,168  

High Income

      —  

International Core Equity

      —  

Mid Cap Growth

      74,222,580  

Natural Resources

      —  

Science and Technology

      195,157,260  

Small Cap Growth

      51,481,891  

Smid Cap Core

      —  

Internal Revenue Code regulations permit each qualifying Portfolio to elect to pass through a foreign tax credit to shareholders with respect to foreign taxes paid by the Portfolio. Each Portfolio elected to pass the following amounts of creditable foreign taxes through to their shareholders:

 

      Foreign Tax
Credit		      Foreign
Derived
Income		  

International Core Equity

    $ 913,717      $ 12,247,436  
 

 

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BOARD OF TRUSTEES/DIRECTORS AND OFFICERS ADDENDUM   IVY VIP

 

 

 

(UNAUDITED)

 

Name, Address, and
Birth Date		   Position(s) Held
with the Fund		   Length of Time
Served		   Principal Occupation(s)
During the Past Five Years		   Number of Portfolios in
Fund Complex Overseen
by Trustee or Officer		   Other Directorships Held by
Trustee or Officer
Interested Trustee

Shawn K. Lytle1
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

February 1970

   President, Chief Executive Officer, and Trustee  

President and Chief Executive Officer since August 2015

 

Trustee since September 2015

   Global Head of Macquarie Investment Management2 (January 2019-Present); Head of Americas of Macquarie Group (December 2017-Present); Deputy Global Head of Macquarie Investment Management (2017-2019); Head of Macquarie Investment Management Americas (2015-2017)   150   Trustee — UBS Relationship Funds, SMA Relationship Trust, and UBS Funds (May 2010- April 2015)
Independent Trustees

Jerome D. Abernathy3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

July 1959

   Trustee   Since January 2019   Managing Member, Stonebrook Capital Management, LLC (financial technology: macro factors and databases) (January 1993-Present)   150   None

Thomas L. Bennett3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

October 1947

   Chair and Trustee  

Trustee since March 2005

Chair since March 2015

   Private Investor (March 2004-Present)   150   None

Ann D. Borowiec3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

November 1958

   Trustee   Since March 2015   Chief Executive Officer, Private Wealth Management (2011-2013) and Market Manager, New Jersey Private Bank (2005-2011) — J.P. Morgan Chase & Co.   150  

Director — Banco Santander International (October 2016-December 2019)

 

Director — Santander Bank, N.A. (December 2016- December 2019)

Joseph W. Chow3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

January 1953

   Trustee   Since January 2013   Private Investor (April 2011-Present)   150   Director and Audit Committee Member — Hercules Technology Growth Capital, Inc. (July 2004-July 2014)

H. Jeffrey Dobbs
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

May 1955

   Trustee   Since April 2019   Global Sector Chairman, Industrial Manufacturing, KPMG LLP (2010-2015)   150  

Director, Valparaiso University (2012-Present)

 

Director, TechAccel LLC (2015-Present) (Tech R&D)

 

Board Member, Kansas City Repertory Theatre (2015-Present)

 

Board Member, PatientsVoices, Inc. (healthcare) (2018-Present)

 

Kansas City Campus for Animal Care (2018-Present)

 

Director, National Association of Manufacturers (2010-2015)

 

Director, The Children’s Center (2003-2015)

 

Director, Metropolitan Affairs Coalition (2003-2015)

 

Director, Michigan Roundtable for Diversity and Inclusion (2003-2015)

 

Trustee, Ivy Funds Complex (2019-2021)

 

     
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Name, Address, and
Birth Date		   Position(s) Held
with the Fund		   Length of Time
Served		   Principal Occupation(s)
During the Past Five Years		   Number of Portfolios in
Fund Complex Overseen
by Trustee or Officer		   Other Directorships Held by
Trustee or Officer

John A. Fry3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

May 1960

   Trustee   Since January 2001  

President — Drexel University (August 2010-Present)

 

President — Franklin & Marshall College (July 2002-June 2010)

   150  

Director; Compensation Committee and Governance Committee Member — Community Health Systems (May 2004-Present)

 

Director — Drexel Morgan & Co. (2015- 2019)

 

Director and Audit Committee Member — vTv Therapeutics Inc. (2017-Present)

 

Director and Audit Committee Member — FS Credit Real Estate Income Trust, Inc. (2018-Present)

 

Director — Federal Reserve Bank of Philadelphia (January 2020-Present)

Joseph Harroz, Jr.
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

January 1967

   Trustee   Since November 1998   President (2020-Present), Interim President (2019-2020), Vice President (2010-2019) and Dean (2010-2019), College of Law, University of Oklahoma; Managing Member, Harroz Investments, LLC, (commercial enterprises) (1998-2019); Managing Member, St. Clair, LLC (commercial enterprises) (2019-Present)   150  

Director, OU Medicine, Inc. (2020-present); Director and Shareholder, Valliance Bank (2007-Present)

 

Director, Foundation Healthcare (formerly Graymark HealthCare) (2008-2017)

 

Trustee, the Mewbourne Family Support Organization (2006-Present) (non-profit)

 

Independent Director, LSQ Manager, Inc. (real estate) (2007-2016)

 

Director, Oklahoma Foundation for Excellence (non-profit) (2008-Present)

 

Trustee, Ivy Funds Complex (1998-2021)

 

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Name, Address, and
Birth Date		   Position(s) Held
with the Fund		   Length of Time
Served		   Principal Occupation(s)
During the Past Five Years		   Number of Portfolios in
Fund Complex Overseen
by Trustee or Officer		   Other Directorships Held by
Trustee or Officer

Sandra A.J. Lawrence
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

September 1957

   Trustee   Since April 2019   Chief Administrative Officer, Children’s Mercy Hospitals and Clinics (2016-2019); CFO, Children’s Mercy Hospitals and Clinics (2005-2016)   150  

Director, Hall Family Foundation (1993-Present)

 

Director, Westar Energy (utility) (2004-2018)

 

Trustee, Nelson-Atkins Museum of Art (non-profit) (2021-Present) (2007-2020)

 

Director, Turn the Page KC (non-profit) (2012-2016)

 

Director, Kansas Metropolitan Business and Healthcare Coalition (non-profit) (2017-2019)

 

Director, National Association of Corporate Directors (non-profit) National Board (2022-Present); Regional Board (2017-2021)

 

Director, American Shared Hospital Services (medical device) (2017-2021)

 

Director, Evergy, Inc., Kansas City Power & Light Company, KCP&L Greater Missouri Operations Company, Westar Energy, Inc. and Kansas Gas and Electric Company (related utility companies) (2018-Present)

 

Director, Stowers (research) (2018)

 

Co-Chair, Women Corporate Directors (director education) (2018-2020)

 

Trustee, Ivy Funds Complex (2019-2021)

 

Director, Brixmor Property Group Inc. (2021-Present)

 

Director, Sera Prognostics Inc. (biotechnology) (2021-Present)

 

Director, Recology (resource recovery) (2021-Present)

Frances A. Sevilla-Sacasa3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

January 1956

   Trustee   Since September 2011  

Private Investor (January 2017-Present)

 

Chief Executive Officer — Banco Itaú International (April 2012-December 2016)

 

Executive Advisor to Dean (August 2011-March 2012) and Interim Dean (January 2011-July 2011) — University of Miami School of Business Administration

 

President — U.S. Trust, Bank of America Private Wealth Management (Private Banking) (July 2007-December 2008)

   150  

Trust Manager and Audit Committee Chair — Camden Property Trust (August 2011-Present)

 

Director; Audit & Compensation Committee Member — Callon Petroleum Company (December 2019-Present)

 

Director; Audit Committee Member — New Senior Investment Group Inc. (January 2021-September 2021)

 

Director; Audit Committee Member — Carrizo Oil & Gas, Inc. (March 2018- December 2019)

 

     
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Name, Address, and
Birth Date		   Position(s) Held
with the Fund		   Length of Time
Served		   Principal Occupation(s) During
the Past Five Years		   Number of Portfolios in
Fund Complex Overseen by
Trustee or Officer		   Other Directorships Held by
Trustee or Officer

Thomas K. Whitford3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

March 1956

   Trustee   Since January 2013   Vice Chairman (2010-April 2013) — PNC Financial Services Group   150  

Director — HSBC North America Holdings Inc. (December 2013-Present)

 

Director — HSBC USA Inc. (July 2014-Present)

 

Director — HSBC Bank USA, National Association (July 2014-March 2017)

 

Director — HSBC Finance Corporation (December 2013-April 2018)

Christianna Wood3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

August 1959

   Trustee   Since January 2019   Chief Executive Officer and President — Gore Creek Capital, Ltd. (August 2009-Present)   150  

Director; Finance Committee and Audit Committee Member — H&R Block Corporation (July 2008-Present)

 

Director; Investments Committee, Capital and Finance Committee and Audit Committee Member — Grange Insurance (2013-Present)

 

Trustee; Chair of Nominating and Governance Committee and Member of Audit Committee — The Merger Fund (2013-October 2021), The Merger Fund VL (2013-October 2021), WCM Alternatives: Event-Driven Fund (2013-October 2021), and WCM Alternatives: Credit Event Fund (December 2017-October 2021)

 

Director; Chair of Governance Committee and Audit Committee Member — International Securities Exchange (2010-2016)

Janet L. Yeomans3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

July 1948

   Trustee   Since April 1999   Vice President and Treasurer (January 2006-July 2012) Vice President — Mergers & Acquisitions (January 2003-January 2006), and Vice President and Treasurer (July 1995-January 2003) — 3M Company   150   Director; Personnel and Compensation Committee Chair; Member of Nominating, Investments, and Audit Committees for various periods throughout directorship — Okabena Company (2009-2017)

 

Officers   Position(s) Held
with the Trust		   Length of Time Served   Principal Occupation(s)
During the Past Five Years

David F. Connor4
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

December 1963

   Senior Vice President, General Counsel, and Secretary   Senior Vice President, General Counsel, and Secretary since April 2021   David F. Connor has served in various capacities at different times at Macquarie Investment Management.

Daniel V. Geatens4
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

October 1972

   Senior Vice President and Treasurer   Senior Vice President and Treasurer since April 2021   Daniel V. Geatens has served in various capacities at different times at Macquarie Investment Management.

 

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Officers   Position(s) Held
with the Trust		   Length of Time Served   Principal Occupation(s)
During the Past Five Years

Richard Salus
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

October 1963

   Senior Vice President and Chief Financial Officer   Senior Vice President and Chief Financial Officer since April 2021   Richard Salus has served in various capacities at different times at Macquarie Investment Management.

1 Shawn K. Lytle is considered to be an “Interested Trustee” because he is an executive officer of the Manager. Mr. Lytle was appointed as Trustee of the Trust effective April 30, 2021.

2 Macquarie Investment Management is the marketing name for certain companies comprising the asset management division of Macquarie Group, including the Funds’ Manager, principal underwriter, and transfer agent.

3 Messrs. Abernathy, Bennett, Chow, Fry, Whitford, and Mss. Borowiec, Sevilla-Sacasa, Wood, Yeomans were appointed as Trustees of the Trust effective April 30, 2021.

4 David F. Connor and Daniel V. Geatens serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment manager and principal underwriter as the Funds. Mr. Geatens also serves as the Chief Financial Officer of the Optimum Fund Trust, and he is the Chief Financial Officer and Treasurer for Macquarie Global Infrastructure Total Return Fund Inc., which has the same investment manager as the Funds.

The Statement of Additional Information for the Portfolios includes additional information about the Trustees and Officers and is available, without charge, upon request by calling 888-923-3355.

 

     
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ANNUAL PRIVACY NOTICE   IVY VIP

 

 

 

(UNAUDITED)

 

FACTS    What does Ivy Variable Insurance Portfolios do with your personal information?
Why?    Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share and protect your personal information. Please read this notice carefully to understand what we do.
What?    The types of personal information we collect and share depend on the product or service you have with us. The information can include:
    

•    Social Security Number and income,

    

•    Assets and transaction history, and

    

•    Checking account information and wire transfer instructions.

     When you are no longer our customer, we continue to share your information as described in this notice.
How?    All financial companies need to share customers’ personal information to conduct everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information, the reasons Ivy Variable Insurance Portfolios chooses to share, and whether you can limit this sharing.

 

Reasons we can share your personal information    Does Ivy Variable
Insurance Portfolios
share?		    Can you limit this
sharing?
For our everyday business purposes – such as to process your transactions, maintain your accounts, respond to court orders and legal investigations or report to credit bureaus    Yes    No
For our marketing purposes – to offer our products and services to you    Yes    No
For joint marketing with other financial companies    No    We don’t share
For our affiliates’ everyday business purposes – information about your transactions and experiences    Yes    No
For our affiliates everyday business purposes – information about your creditworthiness    No    We don’t share
For our affiliates to market to you    No    We don’t share
For non-affiliates to market to you    No    We don’t share

 

Questions?    Call 1(800) 777-6472 with questions about this notice. Client service representatives are available Monday through
Friday from 7:30 am to 5:00 pm CST. You may also go to www.ivyinvestments.com/privacy_policy.
      If we serve you through an investment professional, such as a registered representative of a broker-dealer or an
investment adviser representative (each, a “financial advisor”), please contact them directly. Specific internet
addresses, mailing addresses and telephone numbers are listed on your statements and other correspondence.

 

Who we are      
Who is providing this notice?    Ivy Variable Insurance Portfolios
What we do      
How does Ivy Variable Insurance Portfolios protect my personal information?    To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.
How does Ivy Variable Insurance Portfolios collect my personal information?    We collect your personal information, for example, when you:
    

•    Give us your contact information or other personal information,

    

•    Open an account, or

    

•    Make deposits to an account or withdrawals from an account.

     We also collect your personal information from our affiliates.

 

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What we do      
Why can’t I limit all sharing?    Federal law gives you the right to limit only:
    

•    Sharing for affiliates’ everyday business purposes – information about your creditworthiness,

    

•    Affiliates from using your information to market to you, and

    

•    Sharing for non-affiliates to market to you.

     State laws and individual companies may give you additional rights to limit sharing.
Definitions      
Affiliates    Companies related by common ownership or control. They can be financial and nonfinancial companies.
    

•    Affiliates of Ivy Funds include Waddell & Reed Services Company, Ivy Distributors, Inc., and Ivy Investment Management Company.

Non-affiliates    Companies not related by common ownership or control. They can be financial and nonfinancial companies.
    

•    Ivy Funds does not share your personal information with non-affiliates so they can market to you.

Joint marketing    A formal agreement between non-affiliated financial companies that together market financial products or services to you.
    

•    Ivy Funds does not jointly market.

Other important
information		      
     If you own shares of Ivy Variable Insurance Portfolios in the name of a third party, such as a bank or a broker-dealer, the third party’s privacy policy may apply to you in addition to ours.
     If you are working with a financial advisor, and the financial advisor leaves their firm and joins another non-affiliated broker-dealer or registered investment adviser, then the financial advisor may be permitted to use limited information to contact you. The information that the financial advisor may use is comprised of your name, address, email address, telephone number and account title.

 

     
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PROXY VOTING INFORMATION   IVY VIP

 

 

 

(UNAUDITED)

 

Proxy Voting Guidelines

A description of the policies and procedures Ivy Variable Insurance Portfolios uses to determine how to vote proxies relating to portfolio securities is available (i) without charge, upon request, by calling 1.888.923-3355 and (ii) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.

Proxy Voting Records

Information regarding how the Portfolio voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on Form N-PX at www.ivyinvestments.com and on the SEC’s website at www.sec.gov.

 

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QUARTERLY PORTFOLIO SCHEDULE INFORMATION   IVY VIP

 

 

 

(UNAUDITED)

 

Portfolio holdings can be found on the Trust’s website at www.ivyinvestments.com. Alternatively, a complete schedule of portfolio holdings of each Portfolio for the first and third quarters of each fiscal year is filed with the SEC and can be found as an exhibit to the Trust’s Form N-PORT. These holdings may be viewed in the following ways:

 

•  

On the SEC’s website at www.sec.gov.

 

•  

For review and copy at the SEC’s Public Reference Room in Washington, DC. Information on the operations of the Public Reference Room may be obtained by calling 1.800.SEC.0330.

 

     
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DELAWARE FUNDS BY MACQUARIE FAMILY       

 

 

 

Global/International Portfolios

Delaware Ivy VIP Global Equity Income

Delaware Ivy VIP Global Growth

Delaware Ivy VIP International Core Equity

Domestic Equity Portfolios

Delaware Ivy VIP Core Equity

Delaware Ivy VIP Growth

Delaware Ivy VIP Mid Cap Growth

Delaware Ivy VIP Small Cap Growth

Delaware Ivy VIP Smid Cap Core

Delaware Ivy VIP Value

Fixed Income Portfolios

Delaware Ivy VIP Corporate Bond

Delaware Ivy VIP Global Bond

Delaware Ivy VIP High Income

Delaware Ivy VIP Limited-Term Bond

Money Market Portfolio

Delaware Ivy VIP Government Money Market

Specialty Portfolios

Delaware Ivy VIP Asset Strategy

Delaware Ivy VIP Balanced

Delaware Ivy VIP Energy

Delaware Ivy VIP Natural Resources

Delaware Ivy VIP Pathfinder Aggressive

Delaware Ivy VIP Pathfinder Conservative

Delaware Ivy VIP Pathfinder Moderate

Delaware Ivy VIP Pathfinder Moderately Aggressive

Delaware Ivy VIP Pathfinder Moderately Conservative

Delaware Ivy VIP Pathfinder Moderate — Managed Volatility

Delaware Ivy VIP Pathfinder Moderately Aggressive — Managed Volatility

Delaware Ivy VIP Pathfinder Moderately Conservative — Managed Volatility

Delaware Ivy VIP Science and Technology

Delaware Ivy VIP Securian Real Estate Securities

 

 

 

The underlying portfolios discussed in this report are only available as investment options in variable annuity and variable life insurance contracts issued by life insurance companies. They are not offered or made available directly to the general public.

This report is submitted for the general information of the shareholders of Ivy Variable Insurance Portfolios. It is not authorized for distribution to prospective investors in a Portfolio unless accompanied with or preceded by the current Portfolio prospectus as well as the variable product prospectus.

 

     
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ANN-VIP1 (12/21)

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LOGO

 

VARIABLE INSURANCE PORTFOLIOS

   

 

Annual Report

 

DECEMBER 31, 2021

 

 

 

Ivy Variable Insurance Portfolios*   
Delaware Ivy VIP Core Equity (formerly, Ivy VIP Core Equity)      Class II  
Delaware Ivy VIP Corporate Bond (formerly, Ivy VIP Corporate Bond)      Class II  
Delaware Ivy VIP Global Bond (formerly, Ivy VIP Global Bond)      Class II  

Delaware Ivy VIP Global Equity Income (formerly, Ivy VIP Global Equity Income)

      Class II  
Delaware Ivy VIP Global Growth (formerly, Ivy VIP Global Growth)      Class II  
Delaware Ivy VIP Limited-Term Bond (formerly, Ivy VIP Limited-Term Bond)      Class II  
Delaware Ivy VIP Securian Real Estate Securities (formerly, Ivy VIP Securian Real Estate Securities)      Class II  
Delaware Ivy VIP Value (formerly, Ivy VIP Value)      Class II  

 

*

Effective July 1, 2021, the name of each portfolio has been updated from Ivy VIP to Delaware Ivy VIP as indicated.

 

 

IVY INVESTMENTS® refers to the investment management and investment advisory services offered by Macquarie Investment Management Business Trust (MIMBT) through its various series.

On December 2, 2020, Waddell & Reed Financial, Inc. (“WDR”), the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios (the “VIP Portfolios”), and Macquarie Management Holdings, Inc., the U.S. holding company for Macquarie Group Limited’s U.S. asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of WDR (the “Transaction”).

The Transaction closed on April 30, 2021. The VIP Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company, a series of Macquarie Investment Management Business Trust, and distributed by Delaware Distributors, L.P.

Table of Contents
CONTENTS   IVY VIP

 

 

 

Illustration of Portfolio Expenses

      4  

Management Discussion, Portfolio Highlights and Schedule of Investments:

         

Delaware Ivy VIP Core Equity (formerly, Ivy VIP Core Equity)

      6  

Delaware Ivy VIP Corporate Bond (formerly, Ivy VIP Corporate Bond)

      13  

Delaware Ivy VIP Global Bond (formerly, Ivy VIP Global Bond)

      24  

Delaware Ivy VIP Global Equity Income (formerly, Ivy VIP Global Equity Income)

      33  

Delaware Ivy VIP Global Growth (formerly, Ivy VIP Global Growth)

      41  

Delaware Ivy VIP Limited-Term Bond (formerly, Ivy VIP Limited-Term Bond)

      48  

Delaware Ivy VIP Securian Real Estate Securities (formerly, Ivy VIP Securian Real Estate Securities)

      58  

Delaware Ivy VIP Value (formerly, Ivy VIP Value)

      64  

Statements of Assets and Liabilities

     70  

Statements of Operations

      71  

Statements of Changes in Net Assets

      72  

Financial Highlights

      74  

Notes to Financial Statements

      76  

Report of Independent Registered Public Accounting Firm

      90  

Income Tax Information

      91  

Board of Trustees / Directors and Officers Addendum

      92  

Annual Privacy Notice

      96  

Proxy Voting Information

      98  

Quarterly Portfolio Schedule Information

     99  

Macquarie Investment Management (MIM) is a global asset manager with offices in the United States, Europe, Asia, and Australia. As active managers, we prioritize autonomy and accountability at the investment team level in pursuit of opportunities that matter for clients. Delaware Funds is one of the longest-standing mutual fund families, with more than 80 years in existence.

If you are interested in learning more about creating an investment plan, contact your financial advisor.

You can learn more about Delaware Funds or obtain a prospectus at www.ivyinvestments.com/reports/ivip.

To view your shareholder statement online, go to www.ivyinvestments.com, log in to your account, and select “Statements,” or to view a mutual fund fee and expense calculator, visit https://tools.finra.org/fund_analyzer/.

Macquarie Asset Management (MAM) offers a diverse range of products including securities investment management, infrastructure and real asset management, and fund and equity-based structured products. MIM is the marketing name for certain companies comprising the asset management division of Macquarie Group. This includes the following investment advisers: Macquarie Investment Management Business Trust (MIMBT), Macquarie Funds Management Hong Kong Limited, Macquarie Investment Management Austria Kapitalanlage AG, Macquarie Investment Management Global Limited, Macquarie Investment Management Europe Limited, and Macquarie Investment Management Europe S.A.

The Portfolios are distributed by Delaware Distributors, L.P. (DDLP), an affiliate of MIMBT and Macquarie Group Limited.

None of the entities noted in this document is an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia) and the obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (Macquarie Bank). Macquarie Bank does not guarantee or otherwise provide assurance in respect of the obligations of these entities. In addition, if this document relates to an investment (a) each investor is subject to investment risk including possible delays in repayment and loss of income and principal invested and (b) none of Macquarie Bank or any other Macquarie Group company guarantees any particular rate of return on or the performance of the investment, nor do they guarantee repayment of capital in respect of the investment.

The Portfolios are governed by US laws and regulations. Unless otherwise noted, views expressed herein are current as of December 31, 2021, and subject to change for events occurring after such date. The Portfolios are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested.

 

2   ANNUAL REPORT   2021  
     

Table of Contents
CONTENTS   IVY VIP

 

 

 

Advisory services provided by Delaware Management Company, a series of MIMBT, a US registered investment advisor. All third-party marks cited are the property of their respective owners.

© 2022 Macquarie Management Holdings, Inc.

 

     
    2021       ANNUAL REPORT       3  

Table of Contents
ILLUSTRATION OF PORTFOLIO EXPENSES   IVY VIP

 

 

 

(UNAUDITED)

 

Expense Example

 

As a shareholder of a Portfolio, you incur ongoing costs, including management fees, distribution and service fees, and other Portfolio expenses. The following table is intended to help you understand your ongoing costs (in dollars) of investing in a Portfolio 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 six-month period ended December 31, 2021.

Actual Expenses

 

The first section in the following table provides information about actual investment values and actual expenses for each share class. You may use the information in this section, together with your initial investment in Portfolio shares, to estimate the expenses that you paid over the period. Simply divide the value of that investment by $1,000 (for example, a $7,500 initial investment divided by $1,000 = 7.5), 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 investment during this period. In addition, there are fees and expenses imposed under the variable annuity or variable life insurance contract through which shares of the Portfolio are held. Additional fees have the effect of reducing investment returns.

Hypothetical Example for Comparison Purposes

 

The second section in the following table provides information about hypothetical investment values and hypothetical expenses for each share class based on the Portfolio’s actual expense ratio and an assumed rate of return of five percent per year before expenses, which is not the Portfolio’s actual return. The hypothetical investment values and expenses may not be used to estimate the actual investment value at the end of the period or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this five percent hypothetical example with the five percent hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs as a shareholder of the Portfolio and do not reflect any fees and expenses imposed under the variable annuity or variable life insurance contract through which shares of the Portfolio are held.

Expenses paid may be impacted by expense reduction arrangements. If those arrangements had not been in place, expenses paid would have been higher. See Note 5 in Notes to Financial Statements for further information.

 

 

4   ANNUAL REPORT   2021  
     

Table of Contents
ILLUSTRATION OF PORTFOLIO EXPENSES   IVY VIP

 

 

 

(UNAUDITED)

 

    Actual(1)     Hypothetical(2)        
Portfolio   Beginning
Account
Value
6-30-21		     Ending
Account
Value
12-31-21		     Expenses
Paid During
Period*		     Beginning
Account
Value
6-30-21		     Ending
Account
Value
12-31-21		     Expenses
Paid During
Period*		     Annualized
Expense Ratio
Based on the
Six-Month
Period		  

Core Equity(a)

                                                        

Class II

   $ 1,000     $ 1,123.60     $ 5.10     $ 1,000     $ 1,020.42     $ 4.85       0.95%  

Corporate Bond(b)

                                                        

Class II

   $ 1,000     $ 1,000.00     $ 3.80     $ 1,000     $ 1,021.38     $ 3.84       0.76%  

Global Bond(c)

                                                        

Class II

   $ 1,000     $ 993.40     $ 1.89     $ 1,000     $ 1,023.31     $ 1.92       0.38%  

Global Equity Income(d)

                                                        

Class II

   $ 1,000     $ 1,057.30     $ 5.25     $ 1,000     $ 1,020.10     $ 5.15       1.01%  

Global Growth(e)

                                                        

Class II

   $ 1,000     $ 1,054.10     $ 5.85     $ 1,000     $ 1,019.51     $ 5.76       1.13%  

Limited-Term Bond(f)

                                                        

Class II

   $ 1,000     $ 993.80     $ 3.99     $ 1,000     $ 1,021.22     $ 4.04       0.79%  

Securian Real Estate Securities(g)

                                                        

Class II

   $ 1,000     $ 1,170.40     $ 6.40     $ 1,000     $ 1,019.33     $ 5.96       1.16%  

Value(h)

 

Class II

   $ 1,000     $ 1,091.70     $ 5.23     $ 1,000     $ 1,020.21     $ 5.05       0.99%  

 

*

Portfolio expenses are equal to the Portfolio’s annualized expense ratio (provided in the table), multiplied by the average account value over the period, multiplied by 184 days in the six-month period ended December 31, 2021, and divided by 365.

 

(1)

This section uses the Portfolio’s actual total return and actual Portfolio expenses. It is a guide to the actual expenses paid by the Portfolio in the period. The “Ending Account Value” shown is computed using the Portfolio’s actual return and the “Expenses Paid During Period” column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Portfolio. A shareholder may use the information here, together with the dollar amount invested, to estimate the expenses that were paid over the period. For every thousand dollars a shareholder has invested, the expenses are listed in the last column of this section.

 

(2)

This section uses a hypothetical five percent annual return and actual Portfolio expenses. It helps to compare the Portfolio’s ongoing costs with other mutual funds. A shareholder can compare the Portfolio’s ongoing costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other Portfolios.

 

(a)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Core Equity to Delaware Ivy VIP Core Equity.

 

(b)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Corporate Bond to Delaware Ivy VIP Corporate Bond.

 

(c)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Global Bond to Delaware Ivy VIP Global Bond.

 

(d)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Global Equity Income to Delaware Ivy VIP Global Equity Income.

 

(e)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Global Growth to Delaware Ivy VIP Global Growth.

 

(f)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Limited-Term Bond to Delaware Ivy VIP Limited-Term Bond.

 

(g)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Securian Real Estate Securities to Delaware Ivy VIP Securian Real Estate Securities.

 

(h)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Value to Delaware Ivy VIP Value.

The above illustrations are based on ongoing costs only.

 

     
    2021       ANNUAL REPORT       5  

Table of Contents
MANAGEMENT DISCUSSION   DELAWARE IVY VIP CORE EQUITY

 

 

 

(UNAUDITED)

 

Erik R. Becker, CFA, portfolio manager of Delaware Ivy VIP Core Equity, discusses positioning, performance and results for the fiscal year ended December 31, 2021. Mr. Becker has managed the Portfolio since 2006 and has 23 years of industry experience.

Fiscal Year Performance

 

 

For the 12 Months Ended December 31, 2021

         

Delaware Ivy VIP Core Equity (Class II shares at net asset value)

      28.94%  

Benchmark

         

S&P 500 Index

      28.71%  

(generally reflects the performance of large- and medium-sized U.S. stocks)

         

Please note that Portfolio returns include applicable fees and expenses while index returns do not include any such fees. Also, the Portfolio’s performance data does not take into account any product expenses or charges associated with owning a variable life or annuity policy, which is invested in Ivy Variable Insurance Portfolios.

Market review

 

For the year ended December 31, 2021, the S&P 500 index, the Portfolio’s benchmark increased 28.71%. All market sectors participated in the rally with the strongest gains accruing to energy shares, which increased by more than 50%. Global demand for energy continued to improve post the brief recession in 2020 while OPEC continued to limit supply increases to drive energy prices higher. Real estate, financials, and information technology shares put up strong performance with each sector besting the overall market’s return. Underperforming sectors for the reporting year included the defensive sectors of utilities and consumer staples.

Contributors and detractors

 

The Portfolio had a strong return for the reporting period, slightly outperforming its benchmark. Sector allocation, or the decision to overweight or underweight a particular sector, slightly detracted from performance. An overweight position to the financials sector, which performed better than the market, outweighed underweight positions in the energy and real estate sectors where performance bested the market. This was more than compensated for through individual stock selection where strong performance among our financials and healthcare holdings outweighed weaker security selection within information technology.

From an individual stock standpoint, the best performers in terms of contribution to the Portfolio’s return were alternative investment managers Blackstone Inc. and KKR & Co. Alternative investment managers perform essentially the same function as public market investors, though they typically invest in private markets by purchasing private equity, credit, infrastructure, and real estate assets. Fundraising dramatically accelerated in 2021 for both companies as pensions, endowments, sovereign wealth funds, and individuals search for ways to generate income in a low interest rate environment. Alphabet, Inc. (parent company of Google), HCA Healthcare (a COVID-19 beneficiary), and AutoZone, Inc. were among the reporting year’s biggest beneficiaries.

Our greatest missteps for the measurement period included owning Fiserv, Inc., a payments processing company and provider of data processing systems for banks. Competition intensified in Fiserv’s major markets with a number of competitors going public in 2021. We believe Fiserv has unique assets, particularly its ownership of Clover, which helps small businesses automate and accept payments. Zimmer Biomet Holdings also detracted from performance as the provider of hip, knee, and spine replacements suffered from lower market demand as COVID-19 crowded out discretionary procedures in hospitals. Take Two Interactive, Mastercard, and Charter Communications rounded out the reporting year’s weakest performers.

Outlook

 

2021 was a highly unusual year. We learned that predicting the path of a global pandemic is anything but certain. In previous commentary we wrote about our hopes that we had seen the worst in terms of infection rates and about expectations that progress on vaccinating billions of people globally would finally bring an end to this terrible virus. In November, after absorbing the coronavirus’ Delta variant, we learned that a new variant, Omicron, was far more infectious. We are currently well into the fourth wave of COVID-19, though fortunately this variant of the virus appears to be far less lethal than previous ones.

 

6   ANNUAL REPORT   2021  
     

Table of Contents
           

 

 

 

 

Despite the stop-and-go in terms of business activity as societies find ways to cope with growing infection levels, S&P 500 earnings were a bright spot. Returns are likely to have increased by more than 50% in 2021 over 2020. We believe the remarkable profitability of domestic companies (aided by extraordinary US government stimulus efforts) drove the majority of the appreciation in the equity market. Over the long term, we expect equity markets to broadly track earnings performance.

The close of 2021 brought positive news on the job market with unemployment falling to 3.9%, nearly retracing to the pre-pandemic level of 3.5%. Many Americans have opted not to rejoin the labor force. This, in turn, has led to accelerated wages. Combined with significant savings built up during the pandemic, we believe consumers are holding on to $2 trillion more in savings than the pre-pandemic trendline. It appears the massive consumer spending shift to goods versus the 50-year trend toward an increasing spend on services, combined with supply disruptions, has led to an inflationary impulse not seen since the early 1980s. In recognition of this impulse, Federal Reserve (Fed) Chair Jerome Powell pivoted to a less accommodative or “more hawkish” stance at his press conference in late November. We think it is reasonable to believe monetary policy will be less of a tailwind for financial markets for the remainder of this economic cycle.

Because of the cross-currents of an unknowable path of COVID-19, supply disruptions, staffing difficulties, and persistent wage inflation, forecasting future earnings for the companies we follow has become more difficult. At month 18 of the economic recovery, forecasted earnings growth is expected to moderate from the torrid pace in 2021. Forecasters are currently anticipating much more modest growth in S&P 500 Index earnings in 2022 at around 10%. Coupled with a more active Fed, repeating the exceptional market performance of 2021 will be a tall task.

We continue to be more focused on seeking individual companies that we believe possess the unique ability to outgrow long-run expectations at attractive valuation levels. We are particularly interested in finding ways to capitalize on a multi-year recovery in service spending. Living with COVID-19 for the past 18 months, consumers globally have focused their spending on goods rather than services, reversing long-standing trends toward travel and dining away from home. Though the most recent wave of the Omicron variant has delayed this theme, our holdings of companies such as American Express, Mastercard, Airbus, and Sysco Corp. (distributor of food products to restaurants and institutions) have benefitted. Consumers appear in good shape, with powerful wage gains and aggregate savings in excess of $2 trillion. With a strong consumer backdrop, we also believe we are poised to see an inflection in new car purchases that have been delayed as the result of semiconductor supply availability. While used car prices are up more than 40% from levels just a year ago, automakers have been unable to fulfill consumer demand for new vehicles. Auto original equipment manufacturers, auto suppliers, and even US railroads have been impacted by the inability to produce cars. We anticipate a full recovery in auto inventory levels will take about two years, providing a growth impulse for suppliers like Aptiv plc and TE Connectivity, and Union Pacific. Both TE Connectivity and Union Pacific are owned in the Portfolio.

On the flip side, we are cognizant of companies that appear to be overearning based on current business conditions. We have reduced the position sizes in AutoZone, which benefitted from US government stimulus issued to consumers and rising prices new/used and HCA Holdings, Inc., which benefitted from a large influx of high acuity and highly profitable COVID-19 patients. Business trends in 2022 seem unlikely to be as favorable for either company. We believe higher short-term interest rates with more interest rate volatility is the base case, a positive backdrop for many of our holdings within the financials sector, our largest benchmark sector overweight position. As always, we will do our best to navigate an ever-changing landscape and look forward to updating you in the future.

Effective July 1, 2021, the Portfolio name changed from Ivy VIP Core Equity.

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

Past performance is not a guarantee of future results. The value of the Portfolio’s shares will change, and you could lose money on your investment.

Because the Portfolio is generally invested in a small number of stocks, the performance of any one security held by the Portfolio will have a greater impact than if the Portfolio were invested in a larger number of securities. Although larger companies tend to be less volatile than companies with smaller market capitalizations, returns on investments in securities of large capitalization companies could trail the returns on investments in securities of smaller companies. These and other risks are more fully described in the Portfolio’s prospectus.

 

     
    2021       ANNUAL REPORT       7  

Table of Contents
           

 

 

 

 

The opinions expressed in this report are those of the portfolio manager and are current only through the end of the period of the report as stated on the cover. The portfolio manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of Delaware Ivy VIP Core Equity.

 

8   ANNUAL REPORT   2021  
     

Table of Contents
PORTFOLIO HIGHLIGHTS   DELAWARE IVY VIP CORE EQUITY(a)

 

 

 

ALL DATA IS AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Asset Allocation

 

 

Stocks

     99.2%  

Information Technology

     27.5%  

Financials

     20.5%  

Health Care

     13.3%  

Consumer Discretionary

     10.5%  

Industrials

     9.1%  

Communication Services

     7.0%  

Consumer Staples

     5.4%  

Materials

     3.5%  

Utilities

     2.4%  

Liabilities (Net of Cash and Other Assets), and Cash Equivalents+

     0.8%  
 

 

Top 10 Equity Holdings

 

Company    Sector      Industry

Microsoft Corp.

   

Information Technology

     

Systems Software

Apple, Inc.

   

Information Technology

     

Technology Hardware, Storage & Peripherals

Alphabet, Inc., Class A

   

Communication Services

     

Interactive Media & Services

UnitedHealth Group, Inc.

   

Health Care

     

Managed Health Care

Amazon.com, Inc.

   

Consumer Discretionary

     

Internet & Direct Marketing Retail

Costco Wholesale Corp.

   

Consumer Staples

     

Hypermarkets & Super Centers

MasterCard, Inc., Class A

   

Information Technology

     

Data Processing & Outsourced Services

TE Connectivity Ltd.

   

Information Technology

     

Electronic Manufacturing Services

CME Group, Inc.

   

Financials

     

Financial Exchanges & Data

Danaher Corp.

   

Health Care

     

Life Sciences Tools & Services

See your advisor or www.ivyinvestments.com for more information on the Portfolio’s most recently published Top 10 Equity Holdings.

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

(a)Effective July 1, 2021, the name of Ivy VIP Core Equity changed to Delaware Ivy VIP Core Equity.

 

     
    2021       ANNUAL REPORT       9  

Table of Contents
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT   DELAWARE IVY VIP CORE EQUITY(a)

 

 

 

(UNAUDITED)

 

LOGO

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class II  

1-year period ended 12-31-21

      28.94%  

5-year period ended 12-31-21

      18.82%  

10-year period ended 12-31-21

      15.53%  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

 

(a)

Effective July 1, 2021, the name of Ivy VIP Core Equity changed to Delaware Ivy VIP Core Equity.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

10   ANNUAL REPORT   2021  
     

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP CORE EQUITY (in thousands)

 

 

 

DECEMBER 31, 2021

 

COMMON STOCKS   Shares     Value  

Communication Services

 

 

Cable & Satellite – 1.0%

 

Charter Communications, Inc., Class A (A)

     11     $ 7,449  
   

 

 

  
 

Interactive Home Entertainment – 1.0%

 

Take–Two Interactive Software, Inc.(A)

     43       7,699  
   

 

 

  
 

Interactive Media & Services – 4.3%

 

Alphabet, Inc., Class A(A)

     11       31,682  
   

 

 

  
 

Movies & Entertainment – 0.7%

 

Netflix, Inc.(A)

     8       4,952  
   

 

 

  
 

Total Communication Services – 7.0%

 

     51,782  

Consumer Discretionary

 

 

Auto Parts & Equipment – 2.3%

 

Aptiv plc(A)

     102       16,774  
   

 

 

  
 

Automotive Retail – 1.5%

 

AutoZone, Inc.(A)

     5       11,067  
   

 

 

  
 

Footwear – 1.7%

 

NIKE, Inc., Class B

     76       12,628  
   

 

 

  
 

Homebuilding – 1.6%

 

D.R. Horton, Inc.

     109       11,790  
   

 

 

  
 

Internet & Direct Marketing Retail – 3.4%

 

Amazon.com, Inc.(A)

     7       24,721  
   

 

 

  
 

Total Consumer Discretionary – 10.5%

 

     76,980  

Consumer Staples

 

 

Food Distributors – 2.4%

 

Sysco Corp.

     222       17,425  
   

 

 

  
 

Hypermarkets & Super Centers – 3.0%

 

Costco Wholesale Corp.

     39       21,966  
   

 

 

  
 

Total Consumer Staples – 5.4%

 

     39,391  

Financials

 

 

Asset Management & Custody Banks – 6.2%

 

Artisan Partners Asset Management, Inc.

     208       9,925  

Blackstone Group, Inc. (The), Class A

     132       17,083  

KKR & Co.

     251       18,730  
   

 

 

  
      45,738  
   

 

 

  
 

Consumer Finance – 2.0%

 

American Express Co.

     91       14,852  
   

 

 

  
 

Financial Exchanges & Data – 4.0%

 

CME Group, Inc.

     89       20,271  

Intercontinental Exchange, Inc.

     68       9,300  
   

 

 

  
      29,571  
   

 

 

  
COMMON STOCKS (Continued)   Shares     Value  

Insurance Brokers – 1.6%

 

Aon plc

     38     $ 11,281  
   

 

 

  
 

Investment Banking & Brokerage – 3.3%

 

Charles Schwab Corp. (The)

     107       9,023  

Morgan Stanley

     153       15,032  
   

 

 

  
      24,055  
   

 

 

  
 

Other Diversified Financial Services – 2.4%

 

JPMorgan Chase & Co.

     111       17,629  
   

 

 

  
 

Property & Casualty Insurance – 1.0%

 

Progressive Corp. (The)

     73       7,475  
   

 

 

  
 

Total Financials – 20.5%

 

     150,601  

Health Care

 

 

Health Care Facilities – 1.6%

 

HCA Holdings, Inc.

     45       11,586  
   

 

 

  
 

Life Sciences Tools & Services – 2.6%

 

Danaher Corp.

     59       19,561  
   

 

 

  
 

Managed Health Care – 4.1%

 

UnitedHealth Group, Inc.

     60       30,282  
   

 

 

  
 

Pharmaceuticals – 5.0%

 

Eli Lilly and Co.

     68       18,888  

Zoetis, Inc.

     72       17,598  
   

 

 

  
      36,486  
   

 

 

  
 

Total Health Care – 13.3%

 

     97,915  

Industrials

 

 

Aerospace & Defense – 2.0%

 

Airbus SE ADR

     467       14,908  
   

 

 

  
 

Agricultural & Farm Machinery – 1.4%

 

Deere & Co.

     29       10,077  
   

 

 

  
 

Railroads – 2.2%

 

Union Pacific Corp.

     63       15,994  
   

 

 

  
 

Research & Consulting Services – 1.3%

 

TransUnion

     78       9,216  
   

 

 

  
 

Trading Companies & Distributors – 2.2%

 

United Rentals, Inc.(A)

     50       16,541  
   

 

 

  
 

Total Industrials – 9.1%

 

     66,736  

Information Technology

 

 

Application Software – 0.4%

 

Autodesk, Inc.(A)

     9       2,512  
   

 

 

  
 

Data Processing & Outsourced Services – 4.7%

 

Fiserv, Inc.(A)

     127       13,157  

MasterCard, Inc., Class A

     60       21,463  
   

 

 

  
      34,620  
   

 

 

  
COMMON STOCKS (Continued)   Shares     Value  

Electronic Manufacturing Services – 2.9%

 

TE Connectivity Ltd.

     130     $ 20,963  
   

 

 

  
 

Internet Services & Infrastructure – 1.4%

 

VeriSign, Inc.(A)

     41       10,524  
   

 

 

  
 

Semiconductors – 4.4%

 

Marvell Technology Group Ltd.

     70       6,091  

Taiwan Semiconductor Manufacturing Co. Ltd. ADR

     111       13,393  

Texas Instruments, Inc.

     69       13,028  
   

 

 

  
      32,512  
   

 

 

  
 

Systems Software – 8.9%

 

Microsoft Corp.

     194       65,345  
   

 

 

  
 

Technology Hardware, Storage & Peripherals – 4.8%

 

Apple, Inc.

     199       35,294  
   

 

 

  
 

Total Information Technology – 27.5%

 

     201,770  

Materials

 

 

Industrial Gases – 1.9%

 

Linde plc

     41       14,245  
   

 

 

  
 

Specialty Chemicals – 1.6%

 

Sherwin–Williams Co. (The)

     34       11,807  
   

 

 

  
 

Total Materials – 3.5%

 

     26,052  

Utilities

 

 

Electric Utilities – 2.4%

 

NextEra Energy, Inc.

     189       17,652  
   

 

 

  
 

Total Utilities – 2.4%

 

     17,652  
 

TOTAL COMMON STOCKS – 99.2%

 

   $ 728,879  

(Cost: $466,072)

      
 
SHORT-TERM SECURITIES              

Money Market Funds(B) – 0.9%

 

State Street Institutional U.S. Government Money Market Fund – Premier Class, 0.030%

     6,552       6,552  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 0.9%

 

   $ 6,552  

(Cost: $6,552)

      
 

TOTAL INVESTMENT SECURITIES – 100.1%

 

   $ 735,431  

(Cost: $472,624)

      
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (0.1)%

 

     (371 ) 
 

NET ASSETS – 100.0%

 

   $ 735,060  
 

 

     
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SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP CORE EQUITY (in thousands)

 

 

 

DECEMBER 31, 2021

 

Notes to Schedule of Investments

 

(A)

No dividends were paid during the preceding 12 months.

 

(B)

Rate shown is the annualized 7-day yield at December 31, 2021.

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

      Level 1      Level 2      Level 3  

Assets

         

Investments in Securities

         

Common Stocks

    $ 728,879      $ —      $ —  

Short-Term Securities

      6,552        —        —  

Total

    $ 735,431      $ —      $ —  

The following acronym is used throughout this schedule:

ADR = American Depositary Receipts

 

See Accompanying Notes to Financial Statements.

 

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MANAGEMENT DISCUSSION   DELAWARE IVY VIP CORPORATE BOND

 

 

 

(UNAUDITED)

 

Significant Event: On September 13, 2021, the Board of Trustees (Board) of the Ivy Variable Insurance Portfolios approved the appointment of the portfolio manager team of Michael G. Wildstein, Wayne A. Anglace, and Kashif Ishaq of Delaware Management Company (DMC) as new portfolio managers. In connection with this change, the Board approved applicable revisions to the Portfolio’s investment strategies and benchmark. All changes took effect on November 15, 2021.

Effective November 15, 2021, the Portfolio’s new benchmark index is the Bloomberg US Corporate Investment Grade Index. The managers believe that this index is more consistent with the investment philosophy of the Portfolio and more reflective of the types of securities in which the Portfolio invests than the previous benchmark index. Both the new benchmark index and the Portfolio’s previous benchmark index are included for comparison purposes.

Below, Michael G. Wildstein, Wayne A. Anglace, and Kashif Ishaq, portfolio managers of Delaware Ivy VIP Corporate Bond, discuss positioning, performance and results for the fiscal year ended December 31, 2021.

Fiscal Year Performance

 

 

For the 12 Months Ended December 31, 2021

         

Delaware Ivy VIP Corporate Bond (Class II shares at net asset value)

      -0.85%  

Benchmark

         

Bloomberg US Corporate Investment Grade Index

      -1.04%  

(generally reflects the performance of securities representing the US corporate bond market)

         

Bloomberg US Credit Index

      -1.08%  

(generally reflects the performance of securities representing the US credit market)

         

Please note that the Portfolio returns include applicable fees and expenses, whereas the index returns do not include any such fees. Also, the Portfolio’s performance data does not take into account any product expenses or charges associated with owning a variable life or annuity policy, which is invested in Ivy Variable Insurance Portfolios.

 

Market review

 

From a capital markets perspective, interest rate volatility stole the show in 2021 as 10-year Treasury rates largely influenced total returns in credit markets. Ten-year rates lifted off in the first quarter of the year, increasing by 79 basis points to end the quarter at 1.74%, marking one of the weakest quarters in the Treasury market since the 2008 global financial crisis. We believe anticipation of more aggressive rate action by the Federal Open Market Committee (FOMC) was the likely culprit behind the dramatic bear steepening. By July, however, the 10-year Treasury rate was back to 1.17%. We suspect this noteworthy flattening was more a result of technicals in the Treasury market than a fundamental view on rates or future economic activity. US investment grade spreads largely ignored the rate volatility, however, and compressed by roughly 15 basis points. For the full calendar year, spreads of US investment grade bonds remained benign and traded in a range of about 20 basis points — aided by the global search for yield and solid corporate credit metrics.

The effects of COVID-19 on capital markets also ebbed and flowed. The combination of lower infection rates in the summer and the introduction of vaccine booster shots were offset by the new Omicron variant late in the year. Although COVID-19 has continued to cause consumer demand and economic activity to sputter, the overall direction in 2021 was positive. Airline and cruise travel began to tick up, while social and sporting events also reopened.

Many investors peered through the choppy COVID-19 environment, as the price of crude oil rose from $59 to $75 a barrel during the period. While some of this price increase was due to February’s winter storm Uri in Texas and planned production cuts by OPEC+, higher future demand was also influenced by a return to normal after COVID-19 shutdowns.

Late in the year, inflation became a concern, causing investors to react negatively. Ongoing data reflecting higher prices gave the US Federal Reserve (Fed) some concern that inflation may not be as transitory as it had projected, prompting more hawkish commentary around the pace of tapering asset purchases and rate tightening. We think these concerns, as well as new Fed governors to be elected early in the year, may add to interest rate volatility in 2022.

US bond markets continued to benefit in 2021 from the low-to-negative rates in overseas markets, particularly in Europe and Japan. The European Central Bank (ECB) adopted an ultra-easy monetary policy and ramped up its bond-buying program, leading yields to drop, and foreign investors turned to the US to purchase higher yielding fixed income assets.

 

     
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US investors also took advantage of higher US yields. Since the onset of the pandemic in March 2020, mutual fund flows into investment grade credit have grown steadily stronger, while life insurance companies and pension funds have also had robust demand for fixed income securities.

Issuance of US investment grade bonds hit the second highest annual level on record in 2021, next to 2020, as companies continued to take advantage of low borrowing costs and the abundant liquidity for refinancing as well as merger and acquisition activity. Despite the near-record supply in 2021, demand remained solid amid the global search for yield.

Performance review

 

The Portfolio posted a negative return for the fiscal year but outperformed its benchmark index. During the first quarter, the Portfolio posted a negative return but outperformed its benchmark. The Portfolio’s duration rose during the period. After having been moderately under the benchmark’s duration, it closed the quarter close to the benchmark’s duration of 8.23 years. Higher duration means higher price volatility for a given change in spreads as well as interest rates. Additionally, the Portfolio increased its allocation to BBB and BB rated securities, while decreasing its exposure to A and AA rated securities. The largest changes in sector positioning were increases in the technology and industrial sectors and decreases in the financial and consumer non-cyclical sectors.

For the second quarter, the Portfolio had a positive return and outperformed its benchmark in the quarter. The Fund’s duration rose during the period and remained close to the benchmark’s duration of 8.46 years. The Fund increased its allocation to AAA, AA, A and BB rated securities, while decreasing its exposure to BBB rated securities. The largest changes in sector positioning were increases in the information technology and utilities sectors and decreases in the financial and consumer cyclical sectors.

The Portfolio had a positive return and outperformed its benchmark in the third quarter. The Portfolio’s duration fell during the period and was modestly below the benchmark’s duration of 8.33 years. The Portfolio increased its allocation to A, BBB and BB rated securities, while decreasing its exposure to AAA and AA rated securities.

During the fourth quarter, the Portfolio outperformed the benchmark. Contributors to performance included yield curve and duration positioning (especially an underweight to long-end duration); credit picks in technology, automotive, and food/beverage industries; and an overweight to the airline sector. Detractors from performance were driven by security selection in electric, brokerage, and food/beverage industries.

Outlook

 

Looking ahead to 2022, we believe that credit spreads should remain rangebound but with increasing bouts of volatility as (1) investors adjust to the Fed’s shift toward policy normalization; (2) economic growth remains healthy but down from the near-record levels in 2021; (3) the trajectory of COVID-19 and the new variant continues to evolve; and (4) technicals and fundamentals remain supportive.

Credit fundamentals have fully recovered from the 2020 recession for most sectors, and we believe they will continue to improve with global economic recovery underway, although subject to potential headwinds, including Fed policy action, growth in China, supply constraints, cost inflation, and the Omicron variant. The record access to capital markets during the pandemic enabled companies to solidify liquidity positions. However, we believe the use of these cash balances going forward presents some risk for increased shareholder-friendly activity or leveraging events, especially among higher-rated issuers that are able and willing to move down in quality while staying within the investment grade spectrum. Inflationary pressures on credit fundamentals will vary by sector but should remain manageable, in our view, given the strong earnings margin environment and cash positions that will likely be carried forward into 2022.

Technicals within US credit continue to provide strong support to the asset class, with few alternatives for investors to earn material yield, aside from emerging market debt or assuming substantial duration risk. Supply for 2022 is expected to be slightly below 2021 totals, which have returned to more normalized levels, as expectations for higher rates likely pulled forward some supply into 2021 to lock in lower borrowing costs and companies spent some of the record cash accumulated. We believe demand for US corporate debt should remain strong in 2022 as the lack of yield globally continues, driving foreign demand. Meanwhile, domestic demand is anchored by yield buyers, such as life insurers and pension funds that benefit from rising pension funding ratios, supporting a rotation out of riskier asset classes into fixed income.

We think that 2022 will likely be a yield-carry type environment for investment grade credit, with interest rates on an upward path, driving flat to negative total returns for the asset class. However, we believe opportunities still exist within investment grade credit as well as high yield, which can be exploited with proper fundamental analysis. We continue to advocate an overweight to BBB-rated and BB-rated credits, as carry and excess yield remain important in this environment with improved fundamentals. We also anticipate a decline in shareholder-friendly behavior — such as levered M&A,

 

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increased dividends, and share buybacks — from BBB-rated issuers that have less financial flexibility to maintain investment grade ratings than A-rated issuers.

Effective July 1, 2021, the Portfolio name changed from Ivy VIP Corporate Bond.

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are not managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Portfolio’s shares will change, and you could lose money on your investment.

Investing involves risk, including the possible loss of principal.

Fixed income securities and bond funds 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. This includes prepayment risk, the risk that the principal of a bond that is held by a portfolio will be prepaid prior to maturity at the time when interest rates are lower than what the bond was paying. A portfolio may then have to reinvest that money at a lower interest rate.

IBOR risk is the risk that changes related to the use of the London interbank offered rate (LIBOR) or similar rates (such as EONIA) could have adverse impacts on financial instruments that reference these rates. The abandonment of these rates and transition to alternative rates could affect the value and liquidity of instruments that reference them and could affect investment strategy performance.

Natural or environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis, and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics, have been and can be highly disruptive to economies and markets, adversely impacting individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Portfolio’s investments. Given the increasing interdependence among global economies and markets, conditions in one country, market, or region are increasingly likely to adversely affect markets, issuers, and/or foreign exchange rates in other countries. These disruptions could prevent the Portfolio from executing advantageous investment decisions in a timely manner and could negatively impact the Portfolio’s ability to achieve its investment objective. Any such event(s) could have a significant adverse impact on the value and risk profile of the Portfolio.

The opinions expressed in this report are those of the portfolio managers and are current only through the end of the period of the report as stated on the cover. The portfolio managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of Delaware Ivy VIP Corporate Bond.

 

     
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Table of Contents
PORTFOLIO HIGHLIGHTS   DELAWARE IVY VIP CORPORATE BOND(a)

 

 

 

ALL DATA IS AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Asset Allocation

 

Bonds

     98.6%  

Corporate Debt Securities

     94.8%  

Asset-Backed Securities

     1.7%  

Municipal Bonds –Taxable

     1.1%  

Other Government Securities

     0.7%  

United States Government and Government Agency Obligations

     0.2%  

Mortgage-Backed Securities

     0.1%  

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

     1.4%  

Quality Weightings

 

Investment Grade

     93.1%  

AAA

     1.5%  

AA

     9.4%  

A

     31.5%  

BBB

     50.7%  

Non-Investment Grade

     5.5%  

BB

     5.2%  

Non-rated

     0.3%  

Cash and Other Assets (Net of Liabilities),
and Cash Equivalents+

     1.4%  

Our preference is to always use ratings obtained from Standard & Poor’s, Moody’s, and Fitch. It is each Portfolio’s general policy to classify such security at the lower rating level if only two ratings are available. If more than two ratings are available and a median exists, the median is used. If more than two ratings exist without a median, the lower of the two middle ratings is used. We do not evaluate these ratings, but simply assign them to the appropriate credit quality category as determined by the rating agency.

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

(a) Effective July 1, 2021, the name of Ivy VIP Corporate Bond changed to Delaware Ivy VIP Corporate Bond.

 

 

16   ANNUAL REPORT   2021  
     

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COMPARISON OF CHANGE IN VALUE

OF $10,000 INVESTMENT

   DELAWARE IVY VIP CORPORATE BOND(a)

 

 

 

(UNAUDITED)

 

LOGO

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class II  

1-year period ended 12-31-21

      -0.85%  

5-year period ended 12-31-21

      4.72%  

10-year period ended 12-31-21

      3.56%  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

 

(a)

Effective July 1, 2021, the name of Ivy VIP Corporate Bond changed to Delaware Ivy VIP Corporate Bond.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

(b)

Effective November 15, 2021, the Portfolio’s new benchmark is the Bloomberg U.S. Corporate Investment Grade Index. Delaware Management Company (“DMC”) believes that this index is more reflective of the types of securities that the Portfolio invests in. Both the new benchmark and the Portfolio’s previous benchmark noted above are included for comparison purposes.

 

     
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Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP CORPORATE BOND (in thousands)

 

 

 

DECEMBER 31, 2021

 

ASSET-BACKED SECURITIES   Principal     Value  

AerCap Ireland Capital Ltd. and AerCap Global Aviation Trust:

      

3.500%, 5-26-22

   $ 296     $ 299  

1.750%, 1-30-26

     2,182       2,142  

Air Canada Enhanced Equipment Trust, Series 2015-2, Class AA,

      

3.750%, 12-15-27 (A)

     735       762  

American Airlines Class AA Pass-Through Certificates, Series 2016-2,

      

3.200%, 6-15-28

     1,445       1,452  

American Airlines, Inc. Pass-Through Certificates, Series 2016-1, Class AA,

      

3.575%, 1-15-28

     762       774  

American Airlines, Inc. Pass-Through Certificates, Series 2017-1, Class AA,

      

3.650%, 2-15-29

     1,953       2,038  

Delta Air Lines, Inc. Pass-Through Certificates, Series 2020AA, Class B,

      

2.000%, 6-10-28

     1,388       1,360  

United Airlines Pass-Through Certificates, Series 2016-AA,

      

3.100%, 7-7-28

     2,327       2,394  
   

 

 

  
 

TOTAL ASSET-BACKED
SECURITIES – 1.7%

 

   $ 11,221  

(Cost: $10,970)

      
 
CORPORATE DEBT SECURITIES         

Communication Services

 

 

Alternative Carriers – 0.4%

 

Bell Canada (GTD by BCE, Inc.),

      

4.300%, 7-29-49

     2,138       2,603  
   

 

 

  
 

Cable & Satellite – 2.8%

 

Charter Communications Operating LLC and Charter Communications Operating Capital Corp.:

      

4.500%, 2-1-24

     2,306       2,454  

3.900%, 6-1-52

     1,115       1,120  

3.850%, 4-1-61

     1,350       1,277  

Comcast Corp. (GTD by Comcast Cable Communications and NBCUniversal):

      

3.900%, 3-1-38

     500       567  

2.887%, 11-1-51 (A)

     1,446       1,402  

Comcast Corp. (GTD by Comcast Cable Communications LLC and NBCUniversal Media LLC),

      

3.250%, 11-1-39

     3,875       4,096  

Cox Communications, Inc.:

      

2.950%, 10-1-50 (A)

     850       796  

3.600%, 6-15-51 (A)

     925       971  

Omnicom Group, Inc. and Omnicom Capital, Inc.,

      

3.650%, 11-1-24

     1,260       1,336  

Viacom, Inc.,

      

4.750%, 5-15-25

     4,000       4,390  
   

 

 

  
      18,409  
   

 

 

  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Integrated Telecommunication Services – 2.8%

 

AT&T, Inc.:

      

3.500%, 6-1-41

   $ 2,000     $ 2,060  

3.650%, 6-1-51

     3,900       4,048  

3.500%, 9-15-53

     1,800       1,819  

3.550%, 9-15-55

     942       947  

Sprint Corp.,

      

7.875%, 9-15-23

     2,742       3,024  

Verizon Communications, Inc.:

      

4.500%, 8-10-33

     3,575       4,209  

2.650%, 11-20-40

     1,250       1,190  

2.987%, 10-30-56

     1,492       1,416  
   

 

 

  
      18,713  
   

 

 

  
 

Interactive Media & Services – 0.3%

 

Alphabet, Inc.,

      

2.050%, 8-15-50

     2,631       2,355  
   

 

 

  
 

Movies & Entertainment – 1.2%

 

Netflix, Inc.,

      

5.875%, 2-15-25

     4,035       4,540  

Walt Disney Co. (The):

      

4.125%, 6-1-44

     1,724       2,064  

3.600%, 1-13-51

     1,175       1,332  
   

 

 

  
      7,936  
   

 

 

  
 

Wireless Telecommunication Service – 1.5%

 

Crown Castle Towers LLC,

      

3.663%, 5-15-25 (A)

     2,450       2,549  

T-Mobile USA, Inc.:

      

3.500%, 4-15-25

     5,555       5,890  

2.875%, 2-15-31

     450       445  

4.375%, 4-15-40

     575       658  

3.300%, 2-15-51

     425       416  
   

 

 

  
      9,958  
   

 

 

  
 

Total Communication Services – 9.0%

 

     59,974  

Consumer Discretionary

 

 

Apparel Retail – 0.1%

 

Nordstrom, Inc.,

      

2.300%, 4-8-24

     450       450  
   

 

 

  
 

Apparel, Accessories & Luxury Goods – 0.2%

 

PVH Corp.,

      

4.625%, 7-10-25

     1,550       1,689  
   

 

 

  
 

Automobile Manufacturers – 0.1%

 

Nissan Motor Co. Ltd.,

      

3.522%, 9-17-25 (A)

     850       892  
   

 

 

  
 

Automotive Retail – 1.0%

 

7-Eleven, Inc.:

      

1.300%, 2-10-28 (A)

     925       882  

1.800%, 2-10-31 (A)

     3,300       3,126  

AutoNation, Inc.,

      

2.400%, 8-1-31

     2,600       2,510  
   

 

 

  
      6,518  
   

 

 

  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Casinos & Gaming – 0.1%

 

Genting New York LLC and Genny Capital, Inc.,

      

3.300%, 2-15-26 (A)

   $ 850     $ 843  
   

 

 

  
 

Education Services – 0.1%

 

University of Southern California,

      

3.028%, 10-1-39

     500       532  
   

 

 

  
 

Footwear – 0.6%

 

NIKE, Inc.,

      

3.250%, 3-27-40

     3,400       3,706  
   

 

 

  
 

Home Improvement Retail – 1.0%

 

Home Depot, Inc. (The):

      

3.300%, 4-15-40

     4,500       4,888  

4.200%, 4-1-43

     1,670       2,020  
   

 

 

  
      6,908  
   

 

 

  
 

Homebuilding – 1.6%

 

D.R. Horton, Inc.:

      

2.600%, 10-15-25

     3,080       3,182  

1.300%, 10-15-26

     460       449  

Lennar Corp.,

      

4.750%, 11-15-22 (B)

     2,065       2,114  

NVR, Inc.,

      

3.000%, 5-15-30

     4,022       4,184  

Toll Brothers Finance Corp. (GTD by Toll Brothers, Inc.):

      

4.375%, 4-15-23

     470       486  

3.800%, 11-1-29

     575       619  
   

 

 

  
      11,034  
   

 

 

  
 

Internet & Direct Marketing Retail – 1.2%

 

Amazon.com, Inc.,

      

3.875%, 8-22-37

     5,677       6,684  

Expedia Group, Inc.,

      

6.250%, 5-1-25 (A)

     1,061       1,198  
   

 

 

  
      7,882  
   

 

 

  
 

Total Consumer Discretionary – 6.0%

 

     40,454  

Consumer Staples

 

 

Agricultural Products – 0.4%

 

Cargill, Inc.,

      

2.125%, 4-23-30 (A)

     2,688       2,661  
   

 

 

  
 

Brewers – 0.4%

 

Anheuser-Busch Inbev Finance, Inc. (GTD by AB INBEV/BBR/COB),

      

4.700%, 2-1-36

     1,965       2,375  
   

 

 

  
 

Drug Retail – 0.3%

 

CVS Health Corp.,

      

4.780%, 3-25-38

     1,715       2,091  
   

 

 

  
 

Food Distributors – 0.4%

 

Sysco Corp.,

      

3.750%, 10-1-25

     2,726       2,924  
   

 

 

  
 

 

18   ANNUAL REPORT   2021  
     

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP CORPORATE BOND (in thousands)

 

 

 

DECEMBER 31, 2021

 

CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Food Retail – 0.3%

 

Darling Ingredients, Inc.,

      

5.250%, 4-15-27 (A)

   $ 1,848     $ 1,909  
   

 

 

  
 

Household Products – 0.8%

 

Clorox Co. (The),

      

3.900%, 5-15-28

     4,676       5,249  
   

 

 

  
 

Hypermarkets & Super Centers – 0.2%

 

Walmart, Inc.,

      

2.650%, 9-22-51

     1,410       1,446  
   

 

 

  
 

Packaged Foods & Meats – 2.9%

 

Conagra Brands, Inc.,

      

0.500%, 8-11-23

     700       694  

Hormel Foods Corp.,

      

3.050%, 6-3-51

     2,431       2,589  

Kraft Heinz Foods Co.,

      

3.000%, 6-1-26

     211       221  

McCormick & Co., Inc.:

      

3.500%, 9-1-23

     771       798  

0.900%, 2-15-26

     3,572       3,455  

Nestle Holdings, Inc.:

      

3.900%, 9-24-38 (A)

     2,480       2,888  

4.000%, 9-24-48 (A)

     4,020       4,952  

Tyson Foods, Inc. (GTD by Tyson Fresh Meats, Inc.),

      

3.950%, 8-15-24

     3,750       3,989  
   

 

 

  
      19,586  
   

 

 

  
 

Personal Products – 0.4%

 

Estee Lauder Co., Inc. (The),

      

1.950%, 3-15-31

     2,800       2,761  
   

 

 

  
 

Soft Drinks – 1.5%

 

Coca-Cola Co. (The):

      

2.250%, 1-5-32

     1,215       1,236  

3.000%, 3-5-51

     1,130       1,199  

Coca-Cola European Partners plc,

      

0.800%, 5-3-24 (A)

     2,270       2,234  

Keurig Dr Pepper, Inc.,

      

0.750%, 3-15-24

     1,115       1,108  

PepsiCo, Inc.:

      

3.625%, 3-19-50

     2,325       2,754  

2.750%, 10-21-51

     1,420       1,459  
   

 

 

  
      9,990  
   

 

 

  
 

Tobacco – 0.7%

 

Imperial Brands Finance plc,

      

3.125%, 7-26-24 (A)

     4,200       4,342  
   

 

 

  
 

Total Consumer Staples – 8.3%

 

     55,334  

Energy

 

 

Oil & Gas Exploration & Production – 0.9%

 

Canadian Natural Resources Ltd.,

      

3.850%, 6-1-27

     3,225       3,458  

EQT Corp.:

      

3.000%, 10-1-22

     1,450       1,466  

6.625%, 2-1-25 (B)

     650       734  
   

 

 

  
      5,658  
   

 

 

  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Oil & Gas Storage & Transportation – 3.1%

 

Cheniere Energy Partners L.P.,

      

4.000%, 3-1-31

   $ 800     $ 840  

Colonial Pipeline Co.,

      

4.250%, 4-15-48 (A)

     1,000       1,183  

Colorado Interstate Gas Co.,

      

4.150%, 8-15-26 (A)

     1,000       1,090  

Energy Transfer L.P.,

      

6.250%, 4-15-49

     520       681  

Energy Transfer Partners L.P.,

      

6.000%, 6-15-48

     1,000       1,245  

EQT Midstream Partners L.P.,

      

4.750%, 7-15-23

     337       351  

Kinder Morgan, Inc.,

      

5.550%, 6-1-45

     1,000       1,267  

Midwest Connector Capital Co. LLC,

      

4.625%, 4-1-29 (A)

     1,949       2,102  

Plains All American Pipeline L.P. and PAA Finance Corp.:

      

3.600%, 11-1-24

     1,031       1,078  

4.500%, 12-15-26

     1,750       1,923  

Sabal Trail Transmission LLC,

      

4.246%, 5-1-28 (A)

     2,500       2,786  

Transcontinental Gas Pipe Line Co. LLC:

      

3.250%, 5-15-30

     1,225       1,293  

4.600%, 3-15-48

     1,000       1,212  

Williams Partners L.P.,

      

4.850%, 3-1-48

     3,250       3,959  
   

 

 

  
      21,010  
   

 

 

  
 

Total Energy – 4.0%

 

     26,668  

Financials

 

 

Asset Management & Custody Banks – 3.8%

 

Apollo Management Holdings L.P.,

      

2.650%, 6-5-30 (A)

     2,340       2,362  

Blackstone Holdings Finance Co. LLC:

      

1.600%, 3-30-31 (A)

     950       885  

2.000%, 1-30-32 (A)

     3,760       3,624  

Blue Owl Finance LLC,

      

3.125%, 6-10-31 (A)

     4,035       3,953  

Citadel Finance LLC,

      

3.375%, 3-9-26 (A)

     1,533       1,532  

Jefferies Group LLC and Jefferies Group Capital Finance, Inc.,

      

2.625%, 10-15-31

     2,130       2,097  

KKR Group Finance Co. VIII LLC (GTD by KKR & Co., Inc. and KKR Group Partnership L.P.),

      

3.500%, 8-25-50 (A)

     4,000       4,197  

National Securities Clearing Corp.,

      

1.500%, 4-23-25 (A)

     5,000       5,034  

Owl Rock Capital Corp.:

      

5.250%, 4-15-24

     675       720  

4.000%, 3-30-25

     1,025       1,067  
   

 

 

  
      25,471  
   

 

 

  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Consumer Finance – 1.2%

 

Ford Motor Credit Co. LLC:

      

3.810%, 1-9-24

   $ 1,500     $ 1,558  

2.700%, 8-10-26

     1,065       1,075  

General Motors Financial Co., Inc. (GTD by AmeriCredit Financial Services, Inc.):

      

3.700%, 5-9-23

     2,000       2,060  

1.250%, 1-8-26

     2,125       2,082  

2.400%, 10-15-28

     1,420       1,417  
   

 

 

  
      8,192  
   

 

 

  
 

Diversified Banks – 5.3%

 

Bank of America Corp.:

      

3.974%, 2-7-30

     2,500       2,756  

2.496%, 2-13-31

     4,000       4,015  

2.592%, 4-29-31

     3,675       3,716  

1.898%, 7-23-31

     1,325       1,270  

2.299%, 7-21-32

     3,225       3,174  

Citizens Bank N.A.,

      

3.250%, 2-14-22

     372       372  

Danske Bank A.S.,

      

2.700%, 3-2-22 (A)

     1,300       1,305  

ING Groep N.V.,

      

3.550%, 4-9-24

     1,325       1,390  

Korea Development Bank,

      

3.000%, 3-19-22

     1,125       1,130  

Mitsubishi UFJ Financial Group, Inc.,

      

3.218%, 3-7-22

     2,000       2,010  

Royal Bank of Canada,

      

2.300%, 11-3-31

     2,375       2,389  

Toronto-Dominion Bank,

      

3.250%, 3-11-24

     1,275       1,333  

U.S. Bancorp,

      

2.491%, 11-3-36

     2,300       2,294  

Wells Fargo & Co.:

      

2.393%, 6-2-28

     2,500       2,542  

4.150%, 1-24-29

     530       594  

2.879%, 10-30-30

     4,080       4,246  

5.013%, 4-4-51

     650       889  
   

 

 

  
      35,425  
   

 

 

  
 

Diversified Capital Markets – 0.3%

 

Credit Suisse Group AG,

      

3.574%, 1-9-23 (A)

     2,000       2,001  
   

 

 

  
 

Investment Banking & Brokerage – 4.8%

 

Charles Schwab Corp. (The),

      

1.650%, 3-11-31

     3,150       3,029  

Goldman Sachs Group, Inc. (The):

      

2.905%, 7-24-23

     1,000       1,011  

4.250%, 10-21-25

     3,250       3,548  

3.500%, 11-16-26

     2,000       2,132  

3.800%, 3-15-30

     2,550       2,810  

1.992%, 1-27-32

     2,920       2,803  

2.383%, 7-21-32

     3,325       3,277  

Morgan Stanley:

      

4.875%, 11-1-22

     2,931       3,030  

3.875%, 1-27-26

     3,850       4,167  

2.699%, 1-22-31

     1,500       1,536  

1.794%, 2-13-32

     3,525       3,341  
 

 

     
    2021       ANNUAL REPORT       19  

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP CORPORATE BOND (in thousands)

 

 

 

DECEMBER 31, 2021

 

CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Investment Banking & Brokerage (Continued)

 

Morgan Stanley (3-Month U.S. LIBOR plus 140 bps),

      

1.524%, 10-24-23 (C)

   $ 1,500     $ 1,513  
   

 

 

  
      32,197  
   

 

 

  
 

Life & Health Insurance – 0.7%

 

Northwestern Mutual Life Insurance Co. (The),

      

3.850%, 9-30-47 (A)

     3,000       3,396  

Principal Life Global Funding II,

      

3.000%, 4-18-26 (A)

     1,000       1,050  
   

 

 

  
      4,446  
   

 

 

  
 

Multi-Line Insurance – 0.8%

 

Aon Corp. (GTD by Aon plc),

      

2.800%, 5-15-30

     4,900       5,056  
   

 

 

  
 

Other Diversified Financial Services – 5.7%

 

Citigroup, Inc.:

      

3.500%, 5-15-23

     2,260       2,337  

3.520%, 10-27-28

     1,750       1,879  

4.412%, 3-31-31

     2,735       3,127  

2.572%, 6-3-31

     4,872       4,919  

4.700%, 7-30-68

     850       861  

5.000%, 3-12-69

     1,575       1,626  

JPMorgan Chase & Co.:

      

3.875%, 9-10-24

     1,424       1,511  

3.220%, 3-1-25

     6,000       6,241  

2.522%, 4-22-31

     10,202       10,322  

1.764%, 11-19-31

     3,250       3,084  

4.000%, 10-1-68

     1,650       1,659  

5.000%, 2-1-69

     490       504  
   

 

 

  
      38,070  
   

 

 

  
 

Property & Casualty Insurance – 0.3%

 

First American Financial Corp.,

      

2.400%, 8-15-31

     2,100       2,057  
   

 

 

  
 

Specialized Finance – 0.6%

 

LSEGA Financing plc,

      

2.500%, 4-6-31 (A)

     3,815       3,830  
   

 

 

  
 

Total Financials – 23.5%

 

     156,745  

Health Care

 

 

Biotechnology – 0.2%

 

Amgen, Inc.,

      

2.800%, 8-15-41

     1,750       1,686  
   

 

 

  
 

Health Care Equipment – 0.6%

 

Boston Scientific Corp.:

      

3.850%, 5-15-25

     1,575       1,695  

1.900%, 6-1-25

     2,000       2,024  
   

 

 

  
      3,719  
   

 

 

  
 

Health Care Facilities – 0.7%

 

HCA, Inc. (GTD by HCA Holdings, Inc.):

      

5.875%, 5-1-23

     1,125       1,192  

5.875%, 2-1-29

     350       418  

5.250%, 6-15-49

     465       598  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Health Care Facilities (Continued)

 

Universal Health Services, Inc.,

      

1.650%, 9-1-26 (A)

   $ 2,535     $ 2,491  
   

 

 

  
      4,699  
   

 

 

  
 

Health Care Supplies – 0.4%

 

Dentsply Sirona, Inc.,

      

3.250%, 6-1-30

     2,706       2,861  
   

 

 

  
 

Managed Health Care – 2.1%

 

Anthem, Inc.,

      

2.250%, 5-15-30

     1,850       1,846  

Centene Corp.,

      

2.450%, 7-15-28

     805       794  

Humana, Inc.:

      

2.900%, 12-15-22

     5,000       5,100  

0.650%, 8-3-23

     460       458  

1.350%, 2-3-27

     460       447  

UnitedHealth Group, Inc.:

      

2.750%, 5-15-40

     250       254  

3.050%, 5-15-41

     3,685       3,862  

3.700%, 8-15-49

     1,000       1,154  
   

 

 

  
      13,915  
   

 

 

  
 

Pharmaceuticals – 2.9%

 

Bayer U.S. Finance II LLC:

      

3.875%, 12-15-23 (A)

     900       941  

2.850%, 4-15-25 (A)

     3,065       3,133  

Merck & Co., Inc.:

      

2.350%, 6-24-40

     3,075       2,935  

2.450%, 6-24-50

     2,000       1,890  

Novartis Capital Corp. (GTD by Novartis AG):

      

2.200%, 8-14-30

     2,500       2,540  

4.400%, 5-6-44

     803       1,029  

Royalty Pharma plc (GTD by Royalty Pharma Holdings Ltd.):

      

1.200%, 9-2-25

     3,840       3,762  

3.300%, 9-2-40

     325       325  

Zoetis, Inc.:

      

3.900%, 8-20-28

     556       617  

2.000%, 5-15-30

     2,065       2,038  
   

 

 

  
      19,210  
   

 

 

  
 

Total Health Care – 6.9%

 

     46,090  

Industrials

 

 

Aerospace & Defense – 3.3%

 

BAE Systems Holdings, Inc.,

      

3.850%, 12-15-25 (A)

     3,500       3,755  

Boeing Co. (The):

      

2.950%, 2-1-30

     3,000       3,060  

5.150%, 5-1-30

     1,000       1,166  

3.750%, 2-1-50

     3,375       3,517  

General Dynamics Corp.,

      

2.850%, 6-1-41

     2,540       2,618  

Huntington Ingalls Industries, Inc.,

      

2.043%, 8-16-28 (A)

     2,300       2,253  

Raytheon Technologies Corp.:

      

2.250%, 7-1-30

     4,750       4,742  

3.125%, 7-1-50

     1,075       1,101  
   

 

 

  
      22,212  
   

 

 

  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Airlines – 0.0%

 

Aviation Capital Group LLC,

      

3.500%, 11-1-27 (A)

   $ 255     $ 262  
   

 

 

  
 

Building Products – 0.7%

 

Lennox International, Inc.,

      

1.350%, 8-1-25

     2,750       2,718  

Masco Corp.,

      

1.500%, 2-15-28

     2,225       2,155  
   

 

 

  
      4,873  
   

 

 

  
 

Diversified Support Services – 0.4%

 

Genpact Luxembourg S.a.r.l. (GTD by Genpact Ltd.),

      

3.375%, 12-1-24

     1,500       1,581  

Genpact Luxembourg S.a.r.l. and Genpact USA, Inc.,

      

1.750%, 4-10-26

     900       897  
   

 

 

  
      2,478  
   

 

 

  
 

Electrical Components & Equipment – 0.4%

 

Vontier Corp.,

      

2.400%, 4-1-28 (A)

     2,973       2,878  
   

 

 

  
 

Environmental & Facilities Services – 1.3%

 

Republic Services, Inc.:

      

2.300%, 3-1-30

     4,122       4,137  

1.450%, 2-15-31

     910       848  

Waste Connections, Inc.,

      

3.500%, 5-1-29

     3,049       3,300  
   

 

 

  
      8,285  
   

 

 

  
 

Railroads – 0.9%

 

Burlington Northern Santa Fe LLC,

      

4.550%, 9-1-44

     1,000       1,264  

Canadian Pacific Railway Ltd.,

      

2.450%, 12-2-31 (D)

     1,000       1,021  

Kansas City Southern,

      

3.500%, 5-1-50

     1,250       1,335  

Union Pacific Corp.,

      

3.550%, 8-15-39

     1,875       2,082  
   

 

 

  
      5,702  
   

 

 

  
 

Research & Consulting Services – 1.7%

 

CoStar Group, Inc.,

      

2.800%, 7-15-30 (A)

     2,431       2,434  

IHS Markit Ltd.,

      

5.000%, 11-1-22 (A)

     2,840       2,933  

Thomson Reuters Corp.,

      

3.350%, 5-15-26

     2,760       2,933  

Verisk Analytics, Inc.,

      

3.625%, 5-15-50

     2,660       2,901  
   

 

 

  
      11,201  
   

 

 

  
 

Total Industrials – 8.7%

 

     57,891  

Information Technology

 

 

Application Software – 4.2%

 

Adobe, Inc.,

      

2.300%, 2-1-30

     3,417       3,496  
 

 

20   ANNUAL REPORT   2021  
     

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP CORPORATE BOND (in thousands)

 

 

 

DECEMBER 31, 2021

 

CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Application Software (Continued)

 

Autodesk, Inc.:

      

2.850%, 1-15-30

   $ 5,231     $ 5,405  

2.400%, 12-15-31

     460       459  

CDW LLC and CDW Finance Corp. (GTD by CDW Corp.):

      

2.670%, 12-1-26

     815       837  

3.276%, 12-1-28

     2,610       2,679  

3.569%, 12-1-31

     1,085       1,131  

Infor, Inc.:

      

1.450%, 7-15-23 (A)

     635       637  

1.750%, 7-15-25 (A)

     3,270       3,251  

Nuance Communications, Inc.,

      

5.625%, 12-15-26

     3,450       3,563  

NXP B.V. and NXP Funding LLC:

      

4.875%, 3-1-24 (A)

     608       653  

3.875%, 6-18-26 (A)

     2,800       3,025  

salesforce.com, Inc.:

      

2.700%, 7-15-41

     700       701  

2.900%, 7-15-51

     2,025       2,066  
   

 

 

  
      27,903  
   

 

 

  
 

Data Processing & Outsourced Services – 3.2%

 

Fidelity National Information Services, Inc.,

      

1.650%, 3-1-28

     2,225       2,156  

Fiserv, Inc.,

      

3.850%, 6-1-25

     4,646       4,965  

Global Payments, Inc.:

      

2.650%, 2-15-25

     4,000       4,113  

2.900%, 11-15-31

     1,280       1,300  

PayPal Holdings, Inc.:

      

2.300%, 6-1-30

     2,110       2,145  

3.250%, 6-1-50

     1,100       1,182  

Visa, Inc.:

      

2.700%, 4-15-40

     4,897       5,014  

4.300%, 12-14-45

     415       524  
   

 

 

  
      21,399  
   

 

 

  
 

Semiconductor Equipment – 0.0%

 

Lam Research Corp.,

      

1.900%, 6-15-30

     230       227  
   

 

 

  
 

Semiconductors – 4.4%

 

Broadcom Corp. and Broadcom Cayman Finance Ltd. (GTD by Broadcom Ltd.),

      

3.469%, 4-15-34 (A)

     1,483       1,554  

Broadcom, Inc.,

      

3.419%, 4-15-33 (A)

     2,500       2,624  

Intel Corp.,

      

4.100%, 5-19-46

     3,200       3,810  

Maxim Integrated Products, Inc.,

      

3.450%, 6-15-27

     1,700       1,835  

Microchip Technology, Inc.:

      

0.972%, 2-15-24

     1,250       1,240  

0.983%, 9-1-24 (A)

     2,685       2,637  

QUALCOMM, Inc.:

      

4.300%, 5-20-47

     1,500       1,883  

3.250%, 5-20-50 (D)

     500       550  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Semiconductors (Continued)

 

Taiwan Semiconductor Manufacturing Co. Ltd.,

      

1.375%, 9-28-30 (A)

   $ 2,215     $ 2,058  

Texas Instruments, Inc.:

      

3.875%, 3-15-39

     2,994       3,545  

4.150%, 5-15-48

     400       501  

TSMC Global Ltd.,

      

2.250%, 4-23-31 (A)

     3,900       3,867  

Xilinx, Inc.:

      

2.950%, 6-1-24

     1,500       1,553  

2.375%, 6-1-30

     1,700       1,724  
   

 

 

  
      29,381  
   

 

 

  
 

Systems Software – 1.8%

 

Fortinet, Inc.:

      

1.000%, 3-15-26

     2,335       2,264  

2.200%, 3-15-31

     2,320       2,273  

Microsoft Corp.:

      

3.500%, 2-12-35

     2,385       2,728  

2.921%, 3-17-52

     2,975       3,167  

VMware, Inc.,

      

4.500%, 5-15-25

     1,650       1,798  
   

 

 

  
      12,230  
   

 

 

  
 

Technology Hardware, Storage & Peripherals – 1.6%

 

Apple, Inc.:

      

3.850%, 5-4-43

     1,350       1,593  

4.650%, 2-23-46

     1,739       2,286  

3.850%, 8-4-46

     1,800       2,138  

2.950%, 9-11-49

     725       749  

2.650%, 5-11-50

     675       665  

2.650%, 2-8-51

     1,075       1,060  

2.700%, 8-5-51

     1,125       1,115  

Seagate HDD Cayman (GTD by Seagate Technology plc),

      

4.750%, 6-1-23

     965       1,010  
   

 

 

  
      10,616  
   

 

 

  
 

Total Information Technology – 15.2%

 

     101,756  

Materials

 

 

Construction Materials – 0.2%

 

Martin Marietta Materials, Inc.,

      

0.650%, 7-15-23

     1,165       1,161  
   

 

 

  
 

Fertilizers & Agricultural Chemicals – 0.5%

 

Mosaic Co. (The):

      

3.250%, 11-15-22

     1,333       1,359  

4.250%, 11-15-23

     400       421  

Nutrien Ltd.,

      

5.250%, 1-15-45

     1,320       1,762  
   

 

 

  
      3,542  
   

 

 

  
 

Gold – 0.1%

 

Newmont Corp.,

      

2.600%, 7-15-32

     735       737  
   

 

 

  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Metal & Glass Containers – 0.1%

 

Colonial Enterprises, Inc.,

      

3.250%, 5-15-30 (A)

   $ 700     $ 739  
   

 

 

  
 

Paper Packaging – 0.5%

 

Avery Dennison Corp.,

      

0.850%, 8-15-24

     700       691  

Graphic Packaging International LLC (GTD by Graphic Packaging International Partners LLC and Field Container Queretaro (USA) LLC),

      

0.821%, 4-15-24 (A)

     2,480       2,442  
   

 

 

  
      3,133  
   

 

 

  
 

Total Materials – 1.4%

 

     9,312  

Real Estate

 

 

Health Care REITs – 0.6%

 

Welltower, Inc.:

      

3.625%, 3-15-24

     1,429       1,503  

2.050%, 1-15-29

     2,300       2,266  
   

 

 

  
      3,769  
   

 

 

  
 

Industrial REITs – 0.2%

 

Avolon Holdings Funding Ltd.:

      

3.625%, 5-1-22 (A)

     1,160       1,168  

3.250%, 2-15-27 (A)

     540       544  
   

 

 

  
      1,712  
   

 

 

  
 

Specialized REITs – 4.2%

 

American Tower Corp.:

      

3.070%, 3-15-23 (A)

     1,500       1,501  

3.000%, 6-15-23

     2,500       2,571  

4.400%, 2-15-26

     1,000       1,093  

American Tower Trust I,

      

3.652%, 3-23-28 (A)

     1,000       1,048  

Crown Castle International Corp.:

      

3.150%, 7-15-23

     175       180  

3.200%, 9-1-24

     2,250       2,350  

1.050%, 7-15-26

     2,500       2,417  

4.000%, 3-1-27

     2,000       2,176  

CyrusOne L.P. and CyrusOne Finance Corp. (GTD by CyrusOne, Inc.),

      

2.900%, 11-15-24

     3,389       3,502  

EPR Properties,

      

4.950%, 4-15-28

     720       778  

Equinix, Inc.,

      

2.625%, 11-18-24

     4,895       5,047  

Extra Space Storage L.P.:

      

2.550%, 6-1-31

     3,485       3,434  

2.350%, 3-15-32

     2,167       2,109  
   

 

 

  
      28,206  
   

 

 

  
 

Total Real Estate – 5.0%

 

     33,687  
 

 

     
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Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP CORPORATE BOND (in thousands)

 

 

 

DECEMBER 31, 2021

 

CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Utilities

 

 

Electric Utilities – 4.7%

 

Alabama Power Co.,

      

3.125%, 7-15-51 (D)

   $ 2,315     $ 2,367  

Appalachian Power Co.,

      

4.500%, 3-1-49

     1,500       1,807  

CenterPoint Energy, Inc.:

      

4.250%, 11-1-28

     1,683       1,872  

2.950%, 3-1-30

     2,050       2,119  

Commonwealth Edison Co.,

      

3.650%, 6-15-46

     3,000       3,330  

Duke Energy Indiana LLC,

      

3.750%, 5-15-46

     1,430       1,598  

Duke Energy Ohio, Inc.,

      

4.300%, 2-1-49

     410       493  

Entergy Corp.,

      

3.750%, 6-15-50

     3,550       3,830  

FirstEnergy Corp.:

      

2.850%, 7-15-22

     1,306       1,312  

2.650%, 3-1-30

     775       767  

3.400%, 3-1-50

     690       678  

Georgia Power Co.,

      

3.700%, 1-30-50

     970       1,034  

MidAmerican Energy Co.,

      

3.950%, 8-1-47

     2,000       2,359  

National Rural Utilities Cooperative Finance Corp.,

      

4.400%, 11-1-48

     2,000       2,511  

Southern California Edison Co.,

      

4.125%, 3-1-48

     1,275       1,434  

Virginia Electric and Power Co., Series B,

      

4.600%, 12-1-48

     1,736       2,220  

Wisconsin Electric Power Co.:

      

4.250%, 6-1-44

     250       298  

4.300%, 10-15-48

     1,250       1,540  
   

 

 

  
      31,569  
   

 

 

  
 

Gas Utilities – 0.5%

 

Southern California Gas Co.,

      

4.300%, 1-15-49

     2,505       3,121  
   

 

 

  
 

Multi-Utilities – 1.1%

 

Baltimore Gas and Electric Co.,

      

4.250%, 9-15-48

     1,500       1,835  

Black Hills Corp.:

      

1.037%, 8-23-24

     1,650       1,630  

4.350%, 5-1-33

     2,000       2,282  

Pacific Gas and Electric Co.,

      

3.000%, 6-15-28

     1,771       1,785  
   

 

 

  
      7,532  
   

 

 

  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Water Utilities – 0.5%

 

American Water Capital Corp.,

      

4.150%, 6-1-49

   $ 2,600     $ 3,077  
   

 

 

  
 

Total Utilities – 6.8%

 

     45,299  
 

TOTAL CORPORATE DEBT
SECURITIES – 94.8%

 

   $ 633,210  

(Cost: $624,087)

      
 
MORTGAGE-BACKED SECURITIES              

Non-Agency REMIC/CMO – 0.1%

 

MASTR Adjustable Rate Mortgages Trust, Series 2005-1, Class B1 (Mortgage spread to 10-year U.S. Treasury index),

      

2.519%, 3-25-35 (C)

     738       624  
   

 

 

  
 

TOTAL MORTGAGE-BACKED SECURITIES – 0.1%

 

   $ 624  

(Cost: $735)

 

    
 
MUNICIPAL BONDS – TAXABLE              

New York – 0.5%

 

NYC Indl Dev Agy, Rental Rev Bonds (Yankee Stadium Proj), Ser 2009,

      

11.000%, 3-1-29 (A)

     2,705       3,595  
   

 

 

  
 

Ohio – 0.4%

 

OH State Univ, Gen Receipts Bonds (Multiyear Debt Issuance Prog), Ser 2016A,

      

3.798%, 12-1-46

     2,000       2,412  
   

 

 

  
 

Puerto Rico – 0.2%

 

Cmnwlth of PR, Pub Impvt Rfdg GO Bonds, Ser 2012A,

      

7.500%, 8-20-40

     1,760       1,681  
   

 

 

  
 

TOTAL MUNICIPAL BONDS –
TAXABLE – 1.1%

 

   $ 7,688  

(Cost: $6,372)

      
 
OTHER GOVERNMENT
SECURITIES (E)		              

Canada – 0.4%

 

Province de Quebec,

      

7.140%, 2-27-26

     2,500       3,028  
   

 

 

  
OTHER GOVERNMENT
SECURITIES (E) (Continued)		  

Principal

    

Value

  

Colombia – 0.1%

 

Republic of Colombia,

      

3.250%, 4-22-32

   $ 925     $ 834  
   

 

 

  
 

Mexico – 0.2%

 

United Mexican States,

      

3.750%, 4-19-71

     1,250       1,127  
   

 

 

  
 

TOTAL OTHER GOVERNMENT SECURITIES – 0.7%

 

   $ 4,989  

(Cost: $4,784)

      
 
UNITED STATES GOVERNMENT
AGENCY OBLIGATIONS		              

Agency Obligations – 0.2%

 

Tennessee Valley Authority,

      

2.875%, 2-1-27

     1,000       1,070  
   

 

 

  
 

Mortgage-Backed Obligations – 0.0%

 

Government National Mortgage Association Agency REMIC/CMO (Mortgage spread to 5-year U.S. Treasury index),

      

0.004%, 6-17-45 (A)(C)(F)

     4       — * 
   

 

 

  
 

TOTAL UNITED STATES GOVERNMENT AGENCY OBLIGATIONS – 0.2%

 

   $ 1,070  

(Cost: $1,001)

      
 
SHORT-TERM SECURITIES   Shares         

Money Market Funds (H) – 0.7%

 

Dreyfus Institutional Preferred Government Money Market Fund – Institutional Shares,

      

0.010% (G)

     1,166       1,166  

State Street Institutional U.S. Government Money Market Fund – Premier Class,

      

0.030%

     3,215       3,215  
   

 

 

  
      4,381  
   

 

 

  
 

TOTAL SHORT-TERM
SECURITIES – 0.7%

 

   $ 4,381  

(Cost: $4,381)

      
 

TOTAL INVESTMENT
SECURITIES – 99.3%

 

   $ 663,183  

(Cost: $652,330)

      
 

CASH AND OTHER ASSETS, NET OF LIABILITIES – 0.7%

 

     4,795  
 

NET ASSETS – 100.0%

 

   $ 667,978  
 

 

22   ANNUAL REPORT   2021  
     

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP CORPORATE BOND (in thousands)

 

 

 

DECEMBER 31, 2021

 

Notes to Schedule of Investments

 

*

Not shown due to rounding.

 

(A)

Securities were purchased pursuant to an exemption from registration available under Rule 144A under the Securities Act of 1933 and may only be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2021 the total value of these securities amounted to $125,160 or 18.7% of net assets.

 

(B)

Step bond that pays an initial coupon rate for the first period and then a higher or lower coupon rate for the following periods. Interest rate disclosed is that which is in effect at December 31, 2021.

 

(C)

Variable rate security. Interest rate disclosed is that which is in effect at December 31, 2021. Description of the reference rate and spread, if applicable, are included in the security description.

 

(D)

All or a portion of securities with an aggregate value of $3,048 are on loan.

 

(E)

Other Government Securities may include emerging markets sovereign, quasi-sovereign, corporate and supranational agency and organization debt securities.

 

(F)

Interest-only security. Amount shown as principal represents notional amount for computation of interest.

 

(G)

Investment made with cash collateral received from securities on loan.

 

(H)

Rate shown is the annualized 7-day yield at December 31, 2021.

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Asset-Backed Securities

   $ —      $ 11,221      $ —  

Corporate Debt Securities

     —        633,210        —  

Mortgage-Backed Securities

     —        624        —  

Municipal Bonds

     —        7,688        —  

Other Government Securities

     —        4,989        —  

United States Government Agency Obligations

     —        1,070        —  

Short-Term Securities

     4,381        —        —  

Total

   $ 4,381      $ 658,802      $ —  

The following acronyms are used throughout this schedule:

CMO = Collateralized Mortgage Obligation

GTD = Guaranteed

LIBOR = London Interbank Offered Rate

REIT = Real Estate Investment Trust

REMIC = Real Estate Mortgage Investment Conduit

 

See Accompanying Notes to Financial Statements.

 

     
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Table of Contents
MANAGEMENT DISCUSSION   DELAWARE IVY VIP GLOBAL BOND

 

 

 

(UNAUDITED)

 

On September 13, 2021, the Board of Trustees of the Ivy Variable Insurance Portfolios approved a proposal to liquidate and dissolve the Portfolio. The liquidation and dissolution date (Liquidation Date) will be announced at least 60 days prior to the liquidation. Effective on November 15, 2021, Andrew Vonthethoff serves as the portfolio manager of the Portfolio until the Liquidation Date.

The Portfolio was closed to new investors on September 30, 2021, and will be closed to existing shareholders one (1) business days before the Liquidation Date.

Below, Andrew Vonthethoff, portfolio manager of Delaware Ivy VIP Global Bond, discusses positioning, performance and results for the fiscal year ended December 31, 2021. Mr. Vonthethoff has 13 years of industry experience.

Fiscal Year Performance

 

 

For the 12 months ended December 31, 2021

         

Delaware Ivy VIP Global Bond (Class II shares at net asset value)

      -0.84%  

Benchmark

         

Bloomberg US Universal Index

      -1.10%  

(generally reflects performance of US dollar-denominated taxable bonds that are rated either investment-grade or high yield; includes US Treasury bonds, investment-grade and high yield US corporate bonds, mortgage-backed securities, and Eurodollar bonds)

         

Please note that the Portfolio returns include applicable fees and expenses, whereas the index returns do not include any such fees. Also, the Portfolio’s performance data does not take into account any product expenses or charges associated with owning a variable life or annuity policy, which is invested in Ivy Variable Insurance Portfolios.

 

Market review

 

Credit markets were generally stable and positive for 2021 despite events in the real economy continuing 2020’s pattern of significant volatility and uncertainty. The pandemic dragged on for another year, with continued disruption to normal life. The first months of the fiscal year were dominated by positive sentiment around COVID-19 progress, with a series of novel, highly effective vaccines, and the US in a leading position in the initial vaccine rollout. This eventually gave way to the realities of new variants, vaccine hesitancy, and new waves, including in regions previously very successful at tamping down outbreaks.

Overall, demand and consumer spending remained very strong throughout the fiscal year, with consumer attitudes seeming to “move on” from the virus despite repeated new waves. The demand for goods resumed throughout the economy as well as for experiences that were heavily restricted for much of 2020, such as airline travel and dining. That said, strong demand was met with supply-side problems as supply chain woes continued and worsened in many cases. The labor force also remained impaired, with total employment not recovering by the end of 2021. The result was a surge in inflation in almost every aspect of the economy, with rising prices in industrial commodities, energy, durable goods, and food, which accelerated overall consumer price readings to levels not seen since the 1980s. We believe this puts pressure on workers (as real wages fall), central banks, and ultimately politicians to act to curb further price pressures.

Central banks began to change their tune on support for markets and the economy amid the surge in inflation. This began in emerging markets, with several central banks delivering multiple rate hikes to maintain control of inflation and policy credibility. This was joined by previously highly supportive central banks, such as the Bank of England, which began signaling (and delivered) rate increases late in the fiscal year. This culminated most significantly in the US Federal Reserve (Fed) abandoning its characterization of inflation as “transitory” and making a sharp hawkish tilt in its communications. We believe central banks will be less supportive in the coming year, which is compounded by the withdrawal of fiscal policy, with government spending programs such as the Biden administration’s Build Back Better Plan failing to continue the strong fiscal impetus of 2020 and early 2021.

Beyond developed markets, growth remained mixed as a result of renewed COVID-19 waves. China tightened its property market and repeated policy changes for investors. Restrictions on borrowing and leverage in the property sector severely affected high-yield property developer credits, with multiple defaults in a sector that contributes directly and indirectly over a quarter of China’s gross domestic product (GDP). Cleaning up the indebtedness in the sector aligns with the governments deleveraging and “common prosperity” policies, but the speed and severity of the repricing led to the government beginning to ease policy by the end of the year.

 

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The most significant financial market developments over the year were arguably in the bond market, which was punctuated by multiple periods of significant repricings. Bond markets began the year with a belief that inflation would be temporary, and that central banks would remain accommodative for years to come. However, evidence of prolonged inflation, shortages, and a continued strong recovery in the economy, repeatedly tested that view. The short end of the yield curve was most directly affected as 2-year Treasury yields rose from 0.12% to 0.73% by fiscal year end, leading to significant curve flattening. Generally speaking, bond markets across the globe experienced higher yields.

Remarkably, with developments in the economy, policy support, and bond markets, risk assets such as credit and equities were generally stable and well supported. US investment-grade credit finished the year 4 basis points tighter in spread and traded in a spread range of 21 basis points for the year. This is the tightest range since 2006. Emerging markets were mixed, with China property developments severely affecting that market, but broader performance remaining strong, particularly among corporates.

Performance review

 

The Portfolio outperformed its benchmark index for the fiscal year. Excess running yield from credit holdings (both developed and emerging markets) was a key driver of performance. Low duration positioning versus the benchmark also contributed to performance, with sharp repricings in government bond yields over the year. The Portfolio’s relatively large US dollar exposure benefitted performance as the dollar was strong over the fiscal year. For instance, the US dollar rose 7% relative to the euro for the year.

The Portfolio maintained positions in emerging-market and developed markets credit over the year. Duration remained relatively low, reflecting the overall philosophy of the strategy (to reduce interest-rate related volatility), and expectations for some further interest rate increases in the coming quarters. We continue to focus on maintaining proper diversification for the Portfolio by investing in different securities, sectors, countries and currencies. This flexibility allows us to seek less volatility with a reasonable yield that we believe should reward investors over the longer term.

We continue to search for value in emerging-market and developed market corporate bonds, while seeking to reduce the total risk allocation gradually, reflecting tighter spreads and the reality of much less supportive policy support expected for the coming year. We think there will be more opportunities to redeploy liquidity due to the volatility with lower overall growth, mid-term elections in the US, and the Fed’s normalization of interest rates.

Looking ahead

 

Over the final quarter of 2021, it became increasingly clear to us that central banks had growing discomfort with inflation, which had proved larger and more prolonged than they had expected. This is typically not compatible with highly accommodative policy. Frustrations with fiscal progress, supply chain pressures, tight labor markets, and resilient consumers has kept the pace of price increases high. It still seems appropriate to us to expect inflation to fall (from extremely high levels) in 2022 as base effects kick in and supply kinks unwind. That said, central banks are now committed to acting to avoid this episode of having a permanent effect on consumer psyche and behavior.

Growth, particularly nominal growth, is very strong and is also reflected in corporate earnings growth. This is likely to fall but remain at elevated levels for some time. The challenge for credit markets is that policy support is turning rapidly from a strong tailwind to a headwind, and as a result, we expect higher volatility in spreads, more opportunities to add positions at attractive levels, and a higher risk (though not our base case) of a policy mistake. Under our base case, credit spreads are expected to be volatile but capped, and finish the year somewhat wider. Bond yields are similarly likely to have an upward bias, though we think meaningfully higher yields are impossible to maintain in a highly indebted world. A policy mistake would result from the Fed tightening too rapidly in an economy that is already slowing (in both real and nominal terms) and affecting financial markets. In that scenario, we believe sharply wider credit spreads and lower bond yields are likely (similar to late 2018), and inflation would likely come under control quickly due to collapsing demand.

Technical demand factors that have driven credit markets for years generally remain intact. Global yields are low and US dollar credit remains one of the few sources of yield, which we believe supports this market. Supply of new debt is also expected to fall this year.

The pandemic continues to affect the globe, but 2022 will hopefully mark a move towards an endemic phase for some parts of the world. The combination of vaccines and high infection rates in many countries, and the Omicron variant that so far has proven to be highly transmissible but somewhat less dangerous, could provide significant protection from severe infection. Different regions are at different stages, of course, with China still generally supporting a “COVID zero” policy. While this worked well in the early stages of the pandemic, it will likely be increasingly difficult and costly to maintain as the broader world continues to reopen.

 

     
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Table of Contents
           

 

 

 

 

Finally, the tilt away from globalization that has been underway for about half of the decade, is likely to be reinforced. We believe new factors stemming from COVID-19 and heightened geopolitical tension between the US and China will likely fuel the move further away from globalization, which may change complex international supply chains, and be a factor in providing upward pressure to prices for some time.

Effective July 1, 2021, the Portfolio name changed from Ivy VIP Global Bond.

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

Past performance is not a guarantee of future results. The value of the Portfolio’s shares will change, and you could lose money on your investment.

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. 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 to obtain precise valuations of the high yield securities.

International investments entail risks including fluctuation in currency values, differences in accounting principles, or economic or political instability. Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility, lower trading volume, and higher risk of market closures. In many emerging markets, there is substantially less publicly available information and the available information may be incomplete or misleading. Legal claims are generally more difficult to pursue.

IBOR risk is the risk that changes related to the use of the London interbank offered rate (LIBOR) or similar rates (such as EONIA) could have adverse impacts on financial instruments that reference these rates. The abandonment of these rates and transition to alternative rates could affect the value and liquidity of instruments that reference them and could affect investment strategy performance.

Natural or environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis, and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics, have been and can be highly disruptive to economies and markets, adversely impacting individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Portfolio’s investments. Given the increasing interdependence among global economies and markets, conditions in one country, market, or region are increasingly likely to adversely affect markets, issuers, and/or foreign exchange rates in other countries. These disruptions could prevent the Portfolio from executing advantageous investment decisions in a timely manner and could negatively impact the Portfolio’s ability to achieve its investment objective. Any such event(s) could have a significant adverse impact on the value and risk profile of the Portfolio.

The opinions expressed in this report are those of the portfolio manager and are current only through the end of the period of the report as stated on the cover. The manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged, and includes reinvested dividends and does not include fees. One cannot invest directly in an index, nor is an index representative of Delaware Ivy VIP Global Bond.

 

26   ANNUAL REPORT   2021  
     

Table of Contents
PORTFOLIO HIGHLIGHTS   DELAWARE IVY VIP GLOBAL BOND(a)

 

 

 

ALL DATA IS AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Asset Allocation

 

Bonds

     97.9%  

Corporate Debt Securities

     80.2%  

United States Government and Government Agency Obligations

     11.9%  

Other Government Securities

     5.8%  

Liabilities (Net of Cash and Other Assets), and Cash Equivalents+

     2.1%  

Quality Weightings

 

Investment Grade

     79.6%  

AAA

     2.0%  

AA

     14.9%  

A

     17.4%  

BBB

     45.3%  

Non-Investment Grade

     18.3%  

BB

     14.5%  

B

     2.5%  

CCC

     1.3%  

Liabilities (Net of Cash and Other Assets), and Cash Equivalents+

     2.1%  

Our preference is to always use ratings obtained from Standard & Poor’s, Moody’s, and Fitch. It is each Portfolio’s general policy to classify such security at the lower rating level if only two ratings are available. If more than two ratings are available and a median exists, the median is used. If more than two ratings exist without a median, the lower of the two middle ratings is used. We do not evaluate these ratings, but simply assign them to the appropriate credit quality category as determined by the rating agency.

Country Weightings

 

North America

     34.2%  

United States

     23.8%  

Mexico

     8.7%  

Other North America

     1.7%  

South America

     21.6%  

Chile

     6.9%  

Brazil

     5.0%  

Peru

     4.5%  

Other South America

     5.2%  

Pacific Basin

     20.3%  

China

     4.9%  

South Korea

     3.8%  

India

     3.6%  

Other Pacific Basin

     8.0%  

Europe

     10.1%  

United Kingdom

     4.5%  

Other Europe

     5.6%  

Middle East

     1.2%  

Bahamas/Caribbean

     3.0%  

Other

     6.2%  

Africa

     1.3%  

Liabilities (Net of Cash and Other Assets), and Cash Equivalents+

     2.1%  
 

 

+Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

(a)Effective July 1, 2021, the name of Ivy VIP Global Bond changed to Delaware Ivy VIP Global Bond.

 

     
    2021       ANNUAL REPORT       27  

Table of Contents
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT   DELAWARE IVY VIP GLOBAL BOND(a)

 

 

 

(UNAUDITED)

 

LOGO

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class II  

1-year period ended 12-31-21

      -0.84%  

5-year period ended 12-31-21

      4.08%  

10-year period ended 12-31-21

      3.28%  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

 

(a)

Effective July 1, 2021, the name of Ivy VIP Global Bond changed to Delaware Ivy VIP Global Bond.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

28   ANNUAL REPORT   2021  
     

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP GLOBAL BOND (in thousands)

 

 

 

DECEMBER 31, 2021

 

CORPORATE DEBT SECURITIES   Principal     Value  

Argentina

 

 

Energy – 0.8%

 

Pampa Energia S.A.

      

7.500%, 1-24-27 (A)

   $ 150     $ 130  
   

 

 

  
 

Total Argentina – 0.8%

 

   $ 130  

Australia

 

 

Utilities – 1.3%

 

Ausgrid Finance Pty Ltd.

      

3.850%, 5-1-23 (A)

     200       206  
   

 

 

  
 

Total Australia – 1.3%

 

   $ 206  

Austria

 

 

Consumer Staples – 1.3%

 

JBS Investments II GmbH (GTD by JBS S.A.)

      

5.750%, 1-15-28 (A)

     200       209  
   

 

 

  
 

Total Austria – 1.3%

 

   $ 209  

Bermuda

 

 

Consumer Staples – 0.6%

 

Bacardi Ltd.

      

4.450%, 5-15-25 (A)

     100       109  
   

 

 

  
 

Energy – 1.2%

 

GeoPark Ltd.

      

5.500%, 1-17-27 (A)

     200       193  
   

 

 

  
 

Total Bermuda – 1.8%

 

   $ 302  

Brazil

 

 

Financials – 1.2%

 

XP, Inc.

      

3.250%, 7-1-26 (A)

     200       192  
   

 

 

  
 

Industrials – 1.3%

 

Cosan Ltd.

      

5.500%, 9-20-29 (A)

     200       208  
   

 

 

  
 

Materials – 1.3%

 

Nexa Resources S.A.

      

6.500%, 1-18-28 (A)

     200       220  
   

 

 

  
 

Utilities – 1.2%

 

Aegea Finance S.a.r.l.

      

5.750%, 10-10-24 (A)

     200       206  
   

 

 

  
 

Total Brazil – 5.0%

 

   $ 826  

British Virgin Islands

 

 

Information Technology – 1.2%

 

Taiwan Semiconductor Manufacturing Co. Ltd.

      

1.000%, 9-28-27 (A)

     200       189  
   

 

 

  
 

Total British Virgin Islands – 1.2%

 

   $ 189  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Canada

 

 

Energy – 0.7%

 

TransCanada PipeLines Ltd.

      

4.250%, 5-15-28

   $ 100     $ 112  
   

 

 

  
 

Financials – 1.0%

 

Brookfield Finance, Inc. (GTD by Brookfield Asset Management, Inc.)

      

4.350%, 4-15-30

     100       113  

Royal Bank of Canada

      

4.650%, 1-27-26

     50       56  
   

 

 

  
      169  
   

 

 

  
 

Total Canada – 1.7%

 

   $ 281  

Chile

 

 

Communication Services – 1.3%

 

VTR Finance B.V.

      

6.375%, 7-15-28 (A)

     200       208  
   

 

 

  
 

Financials – 1.2%

 

Banco del Estado de Chile

      

2.704%, 1-9-25 (A)

     200       204  
   

 

 

  
 

Industrials – 1.3%

 

Empresa de Transporte de Pasajeros Metro S.A.

      

3.650%, 5-7-30 (A)

     200       213  
   

 

 

  
 

Materials – 1.3%

 

Celulosa Arauco y Constitucion S.A.

      

4.500%, 8-1-24

     200       213  
   

 

 

  
 

Utilities – 1.8%

 

Colbun S.A.

      

4.500%, 7-10-24 (A)

     200       211  

Enel Chile S.A.

      

4.875%, 6-12-28

     80       88  
   

 

 

  
      299  
   

 

 

  
 

Total Chile – 6.9%

 

   $ 1,137  

China

 

 

Communication Services – 1.2%

 

Weibo Corp.

      

3.500%, 7-5-24

     200       206  
   

 

 

  
 

Consumer Discretionary – 1.3%

 

Alibaba Group Holding Ltd.

      

3.400%, 12-6-27

     200       212  
   

 

 

  
 

Information Technology – 2.4%

 

Baidu, Inc.

      

1.625%, 2-23-27

     200       195  

Lenovo Group Ltd.

      

3.421%, 11-2-30 (A)

     200       202  
   

 

 

  
      397  
   

 

 

  
 

Total China – 4.9%

 

   $ 815  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Colombia

 

 

Financials – 1.3%

 

Banco de Bogota S.A.

      

5.375%, 2-19-23 (A)

   $ 200     $ 207  
   

 

 

  
 

Utilities – 1.2%

 

Empresas Publicas de Medellin E.S.P.

      

4.250%, 7-18-29 (A)

     200       190  
   

 

 

  
 

Total Colombia – 2.5%

 

   $ 397  

Hong Kong

 

 

Financials – 1.3%

 

Bangkok Bank Public Co. Ltd.

      

4.050%, 3-19-24 (A)

     200       212  
   

 

 

  
 

Total Hong Kong – 1.3%

 

   $ 212  

India

 

 

Financials – 1.2%

 

Power Finance Corp. Ltd.

      

3.900%, 9-16-29

     200       206  
   

 

 

  
 

Utilities – 2.4%

 

Adani Electricity Mumbai Ltd.

      

3.949%, 2-12-30 (A)

     200       198  

Adani Green Energy (UP) Ltd., Parampujya Solar Energy Private Ltd. and Prayatna Developers Private Ltd.

      

4.375%, 9-8-24 (A)

     200       203  
   

 

 

  
      401  
   

 

 

  
 

Total India – 3.6%

 

   $ 607  

Indonesia

 

 

Utilities – 2.8%

 

Perusahaan Listrik Negara:

      

5.450%, 5-21-28 (A)

     200       229  

5.375%, 1-25-29 (A)

     200       230  
   

 

 

  
      459  
   

 

 

  
 

Total Indonesia – 2.8%

 

   $ 459  

Isle of Man

 

 

Consumer Discretionary – 1.3%

 

GOHL Capital Ltd.

      

4.250%, 1-24-27

     200       206  
   

 

 

  
 

Total Isle of Man – 1.3%

 

   $ 206  

Japan

 

 

Financials – 1.4%

 

Mitsubishi UFJ Financial Group, Inc.

      

3.287%, 7-25-27

     100       107  

Sumitomo Mitsui Financial Group, Inc.

      

3.748%, 7-19-23

     110       115  
   

 

 

  
      222  
   

 

 

  
 

Total Japan – 1.4%

 

   $ 222  
 

 

     
    2021       ANNUAL REPORT       29  

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP GLOBAL BOND (in thousands)

 

 

 

DECEMBER 31, 2021

 

CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Luxembourg

 

 

Financials – 1.1%

 

JSM Global S.a.r.l.

      

4.750%, 10-20-30 (A)

   $ 200     $ 185  
   

 

 

  
 

Total Luxembourg – 1.1%

 

   $ 185  

Malaysia

 

 

Consumer Discretionary – 1.2%

 

GENM Capital Labuan Ltd.

      

3.882%, 4-19-31 (A)

     200       195  
   

 

 

  
 

Total Malaysia – 1.2%

 

   $ 195  

Mexico

 

 

Consumer Staples – 1.3%

 

Grupo Bimbo S.A.B. de C.V.

 

    

3.875%, 6-27-24 (A)

     200       211  
   

 

 

  
 

Energy – 0.3%

 

Petroleos Mexicanos

      

6.700%, 2-16-32 (A)

     54       54  
   

 

 

  
 

Financials – 0.9%

 

Banco Santander S.A.

      

4.125%, 11-9-22 (A)

     150       154  
   

 

 

  
 

Industrials – 2.5%

 

Alfa S.A.B. de C.V.

      

5.250%, 3-25-24 (A)

     200       212  

Grupo Kuo S.A.B. de C.V.

      

5.750%, 7-7-27 (A)

     200       206  
   

 

 

  
      418  
   

 

 

  
 

Materials – 2.5%

 

Industrias Penoles S.A.B. de C.V.

      

4.150%, 9-12-29 (A)

     200       216  

Orbia Advance Corp. S.A.B. de C.V.

      

1.875%, 5-11-26 (A)

     200       197  
   

 

 

  
      413  
   

 

 

  
 

Total Mexico – 7.5%

 

   $ 1,250  

Netherlands

 

 

Energy – 0.6%

 

Petrobras Global Finance B.V. (GTD by Petroleo Brasileiro S.A.)

      

5.600%, 1-3-31

     100       106  
   

 

 

  
 

Health Care – 1.3%

 

Teva Pharmaceutical Finance Netherlands III B.V. (GTD by Teva Pharmaceutical Industries Ltd.)

      

6.750%, 3-1-28 (B)

     200       213  
   

 

 

  
 

Total Netherlands – 1.9%

 

   $ 319  
CORPORATE DEBT
SECURITIES
(Continued)		   Principal     Value  

Nigeria

 

 

Financials – 1.3%

 

Africa Finance Corp.

      

4.375%, 4-17-26 (A)

   $ 200     $ 216  
   

 

 

  
 

Total Nigeria – 1.3%

 

   $ 216  

Panama

 

 

Financials – 1.2%

 

Banco Latinoamericanco de Comercio Exterior S.A.

      

2.375%, 9-14-25 (A)

     200       200  
   

 

 

  
 

Total Panama – 1.2%

 

   $ 200  

Peru

 

 

Financials – 3.3%

 

Banco de Credito del Peru

      

4.250%, 4-1-23 (A)

     150       155  

Banco Internacional del Peru S.A.

      

3.250%, 10-4-26 (A)

     200       204  

Corporacion Financiera de Desarrolla S.A.

      

2.400%, 9-28-27 (A)

     200       195  
   

 

 

  
      554  
   

 

 

  
 

Total Peru – 3.3%

 

   $ 554  

Saudi Arabia

 

 

Energy – 1.2%

 

Saudi Arabian Oil Co.

      

1.250%, 11-24-23 (A)

     200       200  
   

 

 

  
 

Total Saudi Arabia – 1.2%

 

   $ 200  

South Korea

 

 

Consumer Discretionary – 1.2%

 

Kia Corp.

      

1.750%, 10-16-26 (A)

     200       198  
   

 

 

  
 

Financials – 2.6%

 

Hyundai Capital Services, Inc.

      

2.983%, 8-29-22 (A)

     210       213  

Korea Development Bank

      

3.250%, 2-19-24

     200       209  
   

 

 

  
      422  
   

 

 

  
 

Total South Korea – 3.8%

 

   $ 620  

United Arab Emirates

 

 

Energy – 1.2%

 

Galaxy Pipeline Assets BidCo Ltd.

      

1.750%, 9-30-27 (A)

     196       196  
   

 

 

  
 

Financials – 1.2%

 

NBK SPC Ltd.

      

1.625%, 9-15-27 (A)

     200       195  
   

 

 

  
 

Total United Arab Emirates – 2.4%

 

   $ 391  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

United Kingdom

 

 

Consumer Staples – 1.2%

 

Imperial Tobacco Finance plc

      

3.750%, 7-21-22 (A)

   $ 200     $ 202  
   

 

 

  
 

Financials – 3.3%

 

ANZ New Zealand International Ltd.

      

3.450%, 1-21-28 (A)

     200       217  

Royal Bank of Scotland Group plc (The)

      

6.000%, 12-19-23

     100       109  

State Bank of India

      

4.875%, 4-17-24 (A)

     200       214  
   

 

 

  
      540  
   

 

 

  
 

Total United Kingdom – 4.5%

 

   $ 742  

United States

 

 

Consumer Discretionary – 0.6%

 

D.R. Horton, Inc.

      

2.600%, 10-15-25

     100       103  
   

 

 

  
 

Consumer Staples – 1.6%

 

Keurig Dr Pepper, Inc.

      

4.597%, 5-25-28

     125       142  

Reynolds American, Inc.

      

4.450%, 6-12-25

     100       108  
   

 

 

  
      250  
   

 

 

  
 

Financials – 6.2%

 

Bank of America Corp.

      

3.593%, 7-21-28

     125       135  

BBVA Bancomer S.A.

      

5.875%, 9-13-34 (A)

     200       219  

Citadel Finance LLC

      

3.375%, 3-9-26 (A)

     100       100  

Citigroup, Inc.

      

3.520%, 10-27-28

     125       134  

Goldman Sachs Group, Inc. (The)

      

3.814%, 4-23-29

     100       109  

JPMorgan Chase & Co.:

      

3.540%, 5-1-28

     118       128  

4.000%, 10-1-68 (B)

     50       51  

Wells Fargo & Co.

      

4.300%, 7-22-27

     125       139  
   

 

 

  
      1,015  
   

 

 

  
 

Health Care – 1.7%

 

Bayer U.S. Finance II LLC

      

2.850%, 4-15-25 (A)

     200       205  

Fresenius U.S. Finance II, Inc.

      

4.500%, 1-15-23 (A)

     75       77  
   

 

 

  
      282  
   

 

 

  
 

Industrials – 0.5%

 

BAE Systems Holdings, Inc.

      

3.800%, 10-7-24 (A)

     75       80  
   

 

 

  
 

Real Estate – 1.3%

 

Aircastle Ltd.

      

4.400%, 9-25-23

     100       105  
 

 

30   ANNUAL REPORT   2021  
     

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP GLOBAL BOND (in thousands)

 

 

 

DECEMBER 31, 2021

 

CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Real Estate (Continued)

 

Crown Castle International Corp.

      

4.000%, 3-1-27

   $ 100     $ 109  
   

 

 

  
      214  
   

 

 

  
 

Total United States – 11.9%

 

   $ 1,944  

Venezuela

 

 

Financials – 1.1%

 

Corporacion Andina de Fomento:

      

3.250%, 2-11-22

     150       150  

2.375%, 5-12-23

     30       31  
   

 

 

  
      181  
   

 

 

  
 

Total Venezuela – 1.1%

 

   $ 181  
 

TOTAL CORPORATE DEBT SECURITIES – 80.2%

 

   $ 13,195  

(Cost: $12,793)

      
 
OTHER GOVERNMENT
SECURITIES (C)		              

Argentina – 0.5%

 

Republic of Argentina:

      

1.000%, 7-9-29

     12       4  

0.125%, 7-9-30

     243       86  
   

 

 

  
      90  
   

 

 

  
 

Mexico – 1.2%

 

United Mexican States

      

3.250%, 4-16-30

     200       205  
   

 

 

  
OTHER GOVERNMENT SECURITIES (C)
(Continued)		   Principal     Value  

Panama – 1.3%

 

Republic of Panama

      

3.750%, 4-17-26

   $ 200     $ 213  
   

 

 

  
 

Peru – 1.2%

 

Republic of Peru:

      

2.783%, 1-23-31

     100       100  

1.862%, 12-1-32

     100       91  
   

 

 

  
      191  
   

 

 

  
 

Qatar – 1.3%

 

Qatar Government Bond

      

3.875%, 4-23-23

     200       208  
   

 

 

  
 

Uruguay – 0.3%

 

Republica Orient Uruguay

      

4.500%, 8-14-24

     50       53  
   

 

 

  
 

TOTAL OTHER GOVERNMENT SECURITIES – 5.8%

 

   $ 960  

(Cost: $1,002)

 

    
 
UNITED STATES GOVERNMENT
OBLIGATIONS		              

United States – 11.9%

 

U.S. Treasury Bonds

      

0.875%, 11-15-30

     200       190  
   

 

 

  

U.S. Treasury Notes:

      

2.125%, 9-30-24

     100       103  

2.250%, 11-15-25

     90       94  

0.375%, 11-30-25

     300       291  

0.750%, 4-30-26

     400       392  
UNITED STATES GOVERNMENT
OBLIGATIONS (Continued)		   Principal     Value  

United States (Continued)

 

2.375%, 5-15-27

   $ 125     $ 132  

0.375%, 7-31-27

     200       190  

0.375%, 9-30-27

     300       284  

0.625%, 11-30-27

     100       96  

1.000%, 7-31-28

     200       195  
   

 

 

  
      1,967  
   

 

 

  
 

TOTAL UNITED STATES GOVERNMENT OBLIGATIONS – 11.9%

 

   $ 1,967  

(Cost: $2,008)

 

    
 
SHORT-TERM SECURITIES   Shares         

Money Market Funds (D) – 2.3%

 

State Street Institutional U.S. Government Money Market Fund – Premier Class
0.030%

     201       201  

Dreyfus Institutional Preferred Government Money Market Fund – Institutional Shares 0.010% (E)

     179       179  
   

 

 

  
      380  
   

 

 

  
 

TOTAL SHORT-TERM
SECURITIES – 2.3%

 

   $ 380  

(Cost: $380)

 

    
 

TOTAL INVESTMENT
SECURITIES – 100.2%

 

   $ 16,502  

(Cost: $16,183)

 

    
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (0.2)%

 

     (34 ) 
 

NET ASSETS – 100.0%

 

   $ 16,468  
 

Notes to Schedule of Investments

 

(A)

Securities were purchased pursuant to an exemption from registration available under Rule 144A under the Securities Act of 1933 and may only be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2021 the total value of these securities amounted to $9,285 or 56.4% of net assets.

 

(B)

All or a portion of securities with an aggregate value of $215 are on loan.

 

(C)

Other Government Securities may include emerging markets sovereign, quasi-sovereign, corporate and supranational agency and organization debt securities.

 

(D)

Rate shown is the annualized 7-day yield at December 31, 2021.

 

(E)

Investment made with cash collateral received from securities on loan.

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Corporate Debt Securities

   $ —      $ 13,195      $ —  

Other Government Securities

     —        960        —  

United States Government Obligations

     —        1,967        —  

Short-Term Securities

     380        —        —  

Total

   $ 380      $ 16,122      $ —  

The following acronym is used throughout this schedule:

GTD = Guaranteed

 

     
    2021       ANNUAL REPORT       31  

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP GLOBAL BOND (in thousands)

 

 

 

DECEMBER 31, 2021

 

Country Diversification

 

(as a % of net assets)

 

United States

     23.8%  

Mexico

     8.7%  

Chile

     6.9%  

Brazil

     5.0%  

China

     4.9%  

Peru

     4.5%  

United Kingdom

     4.5%  

South Korea

     3.8%  

India

     3.6%  

Indonesia

     2.8%  

Panama

     2.5%  

Colombia

     2.5%  

United Arab Emirates

     2.4%  

Netherlands

     1.9%  

Bermuda

     1.8%  

Country Diversification (Continued)

 

Canada

     1.7%  

Japan

     1.4%  

Argentina

     1.3%  

Nigeria

     1.3%  

Hong Kong

     1.3%  

Austria

     1.3%  

Qatar

     1.3%  

Isle of Man

     1.3%  

Australia

     1.3%  

Saudi Arabia

     1.2%  

Malaysia

     1.2%  

British Virgin Islands

     1.2%  

Luxembourg

     1.1%  

Venezuela

     1.1%  

Other Countries

     0.3%  

Other+

     2.1%  
 

 

+Includes liabilities (net of cash and other assets), and cash equivalents

 

See Accompanying Notes to Financial Statements.

 

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MANAGEMENT DISCUSSION   DELAWARE IVY VIP GLOBAL EQUITY INCOME

 

 

 

(UNAUDITED)

 

On September 13, 2021, the Board of Trustees (Board) of the Ivy Variable Insurance Portfolios approved the appointment of the portfolio manager team of Jens Hansen, Klaus Petersen, CFA, Claus Juul, Åsa Annerstedt, Allan Saustrup Jensen, CFA, CAIA®, and Chris Gowlland, CFA of Delaware Management Company (DMC) as new portfolio managers. In connection with this change, the Board approved applicable revisions to the Portfolio’s investment strategies and benchmark. All changes took effect on November 15, 2021.

Effective November 15, 2021, the Portfolio’s new benchmark index is the MSCI World Index. The portfolio managers believe that this index is more consistent with the investment philosophy of the Portfolio and more reflective of the types of securities in which the Portfolio invests than the previous benchmark index. Both the new benchmark index and the Portfolio’s previous benchmark index are included for comparison purposes.

Below, Jens Hansen, Klaus Petersen, CFA, Claus Juul, Åsa Annerstedt, Allan Saustrup Jensen, CFA, CAIA®, and Chris Gowlland, CFA, portfolio managers of Delaware Ivy VIP Global Equity Income, discuss positioning, performance and results for the fiscal year ended December 31, 2021.

Fiscal Year Performance

 

 

For the 12 Months Ended December 31, 2021

         

Delaware Ivy VIP Global Equity Income (Class II shares at net asset value)

      16.97%  

Benchmark

         

MSCI World Index

      21.82%  

(generally reflects the performance of securities around the world)

         

FTSE All-World High Dividend Yield Index

      17.89%  

(generally reflects the performance of securities with higher-than-average dividend yields in the global market)

         

Please note that Portfolio returns include applicable fees and expenses, whereas the index returns do not include any such fees. Also, the Portfolio’s performance data does not take into account any product expenses or charges associated with owning a variable life or annuity policy, which is invested in Ivy Variable Insurance Portfolios.

 

Market review

 

For the past 12 months, investors have closely watched the expansion of the external shock the coronavirus pandemic caused. And as much as everyone wanted it to transition into an epidemic and eventually disappear, COVID-19 continued to affect every industry and sector, both short-term and long-term, disrupting global supply chains.

Despite the resurgence of COVID-19 characterized by the global spread of the Delta variant during the year and the appearance of the new Omicron variant at the end of the year, the financial bull market of 2021 ended on a strong note. The MSCI World Index gained more than 21%, following central banks and governments providing financial support; the optimism generated by learning to better handle the pandemic; and the positive economic effects of rising vaccination rates.

Also, at the center of investors’ focus during the fall were higher energy costs and higher inflation, whether transitory or on track to reach the high levels seen in the 1970s. But the mere presence of the currently higher inflation level, coupled with continued suppressed interest rates, provides some of the lowest real interest rates on record. We believe 2022 may be a year when central banks finally change course and realize that money printing, while it can be a temporary relief, is not a sustainable way to global prosperity. We think this may lead to a greater focus on capital efficiency and a reduction in the proliferation of zombie businesses (that is, nonviable firms with low growth prospects that survive on cheap credit).

Performance review

 

The Portfolio underperformed relative to its benchmark index for the fiscal year. During the first quarter, sector allocation was the main driver of relative underperformance, while slightly positive stock selection offset some of the sector allocation drag. The Portfolio’s overweight positions in utilities and healthcare as well as underweight position in energy hurt relative performance.

During the second quarter, stock selection was the main driver of relative underperformance along with slightly negative sector allocation. Currency slightly aided performance for the period even as the Portfolio was underweight the US dollar,

 

     
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which weakened 1% versus other global currencies, but was much stronger than some currencies we were also underweight. The Portfolio’s overweight positions in utilities hurt relative performance. Stock selection was most positive in healthcare, while selection in consumer discretionary, utilities, and industrials were a drag on relative performance. Geographically, stock selection was positive in the US while negative in the Europe (Germany) and Asia (Japan).

The Portfolio outperformed the benchmark during the third quarter primarily driven by strong stock selection. From an individual security point of view, the Portfolio’s holdings in ORIX Corp., Axa S.A., ConocoPhillips, Tokio Marine Holdings, Inc. and Morgan Stanley were the strongest contributors to performance. The Portfolio no longer holds Axa S.A., ConocoPhillips, or Morgan Stanley.

The Portfolio underperformed the benchmark during the fourth quarter. An underweight allocation and poor stock selection in the information technology sector was a main detractor from performance.

Outlook

 

We think it is difficult to grasp whether inflation is transitory or here to stay. According to Fed Chairman Jerome Powell, the Fed is ready to remove the reference to “transitory” when discussing inflation. But the mere presence of the currently higher inflation level, coupled with continued suppressed interest rates, provides some of the lowest real interest rates on record. To find an equally low real interest rate in recent history, we must go back to the 1970s and early 1980s. We believe this financial repression is one of the strong arguments for equities. Underlining the Fed’s more hawkish stance since September and November, it has accelerated tapering of its monthly asset purchases to $30 billion, up from $15 billion.

Coinciding with the brutal stock market volatility of February-March 2020 and the forceful injections of stimulus from governments and central banks that commenced globally in the months that followed, the Renaissance IPO Index, which tracks newly listed US-based initial public offerings (IPOs), handily outperformed the S&P 500® Index in 2020. However, relatively quickly in 2021, the Renaissance IPO Index began to underperform the S&P 500 Index. This underperformance escalated when the Fed changed its language about inflation and tapering.

As stated, we believe 2022 may be a year in which central banks finally change course and realize that printing money, which may offer temporary relief, is not a sustainable path to global prosperity.

Effective July 1, 2021, the Portfolio name changed from Ivy VIP Global Equity Income.

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

Past performance is not a guarantee of future results. The value of the Portfolio’s shares will change, and you could lose money on your investment.

Investing involves risk, including the possible loss of principal.

International investments entail risks including fluctuation in currency values, differences in accounting principles, or economic or political instability. Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility, lower trading volume, and higher risk of market closures. In many emerging markets, there is substantially less publicly available information and the available information may be incomplete or misleading. Legal claims are generally more difficult to pursue.

Natural or environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis, and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics, have been and can be highly disruptive to economies and markets, adversely impacting individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Portfolio’s investments. Given the increasing interdependence among global economies and markets, conditions in one country, market, or region are increasingly likely to adversely affect markets, issuers, and/or foreign exchange rates in other countries. These disruptions could prevent the Portfolio from executing advantageous investment decisions in a timely manner and could negatively impact the Portfolio’s ability to achieve its investment objective. Any such event(s) could have a significant adverse impact on the value and risk profile of the Portfolio.

 

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The opinions expressed in this report are those of the portfolio managers and are current only through the end of the period of the report as stated on the cover. The portfolio managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged, and includes reinvested dividends and does not include fees. One cannot invest directly in an index, nor is an index representative of Delaware Ivy VIP Global Equity Income.

 

 

     
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PORTFOLIO HIGHLIGHTS   DELAWARE IVY VIP GLOBAL EQUITY INCOME(a)

 

 

 

ALL DATA IS AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Asset Allocation

 

Stocks

     99.3%  

Consumer Staples

     42.1%  

Health Care

     23.3%  

Consumer Discretionary

     9.6%  

Industrials

     7.6%  

Information Technology

     7.2%  

Materials

     4.2%  

Communication Services

     3.3%  

Financials

     1.5%  

Utilities

     0.5%  

Energy

     0.0%  

Liabilities (Net of Cash and Other Assets), and Cash Equivalents+

     0.7%  

Country Weightings

 

Europe

     58.5%  

France

     13.4%  

Germany

     11.5%  

Switzerland

     9.7%  

United Kingdom

     7.4%  

Sweden

     6.2%  

Spain

     3.9%  

Other Europe

     6.4%  

North America

     34.1%  

United States

     34.1%  

Pacific Basin

     6.7%  

Japan

     6.7%  

Other

     0.0%  

Liabilities (Net of Cash and Other Assets), and Cash Equivalents+

     0.7%  
 

 

Top 10 Equity Holdings

 

Company    Sector      Industry

Lamb Weston Holdings, Inc.

   

Consumer Staples

     

Packaged Foods & Meats

Nestle S.A., Registered Shares

   

Consumer Staples

     

Packaged Foods & Meats

Diageo plc

   

Consumer Staples

     

Distillers & Vintners

Pfizer, Inc.

   

Health Care

     

Pharmaceuticals

Amadeus IT Holding S.A.

   

Information Technology

     

Data Processing & Outsourced Services

L Air Liquide S.A.

   

Materials

     

Industrial Gases

Kimberly-Clark Corp.

   

Consumer Staples

     

Household Products

Fresenius Medical Care AG & Co. KGaA

   

Health Care

     

Health Care Services

Koninklijke Ahold Delhaize N.V.

   

Consumer Staples

     

Food Retail

Danone S.A.

   

Consumer Staples

     

Packaged Foods & Meats

See your advisor or www.ivyinvestments.com for more information on the Portfolio’s most recently published Top 10 Equity Holdings.

+Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

(a)Effective July 1, 2021, the name of Ivy VIP Global Equity Income changed to Delaware Ivy VIP Global Equity Income.

 

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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT   DELAWARE IVY VIP GLOBAL EQUITY INCOME(a)

 

 

 

(UNAUDITED)

 

LOGO

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class II  

1-year period ended 12-31-21

      16.97%  

5-year period ended 12-31-21

      8.69%  

10-year period ended 12-31-21

      9.86%  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

 

(a)

Effective July 1, 2021, the name of Ivy VIP Global Equity Income changed to Delaware Ivy VIP Global Equity Income.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

(b) Effective November 15, 2021, the Portfolio’s new benchmark is the MSCI World Index. DMC believes that this index is more reflective of the types of securities that the Portfolio invests in. Both the new benchmark and the Portfolio’s previous benchmark noted above are included for comparison purposes.

 

     
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Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP GLOBAL EQUITY INCOME (in thousands)

 

 

 

DECEMBER 31, 2021

 

COMMON STOCKS   Shares     Value  

Denmark

 

 

Health Care – 3.0%

 

Novo Nordisk A/S, Class B

     78     $ 8,786  
   

 

 

  
 

Total Denmark – 3.0%

 

   $ 8,786  

France

 

 

Communication Services – 3.3%

 

Orange S.A.

     629       6,744  

Publicis Groupe S.A.

     43       2,918  
   

 

 

  
      9,662  
   

 

 

  
 

Consumer Discretionary – 2.5%

 

Sodexo S.A.

     84       7,341  
   

 

 

  
 

Consumer Staples – 3.3%

 

Danone S.A.

     156       9,668  
   

 

 

  
 

Health Care – 0.5%

 

Sanofi-Aventis

     14       1,371  
   

 

 

  
 

Industrials – 0.0%

 

Schneider Electric S.A.

     — *      30  
   

 

 

  
 

Materials – 3.8%

 

L Air Liquide S.A.

     63       11,022  
   

 

 

  
 

Total France – 13.4%

 

   $ 39,094  

Germany

 

 

Communication Services – 0.0%

 

Deutsche Telekom AG, Registered Shares

     2       29  
   

 

 

  
 

Consumer Discretionary – 2.9%

 

adidas AG

     30       8,613  
   

 

 

  
 

Health Care – 3.5%

 

Fresenius Medical Care AG & Co. KGaA

     157       10,215  
   

 

 

  
 

Industrials – 1.5%

 

Knorr-Bremse AG

     44       4,384  

Siemens AG

     — *      17  
   

 

 

  
      4,401  
   

 

 

  
 

Information Technology – 3.1%

 

SAP AG

     63       8,998  
   

 

 

  
 

Utilities – 0.5%

 

RWE Aktiengesellschaft

     36       1,457  
   

 

 

  
 

Total Germany – 11.5%

 

   $ 33,713  

Ireland

 

 

Materials – 0.0%

 

CRH plc

     — *      16  
   

 

 

  
 

Total Ireland – 0.0%

 

   $ 16  
COMMON STOCKS (Continued)   Shares     Value  

Japan

 

 

Consumer Staples – 6.7%

 

Asahi Breweries Ltd.

     113     $ 4,384  

Kao Corp. (A)

     118       6,201  

Kirin Brewery Co. Ltd. (A)

     2       27  

Lawson, Inc.

     68       3,241  

Seven & i Holdings Co. Ltd.

     137       6,022  
   

 

 

  
      19,875  
   

 

 

  
 

Financials – 0.0%

 

ORIX Corp.

     1       18  

Tokio Marine Holdings, Inc.

     — *      17  
   

 

 

  
      35  
   

 

 

  
 

Industrials – 0.0%

 

ITOCHU Corp.

     1       21  
   

 

 

  
 

Total Japan – 6.7%

 

   $ 19,931  

Netherlands

 

 

Consumer Staples – 3.4%

 

Koninklijke Ahold Delhaize N.V.

     287       9,857  
   

 

 

  
 

Total Netherlands – 3.4%

 

   $ 9,857  

South Africa

 

 

Energy – 0.0%

 

Thungela Resources Ltd. (B)

     — *      — * 
   

 

 

  
 

Total South Africa – 0.0%

 

   $ — * 

Spain

 

 

Information Technology – 3.9%

 

Amadeus IT Holding S.A.

     171       11,559  
   

 

 

  
 

Total Spain – 3.9%

 

   $ 11,559  

Sweden

 

 

Consumer Discretionary – 1.5%

 

H & M Hennes & Mauritz AB

     231       4,532  
   

 

 

  
 

Consumer Staples – 2.4%

 

Svenska Cellulosa Aktiebolaget SCA (publ), Class B

     213       6,964  
   

 

 

  
 

Energy – 0.0%

 

Lundin Energy AB

     1       26  
   

 

 

  
 

Industrials – 2.3%

 

Securitas AB, Class B

     481       6,618  
   

 

 

  
 

Total Sweden – 6.2%

 

   $ 18,140  

Switzerland

 

 

Consumer Discretionary – 2.7%

 

Swatch Group Ltd. (The), Bearer Shares

     26       7,839  
   

 

 

  
COMMON STOCKS (Continued)   Shares     Value  

Consumer Staples – 4.2%

 

Nestle S.A., Registered Shares

     89     $ 12,465  
   

 

 

  
 

Financials – 0.0%

 

Zurich Financial Services, Registered Shares

     — *      22  
   

 

 

  
 

Health Care – 2.8%

 

Roche Holdings AG, Genusscheine

     20       8,214  
   

 

 

  
 

Total Switzerland – 9.7%

 

   $ 28,540  

United Kingdom

 

 

Consumer Staples – 4.2%

 

Diageo plc

     228       12,439  

Unilever plc

     — *      16  
   

 

 

  
      12,455  
   

 

 

  
 

Financials – 0.0%

 

3i Group plc

     2       31  
   

 

 

  
 

Health Care – 3.0%

 

AstraZeneca plc

     12       1,360  

Smith & Nephew plc

     445       7,791  
   

 

 

  
      9,151  
   

 

 

  
 

Industrials – 0.2%

 

Intertek Group plc

     8       618  
   

 

 

  
 

Materials – 0.0%

 

Anglo American plc

     1       30  
   

 

 

  
 

Total United Kingdom – 7.4%

 

   $ 22,285  

United States

 

 

Consumer Discretionary – 0.0%

 

V.F. Corp.

     — *      29  
   

 

 

  
 

Consumer Staples – 17.9%

 

Clorox Co. (The)

     35       6,026  

ConAgra Foods, Inc.

     198       6,772  

General Mills, Inc.

     126       8,503  

Ingredion, Inc.

     84       8,070  

Kimberly-Clark Corp.

     72       10,222  

Lamb Weston Holdings, Inc.

     204       12,923  

Procter & Gamble Co. (The)

     — *      29  
   

 

 

  
      52,545  
   

 

 

  
 

Health Care – 10.5%

 

CVS Caremark Corp.

     6       648  

Henry Schein, Inc. (B)

     118       9,176  

Merck & Co., Inc.

     123       9,401  

Pfizer, Inc.

     198       11,688  
   

 

 

  
      30,913  
   

 

 

  
 

Industrials – 3.6%

 

3M Co.

     41       7,363  

Parker Hannifin Corp.

     10       3,216  

Raytheon Technologies Corp.

     — *      30  
   

 

 

  
      10,609  
   

 

 

  
 

 

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SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP GLOBAL EQUITY INCOME (in thousands)

 

 

 

DECEMBER 31, 2021

 

COMMON STOCKS (Continued)   Shares     Value  

Information Technology – 0.2%

 

Cisco Systems, Inc.

     11     $ 709  
   

 

 

  
 

Materials – 0.4%

 

Eastman Chemical Co.

     10       1,216  
   

 

 

  
 

Utilities – 0.0%

 

Exelon Corp.

     1       31  

Public Service Enterprise Group, Inc.

     — *      29  
   

 

 

  
      60  
   

 

 

  
 

Total United States – 32.6%

 

   $ 96,081  
 

TOTAL COMMON STOCKS – 97.8%

 

   $ 288,002  

(Cost: $276,443)

 

    
 
INVESTMENT FUNDS              

United States – 1.5%

 

iShares ESG Aware MSCI EAFE ETF

     10       762  

Vanguard FTSE Developed Markets ETF

     16       821  

Vanguard S&P 500 ETF

     6       2,676  
   

 

 

  
      4,259  
   

 

 

  
 

TOTAL INVESTMENT FUNDS – 1.5%

 

   $ 4,259  

(Cost: $4,320)

 

SHORT-TERM SECURITIES   Shares     Value  

Money Market Funds (C) – 2.9%

 

State Street Institutional U.S. Government Money Market Fund – Premier Class 0.030%

     2,511     $ 2,511  

Dreyfus Institutional Preferred Government Money Market Fund – Institutional Shares 0.010% (D)

     5,932       5,932  
   

 

 

  
      8,443  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 2.9%

 

   $ 8,443  

(Cost: $8,443)

 

    
 

TOTAL INVESTMENT
SECURITIES – 102.2%

 

   $ 300,704  

(Cost: $289,206)

 

    
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (2.2)%

 

     (6,344 ) 
 

NET ASSETS – 100.0%

 

   $ 294,360  

    

 

Notes to Schedule of Investments

 

*

Not shown due to rounding.

 

(A)

All or a portion of securities with an aggregate value of $5,591 are on loan.

 

(B)

No dividends were paid during the preceding 12 months.

 

(C)

Rate shown is the annualized 7-day yield at December 31, 2021.

 

(D)

Investment made with cash collateral received from securities on loan.

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1     Level 2      Level 3  

Assets

       

Investments in Securities

       

Common Stocks

       

Communication Services

   $ 9,662     $ 29      $ —  

Consumer Discretionary

     7,370       20,984        —  

Consumer Staples

     84,525       39,304        —  

Energy

     — *      26        —  

Financials

     31       57        —  

Health Care

     41,435       27,215        —  

Industrials

     11,257       11,040        —  

Information Technology

     709       20,557        —  

Materials

     12,284       —        —  

Utilities

     60       1,457        —  

Total Common Stocks

   $ 167,333     $ 120,669      $ —  

Investment Funds

     4,259       —        —  

Short-Term Securities

     8,443       —        —  

Total

   $ 180,035     $ 120,669      $ —  

 

     
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SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP GLOBAL EQUITY INCOME (in thousands)

 

 

 

DECEMBER 31, 2021

 

Market Sector Diversification

 

(as a % of net assets)

 

Consumer Staples

     42.1%  

Health Care

     23.3%  

Consumer Discretionary

     9.6%  

Industrials

     7.6%  

Information Technology

     7.2%  

Materials

     4.2%  

Communication Services

     3.3%  

Financials

     1.5%  

Utilities

     0.5%  

Energy

     0.0%  

Other+

     0.7%  

    

 

 

+Includes liabilities (net of cash and other assets), and cash equivalents

 

See Accompanying Notes to Financial Statements.

 

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MANAGEMENT DISCUSSION   DELAWARE IVY VIP GLOBAL GROWTH

 

 

 

(UNAUDITED)

 

On September 13, 2021, the Board of Trustees (Board) of the Ivy Variable Insurance Portfolios approved the appointment of the portfolio manager team of F. Chace Brundige and Aditya Kapoor of Delaware Management Company as new portfolio managers. In connection with this change, the Board approved applicable revisions to the Portfolio’s investment strategies and benchmark. In addition, on November 1, 2021, it was announced that Charles John was being added as an additional portfolio manager. All changes took effect on November 15, 2021.

Below, Chace Brundige, CFA, Aditya Kapoor, CFA, and Charles John, portfolio managers of Delaware Ivy VIP Global Growth, discuss positioning, performance and results for the fiscal year ended December 31, 2021.

Fiscal Year Performance

 

 

For the 12 Months Ended December 31, 2021

         

Delaware Ivy VIP Global Growth (Class II shares at net asset value)

      17.86%  

Benchmark

         

MSCI All Country World Index (Gross)

      19.04%  

(generally reflects the performance of equity markets in developed and emerging markets)

         

MSCI All Country World Index (Net)

      18.54%  

(generally reflects the performance of equity markets in developed and emerging markets)

         

MSCI World Index

      21.82%  

(generally reflects the performance of securities markets around the world)

         

Please note that Portfolio returns include applicable fees and expenses, whereas the index returns do not include any such fees. Also, the Portfolio’s performance data does not take into account any product expenses or charges associated with owning a variable life or annuity policy, which is invested in Ivy Variable Insurance Portfolios.

Index “net” return approximates the minimum possible dividend reinvestment, after deduction of withholding tax at the highest possible rate. Index “gross” return approximates the maximum possible dividend reinvestment.

Effective November 15, 2021, the Portfolio’s new benchmark is the MSCI ACWI Index. DMC believes that this index is more reflective of the types of securities that the Portfolio invests in. Both the new benchmark and the Portfolio’s previous benchmark noted above are included for comparison purposes.

 

A year in review

 

Nearly two years into one of history’s greatest human and economic shocks, we seem to be nearing the later and hopefully last phases of the COVID-19 pandemic. Yet, we are still faced with risks and lasting changes to the global corporate landscape. Some of these shifts are a direct result of the pandemic (the ultimate impact of hybrid work, sustainability of pandemic beneficiaries and recovery of losers, global travel, the supply chain, disappearance of workers in the consumer service sectors, etc.), while others have been percolating and are an indirect result of the pandemic such as the trajectory of inflation and US Federal Reserve (Fed) policy.

While these risks were well documented, by most accounts, markets were not concerned. Many major global equity indexes ended the year at or near all-time highs, fixed-income spreads remained historically tight, and volatility was generally at low levels. Much of this can be attributed to what has been impressive execution by many companies. Yes, certain service industries (airlines, hotels, restaurants, movie theatres, cruise lines, etc.) have struggled, and autos have been supply chain constrained, but many industries are thriving. Technology continues to proliferate as software companies, media, ecommerce, and semi-conductors have done well. Additionally, health care continues to advance, and industrials have been thriving as building products, machinery, and automation are in high demand. And after years of underinvestment, legacy energy businesses are experiencing a resurgence.

The year was not without challenges. Despite COVID-19 vaccine rollouts, the world was challenged with the Delta variant and the emergence of Omicron as the year ended. Areas of the emerging world were hit particularly hard, specifically India and Brazil, which faced real human crises during the Delta variant wave.

Chinese regulators took markets by surprise as they waged a battle with many of their corporate champions as they look to avoid monopolistic dynamics that could hurt small- and medium-sized businesses and consumers. The regulatory framework is still unclear, and valuations remain compressed. Inflationary pressure grew throughout the year, and the Fed became more hawkish. It appears monetary policy is shifting.

Performance for the year

 

For the fiscal year, the Portfolio posted positive performance but underperformed its benchmark index. The largest detractors from performance included poor stock selection and an overweight allocation to consumer discretionary as well

 

     
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as poor stock selection in information technology and financials. On the positive side, stock selection in industrials, health care, and energy were strong. Generally, stock selection in the US underperformed, while international holdings did well on a relative basis.

On an individual stock basis, the top detractors from performance were Ping An Insurance Group Co. of China Ltd., Alibaba Group Holding Ltd., and PayPal, Inc. The Portfolio no longer holds Ping An Insurance Group or Alibaba Group Holding Ltd. Ping An Insurance Group, a Chinese insurance company, struggled as pandemic-related border control with Hong Kong weighed on the company’s high-growth life insurance business. Alibaba, a Chinese ecommerce giant, was down as Chinese regulators began to tighten their grip on the large Chinese company’s data and changed monopolistic practices that gave Alibaba an advantage over smaller competitors and hurt consumers. PayPal, the US digital payments company, was down sharply in the final quarter of the fiscal year after hitting several snags, including rumors that the company was going to make an uncharacteristically large acquisition and after they lowered guidance.

On the positive side, Ambarella, Inc., Intuit, Inc., and Canadian Natural Resources Ltd. were the greatest contributors. Ambarella, a US-based semiconductor company that specializes in video and imaging processing, continued to execute and get new design wins. Sentiment trended higher as the company is becoming a leader in automotive semiconductors. Intuit has continued to execute as demand for their financial management software benefitted through the pandemic. The company has an aggressive growth strategy and has made some strategic acquisitions to gain additional market share. Canadian Natural Resources was up as energy prices rose. We believe the stock was severely undervalued, leaving an extreme price dislocation that we feel justified the position regardless of energy price performance.

Outlook

 

As we look ahead to the new fiscal year, we begin to search for more clarity on key issues such as the pandemic, inflation, and central bank policy, and how that will translate to corporate earnings and stock valuations. With that, as we have seen over the last year, there will be surprises. However, these environments can be particularly fruitful for active managers as overblown stock reactions and volatility may allow investors to capture these opportunities. Our core mandate grants us the ability to capitalize on perceived dislocations across various types of businesses.

We are hard pressed to make a prediction of how heated inflation will be or when the Fed and other central banks will take action to combat it. We anticipate that certain inflationary pressures will alleviate while others will remain high. However, we are unsure we can handicap those impacts as we look out several years. In fact, the unpredictability of these risks reiterates our confidence in focusing on stock selection, while neutralizing non-idiosyncratic risks to the extent our investment mandate allows. We will remain macro aware, while gearing our focus on finding companies that may drive growth despite these uncontrollable pressures.

One area that we believe has opportunity is emerging markets, which was weak through most of 2021. Between harsh and unfortunate COVID-19 waves, particularly in India, Brazil, and South Africa, regulation in China, governmental volatility in Brazil, and the threat of inflation/higher global interest rates, there has been a lot of bad news in emerging markets. As such, we believe it has created an opportunity to invest in strong companies at a discount. We continue to assess the emerging-market landscape and take a methodical approach toward investing in the region.

After a year that leaves us with many question marks, we believe that 2022 is shaping up to be a year where we begin to see answers emerge. The pandemic, we hope, shifts toward a more manageable endemic, inflationary pressures are sorted into those that are sustained versus transitory, China provides color on regulation and provides needed stimulus to their economy, and central banks are more definitive in the direction they plan to go with policy. Regardless of what happens through the macro lens, we remain confident in the direction we continue to take Portfolio.

Effective July 1, 2021, the Portfolio name changed from Ivy VIP Global Growth.

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

Past performance is not a guarantee of future results. The value of the Portfolio’s shares will change, and you could lose money on your investment.

Investing involves risk, including the possible loss of principal.

 

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International investments entail risks including fluctuation in currency values, differences in accounting principles, or economic or political instability. Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility, lower trading volume, and higher risk of market closures. In many emerging markets, there is substantially less publicly available information and the available information may be incomplete or misleading. Legal claims are generally more difficult to pursue.

Risk is increased in a concentrated portfolio since it holds a limited number of securities with each investment having a greater effect on the overall performance.

Natural or environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis, and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics, have been and can be highly disruptive to economies and markets, adversely impacting individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Portfolio’s investments. Given the increasing interdependence among global economies and markets, conditions in one country, market, or region are increasingly likely to adversely affect markets, issuers, and/or foreign exchange rates in other countries. These disruptions could prevent the Portfolio from executing advantageous investment decisions in a timely manner and could negatively impact the Portfolio’s ability to achieve its investment objective. Any such event(s) could have a significant adverse impact on the value and risk profile of the Portfolio.

The opinions expressed in this report are those of the portfolio managers and are current only through the end of the period of the report as stated on the cover. The portfolio managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged, and includes reinvested dividends and does not include fees. One cannot invest directly in an index, nor is an index representative of Delaware Ivy VIP Global Growth.

 

     
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PORTFOLIO HIGHLIGHTS   DELAWARE IVY VIP GLOBAL GROWTH(a)

 

 

 

ALL DATA IS AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Asset Allocation

 

Stocks

     98.6%  

Information Technology

     28.2%  

Consumer Discretionary

     15.7%  

Industrials

     15.0%  

Financials

     13.3%  

Health Care

     11.6%  

Communication Services

     7.1%  

Energy

     5.5%  

Consumer Staples

     2.2%  

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

     1.4%  

 

Country Weightings

 

North America

     64.6%  

United States

     62.4%  

Other North America

     2.2%  

Europe

     24.0%  

United Kingdom

     6.9%  

France

     6.5%  

Germany

     4.8%  

Other Europe

     5.8%  

Pacific Basin

     10.0%  

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

     1.4%  
 

 

Top 10 Equity Holdings

 

Company    Country      Sector      Industry

Microsoft Corp.

   

United States

     

Information Technology

     

Systems Software

Amazon.com, Inc.

   

United States

     

Consumer Discretionary

     

Internet & Direct Marketing Retail

Apple, Inc.

   

United States

     

Information Technology

     

Technology Hardware, Storage & Peripherals

Alphabet, Inc., Class A

   

United States

     

Communication Services

     

Interactive Media & Services

Airbus SE

   

France

     

Industrials

     

Aerospace & Defense

Intuit, Inc.

   

United States

     

Information Technology

     

Application Software

Ingersoll-Rand, Inc.

   

United States

     

Industrials

     

Industrial Machinery

Schneider Electric S.A.

   

France

     

Industrials

     

Electrical Components & Equipment

Ambarella, Inc.

   

United States

     

Information Technology

     

Semiconductors

Morgan Stanley

   

United States

     

Financials

     

Investment Banking & Brokerage

See your advisor or www.ivyinvestments.com for more information on the Portfolio’s most recently published Top 10 Equity Holdings.

+Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

(a)Effective July 1, 2021, the name of Ivy VIP Global Growth changed to Delaware Ivy VIP Global Growth.

 

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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT   DELAWARE IVY VIP GLOBAL GROWTH(a)

 

 

 

(UNAUDITED)

 

LOGO

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class II  

1-year period ended 12-31-21

      17.86%  

5-year period ended 12-31-21

      15.87%  

10-year period ended 12-31-21

      11.52%  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

 

(a)

Effective July 1, 2021, the name of Ivy VIP Global Growth changed to Delaware Ivy VIP Global Growth.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

(b) Effective November 15, 2021, the Portfolio’s new benchmark is the MSCI ACWI Index. DMC believes that this index is more reflective of the types of securities that the Portfolio invests in. Both the new benchmark and the Portfolio’s previous benchmark noted above are included for comparison purposes.

 

     
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SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP GLOBAL GROWTH (in thousands)

 

 

 

DECEMBER 31, 2021

 

COMMON STOCKS   Shares     Value  

Canada

 

 

Energy – 2.2%

 

Canadian Natural Resources Ltd.

     83     $ 3,491  
   

 

 

  
 

Total Canada – 2.2%

 

   $ 3,491  

China

 

 

Communication Services – 1.2%

 

Tencent Holdings Ltd.

     34       1,986  
   

 

 

  
 

Total China – 1.2%

 

   $ 1,986  

France

 

 

Consumer Discretionary – 1.0%

 

LVMH Moet Hennessy – Louis Vuitton

     2       1,539  
   

 

 

  
 

Industrials – 5.5%

 

Airbus SE

     36       4,638  

Schneider Electric S.A.

     21       4,165  
   

 

 

  
      8,803  
   

 

 

  
 

Total France – 6.5%

 

   $ 10,342  

Germany

 

 

Consumer Discretionary – 1.3%

 

HelloFresh SE (A)

     28       2,165  
   

 

 

  
 

Financials – 1.2%

 

Deutsche Boerse AG

     11       1,883  
   

 

 

  
 

Information Technology – 1.6%

 

Infineon Technologies AG

     54       2,512  
   

 

 

  
 

Total Germany – 4.1%

 

   $ 6,560  

India

 

 

Energy – 1.5%

 

Reliance Industries Ltd.

     75       2,390  
   

 

 

  
 

Total India – 1.5%

 

   $ 2,390  

Italy

 

 

Consumer Discretionary – 2.4%

 

Ferrari N.V.

     15       3,853  
   

 

 

  
 

Total Italy – 2.4%

 

   $ 3,853  

Japan

 

 

Financials – 1.9%

 

ORIX Corp.

     146       2,976  
   

 

 

  
 

Industrials – 1.2%

 

Recruit Holdings Co. Ltd.

     33       2,014  
   

 

 

  
 

Total Japan – 3.1%

 

   $ 4,990  
COMMON STOCKS (Continued)   Shares     Value  

South Korea

 

 

Information Technology – 1.8%

 

Samsung Electronics Co. Ltd.

     44     $ 2,916  
   

 

 

  
 

Total South Korea – 1.8%

 

   $ 2,916  

Switzerland

 

 

Health Care – 1.3%

 

Alcon, Inc.

     23       2,040  
   

 

 

  
 

Industrials – 2.1%

 

Ferguson plc

     19       3,383  
   

 

 

  
 

Total Switzerland – 3.4%

 

   $ 5,423  

Taiwan

 

 

Information Technology – 2.4%

 

Taiwan Semiconductor Manufacturing Co. Ltd. ADR

     32       3,879  
   

 

 

  
 

Total Taiwan – 2.4%

 

   $ 3,879  

United Kingdom

 

 

Communication Services – 1.1%

 

WPP Group plc

     111       1,677  
   

 

 

  
 

Consumer Discretionary – 1.8%

 

Aptiv plc (A)

     18       2,943  
   

 

 

  
 

Consumer Staples – 2.2%

 

Diageo plc

     39       2,146  

Unilever plc

     26       1,387  
   

 

 

  
      3,533  
   

 

 

  
 

Health Care – 1.8%

 

AstraZeneca plc

     15       1,818  

AstraZeneca plc ADR

     18       1,028  
   

 

 

  
      2,846  
   

 

 

  
 

Total United Kingdom – 6.9%

 

   $ 10,999  

United States

 

 

Communication Services – 4.8%

 

Alphabet, Inc., Class A (A)

     2       4,795  

Frontier Communications Corp. (A)

     69       2,040  

Pinterest, Inc., Class A (A)

     22       803  
   

 

 

  
      7,638  
   

 

 

  
 

Consumer Discretionary – 8.5%

 

Amazon.com, Inc. (A)

     2       5,745  

Darden Restaurants, Inc.

     22       3,281  

Dollar General Corp.

     5       1,107  

Skechers USA, Inc. (A)

     76       3,317  
   

 

 

  
      13,450  
   

 

 

  
 

Energy – 1.8%

 

ConocoPhillips

     41       2,939  
   

 

 

  
COMMON STOCKS (Continued)   Shares     Value  

Financials – 10.2%

 

Citigroup, Inc.

     24     $ 1,461  

CME Group, Inc.

     6       1,311  

Discover Financial Services

     17       1,998  

Goldman Sachs Group, Inc. (The)

     9       3,436  

JPMorgan Chase & Co.

     14       2,146  

Morgan Stanley

     40       3,897  

Pinnacle Financial Partners, Inc.

     23       2,163  
   

 

 

  
      16,412  
   

 

 

  
 

Health Care – 8.5%

 

Abbott Laboratories

     14       2,016  

HCA Holdings, Inc.

     7       1,698  

Johnson & Johnson

     10       1,645  

Regeneron Pharmaceuticals, Inc. (A)

     4       2,289  

Thermo Fisher Scientific, Inc.

     5       3,400  

UnitedHealth Group, Inc.

     5       2,617  
   

 

 

  
      13,665  
   

 

 

  
 

Industrials – 6.2%

 

Ingersoll-Rand, Inc.

     72       4,442  

Raytheon Technologies Corp.

     23       2,022  

Union Pacific Corp.

     13       3,294  
   

 

 

  
      9,758  
   

 

 

  
 

Information Technology – 22.4%

 

Adobe, Inc. (A)

     4       2,297  

Ambarella, Inc. (A)

     20       4,010  

Apple, Inc.

     30       5,260  

Autodesk, Inc. (A)

     3       871  

Fidelity National Information Services, Inc.

     18       2,012  

Intuit, Inc.

     7       4,569  

MasterCard, Inc., Class A

     9       3,138  

Microsoft Corp.

     23       7,616  

PayPal, Inc. (A)

     18       3,367  

Visa, Inc., Class A

     12       2,520  
   

 

 

  
      35,660  
   

 

 

  
 

Total United States – 62.4%

 

   $ 99,522  
 

TOTAL COMMON STOCKS – 97.9%

 

   $ 156,351  

(Cost: $94,500)

 

    
 
PREFERRED STOCKS              

Germany

 

 

Consumer Discretionary – 0.7%

 

Volkswagen AG, 2.260%

     5       1,100  
   

 

 

  
 

Total Germany – 0.7%

 

   $ 1,100  
 

TOTAL PREFERRED STOCKS – 0.7%

 

   $ 1,100  

(Cost: $1,592)

 

    
 

 

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SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP GLOBAL GROWTH (in thousands)

 

 

 

DECEMBER 31, 2021

 

SHORT-TERM SECURITIES   Shares     Value  

Money Market Funds (B) – 1.0%

 

State Street Institutional U.S. Government Money Market Fund – Premier Class
0.030%

     1,655     $ 1,655  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 1.0%

 

   $ 1,655  

(Cost: $1,655)

 

    
 

TOTAL INVESTMENT SECURITIES – 99.6%

 

   $ 159,106  

(Cost: $97,747)

      
 

CASH AND OTHER ASSETS, NET OF LIABILITIES – 0.4%

 

     567  
 

NET ASSETS – 100.0%

 

   $ 159,673  

    

    

 

Notes to Schedule of Investments

 

(A)

No dividends were paid during the preceding 12 months.

 

(B)

Rate shown is the annualized 7-day yield at December 31, 2021.

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

        

Communication Services

   $ 11,301      $ —      $ —  

Consumer Discretionary

     17,932        6,018        —  

Consumer Staples

     3,533        —        —  

Energy

     8,820        —        —  

Financials

     16,412        4,859        —  

Health Care

     16,511        2,040        —  

Industrials

     21,944        2,014        —  

Information Technology

     39,539        5,428        —  

Total Common Stocks

   $ 135,992      $ 20,359      $ —  

Preferred Stocks

     —        1,100        —  

Short-Term Securities

     1,655        —        —  

Total

   $ 137,647      $ 21,459      $ —  

The following acronym is used throughout this schedule:

ADR = American Depositary Receipts

 

Market Sector Diversification

 

(as a % of net assets)

 

Information Technology

     28.2%  

Consumer Discretionary

     15.7%  

Industrials

     15.0%  

Financials

     13.3%  

Health Care

     11.6%  

 

Market Sector Diversification (Continued)

 

Communication Services

     7.1%  

Energy

     5.5%  

Consumer Staples

     2.2%  

Other+

     1.4%  

 

+Includes cash and other assets (net of liabilities), and cash equivalents

 

 

 

See Accompanying Notes to Financial Statements.

 

     
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MANAGEMENT DISCUSSION   DELAWARE IVY VIP LIMITED-TERM BOND

 

 

 

(UNAUDITED)

 

On September 13, 2021, the Board of Trustees (Board) of the Ivy Variable Insurance Portfolios approved the appointment of the portfolio manager team of J. David Hillmeyer, CFA and Daniela Mardarovici, CFA of Delaware Management Company as portfolio managers. In connection with this change, the Board approved applicable revisions to the Portfolio’s investment strategies. All changes took effect on or about November 15, 2021.

Below, J. David Hillmeyer, CFA and Daniela Mardarovici, CFA, portfolio managers of Delaware Ivy VIP Limited-Term Bond, discusses positioning, performance and results for the fiscal year ended December 31, 2021.

Fiscal Year Performance

 

 

For the 12 Months Ended December 31, 2021

         

Delaware Ivy VIP Limited-Term Bond (Class II shares at net asset value)

     -0.49%  

Benchmark

         

Bloomberg 1-3 Year US Government/Credit Index

      -0.47%  

(generally reflects the performance of securities representing the bond market that have maturities between 1 and 3 years)

         

Please note that the Portfolio returns include applicable investment fees and expenses, whereas the index returns do not include any such fees. Also, the Portfolio’s performance data does not take into account any product expenses or charges associated with owning a variable life or annuity policy, which is invested in Ivy Variable Insurance Portfolios.

 

Market review

 

The economic recovery that began in 2020 continued through 2021. Gross domestic product (GDP) growth was strong, benefiting from consumers’ resilience and the significant amounts of liquidity the US Federal Reserve (Fed) provided. Positive news was abundant early in the fiscal year ended December 31, 2021. The improving US jobs market, rapid vaccination rollout, and the $1.9 trillion stimulus package Congress passed in March all helped boost confidence that the economy was returning to normal.

As the year progressed, the news became mixed. Initial efforts to pass a major infrastructure bill were pushed back by a fair bit of congressional resistance. Although a smaller version of that bill eventually passed, the broader Build Back Better Act failed to garner enough support to become law in 2021.

The housing market was the strongest it had been since the global financial crisis, aided by fiscal stimulus and the Fed’s accommodative monetary policies. Investors appeared comfortable with the idea that interest rates were rising for good reason, leading them to continue to buy non-Treasury fixed-income investments.

In spring 2021, risk markets rose, and economic growth remained robust as vaccination counts climbed at a time when inflation numbers were increasing. The yield curve began to flatten, and the Fed hinted at a possible change in monetary policy; however, as company fundamentals continued to improve, investors remained resilient and continued to support markets. A similar narrative was unfolding in European markets as German rates climbed higher but remained in negative territory.

Interestingly, in the summer of 2021, the Fed highlighted additional policy considerations, including climate change and equality in the workforce. These new factors meant that investors may have to adjust how the Fed’s decisions could be affected by environmental and equality concerns.

In the third and fourth quarters of 2021, COVID-19 variants Delta and Omicron resulted in rising infection rates and called into question the return to normalcy. Significantly, the Fed, which had been describing inflation as transitory, quickly abandoned that term late in the year, raising the specter that a change in policy was afoot.

Within the Portfolio

 

For the fiscal period, the Portfolio had a negative return, slightly underperforming its Bloomberg 1-3 Year US Government/Credit Index benchmark.

For the first quarter of 2021, the Portfolio underperformed its benchmark. The dramatic rise in yields and the steepening of the yield curve presented an attractive opportunity to increase duration and the Portfolio’s allocation to intermediate maturities. Approximately 8-9% was added to the Portfolio’s overall weighting in the 3- to 5-year part of the curve, raising duration slightly over the benchmark. Most of the purchases in the Portfolio were in investment-grade corporate bonds. The decision to own any bonds beyond the maturity of those in the benchmark caused the Portfolio’s underperformance in the quarter.

 

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For the second quarter of 2021, the Portfolio had a positive return, outperforming its benchmark. The Portfolio’s overweight in both corporate bonds and mortgage-backed securities significantly contributed to the performance. The underweight position in US Treasuries helped as well as many of those securities had negative returns due to rising yields in the quarter.

For the third quarter of 2021, the Portfolio had a positive return, outperforming its benchmark. The general strategy and asset allocation remained in place over the quarter. The Portfolio had an allocation of approximately 58-60% corporate bonds, 20-22% US Treasuries, and 15-18% mortgage-backed securities. The Portfolio’s overweight in both corporate bonds and mortgage-backed securities contributed to the performance. The underweight position in US Treasuries helped as well because the overall returns in US Treasuries were positive, but only slightly.

For the fourth quarter of 2021, the Portfolio experienced a negative return. The Portfolio owned about 5% in high yield, which contributed positively to performance as the asset class generated positive excess returns. An allocation of approximately 10% to commercial mortgage-backed securities (CMBS) was a modest contributor as well. An overweight to investment grade corporates combined with security selection detracted. In addition, yield curve management during the quarter weighed on the Portfolio’s return.

Outlook

 

As we enter 2022, there is growing uncertainty about what the next few months and full year may look like for monetary and fiscal policy.

We believe that fundamentals continue to support credit. The incremental yield advantage the asset class offers over lower-risk assets remains important, as the additional income continues to be critical. US-dollar assets remain attractive to foreign investors. Accordingly, we continue to maintain the Portfolio overweight to credit entering the new fiscal year.

With that fundamental backdrop remaining strong, we believe the Portfolio’s small allocation to high yield bonds should remain helpful in taking advantage of those incremental yield opportunities. Our primary focus in high yield continues to be BB-rated issues (relatively good quality within high yield), particularly in industrials companies.

In our view, further flattening of the US yield curve, particularly on the front end, could be a risk along with possible Fed policy mistakes. One could argue that a policy mistake already occurred when the Fed delayed action on historically high inflation. At a time when the central bank is pulling back quantitative easing and considering raising interest rates, investors will be focused on how effectively the Fed addresses inflation throughout the year.

With credit spreads starting 2022 wider than long-term historical averages, we don’t anticipate meaningful price appreciation. We also don’t foresee material spread widening in the first few months of the year. However, as the year progresses and the Fed embarks on a rate hiking cycle, we would anticipate a possible rise in market volatility.

Finally, geopolitical tensions have risen lately, as highlighted by increased uncertainty regarding Russia-Ukraine and the ongoing China-US rivalry as China looks to extend its influence around the world. More broadly, we believe the global rise of autocrats is worth monitoring, particularly at a time when the US, the largest democracy in the world, deals with its own challenges on the political home front.

With all these factors at play, we think market volatility is likely to increase in the coming months. However, with fundamentals relatively strong, we intend to continue to source income from spread products while keeping one eye on the Fed and the impacts that its policy responses may have on markets, and we will adjust our thinking accordingly.

Effective July 1, 2021, the Portfolio name changed from Ivy VIP Limited-Term Bond.

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

Past performance is not a guarantee of future results. As with any mutual fund, the value of the Portfolio’s shares will change, and you could lose money on your investment. Certain U.S. government securities in which the Portfolio may invest, such as Treasury securities and securities issued by the Government National Mortgage Association (Ginnie Mae), are backed by the full faith and credit of the U.S. government. However, other government securities in which the Portfolio may invest, such as securities issued by the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal Home Loan

 

     
    2021       ANNUAL REPORT       49  

Table of Contents
           

 

 

 

 

Banks (FHLB), are not backed by the full faith and credit of the U.S. government, are not insured or guaranteed by the U.S. government and, instead, may be supported only by the right of the issuer to borrow from the U.S. Treasury or by the credit of the issuer.

Fixed-income securities are subject to interest rate risk and, as such, the Portfolio’s net asset value may fall as interest rates rise. These and other risks are more fully described in the Portfolio’s prospectus.

The opinions expressed in this report are those of the portfolio managers and are current only through the end of the period of the report as stated on the cover. The portfolio managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of the Delaware Ivy VIP Limited-Term Bond.

 

50   ANNUAL REPORT   2021  
     

Table of Contents
PORTFOLIO HIGHLIGHTS   DELAWARE IVY VIP LIMITED-TERM BOND(a)

 

 

 

ALL DATA IS AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Asset Allocation

 

Bonds

     99.1%  

Corporate Debt Securities

     61.0%  

United States Government and Government Agency Obligations

     36.7%  

Asset-Backed Securities

     1.4%  

Cash and Other Assets (Net of Liabilities),
and Cash Equivalents+

     0.9%  

Quality Weightings

 

Investment Grade

     91.1%  

AAA

     10.7%  

AA

     17.1%  

A

     20.1%  

BBB

     43.2%  

Non-Investment Grade

     8.0%  

BB

     4.3%  

Non-rated

     3.7%  

Cash and Other Assets (Net of Liabilities),
and Cash Equivalents+

     0.9%  

Our preference is to always use ratings obtained from Standard & Poor’s, Moody’s, and Fitch. It is each Portfolio’s general policy to classify such security at the lower rating level if only two ratings are available. If more than two ratings are available and a median exists, the median is used. If more than two ratings exist without a median, the lower of the two middle ratings is used. We do not evaluate these ratings, but simply assign them to the appropriate credit quality category as determined by the rating agency.

(a)Effective July 1, 2021, the name of Ivy VIP Limited-Term Bond changed to Delaware Ivy VIP Limited-Term Bond.

 

 

+Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

     
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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT   DELAWARE IVY VIP LIMITED-TERM BOND(a)

 

 

 

(UNAUDITED)

 

LOGO

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class II  

1-year period ended 12-31-21

      -0.49%  

5-year period ended 12-31-21

      2.00%  

10-year period ended 12-31-21

      1.66%  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

 

(a)

Effective July 1, 2021, the name of Ivy VIP Limited-Term Bond changed to Delaware Ivy VIP Limited-Term Bond.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

52   ANNUAL REPORT   2021  
     

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SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP LIMITED-TERM BOND (in thousands)

 

 

 

DECEMBER 31, 2021

 

ASSET-BACKED SECURITIES   Principal     Value  

American Airlines Class AA Pass-Through Certificates, Series 2016-2,

      

3.200%, 6-15-28

   $ 765     $ 768  

SBA Tower Trust, Series 2014-2 (GTD by SBA Guarantor LLC and SBA Holdings LLC),

      

3.869%, 10-8-24 (A)

     2,000       2,070  

SBA Tower Trust, Series 2019-1C (GTD by SBA Guarantor LLC and SBA Holdings LLC),

      

2.836%, 1-15-25 (A)

     1,621       1,663  

SBA Tower Trust, Series 2020-1 (GTD by SBA Guarantor LLC and SBA Holdings LLC),

      

1.884%, 1-15-26 (A)

     1,155       1,153  
   

 

 

  
 

TOTAL ASSET-BACKED
SECURITIES – 1.4%

 

   $ 5,654  

(Cost: $5,682)

      
 
CORPORATE DEBT SECURITIES              

Communication Services

 

 

Cable & Satellite – 0.9%

 

Charter Communications Operating LLC and Charter Communications Operating Capital Corp.:

      

4.500%, 2-1-24

     1,215       1,293  

4.908%, 7-23-25

     1,485       1,636  

Omnicom Group, Inc. and Omnicom Capital, Inc.,

      

3.650%, 11-1-24

     700       743  
   

 

 

  
      3,672  
   

 

 

  
 

Integrated Telecommunication Services – 2.6%

 

AT&T, Inc.:

      

4.125%, 2-17-26

     1,500       1,638  

1.700%, 3-25-26

     1,350       1,344  

2.950%, 7-15-26

     1,250       1,315  

Sprint Corp.,

      

7.875%, 9-15-23

     1,721       1,898  

Verizon Communications, Inc.:

      

1.450%, 3-20-26

     800       797  

3.000%, 3-22-27

     3,020       3,193  
   

 

 

  
      10,185  
   

 

 

  
 

Movies & Entertainment – 0.8%

 

Netflix, Inc.,

      

5.875%, 2-15-25

     1,250       1,406  

TWDC Enterprises 18 Corp.,

      

7.550%, 7-15-93

     1,350       1,520  
   

 

 

  
      2,926  
   

 

 

  
 

Wireless Telecommunication Service – 1.0%

 

Crown Castle Towers LLC:

      

3.720%, 7-15-23 (A)

     745       754  

3.663%, 5-15-25 (A)

     950       988  

T-Mobile USA, Inc.,

      

3.500%, 4-15-25

     2,000       2,121  
   

 

 

  
      3,863  
   

 

 

  
 

Total Communication Services – 5.3%

 

     20,646  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Consumer Discretionary

 

 

Apparel Retail – 0.1%

 

Nordstrom, Inc.,

      

2.300%, 4-8-24

   $ 270     $ 270  
   

 

 

  
 

Apparel, Accessories & Luxury Goods – 0.4%

 

PVH Corp.,

      

4.625%, 7-10-25

     1,500       1,635  
   

 

 

  
 

Automobile Manufacturers – 1.1%

 

General Motors Co.,

      

4.875%, 10-2-23

     1,000       1,063  

Nissan Motor Co. Ltd.,

      

3.043%, 9-15-23 (A)

     1,250       1,283  

Volkswagen Group of America, Inc.,

      

0.875%, 11-22-23 (A)

     1,850       1,839  
   

 

 

  
      4,185  
   

 

 

  
 

Automotive Retail – 0.4%

 

7-Eleven, Inc.,

      

0.800%, 2-10-24 (A)

     1,000       989  

AutoNation, Inc.,

      

3.500%, 11-15-24

     525       551  
   

 

 

  
      1,540  
   

 

 

  
 

Casinos & Gaming – 0.2%

 

Genting New York LLC and Genny Capital, Inc.,

      

3.300%, 2-15-26 (A)

     725       719  

GLP Capital L.P. and GLP Financing II, Inc.,

      

5.375%, 11-1-23

     280       297  
   

 

 

  
      1,016  
   

 

 

  
 

Homebuilding – 0.8%

 

D.R. Horton, Inc.:

      

2.600%, 10-15-25

     625       646  

1.300%, 10-15-26

     500       488  

Lennar Corp.,

      

4.750%, 11-15-22 (B)

     2,000       2,048  
   

 

 

  
      3,182  
   

 

 

  
 

Internet & Direct Marketing Retail – 0.3%

 

Expedia Group, Inc.:

      

3.600%, 12-15-23

     775       806  

6.250%, 5-1-25 (A)

     220       248  
   

 

 

  
      1,054  
   

 

 

  
 

Total Consumer Discretionary – 3.3%

 

     12,882  

Consumer Staples

 

 

Agricultural Products – 0.4%

 

Cargill, Inc.,

      

1.375%, 7-23-23 (A)

     1,500       1,512  
   

 

 

  
 

Distillers & Vintners – 0.8%

 

Constellation Brands, Inc.:

      

3.200%, 2-15-23

     1,000       1,022  

4.250%, 5-1-23

     1,188       1,238  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Distillers & Vintners (Continued)

 

Diageo Capital plc (GTD by Diageo plc),

      

3.500%, 9-18-23

   $ 1,000     $ 1,042  
   

 

 

  
      3,302  
   

 

 

  
 

Food Distributors – 0.4%

 

Sysco Corp.,

      

3.750%, 10-1-25

     1,350       1,448  
   

 

 

  
 

Food Retail – 0.4%

 

Darling Ingredients, Inc.,

      

5.250%, 4-15-27 (A)

     1,648       1,703  
   

 

 

  
 

Household Products – 0.2%

 

Procter & Gamble Co. (The),

      

1.000%, 4-23-26

     750       742  
   

 

 

  
 

Packaged Foods & Meats – 1.2%

 

Conagra Brands, Inc.,

      

1.375%, 11-1-27

     955       913  

McCormick & Co., Inc.:

      

3.500%, 9-1-23

     475       491  

0.900%, 2-15-26

     1,025       992  

Tyson Foods, Inc. (GTD by Tyson Fresh Meats, Inc.),

      

3.950%, 8-15-24

     2,000       2,127  
   

 

 

  
      4,523  
   

 

 

  
 

Soft Drinks – 1.3%

 

Coca-Cola European Partners plc,

      

0.800%, 5-3-24 (A)

     1,500       1,476  

Coca-Cola Refreshments USA, Inc.,

      

8.000%, 9-15-22

     2,125       2,238  

Keurig Dr Pepper, Inc.:

      

4.057%, 5-25-23

     654       682  

0.750%, 3-15-24

     680       675  
   

 

 

  
      5,071  
   

 

 

  
 

Total Consumer Staples – 4.7%

 

     18,301  

Energy

 

 

Oil & Gas Exploration & Production – 1.0%

 

Aker BP ASA,

      

2.875%, 1-15-26 (A)

     1,325       1,374  

EQT Corp.,

      

3.000%, 10-1-22

     1,050       1,062  

Harvest Operations Corp.,

      

1.000%, 4-26-24 (A)

     1,400       1,391  
   

 

 

  
      3,827  
   

 

 

  
 

Oil & Gas Refining & Marketing – 0.3%

 

HollyFrontier Corp.,

      

2.625%, 10-1-23

     1,075       1,096  
   

 

 

  
 

Oil & Gas Storage & Transportation – 2.1%

 

Cheniere Corpus Christi Holdings LLC,

      

7.000%, 6-30-24

     500       553  

EQT Midstream Partners L.P.,

      

4.750%, 7-15-23

     506       527  
 

 

     
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SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP LIMITED-TERM BOND (in thousands)

 

 

 

DECEMBER 31, 2021

 

CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Oil & Gas Storage & Transportation (Continued)

 

Galaxy Pipeline Assets BidCo Ltd.,

      

1.750%, 9-30-27 (A)

   $ 1,468     $ 1,473  

Kinder Morgan Energy Partners L.P.,

      

3.450%, 2-15-23

     1,000       1,021  

Midwest Connector Capital Co. LLC,

      

3.625%, 4-1-22 (A)

     1,550       1,553  

Plains All American Pipeline L.P. and PAA Finance Corp.,

      

3.850%, 10-15-23

     1,800       1,868  

Sunoco Logistics Partners Operations L.P. (GTD by Sunoco Logistics Partners L.P.),

      

4.250%, 4-1-24

     1,132       1,189  
   

 

 

  
      8,184  
   

 

 

  
 

Total Energy – 3.4%

 

     13,107  

Financials

 

 

Asset Management & Custody Banks – 1.5%

 

Ares Capital Corp.:

      

3.500%, 2-10-23

     575       588  

4.250%, 3-1-25

     704       746  

Brookfield Finance, Inc. (GTD by Brookfield Asset Management, Inc.),

      

4.000%, 4-1-24

     1,150       1,213  

Citadel Finance LLC,

      

3.375%, 3-9-26 (A)

     1,783       1,782  

National Securities Clearing Corp.,

      

1.200%, 4-23-23 (A)

     350       352  

Owl Rock Capital Corp.,

      

3.400%, 7-15-26

     1,300       1,322  
   

 

 

  
      6,003  
   

 

 

  
 

Consumer Finance – 3.0%

 

Ally Financial, Inc.:

      

1.450%, 10-2-23

     3,060       3,075  

5.800%, 5-1-25

     2,150       2,428  

Discover Bank:

      

2.450%, 9-12-24

     1,850       1,895  

3.450%, 7-27-26

     2,000       2,118  

Ford Motor Credit Co. LLC,

      

2.700%, 8-10-26

     550       556  

General Motors Financial Co., Inc. (GTD by AmeriCredit Financial Services, Inc.),

      

1.200%, 10-15-24

     825       819  

Hyundai Capital America,

      

1.250%, 9-18-23 (A)

     800       800  
   

 

 

  
      11,691  
   

 

 

  
 

Diversified Banks – 3.9%

 

Bank of America Corp.:

      

4.125%, 1-22-24

     1,000       1,063  

0.523%, 6-14-24

     825       820  

4.200%, 8-26-24

     1,325       1,421  

4.000%, 1-22-25

     1,000       1,069  

1.734%, 7-22-27

     1,250       1,241  

Mitsubishi UFJ Financial Group, Inc.,

      

0.848%, 9-15-24

     1,500       1,493  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Diversified Banks (Continued)

 

Mizuho Financial Group, Inc.,

      

0.849%, 9-8-24

   $ 1,800     $ 1,792  

National Bank of Canada,

      

2.100%, 2-1-23

     1,400       1,419  

Svenska Handelsbanken AB,

      

0.625%, 6-30-23 (A)

     1,500       1,496  

U.S. Bancorp,

      

2.375%, 7-22-26

     844       878  

Wells Fargo & Co.,

      

3.000%, 4-22-26

     2,300       2,418  
   

 

 

  
      15,110  
   

 

 

  
 

Financial Exchanges & Data – 0.9%

 

Intercontinental Exchange, Inc.:

      

0.700%, 6-15-23

     1,300       1,297  

3.450%, 9-21-23

     2,080       2,162  
   

 

 

  
      3,459  
   

 

 

  
 

Investment Banking & Brokerage – 3.6%

 

Charles Schwab Corp. (The),

      

0.900%, 3-11-26

     1,600       1,562  

Goldman Sachs Group, Inc. (The):

      

3.850%, 7-8-24

     1,500       1,588  

4.250%, 10-21-25

     2,500       2,729  

1.948%, 10-21-27

     1,400       1,395  

Goldman Sachs Group, Inc. (The) (Secured Overnight Financing Rate plus 79 bps),

      

0.839%, 12-9-26 (C)

     1,300       1,309  

Morgan Stanley:

      

3.700%, 10-23-24

     1,350       1,438  

3.125%, 7-27-26

     3,607       3,825  

Morgan Stanley (3-Month U.S. LIBOR plus 110 bps),

      

4.000%, 5-31-23 (C)

     300       303  
   

 

 

  
      14,149  
   

 

 

  
 

Life & Health Insurance – 2.4%

 

Aflac, Inc.,

      

1.125%, 3-15-26

     1,210       1,189  

F&G Global Funding,

      

1.750%, 6-30-26 (A)

     850       845  

MassMutual Global Funding II,

      

0.600%, 4-12-24 (A)

     1,900       1,879  

Metropolitan Life Global Funding I,

      

0.900%, 6-8-23 (A)

     1,250       1,254  

Principal Life Global Funding II,

      

0.750%, 4-12-24 (A)

     800       795  

Protective Life Global Funding:

      

0.631%, 10-13-23 (A)(D)

     750       747  

1.618%, 4-15-26 (A)

     1,350       1,345  

Reliance Standard Life Insurance II,

      

2.150%, 1-21-23 (A)

     1,400       1,419  
   

 

 

  
      9,473  
   

 

 

  
 

Multi-Line Insurance – 0.9%

 

Athene Global Funding:

      

0.950%, 1-8-24 (A)

     1,750       1,740  

0.914%, 8-19-24 (A)

     850       838  

1.608%, 6-29-26 (A)

     1,000       983  
   

 

 

  
      3,561  
   

 

 

  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Other Diversified Financial Services – 2.7%

 

Citigroup, Inc.:

      

3.500%, 5-15-23

   $ 1,510     $ 1,561  

0.776%, 10-30-24

     1,300       1,293  

5.500%, 9-13-25

     1,000       1,132  

JPMorgan Chase & Co.:

      

3.875%, 9-10-24

     847       899  

0.653%, 9-16-24

     1,000       996  

1.045%, 11-19-26

     3,900       3,801  

1.578%, 4-22-27

     800       791  
   

 

 

  
      10,473  
   

 

 

  
 

Regional Banks – 0.5%

 

First Horizon National Corp.,

      

3.550%, 5-26-23

     2,000       2,061  
   

 

 

  
 

Specialized Finance – 1.0%

 

AerCap Ireland Capital Ltd. and AerCap Global Aviation Trust,

      

1.650%, 10-29-24

     2,000       1,997  

Corporacion Andina de Fomento,

      

2.375%, 5-12-23

     500       509  

FS KKR Capital Corp.,

      

4.750%, 5-15-22

     820       829  

LSEGA Financing plc,

      

0.650%, 4-6-24 (A)

     540       533  
   

 

 

  
      3,868  
   

 

 

  
 

Total Financials – 20.4%

 

     79,848  

Health Care

 

 

Health Care Equipment – 0.2%

 

Boston Scientific Corp.,

      

3.850%, 5-15-25

     875       942  
   

 

 

  
 

Health Care Facilities – 0.9%

 

HCA, Inc. (GTD by HCA Holdings, Inc.):

      

4.750%, 5-1-23

     656       688  

5.875%, 5-1-23

     1,469       1,557  

Universal Health Services, Inc.,

      

1.650%, 9-1-26 (A)

     1,350       1,326  
   

 

 

  
      3,571  
   

 

 

  
 

Health Care Services – 0.3%

 

Highmark, Inc.,

      

1.450%, 5-10-26 (A)

     1,375       1,348  
   

 

 

  
 

Managed Health Care – 0.7%

 

Anthem, Inc.,

      

3.350%, 12-1-24

     2,000       2,114  

Humana, Inc.:

      

0.650%, 8-3-23

     250       249  

1.350%, 2-3-27

     250       243  
   

 

 

  
      2,606  
   

 

 

  
 

Pharmaceuticals – 2.3%

 

AbbVie, Inc.,

      

2.300%, 11-21-22

     1,400       1,420  
 

 

54   ANNUAL REPORT   2021  
     

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP LIMITED-TERM BOND (in thousands)

 

 

 

DECEMBER 31, 2021

 

CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Pharmaceuticals (Continued)

 

Bayer U.S. Finance II LLC:

      

3.875%, 12-15-23 (A)

   $ 1,400     $ 1,463  

2.850%, 4-15-25 (A)

     1,260       1,288  

Novartis Capital Corp. (GTD by Novartis AG),

      

3.000%, 11-20-25

     1,250       1,326  

Royalty Pharma plc (GTD by Royalty Pharma Holdings Ltd.):

      

0.750%, 9-2-23

     1,800       1,789  

1.200%, 9-2-25

     1,647       1,614  
   

 

 

  
      8,900  
   

 

 

  
 

Total Health Care – 4.4%

 

     17,367  

Industrials

 

 

Aerospace & Defense – 2.0%

 

Boeing Co. (The):

      

2.200%, 10-30-22

     2,000       2,020  

2.800%, 3-1-23

     2,250       2,291  

Harris Corp.,

      

3.832%, 4-27-25

     775       827  

Leidos, Inc. (GTD by Leidos Holdings, Inc.),

      

2.950%, 5-15-23

     1,870       1,919  

Park Aerospace Holdings Ltd.,

      

5.500%, 2-15-24 (A)

     700       751  
   

 

 

  
      7,808  
   

 

 

  
 

Agricultural & Farm Machinery – 0.4%

 

CNH Industrial Capital LLC (GTD by CNH Industrial Capital America LLC and New Holland Credit Co. LLC),

      

1.950%, 7-2-23

     1,550       1,571  
   

 

 

  
 

Airlines – 0.3%

 

Aviation Capital Group LLC,

      

4.375%, 1-30-24 (A)

     1,000       1,049  
   

 

 

  
 

Building Products – 0.5%

 

Lennox International, Inc.,

      

1.350%, 8-1-25

     2,150       2,125  
   

 

 

  
 

Diversified Support Services – 0.3%

 

Genpact Luxembourg S.a.r.l. and Genpact USA, Inc.,

      

1.750%, 4-10-26

     1,100       1,097  
   

 

 

  
 

Electrical Components & Equipment – 0.2%

 

Vontier Corp.,

      

1.800%, 4-1-26 (A)

     815       804  
   

 

 

  
 

Environmental & Facilities Services – 0.9%

 

Republic Services, Inc.,

      

0.875%, 11-15-25

     1,800       1,751  

Waste Management, Inc. (GTD by Waste Management Holdings, Inc.),

      

0.750%, 11-15-25

     1,955       1,905  
   

 

 

  
      3,656  
   

 

 

  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Industrial Conglomerates – 0.1%

 

General Electric Capital Corp.,

      

5.012%, 1-1-24

   $ 534     $ 560  
   

 

 

  
 

Industrial Machinery – 0.4%

 

Roper Technologies, Inc.,

      

1.000%, 9-15-25

     1,400       1,369  
   

 

 

  
 

Railroads – 0.4%

 

Canadian National Railway Co.,

      

2.750%, 3-1-26

     1,400       1,464  
   

 

 

  
 

Research & Consulting Services – 0.8%

 

IHS Markit Ltd.,

      

5.000%, 11-1-22 (A)

     1,690       1,745  

Thomson Reuters Corp.,

      

4.300%, 11-23-23

     1,269       1,334  
   

 

 

  
      3,079  
   

 

 

  
 

Total Industrials – 6.3%

 

     24,582  

Information Technology

 

 

Application Software – 1.1%

 

Infor, Inc.,

      

1.450%, 7-15-23 (A)

     877       880  

Nuance Communications, Inc.,

      

5.625%, 12-15-26

     2,455       2,536  

NXP B.V. and NXP Funding LLC,

      

3.875%, 6-18-26 (A)

     1,000       1,080  
   

 

 

  
      4,496  
   

 

 

  
 

Data Processing & Outsourced Services – 1.6%

 

Fidelity National Information Services, Inc.,

      

0.600%, 3-1-24

     1,365       1,344  

Global Payments, Inc.,

      

2.650%, 2-15-25

     1,875       1,928  

PayPal Holdings, Inc.,

      

1.650%, 6-1-25

     3,050       3,090  
   

 

 

  
      6,362  
   

 

 

  
 

Internet Services & Infrastructure – 0.1%

 

Baidu, Inc.,

      

1.720%, 4-9-26

     379       375  
   

 

 

  
 

Semiconductors – 1.5%

 

Microchip Technology, Inc.,

      

0.983%, 9-1-24 (A)

     1,850       1,817  

TSMC Global Ltd.,

      

1.250%, 4-23-26 (A)

     1,500       1,471  

Xilinx, Inc.,

      

2.950%, 6-1-24

     2,575       2,667  
   

 

 

  
      5,955  
   

 

 

  
 

Systems Software – 0.5%

 

Fortinet, Inc.,

      

1.000%, 3-15-26

     1,095       1,062  

VMware, Inc.,

      

4.500%, 5-15-25

     700       763  
   

 

 

  
      1,825  
   

 

 

  
CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Technology Hardware, Storage & Peripherals – 0.9%

 

Apple, Inc.,

      

3.000%, 2-9-24

   $ 2,650     $ 2,762  

Seagate HDD Cayman (GTD by Seagate Technology plc),

      

4.750%, 6-1-23

     650       680  
   

 

 

  
      3,442  
   

 

 

  
 

Total Information Technology – 5.7%

 

     22,455  

Materials

 

 

Diversified Chemicals – 0.2%

 

DowDuPont, Inc.,

      

4.205%, 11-15-23

     800       846  
   

 

 

  
 

Fertilizers & Agricultural Chemicals – 0.4%

 

Mosaic Co. (The):

      

3.250%, 11-15-22

     774       789  

4.250%, 11-15-23

     250       263  

Nutrien Ltd.,

      

1.900%, 5-13-23

     500       507  
   

 

 

  
      1,559  
   

 

 

  
 

Paper Packaging – 0.5%

 

Avery Dennison Corp.,

      

0.850%, 8-15-24

     375       370  

Graphic Packaging International LLC (GTD by Graphic Packaging International Partners LLC and Field Container Queretaro (USA) LLC),

      

0.821%, 4-15-24 (A)

     1,350       1,329  
   

 

 

  
      1,699  
   

 

 

  
 

Total Materials – 1.1%

 

     4,104  

Real Estate

 

 

Industrial REITs – 0.3%

 

Avolon Holdings Funding Ltd.:

      

3.625%, 5-1-22 (A)

     500       503  

4.250%, 4-15-26 (A)

     400       425  
   

 

 

  
      928  
   

 

 

  
 

Office REITs – 0.1%

 

Vornado Realty L.P.,

      

2.150%, 6-1-26

     400       400  
   

 

 

  
 

Specialized REITs – 2.9%

 

American Tower Corp.:

      

3.070%, 3-15-23 (A)

     3,545       3,548  

0.600%, 1-15-24

     1,300       1,287  

1.300%, 9-15-25

     795       783  

Crown Castle International Corp.:

      

3.150%, 7-15-23

     400       412  

1.050%, 7-15-26

     1,650       1,595  

CyrusOne L.P. and CyrusOne Finance Corp. (GTD by CyrusOne, Inc.),

      

2.900%, 11-15-24

     1,310       1,354  
 

 

     
    2021       ANNUAL REPORT       55  

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP LIMITED-TERM BOND (in thousands)

 

 

 

DECEMBER 31, 2021

 

CORPORATE DEBT SECURITIES
(Continued)		   Principal     Value  

Specialized REITs (Continued)

 

Equinix, Inc.:

      

2.625%, 11-18-24

   $ 1,112     $ 1,147  

1.000%, 9-15-25

     1,325       1,286  
   

 

 

  
      11,412  
   

 

 

  
 

Total Real Estate – 3.3%

 

     12,740  

Utilities

 

 

Electric Utilities – 2.5%

 

Edison International,

      

3.550%, 11-15-24

     1,300       1,361  

Evergy, Inc.,

      

5.292%, 6-15-22 (B)

     1,154       1,164  

FirstEnergy Corp.,

      

2.850%, 7-15-22

     1,665       1,672  

MidAmerican Energy Co.,

      

3.700%, 9-15-23

     1,045       1,086  

National Rural Utilities Cooperative Finance Corp.,

      

1.000%, 6-15-26

     800       781  

Southern Co. (The),

      

0.600%, 2-26-24

     1,365       1,348  

Virginia Electric and Power Co., Series C,

      

2.750%, 3-15-23

     2,515       2,559  
   

 

 

  
      9,971  
   

 

 

  
 

Multi-Utilities – 0.6%

 

Black Hills Corp.,

      

1.037%, 8-23-24

     1,000       988  

Dominion Energy Gas Holdings LLC,

      

3.550%, 11-1-23

     1,235       1,285  
   

 

 

  
      2,273  
   

 

 

  
 

Total Utilities – 3.1%

 

     12,244  
 

TOTAL CORPORATE DEBT SECURITIES – 61.0%

 

   $ 238,276  

(Cost: $239,384)

      
 
UNITED STATES GOVERNMENT
AGENCY OBLIGATIONS		              

Mortgage-Backed Obligations – 14.6%

 

Federal Home Loan Mortgage Corp. Agency REMIC/CMO,

      

2.500%, 5-15-44

     323       332  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (1-Month U.S. LIBOR plus 185 bps),

      

1.944%, 8-25-25 (A)(C)

     955       939  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (1-Month U.S. LIBOR plus 195 bps),

      

2.044%, 3-25-28 (A)(C)

     637       621  
UNITED STATES GOVERNMENT
AGENCY OBLIGATIONS (Continued)		   Principal     Value  

Mortgage-Backed Obligations (Continued)

 

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (1-Month U.S. LIBOR plus 200 bps),

      

2.094%, 5-25-25 (A)(C)

   $ 527     $ 519  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (1-Month U.S. LIBOR plus 205 bps),

      

2.144%, 6-25-28 (A)(C)

     418       411  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (1-Month U.S. LIBOR plus 215 bps),

      

2.244%, 1-25-27 (A)(C)

     854       849  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (1-Month U.S. LIBOR plus 220 bps):

      

2.294%, 7-25-26 (A)(C)

     868       865  

2.294%, 4-25-29 (A)(C)

     543       544  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (1-Month U.S. LIBOR plus 225 bps),

      

2.344%, 12-25-29 (A)(C)

     1,163       1,153  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (1-Month U.S. LIBOR plus 230 bps):

      

2.394%, 8-25-29 (A)(C)

     955       962  

2.394%, 9-25-29 (A)(C)

     579       581  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (1-Month U.S. LIBOR plus 235 bps),

      

2.444%, 2-25-26 (A)(C)

     1,649       1,651  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (1-Month U.S. LIBOR plus 245 bps),

      

2.544%, 11-25-29 (A)(C)

     1,221       1,218  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (1-Month U.S. LIBOR plus 250 bps),

      

2.594%, 11-25-24 (A)(C)

     298       297  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (1-Month U.S. LIBOR plus 255 bps),

      

2.644%, 6-25-27 (A)(C)

     415       411  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (1-Month U.S. LIBOR plus 265 bps),

      

2.744%, 5-25-27 (A)(C)

     708       714  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (1-Month U.S. LIBOR plus 270 bps),

      

2.794%, 11-25-27 (A)(C)

     484       484  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (1-Month U.S. LIBOR plus 710 bps),

      

7.194%, 9-25-22 (A)(C)

     707       701  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (Mortgage spread to 2-year U.S. Treasury index),

      

3.496%, 8-25-46 (A)(C)

     1,250       1,288  
UNITED STATES GOVERNMENT
AGENCY OBLIGATIONS (Continued)		   Principal     Value  

Mortgage-Backed Obligations (Continued)

 

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (Mortgage spread to 3-year U.S. Treasury index):

      

3.390%, 7-25-22 (A)(C)

   $ 1,720     $ 1,739  

3.632%, 7-25-46 (A)(C)

     2,000       2,053  

3.934%, 12-25-46 (A)(C)

     1,270       1,325  

3.559%, 11-25-47 (A)(C)

     5,000       5,073  

3.507%, 2-25-48 (A)(C)

     2,000       1,999  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (Mortgage spread to 5-year U.S. Treasury index):

      

3.567%, 11-25-23 (A)(C)

     10,870       11,156  

3.866%, 5-25-45 (A)(C)

     600       605  

3.555%, 6-25-45 (A)(C)

     1,000       1,027  

3.496%, 8-25-46 (A)(C)

     1,009       1,044  

3.559%, 11-25-47 (A)(C)

     2,724       2,766  

3.507%, 2-25-48 (A)(C)

     1,000       1,000  

3.587%, 6-25-48 (A)(C)

     1,170       1,233  

3.528%, 12-25-49 (A)(C)

     600       615  

Federal Home Loan Mortgage Corp. Agency REMIC/CMO (Mortgage spread to 7-year U.S. Treasury index):

      

3.689%, 6-25-22 (A)(C)

     2,000       2,019  

4.057%, 5-25-25 (A)(C)

     225       240  

3.673%, 11-25-49 (A)(C)

     1,900       1,988  

3.649%, 11-25-50 (A)(C)

     5,650       5,920  

Federal Home Loan Mortgage Corp. Fixed Rate Participation Certificates,

      

4.500%, 8-1-30

     282       305  

Government National Mortgage Association Agency REMIC/CMO,

      

2.000%, 3-16-42

     406       411  
   

 

 

  
      57,058  
   

 

 

  
 

TOTAL UNITED STATES GOVERNMENT AGENCY OBLIGATIONS – 14.6%

 

   $ 57,058  

(Cost: $56,225)

      
 
UNITED STATES GOVERNMENT
OBLIGATIONS		              

Treasury Obligations – 22.1%

 

U.S. Treasury Notes:

      

1.750%, 4-30-22

     13,000       13,069  

1.750%, 5-31-22

     2,250       2,265  

2.000%, 7-31-22

     10,000       10,103  

1.375%, 10-15-22

     1,000       1,008  

2.375%, 1-31-23

     2,250       2,297  

2.500%, 3-31-23

     1,000       1,025  

0.250%, 6-15-23

     10,000       9,955  

0.125%, 8-15-23

     6,300       6,249  

0.125%, 12-15-23

     3,000       2,966  

0.125%, 1-15-24

     3,000       2,962  

0.375%, 9-15-24

     3,000       2,958  

0.625%, 10-15-24

     14,750       14,633  
 

 

56   ANNUAL REPORT   2021  
     

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP LIMITED-TERM BOND (in thousands)

 

 

 

DECEMBER 31, 2021

 

UNITED STATES GOVERNMENT
OBLIGATIONS (Continued)		   Principal     Value  

Treasury Obligations (Continued)

 

1.000%, 12-15-24

   $ 13,215     $ 13,231  

0.375%, 11-30-25

     4,000       3,879  
   

 

 

  
      86,600  
   

 

 

  
 

TOTAL UNITED STATES GOVERNMENT OBLIGATIONS – 22.1%

 

   $ 86,600  

(Cost: $86,614)

      
 
SHORT-TERM SECURITIES   Shares         

Money Market Funds (F) – 0.6%

 

Dreyfus Institutional Preferred Government Money Market Fund – Institutional Shares,

      

0.010% (E)

     306       306  
SHORT-TERM SECURITIES
(Continued)		   Shares     Value  

Money Market Funds (F) (Continued)

 

State Street Institutional U.S. Government Money Market Fund – Premier Class,

      

0.030%

     1,990     $ 1,990  
   

 

 

  
      2,296  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 0.6%

 

   $ 2,296  

(Cost: $2,296)

      
 

TOTAL INVESTMENT SECURITIES – 99.7%

 

   $ 389,884  

(Cost: $390,201)

      
 

CASH AND OTHER ASSETS, NET OF LIABILITIES – 0.3%

 

     1,221  
 

NET ASSETS – 100.0%

 

   $ 391,105  

    

 

Notes to Schedule of Investments

 

(A)

Securities were purchased pursuant to an exemption from registration available under Rule 144A under the Securities Act of 1933 and may only be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2021 the total value of these securities amounted to $115,833 or 29.6% of net assets.

 

(B)

Step bond that pays an initial coupon rate for the first period and then a higher or lower coupon rate for the following periods. Interest rate disclosed is that which is in effect at December 31, 2021.

 

(C)

Variable rate security. Interest rate disclosed is that which is in effect at December 31, 2021. Description of the reference rate and spread, if applicable, are included in the security description.

 

(D)

All or a portion of securities with an aggregate value of $299 are on loan.

 

(E)

Investment made with cash collateral received from securities on loan.

 

(F)

Rate shown is the annualized 7-day yield at December 31, 2021.

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Asset-Backed Securities

   $ —      $ 5,654      $ —  

Corporate Debt Securities

     —        238,276        —  

United States Government Agency Obligations

     —        57,058        —  

United States Government Obligations

     —        86,600        —  

Short-Term Securities

     2,296        —        —  

Total

   $ 2,296      $ 387,588      $ —  

The following acronyms are used throughout this schedule:

CMO = Collateralized Mortgage Obligation

GTD = Guaranteed

LIBOR = London Interbank Offered Rate

REIT = Real Estate Investment Trust

REMIC = Real Estate Mortgage Investment Conduit

 

See Accompanying Notes to Financial Statements.

 

     
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Table of Contents
MANAGEMENT DISCUSSION   DELAWARE IVY VIP SECURIAN REAL ESTATE SECURITIES

 

 

 

(UNAUDITED)

 

Below, Lowell R. Bolken, CFA, Matthew K. Richmond and Joshua M. Klaetsch, the co-portfolio managers of Delaware Ivy VIP Securian Real Estate Securities during the fiscal year ended December 31, 2021, discuss positioning, performance and results for the fiscal year. Mr. Bolken has managed the Portfolio since 2006 and has 31 years of industry experience. Mr. Richmond has co-managed the Portfolio since 2014 and has 27 years of industry experience. Mr. Klaetsch joined the portfolio management team in 2018 and has 15 years of industry experience. Delaware Ivy VIP Securian Real Estate Securities is subadvised by Securian Asset Management, Inc.

Fiscal Year Performance

 

 

For the 12 Months Ended December 31, 2021

         

Delaware Ivy VIP Securian Real Estate Securities (Class II shares at net asset value)

      43.68%  

Benchmark

         

FTSE Nareit Equity REITs Index

      43.24%  

(Generally reflects the performance of securities representing the commercial real estate market)

         

Please note that Portfolio returns include applicable fees and expenses while index returns do not include any such fees. Also, the Portfolio’s performance data does not take into account any product expenses or charges associated with owning a variable life or annuity policy, which is invested in Ivy Variable Insurance Portfolios.

Market review

 

Real estate stocks finished the year with a flourish. The FTSE Nareit Equity REITs Index (Fund’s benchmark) returned 16.3% in the fourth quarter, a resounding cap to a year of record performance. For the calendar year, the index returned 43.2%. Despite the unwelcome emergence of the COVID-19 Omicron variant, investors running for cover from inflation and rapid improvement in real estate conditions combined to propel the sector. The same can be said for calendar year performance, with each quarter seemingly delivering better-than-expected operations across the sector. The improvement wasn’t uniform, and certainly there will be property sectors, which are slower to improve, but it appears unmistakably that a recovery is underway.

Contributors and detractor

 

The Portfolio outperformed its benchmark for the measurement period ended December 31, 2021. The primary drivers of relative performance were an underweighting to healthcare real estate investment trusts (REITs), an overweight position to self-storage, an overweight position in the second half of the year to shopping center companies, and an overweight position to apartment owners.

Healthcare REIT performance during 2021 was in the bottom half of all REIT sectors in the benchmark, owing to pandemic headwinds in the form of lower move-in volumes, worker shortage-related payroll pressure, and general elevation of overall property expenses. These are primarily issues for skilled nursing facilities and senior housing, whose occupancy recoveries have been choppy in 2021 due first to the COVID-19 Delta variant and later to the Omicron variant. Medical office buildings appear further along in the recovery with the de-prioritizations of elective surgery largely now past. Private investor demand raising market valuations is now providing tailwinds instead. Finally, life science is a smaller but growing subsector that has a steeper demand curve longer term. That said, the Portfolio’s overweight position to the best large-cap performer in the group, which owns a diverse portfolio of high-quality assets helped drive sector outperformance during the period. This, and other strategic underweight positions in skilled nursing facilities and hospitals explains why healthcare was the highest outperformer in the Portfolio of all sectors relative to the benchmark for 2021.

An overweight position to self-storage owners, which returned an impressive 79% for the measurement period, was another leading driver of Portfolio performance. Like warehouse properties, discussed below, owners of self-storage properties are experiencing record operating conditions. Work from home, regional relocations, and housing demand have attracted new customers during the pandemic. A pleasant surprise has been that they are now renting space for longer periods of time than has been typical in the past. As such, rents are above pre-pandemic levels and occupancies are at record highs. We continue to hold an overweight position to the sector but are mindful of the high bar created by recent performance and peak level operations.

The economic re-opening and pent-up consumer demand acted as tailwinds for retail REITs for much of the measurement period, with both malls and shopping centers performing well ahead of the benchmark. For the Portfolio, shopping centers were additive to performance with both stock selection and allocation aiding results. Leasing momentum and retailer

 

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health both continue to improve while the stocks feature an attractive valuation, leading to a Portfolio overweight position to the retail space, with a preference for shopping center REITs over mall REITs.

Rent growth momentum accelerated for multi-family rental and single family rental REITs as job gains led to a significant acceleration in new lease rate growth in 2021. We think this momentum may likely increase as embedded rent growth combined with projected market rent growth should overwhelm current supply deliveries into 2022 in most markets. Within multi-family rentals, the Portfolio was overweight the Sun Belt to begin calendar year 2021 while underweight the benchmark overall. Coastal exposure was added gradually throughout the first half of the calendar year, which eventually led to a sector overweight to the benchmark. We expect these companies will continue to thrive as large coastal market employers return to normal operations in 2022. We remain overweight the sector.

Every single property sector delivered positive returns during the fourth quarter, but owners of warehouse properties were among the strongest performers. On average, the group returned 62%. As headlines raged regarding supply chain bottlenecks and the nation’s ports bulged with ships waiting to unload, the first landing spot for all the backlogged stuff is the industrial REITs. Before any of those goods or raw materials make it to end-consumers’ doorsteps, they stop in a warehouse (or multiple warehouses) along the supply chain.

Office companies were a notable detractor from relative performance. In previous commentary we had written that the value discrepancy between private and public market valuations was too cheap to ignore. We began to take advantage of that pricing discrepancy early in the fourth quarter of 2021, and like with hotels, the sector was punished by the effect of the surge of the Omicron variant. A series of large, national employers publicly announced delays or outright cancelations to their return to office plans. While we believe office demand will be negatively impacted for the foreseeable future, we feel that the price at which office stocks trade today more than factors in a weaker outlook. We believe some of this pricing gap will be closed as 2022 unfolds, assuming no new significant COVID-19 variants emerge.

Outlook

 

With rich valuations across asset classes, we think a Federal Reserve (Fed) misstep resulting in a repricing of interest rates would spell trouble. The big question on investors’ minds is whether buyers can continue to accept rates that don’t keep pace with inflation. As the pandemic wanes and labor and supply chain challenges resolve, we think inflation is likely to fall in 2022. However, companies are still experiencing supply chain pressures, confidence in pricing power is growing, labor is making gains, and housing effects will lag. We think these challenges have the potential to skew inflation risk to the upside in the coming year.

Despite these risks, interest rates may remain subdued. We think high levels of debt, an aging population, disruptive technological change, and concentrated wealth remain powerful forces. The present comfort with long-term rates near 2% reflects a belief that these impulses will dominate. However, de-globalization and supply chain rationalization, pressure to address climate change and inequality, and depressed levels of immigration have the potential to present more serious structural challenges. Other factors may exacerbate supply and demand imbalances. These include more fiscal/monetary policy coordination with an emphasis on direct cash support and policy tilts toward higher regulation and trust busting at a time when potential growth is slowing. These factors increase the risk that inflation could remain higher than desired for some time, creating both political and financial policy stress.

The combination of monetary tightening, high valuations and an election cycle are likely to be a more volatile mix in the coming year. The battle between longer term disinflationary secular trends and declining potential growth versus the hotter mix of easy financial conditions, populist policies and the costs of climate mitigation is likely to be the story for some time. Like the Fed, we need to be data driven and alert to the possibility that the inflation and rates regimes could change.

At the property level, recovery in the nation’s property markets remains intact and appears to have significant upside in many sectors. We doubt that all property types will return to pre-pandemic cash flow levels in lockstep. Those with short duration lease profiles such as apartments, single family rentals, and self-storage units should continue to fare well in a rising inflation environment. The pandemic accelerated trends that were already in place and focused an unflinching spotlight on those with strong and with bleak futures. Hybrid work arrangements appear here to stay, particularly with the rapid emergent of the Delta variant, causing demand for office space and business travel to likely face a long recovery. As will brick and mortar retail. However, foot traffic at retail facilities has recovered sharply and gives us optimism that consumers will continue to shop in person as well as online. Meanwhile, we believe strongly in “new economy” sectors such as data centers and cell towers, but current valuations give us pause.

REIT stocks remain attractively valued, particularly against the backdrop of Fed actions, improving economic growth, and historically low interest rates. The Delta variant causing a reversion to more cautious social behavior across the country, and the emergence of a “stagflationary” economic backdrop have emerged as the primary risks to the group in the coming quarters.

 

     
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Effective July 1, 2021, the Portfolio name changed from Ivy VIP Securian Real Estate Securities.

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

Past performance is not a guarantee of future results. The value of the Portfolio’s shares will change, and you could lose money on your investment.

Investment risks associated with real estate securities, in addition to other risks, include rental income fluctuation, depreciation, property tax value changes and differences in real estate market values. Real estate securities are subject to interest-rate risk and, as such, the Portfolio’s net asset value may fall as interest rates rise. Investing in companies involved in one specified sector may be more risky and volatile than an investment with greater diversification. These and other risks are more fully described in the Portfolio’s prospectus.

The opinions expressed in this report are those of the Portfolio managers and are current only through the end of the period of the report as stated on the cover. The portfolio managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of Delaware Ivy VIP Securian Real Estate Securities.

 

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PORTFOLIO HIGHLIGHTS   DELAWARE IVY VIP SECURIAN REAL ESTATE SECURITIES(a)

 

 

 

ALL DATA IS AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Asset Allocation

 

Stocks

     99.3%  

Real Estate

     99.3%  

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

     0.7%  

    

 

 

Top 10 Equity Holdings

 

Company    Sector      Industry

ProLogis, Inc.

   

Real Estate

     

Industrial REITs

Public Storage, Inc.

   

Real Estate

     

Specialized REITs

Equinix, Inc.

   

Real Estate

     

Specialized REITs

Simon Property Group, Inc.

   

Real Estate

     

Retail REITs

Digital Realty Trust, Inc.

   

Real Estate

     

Specialized REITs

AvalonBay Communities, Inc.

   

Real Estate

     

Residential REITs

Invitation Homes, Inc.

   

Real Estate

     

Residential REITs

Essex Property Trust, Inc.

   

Real Estate

     

Residential REITs

Welltower, Inc.

   

Real Estate

     

Health Care REITs

Duke Realty Corp.

   

Real Estate

     

Industrial REITs

See your advisor or www.ivyinvestments.com for more information on the Portfolio’s most recently published Top 10 Equity Holdings.

+Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

(a)Effective July 1, 2021, the name of Ivy VIP Securian Real Estate Securities changed to Delaware Ivy VIP Securian Real Estate Securities.

 

     
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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT   DELAWARE IVY VIP SECURIAN REAL ESTATE SECURITIES(a)

 

 

 

 

LOGO

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class II  

1-year period ended 12-31-21

      43.68%  

5-year period ended 12-31-21

      11.50%  

10-year period ended 12-31-21

      11.30%  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

 

(a)

Effective July 1, 2021, the name of Ivy VIP Securian Real Estate Securities changed to Delaware Ivy VIP Securian Real Estate Securities.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

62   ANNUAL REPORT   2021  
     

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP SECURIAN REAL ESTATE SECURITIES (in thousands)

 

 

 

DECEMBER 31, 2021

 

COMMON STOCKS   Shares     Value  

Real Estate

 

 

Diversified REITs – 0.8%

 

Essential Properties Realty Trust, Inc.

     11     $ 320  
   

 

 

  
 

Health Care REITs – 5.6%

 

Healthpeak Properties, Inc.

     9       321  

Ventas, Inc.

     17       859  

Welltower, Inc.

     14       1,158  
   

 

 

  
      2,338  
   

 

 

  
 

Hotel & Resort REITs – 5.6%

 

Host Hotels & Resorts, Inc. (A)

     54       936  

MGM Growth Properties LLC, Class A

     4       143  

Park Hotels & Resorts, Inc. (A)

     36       670  

Pebblebrook Hotel Trust

     12       273  

RLJ Lodging Trust

     22       304  
   

 

 

  
      2,326  
   

 

 

  
 

Industrial REITs – 15.1%

 

Duke Realty Corp.

     16       1,057  

First Industrial Realty Trust, Inc.

     7       444  

ProLogis, Inc.

     25       4,145  

Rexford Industrial Realty, Inc.

     7       600  
   

 

 

  
      6,246  
   

 

 

  
 

Office REITs – 7.7%

 

Alexandria Real Estate Equities, Inc.

     4       836  

Boston Properties, Inc.

     4       426  

Douglas Emmett, Inc.

     6       194  

Highwoods Properties, Inc.

     7       303  

Kilroy Realty Corp.

     8       558  

Orion Office REIT, Inc. (A)

     — *      — * 
COMMON STOCKS (Continued)   Shares     Value  

Office REITs (Continued)

 

SL Green Realty Corp.

     5     $ 330  

Vornado Realty Trust

     13       544  
   

 

 

  
      3,191  
   

 

 

  
 

Residential REITs – 25.0%

 

American Campus Communities, Inc.

     10       579  

American Homes 4 Rent

     19       824  

AvalonBay Communities, Inc.

     7       1,758  

Camden Property Trust

     4       768  

Equity Lifestyle Properties, Inc.

     6       482  

Equity Residential

     8       717  

Essex Property Trust, Inc.

     3       1,163  

Invitation Homes, Inc.

     29       1,301  

Mid-America Apartment Communities, Inc.

     3       711  

Sun Communities, Inc.

     5       987  

UDR, Inc.

     18       1,056  
   

 

 

  
      10,346  
   

 

 

  
 

Retail REITs – 15.4%

 

Agree Realty Corp.

     7       492  

Brixmor Property Group, Inc.

     26       661  

Kimco Realty Corp.

     31       752  

Kite Realty Group Trust

     24       514  

National Retail Properties, Inc.

     13       615  

Realty Income Corp.

     11       761  

Regency Centers Corp.

     9       678  

Simon Property Group, Inc.

     12       1,923  
   

 

 

  
      6,396  
   

 

 

  
COMMON STOCKS (Continued)   Shares     Value  

Specialized REITs – 24.1%

 

American Tower Corp., Class A

     2     $ 673  

Digital Realty Trust, Inc.

     10       1,804  

Equinix, Inc.

     2       2,109  

Extra Space Storage, Inc.

     5       1,043  

Life Storage, Inc.

     6       850  

Public Storage, Inc.

     7       2,548  

SBA Communications Corp.

     1       350  

VICI Properties, Inc.

     20       597  
   

 

 

  
      9,974  
   

 

 

  
 

Total Real Estate – 99.3%

 

     41,137  
 

TOTAL COMMON STOCKS – 99.3%

 

   $ 41,137  

(Cost: $32,047)

      
 
SHORT-TERM SECURITIES              

Money Market Funds (B) – 0.6%

 

State Street Institutional U.S. Government Money Market Fund – Premier Class,
0.030%

     240       240  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 0.6%

 

   $ 240  

(Cost: $240)

      
 

TOTAL INVESTMENT SECURITIES – 99.9%

 

   $ 41,377  

(Cost: $32,287)

      
 

CASH AND OTHER ASSETS, NET OF LIABILITIES – 0.1%

 

     30  
 

NET ASSETS – 100.0%

 

   $ 41,407  
 

 

Notes to Schedule of Investments

 

*

Not shown due to rounding.

 

(A)

No dividends were paid during the preceding 12 months.

 

(B)

Rate shown is the annualized 7-day yield at December 31, 2021.

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 41,137      $ —      $ —  

Short-Term Securities

     240        —        —  

Total

   $ 41,377      $ —      $ —  

The following acronym is used throughout this schedule:

REIT = Real Estate Investment Trust

 

See Accompanying Notes to Financial Statements.

 

     
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Table of Contents
MANAGEMENT DISCUSSION   DELAWARE IVY VIP VALUE

 

 

 

(UNAUDITED)

 

Below, Matthew T. Norris, CFA, portfolio manager of Delaware Ivy VIP Value, discusses positioning, performance and results for the fiscal year ended December 31, 2021. He has managed the Fund since 2003 and has 30 years of industry experience.

Fiscal Year Performance

 

 

For the 12 Months Ended December 31, 2021

         

Delaware Ivy VIP Value (Class II shares at net asset value)

      31.18%  

Benchmark

         

Russell 1000 Value Index

      25.16%  

(generally reflects the performance of large-company value style stocks)

         

Please note that Portfolio returns include applicable fees and expenses while index returns do not include any such fees. Also, the Portfolio’s performance data does not take into account any product expenses or charges associated with owning a variable life or annuity policy, which is invested in Ivy Variable Insurance Portfolios.

Market conditions

 

In calendar 2021 the stock market set various new highs, as the US economy continued a start and stop recovery from the COVID-19 shutdown of 2020. A weak January 2021 was followed by a strong spring, flattish summer and fall, and then a year-end rally. Some of these moves were caused by a non-financial event – the emergence of new variants of the COVID-19 virus. Others were caused by more traditional economic forces.

The unemployment rate remained elevated relative to pre-pandemic levels but continued to decline. Wage inflation appeared during the reporting period and seems likely to stay around for the foreseeable future. By year-end 2021, the number of job openings was 1.7 times greater than the number of individuals seeking work. We believe in order to attract new employees, companies must increase wages.

Housing demand remained strong with help from record low mortgage rates, a demographic tailwind, and nesting/work-from-home trends. Record low inventory continues to place pressure on homebuilders to keep up with demand while also placing upward pressure on home prices, a potential risk to the outlook for affordability.

Personal consumption has vacillated with virus news, as each new variant has created caution in consumer behavior. The online portion of consumption continued to take market share from brick and mortar retailers. Goods appear to have more than recovered relative to pre-pandemic levels, while services will likely remain depressed until a majority of the US population has been fully vaccinated.

Manufacturing activity strengthened, and the combination of elevated orders and low inventories is expected to support ongoing production in coming months of 2022.

Inflation and the strong US economy have combined to force a change in the Federal Reserve’s (Fed) thinking. The Fed has begun to taper (decrease) its purchase of bonds and is now expected to raise interest rates during 2022. We believe this removal of stimulus measures should be monitored closely.

Contributors and detractors

 

The Russell 1000 Value Index, the Portfolio’s benchmark, was up 25.16% for the measurement period. By comparison, the Portfolio returned 31.18% for the same period, outperforming the benchmark.

During the measurement period, the sectors of healthcare, industrials, information technology, and consumer discretionary each added greater than 1% to relative performance. Our single best relative contributor; however, came from outside those sectors, with oil producer EOG Resources rising significantly in the period. Other names with notable positive performance included nVent Electric, Seagate Technology, Hospital Corporation of America (HCA), and Capital One Financial. All of these companies continue to be held in the Portfolio.

The Portfolio’s worst relative sectors were materials and financials. BHP Group Ltd., a metals and mining company, was flat for the reporting year. BHP was sold prior to December 31, 2021. In financials, mortgage real estate investment trust (REIT) company AGNC Capital rose, while life insurance company RGA decreased. Our single worst holding during the period was in information technology, where Fidelity National Information Services decreased significantly. Fidelity provides back-office services to banks and other financial firms, and a recent acquisition has clouded its outlook. We believe this name is notably undervalued and continue to hold it in the Portfolio.

 

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The Portfolio does not attempt to make sector calls, rather focusing primarily on stock selection. We hold overweight or underweight positions in sectors based on individual stock opportunity, with some limits to control risk or volatility. The Portfolio currently holds overweight positions in energy and consumer discretionary. In these areas, we have been able to find what we believe are good companies with repeatable business models generating high rates of free cash flow, and low stock prices relative to our estimation of each company’s true intrinsic value. We currently hold underweight positions in real estate and consumer staples, simply due to what we think are a lack of compelling ideas currently available. Real estate ended the year 1.4% below the benchmark’s weighting, which was the only sector with a greater than 1% deviation from the index.

 

 

Outlook

The US economy has nearly fully recovered from the coronavirus shutdown of spring 2020. Since that time, Congress and the Fed have provided numerous stimulus measures to help in the domestic recovery. Now these stimulus measures are ending, and the US economy will be required to stand on its own. The change in Fed outlook should result in higher interest rates at the longer end of the Treasury curve, and we expect the Fed to raise shorter term rates during 2022. Rising federal funds rates typically constrain economic growth, and the 25% plus market returns we saw in 2021 seem unlikely to repeat. Fed actions, and the ebb and flow of COVID-19 variants, are likely the two most important factors to analyze for the coming year.

While the economic forces listed above are clearly important factors, our first approach is from the company level. We seek to find quality, growing companies whose stocks are trading below what we consider to be their intrinsic values. This is often due to short-term negative factors, and we become larger owners of a company if we feel those negatives are about to dissipate. We continue to seek and make investments one company at a time in an effort to benefit clients over the long term.

Effective July 1, 2021, the Portfolio name changed from Ivy VIP Value.

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

Past performance is no guarantee of future results. The value of the Portfolio’s shares will change, and you could lose money on your investment.

Value stocks are stocks of companies that may have experienced adverse business or industry developments, or may be subject to special risks that have caused the stocks to be out of favor and, in the opinion of the Portfolio’s manager, undervalued. The value of a security believed by the Portfolio’s manager to be undervalued may never reach what the manager believes to be its full value, or such security’s value may decrease. These and other risks are more fully described in the Portfolio’s prospectus.

The use of derivatives presents several risks, including the risk that these instruments may change in value in a manner that adversely affects the Portfolio’s value and the risk that fluctuations in the value of the derivatives may not correlate with the corresponding securities or fixed-income markets or the underlying asset upon which the derivative’s value is based.

The opinions expressed in this report are those of the portfolio manager and are current only through the end of the period of the report as stated on the cover. The portfolio manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The index noted is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of Delaware Ivy VIP Value.

 

     
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Table of Contents
PORTFOLIO HIGHLIGHTS   DELAWARE IVY VIP VALUE(a)

 

 

 

ALL DATA IS AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Asset Allocation

 

Stocks

     98.5%  

Financials

     20.3%  

Health Care

     17.9%  

Industrials

     11.2%  

Information Technology

     10.6%  

Communication Services

     7.2%  

Consumer Discretionary

     6.6%  

Consumer Staples

     6.5%  

Energy

     5.8%  

Utilities

     4.9%  

Real Estate

     3.8%  

Materials

     3.7%  

Liabilities (Net of Cash and Other Assets), and Cash Equivalents+

     1.5%  
 

 

Top 10 Equity Holdings

 

Company    Sector      Industry

CVS Caremark Corp.

   

Health Care

     

Health Care Services

Anthem, Inc.

   

Health Care

     

Managed Health Care

Wal-Mart Stores, Inc.

   

Consumer Staples

     

Hypermarkets & Super Centers

Morgan Stanley

   

Financials

     

Investment Banking & Brokerage

Raytheon Technologies Corp.

   

Industrials

     

Aerospace & Defense

Philip Morris International, Inc.

   

Consumer Staples

     

Tobacco

McKesson Corp.

   

Health Care

     

Health Care Distributors

NXP Semiconductors N.V.

   

Information Technology

     

Semiconductors

CB Richard Ellis Group, Inc.

   

Real Estate

     

Real Estate Services

Marathon Petroleum Corp.

   

Energy

     

Oil & Gas Refining & Marketing

See your advisor or www.ivyinvestments.com for more information on the Portfolio’s most recently published Top 10 Equity Holdings.

+ Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

(a)Effective July 1, 2021, the name of Ivy VIP Value changed to Delaware Ivy VIP Value.

 

66   ANNUAL REPORT   2021  
     

Table of Contents
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT   DELAWARE IVY VIP VALUE(a)

 

 

 

(UNAUDITED)

 

LOGO

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Class II  

1-year period ended 12-31-21

      31.18%  

5-year period ended 12-31-21

      12.02%  

10-year period ended 12-31-21

      12.89%  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

 

(a)

Effective July 1, 2021, the name of Ivy VIP Value changed to Delaware Ivy VIP Value.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

     
    2021       ANNUAL REPORT       67  

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP VALUE (in thousands)

 

 

 

DECEMBER 31, 2021

 

COMMON STOCKS   Shares     Value  

Communication Services

 

 

Alternative Carriers – 2.4%

 

Liberty Global, Inc., Series C (A)

     314     $ 8,808  
   

 

 

  
 

Cable & Satellite – 4.8%

 

Comcast Corp., Class A

     198       9,970  

Liberty Media Corp., Class C (A)

     152       7,732  
   

 

 

  
      17,702  
   

 

 

  
 

Total Communication Services – 7.2%

 

     26,510  

Consumer Discretionary

 

 

Auto Parts & Equipment – 1.3%

 

BorgWarner, Inc.

     104       4,705  
   

 

 

  
 

Automotive Retail – 2.5%

 

AutoZone, Inc. (A)

     4       9,310  
   

 

 

  
 

General Merchandise Stores – 2.8%

 

Target Corp.

     45       10,369  
   

 

 

  
 

Total Consumer Discretionary – 6.6%

 

     24,384  

Consumer Staples

 

 

Hypermarkets & Super Centers – 3.4%

 

Wal-Mart Stores, Inc.

     87       12,634  
   

 

 

  
 

Tobacco – 3.1%

 

Philip Morris International, Inc.

     120       11,419  
   

 

 

  
 

Total Consumer Staples – 6.5%

 

     24,053  

Energy

 

 

Oil & Gas Exploration & Production – 2.9%

 

EOG Resources, Inc.

     121       10,712  
   

 

 

  
 

Oil & Gas Refining & Marketing – 2.9%

 

Marathon Petroleum Corp.

     170       10,883  
   

 

 

  
 

Total Energy – 5.8%

 

     21,595  

Financials

 

 

Asset Management & Custody Banks – 2.8%

 

Ameriprise Financial, Inc.

     34       10,316  
   

 

 

  
 

Consumer Finance – 4.9%

 

Capital One Financial Corp.

     62       8,940  

Synchrony Financial

     199       9,233  
   

 

 

  
      18,173  
   

 

 

  
 

Diversified Banks – 2.4%

 

Wells Fargo & Co.

     184       8,822  
   

 

 

  
 

Investment Banking & Brokerage – 3.1%

 

Morgan Stanley

     117       11,453  
   

 

 

  
 

Mortgage REITs – 2.3%

 

AGNC Investment Corp.

     575       8,653  
   

 

 

  
COMMON STOCKS (Continued)   Shares     Value  

Property & Casualty Insurance – 1.3%

 

Arch Capital Group Ltd. (A)

     105     $ 4,668  
   

 

 

  
 

Regional Banks – 2.1%

 

Regions Financial Corp.

     363       7,910  
   

 

 

  
 

Reinsurance – 1.4%

 

Reinsurance Group of America, Inc.

     46       5,040  
   

 

 

  
 

Total Financials – 20.3%

 

     75,035  

Health Care

 

 

Biotechnology – 5.0%

 

Regeneron Pharmaceuticals, Inc. (A)

     14       9,135  

Vertex Pharmaceuticals, Inc. (A)

     42       9,237  
   

 

 

  
      18,372  
   

 

 

  
 

Health Care Distributors – 3.0%

 

McKesson Corp.

     45       11,099  
   

 

 

  
 

Health Care Facilities – 2.8%

 

HCA Holdings, Inc.

     40       10,380  
   

 

 

  
 

Health Care Services – 3.6%

 

CVS Caremark Corp.

     131       13,558  
   

 

 

  
 

Managed Health Care – 3.5%

 

Anthem, Inc.

     28       12,919  
   

 

 

  
 

Total Health Care – 17.9%

 

     66,328  

Industrials

 

 

Aerospace & Defense – 5.5%

 

Northrop Grumman Corp.

     24       9,133  

Raytheon Technologies Corp.

     133       11,439  
   

 

 

  
      20,572  
   

 

 

  
 

Electrical Components & Equipment – 2.8%

 

nVent Electric plc

     271       10,302  
   

 

 

  
 

Railroads – 2.9%

 

Norfolk Southern Corp.

     36       10,654  
   

 

 

  
 

Total Industrials – 11.2%

 

     41,528  

Information Technology

 

 

Data Processing & Outsourced Services – 2.1%

 

Fidelity National Information Services, Inc.

     69       7,578  
   

 

 

  
 

Semiconductors – 5.9%

 

Broadcom Corp., Class A

     16       10,661  

NXP Semiconductors N.V.

     48       11,042  
   

 

 

  
      21,703  
   

 

 

  
COMMON STOCKS (Continued)   Shares     Value  

Technology Hardware, Storage & Peripherals – 2.6%

 

Seagate Technology

     86     $ 9,756  
   

 

 

  
 

Total Information Technology – 10.6%

 

     39,037  

Materials

 

 

Commodity Chemicals – 1.6%

 

LyondellBasell Industries N.V., Class A

     65       5,986  
   

 

 

  
 

Paper Packaging – 2.1%

 

Graphic Packaging Holding Co.

     387       7,545  
   

 

 

  
 

Total Materials – 3.7%

 

     13,531  

Real Estate

 

 

Real Estate Services – 3.0%

 

CB Richard Ellis Group, Inc. (A)

     102       11,018  
   

 

 

  
 

Specialized REITs – 0.8%

 

Weyerhaeuser Co.

     70       2,879  
   

 

 

  
 

Total Real Estate – 3.8%

 

     13,897  

Utilities

 

 

Electric Utilities – 4.9%

 

Evergy, Inc. (B)

     125       8,555  

FirstEnergy Corp.

     232       9,656  
   

 

 

  
      18,211  
   

 

 

  
 

Total Utilities – 4.9%

 

     18,211  
 

TOTAL COMMON STOCKS – 98.5%

 

   $ 364,109  

(Cost: $277,970)

      
 
SHORT-TERM SECURITIES              

Money Market Funds (C) – 1.6%

 

State Street Institutional U.S. Government Money Market Fund – Premier Class,

     

0.030%

     5,883       5,883  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 1.6%

 

   $ 5,883  

(Cost: $5,883)

      
 

TOTAL INVESTMENT SECURITIES – 100.1%

 

   $ 369,992  

(Cost: $283,853)

      
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – (0.1)%

 

     (248 ) 
 

NET ASSETS – 100.0%

 

   $ 369,744  
 

 

68   ANNUAL REPORT   2021  
     

Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP VALUE (in thousands)

 

 

 

DECEMBER 31, 2021

 

Notes to Schedule of Investments

 

(A)

No dividends were paid during the preceding 12 months.

 

(B)

All or a portion of securities with an aggregate value of $192 are held in collateralized accounts to cover potential obligations with respect to outstanding written options.

 

(C)

Rate shown is the annualized 7-day yield at December 31, 2021.

The following written options were outstanding at December 31, 2021 (contracts and exercise prices unrounded):

 

Underlying Security    Counterparty, if OTC    Type    Number of
Contracts		      Notional
Amount		      Expiration
Month		    Exercise
Price		      Premium
Received		      Value         

Arch Capital Group Ltd.

    N/A    Call      250        25      January 2022    $ 45.00      $ 20      $ (14 )   

AutoZone, Inc.

    N/A    Call      5        1      January 2022      2,100.00        17        (22 )   

Broadcom Corp., Class A

    N/A    Call      18        2      January 2022      640.00        22        (58 )   

FirstEnergy Corp.

    N/A    Call      271        27      January 2022      41.00        19        (28 )   

Liberty Media Corp., Class C

    N/A    Call      228        23      January 2022      50.00        17        (55 )   

NXP Semiconductors N.V.

    N/A    Put      94        9      January 2022      160.00        42        (2 )   

Reinsurance Group of America, Inc.

    JPMorgan Chase Bank N.A.    Put      84        8      April 2022      135.00        242        (226 )   
                    

 

 

  
                     $ 379      $ (405 )   
                    

 

 

  

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Common Stocks

   $ 364,109      $ —      $ —  

Short-Term Securities

     5,883        —        —  

Total

   $ 369,992      $ —      $ —  

Liabilities

        

Written Options

   $ 122      $ 283      $ —  

The following acronyms are used throughout this schedule:

OTC = Over the Counter

REIT = Real Estate Investment Trust

 

See Accompanying Notes to Financial Statements.

 

     
    2021       ANNUAL REPORT       69  

Table of Contents
STATEMENTS OF ASSETS AND LIABILITIES   IVY VIP

 

 

 

AS OF DECEMBER 31, 2021

 

(In thousands, except per share amounts)   Core
Equity(1)		   Corporate
Bond(2)		   Global
Bond(3)		   Global
Equity
Income(4)		   Global
Growth(5)		   Limited-
Term
Bond(6)		   Securian
Real Estate
Securities(7)		   Value(8)

ASSETS

                                

Investments in unaffiliated securities at value+^

     $ 735,431     $ 663,183     $ 16,502     $ 300,704     $ 159,106     $ 389,884     $ 41,377     $ 369,992

Investments at Value

       735,431       663,183       16,502       300,704       159,106       389,884       41,377       369,992

Cash

       —       —       —       —       —       —       — *       —

Investment securities sold receivable

       —       —       —       3,979       —       —       23       958

Dividends and interest receivable

       377       4,959       169       1,099       807       1,965       107       493

Capital shares sold receivable

       16       1,766       — *       7       3       10       4       6

Receivable from affiliates

       141       —       —       —       35       —       —       —

Receivable from securities lending income – net

       —       1       1       3       1       — *       —       1

Prepaid and other assets

       1       1       — *       — *       — *       1       — *       1

Total Assets

       735,966       669,910       16,672       305,792       159,952       391,860       41,511       371,451

LIABILITIES

                                

Cash collateral on securities loaned at value

       —       1,166       179       5,932       —       306       —       —

Investment securities purchased payable

       —       —       —       5,104       —       —       20       715

Capital shares redeemed payable

       181       253       18       100       65       154       36       217

Independent Trustees and Chief Compliance Officer fees payable

       115       79       1       44       55       28       7       63

Distribution and service fees payable

       5       4       — *       2       1       3       1       2

Investment management fee payable

       14       9       —       5       4       5       1       7

Accounting services fee payable

       16       14       1       8       5       10       2       10

Written options at value+

       —       —       —       —       —       —       —       405

Other liabilities

       575       407       5       237       149       249       37       288

Total Liabilities

       906       1,932       204       11,432       279       755       104       1,707

Total Net Assets

     $ 735,060     $ 667,978     $ 16,468     $ 294,360     $ 159,673     $ 391,105     $ 41,407     $ 369,744

NET ASSETS

                                

Capital paid in (shares authorized – unlimited)

     $ 339,847     $ 628,223     $ 16,662     $ 214,832     $ 79,111     $ 384,386     $ 27,747     $ 175,860

Total Distributable Earnings (Loss)

       395,213       39,755       (194 )       79,528       80,562       6,719       13,660       193,884

Total Net Assets

     $ 735,060     $ 667,978     $ 16,468     $ 294,360     $ 159,673     $ 391,105     $ 41,407     $ 369,744

CAPITAL SHARES OUTSTANDING:

                                

Class II

       41,550       118,617       3,276       42,732       33,170       79,991       4,239       44,879

NET ASSET VALUE PER SHARE:

                                

Class II

     $ 17.69     $ 5.63     $ 5.03     $ 6.89     $ 4.81     $ 4.89     $ 9.77     $ 8.24

+COST

                                

Investments in unaffiliated securities at cost

     $ 472,624     $ 652,330     $ 16,183     $ 289,206     $ 97,747     $ 390,201     $ 32,287     $ 283,853

Written options premiums received

       —       —       —       —       —       —       —       379

^Securities loaned at value

       —       3,048       215       5,591       —       299       —       —

 

*

Not shown due to rounding.

 

(1)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Core Equity to Delaware Ivy VIP Core Equity.

 

(2)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Corporate Bond to Delaware Ivy VIP Corporate Bond.

 

(3)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Global Bond to Delaware Ivy VIP Global Bond.

 

(4)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Global Equity Income to Delaware Ivy VIP Global Equity Income.

 

(5)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Global Growth to Delaware Ivy VIP Global Growth.

 

(6)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Limited-Term Bond to Delaware Ivy VIP Limited-Term Bond.

 

(7)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Securian Real Estate Securities to Delaware Ivy VIP Securian Real Estate Securities.

 

(8)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Value to Delaware Ivy VIP Value.

 

See Accompanying Notes to Financial Statements.

 

70   ANNUAL REPORT   2021  
     

Table of Contents
STATEMENTS OF OPERATIONS   IVY VIP

 

 

 

FOR THE YEAR ENDED DECEMBER 31, 2021

 

(In thousands)   Core
Equity(1)		   Corporate
Bond(2)		   Global
Bond(3)		   Global
Equity
Income(4)		   Global
Growth(5)		   Limited-
Term Bond(6)		   Securian
Real Estate
Securities(7)		   Value(8)

INVESTMENT INCOME

                                

Dividends from unaffiliated securities

     $ 8,546     $ 3     $ — *     $ 10,730     $ 2,168     $ — *     $ 701     $ 9,481

Foreign dividend withholding tax

       (39 )       —       —       (851 )       —       —       —       (78 )

Interest and amortization from unaffiliated securities

       —       19,029       713       —       328       8,016       —       —

Foreign interest withholding tax

       —       —       — *       —       —       —       —       —

Securities lending income – net

       — *       6       5       83       4       6       —       60

Total Investment Income

       8,507       19,038       718       9,962       2,500       8,022       701       9,463

EXPENSES

                                

Investment management fee

       5,217       3,402       124       2,211       1,361       2,172       328       3,140

Distribution and service fees:

                                

Class II

       1,863       1,791       50       790       400       1,086       91       1,121

Custodian fees

       14       12       1       30       11       8       4       6

Independent Trustees and Chief Compliance Officer fees

       62       57       3       26       22       32       5       37

Accounting services fee

       181       168       14       95       64       125       27       127

Professional fees

       8       8       6       9       8       9       7       13

Third-party valuation service fees

       —       — *       —       5       7       —       —       —

Other

       29       26       12       38       23       18       11       20

Total Expenses

       7,374       5,464       210       3,204       1,896       3,450       473       4,464

Less:

                                

Expenses in excess of limit

       (288 )       —       (124 )       —       (82 )       —       (33 )       —

Total Net Expenses

       7,086       5,464       86       3,204       1,814       3,450       440       4,464

Net Investment Income

       1,421       13,574       632       6,758       686       4,572       261       4,999

REALIZED AND UNREALIZED GAIN (LOSS)

                                

Net realized gain (loss) on:

                                

Investments in unaffiliated securities

       131,045       13,719       1       65,907       18,682       2,511       4,410       104,943

Futures contracts

       —       1,688       —       —       —       —       —       —

Written options

       —       —       —       —       —       —       —       833

Foreign currency exchange transactions

       —       —       8       (35 )       (31 )       —       —       —

Net change in unrealized appreciation (depreciation) on:

                                

Investments in unaffiliated securities

       57,505       (33,443 )       (806 )       (22,838 )       6,957       (9,169 )       8,483       15,749

Futures contracts

       —       65       —       —       —       —       —       —

Written options

       —       —       —       —       —       —       —       (228 )

Foreign currency exchange transactions

       —       —       — *       (30 )       (28 )       —       —       —

Net Realized and Unrealized Gain (Loss)

       188,550       (17,971 )       (797 )       43,004       25,580       (6,658 )       12,893       121,297

Net Increase (Decrease) in Net Assets Resulting from Operations

     $ 189,971     $ (4,397 )     $ (165 )     $ 49,762     $ 26,266     $ (2,086 )     $ 13,154     $ 126,296

 

*

Not shown due to rounding.

 

(1)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Core Equity to Delaware Ivy VIP Core Equity.

 

(2)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Corporate Bond to Delaware Ivy VIP Corporate Bond.

 

(3)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Global Bond to Delaware Ivy VIP Global Bond.

 

(4)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Global Equity Income to Delaware Ivy VIP Global Equity Income.

 

(5)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Global Growth to Delaware Ivy VIP Global Growth.

 

(6)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Limited-Term Bond to Delaware Ivy VIP Limited-Term Bond.

 

(7)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Securian Real Estate Securities to Delaware Ivy VIP Securian Real Estate Securities.

 

(8)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Value to Delaware Ivy VIP Value.

 

See Accompanying Notes to Financial Statements.

 

     
    2021       ANNUAL REPORT       71  

Table of Contents
STATEMENTS OF CHANGES IN NET ASSETS   IVY VIP

 

 

 

 

    Core Equity(1)   Corporate Bond(2)   Global Bond(3)
(In thousands)   Year ended
12-31-21		   Year ended
12-31-20		   Year ended
12-31-21		   Year ended
12-31-20		   Year ended
12-31-21		   Year ended
12-31-20

INCREASE (DECREASE) IN NET ASSETS

                        

Operations:

                        

Net investment income

     $ 1,421     $ 3,494     $ 13,574     $ 14,713     $ 632     $ 738

Net realized gain (loss) on investments

       131,045       29,057       15,407       32,425       9       (86 )

Net change in unrealized appreciation (depreciation)

       57,505       102,469       (33,378 )       14,689       (806 )       833

Net Increase (Decrease) in Net Assets Resulting from Operations

       189,971       135,020       (4,397 )       61,827       (165 )       1,485

Distributions to Shareholders From:

                        

Accumulated earnings:

                        

(combined net investment income and net realized gains)

                        

Class II

       (32,448 )       (41,268 )       (44,860 )       (15,230 )       (736 )       (784 )

Total Distributions to Shareholders

       (32,448 )       (41,268 )       (44,860 )       (15,230 )       (736 )       (784 )

Capital Share Transactions

       (159,138 )       (80,352 )       32,423       38,413       (3,173 )       (761 )

Net Increase (Decrease) in Net Assets

       (1,615 )       13,400       (16,834 )       85,010       (4,074 )       (60 )

Net Assets, Beginning of Period

       736,675       723,275       684,812       599,802       20,542       20,602

Net Assets, End of Period

     $ 735,060     $ 736,675     $ 667,978     $ 684,812     $ 16,468     $ 20,542
    Global Equity Income(4)   Global Growth(5)   Limited-Term Bond(6)
(In thousands)   Year ended
12-31-21		   Year ended
12-31-20		   Year ended
12-31-21		   Year ended
12-31-20		   Year ended
12-31-21		   Year ended
12-31-20

INCREASE (DECREASE) IN NET ASSETS

                        

Operations:

                        

Net investment income

     $ 6,758     $ 6,318     $ 686     $ 78     $ 4,572     $ 6,592

Net realized gain (loss) on investments

       65,872       (2,049 )       18,651       11,243       2,511       7,840

Net change in unrealized appreciation (depreciation)

       (22,868 )       9,706       6,929       15,830       (9,169 )       1,725

Net Increase in Net Assets Resulting from Operations

       49,762       13,975       26,266       27,151       (2,086 )       16,157

Distributions to Shareholders From:

                        

Accumulated earnings:

                        

(combined net investment income and net realized gains)

                        

Class II

       (7,042 )       (8,016 )       (7,648 )       (585 )       (8,512 )       (10,693 )

Total Distributions to Shareholders

       (7,042 )       (8,016 )       (7,648 )       (585 )       (8,512 )       (10,693 )

Capital Share Transactions

       (63,600 )       12,697       (14,615 )       (19,238 )       (28,270 )       (28,033 )

Net Increase (Decrease) in Net Assets

       (20,880 )       18,656       4,003       7,328       (38,868 )       (22,569 )

Net Assets, Beginning of Period

       315,240       296,584       155,670       148,342       429,973       452,542

Net Assets, End of Period

     $ 294,360     $ 315,240     $ 159,673     $ 155,670     $ 391,105     $ 429,973

 

(1)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Core Equity to Delaware Ivy VIP Core Equity.

 

(2)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Corporate Bond to Delaware Ivy VIP Corporate Bond.

 

(3)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Global Bond to Delaware Ivy VIP Global Bond.

 

(4)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Global Equity Income to Delaware Ivy VIP Global Equity Income.

 

(5)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Global Growth to Delaware Ivy VIP Global Growth.

 

(6)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Limited-Term Bond to Delaware Ivy VIP Limited-Term Bond.

 

See Accompanying Notes to Financial Statements.

 

72   ANNUAL REPORT   2021  
     

Table of Contents
STATEMENTS OF CHANGES IN NET ASSETS   IVY VIP

 

 

 

 

    Securian Real Estate
Securities(1)		   Value(2)
(In thousands)   Year ended
12-31-21		   Year ended
12-31-20		   Year ended
12-31-21		   Year ended
12-31-20

INCREASE (DECREASE) IN NET ASSETS

                

Operations:

                

Net investment income

     $ 261     $ 319     $ 4,999     $ 6,722

Net realized gain (loss) on investments

       4,410       445       105,776       (3,730 )

Net change in unrealized appreciation (depreciation)

       8,483       (1,951 )       15,521       859

Net Increase (Decrease) in Net Assets Resulting from Operations

       13,154       (1,187 )       126,296       3,851

Distributions to Shareholders From:

                

Accumulated earnings:

                

(combined net investment income and net realized gains)

                

Class II

       (882 )       (2,884 )       (8,558 )       (26,609 )

Total Distributions to Shareholders

       (882 )       (2,884 )       (8,558 )       (26,609 )

Capital Share Transactions

       (1,962 )       (293 )       (212,996 )       (23,117 )

Net Increase (Decrease) in Net Assets

       10,310       (4,364 )       (95,258 )       (45,875 )

Net Assets, Beginning of Period

       31,097       35,461       465,002       510,877

Net Assets, End of Period

     $ 41,407     $ 31,097     $ 369,744     $ 465,002

 

(1)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Securian Real Estate Securities to Delaware Ivy VIP Securian Real Estate Securities.

 

(2)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Value to Delaware Ivy VIP Value.

 

See Accompanying Notes to Financial Statements.

 

     
    2021       ANNUAL REPORT       73  

Table of Contents
FINANCIAL HIGHLIGHTS   IVY VIP
 

 

 

 

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

     Net Asset
Value,
Beginning of
Period		   Net
Investment
Income(1)		   Net Realized
and Unrealized
Gain (Loss) on
Investments		   Total from
Investment
Operations		   Distributions
From Net
Investment
Income		   Distributions
From Net
Realized
Gains		   Total
Distributions

Core Equity

                            

Class II Shares

                            

Year ended 12-31-2021

     $ 14.36     $ 0.03     $ 4.01     $ 4.04     $ (0.09 )     $ (0.62 )     $ (0.71 )

Year ended 12-31-2020

       12.63       0.06       2.44       2.50       (0.07 )       (0.70 )       (0.77 )

Year ended 12-31-2019

       10.80       0.06       3.10       3.16       (0.07 )       (1.26 )       (1.33 )

Year ended 12-31-2018

       12.30       0.07       (0.53 )       (0.46 )       (0.06 )       (0.98 )       (1.04 )

Year ended 12-31-2017

       10.67       0.05       2.09       2.14       (0.05 )       (0.46 )       (0.51 )

Corporate Bond

                            

Class II Shares

                            

Year ended 12-31-2021

       6.05       0.11       (0.17 )       (0.06 )       (0.12 )       (0.24 )       (0.36 )

Year ended 12-31-2020

       5.60       0.14       0.46       0.60       (0.15 )       —       (0.15 )

Year ended 12-31-2019

       5.13       0.15       0.47       0.62       (0.15 )       —       (0.15 )

Year ended 12-31-2018

       5.35       0.14       (0.24 )       (0.10 )       (0.11 )       (0.01 )       (0.12 )

Year ended 12-31-2017

       5.27       0.12       0.08       0.20       (0.08 )       (0.04 )       (0.12 )

Global Bond

                            

Class II Shares

                            

Year ended 12-31-2021

       5.26       0.16       (0.20 )       (0.04 )       (0.19 )       —       (0.19 )

Year ended 12-31-2020

       5.07       0.19       0.20       0.39       (0.20 )       —       (0.20 )

Year ended 12-31-2019

       4.81       0.20       0.24       0.44       (0.18 )       —       (0.18 )

Year ended 12-31-2018

       4.96       0.17       (0.18 )       (0.01 )       (0.14 )       —       (0.14 )

Year ended 12-31-2017

       4.89       0.15       0.06       0.21       (0.14 )       —       (0.14 )

Global Equity Income

                            

Class II Shares

                            

Year ended 12-31-2021

       6.02       0.14       0.87       1.01       (0.14 )       —       (0.14 )

Year ended 12-31-2020

       6.01       0.12       0.03       0.15       (0.14 )       —       (0.14 )

Year ended 12-31-2019

       6.89       0.16       1.17       1.33       (0.22 )       (1.99 )       (2.21 )

Year ended 12-31-2018

       8.58       0.16       (1.07 )       (0.91 )       (0.14 )       (0.64 )       (0.78 )

Year ended 12-31-2017

       7.79       0.13       1.03       1.16       (0.10 )       (0.27 )       (0.37 )

Global Growth

                            

Class II Shares

                            

Year ended 12-31-2021

       4.29       0.02       0.72       0.74       — *       (0.22 )       (0.22 )

Year ended 12-31-2020

       3.58       0.00 *        0.72       0.72       (0.01 )       —       (0.01 )

Year ended 12-31-2019

       8.67       0.02       1.45       1.47       (0.06 )       (6.50 )       (6.56 )

Year ended 12-31-2018

       9.87       0.05       (0.58 )       (0.53 )       (0.05 )       (0.62 )       (0.67 )

Year ended 12-31-2017

       8.14       0.04       1.93       1.97       — *       (0.24 )       (0.24 )

Limited-Term Bond

                            

Class II Shares

                            

Year ended 12-31-2021

       5.01       0.05       (0.07 )       (0.02 )       (0.08 )       (0.02 )       (0.10 )

Year ended 12-31-2020

       4.95       0.08       0.12       0.20       (0.14 )       —       (0.14 )

Year ended 12-31-2019

       4.84       0.09       0.11       0.20       (0.09 )       —       (0.09 )

Year ended 12-31-2018

       4.88       0.09       (0.05 )       0.04       (0.08 )       —       (0.08 )

Year ended 12-31-2017

       4.89       0.08       (0.01 )       0.07       (0.08 )       —       (0.08 )

Securian Real Estate Securities

                            

Class II Shares

                            

Year ended 12-31-2021

       6.97       0.06       2.95       3.01       (0.08 )       (0.13 )       (0.21 )

Year ended 12-31-2020

       8.05       0.07       (0.46 )       (0.39 )       (0.12 )       (0.57 )       (0.69 )

Year ended 12-31-2019

       6.60       0.17       1.43       1.60       (0.12 )       (0.03 )       (0.15 )

Year ended 12-31-2018

       7.64       0.10       (0.54 )       (0.44 )       (0.11 )       (0.49 )       (0.60 )

Year ended 12-31-2017

       8.40       0.11       0.27       0.38       (0.11 )       (1.03 )       (1.14 )

Value

                            

Class II Shares

                            

Year ended 12-31-2021

       6.40       0.08       1.90       1.98       (0.14 )       —       (0.14 )

Year ended 12-31-2020

       6.72       0.09       (0.05 )       0.04       (0.12 )       (0.24 )       (0.36 )

Year ended 12-31-2019

       5.69       0.11       1.32       1.43       (0.05 )       (0.35 )       (0.40 )

Year ended 12-31-2018

       6.44       0.07       (0.51 )       (0.44 )       (0.12 )       (0.19 )       (0.31 )

Year ended 12-31-2017

       5.93       0.11       0.61       0.72       (0.09 )       (0.12 )       (0.21 )

 

*

Not shown due to rounding.

 

(1)

Based on average weekly shares outstanding.

 

(2)

Based on net asset value. Total returns do not reflect a sales charge or contingent sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3)

Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

 

74   ANNUAL REPORT   2021  
     

Table of Contents
 
           

 

 

 

 

     Net Asset
Value,
End of Period		   Total
Return(2)		   Net Assets,
End of Period
(in millions)		   Ratio of Expenses
to Average Net
Assets Including
Expense Waiver		   Ratio of Net
Investment
Income to
Average
Net Assets
Including
Expense
Waiver		   Ratio of
Expenses to
Average
Net Assets
Excluding
Expense
Waiver(3)		   Ratio of Net
Investment
Income
(Loss) to
Average
Net Assets
Excluding
Expense
Waiver(3)		   Portfolio
Turnover
Rate

Core Equity

 

Class II Shares

                                

Year ended 12-31-2021

     $ 17.69       28.94 %     $ 735       0.95 %       0.19 %       0.99 %       0.15 %       29 %

Year ended 12-31-2020

       14.36       21.52       737       0.95       0.51       1.00       0.46       58

Year ended 12-31-2019

       12.63       31.09       723       0.95       0.53       1.00       0.48       80

Year ended 12-31-2018

       10.80       -4.51       626       0.95       0.59       1.00       0.54       99

Year ended 12-31-2017

       12.30       20.75       445       0.95       0.42       1.00       0.37       78

Corporate Bond

                                

Class II Shares

                                

Year ended 12-31-2021

       5.63       -0.85       668       0.76       1.90       —       —       85

Year ended 12-31-2020

       6.05       10.97       685       0.77       2.34       —       —       95

Year ended 12-31-2019

       5.60       12.18       600       0.77       2.73       —       —       66

Year ended 12-31-2018

       5.13       -1.90       544       0.77       2.77       —       —       63

Year ended 12-31-2017

       5.35       4.01       548       0.78       2.32       —       —       66

Global Bond

                                

Class II Shares

                                

Year ended 12-31-2021

       5.03       -0.84       16       0.43       3.18       1.06       2.55       37

Year ended 12-31-2020

       5.26       8.15       21       0.65       3.71       1.28       3.08       56

Year ended 12-31-2019

       5.07       9.42       21       0.50       3.96       1.13       3.33       43

Year ended 12-31-2018

       4.81       -0.18       22       0.50       3.52       1.12       2.90       37

Year ended 12-31-2017

       4.96       4.27       23       0.50       3.08       1.12       2.46       49

Global Equity Income

                                

Class II Shares

                                

Year ended 12-31-2021

       6.89       16.97       294       1.01       2.14       —       —       109

Year ended 12-31-2020

       6.02       3.15       315       1.03       2.19       —       —       73

Year ended 12-31-2019

       6.01       23.15       297       1.02       2.52       —       —       39

Year ended 12-31-2018

       6.89       -11.68       284       1.01       2.01       —       —       93

Year ended 12-31-2017

       8.58       15.56       527       1.00       1.60       —       —       35

Global Growth

                                

Class II Shares

                                

Year ended 12-31-2021

       4.81       17.86       160       1.13       0.43       1.18       0.38       22

Year ended 12-31-2020

       4.29       20.58       156       1.13       0.06       1.23       -0.04       33

Year ended 12-31-2019

       3.58       25.93       148       1.13       0.41       1.21       0.33       26

Year ended 12-31-2018

       8.67       -6.27       134       1.13       0.46       1.18       0.41       40

Year ended 12-31-2017

       9.87       24.52       424       1.14       0.47       1.17       0.44       54

Limited-Term Bond

                                

Class II Shares

                                

Year ended 12-31-2021

       4.89       -0.49       391       0.79       1.05       —       —       48

Year ended 12-31-2020

       5.01       4.14       430       0.81       1.60       —       —       74

Year ended 12-31-2019

       4.95       4.23       453       0.79       1.89       —       —       54

Year ended 12-31-2018

       4.84       0.78       542       0.79       1.91       —       —       53

Year ended 12-31-2017

       4.88       1.40       443       0.80       1.62       —       —       55

Securian Real Estate Securities

                                

Class II Shares

                                

Year ended 12-31-2021

       9.77       43.68       41       1.21       0.71       1.30       0.62       57

Year ended 12-31-2020

       6.97       -3.13       31       1.37       1.06       1.46       0.97       72

Year ended 12-31-2019

       8.05       24.43       35       1.26       1.36       1.35       1.27       54

Year ended 12-31-2018

       6.60       -5.57       34       1.24       1.45       1.33       1.36       71

Year ended 12-31-2017

       7.64       5.39       43       1.22       1.38       1.31       1.29       73

Value

                                

Class II Shares

                                

Year ended 12-31-2021

       8.24       31.18       370       1.00       1.11       —       —       41

Year ended 12-31-2020

       6.40       1.98       465       1.01       1.57       —       —       63

Year ended 12-31-2019

       6.72       26.33       511       1.00       1.81       —       —       62

Year ended 12-31-2018

       5.69       -7.24       446       1.00       1.09       —       —       56

Year ended 12-31-2017

       6.44       12.49       432       1.00       1.74       —       —       67

 

See Accompanying Notes to Financial Statements.

 

     
    2021       ANNUAL REPORT       75  

Table of Contents
NOTES TO FINANCIAL STATEMENTS   IVY VIP

 

 

 

DECEMBER 31, 2021

 

1.   ORGANIZATION

Ivy Variable Insurance Portfolios, a Delaware statutory trust (the “Trust”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. Delaware Ivy VIP Core Equity (formerly known as Ivy VIP Core Equity), Delaware Ivy VIP Corporate Bond (formerly known as Ivy VIP Corporate Bond), Delaware Ivy VIP Global Bond (formerly known as Ivy VIP Global Bond), Delaware Ivy VIP Global Equity Income (formerly known as Ivy VIP Global Equity Income), Delaware Ivy VIP Global Growth (formerly known as Ivy VIP Global Growth), Delaware Ivy VIP Limited-Term Bond (formerly known as Ivy VIP Limited-Term Bond), Delaware Ivy VIP Securian Real Estate Securities (formerly known as Ivy VIP Securian Real Estate Securities) and Delaware Ivy VIP Value (formerly known as Ivy VIP Value) (each, a “Portfolio”) are eight series of the Trust and are the only series of the Trust included in these financial statements. The assets belonging to each Portfolio are held separately by the custodian. The investment objective, policies and risk factors of each Portfolio are described more fully in the Prospectus and Statement of Additional Information (“SAI”). Each Portfolio’s investment adviser was Ivy Investment Management Company (“IICO”) through April 30, 2021. Effective April 30, 2021, each Portfolio’s investment adviser is Delaware Management Company (“DMC”).

 

2.   SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by each Portfolio.

Security Transactions and Related Investment Income. Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses are calculated on the identified cost basis. Interest income is recorded on the accrual basis and includes paydown gain (loss) and accretion of discounts and amortization of premiums. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Portfolio is informed of the ex-dividend date. All or a portion of the distributions received from a real estate investment trust or publicly traded partnership may be designated as a reduction of cost of the related investment or realized gain. The financial statements reflect an estimate of the reclassification of the distribution character.

Foreign Currency Translation. Each Portfolio’s accounting records are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars daily, using foreign exchange rates obtained from an independent pricing service approved by the Board of Trustees of the Trust (the “Board”). Purchases and sales of investment securities and accruals of income and expenses are translated at the rate of exchange prevailing on the date of the transaction. For assets and liabilities other than investments in securities, net realized and unrealized gains and losses from foreign currency translation arise from changes in currency exchange rates. Each Portfolio combines fluctuations from currency exchange rates and fluctuations in value when computing net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments. Foreign exchange rates are typically valued as of the close of the New York Stock Exchange (“NYSE”), normally 4:00 P.M. Eastern time, on each day the NYSE is open for trading.

Dividends and Distributions to Shareholders. Dividends and distributions to shareholders are recorded by each Portfolio on the business day following record date. Net investment income dividends and capital gains distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America (“U.S. GAAP”). If the total dividends and distributions made in any tax year exceeds net investment income and accumulated realized capital gains, a portion of the total distribution may be treated as a tax return of capital.

Income Taxes. It is the policy of each Portfolio to distribute all of its taxable income and capital gains to its shareholders and to otherwise qualify as a regulated investment company under Subchapter M of the Internal Revenue Code. In addition, each Portfolio intends to pay distributions as required to avoid imposition of excise tax. Accordingly, no provision has been made for Federal income taxes. The Portfolios file income tax returns in U.S. federal and applicable state jurisdictions. The Portfolios’ tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax returns. Management of the Trust periodically reviews all tax positions to assess whether it is more likely than not that the position would be sustained upon examination by the relevant tax authority based on the technical merits of each position. As of the date of these financial statements, management believes that no liability for unrecognized tax positions is required.

Segregation and Collateralization. In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”), the Dodd Frank Wall Street Reform and Consumer Protection Act, or the interpretive rules and regulations of the U.S. Commodities Futures Trading Commission require that a Portfolio either deliver collateral or segregate assets in connection with certain investments (e.g., dollar rolls, financial futures contracts, foreign currency exchange contracts, options written, securities with extended settlement periods, and swaps), the Portfolio will segregate collateral or designate on its books and records, cash or other liquid securities having a value at least equal to the amount that is required to be physically segregated for the benefit of the counterparty. Furthermore, based on requirements and

 

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agreements with certain exchanges and third party broker-dealers, each party has requirements to deliver/deposit cash or securities as collateral for certain investments. Certain countries require that cash reserves be held while investing in companies incorporated in that country. These cash reserves and cash collateral that has been pledged to cover obligations of the Portfolios under derivative contracts, if any, will be reported separately on the Statements of Assets and Liabilities as “Due from broker”. Securities collateral pledged for the same purpose, if any, is noted on the Schedule of Investments.

Concentration of Market and Credit Risk. In the normal course of business, the Portfolios invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Portfolios may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Portfolios; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Portfolios may be exposed to counterparty credit risk, or the risk that an entity with which the Portfolios have unsettled or open transactions may fail to or be unable to perform on its commitments. The Portfolios manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Portfolios to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Portfolios’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded on the Portfolios’ Statements of Assets and Liabilities, less any collateral held by the Portfolios.

Certain Portfolios may hold high-yield or non-investment-grade bonds, that may be subject to a greater degree of credit risk. Credit risk relates to the ability of the issuer to meet interest or principal payments or both as they become due. The Portfolios may acquire securities in default and are not obligated to dispose of securities whose issuers subsequently default.

Certain Portfolios may enter into financial instrument transactions (such as swaps, futures, options and other derivatives) that may have off-balance sheet market risk. Off-balance sheet market risk exists when the maximum potential loss on a particular financial instrument is greater than the value of such financial instrument, as reflected on the Statements of Assets and Liabilities.

If a Portfolio invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in financial derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Portfolio, or, in the case of hedging positions, that the Portfolio’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad.

There is a risk that changes related to the use of the London Interbank Offered Rate (“LIBOR”) or similar interbank offered rates (“IBORs,” such as the Euro Overnight Index Average (“EONIA”)) could have adverse impacts on financial instruments that reference LIBOR or a similar rate. While some instruments may contemplate a scenario where LIBOR or a similar rate is no longer available by providing for an alternative rate setting methodology, not all instruments have such fallback provisions and the effectiveness of replacement rates is uncertain. The abandonment of LIBOR and similar rates could affect the value and liquidity of instruments that reference such rates, especially those that do not have fallback provisions. The use of alternative reference rate products may impact investment strategy performance.

The global outbreak of COVID-19 (commonly referred to as “coronavirus”) has disrupted economic markets and resulted in travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, prolonged quarantines, cancellations, supply chain disruptions, and lower consumer demand, as well as general concern and uncertainty. The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.

Inflation-Indexed Bonds. Certain Portfolios may invest in inflation-indexed bonds. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted to the rate of inflation. The interest rate on these bonds is generally fixed at issuance at a rate lower than typical bonds. Over the life of an inflation-indexed bond, however, interest will be paid based on a principal value, which is adjusted for inflation. Any increase or decrease in the principal amount of an inflation-indexed bond will be included as interest income on the Statements of Operations, even though investors do not receive their principal until maturity.

 

     
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Interest Only Obligations. These securities entitle the owner to receive only the interest portion from a bond, Treasury note or pool of mortgages. These securities are generally created by a third party separating a bond or pool of mortgages into distinct interest-only and principal-only securities. As the principal (par) amount of a bond or pool of mortgages is paid down, the amount of interest income earned by the owner will decline as well.

Loans. Certain Portfolios may invest in loans, the interest rates of which float or adjust periodically based upon a specified adjustment schedule, benchmark indicator, or prevailing interest rates, the debtor of which may be a domestic or foreign corporation, partnership or other entity (“Borrower”). Loans generally pay interest at rates which are periodically redetermined by reference to a base lending rate plus a premium. These base lending rates generally include prime rates of one or more major U.S. banks, the LIBOR or certificates of deposit rates. Loans often require prepayments from excess cash flow or permit the Borrower to repay at its election. The degree to which Borrowers repay cannot be predicted with accuracy. As a result, the actual maturity may be substantially less than the stated maturities. Loans are exempt from registration under the Securities Act of 1933, as amended, may contain certain restrictions on resale, and cannot be sold publicly. A Portfolio’s investments in loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties.

When a Portfolio purchases assignments, it acquires all the rights and obligations under the loan agreement of the assigning lender. Assignments may, however, be arranged through private negotiations between potential assignees and potential assignors, and the rights and obligations acquired by the purchaser of an assignment may differ from, and be more limited than those held by the assigning lender. When a Portfolio purchases a participation of a loan interest, the Portfolio typically enters into a contractual agreement with the lender or other third party selling the participation. A participation interest in loans includes the right to receive payments of principal, interest and any fees to which it is entitled from the lender and only upon receipt by the lender of payments from the Borrower, but not from the Borrower directly. When investing in a participation interest, if a Borrower is unable to meet its obligations under a loan agreement, a Portfolio generally has no direct right to enforce compliance with the terms of the loan agreement. As a result, the Portfolio assumes the credit risk of the Borrower, the selling participant, and any other persons that are interpositioned between the Portfolio and the Borrower. If the lead lender in a typical lending syndicate becomes insolvent, enters Federal Deposit Insurance Corporation (“FDIC”) receivership or, if not FDIC insured, enters into bankruptcy, the Portfolio may incur certain costs and delays in receiving payment or may suffer a loss of principal and interest.

Payment In-Kind Securities. Certain Portfolios may invest in payment in-kind securities (“PIKs”). PIKs give the issuer the option at each interest payment date of making interest payments in cash or in additional debt securities. Those additional debt securities usually have the same terms, including maturity dates and interest rates, and associated risks as the original bonds. The daily market quotations of the original bonds may include the accrued interest (referred to as a dirty price) and require a pro-rata adjustment from the unrealized appreciation or depreciation on investments to interest receivable on the Statements of Assets and Liabilities.

Securities on a When-Issued or Delayed Delivery Basis. Certain Portfolios may purchase securities on a “when-issued” basis, and may purchase or sell securities on a “delayed delivery” basis. “When-issued” or “delayed delivery” refers to securities whose terms and indenture are available and for which a market exists, but which are not available for immediate delivery. Delivery and payment for securities that have been purchased by a Portfolio on a when-issued basis normally take place within six months and possibly as long as two years or more after the trade date. During this period, such securities do not earn interest, are subject to market fluctuation and may increase or decrease in value prior to their delivery. The purchase of securities on a when-issued basis may increase the volatility of a Portfolio’s NAV to the extent the Portfolio executes such transactions while remaining substantially fully invested. When a Portfolio engages in when-issued or delayed delivery transactions, it relies on the buyer or seller, as the case may be, to complete the transaction. Their failure to do so may cause the Portfolio to lose the opportunity to obtain or dispose of the security at a price and yield DMC, or the Portfolio’s investment subadviser, as applicable, consider advantageous. The Portfolio maintains internally designated assets with a value equal to or greater than the amount of its purchase commitments. The Portfolio may also sell securities that it purchased on a when-issued or delayed delivery basis prior to settlement of the original purchase.

Custodian Fees. “Custodian fees” on the Statements of Operations may include interest expense incurred by a Portfolio on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. A Portfolio pays interest to its custodian on such cash overdrafts, to the extent they are not offset by positive cash balances maintained by that Portfolio. The “Earnings credit” line item, if shown, represents earnings on cash balances maintained by that Portfolio during the period. Such interest expense and other custodian fees may be paid with these earnings.

Indemnification. The Trust’s organizational documents provide current and former Trustees and Officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Trust. In the normal course of business, the Trust may also enter into contracts that provide general indemnification. The Trust’s maximum exposure under these arrangements is unknown and is dependent on future claims that may be made against the Trust. The risk of material loss from such claims is considered remote.

 

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Basis of Preparation. Each Portfolio is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 (“ASC 946”). The accompanying financial statements were prepared in accordance with U.S. GAAP, including but not limited to ASC 946. U.S. GAAP requires the use of estimates made by management. Management believes that estimates and valuations are appropriate; however, actual results may differ from those estimates, and the valuations reflected in the accompanying financial statements may differ from the value ultimately realized upon sale or maturity.

Subsequent Events. Management has determined that no material events or transactions occurred subsequent to December 31, 2021, that would require recognition or disclosure in the Portfolios’ financial statements.

 

3.   INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Each Portfolio’s investments are reported at fair value. Fair value is defined as the price that each Portfolio would receive upon selling an asset or would pay upon satisfying a liability in an orderly transaction between market participants at the measurement date. Each Portfolio calculates the NAV of its shares as of the close of the NYSE, normally 4:00 P.M. Eastern time, on each day the NYSE is open for trading.

For purposes of calculating the NAV, the portfolio securities and financial instruments are valued on each business day using pricing and valuation methods as adopted by the Board. Where market quotes are readily available, fair value is generally determined on the basis of the last reported sales price, or if no sales are reported, based on quotes obtained from a quotation reporting system, established market makers, or pricing services.

Prices for fixed-income securities are typically based on quotes that are obtained from an independent pricing service approved by the Board. To determine values of fixed-income securities, the independent pricing service utilizes such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Securities that cannot be valued by the independent pricing service may be valued using quotes obtained from dealers that make markets in the securities.

Short-term securities with maturities of 60 days or less are valued based on quotes that are obtained from an independent pricing service approved by the Board as described in the preceding paragraph above.

Because many foreign markets close before the NYSE, events may occur between the close of the foreign market and the close of the NYSE that could have a material impact on the valuation of foreign securities. Waddell & Reed Services Company (“WRSCO”), pursuant to procedures adopted by the Board, evaluates the impact of these events and may adjust the valuation of foreign securities to reflect the fair value as of the close of the NYSE. In addition, all securities for which values are not readily available or are deemed unreliable are appraised at fair value as determined in good faith under the supervision of the Board.

Where market quotes are not readily available, portfolio securities or financial instruments are valued at fair value, as determined in good faith by the Board or Valuation Committee pursuant to procedures approved by the Board.

Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information or broker quotes), including where events occur after the close of the relevant market, but prior to the NYSE close, that materially affect the values of a Portfolio’s securities or financial instruments. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the securities trade do not open for trading for the entire day and no other market prices are available.

The Board has delegated to WRSCO the responsibility for monitoring significant events that may materially affect the values of a Portfolio’s securities or financial instruments and for determining whether the value of the applicable securities or financial instruments should be re-evaluated in light of such significant events. DMC, pursuant to authority delegated by the Board, has established a Valuation Committee to administer and oversee the valuation process, including the use of third party pricing vendors.

The Board has adopted methods for valuing securities and financial instruments in circumstances where market quotes are not readily available. For instances in which daily market quotes are not readily available, investments may be valued, pursuant to procedures established by the Board, with reference to other securities or indices. In the event that the security or financial instrument cannot be valued pursuant to one of the valuation methods established by the Board, the value of the security or financial instrument will be determined in good faith by the Valuation Committee in accordance with the procedures adopted by the Board.

When a Portfolio uses these fair valuation methods applied by WRSCO that use significant unobservable inputs to determine its NAV, securities will be priced by a method that the Board or persons acting at its direction believe accurately reflects fair value and are categorized as Level 3 of the fair value hierarchy. These methods may require subjective determinations about the value of a security. The prices used by a Portfolio may differ from the value that will ultimately be realized at the time the securities are sold.

 

     
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WRSCO is responsible for monitoring the implementation of the pricing and valuation policies through a series of activities to provide reasonable comfort of the accuracy of prices including: 1) periodic vendor due diligence meetings to review methodologies, new developments, and process at vendors, 2) daily and monthly multi-source pricing comparisons reviewed and submitted to the Valuation Committee, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by management and the Valuation Committee.

Accounting standards establish a framework for measuring fair value and a three-level hierarchy for fair value measurements 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 factors that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

An individual investment’s fair value measurement is assigned a level based upon the observability of the inputs which are significant to the overall valuation.

The three-tier hierarchy of inputs is summarized as follows:

 

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Level 1 – Observable inputs such as quoted prices, available in active markets, for identical assets or liabilities.

 

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Level 2 – Significant other observable inputs, which may include, but are 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.

 

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Level 3 – Significant unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available, which may include assumptions made by the Board or persons acting at its direction that are used in determining the fair value of investments.

A description of the valuation techniques applied to the Portfolios’ major classes of assets and liabilities measured at fair value on a recurring basis follows:

Asset-Backed Securities and Mortgage-Backed Securities. The fair value of asset-backed securities and mortgage-backed securities are estimated using recently executed transactions and based on models that consider the estimated cash flows of each debt tranche of the issuer, establish a benchmark yield, and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche including, but not limited to, the prepayment speed assumptions and attributes of the collateral. To the extent the inputs are observable and timely, the values would be categorized in Level 2 of the fair value hierarchy, and otherwise they would be categorized as Level 3.

Corporate Bonds. The fair value of corporate bonds, as obtained from an independent pricing service, is estimated using various techniques, which consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, fundamental data relating to the issuer, and credit default swap spreads adjusted for any basis difference between cash and derivative instruments. While most corporate bonds are categorized in Level 2 of the fair value hierarchy, in instances where lower relative weight is placed on transaction prices, quotations, or similar observable inputs, they are categorized in Level 3 of the fair value hierarchy.

Derivative Instruments. Forward foreign currency contracts are valued based upon the closing prices of the forward currency rates determined at the close of the NYSE, which are provided by an independent pricing service. Swaps derive their value from underlying asset prices, indices, reference rates and other inputs or a combination of these factors. Swaps are valued by an independent pricing service unless the price is unavailable, in which case they are valued at the price provided by a dealer in that security. Exchange-traded futures contracts are generally valued at the settlement price. Listed options are ordinarily valued at the mean of the last bid and ask price provided by an independent pricing service unless the price is unavailable, in which case they are valued at a quotation obtained from a broker-dealer. Over the counter (“OTC”) options are ordinarily valued at the mean of the last bid and ask price for a comparable listed option provided by an independent pricing service unless such a price is unavailable, in which case they are valued at a quotation obtained from a broker-dealer.

Listed derivatives that are actively traded are valued based on quoted prices from the exchange and are categorized in Level 1 of the fair value hierarchy. OTC derivative contracts include forward foreign currency contracts, swap agreements, and option contracts related to interest rates, foreign currencies, credit standing of reference entities, equity prices, or commodity prices. Depending on the product and the terms of the transaction, the fair value of the OTC derivative products are modeled taking into account the counterparties’ creditworthiness and using a series of techniques, including simulation models. Many pricing models do not entail material subjectivity because the methodologies employed do not necessitate significant judgments and the pricing inputs are observed from actively quoted markets, as is the case with interest rate

 

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swap and option contracts. OTC derivative products valued using pricing models with significant observable inputs are categorized within Level 2 of the fair value hierarchy.

Equity Securities. Equity securities traded on U.S. or foreign securities exchanges or included in a national market system are valued at the official closing price at the close of each business day unless otherwise stated below. OTC equity securities and listed securities for which no price is readily available are valued at the average of the last bid and ask prices.

Mutual funds, including investment funds, typically are valued at the NAV reported as of the valuation date. Securities that are stated at the last reported sales price or closing price on the day of valuation taken from the primary exchange where the security is principally traded and to the extent these securities are actively traded and valuation adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy.

Foreign securities, for which the primary trading market closes at the same time or after the NYSE, are valued based on quotations from the primary market in which they are traded and categorized in Level 1. Because many foreign securities markets and exchanges close prior to the close of the NYSE, closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after that close. Certain foreign securities may be fair valued using a pricing service that considers the correlation of the trading patterns of the foreign security to the intra-day trading in the U.S. markets for investments such as American Depositary Receipts, financial futures, exchange-traded funds, and the movement of certain indices of securities based on a statistical analysis of their historical relationship; such valuations generally are categorized in Level 2.

Preferred stock, repurchase agreements, and other equities traded on inactive markets or valued by reference to similar instruments are also generally categorized in Level 2.

Loans. Loans are valued using a price or composite price from one or more brokers or dealers as obtained from an independent pricing service. The fair value of loans is estimated using recently executed transactions, market price quotations, credit/market events, and cross-asset pricing. Inputs are generally observable market inputs obtained from independent sources. Loans are generally categorized in Level 2 of the fair value hierarchy, unless key inputs are unobservable in which case they would be categorized as Level 3.

Municipal Bonds. Municipal bonds are fair valued based on pricing models used by and obtained from an independent pricing service that take into account, among other factors, information received from market makers and broker-dealers, current trades, bid-wants lists, offerings, market movements, the callability of the bond, state of issuance, benchmark yield curves, and bond insurance. To the extent that these inputs are observable and timely, the fair values of municipal bonds would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.

Restricted Securities. Restricted securities that are deemed to be Rule 144A securities and illiquid, as well as restricted securities held in non-public entities, are included in Level 3 of the fair value hierarchy to the extent that significant inputs to valuation are unobservable, because they trade infrequently, if at all and, therefore, the inputs are unobservable. Restricted securities that are valued at a discount to similar publicly traded securities may be categorized as Level 2 of the fair value hierarchy to the extent that the discount is considered to be insignificant to the fair value measurement in its entirety; otherwise they may be categorized as Level 3.

U.S. Government and Agency Securities. U.S. government and agency securities are normally valued using a model that incorporates market observable data such as reported sales of similar securities, broker quotes, yields, bids, offers, quoted market prices, and reference data. Accordingly, U.S. government and agency securities are normally categorized in Level 2 of the fair value hierarchy depending on the liquidity and transparency of the market.

Transfers from Level 2 to Level 3, if any, occurred primarily due to the lack of observable market data due to decreased market activity or information for these securities. Transfers from Level 3 to Level 2, if any, occurred primarily due to the increased availability of observable market data due to increased market activity or information.

For fair valuations using unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances for reported fair values that presents changes attributable to total realized and unrealized gains or losses, purchases and sales, and transfers in or out of the Level 3 category during the period. In accordance with the requirements of U.S. GAAP, a fair value hierarchy and Level 3 reconciliation, if any, have been included in the Notes to the Schedule of Investments for each respective Portfolio.

Net realized gain (loss) and net unrealized appreciation (depreciation), shown on the reconciliation of Level 3 investments, if applicable, are included on the Statements of Operations in net realized gain (loss) on investments in unaffiliated and/or affiliated securities and in net change in unrealized appreciation (depreciation) on investments in unaffiliated and/or affiliated securities, respectively.

 

     
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4.   DERIVATIVE INSTRUMENTS ($ amounts in thousands unless indicated otherwise)

The following disclosures contain information on why and how the Portfolios use derivative instruments, the associated risks of investing in derivative instruments, and how derivative instruments affect the Portfolios’ financial positions and results of operations.

Futures Contracts. Each Portfolio is authorized to engage in buying and selling futures contracts. Upon entering into a futures contract, a Portfolio is required to deposit, in a segregated account, an amount equal to a varying specified percentage of the contract amount. This amount is known as the initial margin. Subsequent amounts, known as variation margin, are paid or received by the Portfolio each day, dependent on the daily fluctuations in the value of the underlying debt security or index. Options on futures contracts may also be purchased or sold by a Portfolio.

Futures contracts are reported on a schedule following the Schedule of Investments. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are identified on the Schedule of Investments. Cash held by the broker to cover initial margin requirements on open futures contracts and the receivable and/or payable for the daily mark to market for the variation margin are noted on the Statements of Assets and Liabilities. The net change in unrealized appreciation (depreciation) is reported on the Statements of Operations. Realized gains (losses) are reported on the Statements of Operations at the closing or expiration of futures contracts.

Risks of entering into futures contracts include the possibility of loss of securities or cash held as collateral, that there may be an illiquid market where the Portfolio is unable to close the contract or enter into an offsetting position and, if used for hedging purposes, the risk that the price of the contract will correlate imperfectly with the prices of the Portfolio’s securities.

Corporate Bond invests in long and/or short positions in futures contracts to gain exposure to, or economically hedge against, changes in interest rates (interest rate risk).

Option Contracts. Options purchased by a Portfolio are accounted for in the same manner as portfolio securities. The cost of the underlying instruments acquired through the exercise of call options is increased by the premium paid to purchase the call. The proceeds from instruments sold through the exercise of put options are decreased by the premium paid to purchase the put.

When a Portfolio writes (sells) an option, an amount equal to the premium received by the Portfolio is recorded as a liability. The amount of the liability is subsequently adjusted to reflect the current value of the option written. When an option expires on its stipulated expiration date or a Portfolio enters into a closing purchase transaction, the Portfolio realizes a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the call option was sold), and the liability related to such option is extinguished. When a written call option is exercised, the premium is added to the proceeds from the sale of the underlying instrument in determining whether a Portfolio has realized a gain or loss. When a written put is exercised, the cost basis of the instruments purchased by a Portfolio is reduced by the amount of the premium received.

Investments in options, whether purchased or written, involve certain risks. Writing put options and purchasing call options may increase a Portfolio’s exposure to the underlying instrument. With written options, there may be times when a Portfolio will be required to purchase or sell instruments to meet its obligation under the option contract where the required action is not beneficial to the Portfolio, due to unfavorable movement of the market price of the underlying instrument.

Option contracts can be traded on a regulated exchange or traded OTC. Unlike the trades on a regulated exchange where the clearinghouse guarantees the performances of both the buyer and the seller, to the extent a Portfolio enters into OTC option transactions with counterparties, the Portfolio will be exposed to the risk that counterparties to these OTC transactions will be unable to meet their obligations under the terms of the transaction.

Value writes call and put options to increase or decrease hedging exposure to underlying instruments (which include credit risk, equity risk, foreign currency exchange rate risk, event risk and/or interest rate risk), increase exposure to various equity markets or certain sectors, gain exposure to or facilitate trading in certain securities and/or, in the case of options written, to generate returns from options premiums.

Collateral and rights of offset. A Portfolio mitigates credit risk with respect to OTC derivative counterparties through credit support annexes (“CSA”) included with an International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreement which is the standard contract governing all OTC derivative transactions between the Portfolio and each of its counterparties. Although it is not possible to eliminate credit risk entirely, the CSA allows the Portfolio and its counterparty to reduce their exposure to the risk of payment default by the other party by holding an amount in collateral equivalent to the realized and unrealized amount of exposure to the counterparty, which is generally held by the Portfolio’s custodian. An amount of collateral is moved to/from applicable counterparties only if the amount of collateral required to be posted surpasses both the threshold and the minimum transfer amount pre-agreed in the CSA between the Portfolio and the counterparty. See Note 2 “Segregation and Collateralization” for additional information with respect to collateral practices.

 

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Offsetting of Assets and Liabilities. The following tables present financial instruments that are either (1) offset or (2) subject to an enforceable master netting arrangement or similar agreement as of December 31, 2021:

 

Liabilities  

 

      Gross Amounts Not Offset on the
Statements of Assets and Liabilities		  
Portfolio   Counterparty   Gross
Amounts of
Recognized
Liabilities		     Gross
Amounts
Offset on the
Statements
of Assets and
Liabilities		     Net Amounts
of Liabilities
Presented on
the Statements
of Assets and
Liabilities		     Financial
Instruments
and
Derivatives
Available
for Offset		     Non-Cash
Collateral
Pledged		     Cash
Collateral
Pledged		     Net
Amount
Payable		  

Value

                

Written options at value

   JPMorgan Securities LLC   $ 226     $ —     $ 226     $ —     $ (192 )    $ —     $ 34  

 

Additional   Disclosure Related to Derivative Instruments

Fair values of derivative instruments as of December 31, 2021:

 

       

Assets

          

Liabilities

  
Portfolio   Type of Risk
Exposure		   Statements of Assets & Liabilities
Location		   Value            Statements of Assets & Liabilities
Location		   Value  
Value   Equity       $ —             Written options at value   $ 405  

Amount of realized gain (loss) on derivatives recognized on the Statements of Operations for the year ended December 31, 2021:

 

         Net realized gain (loss) on:         
Portfolio   Type of Risk
Exposure		    Investments in
unaffiliated
securities*		      Swap
agreements		      Futures
contracts		      Written
options		      Forward
foreign
currency
contracts		      Total  
Corporate Bond   Interest rate    $ —      $ —      $ 1,688      $ —      $ —      $ 1,688  
Value   Equity      —        —        —        833        —        833  

* Purchased options are reported as investments in unaffiliated securities and are reflected on the accompanying Schedule of Investments.

Change in unrealized appreciation (depreciation) on derivatives recognized on the Statements of Operations for the year ended December 31, 2021:

 

         Net change in unrealized appreciation (depreciation) on:         
Portfolio   Type of Risk
Exposure		    Investments in
unaffiliated
securities*		      Swap
agreements		      Futures
contracts		      Written
options		      Forward
foreign
currency
contracts		      Total  
Corporate Bond   Interest rate    $ —      $ —      $ 65      $ —      $ —      $ 65  
Value   Equity      —        —        —        (228 )       —        (228 ) 

* Purchased options are reported as investments in unaffiliated securities and are reflected on the accompanying Schedule of Investments.

During the year ended December 31, 2021, the average derivative volume was as follows:

 

Portfolio   Forward foreign
currency contracts(1)		   Long futures
contracts(2) 		  Short futures
contracts(2) 		  Swap
agreements(3)		   Purchased
options(2) 		  Written
options(2)
Corporate Bond   $—     $ 3,063     $ 15,288     $ —     $ —     $ —
Value   —       —       —       —       —       317

 

(1)

Average absolute value of unrealized appreciation/depreciation during the period.

(2)

Average value outstanding during the period.

(3)

Average notional amount outstanding during the period.

 

     
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5.   INVESTMENT MANAGEMENT AND PAYMENTS TO AFFILIATED PERSONS ($ amounts in thousands unless indicated otherwise)

Management Fees. IICO served as each Portfolio’s investment adviser through April 30, 2021. Effective April 30, 2021, DMC serves as each Portfolio’s investment adviser. The management fee is accrued daily by each Portfolio at the following annual rates as a percentage of average daily net assets:

 

Portfolio (M – Millions)    $0 to
$500M		     $500 to
$1,000M		     $1,000 to
$1,500M		     $1,500 to
$2,000M		     $2,000 to
$3,000M		     Over
$3,000M		  

Core Equity

      0.700 %      0.700 %      0.650 %      0.650 %      0.600 %      0.550 % 

Corporate Bond

      0.475       0.475       0.450       0.400       0.400       0.400  

Global Bond

      0.625       0.600       0.550       0.500       0.500       0.500  

Global Equity Income

      0.700       0.700       0.650       0.650       0.600       0.550  

Global Growth

      0.850       0.850       0.830       0.830       0.800       0.760  

Limited-Term Bond

      0.500       0.450       0.400       0.350       0.350       0.350  

Securian Real Estate Securities

      0.900       0.900       0.870       0.870       0.840       0.800  

Value

      0.700       0.700       0.650       0.650       0.600       0.550  

DMC may seek investment advice and recommendations from its affiliates: Macquarie Investment Management Europe Limited, Macquarie Investment Management Austria Kapitalanlage AG, and Macquarie Investment Management Global Limited (together, the “Affiliated Sub-Advisors”). DMC may also permit these Affiliated Sub-Advisors to execute Portfolio security trades on behalf of DMC and exercise investment discretion for securities in certain markets where DMC believes it will be beneficial to utilize an Affiliated Sub-Advisor’s specialized market knowledge. Although the Affiliated Sub-Advisors serve as sub-advisors, DMC has ultimate responsibility for all investment advisory services. For these services, DMC, not a Portfolio, pays each Affiliated Sub-Advisor a portion of its investment management fee.

DMC may permit its affiliates, Macquarie Investment Management Global Limited (MIMGL) and Macquarie Funds Management Hong Kong Limited (together, the “Affiliated Sub-Advisors”), to execute Portfolio equity security trades on its behalf. DMC may also seek quantitative support from MIMGL. Although the Affiliated Sub-Advisors serve as sub-advisors, DMC has ultimate responsibility for all investment advisory services. For these services, DMC, not the Portfolio, may pay each Affiliated Sub-Advisor a portion of its investment management fee.

DMC has entered into a Subadvisory Agreement with the following entity on behalf of Securian Real Estate Securities:

Securian Asset Management, Inc. (“Securian”) serves as subadvisor to Securian Real Estate Securities. The subadvisor makes investment decisions in accordance with the Portfolio’s investment objectives, policies and restrictions under the supervision of DMC and the Board of Trustees. DMC pays all applicable costs of the subadvisor.

Independent Trustees and Chief Compliance Officer Fees. Through April 30, 2021, fees paid to the Independent Trustees could be paid in cash or deferred to a later date, at the election of the Trustees according to the Deferred Fee Agreement entered into between the Trust and the Trustee(s). Each Portfolio recorded its portion of the deferred fees as a liability on the Statement of Assets and Liabilities. All fees paid in cash plus any appreciation (depreciation) in the underlying deferred plan are shown on the Statement of Operations. Additionally, fees paid to the Chief Compliance Officer of the Portfolios are shown on the Statement of Operations.

Accounting Services Fees. The Trust has an Accounting and Administrative Services Agreement with WRSCO, doing business as WI Services Company (“WISC”). Under the agreement, WISC acts as the agent in providing bookkeeping and accounting services and assistance to the Trust, including maintenance of Portfolio records, pricing of Portfolio shares and preparation of certain shareholder reports. For these services, each Portfolio pays WISC a monthly fee of one-twelfth of the annual fee based on the average net asset levels shown in the following table:

 

(M – Millions)    $0 to
$10M		      $10 to
$25M		      $25 to
$50M		      $50 to
$100M		      $100 to
$200M		      $200 to
$350M		      $350 to
$550M		      $550 to
$750M		      $750 to
$1,000M		      Over
$1,000M		  

Annual Fee Rate

    $ 0.00      $ 11.50      $ 23.10      $ 35.50      $ 48.40      $ 63.20      $ 82.50      $ 96.30      $ 121.60      $ 148.50  

Each Portfolio also pays WISC a monthly administrative fee at the annual rate of 0.01%, or one basis point, for the first $1 billion of net assets with no fee charged for net assets in excess of $1 billion. This fee is voluntarily waived by WISC until a Portfolio’s net assets are at least $10 million and is included in “Accounting services fee” on the Statements of Operations.

Shareholder Servicing. Under the Transfer Agency Agreement between the Trust and WISC, each Portfolio reimburses WISC for certain out-of-pocket costs.

Service Plan. Class II. Under a Service Plan adopted by the Trust pursuant to Rule 12b–1 under the 1940 Act, each Portfolio may pay a service fee to Ivy Distributors, Inc. (“IDI”) through April 30, 2021 and Delaware Distributors, L.P. (“DDLP”) effective April 30, 2021 for Class II shares in an amount not to exceed 0.25% of the Portfolio’s average annual net assets. The fee is to be paid to compensate IDI/DDLP for amounts it expends in connection with the provision of personal services to Policyowners and/or maintenance of Policyowner accounts.

 

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Expense Reimbursements and/or Waivers. DMC, the Portfolios’ investment manager, DDLP, the Portfolios’ distributor, and/or Waddell & Reed Services Company, doing business as WISC, the Portfolios’ transfer agent, have contractually agreed to reimburse sufficient management fees, 12b-1 fees and/or shareholder servicing fees to cap the total annual ordinary fund operating expenses (which would exclude interest, taxes, brokerage commissions, acquired fund fees and expenses, and extraordinary expenses, if any). Portfolio and class expense limitations and related waivers/reimbursements for the year ended December 31, 2021 were as follows:

 

Portfolio Name    Share
Class Name		    Type of
Expense
Limit		    Commencement
Date		    End Date    Expense
Limit		   Amount of
Expense
Waiver/
Reimbursement		   Expense
Reduced

Core Equity

    Class II    Contractual    10-1-2016    4-30-2022    0.95%   $288   12b-1 Fees
and/or
Shareholder
Servicing

Global Bond

    Class II    Voluntary    N/A    N/A    N/A   $124(1)   Investment
Management
Fee

Global Growth

    Class II    Contractual    10-1-2016    4-30-2022    1.13%   $82   12b-1 Fees
and/or
Shareholder
Servicing

Securian Real Estate Securities

    Class II    Contractual    12-3-2012    4-30-2022    N/A   $33(2)   Investment
Management
Fee

 

(1)

For Portfolios that were managed solely by DMC/IICO, DMC/IICO voluntarily agreed to waive its management fee for any day that a portfolio’s net assets were less than $25 million during the fiscal year.

(2)

The Portfolio’s investment management fee is being reduced by 0.09% of average daily net assets until April 30, 2022.

Any amounts due to the Portfolios as a reimbursement but not paid as of December 31, 2021 are shown as a receivable from affiliates on the Statements of Assets and Liabilities.

 

6.   INTERFUND LENDING PROGRAM

Pursuant to an exemptive order issued by the SEC (“Order”), the Delaware Ivy Funds, Delaware Ivy Variable Insurance Portfolios and InvestEd Portfolios (collectively, the “Funds” only for purposes of this footnote 6) have the ability to lend money to, and borrow money from, each other pursuant to a master interfund lending agreement (“Interfund Lending Program”). Under the Interfund Lending Program, the Funds may lend or borrow money for temporary purposes directly to or from one another (each an “Interfund Loan”), subject to meeting the conditions of the Order. The interest rate to be charged on an Interfund Loan is the average of the overnight repurchase agreement rate and the short-term bank loan rate. The Funds have not utilized the Interfund Lending Program from the period January 1, 2021 to December 31, 2021. Additionally, no interfund loans are outstanding as of December 31, 2021.

 

7.   INVESTMENT SECURITIES TRANSACTIONS ($ amounts in thousands)

The cost of purchases and the proceeds from maturities and sales of investment securities (excluding short-term securities) for the year ended December 31, 2021, were as follows:

 

     Purchases      Sales  
      U.S. Government      Other Issuers      U.S. Government      Other Issuers  

Core Equity

    $ —      $ 210,658      $ —      $ 403,910  

Corporate Bond

      92,323        517,434        93,007        502,621  

Global Bond

      1,095        5,959        1,674        8,254  

Global Equity Income

      —        336,451        —        400,093  

Global Growth

      —        34,092        —        57,756  

Limited-Term Bond

      67,330        135,181        101,186        125,942  

Securian Real Estate Securities

      —        20,303        —        22,241  

Value

      —        178,270        —        387,925  

 

     
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8.   LOANS OF PORTFOLIO SECURITIES ($ amounts in thousands)

Each Portfolio may lend their portfolio securities only to borrowers that are approved by the Portfolio’s securities lending agent, The Bank of New York Mellon (“BNYM”). The borrower pledges and maintains with the Portfolio collateral consisting of cash or securities issued or guaranteed by the U.S. government. The collateral received by the Portfolio is required to have a value of at least 102% of the market value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% of the market value for all other securities, except in the case of loans of foreign securities which are denominated and payable in U.S. dollars, in which case the collateral is required to have a value of at least 102% of the market value of the loaned securities. The market value of the loaned securities is determined at the close of each business day and any additional required collateral is delivered to the Portfolio and any excess collateral is returned by the Portfolio on the next business day. During the term of the loan, the Portfolio is entitled to all distributions made on or in respect of the loaned securities but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

Cash received as collateral for securities on loan may be reinvested in the Dreyfus Institutional Preferred Government Money Market Fund—Institutional Shares or certain other registered money market funds and are disclosed in the Portfolio’s Schedule of Investments and are reflected in the Statements of Assets and Liabilities as cash collateral on securities loaned at value. Non-cash collateral, in the form of securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, is not disclosed in the Portfolio’s Statements of Assets and Liabilities as it is held by the lending agent on behalf of the Portfolio and the Portfolio does not have the ability to re-hypothecate these securities. The securities on loan for each Portfolio are also disclosed in its Schedule of Investments. The total value of any securities on loan as of December 31, 2021 and the total value of the related cash collateral are disclosed in the Statements of Assets and Liabilities. Income earned by the Portfolios from securities lending activity is disclosed in the Statements of Operations.

The following is a summary of each Portfolio’s securities lending positions and related cash and non-cash collateral received as of December 31, 2021:

 

Portfolio    Value of
Securities
on Loan		      Cash
Collateral
Received		      Non-Cash
Collateral
Received		      Total
Collateral
Received		  

Corporate Bond

    $ 3,048      $ 1,166      $ 1,956      $ 3,122  

Global Bond

      215        179        41        220  

Global Equity Income

      5,591        5,932        —        5,932  

Limited-Term Bond

      299        306        —        306  

The cash collateral received amounts presented in the table above are transactions accounted for as secured borrowings and have an overnight and continuous maturity. The proceeds from the cash collateral received is invested in registered money market funds.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Portfolios benefit from a borrower indemnity provided by BNYM. BNYM’s indemnity allows for full replacement of securities lent wherein BNYM will purchase the unreturned loaned securities on the open market by applying the proceeds of the collateral or to the extent such proceeds are insufficient or the collateral is unavailable, BNYM will purchase the unreturned loan securities at BNYM’s expense. However, the Portfolio could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.

 

9.   CAPITAL SHARE TRANSACTIONS (All amounts in thousands)

The Trust has authorized an unlimited number of no par value shares of beneficial interest. Transactions in shares of beneficial interest were as follows:

 

    Core Equity            Corporate Bond  
    Year ended
12-31-21		     Year ended
12-31-20		            Year ended
12-31-21		     Year ended
12-31-20		  
    Shares     Value     Shares     Value            Shares     Value     Shares     Value  

Shares issued from sale of shares:

                   

Class II

     726     $ 11,448       2,903     $ 31,943          27,486     $ 159,641       31,953     $ 185,875  

Shares issued in reinvestment of distributions to shareholders:

                   

Class II

     2,139       32,448       3,675       41,268          8,184       44,860       2,715       15,230  

Shares redeemed:

 

Class II

     (12,603 )      (203,034 )      (12,562 )      (153,563 )         (30,213 )      (172,078 )      (28,668 )      (162,692 ) 
 

 

 

       

 

 

  

Net increase (decrease)

     (9,738 )    $ (159,138 )      (5,984 )    $ (80,352 )         5,457     $ 32,423       6,000     $ 38,413  
 

 

 

       

 

 

  

 

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    Global Bond            Global Equity Income  
    Year ended
12-31-21		     Year ended
12-31-20		            Year ended
12-31-21		     Year ended
12-31-20		  
    Shares     Value     Shares     Value            Shares     Value     Shares     Value  

Shares issued from sale of shares:

                   

Class II

     834     $ 4,282       1,085     $ 5,544          2,754     $ 18,193       16,011     $ 80,580  

Shares issued in reinvestment of distributions to shareholders:

                   

Class II

     147       736       164       784          1,077       7,042       1,697       8,016  

Shares redeemed:

 

Class II

     (1,612 )      (8,191 )      (1,406 )      (7,089 )         (13,470 )      (88,835 )      (14,700 )      (75,899 ) 
 

 

 

       

 

 

  

Net increase (decrease)

     (631 )    $ (3,173 )      (157 )    $ (761 )         (9,639 )    $ (63,600 )      3,008     $ 12,697  
 

 

 

       

 

 

  
    Global Growth             Limited-Term Bond  
    Year ended
12-31-21		     Year ended
12-31-20		            Year ended
12-31-21		     Year ended
12-31-20		  
    Shares     Value     Shares     Value            Shares     Value     Shares     Value  

Shares issued from sale of shares:

                   

Class II

     697     $ 3,185       1,469     $ 5,075          15,427     $ 76,583       25,074     $ 124,940  

Shares issued in reinvestment of distributions to shareholders:

                   

Class II

     1,757       7,648       178       585          1,731       8,512       2,180       10,693  

Shares redeemed:

 

Class II

     (5,540 )      (25,448 )      (6,864 )      (24,898 )         (23,002 )      (113,365 )      (32,863 )      (163,666 ) 
 

 

 

       

 

 

  

Net decrease

     (3,086 )    $ (14,615 )      (5,217 )    $ (19,238 )         (5,844 )    $ (28,270 )      (5,609 )    $ (28,033 ) 
 

 

 

       

 

 

  
    Securian Real Estate Securities            Value  
    Year ended
12-31-21		     Year ended
12-31-20		            Year ended
12-31-21		     Year ended
12-31-20		  
    Shares     Value     Shares     Value            Shares     Value     Shares     Value  

Shares issued from sale of shares:

                   

Class II

     599     $ 4,942       644     $ 4,266          1,830     $ 13,691       15,095     $ 79,254  

Shares issued in reinvestment of distributions to shareholders:

                   

Class II

     112       882       494       2,884          1,137       8,558       5,308       26,609  

Shares redeemed:

 

Class II

     (932 )      (7,786 )      (1,084 )      (7,443 )         (30,759 )      (235,245 )      (23,715 )      (128,980 ) 
 

 

 

       

 

 

  

Net increase (decrease)

     (221 )    $ (1,962 )      54     $ (293 )         (27,792 )    $ (212,996 )      (3,312 )    $ (23,117 ) 
 

 

 

       

 

 

  

 

10.   COMMITMENTS

Bridge loan commitments may obligate a Portfolio to furnish temporary financing to a borrower until permanent financing can be arranged. In connection with these commitments, the Portfolio earns a commitment fee, typically set as a percentage of the commitment amount. Such fee income is included in interest income on the Statements of Operations. At December 31, 2021, there were no outstanding bridge loan commitments.

 

11.   OTHER FUND INFORMATION

At a meeting held on January 12, 2021, the Trustees, upon recommendation of the Audit Committee, selected PricewaterhouseCoopers LLP (“PwC”), contingent on PwC finalizing their independence assessment, to serve as the independent registered public accounting firm for the Trust for the fiscal year ending December 31, 2021. PwC affirmed their independence as an independent registered public accounting firm on February 18, 2021. During the fiscal year ended December 31, 2020, Deloitte & Touche LLP’s (“Deloitte”) audit report on the financial statements of each Portfolio in the Trust did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. In addition, there were no disagreements between the Trust and Deloitte on accounting principles, financial statements disclosures or audit scope, which, if not resolved to the satisfaction of Deloitte, would have caused them to make reference to the disagreement in their reports. Neither the Trust nor anyone on its behalf

 

     
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has consulted with PwC at any time prior to their selection with respect to the application of accounting principles to a specified transaction, either completed or proposed or the type of audit opinion that might be rendered on each Portfolio’s financial statements.

 

12.   BORROWINGS

On November 1, 2021, the Portfolios were added (by way of amendment) as additional participants to a $355,000,000 revolving line of credit (Agreement). The Agreement also includes certain other funds in the Delaware Funds (together with the Portfolios, the Participants) and is intended to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the amendment to the Agreement, the Participants are charged an annual commitment fee of 0.15%, with the addition of an upfront fee of 0.05%, which is allocated across the Participants based on a weighted average of the respective net assets of each Participant. 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 October 31, 2022. The Portfolios had no amounts outstanding as of December 31, 2021, or at any time during the year then ended.

 

13.   FEDERAL INCOME TAX MATTERS ($ amounts in thousands)

For Federal income tax purposes, cost of investments owned at December 31, 2021 and the related unrealized appreciation (depreciation) were as follows:

 

Portfolio    Cost of Investments      Gross Appreciation      Gross Depreciation      Net Unrealized
Appreciation
(Depreciation)		  

Core Equity

    $ 472,522      $ 264,887      $ 1,978      $ 262,909  

Corporate Bond

      652,383        17,411        6,611        10,800  

Global Bond

      16,182        546        226        320  

Global Equity Income

      289,232        13,266        1,794        11,472  

Global Growth

      98,434        63,305        2,633        60,672  

Limited-Term Bond

      390,201        2,468        2,785        (317 ) 

Securian Real Estate Securities

      32,378        9,299        300        8,999  

Value

      283,499        91,068        4,979        86,089  

For Federal income tax purposes, the Portfolios’ undistributed earnings and profit for the year ended December 31, 2021 and the post-October and late-year ordinary activity updated with information available through the date of this report were as follows:

 

Portfolio    Undistributed
Ordinary
Income		      Undistributed
Long-Term
Capital Gains		      Tax Return
of Capital		      Post-
October
Capital
Losses
Deferred		      Late-Year
Ordinary
Losses
Deferred		  

Core Equity

    $ 19,881      $ 112,537      $ —      $ —      $ —  

Corporate Bond

      17,960        11,074        —        —        —  

Global Bond

      540        —        —        —        —  

Global Equity Income

      21,774        46,305        —        —        —  

Global Growth

      2,721        17,236        —        —        —  

Limited-Term Bond

      4,952        2,114        —        —        —  

Securian Real Estate Securities

      2,096        2,510        —        —        —  

Value

      37,151        70,776        —        —        —  

Internal Revenue Code regulations permit each Portfolio to elect to defer into its next fiscal year capital losses and certain specified ordinary items incurred between each November 1 and the end of its fiscal year. Each Portfolio is also permitted to defer into its next fiscal certain ordinary losses that are generated between January 1 and the end of its fiscal year.

 

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The tax character of dividends and distributions paid during the two fiscal years ended December 31, 2021 and 2020 were as follows:

 

     December 31, 2021             December 31, 2020  
Portfolio    Distributed
Ordinary
Income(1)		      Distributed
Long-Term
Capital Gains		              Distributed
Ordinary
Income(1)		      Distributed
Long-Term
Capital Gains		  

Core Equity

    $ 4,049      $ 28,399         $ 10,009      $ 31,259  

Corporate Bond

      32,013        12,847           15,230        —  

Global Bond

      736        —           784        —  

Global Equity Income

      7,042        —           8,016        —  

Global Growth

      89        7,560           585        —  

Limited-Term Bond

      8,512        —           10,693        —  

Securian Real Estate Securities

      329        553           942        1,942  

Value

      8,558        —           10,310        16,299  

 

(1)

Includes short-term capital gains, if any.

Dividends from net investment income and short-term capital gains are treated as ordinary income dividends for federal income tax purposes.

Accumulated capital losses represent net capital loss carryovers as of December 31, 2021 that may be available to offset future realized capital gains and thereby reduce future capital gains distributions. As of December 31, 2021, the capital loss carryforwards were as follows:

 

Portfolio    Short-Term
Capital Loss
Carryover		      Long-Term
Capital Loss
Carryover		  

Core Equity

    $ —      $ —  

Corporate Bond

      —        —  

Global Bond

      218        834  

Global Equity Income

      —        —  

Global Growth

      —        —  

Limited-Term Bond

      —        —  

Securian Real Estate Securities

      —        —  

Value

      —        —  

Net investment income dividends and capital gains distributions are determined in accordance with income tax regulations which may differ from U.S. GAAP. These differences are due to differing treatments for items such as deferral of wash sales, post-October losses, late-year ordinary losses, foreign currency transactions, net operating losses, income from passive foreign investment companies (PFICs) and partnership transactions. At December 31, 2021 , the following reclassifications were made:

 

Portfolio    Accumulated
Earnings
Gain (Loss)		     Paid-In Capital  

Core Equity

      $— *    $ — * 

Corporate Bond

      —       —  

Global Bond

      —       —  

Global Equity Income

      —       —  

Global Growth

      —       —  

Limited-Term Bond

      —       —  

Securian Real Estate Securities

      —       —  

Value

      1       (1 ) 

* Not shown due to rounding.

 

     
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   IVY VIP

 

 

 

To the Board of Trustees of Ivy Variable Insurance Portfolios and Shareholders of Delaware Ivy VIP Core Equity, Delaware Ivy VIP Corporate Bond, Delaware Ivy VIP Global Bond, Delaware Ivy VIP Global Equity Income, Delaware Ivy VIP Global Growth, Delaware Ivy VIP Limited-Term Bond, Delaware Ivy VIP Securian Real Estate Securities and Delaware Ivy VIP Value

Opinions on the Financial Statements

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Delaware Ivy VIP Core Equity, Delaware Ivy VIP Corporate Bond, Delaware Ivy VIP Global Bond, Delaware Ivy VIP Global Equity Income, Delaware Ivy VIP Global Growth, Delaware Ivy VIP Limited-Term Bond, Delaware Ivy VIP Securian Real Estate Securities and Delaware Ivy VIP Value (formerly known as Ivy VIP Core Equity, Ivy VIP Corporate Bond, Ivy VIP Global Bond, Ivy VIP Global Equity Income, Ivy VIP Global Growth, Ivy VIP Limited-Term Bond, Ivy VIP Securian Real Estate Securities and Ivy VIP Value, respectively) (eight of the series constituting Ivy Variable Insurance Portfolios, hereafter collectively referred to as the “Portfolios”) as of December 31, 2021, the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2021 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Portfolios as of December 31, 2021, and the results of each of their operations, changes in each of their net assets, and each of the financial highlights for the year ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

The financial statements of the Portfolios as of and for the year ended December 31, 2020 and the financial highlights for each of the periods ended on or prior to December 31, 2020 (not presented herein, other than the statements of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 12, 2021 expressed an unqualified opinion on those financial statements and financial highlights.

Basis for Opinions

These financial statements are the responsibility of the Portfolios’ management. Our responsibility is to express an opinion on the Portfolios’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Portfolios in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian, transfer agents and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 17, 2022

We have served as the auditor of one or more investment companies in Delaware Funds by Macquarie® since 2010.

 

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INCOME TAX INFORMATION   IVY VIP

 

 

 

AMOUNTS NOT ROUNDED (UNAUDITED)

 

The Portfolios hereby designate the following amounts of dividends paid from net ordinary income as dividends qualifying for the 70% dividends received deduction and Section 163(j) interest dividends eligible to be treated as interest income for purposes of Section 163(j) for corporations for the tax period ended December 31, 2021:

 

      Dividends
Received
Deduction for
Corporations		      Section 163(j)
Interest
Dividends for
Corporations		  

Core Equity

    $ 4,047,120      $ —  

Corporate Bond

      —        9,760  

Global Bond

      —        2,020  

Global Equity Income

      3,321,727        —  

Global Growth

      87,441        124  

Limited-Term Bond

      —        15,398  

Securian Real Estate Securities

      —        —  

Value

      8,554,512        —  

The Portfolios hereby designate the following amounts as distributions of long-term capital gains:

 

Core Equity

    $ 28,399,815  

Corporate Bond

      12,847,459  

Global Bond

      —  

Global Equity Income

      —  

Global Growth

      7,559,604  

Limited-Term Bond

      —  

Securian Real Estate Securities

      552,868  

Value

      —  

Internal Revenue Code regulations permit each qualifying Portfolio to elect to pass through a foreign tax credit to shareholders with respect to foreign taxes paid by the Portfolio. Each Portfolio elected to pass the following amounts of creditable foreign taxes through to their shareholders:

 

      Foreign
Tax Credit		      Foreign
Derived
Income		  

Global Equity Income

    $ 478,292      $ 4,890,898  
 

 

     
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BOARD OF TRUSTEES / DIRECTORS AND OFFICERS ADDENDUM   IVY VIP

 

 

 

(UNAUDITED)

 

Name, Address, and Birth Date   Position(s) Held with
the Fund		   Length of Time Served   Principal Occupation(s)
During the Past Five Years		   Number of Portfolios in
Fund Complex Overseen
by Trustee or Officer		   Other Directorships Held by
Trustee or Officer
Interested Trustee

Shawn K. Lytle1
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

February 1970

   President, Chief Executive Officer, and Trustee  

President and Chief Executive Officer since August 2015

Trustee since September 2015

   Global Head of Macquarie Investment Management2 (January 2019-Present); Head of Americas of Macquarie Group (December 2017-Present); Deputy Global Head of Macquarie Investment Management (2017-2019); Head of Macquarie Investment Management Americas (2015-2017)   150   Trustee — UBS Relationship Funds, SMA Relationship Trust, and UBS Funds (May 2010- April 2015)
Independent Trustees

Jerome D. Abernathy3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

July 1959

   Trustee   Since January 2019   Managing Member, Stonebrook Capital Management, LLC (financial technology: macro factors and databases) (January 1993-Present)   150   None

Thomas L. Bennett3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

October 1947

   Chair and Trustee  

Trustee since March 2005

Chair since March 2015

   Private Investor (March 2004-Present)   150   None

Ann D. Borowiec3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

November 1958

   Trustee   Since March 2015   Chief Executive Officer, Private Wealth Management (2011-2013) and Market Manager, New Jersey Private Bank (2005-2011) — J.P. Morgan Chase & Co.   150  

Director — Banco Santander International (October 2016-December 2019)

Director — Santander Bank, N.A. (December 2016- December 2019)

Joseph W. Chow3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

January 1953

   Trustee   Since January 2013   Private Investor (April 2011-Present)   150   Director and Audit Committee Member — Hercules Technology Growth Capital, Inc. (July 2004-July 2014)

H. Jeffrey Dobbs
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

May 1955

   Trustee   Since April 2019   Global Sector Chairman, Industrial Manufacturing, KPMG LLP (2010-2015)   150  

Director, Valparaiso University (2012-Present)

Director, TechAccel LLC (2015-Present) (Tech R&D)

Board Member, Kansas City Repertory Theatre (2015-Present)

Board Member, PatientsVoices, Inc. (healthcare) (2018-Present)

Kansas City Campus for Animal Care (2018-Present)

Director, National Association of Manufacturers (2010-2015)

Director, The Children’s Center (2003-2015)

Director, Metropolitan Affairs Coalition (2003-2015)

Director, Michigan Roundtable for Diversity and Inclusion (2003-2015)

Trustee, Ivy Funds Complex (2019-2021)

 

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Name, Address, and Birth Date   Position(s) Held with
the Fund		   Length of Time Served   Principal Occupation(s)
During the Past Five Years		   Number of Portfolios in
Fund Complex Overseen
by Trustee or Officer		   Other Directorships Held by
Trustee or Officer

John A. Fry3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

May 1960

   Trustee   Since January 2001  

President — Drexel University (August 2010-Present)

President — Franklin & Marshall College (July 2002-June 2010)

   150  

Director; Compensation Committee and Governance Committee Member — Community Health Systems (May 2004-Present)

Director — Drexel Morgan & Co. (2015- 2019)

Director and Audit Committee Member — vTv Therapeutics Inc. (2017-Present)

Director and Audit Committee Member — FS Credit Real Estate Income Trust, Inc. (2018-Present)

Director — Federal Reserve Bank of Philadelphia (January 2020-Present)

Joseph Harroz, Jr.
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

January 1967

   Trustee   Since November 1998   President (2020-Present), Interim President (2019-2020), Vice President (2010-2019) and Dean (2010-2019), College of Law, University of Oklahoma; Managing Member, Harroz Investments, LLC, (commercial enterprises) (1998-2019); Managing Member, St. Clair, LLC (commercial enterprises) (2019-Present)   150  

Director, OU Medicine, Inc. (2020-present); Director and Shareholder, Valliance Bank (2007-Present)

Director, Foundation Healthcare (formerly Graymark HealthCare) (2008-2017)

Trustee, the Mewbourne Family Support Organization (2006-Present) (non-profit)

Independent Director, LSQ Manager, Inc. (real estate) (2007-2016)

Director, Oklahoma Foundation for Excellence (non-profit) (2008-Present)

Trustee, Ivy Funds Complex (1998-2021)

 

     
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Name, Address, and Birth Date   Position(s) Held with
the Fund		   Length of Time Served   Principal Occupation(s)
During the Past Five Years		   Number of Portfolios in
Fund Complex Overseen
by Trustee or Officer		   Other Directorships Held by
Trustee or Officer

Sandra A.J. Lawrence
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

September 1957

   Trustee   Since April 2019   Chief Administrative Officer, Children’s Mercy Hospitals and Clinics (2016-2019); CFO, Children’s Mercy Hospitals and Clinics (2005-2016)   150  

Director, Hall Family Foundation (1993-Present)

Director, Westar Energy (utility) (2004-2018)

Trustee, Nelson-Atkins Museum of Art (non-profit) (2021-Present) (2007-2020)

Director, Turn the Page KC (non-profit) (2012-2016)

Director, Kansas Metropolitan Business and Healthcare Coalition (non-profit) (2017-2019)

Director, National Association of Corporate Directors (non-profit) National Board (2022-Present); Regional Board (2017-2021)

Director, American Shared Hospital Services (medical device) (2017-2021)

Director, Evergy, Inc., Kansas City Power & Light Company, KCP&L Greater Missouri Operations Company, Westar Energy, Inc. and Kansas Gas and Electric Company (related utility companies) (2018-Present)

Director, Stowers (research) (2018)

Co-Chair, Women Corporate Directors (director education) (2018-2020)

Trustee, Ivy Funds Complex (2019-2021)

Director, Brixmor Property Group Inc. (2021-Present)

Director, Sera Prognostics Inc. (biotechnology) (2021-Present)

Director, Recology (resource recovery) (2021-Present)

Frances A. Sevilla-Sacasa3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

January 1956

   Trustee   Since September 2011  

Private Investor (January 2017-Present)

Chief Executive Officer — Banco Itaú International (April 2012-December 2016)

Executive Advisor to Dean (August 2011-March 2012) and Interim Dean (January 2011-July 2011) — University of Miami School of Business Administration

President — U.S. Trust, Bank of America Private Wealth Management (Private Banking) (July 2007-December 2008)

   150  

Trust Manager and Audit Committee Chair — Camden Property Trust (August 2011-Present)

Director; Audit & Compensation Committee Member — Callon Petroleum Company (December 2019-Present)

Director; Audit Committee Member — New Senior Investment Group Inc. (January 2021-September 2021)

Director; Audit Committee Member — Carrizo Oil & Gas, Inc. (March 2018- December 2019)

Thomas K. Whitford3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

March 1956

   Trustee   Since January 2013   Vice Chairman (2010-April 2013) — PNC Financial Services Group   150  

Director — HSBC North America Holdings Inc. (December 2013-Present)

Director — HSBC USA Inc. (July 2014-Present)

Director — HSBC Bank USA, National Association (July 2014-March 2017)

Director — HSBC Finance Corporation (December 2013-April 2018)

 

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Name, Address, and Birth Date   Position(s) Held with
the Fund		   Length of Time Served   Principal Occupation(s)
During the Past Five Years		   Number of Portfolios in
Fund Complex Overseen
by Trustee or Officer		   Other Directorships Held by
Trustee or Officer

Christianna Wood3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

August 1959

   Trustee   Since January 2019   Chief Executive Officer and President — Gore Creek Capital, Ltd. (August 2009-Present)   150  

Director; Finance Committee and Audit Committee Member — H&R Block Corporation (July 2008-Present)

Director; Investments Committee, Capital and Finance Committee and Audit Committee Member — Grange Insurance (2013-Present)

Trustee; Chair of Nominating and Governance Committee and Member of Audit Committee — The Merger Fund (2013-October 2021), The Merger Fund VL (2013-October 2021), WCM Alternatives: Event-Driven Fund (2013-October 2021), and WCM Alternatives: Credit Event Fund (December 2017-October 2021)

Director; Chair of Governance Committee and Audit Committee Member — International Securities Exchange (2010-2016)

Janet L. Yeomans3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

July 1948

   Trustee   Since April 1999   Vice President and Treasurer (January 2006-July 2012) Vice President — Mergers & Acquisitions (January 2003-January 2006), and Vice President and Treasurer (July 1995-January 2003) — 3M Company   150   Director; Personnel and Compensation Committee Chair; Member of Nominating, Investments, and Audit Committees for various periods throughout directorship — Okabena Company (2009-2017)

Officers

 

     Position(s) Held with
the Trust		   Length of Time Served   Principal Occupation(s)
During the Past Five Years

David F. Connor4
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

December 1963

   Senior Vice President, General Counsel, and Secretary   Senior Vice President, General Counsel, and Secretary since April 2021   David F. Connor has served in various capacities at different times at Macquarie Investment Management.

Daniel V. Geatens4
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

October 1972

   Senior Vice President and Treasurer   Senior Vice President and Treasurer since April 2021   Daniel V. Geatens has served in various capacities at different times at Macquarie Investment Management.

Richard Salus
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

October 1963

   Senior Vice President and Chief Financial Officer   Senior Vice President and Chief Financial Officer since April 2021   Richard Salus has served in various capacities at different times at Macquarie Investment Management.

1 Shawn K. Lytle is considered to be an “Interested Trustee” because he is an executive officer of the Manager. Mr. Lytle was appointed as Trustee of the Trust effective April 30, 2021.

2 Macquarie Investment Management is the marketing name for certain companies comprising the asset management division of Macquarie Group, including the Funds’ Manager, principal underwriter, and transfer agent.

3 Messrs. Abernathy, Bennett, Chow, Fry, Whitford, and Mss. Borowiec, Sevilla-Sacasa, Wood, Yeomans were appointed as Trustees of the Trust effective April 30, 2021.

4 David F. Connor and Daniel V. Geatens serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment manager and principal underwriter as the Funds. Mr. Geatens also serves as the Chief Financial Officer of the Optimum Fund Trust, and he is the Chief Financial Officer and Treasurer for Macquarie Global Infrastructure Total Return Fund Inc., which has the same investment manager as the Funds.

The Statement of Additional Information for the Portfolios includes additional information about the Trustees and Officers and is available, without charge, upon request by calling 888-923-3355.

 

     
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ANNUAL PRIVACY NOTICE   IVY VIP

 

 

 

(UNAUDITED)

 

FACTS    What does Ivy Variable Insurance Portfolios do with your personal information?
Why?    Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share and protect your personal information. Please read this notice carefully to understand what we do.
What?    The types of personal information we collect and share depend on the product or service you have with us. The information can include:
    

•    Social Security Number and income,

    

•    Assets and transaction history, and

    

•    Checking account information and wire transfer instructions.

     When you are no longer our customer, we continue to share your information as described in this notice.
How?    All financial companies need to share customers’ personal information to conduct everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information, the reasons Ivy Variable Insurance Portfolios chooses to share, and whether you can limit this sharing.

 

Reasons we can share your personal information    Does Ivy Variable
Insurance Portfolios
share?		    Can you limit this
sharing?
For our everyday business purposes – such as to process your transactions, maintain your accounts, respond to court orders and legal investigations or report to credit bureaus    Yes    No
For our marketing purposes – to offer our products and services to you    Yes    No
For joint marketing with other financial companies    No    We don’t share
For our affiliates’ everyday business purposes – information about your transactions and experiences    Yes    No
For our affiliates everyday business purposes – information about your creditworthiness    No    We don’t share
For our affiliates to market to you    No    We don’t share
For non-affiliates to market to you    No    We don’t share

 

Questions?    Call 1(800) 777-6472 with questions about this notice. Client service representatives are available Monday through Friday from 7:30 am to 5:00 pm CST. You may also go to www.ivyinvestments.com/privacy_policy.
     If we serve you through an investment professional, such as a registered representative of a broker-dealer or an investment adviser representative (each, a “financial advisor”), please contact them directly. Specific internet addresses, mailing addresses and telephone numbers are listed on your statements and other correspondence.

 

Who we are      
Who is providing this notice?    Ivy Variable Insurance Portfolios
    

    

What we do      
How does Ivy Variable Insurance Portfolios protect my personal information?    To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.
How does Ivy Variable Insurance Portfolios collect my personal information?    We collect your personal information, for example, when you:
    

•    Give us your contact information or other personal information,

    

•    Open an account, or

    

•    Make deposits to an account or withdrawals from an account.

     We also collect your personal information from our affiliates.
         
Why can’t I limit all sharing?    Federal law gives you the right to limit only:
    

•    Sharing for affiliates’ everyday business purposes – information about your creditworthiness,

    

•    Affiliates from using your information to market to you, and

    

•    Sharing for non-affiliates to market to you.

     State laws and individual companies may give you additional rights to limit sharing.

 

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Definitions      
Affiliates    Companies related by common ownership or control. They can be financial and nonfinancial companies.
    

•    Affiliates of Ivy Funds include Waddell & Reed Services Company, Ivy Distributors, Inc., and Ivy Investment Management Company.

Non-affiliates    Companies not related by common ownership or control. They can be financial and nonfinancial companies.
    

•    Ivy Funds does not share your personal information with non-affiliates so they can market to you.

Joint marketing    A formal agreement between non-affiliated financial companies that together market financial products or services to you.
    

•    Ivy Funds does not jointly market.

    

    

Other important information      
     If you own shares of Ivy Variable Insurance Portfolios in the name of a third party, such as a bank or a broker-dealer, the third party’s privacy policy may apply to you in addition to ours.
     If you are working with a financial advisor, and the financial advisor leaves their firm and joins another non-affiliated broker-dealer or registered investment adviser, then the financial advisor may be permitted to use limited information to contact you. The information that the financial advisor may use is comprised of your name, address, email address, telephone number and account title.

 

     
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PROXY VOTING INFORMATION   IVY VIP

 

 

 

(UNAUDITED)

 

Proxy Voting Guidelines

A description of the policies and procedures Ivy Variable Insurance Portfolios uses to determine how to vote proxies relating to portfolio securities is available (i) without charge, upon request, by calling 1.888.923-3355 and (ii) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.

Proxy Voting Records

Information regarding how the Portfolio voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on Form N-PX at www.ivyinvestments.com and on the SEC’s website at www.sec.gov.

 

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QUARTERLY PORTFOLIO SCHEDULE INFORMATION   IVY VIP

 

 

 

(UNAUDITED)

 

Portfolio holdings can be found on the Trust’s website at www.ivyinvestments.com. Alternatively, a complete schedule of portfolio holdings of each Portfolio for the first and third quarters of each fiscal year is filed with the SEC and can be found as an exhibit to the Trust’s Form N-PORT. These holdings may be viewed in the following ways:

 

•  

On the SEC’s website at www.sec.gov.

 

•  

For review and copy at the SEC’s Public Reference Room in Washington, DC. Information on the operations of the Public Reference Room may be obtained by calling 1.800.SEC.0330.

 

     
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DELAWARE FUNDS BY MACQUARIE FAMILY               

 

 

 

Global/International Portfolios

Delaware Ivy VIP Global Equity Income

Delaware Ivy VIP Global Growth

Delaware Ivy VIP International Core Equity

Domestic Equity Portfolios

Delaware Ivy VIP Core Equity

Delaware Ivy VIP Growth

Delaware Ivy VIP Mid Cap Growth

Delaware Ivy VIP Small Cap Growth

Delaware Ivy VIP Smid Cap Core

Delaware Ivy VIP Value

Fixed Income Portfolios

Delaware Ivy VIP Corporate Bond

Delaware Ivy VIP Global Bond

Delaware Ivy VIP High Income

Delaware Ivy VIP Limited-Term Bond

Money Market Portfolio

Delaware Ivy VIP Government Money Market

Specialty Portfolios

Delaware Ivy VIP Asset Strategy

Delaware Ivy VIP Balanced

Delaware Ivy VIP Energy

Delaware Ivy VIP Natural Resources

Delaware Ivy VIP Pathfinder Aggressive

Delaware Ivy VIP Pathfinder Conservative

Delaware Ivy VIP Pathfinder Moderate

Delaware Ivy VIP Pathfinder Moderately Aggressive

Delaware Ivy VIP Pathfinder Moderately Conservative

Delaware Ivy VIP Pathfinder Moderate — Managed Volatility

Delaware Ivy VIP Pathfinder Moderately Aggressive —Managed Volatility

Delaware Ivy VIP Pathfinder Moderately Conservative — Managed Volatility

Delaware Ivy VIP Science and Technology

Delaware Ivy VIP Securian Real Estate Securities

 

 

 

The underlying portfolios discussed in this report are only available as investment options in variable annuity and variable life insurance contracts issued by life insurance companies. They are not offered or made available directly to the general public.

This report is submitted for the general information of the shareholders of Ivy Variable Insurance Portfolios. It is not authorized for distribution to prospective investors in a Portfolio unless accompanied with or preceded by the current Portfolio prospectus as well as the variable product prospectus.

 

     
    2021       ANNUAL REPORT       103  

Table of Contents
  

ANN-VIP2 (12/21)

Table of Contents

LOGO

 

VARIABLE INSURANCE PORTFOLIOS

   

 

Annual Report

 

DECEMBER 31, 2021

 

 

 

IVY VARIABLE INSURANCE PORTFOLIOS*                    
Delaware Ivy VIP Pathfinder Aggressive (formerly, Ivy VIP Pathfinder Aggressive)      Class II  
Delaware Ivy VIP Pathfinder Conservative (formerly, Ivy VIP Pathfinder Conservative)      Class II  
Delaware Ivy VIP Pathfinder Moderate (formerly, Ivy VIP Pathfinder Moderate)      Class II  
Delaware Ivy VIP Pathfinder Moderately Aggressive (formerly, Ivy VIP Pathfinder Moderately Aggressive)      Class II  
Delaware Ivy VIP Pathfinder Moderately Conservative (formerly, Ivy VIP Pathfinder Moderately Conservative)      Class II  
Delaware Ivy VIP Pathfinder Moderate — Managed Volatility (formerly Ivy VIP Pathfinder Moderate — Managed Volatility)      Class II  
Delaware Ivy VIP Pathfinder Moderately Aggressive — Managed Volatility (formerly, Ivy VIP Pathfinder Moderately Aggressive — Managed Volatility)      Class II  
Delaware Ivy VIP Pathfinder Moderately Conservative — Managed Volatility (formerly, Ivy VIP Pathfinder Moderately Conservative — Managed Volatility)      Class II  
Delaware Ivy VIP Government Money Market (formerly, Ivy VIP Government Money Market)      Class II  

 

*

Effective July 1, 2021, the name of each portfolio has been updated from Ivy VIP to Delaware Ivy VIP as indicated.

 

IVY INVESTMENTS® refers to the investment management and investment advisory services offered by Macquarie Investment Management Business Trust (MIMBT) through its various series.

On December 2, 2020, Waddell & Reed Financial, Inc. (“WDR”), the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios (the “VIP Portfolios”), and Macquarie Management Holdings, Inc., the U.S. holding company for Macquarie Group Limited’s U.S. asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of WDR (the “Transaction”).

The Transaction closed on April 30, 2021. The VIP Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company, a series of Macquarie Investment Management Business Trust, and distributed by Delaware Distributors, L.P.

Table of Contents
CONTENTS   IVY VIP

 

 

 

Illustration of Portfolio Expenses

      3  

Management Discussion, Portfolio Highlights and Schedule of Investments:

         

Pathfinder Portfolios

      5  

Managed Volatility Portfolios

     5  

Delaware Ivy VIP Government Money Market (formerly, Ivy VIP Government Money Market)

      21  

Statements of Assets and Liabilities

      25  

Statements of Operations

      27  

Statements of Changes in Net Assets

      29  

Financial Highlights

      32  

Notes to Financial Statements

      36  

Report of Independent Registered Public Accounting Firm

      49  

Income Tax Information

      50  

Board of Trustees / Directors and Officers Addendum

      51  

Annual Privacy Notice

      55  

Proxy Voting Information

      57  

Quarterly Portfolio Schedule Information

     58  

 

Macquarie Investment Management (MIM) is a global asset manager with offices in the United States, Europe, Asia, and Australia. As active managers, we prioritize autonomy and accountability at the investment team level in pursuit of opportunities that matter for clients. Delaware Funds is one of the longest-standing mutual fund families, with more than 80 years in existence.

If you are interested in learning more about creating an investment plan, contact your financial advisor.

You can learn more about Delaware Funds or obtain a prospectus at www.ivyinvestments.com/reports/vip.

To view your shareholder statement online, go to www.ivyinvestments.com, log in to your account, and select “Statements,” or to view a mutual fund fee and expense calculator, visit https://tools.finra.org/fund_analyzer/.

Macquarie Asset Management (MAM) offers a diverse range of products including securities investment management, infrastructure and real asset management, and fund and equity-based structured products. MIM is the marketing name for certain companies comprising the asset management division of Macquarie Group. This includes the following investment advisers: Macquarie Investment Management Business Trust (MIMBT), Macquarie Funds Management Hong Kong Limited, Macquarie Investment Management Austria Kapitalanlage AG, Macquarie Investment Management Global Limited, Macquarie Investment Management Europe Limited, and Macquarie Investment Management Europe S.A.

The Portfolios are distributed by Delaware Distributors, L.P. (DDLP), an affiliate of MIMBT and Macquarie Group Limited.

None of the entities noted in this document is an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia) and the obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (Macquarie Bank). Macquarie Bank does not guarantee or otherwise provide assurance in respect of the obligations of these entities. In addition, if this document relates to an investment (a) each investor is subject to investment risk including possible delays in repayment and loss of income and principal invested and (b) none of Macquarie Bank or any other Macquarie Group company guarantees any particular rate of return on or the performance of the investment, nor do they guarantee repayment of capital in respect of the investment.

The Portfolios are governed by US laws and regulations. Unless otherwise noted, views expressed herein are current as of December 31, 2021, and subject to change for events occurring after such date. The Portfolios are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested.

Advisory services provided by Delaware Management Company, a series of MIMBT, a US registered investment advisor. All third-party marks cited are the property of their respective owners.

© 2022 Macquarie Management Holdings, Inc.

 

2   ANNUAL REPORT   2021  
     

Table of Contents
ILLUSTRATION OF PORTFOLIO EXPENSES   IVY VIP

 

 

 

(UNAUDITED)

 

Expense Example

 

As a shareholder of a Portfolio, you incur ongoing costs, including management fees, distribution and service fees, and other Portfolio expenses. The following table is intended to help you understand your ongoing costs (in dollars) of investing in a Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. As a shareholder in the underlying Delaware Ivy VIP Portfolios, the Pathfinder Aggressive, Pathfinder Conservative, Pathfinder Moderate, Pathfinder Moderately Aggressive and Pathfinder Moderately Conservative Portfolios (collectively, the “Pathfinder Portfolios”) and the Pathfinder Moderate — Managed Volatility, Pathfinder Moderately Aggressive — Managed Volatility and Pathfinder Moderately Conservative — Managed Volatility Portfolios (collectively, the “Managed Volatility Portfolios”) will indirectly bear their pro rata share of the expenses incurred by the underlying funds. These expenses are not included in the Pathfinder Portfolios’ or Managed Volatility Portfolios’ annualized expense ratios or the expenses paid during the period. These expenses are, however, included in the effective expenses paid during the period. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period ended December 31, 2021.

Actual Expenses

 

The first section in the following table provides information about actual investment values and actual expenses for each share class. You may use the information in this section, together with your initial investment in Portfolio shares, to estimate the expenses that you paid over the period. Simply divide the value of that investment by $1,000 (for example, a $7,500 initial investment divided by $1,000 = 7.5), 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 investment during this period. In addition, there are fees and expenses imposed under the variable annuity or variable life insurance contract through which shares of the Portfolio are held. Additional fees have the effect of reducing investment returns.

Hypothetical Example for Comparison Purposes

 

The second section in the following table provides information about hypothetical investment values and hypothetical expenses for each share class based on the Portfolio’s actual expense ratio and an assumed rate of return of five percent per year before expenses, which is not the Portfolio’s actual return. The hypothetical investment values and expenses may not be used to estimate the actual investment value at the end of the period or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this five percent hypothetical example with the five percent hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs as a shareholder of the Portfolio and do not reflect any fees and expenses imposed under the variable annuity or variable life insurance contract through which shares of the Portfolio are held.

Expenses paid may be impacted by expense reduction arrangements. If those arrangements had not been in place, expenses paid would have been higher. See Note 5 in Notes to Financial Statements for further information.

 

 

     
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Table of Contents
ILLUSTRATION OF PORTFOLIO EXPENSES   IVY VIP

 

 

 

(UNAUDITED)

 

    Actual(1)     Hypothetical(2)        
Portfolio   Beginning
Account
Value
6-30-21		     Ending
Account
Value
12-31-21		     Expenses
Paid During
Period*		     Beginning
Account
Value
6-30-21		     Ending
Account
Value
12-31-21		     Expenses
Paid During
Period*		     Annualized
Expense Ratio
Based on the
Six-Month
Period		  

Pathfinder Aggressive(a)

                                                        

Class II

   $ 1,000     $ 1,060.80     $ 0.31     $ 1,000     $ 1,024.91     $ 0.30       0.06%  

Pathfinder Conservative(b)

                                                        

Class II

   $ 1,000     $ 1,034.60     $ 0.31     $ 1,000     $ 1,024.94     $ 0.30       0.05%  

Pathfinder Moderate(c)

                                                        

Class II

   $ 1,000     $ 1,047.90     $ 0.10     $ 1,000     $ 1,025.07     $ 0.10       0.03%  

Pathfinder Moderately Aggressive(d)

                                                        

Class II

   $ 1,000     $ 1,054.50     $ 0.10     $ 1,000     $ 1,025.07     $ 0.10       0.03%  

Pathfinder Moderately Conservative(e)

                                                        

Class II

   $ 1,000       $1,041.10     $ 0.20     $ 1,000     $ 1,025.02     $ 0.20       0.04%  

Pathfinder Moderate — Managed Volatility(f)

                                                        

Class II

   $ 1,000     $ 1,040.60     $ 1.12     $ 1,000       $1,024.11       $1.11       0.22%  

Pathfinder Moderately Aggressive — Managed Volatility(g)

                                                        

Class II

   $ 1,000     $ 1,047.30     $ 1.33     $ 1,000     $ 1,023.92     $ 1.32       0.26%  

Pathfinder Moderately Conservative — Managed Volatility(h)

                                                        

Class II

   $ 1,000     $ 1,033.60     $ 1.32     $ 1,000     $ 1,023.90     $ 1.32       0.26%  

Government Money Market(i)

                                                        

Class II

   $ 1,000     $ 1,000.00     $ 0.30     $ 1,000     $ 1,024.88     $ 0.30       0.08%  

 

*

Portfolio expenses are equal to the Portfolio’s annualized expense ratio (provided in the table), multiplied by the average account value over the period, multiplied by 184 days in the six-month period ended December 31, 2021, and divided by 365.

 

(1)

This section uses the Portfolio’s actual total return and actual Portfolio expenses. It is a guide to the actual expenses paid by the Portfolio in the period. The “Ending Account Value” shown is computed using the Portfolio’s actual return and the “Expenses Paid During Period” column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Portfolio. A shareholder may use the information here, together with the dollar amount invested, to estimate the expenses that were paid over the period. For every thousand dollars a shareholder has invested, the expenses are listed in the last column of this section.

 

(2)

This section uses a hypothetical five percent annual return and actual Portfolio expenses. It helps to compare the Portfolio’s ongoing costs with other mutual funds. A shareholder can compare the Portfolio’s ongoing costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other Portfolios.

 

(a)

Effective July 1, 2021, the name of Ivy VIP Pathfinder Aggressive changed to Delaware Ivy VIP Pathfinder Aggressive.

 

(b)

Effective July 1, 2021, the name of Ivy VIP Pathfinder Conservative changed to Delaware Ivy VIP Pathfinder Conservative.

 

(c)

Effective July 1, 2021, the name of Ivy VIP Pathfinder Moderate changed to Delaware Ivy VIP Pathfinder Moderate.

 

(d)

Effective July 1, 2021, the name of Ivy VIP Pathfinder Moderately Aggressive changed to Delaware Ivy VIP Pathfinder Moderately Aggressive.

 

(e)

Effective July 1, 2021, the name of Ivy VIP Pathfinder Moderately Conservative changed to Delaware Ivy VIP Pathfinder Moderately Conservative.

 

(f)

Effective July 1, 2021, the name of Ivy VIP Pathfinder Moderate — Managed Volatility changed to Delaware Ivy VIP Pathfinder Moderate — Managed Volatility.

 

(g)

Effective July 1, 2021, the name of Ivy VIP Pathfinder Moderately Aggressive — Managed Volatility changed to Delaware Ivy VIP Pathfinder Moderately Aggressive — Managed Volatility.

 

(h)

Effective July 1, 2021, the name of Ivy VIP Pathfinder Moderately Conservative — Managed Volatility changed to Delaware Ivy VIP Pathfinder Moderately Conservative — Managed Volatility.

 

(i)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Government Money Market to Delaware Ivy VIP Government Money Market.

The above illustrations are based on ongoing costs only.

 

4   ANNUAL REPORT   2021  
     

Table of Contents
MANAGEMENT DISCUSSION   PATHFINDER PORTFOLIOS

 

 

 

(UNAUDITED)

 

On September 13, 2021, the Board of Trustees (Board) of the Ivy Variable Insurance Portfolios approved appointing a sub-advisor for each of the five Delaware Ivy VIP Pathfinder Portfolios (the “Pathfinder Portfolios”), and an additional sub-advisor for each of the three Delaware Ivy VIP Pathfinder Managed Volatility Portfolios (the “Managed Volatility Portfolios”) (the Pathfinder Portfolios and the Managed Volatility Portfolios, together, the “Portfolios”), Macquarie Investment Management Austria Kapitalanlage AG (MIMAK), and MIMAK portfolio managers Stefan Löwenthal and Jürgen Wurzer and Aaron D. Young of Delaware Management Company (DMC) as portfolio managers. In connection with these changes, the Board approved applicable revisions to the Portfolios’ investment strategies. All changes took effect on November 15, 2021.

 

Below, Stefan Löwenthal, Jürgen Wurzer and Aaron D. Young, portfolio managers of each of the five Pathfinder Portfolios and the three Managed Volatility Portfolios, discuss positioning, performance and results for the fiscal year ended December 31, 2021. Mr. Löwenthal and Mr. Wurzer have managed the Portfolios since November 2021, while Mr. Young has managed the Portfolios since 2016. Since the Managed Volatility Portfolios’ inception, Securian Asset Management, Inc., (Securian) has served as the subadvisor for the volatility management strategy. Craig Stapleton, CFA of Securian, has 19 years of industry experience and has managed the volatility management strategy since inception. Merlin Erickson, with 29 years of industry experience, and Jeremy Gogos, Ph.D., CFA, with 9 years of industry experience, both of Securian, have managed the strategy since 2017.

Fiscal Year Performance

 

 

For the 12 Months Ended December 31, 2021

         

Delaware Ivy VIP Pathfinder Aggressive

      18.93%  

55% Russell 3000 Index + 30% MSCI EAFE Index + 15% Bloomberg US Credit Index

      17.04%  

Delaware Ivy VIP Pathfinder Conservative

      10.18%  

35% Russell 3000 Index + 35% Bloomberg US Credit Index + 20% Bloomberg 1-3 Year US Gov/Credit Index + 10% MSCI EAFE Index

      9.17%  

Delaware Ivy VIP Pathfinder Moderate

      14.66%  

45% Russell 3000 Index + 25% Bloomberg US Credit Index + 20% MSCI EAFE Index + 10% Bloomberg 1-3 Year US Gov/Credit Index

      13.06%  

Delaware Ivy VIP Pathfinder Moderately Aggressive

      16.88%  

50% Russell 3000 Index + 25% MSCI EAFE Index + 20% Bloomberg US Credit Index + 5% Bloomberg 1-3 Year US Gov/Credit Index

      15.04%  

Delaware Ivy VIP Pathfinder Moderately Conservative

      12.37%  

40% Russell 3000 Index + 30% Bloomberg US Credit Index + 15% MSCI EAFE Index + 15% Bloomberg 1-3 Year US Gov/Credit Index

      11.10%  

Delaware Ivy VIP Pathfinder Moderately Conservative — Managed Volatility

      10.72%  

40% Russell 3000 Index + 30% Bloomberg US Credit Index + 15% MSCI EAFE Index + 15% Bloomberg 1-3 Year US Gov/Credit Index

      11.10%  

Delaware Ivy VIP Pathfinder Moderate — Managed Volatility

      12.99%  

45% Russell 3000 Index + 25% Bloomberg US Credit Index + 20% MSCI EAFE Index + 10% Bloomberg 1-3 Year US Gov/Credit Index

      13.06%  

Delaware Ivy VIP Pathfinder Moderately Aggressive — Managed Volatility

      15.24%  

50% Russell 3000 Index + 25% MSCI EAFE Index + 20% Bloomberg US Credit Index + 5% Bloomberg 1-3 Year US Gov/Credit Index

      15.04%  

 

     
    2021       ANNUAL REPORT       5  

Table of Contents
           

 

 

 

 

Index Performance

 

 

Russell 3000 Index

      25.66%  

(generally reflects the performance of the largest 3,000 US companies representing approximately 98% of the investable US equity market.)

         

MSCI EAFE Index

      11.26%  

(generally reflects the performance of equity securities across 21 developed market countries in Europe, Australasia and the Far East.)

         

Bloomberg US Credit Index

      -1.08%  

(generally reflects the performance of all publicly issued, fixed-rate, nonconvertible, investment-grade corporate debt. Issues are rated at least Baa by Moody’s Investors Service or BBB by Standard & Poor’s, if unrated by Moody’s. Collateralized Mortgage Obligations (CMOs) are not included.)

         

Bloomberg 1-3 Year US Gov/Credit Index

      -0.47%  

(generally reflects the performance of Treasuries, agencies, publicly issued US corporate and foreign debentures and secured notes with at least one but less than three years to maturity.)

         

Multiple indexes are shown because the Portfolios invest in multiple asset classes.

Past performance is not a guarantee of future results. For additional performance information for each Portfolio, please see the Comparison of Change in Value of a $10,000 Investment and the Average Annual Total Return information for each Portfolio found in this report.

Please note that the Portfolio returns include applicable investment fees and expenses, whereas the index returns do not include any such fees. Also, each Portfolio’s performance data does not take into account any product expenses or charges associated with owning a variable life or annuity policy, which is invested in Ivy Variable Insurance Portfolios.

Year in review

 

Global economic activity continued its astounding rebound from the pandemic shock and exceeded expectations in the first half of the fiscal year. However, it was not entirely a quiet ride. Equity volatility increased during the third quarter as growth slowed and fiscal stimulus expectations were disappointing. Amidst this growth slowdown, stagflation concerns grew as inflation increased, largely driven by supply chain issues, bottlenecks, and shortages. Despite this volatility, the market climbed many proverbial walls of worry and continued its ascent higher through the fourth quarter as growth remained robust and many potential risk factors were avoided. The US circumvented a debt crisis at the last moment, per the usual script, and simultaneously avoided significant tax hikes, which at one point, seemed a quite likely threat to corporate profits and potentially consumption. Although the market did not get the entirety of the fiscal stimulus package once promised, it may have been a positive in terms of not creating additional inflationary pressures.

The evolution of the pandemic continues to have a significant influence on the risk appetite of financial markets, and despite worrying virus mutations and the continued spread of cases, the vaccines remain a robust tool in response to the crisis. Vaccine approvals were recently extended to younger age groups and the rollout of booster shots enhanced protection for older demographics. Each subsequent wave of COVID-19 infections has inflicted less severe human, economic, and market damage as vaccines remain highly effective in reducing severe outcomes and populations have increasing resilience from both prior infections and inoculations.

Following the dramatic surge in economic activity from the depths of the crisis, monetary policy is now shifting, globally. Many central banks have already hiked policy rates and are either discussing or actively in the process of tapering quantitative easing (QE) purchases and discussing plans to actively reduce assets held on balance sheets. In the US, the US Federal Reserve (Fed) has begun tapering its QE program, and although tapering is not tightening, per se, the Fed has guided market expectations for several interest rate hikes in 2022.

All said, economic activity and corporate earnings have remained robust, inflationary pressures in supply chains have eased (although others like labor and housing are rising), and central banks are gradually normalizing monetary policy as the global economy elapses the extreme shock of the pandemic and returns to a more normal regime where extreme policy stimulus is no longer prudent nor desirable.

Equity markets vastly outperformed fixed income, with developed markets outperforming emerging markets and the US significantly outperforming other developed markets. China was a distinct outlier, with significant underperformance because of its stringent “zero COVID” policy and various disruptive regulatory actions in technology and property sectors. Energy, along with other cyclical sectors, outperformed defensive sectors such as consumer staples, utilities, and telecommunications. Fixed-income markets were more challenging. Investment-grade returns were primarily driven by duration exposures as expectations for tighter central bank monetary policy lifted interest rates and credit spreads did little to offset that headwind. The high-yield bond market outperformed investment grade due to lower interest-rate sensitivity and a more significant narrowing of credit spreads in these riskier assets. From a currency perspective, US dollar strength was the dominant theme, with many non-US dollar linked emerging-market currencies exhibiting significant weakness.

 

6   ANNUAL REPORT   2021  
     

Table of Contents
           

 

 

 

Performance review

 

Each of the Portfolios finished the year with double-digit, positive returns in 2021. The broad strength across equities was reflected by portfolio benchmarks. The Russell 3000 Index return exceeded 25% and the MSCI EAFE Index return exceeded 11%. Fixed-income returns were slightly negative on the year as interest rates rose. The performance of the Portfolios reflects the mix of returns in the underlying funds during the period and their allocation weightings. A detractor to relative performance was exposure to mid-cap and small-cap equity funds, which underperformed the broader US equity benchmark. However, this slight headwind was offset by a combination of manager outperformance in the small- and mid-cap strategies as well as positive contributions from every other underlying fund in the Portfolio versus its respective asset class benchmark. During the period, the Portfolios undertook only modest changes in the weightings of underlying funds to manage exposures commensurate with the investment objectives of the Portfolios.

Outlook

 

In the coming year, the global economy is likely to continue transitioning from unsustainably high growth to a slower and more sustainable level, supported by moderate corporate earnings growth and buffered by strong consumer and corporate balance sheets.

Inflationary forces are expected to be manageable as transitory pressures abate. However, the future path of inflation data and the Fed’s response function to it will be critical to engineering a soft landing. Labor force participation rates and productivity dynamics will be pivotal in determining what level of growth can be sustained without forcing excessively tight monetary policy.

Of course, the pandemic remains a key risk factor. That said, higher rates of vaccination and natural immunity may be approaching critical mass in many geographies, which hopefully mitigates the risk of overwhelming health care systems.

With tapering commencing and tightening soon on the way, we believe the market will be forced to reckon with higher discount rates, which have already proven to be a headwind for equity valuations. However, recessions and market corrections do not typically begin at the start of rate-hike cycles but rather when earnings decline. And although the rate of earnings growth is slowing, it remains positive. Additionally, the consensus currently expects the Fed Funds Rate to remain lower than pre-crisis, 2019 levels for the next two years.

That said, equity valuations remain a risk factor, as many measures significantly exceed historical averages and have likely peaked given the shift in monetary policy. Equity multiples often decline during tightening cycles, but the asset class can still produce positive returns if inflation remains moderate and interest rates stay relatively low as earnings growth exceeds multiple contraction. Given this balanced outlook, equity allocations are rather neutral with respect to asset class, geography, industry, and style. As a result, we believe the most significant driver of relative returns may be our underlying active managers’ ability to add alpha through security selection.

Effective July 1, 2021, the name of each Portfolio changed by adding the word “Delaware” in front of the words “Ivy VIP.”

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios (“the VIP Portfolios”), and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

Past performance is not a guarantee of future results. As with any mutual fund, the value of each Portfolio’s shares will change, and you could lose money on your investment.

Investing involves risk, including the possible loss of principal.

The ability of each Portfolio to meet its investment objective depends both on the allocation of its assets among the Underlying Funds and the ability of those funds to meet their respective investment objectives. Each Portfolio’s share price will likely change daily based on the performance of the Underlying Funds in which it invests. In general, each Portfolio is subject to the same risks as those of the Underlying Funds it holds. Because the Portfolios are weighted toward Underlying Funds that invest in stocks, both US and foreign, including mid cap and small cap stocks, as well as bonds and short-term instruments, the Portfolios are more subject to the risks associated with those investments.

 

     
    2021       ANNUAL REPORT       7  

Table of Contents
           

 

 

 

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. This includes prepayment risk, the risk that the principal of a bond that is held by a portfolio will be prepaid prior to maturity at the time when interest rates are lower than what the bond was paying. A portfolio may then have to reinvest that money at a lower interest rate.

IBOR risk is the risk that changes related to the use of the London interbank offered rate (LIBOR) or similar rates (such as EONIA) could have adverse impacts on financial instruments that reference these rates. The abandonment of these rates and transition to alternative rates could affect the value and liquidity of instruments that reference them and could affect investment strategy performance.

Natural or environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis, and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics, have been and can be highly disruptive to economies and markets, adversely impacting individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Portfolio’s investments. Given the increasing interdependence among global economies and markets, conditions in one country, market, or region are increasingly likely to adversely affect markets, issuers, and/or foreign exchange rates in other countries. These disruptions could prevent the Portfolio from executing advantageous investment decisions in a timely manner and could negatively impact the Portfolio’s ability to achieve its investment objective. Any such event(s) could have a significant adverse impact on the value and risk profile of the Portfolio.

Securian Asset Management, Inc., may be unsuccessful in managing volatility, and there is a risk that the Managed Volatility Portfolios may experience a high level of volatility in their returns. The Portfolios’ holdings are subject to price volatility, and the Portfolios may not be any less volatile than the market as a whole and could be more volatile. In addition, there can be no guarantee that the Portfolios will achieve their goal of managing the volatility of their equity returns. Furthermore, while the management of volatility seeks competitive returns with more consistent volatility, the management of volatility does not ensure that the Portfolios will deliver competitive returns. Additionally, even if successful, the Portfolios’ management of volatility may also generally result in the Portfolios’ NAV increasing to a lesser degree than the markets (for example, in a rising market with relatively high volatility) or decreasing to a greater degree than the market (for example, in a declining market with relatively low volatility). The Portfolios’ managed volatility strategy may expose the Portfolios to losses (some of which may be sudden) to which it would not have otherwise been exposed if invested only in Underlying Funds. Additionally, the derivatives used by Securian Asset Management to hedge the value of the Portfolios are not identical to the Underlying Funds, and as a result, the Portfolios’ investment in derivatives may decline in value at the same time as the Portfolios’ investment in Underlying Funds. Securian Asset Management does not intend to attempt to manage the volatility of the Portfolios’ fixed-income returns. It is possible that the fixed-income portion of the Portfolios, whose volatility would not be managed by the volatility management strategy, could become more volatile than the equity portion of the Portfolios.

The opinions expressed in this report are those of the portfolio managers and are current only through the end of the period of the report as stated on the cover. The portfolio managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

The indexes noted are unmanaged and include reinvested dividends. One cannot invest directly in an index, nor is an index representative of any Pathfinder Portfolio or Managed Volatility Portfolio.

 

8   ANNUAL REPORT   2021  
     

Table of Contents
PORTFOLIO HIGHLIGHTS   PATHFINDER PORTFOLIOS

 

 

 

ALL DATA IS AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Pathfinder Aggressive(a) – Asset Allocation

 

Delaware Ivy VIP Growth, Class II

   19.6%

Delaware Ivy VIP International Core Equity, Class II

   16.1%

Delaware Ivy VIP Global Equity Income, Class II

   13.5%

Delaware Ivy VIP Core Equity, Class II

   12.4%

Delaware Ivy VIP Value, Class II

   10.6%

Delaware Ivy VIP Corporate Bond, Class II

   9.7%

Delaware Ivy VIP Mid Cap Growth, Class I

   9.7%

Delaware Ivy VIP Limited-Term Bond, Class II

   5.0%

Delaware Ivy VIP Small Cap Growth, Class I

   2.3%

Delaware Ivy VIP Smid Cap Core, Class II

   0.6%

Delaware Ivy VIP High Income, Class I

   0.2%

Liabilities (Net of Cash and Other Assets), and Cash Equivalents+

   0.3%

Pathfinder Conservative(b) – Asset Allocation

 

Delaware Ivy VIP Corporate Bond, Class II

   28.6%

Delaware Ivy VIP Limited-Term Bond, Class II

   24.8%

Delaware Ivy VIP Growth, Class II

   12.9%

Delaware Ivy VIP Core Equity, Class II

   7.3%

Delaware Ivy VIP Mid Cap Growth, Class I

   6.8%

Delaware Ivy VIP Value, Class II

   6.6%

Delaware Ivy VIP International Core Equity, Class II

   5.4%

Delaware Ivy VIP Global Equity Income, Class II

   4.5%

Delaware Ivy VIP Small Cap Growth, Class I

   1.4%

Delaware Ivy VIP High Income, Class I

   1.3%

Delaware Ivy VIP Smid Cap Core, Class II

   0.1%

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

   0.3%

Pathfinder Moderate(c) – Asset Allocation

 

Delaware Ivy VIP Corporate Bond, Class II

   19.2%

Delaware Ivy VIP Growth, Class II

   16.3%

Delaware Ivy VIP Limited-Term Bond, Class II

   14.9%

Delaware Ivy VIP International Core Equity, Class II

   10.7%

Delaware Ivy VIP Core Equity, Class II

   9.9%

Delaware Ivy VIP Global Equity Income, Class II

   9.0%

Delaware Ivy VIP Value, Class II

   8.6%

Delaware Ivy VIP Mid Cap Growth, Class I

   8.2%

Delaware Ivy VIP Small Cap Growth, Class I

   1.8%

Delaware Ivy VIP High Income, Class I

   0.8%

Delaware Ivy VIP Smid Cap Core, Class II

   0.4%

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

   0.2%

Pathfinder Moderately Aggressive(d) – Asset Allocation

 

Delaware Ivy VIP Growth, Class II

   18.0%

Delaware Ivy VIP Corporate Bond, Class II

   14.5%

Delaware Ivy VIP International Core Equity, Class II

   13.4%

Delaware Ivy VIP Core Equity, Class II

   11.2%

Delaware Ivy VIP Global Equity Income, Class II

   11.2%

Delaware Ivy VIP Limited-Term Bond, Class II

   9.9%

Delaware Ivy VIP Value, Class II

   9.6%

Delaware Ivy VIP Mid Cap Growth, Class I

   8.9%

Delaware Ivy VIP Small Cap Growth, Class I

   2.1%

Delaware Ivy VIP High Income, Class I

   0.5%

Delaware Ivy VIP Smid Cap Core, Class II

   0.5%

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

   0.2%
 

 

     
    2021       ANNUAL REPORT       9  

Table of Contents
PORTFOLIO HIGHLIGHTS   PATHFINDER PORTFOLIOS

 

 

 

ALL DATA IS AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Pathfinder Moderately Conservative(e) – Asset Allocation

 

Delaware Ivy VIP Corporate Bond, Class II

   23.9%

Delaware Ivy VIP Limited-Term Bond, Class II

   19.8%

Delaware Ivy VIP Growth, Class II

   14.6%

Delaware Ivy VIP Core Equity, Class II

   8.6%

Delaware Ivy VIP International Core Equity, Class II

   8.0%

Delaware Ivy VIP Value, Class II

   7.6%

Delaware Ivy VIP Mid Cap Growth, Class I

   7.5%

Delaware Ivy VIP Global Equity Income, Class II

   6.7%

Delaware Ivy VIP Small Cap Growth, Class I

   1.6%

Delaware Ivy VIP High Income, Class I

   1.0%

Delaware Ivy VIP Smid Cap Core, Class II

   0.2%

Liabilities (Net of Cash and Other Assets), and Cash Equivalents+

   0.5%

Pathfinder Moderate – Managed Volatility(f) – Asset Allocation

 

Delaware Ivy VIP Corporate Bond, Class II

   18.6%

Delaware Ivy VIP Growth, Class II

   15.9%

Delaware Ivy VIP Limited-Term Bond, Class II

   14.4%

Delaware Ivy VIP International Core Equity, Class II

   10.4%

Delaware Ivy VIP Core Equity, Class II

   9.6%

Delaware Ivy VIP Global Equity Income, Class II

   8.7%

Delaware Ivy VIP Value, Class II

   8.3%

Delaware Ivy VIP Mid Cap Growth, Class I

   8.0%

Delaware Ivy VIP Small Cap Growth, Class I

   1.8%

Delaware Ivy VIP High Income, Class I

   0.7%

Delaware Ivy VIP Smid Cap Core, Class II

   0.3%

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

   3.3%

Pathfinder Moderately Aggressive – Managed Volatility(g) – Asset Allocation

 

Delaware Ivy VIP Growth, Class II

   17.4%

Delaware Ivy VIP Corporate Bond, Class II

   14.0%

Delaware Ivy VIP International Core Equity, Class II

   13.0%

Delaware Ivy VIP Global Equity Income, Class II

   10.9%

Delaware Ivy VIP Core Equity, Class II

   10.8%

Delaware Ivy VIP Limited-Term Bond, Class II

   9.6%

Delaware Ivy VIP Value, Class II

   9.3%

Delaware Ivy VIP Mid Cap Growth, Class I

   8.7%

Delaware Ivy VIP Small Cap Growth, Class I

   2.0%

Delaware Ivy VIP High Income, Class I

   0.5%

Delaware Ivy VIP Smid Cap Core, Class II

   0.5%

Cash and Other Assets (Net of Liabilities), and Cash Equivalents+

   3.3%

Pathfinder Moderately Conservative – Managed Volatility(h) – Asset Allocation

 

Delaware Ivy VIP Corporate Bond, Class II

   23.3%

Delaware Ivy VIP Limited-Term Bond, Class II

   19.3%

Delaware Ivy VIP Growth, Class II

   14.5%

Delaware Ivy VIP Core Equity, Class II

   8.5%

Delaware Ivy VIP International Core Equity, Class II

   7.8%

Delaware Ivy VIP Mid Cap Growth, Class I

   7.4%

Delaware Ivy VIP Value, Class II

   7.4%

Delaware Ivy VIP Global Equity Income, Class II

   6.5%

Delaware Ivy VIP Small Cap Growth, Class I

   1.5%

Delaware Ivy VIP High Income, Class I

   1.0%

Delaware Ivy VIP Smid Cap Core, Class II

   0.2%

Liabilities (Net of Cash and Other Assets), and Cash Equivalents+

   2.6%

The percentages of investments in the underlying funds may not currently be within the target allocation ranges disclosed in the Portfolios’ prospectus due to market movements; these percentages are expected to change over time, and deviation from the target allocation ranges due to market movements is permitted by the prospectus.

 

+

Cash equivalents are defined as highly liquid securities with maturities of less than three months. Cash equivalents may include U.S. Government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.

 

(a)

Effective July 1, 2021, the name of Ivy VIP Pathfinder Aggressive changed to Delaware Ivy VIP Pathfinder Aggressive.

 

(b)

Effective July 1, 2021, the name of Ivy VIP Pathfinder Conservative changed to Delaware Ivy VIP Pathfinder Conservative.

 

(c)

Effective July 1, 2021, the name of Ivy VIP Pathfinder Moderate changed to Delaware Ivy VIP Pathfinder Moderate.

 

(d)

Effective July 1, 2021, the name of Ivy VIP Pathfinder Moderately Aggressive changed to Delaware Ivy VIP Pathfinder Moderately Aggressive.

 

 

 

10   ANNUAL REPORT   2021  
     

Table of Contents
PORTFOLIO HIGHLIGHTS   PATHFINDER PORTFOLIOS

 

 

 

ALL DATA IS AS OF DECEMBER 31, 2021 (UNAUDITED)

 

(e)

Effective July 1, 2021, the name of Ivy VIP Pathfinder Moderately Conservative changed to Delaware Ivy VIP Pathfinder Moderately Conservative.

 

(f)

Effective July 1, 2021, the name of Ivy VIP Pathfinder Moderate — Managed Volatility changed to Delaware Ivy VIP Pathfinder Moderate — Managed Volatility.

 

(g)

Effective July 1, 2021, the name of Ivy VIP Pathfinder Moderately Aggressive — Managed Volatility changed to Delaware Ivy VIP Pathfinder Moderately Aggressive — Managed Volatility.

 

(h)

Effective July 1, 2021, the name of Ivy VIP Pathfinder Moderately Conservative — Managed Volatility changed to Delaware Ivy VIP Pathfinder Moderately Conservative — Managed Volatility.

 

 

     
    2021       ANNUAL REPORT       11  

Table of Contents

COMPARISON OF CHANGE IN VALUE

OF $10,000 INVESTMENT

   PATHFINDER PORTFOLIOS

 

 

 

(UNAUDITED)

 

LOGO

 

^

The Blended Benchmark is computed using a combination of 55% Russell 3000 Index + 30% MSCI EAFE Index + 15% Bloomberg U.S. Credit Index.

 

LOGO

 

^

The Blended Benchmark is computed using a combination of 35% Russell 3000 Index + 35% Bloomberg U.S. Credit Index + 20% Bloomberg 1-3 Year U.S.Gov/Credit Index + 10% MSCI EAFE Index.

See footnotes on page 11.

 

12   ANNUAL REPORT   2021  
     

Table of Contents

COMPARISON OF CHANGE IN VALUE

OF $10,000 INVESTMENT

   PATHFINDER PORTFOLIOS

 

 

 

(UNAUDITED)

 

LOGO

 

^

The Blended Benchmark is computed using a combination of 45% Russell 3000 Index + 25% Bloomberg U.S. Credit Index + 20% MSCI EAFE Index + 10% Bloomberg 1-3 Year U.S. Gov/Credit Index.

 

LOGO

 

^

The Blended Benchmark is computed using a combination of 50% Russell 3000 Index +25% MSCI EAFE Index + 20% Bloomberg U.S. Credit Index + 5% Bloomberg 1-3 Year U.S. Gov/Credit Index.

See footnotes on page 11.

 

     
    2021       ANNUAL REPORT       13  

Table of Contents

COMPARISON OF CHANGE IN VALUE

OF $10,000 INVESTMENT

   PATHFINDER PORTFOLIOS

 

 

 

(UNAUDITED)

 

LOGO

 

^

The Blended Benchmark is computed using a combination of 40% Russell 3000 Index + 30% Bloomberg U.S. Credit Index + 15% MSCI EAFE Index + 15% Bloomberg 1-3 Year U.S. Gov/Credit Index.

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Pathfinder
Aggressive		      Pathfinder
Conservative		      Pathfinder
Moderate		      Pathfinder
Moderately
Aggressive		      Pathfinder
Moderately
Conservative		  

1-year period ended 12-31-21

      18.93%        10.18%        14.66%        16.88%        12.37%  

5-year period ended 12-31-21

      14.24%        9.06%        11.46%        12.68%        10.35%  

10-year period ended 12-31-21

      11.83%        7.29%        9.45%        10.55%        8.41%  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

14   ANNUAL REPORT   2021  
     

Table of Contents

COMPARISON OF CHANGE IN VALUE

OF $10,000 INVESTMENT

   PATHFINDER PORTFOLIOS

 

 

 

(UNAUDITED)

 

LOGO

 

^

The Blended Benchmark is computed using a combination of 45% Russell 3000 Index + 25% Bloomberg U.S. Credit Index + 20% MSCI EAFE Index + 10% Bloomberg 1-3 Year U.S.Gov/Credit Index.

 

LOGO

 

^

The Blended Benchmark is computed using a combination of 50% Russell 3000 Index + 25% MSCI EAFE Index + 20% Bloomberg U.S. Credit Index + 5% Bloomberg 1-3 Year U.S. Gov/Credit Index.

See footnotes on page 13.

 

     
    2021       ANNUAL REPORT       15  

Table of Contents

COMPARISON OF CHANGE IN VALUE

OF $10,000 INVESTMENT

   PATHFINDER PORTFOLIOS

 

 

 

(UNAUDITED)

 

LOGO

 

^

The Blended Benchmark is computed using a combination of 40% Russell 3000 Index + 30% Bloomberg U.S. Credit Index + 15% MSCI EAFE Index + 15% Bloomberg 1-3 Year U.S.Gov/Credit Index.

 

(1)

The value of the investment in the Portfolio is impacted by the ongoing expenses of the Portfolio and assumes reinvestment of dividends and distributions.

 

Average Annual Total Return(2)    Pathfinder
Moderate — Managed
Volatility		      Pathfinder Moderately
Aggressive — Managed
Volatility		      Pathfinder Moderately
Conservative — Managed
Volatility		  

1-year period ended 12-31-21

      12.99%        15.24%        10.72%  

5-year period ended 12-31-21

      9.57%        10.70%        8.65%  

10-year period ended 12-31-21

      —        —        —  

Since inception of Portfolio(3) through 12-31-21

      7.13%        7.93%        6.28%  

 

(2)

Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please visit www.ivyinvestments.com for the Portfolio’s most recent month-end performance. Performance data quoted does not reflect any expenses or charges associated with owning a variable life insurance policy or variable annuity contract that invests in the Portfolio’s shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower.

 

(3)

8-1-13 Pathfinder Moderate — Managed Volatility, 8-1-13 Pathfinder Moderately Aggressive — Managed Volatility and 8-1-13 Pathfinder Moderately Conservative — Managed Volatility (the date on which shares were first acquired by shareholders).

Past performance is not necessarily indicative of future performance. Indexes are unmanaged. The performance graph and table do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Performance results may include the effect of expense reduction arrangements for some or all of the periods shown. If those arrangements had not been in place, the performance results for those periods would have been lower.

 

16   ANNUAL REPORT   2021  
     

Table of Contents
SCHEDULE OF INVESTMENTS   PATHFINDER PORTFOLIOS (in thousands)

 

 

 

DECEMBER 31, 2021

 

Pathfinder Aggressive

 

AFFILIATED MUTUAL FUNDS   Shares     Value  

Delaware Ivy VIP Core Equity, Class II

     519     $ 9,179  

Delaware Ivy VIP Corporate Bond, Class II

     1,276       7,186  

Delaware Ivy VIP Global Equity Income, Class II

     1,450       9,985  

Delaware Ivy VIP Growth, Class II

     976       14,499  

Delaware Ivy VIP High Income, Class I

     54       185  

Delaware Ivy VIP International Core Equity, Class II

     645       11,908  

Delaware Ivy VIP Limited-Term Bond, Class II

     751       3,671  

Delaware Ivy VIP Mid Cap Growth, Class I

     397       7,151  

Delaware Ivy VIP Small Cap Growth, Class I

     155       1,703  

Delaware Ivy VIP Smid Cap Core, Class II

     27       444  

Delaware Ivy VIP Value, Class II

     954       7,859  
   

 

 

  
 

TOTAL AFFILIATED MUTUAL FUNDS – 99.7%

 

   $ 73,770  

(Cost: $66,424)

      
 
SHORT-TERM SECURITIES              
 

Money Market Funds (A) – 0.3%

 

State Street Institutional U.S. Government Money Market Fund – Premier Class,
0.030%

     209       209  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 0.3%

 

   $ 209  

(Cost: $209)

 

 

TOTAL INVESTMENT SECURITIES – 100.0%

 

   $ 73,979  

(Cost: $66,633)

      
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – 0.0%

 

     (21 ) 
 

NET ASSETS – 100.0%

 

   $ 73,958  

Notes to Schedule of Investments

 

(A)

Rate shown is the annualized 7-day yield at December 31, 2021.

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1     Level 2     Level 3  

Assets

      

Investments in Securities

      

Affiliated Mutual Funds

   $ 73,770     $ —     $ —  

Short-Term Securities

     209       —       —  
 

 

 

  

Total

   $ 73,979     $ —     $ —  
 

 

 

  

Pathfinder Conservative

 

AFFILIATED MUTUAL FUNDS   Shares     Value  

Delaware Ivy VIP Core Equity, Class II

     457     $ 8,080  

Delaware Ivy VIP Corporate Bond, Class II

     5,595       31,506  

Delaware Ivy VIP Global Equity Income, Class II

     718       4,947  

Delaware Ivy VIP Growth, Class II

     959       14,240  

Delaware Ivy VIP High Income, Class I

     403       1,374  

Delaware Ivy VIP International Core Equity, Class II

     319       5,900  

Delaware Ivy VIP Limited-Term Bond, Class II

     5,582       27,292  

Delaware Ivy VIP Mid Cap Growth, Class I

     414       7,444  

Delaware Ivy VIP Small Cap Growth, Class I

     138       1,518  

Delaware Ivy VIP Smid Cap Core, Class II

     8       132  

Delaware Ivy VIP Value, Class II

     878       7,234  
   

 

 

  
 

TOTAL AFFILIATED MUTUAL FUNDS – 99.7%

 

   $ 109,667  

(Cost: $104,681)

      
 
SHORT-TERM SECURITIES              
 

Money Market Funds (A) – 0.3%

 

State Street Institutional U.S. Government Money Market Fund – Premier Class,
0.030%

     310       310  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 0.3%

 

   $ 310  

(Cost: $310)

      
 

TOTAL INVESTMENT SECURITIES – 100.0%

 

   $ 109,977  

(Cost: $104,991)

      
 

CASH AND OTHER ASSETS, NET OF LIABILITIES – 0.0%

 

     8  
 

NET ASSETS – 100.0%

 

   $ 109,985  

Notes to Schedule of Investments

 

(A)

Rate shown is the annualized 7-day yield at December 31, 2021.

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1     Level 2     Level 3  

Assets

      

Investments in Securities

      

Affiliated Mutual Funds

   $ 109,667     $ —     $ —  

Short-Term Securities

     310       —       —  
 

 

 

  

Total

   $ 109,977     $ —     $ —  
 

 

 

  

Pathfinder Moderate

 

AFFILIATED MUTUAL FUNDS   Shares     Value  

Delaware Ivy VIP Core Equity, Class II

     3,547     $ 62,753  

Delaware Ivy VIP Corporate Bond, Class II

     21,637       121,849  

Delaware Ivy VIP Global Equity Income, Class II

     8,296       57,146  

Delaware Ivy VIP Growth, Class II

     6,962       103,399  

Delaware Ivy VIP High Income, Class I

     1,398       4,760  

Delaware Ivy VIP International Core Equity, Class II

     3,689       68,143  

Delaware Ivy VIP Limited-Term Bond, Class II

     19,343       94,578  

Delaware Ivy VIP Mid Cap Growth, Class I

     2,901       52,184  

Delaware Ivy VIP Small Cap Growth, Class I

     1,061       11,687  

Delaware Ivy VIP Smid Cap Core, Class II

     137       2,289  

Delaware Ivy VIP Value, Class II

     6,632       54,636  
   

 

 

  
 

TOTAL AFFILIATED MUTUAL FUNDS – 99.8%

 

   $ 633,424  

(Cost: $584,716)

      
 
SHORT-TERM SECURITIES              
 

Money Market Funds (A) – 0.2%

 

State Street Institutional U.S. Government Money Market Fund – Premier Class,
0.030%

     1,248       1,248  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 0.2%

 

   $ 1,248  

(Cost: $1,248)

      
 

TOTAL INVESTMENT SECURITIES – 100.0%

 

   $ 634,672  

(Cost: $585,964)

      
 

CASH AND OTHER ASSETS, NET OF LIABILITIES – 0.0%

 

     106  
 

NET ASSETS – 100.0%

 

   $ 634,778  

Notes to Schedule of Investments

 

(A)

Rate shown is the annualized 7-day yield at December 31, 2021.

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1     Level 2     Level 3  

Assets

      

Investments in Securities

      

Affiliated Mutual Funds

   $ 633,424     $ —     $ —  

Short-Term Securities

     1,248       —       —  
 

 

 

  

Total

   $ 634,672     $ —     $ —  
 

 

 

  
 

 

     
    2021       ANNUAL REPORT       17  

Table of Contents
SCHEDULE OF INVESTMENTS   PATHFINDER PORTFOLIOS (in thousands)

 

 

 

DECEMBER 31, 2021

 

Pathfinder Moderately Aggressive

 

AFFILIATED MUTUAL FUNDS   Shares     Value  

Delaware Ivy VIP Core Equity, Class II

     4,899     $ 86,663  

Delaware Ivy VIP Corporate Bond, Class II

     19,951       112,351  

Delaware Ivy VIP Global Equity Income, Class II

     12,693       87,433  

Delaware Ivy VIP Growth, Class II

     9,396       139,533  

Delaware Ivy VIP High Income, Class I

     1,141       3,884  

Delaware Ivy VIP International Core Equity, Class II

     5,644       104,255  

Delaware Ivy VIP Limited-Term Bond, Class II

     15,785       77,180  

Delaware Ivy VIP Mid Cap Growth, Class I

     3,864       69,505  

Delaware Ivy VIP Small Cap Growth, Class I

     1,461       16,092  

Delaware Ivy VIP Smid Cap Core, Class II

     223       3,735  

Delaware Ivy VIP Value, Class II

     9,072       74,740  
   

 

 

  
 

TOTAL AFFILIATED MUTUAL FUNDS – 99.8%

 

   $ 775,371  

(Cost: $705,767)

      
 
SHORT-TERM SECURITIES              
 

Money Market Funds (A) – 0.2%

 

State Street Institutional U.S. Government Money Market Fund – Premier Class,
0.030%

     1,202       1,202  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 0.2%

 

   $ 1,202  

(Cost: $1,202)

      
 

TOTAL INVESTMENT SECURITIES – 100.0%

 

   $ 776,573  

(Cost: $706,969)

      
 

CASH AND OTHER ASSETS, NET OF LIABILITIES – 0.0%

 

     146  
 

NET ASSETS – 100.0%

 

   $ 776,719  

Notes to Schedule of Investments

 

(A)

Rate shown is the annualized 7-day yield at December 31, 2021.

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1     Level 2     Level 3  

Assets

      

Investments in Securities

      

Affiliated Mutual Funds

   $ 775,371     $ —     $ —  

Short-Term Securities

     1,202       —       —  
 

 

 

  

Total

   $ 776,573     $ —     $ —  
 

 

 

  

Pathfinder Moderately Conservative

 

AFFILIATED MUTUAL FUNDS   Shares     Value  

Delaware Ivy VIP Core Equity, Class II

     911     $ 16,110  

Delaware Ivy VIP Corporate Bond, Class II

     7,942       44,727  

Delaware Ivy VIP Global Equity Income, Class II

     1,832       12,622  

Delaware Ivy VIP Growth, Class II

     1,840       27,331  

Delaware Ivy VIP High Income, Class I

     549       1,869  

Delaware Ivy VIP International Core Equity, Class II

     815       15,053  

Delaware Ivy VIP Limited-Term Bond, Class II

     7,594       37,128  

Delaware Ivy VIP Mid Cap Growth, Class I

     779       14,014  

Delaware Ivy VIP Small Cap Growth, Class I

     274       3,012  

Delaware Ivy VIP Smid Cap Core, Class II

     27       449  

Delaware Ivy VIP Value, Class II

     1,723       14,198  
   

 

 

  
 

TOTAL AFFILIATED MUTUAL FUNDS – 99.5%

 

   $ 186,513  

(Cost: $174,687)

      
 
SHORT-TERM SECURITIES              
 

Money Market Funds (A) – 0.5%

 

State Street Institutional U.S. Government Money Market Fund – Premier Class,
0.030%

     977       977  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 0.5%

 

   $ 977  

(Cost: $977)

      
 

TOTAL INVESTMENT SECURITIES – 100.0%

 

   $ 187,490  

(Cost: $175,664)

      
 

LIABILITIES, NET OF CASH AND OTHER ASSETS – 0.0%

 

     (31 ) 
 

NET ASSETS – 100.0%

 

   $ 187,459  

Notes to Schedule of Investments

 

(A)

Rate shown is the annualized 7-day yield at December 31, 2021.

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1     Level 2     Level 3  

Assets

      

Investments in Securities

      

Affiliated Mutual Funds

   $ 186,513     $ —     $ —  

Short-Term Securities

     977       —       —  
 

 

 

  

Total

   $ 187,490     $ —     $ —  
 

 

 

  

Pathfinder Moderate – Managed Volatility

 

AFFILIATED MUTUAL FUNDS   Shares     Value  

Delaware Ivy VIP Core Equity, Class II

     2,875     $ 50,868  

Delaware Ivy VIP Corporate Bond, Class II

     17,479       98,434  

Delaware Ivy VIP Global Equity Income, Class II

     6,676       45,987  

Delaware Ivy VIP Growth, Class II

     5,656       84,004  

Delaware Ivy VIP High Income, Class I

     1,129       3,845  

Delaware Ivy VIP International Core Equity, Class II

     2,980       55,040  

Delaware Ivy VIP Limited-Term Bond, Class II

     15,606       76,306  

Delaware Ivy VIP Mid Cap Growth, Class I

     2,355       42,363  

Delaware Ivy VIP Small Cap Growth, Class I

     852       9,382  

Delaware Ivy VIP Smid Cap Core, Class II

     110       1,841  

Delaware Ivy VIP Value, Class II

     5,369       44,237  
   

 

 

  
 

TOTAL AFFILIATED MUTUAL FUNDS – 96.7%

 

   $ 512,307  

(Cost: $482,420)

      
 
SHORT-TERM SECURITIES              
 

Money Market Funds (A) – 3.0%

 

State Street Institutional U.S. Government Money Market Fund – Premier Class,
0.030%

     15,856       15,856  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 3.0%

 

   $ 15,856  

(Cost: $15,856)

      
 

TOTAL INVESTMENT SECURITIES – 99.7%

 

   $ 528,163  

(Cost: $498,276)

      
 

CASH AND OTHER ASSETS, NET OF LIABILITIES (B) – 0.3%

 

     1,660  
 

NET ASSETS – 100.0%

 

   $ 529,823  

Notes to Schedule of Investments

 

(A)

Rate shown is the annualized 7-day yield at December 31, 2021.

 

(B)

Cash of $1,769 has been pledged as collateral on open futures contracts.

The following futures contracts were outstanding at December 31, 2021 (contracts unrounded):

 

Description   Type   Number
of
Contracts		     Expiration
Date		     Notional
Amount		     Value     Unrealized
Appreciation
(Depreciation)		  

E-mini Russell 2000 Index

   Short     13       3-17-22       1     $ (1,458 )    $ 16  

S&P 500 Index

   Short     147       3-31-22       7       (34,975 )      (492 ) 
     

 

 

  
          $ (36,433 )    $ (476 ) 
     

 

 

  
 

 

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SCHEDULE OF INVESTMENTS   PATHFINDER PORTFOLIOS (in thousands)

 

 

 

DECEMBER 31, 2021

 

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1     Level 2     Level 3  

Assets

      

Investments in Securities

      

Affiliated Mutual Funds

   $ 512,307     $ —     $ —  

Short-Term Securities

     15,856       —       —  
 

 

 

  

Total

   $ 528,163     $ —     $ —  
 

 

 

  

Futures Contracts

   $ 16     $ —     $ —  
 

 

 

  

Liabilities

      

Futures Contracts

   $ 492     $ —     $ —  
 

 

 

  

Pathfinder Moderately Aggressive – Managed Volatility

 

AFFILIATED MUTUAL FUNDS   Shares     Value  

Delaware Ivy VIP Core Equity, Class II

     622     $ 11,008  

Delaware Ivy VIP Corporate Bond, Class II

     2,533       14,266  

Delaware Ivy VIP Global Equity Income, Class II

     1,613       11,110  

Delaware Ivy VIP Growth, Class II

     1,193       17,719  

Delaware Ivy VIP High Income, Class I

     145       493  

Delaware Ivy VIP International Core Equity, Class II

     717       13,250  

Delaware Ivy VIP Limited-Term Bond, Class II

     2,005       9,801  

Delaware Ivy VIP Mid Cap Growth, Class I

     491       8,833  

Delaware Ivy VIP Small Cap Growth, Class I

     186       2,046  

Delaware Ivy VIP Smid Cap Core, Class II

     28       475  

Delaware Ivy VIP Value, Class II

     1,153       9,496  
   

 

 

  
 

TOTAL AFFILIATED MUTUAL FUNDS – 96.7%

 

   $ 98,497  

(Cost: $90,336)

      
 
SHORT-TERM SECURITIES              
 

Money Market Funds (A) – 3.0%

 

State Street Institutional U.S. Government Money Market Fund – Premier Class,
0.030%

     3,015       3,015  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 3.0%

 

   $ 3,015  

(Cost: $3,015)

      
 

TOTAL INVESTMENT SECURITIES – 99.7%

 

   $ 101,512  

(Cost: $93,351)

      
 

CASH AND OTHER ASSETS, NET OF LIABILITIES (B) – 0.3%

 

     272  
 

NET ASSETS – 100.0%

 

   $ 101,784  

Notes to Schedule of Investments

 

*

Not shown due to rounding.

 

(A)

Rate shown is the annualized 7-day yield at December 31, 2021.

 

(B)

Cash of $323 has been pledged as collateral on open futures contracts.

The following futures contracts were outstanding at December 31, 2021 (contracts unrounded):

 

Description   Type   Number
of
Contracts		     Expiration
Date		     Notional
Amount		     Value     Unrealized
Appreciation
(Depreciation)		  

E-mini Russell 2000 Index

   Short     2       3-17-22       — *    $ (224 )    $ 2  

S&P 500 Index

   Short     27       3-31-22       1       (6,424 )      (90 ) 
     

 

 

  
          $ (6,648 )    $ (88 ) 
     

 

 

  

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1     Level 2     Level 3  

Assets

      

Investments in Securities

      

Affiliated Mutual Funds

   $ 98,497     $ —     $ —  

Short-Term Securities

     3,015       —       —  
 

 

 

  

Total

   $ 101,512     $ —     $ —  
 

 

 

  

Futures Contracts

   $ 2     $ —     $ —  
 

 

 

  

Liabilities

      

Futures Contracts

   $ 90     $ —     $ —  
 

 

 

  
 

 

     
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SCHEDULE OF INVESTMENTS   PATHFINDER PORTFOLIOS (in thousands)

 

 

 

DECEMBER 31, 2021

 

Pathfinder Moderately Conservative – Managed Volatility

 

AFFILIATED MUTUAL FUNDS   Shares     Value  

Delaware Ivy VIP Core Equity, Class II

     191     $ 3,384  

Delaware Ivy VIP Corporate Bond, Class II

     1,656       9,326  

Delaware Ivy VIP Global Equity Income, Class II

     377       2,599  

Delaware Ivy VIP Growth, Class II

     389       5,778  

Delaware Ivy VIP High Income, Class I

     114       389  

Delaware Ivy VIP International Core Equity, Class II

     169       3,126  

Delaware Ivy VIP Limited-Term Bond, Class II

     1,578       7,714  

Delaware Ivy VIP Mid Cap Growth, Class I

     164       2,946  

Delaware Ivy VIP Small Cap Growth, Class I

     56       614  

Delaware Ivy VIP Smid Cap Core, Class II

     6       92  

Delaware Ivy VIP Value, Class II

     361       2,971  
   

 

 

  
 

TOTAL AFFILIATED MUTUAL FUNDS – 97.4%

 

   $ 38,939  

(Cost: $38,146)

      
 
SHORT-TERM SECURITIES              
 

Money Market Funds (A) – 2.6%

 

State Street Institutional U.S. Government Money Market Fund – Premier Class,
0.030%

     1,059       1,059  
   

 

 

  
 

TOTAL SHORT-TERM SECURITIES – 2.6%

 

   $ 1,059  

(Cost: $1,059)

      
 

TOTAL INVESTMENT SECURITIES – 100.0%

 

   $ 39,998  

(Cost: $39,205)

      
 

LIABILITIES, NET OF CASH AND OTHER ASSETS (B) – 0.0%

 

     (10 ) 
 

NET ASSETS – 100.0%

 

   $ 39,988  

Notes to Schedule of Investments

 

*

Not shown due to rounding.

 

(A)

Rate shown is the annualized 7-day yield at December 31, 2021.

 

(B)

Cash of $144 has been pledged as collateral on open futures contracts.

The following futures contracts were outstanding at December 31, 2021 (contracts unrounded):

 

Description   Type   Number
of
Contracts		     Expiration
Date		     Notional
Amount		     Value     Unrealized
Appreciation
(Depreciation)		  

E-mini Russell 2000 Index

   Short     1       3-17-22       — *    $ (112 )    $ 1  

S&P 500 Index

   Short     12       3-31-22       1       (2,855 )      (40 ) 
     

 

 

  
          $ (2,967 )    $ (39 ) 
     

 

 

  

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1     Level 2     Level 3  

Assets

      

Investments in Securities

      

Affiliated Mutual Funds

   $ 38,939     $ —     $ —  

Short-Term Securities

     1,059       —       —  
 

 

 

  

Total

   $ 39,998     $ —     $ —  
 

 

 

  

Futures Contracts

   $ 1     $ —     $ —  
 

 

 

  

Liabilities

      

Futures Contracts

   $ 40     $ —     $ —  
 

 

 

  
 

 

See Accompanying Notes to Financial Statements.

 

20   ANNUAL REPORT   2021  
     

Table of Contents
MANAGEMENT DISCUSSION   DELAWARE IVY VIP GOVERNMENT MONEY MARKET

 

 

 

(UNAUDITED)

 

On September 13, 2021, the Board of Trustees of the Ivy Variable Insurance Portfolios approved a proposal to liquidate and dissolve the Portfolio. The liquidation and dissolution date (Liquidation Date) will be announced at least 60 days prior to the liquidation. Effective on November 15, 2021, Stephen Juszczyszyn and Kathleen Marnell Burst will serve as portfolio managers of the Portfolio until the Liquidation Date.

The Fund was closed to new investors on September 30, 2021 and will be closed to existing shareholders one (1) business day before the Liquidation Date.

Below, Stephen Juszczyszyn and Kathleen Marnell Burst, portfolio managers of Delaware Ivy VIP Government Money Market, discuss positioning, performance and results for the fiscal year ended December 31, 2021.

Market review

 

The markets began 2021 with a significant amount of fiscal and monetary stimulus in place to support the economic recovery from the effects of the global pandemic. Fiscal stimulus in the form of transfer payments were conducted to help mitigate the disruption in payrolls given the elevated levels of unemployment (6.4% in January 2021, according to the Bureau of Labor Statistics). The Fed maintained liquidity through the quantitative easing (QE) program, purchasing $80 billion of Treasuries and $40 billion of mortgage-backed securities (MBS). Accommodative interest rate policy positioned the federal funds rate within a 0-25 basis point range to encourage access to lending markets (one basis point is a hundredth of a percentage point). The Fed utilized the reverse repurchase agreement (RRP) and interest on reserves (IOR) as the respective lower and upper band mechanisms to help manage the rate. Investor demand for short duration government debt remained high during the first and second quarters of 2021, helping to compress yields further.

The economic recovery through 2021, while uneven across sectors, began to manifest with considerable momentum. Challenges regarding materials logistics and rising wages contributed to rising inflation metrics as economic accommodation remained elevated. A Fed pivot from transitory inflation messaging during the fourth quarter of 2021 led to a more rapid QE drawdown, and the likelihood of interest rate hikes occurring sooner than initial market expectations. As a result, short-term rates began rising at the end of September to account for the shift in outlook. In the latter portion of the fourth quarter, interest rate markets recalibrated to pricing in multiple Fed rate increases for 2022 as a realistic change in Fed interest rate policy.

Outlook

 

In 2021, most economies continued to improve despite countries’ having to continue to deal with the impacts from the COVID-19 outbreak. Markets are starting 2022 on sound footing as the economy transitions from recovery to expansion, notwithstanding a rapid increase in COVID-19 cases associated with the Omicron variant. Fundamentals are much improved from early 2020, and a shift in government responses to the pandemic has helped support a handoff from the manufacturing sector to the service-oriented sectors of the economy. We think the central banks around the world will continue to grapple with the policy challenges that inflation presents, and we anxiously await to see if policy makers will deliver an orderly (or disorderly) reduction in inflation at a time when both fiscal and monetary support are waning.

Believe it or not, 2022 brings on another important election cycle in the US as the country goes into this period divided on many critical strategic initiatives. The Biden administration entered 2021 with control of both houses of Congress yet still found it challenging to push through key legislation. With Biden’s approval rating continuing to feel the weight of domestic and global policy missteps, including the Afghanistan withdrawal, vaccination uptake, and the Build Back Better agenda, the upcoming year may prove difficult for his administration’s fiscal agenda and Democrats’ ability to retain control of Congress. Furthermore, with major decisions forthcoming on important matters such as the Joint Comprehensive Plan of Action (aka the Iran nuclear deal) coming into play, the administration’s docket is quite full.

China’s steps to rein in private enterprise in 2021 raised the stakes for investors. Surprisingly to us, with the high degree of uncertainty emanating from the country, markets outside the region essentially brushed off the prospects of more systemic-related volatility originating from the world’s second-largest economy. The coming months may test this thesis as we await further responses from the Chinese government.

We anticipate that growth will moderate further in the coming quarters, as the economy cools from the blistering pace of growth experienced during most of 2021, though we believe that the macro backdrop should remain resilient. That said, we believe the year will be plagued by periods of uncertainty, resulting in an increase in volatility that may create opportunities for the agile investor. The global reflationary tilt will remain in focus in 2022 as ambiguity surrounding the supply chain persists. Furthermore, a continuation of the normalization of the service sector at a time when US consumers are holding trillions in savings may exasperate or prolong the inflationary pressures, potentially leading to additional responses from

 

     
    2021       ANNUAL REPORT       21  

Table of Contents
           

 

 

 

 

the Fed. Lastly, geopolitical headlines are likely to persist as world leaders deal with China’s growth slowing and Russia’s actions in Eastern Europe.

Effective July 1, 2021, the Portfolio name changed from Ivy VIP Government Money Market.

Significant Event: On December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Variable Insurance Portfolios, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The Ivy Variable Insurance Portfolios, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company and distributed by Delaware Distributors, L.P.

You could lose money by investing in Delaware Ivy VIP Government Money Market. Although the Portfolio seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Portfolio is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Portfolio’s sponsor has no legal obligation to provide financial support to the Portfolio, and you should not expect that the sponsor will provide financial support to the Portfolio at any time.

Interest rate increases can cause the price of a money market security to decrease. A decline in the credit quality of an issuer or a provider of credit support or a maturity-shortening structure for a security can cause the price of a money market security to decrease. Portfolio shares are not guaranteed by the U.S. Government. These and other risks are more fully described in the Portfolio’s prospectus.

The opinions expressed in this report are those of the portfolio managers and are current only through the end of the period of the report as stated on the cover. The portfolio managers’ views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.

 

22   ANNUAL REPORT   2021  
     

Table of Contents
PORTFOLIO HIGHLIGHTS   DELAWARE IVY VIP GOVERNMENT MONEY MARKET(a)

 

 

 

ALL DATA IS AS OF DECEMBER 31, 2021 (UNAUDITED)

 

Asset Allocation

 

Money Market Funds

     36.6%  

United States Government and Government Agency Obligations

     62.9%  

Cash and Other Assets (Net of Liabilities)

     0.5%  

 

(a)

Effective July 1, 2021, the name of Ivy VIP Government Money Market changed to Delaware Ivy VIP Government Money Market.

 

 

     
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Table of Contents
SCHEDULE OF INVESTMENTS   DELAWARE IVY VIP GOVERNMENT MONEY MARKET (in thousands)

 

 

 

DECEMBER 31, 2021

 

MONEY MARKET FUNDS   Shares     Value  

Money Market Funds (A) – 36.6%

 

State Street Institutional U.S. Government Money Market Fund – Premier Class,
0.030%, 1-3-22

     17,971     $ 17,971  
   

 

 

  
 

TOTAL MONEY MARKET FUNDS – 36.6%

 

   $ 17,971  

(Cost: $17,971)

      
 
UNITED STATES GOVERNMENT
AND GOVERNMENT AGENCY
OBLIGATIONS		   Principal         

United States Government Agency Obligations – 62.9%

 

U.S. International Development Finance Corp. (GTD by U.S. Government) (3-Month U.S. TB Rate):

      

0.090%, 12-15-26 - 7-7-40 (B)

   $ 30,890       30,891  
   

 

 

  
 

TOTAL UNITED STATES GOVERNMENT AND GOVERNMENT AGENCY
OBLIGATIONS – 62.9%

 

   $ 30,891  

(Cost: $30,891)

      
 

TOTAL INVESTMENT SECURITIES – 99.5%

 

   $ 48,862  

(Cost: $48,862)

      
 

CASH AND OTHER ASSETS, NET OF LIABILITIES – 0.5%

 

     253  
 

NET ASSETS – 100.0%

 

   $ 49,115  
 

 

Notes to Schedule of Investments

 

(A)

Rate shown is the annualized 7-day yield at December 31, 2021.

 

(B)

Variable rate security. Interest rate disclosed is that which is in effect at December 31, 2021. Description of the reference rate and spread, if applicable, are included in the security description.

The following table is a summary of the valuation of the Portfolio’s investments by the fair value hierarchy levels as of December 31, 2021. See Note 3 to the Financial Statements for further information regarding fair value measurement.

 

     Level 1      Level 2      Level 3  

Assets

        

Investments in Securities

        

Money Market Funds

   $ 17,971      $ —      $ —  

United States Government and Government Agency Obligations

     —        30,891        —  
 

 

 

  

Total

   $ 17,971      $ 30,891      $ —  
 

 

 

  

The following acronyms are used throughout this schedule:

GTD = Guaranteed

TB = Treasury Bill

 

See Accompanying Notes to Financial Statements.

 

24   ANNUAL REPORT   2021  
     

Table of Contents
STATEMENTS OF ASSETS AND LIABILITIES   IVY VIP

 

 

 

AS OF DECEMBER 31, 2021

 

(In thousands, except per share amounts)   Pathfinder
Aggressive(1)		   Pathfinder
Conservative(2)		   Pathfinder
Moderate(3)		   Pathfinder
Moderately
Aggressive(4)		   Pathfinder
Moderately
Conservative(5)		   Pathfinder
Moderate —
Managed
Volatility(6)		   Pathfinder
Moderately
Aggressive —
Managed
Volatility(7)		  

Pathfinder
Moderately

Conservative —
Managed
Volatility(8)

ASSETS

                                

Investments in unaffiliated securities at value+

     $ 209       $ 310       $ 1,248       $ 1,202       $ 977       $ 15,856       $ 3,015       $ 1,059  

Investments in affiliated mutual funds at value+

       73,770         109,667         633,424         775,371         186,513         512,307         98,497         38,939  

Investments at Value

       73,979         109,977         634,672         776,573         187,490         528,163         101,512         39,998  

Due from broker

       —         —         —         —         —         1,769         323         144  

Investment securities sold receivable

       —         40         252         298         23         —         —         —  

Dividends and interest receivable

       —*         — *        — *        — *        — *        — *        — *        — * 

Capital shares sold receivable

       3         — *        7         11         1         2         —         —  

Variation margin receivable

       —         —         —         —         —         104         19         8  

Prepaid and other assets

       — *        — *        1         2         — *        1         — *        — * 

Total Assets

       73,982         110,017         634,932         776,884         187,514         530,039         101,854         40,150  

LIABILITIES

                                

Investment securities purchased payable

       —         —         —         —         —         64         —         —  

Capital shares redeemed payable

       12         17         75         71         27         32         45         149  

Independent Trustees and Chief Compliance Officer fees payable

       8         10         68         81         22         19         3         2  

Investment management fee payable

       —         —         —         —         —         3         1         — * 

Accounting services fee payable

       2         3         9         11         4         8         3         2  

Other liabilities

       2         2         2         2         2         90         18         9  

Total Liabilities

       24         32         154         165         55         216         70         162  

Total Net Assets

     $ 73,958       $ 109,985       $ 634,778       $ 776,719       $ 187,459       $ 529,823       $ 101,784       $ 39,988  

NET ASSETS

                                

Capital paid in (shares authorized — unlimited)

     $ 60,580       $ 95,181       $ 524,158       $ 628,837       $ 158,368       $ 404,303       $ 85,657       $ 27,236  

Total Distributable Earnings

       13,378         14,804         110,620         147,882         29,091         125,520         16,127         12,752  

Total Net Assets

     $ 73,958       $ 109,985       $ 634,778       $ 776,719       $ 187,459       $ 529,823       $ 101,784       $ 39,988  

CAPITAL SHARES OUTSTANDING:

                                

Class II

       13,530         19,991         115,117         137,336         33,895         83,693         16,668         6,645  

NET ASSET VALUE PER SHARE:

                                

Class II

     $ 5.47       $ 5.50       $ 5.51       $ 5.66       $ 5.53       $ 6.33       $ 6.11       $ 6.02  

+COST

                                

Investments in unaffiliated securities at cost

     $ 209       $ 310       $ 1,248       $ 1,202       $ 977       $ 15,856       $ 3,015       $ 1,059  

Investments in affiliated mutual funds at cost

       66,424         104,681         584,716         705,767         174,687         482,420         90,336         38,146  

 

*

Not shown due to rounding.

(1)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Aggressive to Delaware Ivy VIP Pathfinder Aggressive.

(2)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Conservative to Delaware Ivy VIP Pathfinder Conservative.

(3)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Moderate to Delaware Ivy VIP Pathfinder Moderate.

(4)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Moderately Aggressive to Delaware Ivy VIP Pathfinder Moderately Aggressive.

(5)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Moderately Conservative to Delaware Ivy VIP Pathfinder Moderately Conservative.

(6)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Moderate – Managed Volatility to Delaware Ivy VIP Pathfinder Moderate – Managed Volatility.

(7)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Moderately Aggressive – Managed Volatility to Delaware Ivy VIP Pathfinder Moderately Aggressive – Managed Volatility.

(8)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Moderately Conservative – Managed Volatility to Delaware Ivy VIP Pathfinder Moderately Conservative – Managed Volatility.

 

See Accompanying Notes to Financial Statements.

 

     
    2021       ANNUAL REPORT       25  

Table of Contents
STATEMENTS OF ASSETS AND LIABILITIES   IVY VIP

 

 

 

AS OF DECEMBER 31, 2021

 

(In thousands, except per share amounts)   Government
Money
Market(1)

ASSETS

 

Investments in unaffiliated securities at value+

     $ 48,862

Investments at Value

       48,862

Investment securities sold receivable

       233

Dividends and interest receivable

       4

Capital shares sold receivable

       — *

Receivable from affiliates

       120

Prepaid and other assets

       1

Total Assets

       49,220

LIABILITIES

    

Capital shares redeemed payable

       43

Distributions payable

       — *

Independent Trustees and Chief Compliance Officer fees payable

       42

Investment management fee payable

       1

Accounting services fee payable

       3

Other liabilities

       16

Total Liabilities

       105

Total Net Assets

     $ 49,115

NET ASSETS

    

Capital paid in (shares authorized — unlimited)

     $ 49,115

Total Distributable Earnings

       — *

Total Net Assets

     $ 49,115

CAPITAL SHARES OUTSTANDING:

    

Class II

       49,118

NET ASSET VALUE PER SHARE:

    

Class II

     $ 1.00

+COST

    

Investments in unaffiliated securities at cost

     $ 48,862

 

*

Not shown due to rounding.

(1)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Government Money Market to Delaware Ivy VIP Government Money Market.

 

See Accompanying Notes to Financial Statements.

 

26   ANNUAL REPORT   2021  
     

Table of Contents
STATEMENTS OF OPERATIONS   IVY VIP

 

 

 

FOR THE YEAR ENDED DECEMBER 31, 2021

 

(In thousands)   Pathfinder
Aggressive(1)		   Pathfinder
Conservative(2)		   Pathfinder
Moderate(3)		   Pathfinder
Moderately
Aggressive(4)		   Pathfinder
Moderately
Conservative(5)		   Pathfinder
Moderate —
Managed
Volatility(6)		   Pathfinder
Moderately
Aggressive —
Managed
Volatility(7)		   Pathfinder
Moderately
Conservative —
Managed
Volatility(8)

INVESTMENT INCOME

                                

Dividends from affiliated mutual funds

     $ 1,208     $ 2,638     $ 13,536     $ 15,226     $ 4,258     $ 15,280     $ 1,841     $ 1,929

Total Investment Income

       1,208       2,638       13,536       15,226       4,258       15,280       1,841       1,929

EXPENSES

                                

Investment management fee

       —       —       —       —       —       1,393       200       166

Custodian fees

       1       2       1       2       1       1       1       1

Independent Trustees and Chief Compliance Officer fees

       5       8       47       57       14       38       6       5

Accounting services fee

       25       35       113       140       43       128       31       26

Insurance fees

       1       2       10       12       3       12       2       1

Printing fees

       10       10       14       15       11       15       10       10

Professional fees

       8       9       11       10       10       13       10       10

Other

       1       — *       2       3       1       1       — *       1

Total Expenses

       51       66       198       239       83       1,601       260       220

Net Investment Income

       1,157       2,572       13,338       14,987       4,175       13,679       1,581       1,709

REALIZED AND UNREALIZED GAIN (LOSS)

                                

Net realized gain (loss) on:

                                

Investments in affiliated mutual funds

       2,444       4,371       28,528       37,051       7,640       65,839       4,026       8,528

Distributions of realized capital gains from affiliated mutual funds

       2,473       3,004       20,362       26,662       5,577       22,986       3,222       2,527

Futures contracts

       —       —       —       —       —       (6,544 )       (768 )       (821 )

Net change in unrealized appreciation (depreciation) on:

                                

Investments in affiliated mutual funds

       6,198       793       26,962       45,805       5,064       (2,604 )       6,032       (2,747 )

Futures contracts

       —       —       —       —       —       192       (10 )       44

Net Realized and Unrealized Gain

       11,115       8,168       75,852       109,518       18,281       79,869       12,502       7,531

Net Increase in Net Assets Resulting from Operations

     $ 12,272     $ 10,740     $ 89,190     $ 124,505     $ 22,456     $ 93,548     $ 14,083     $ 9,240

 

*

Not shown due to rounding.

(1)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Aggressive to Delaware Ivy VIP Pathfinder Aggressive.

(2)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Conservative to Delaware Ivy VIP Pathfinder Conservative.

(3)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Moderate to Delaware Ivy VIP Pathfinder Moderate.

(4)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Moderately Aggressive to Delaware Ivy VIP Pathfinder Moderately Aggressive.

(5)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Moderately Conservative to Delaware Ivy VIP Pathfinder Moderately Conservative.

(6)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Moderate – Managed Volatility to Delaware Ivy VIP Pathfinder Moderate – Managed Volatility.

(7)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Moderately Aggressive – Managed Volatility to Delaware Ivy VIP Pathfinder Moderately Aggressive – Managed Volatility.

(8)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Moderately Conservative – Managed Volatility to Delaware Ivy VIP Pathfinder Moderately Conservative – Managed Volatility.

 

See Accompanying Notes to Financial Statements.

 

     
    2021       ANNUAL REPORT       27  

Table of Contents
STATEMENTS OF OPERATIONS   IVY VIP

 

 

 

FOR THE YEAR ENDED DECEMBER 31, 2021

 

(In thousands)   Government
Money
Market(1)

INVESTMENT INCOME

 

Dividends from unaffiliated securities

     $ 4

Interest and amortization from unaffiliated securities

       48

Total Investment Income

       52

EXPENSES

    

Investment management fee

       224

Custodian fees

       1

Independent Trustees and Chief Compliance Officer fees

       14

Accounting services fee

       42

Professional fees

       8

Other

       22

Total Expenses

       311

Less:

    

Expenses in excess of limit

       (262 )

Total Net Expenses

       49

Net Investment Income

       3

REALIZED AND UNREALIZED GAIN (LOSS)

    

Net realized gain (loss) on:

    

Investments in unaffiliated securities

       — *

Net change in unrealized appreciation (depreciation) on:

    

Investments in unaffiliated securities

       —

Net Realized and Unrealized Gain

       — *

Net Increase in Net Assets Resulting from Operations

     $ 3

 

*

Not shown due to rounding.

(1)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Government Money Market to Delaware Ivy VIP Government Money Market.

 

See Accompanying Notes to Financial Statements.

 

28   ANNUAL REPORT   2021  
     

Table of Contents
STATEMENTS OF CHANGES IN NET ASSETS   IVY VIP

 

 

 

 

    Pathfinder Aggressive(1)    Pathfinder Conservative(2)    Pathfinder Moderate(3)
(In thousands)   Year
ended
12-31-21		    Year
ended
12-31-20		    Year
ended
12-31-21		    Year
ended
12-31-20		    Year
ended
12-31-21		    Year
ended
12-31-20

INCREASE (DECREASE) IN NET ASSETS

                             

Operations:

                             

Net investment income

     $ 1,157      $ 1,172      $ 2,572      $ 2,035      $ 13,338      $ 12,842

Net realized gain on investments

       4,917        3,447        7,375        4,682        48,890        29,782

Net change in unrealized appreciation

       6,198        4,498        793        5,590        26,962        39,792

Net Increase in Net Assets Resulting from Operations

       12,272        9,117        10,740        12,307        89,190        82,416

Distributions to Shareholders From:

                             

Accumulated earnings:

                             

(combined net investment income and net realized gains)

                             

Class II

       (4,619 )        (8,768 )        (6,783 )        (7,983 )        (42,760 )        (79,596 )

Total Distributions to Shareholders

       (4,619 )        (8,768 )        (6,783 )        (7,983 )        (42,760 )        (79,596 )

Capital Share Transactions

       (1,598 )        1,416        (5,744 )        8,635        (67,861 )        (26,530 )

Net Increase (Decrease) in Net Assets

       6,055        1,765        (1,787 )        12,959        (21,431 )        (23,710 )

Net Assets, Beginning of Period

       67,903        66,138        111,772        98,813        656,209        679,919

Net Assets, End of Period

     $ 73,958      $ 67,903      $ 109,985      $ 111,772      $ 634,778      $ 656,209
    Pathfinder Moderately
Aggressive(4)		    Pathfinder Moderately
Conservative(5)		    Pathfinder Moderate —
Managed Volatility(6)
(In thousands)   Year
ended
12-31-21		    Year
ended
12-31-20		    Year
ended
12-31-21		    Year
ended
12-31-20		    Year
ended
12-31-21		    Year
ended
12-31-20

INCREASE (DECREASE) IN NET ASSETS

                             

Operations:

                             

Net investment income

     $ 14,987      $ 15,223      $ 4,175      $ 3,925      $ 13,679      $ 12,125

Net realized gain on investments

       63,713        37,732        13,217        8,495        82,281        8,826

Net change in unrealized appreciation (depreciation)

       45,805        52,016        5,064        11,064        (2,412 )        39,332

Net Increase in Net Assets Resulting from Operations

       124,505        104,971        22,456        23,484        93,548        60,283

Distributions to Shareholders From:

                             

Accumulated earnings:

                             

(combined net investment income and net realized gains)

                             

Class II

       (53,201 )        (109,757 )        (12,483 )        (20,114 )        (21,327 )        (60,610 )

Total Distributions to Shareholders

       (53,201 )        (109,757 )        (12,483 )        (20,114 )        (21,327 )        (60,610 )

Capital Share Transactions

       (93,581 )        (25,125 )        (17,636 )        (9,979 )        (270,966 )        21,803

Net Increase (Decrease) in Net Assets

       (22,277 )        (29,911 )        (7,663 )        (6,609 )        (198,745 )        21,476

Net Assets, Beginning of Period

       798,996        828,907        195,122        201,731        728,568        707,092

Net Assets, End of Period

     $ 776,719      $ 798,996      $ 187,459      $ 195,122      $ 529,823      $ 728,568

 

(1)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Aggressive to Delaware Ivy VIP Pathfinder Aggressive.

(2)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Conservative to Delaware Ivy VIP Pathfinder Conservative.

(3)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Moderate to Delaware Ivy VIP Pathfinder Moderate.

(4)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Moderately Aggressive to Delaware Ivy VIP Pathfinder Moderately Aggressive.

(5)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Moderately Conservative to Delaware Ivy VIP Pathfinder Moderately Conservative.

(6)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Moderate — Managed Volatility to Delaware Ivy VIP Pathfinder Moderate — Managed Volatility.

 

See Accompanying Notes to Financial Statements.

 

     
    2021       ANNUAL REPORT       29  

Table of Contents
STATEMENTS OF CHANGES IN NET ASSETS   IVY VIP

 

 

 

 

    Pathfinder Moderately
Aggressive —
Managed Volatility(1)		    Pathfinder Moderately
Conservative —
Managed Volatility(2)		    Government Money
Market(3)
(In thousands)   Year
ended
12-31-21		    Year
ended
12-31-20		    Year
ended
12-31-21		    Year
ended
12-31-20		    Year
ended
12-31-21		    Year
ended
12-31-20

INCREASE (DECREASE) IN NET ASSETS

                             

Operations:

                             

Net investment income

     $ 1,581      $ 1,490      $ 1,709      $ 1,419      $ 3      $ 623

Net realized gain on investments

       6,480        1,348        10,234        1,822        — *        — *

Net change in unrealized appreciation (depreciation)

       6,022        5,698        (2,703 )        4,448        —        —

Net Increase in Net Assets Resulting from Operations

       14,083        8,536        9,240        7,689        3        623

Distributions to Shareholders From:

                             

Accumulated earnings:

                             

(combined net investment income and net realized gains)

                             

Class II

       (2,886 )        (9,697 )        (3,230 )        (6,043 )        (3 )        (623 )

Total Distributions to Shareholders

       (2,886 )        (9,697 )        (3,230 )        (6,043 )        (3 )        (623 )

Capital Share Transactions

       (5,471 )        3,939        (51,714 )        3,600        (46,791 )        (88,117 )

Net Increase (Decrease) in Net Assets

       5,726        2,778        (45,704 )        5,246        (46,791 )        (88,117 )

Net Assets, Beginning of Period

       96,058        93,280        85,692        80,446        95,906        184,023

Net Assets, End of Period

     $ 101,784      $ 96,058      $ 39,988      $ 85,692      $ 49,115      $ 95,906

 

*

Not shown due to rounding.

(1)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Moderately Aggressive — Managed Volatility to Delaware Ivy VIP Pathfinder Moderately Aggressive — Managed Volatility.

(2)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Pathfinder Moderately Conservative — Managed Volatility to Delaware Ivy VIP Pathfinder Moderately Conservative — Managed Volatility.

(3)

Effective July 1, 2021, the Portfolio’s name changed from Ivy VIP Government Money Market to Delaware Ivy VIP Government Money Market.

 

See Accompanying Notes to Financial Statements.

 

30   ANNUAL REPORT   2021  
     

Table of Contents
           

 

 

 

 

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    2021       ANNUAL REPORT       31  

Table of Contents
FINANCIAL HIGHLIGHTS   IVY VIP
 

 

 

 

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

    

Net Asset
Value,
Beginning of
Period

   Net
Investment
Income(1)		   Net Realized
and Unrealized
Gain (Loss) on
Investments		   Total from
Investment
Operations		   Distributions
From Net
Investment
Income		   Distributions
From Net
Realized
Gains		   Total
Distributions

Pathfinder Aggressive

                            

Class II Shares

                            

Year ended 12-31-2021

     $ 4.92     $ 0.08     $ 0.82     $ 0.90     $ (0.09 )     $ (0.26 )     $ (0.35 )

Year ended 12-31-2020

       5.00       0.09       0.52       0.61       (0.07 )       (0.62 )       (0.69 )

Year ended 12-31-2019

       4.60       0.07       0.92       0.99       (0.14 )       (0.45 )       (0.59 )

Year ended 12-31-2018

       5.16       0.13       (0.32 )       (0.19 )       (0.09 )       (0.28 )       (0.37 )

Year ended 12-31-2017

       4.68       0.08       0.80       0.88       (0.05 )       (0.35 )       (0.40 )

Pathfinder Conservative

                            

Class II Shares

                            

Year ended 12-31-2021

       5.31       0.13       0.39       0.52       (0.10 )       (0.23 )       (0.33 )

Year ended 12-31-2020

       5.15       0.10       0.49       0.59       (0.09 )       (0.34 )       (0.43 )

Year ended 12-31-2019

       4.83       0.09       0.59       0.68       (0.10 )       (0.26 )       (0.36 )

Year ended 12-31-2018

       5.16       0.10       (0.20 )       (0.10 )       (0.06 )       (0.17 )       (0.23 )

Year ended 12-31-2017

       4.90       0.05       0.46       0.51       (0.04 )       (0.21 )       (0.25 )

Pathfinder Moderate

                            

Class II Shares

                            

Year ended 12-31-2021

       5.15       0.11       0.61       0.72       (0.11 )       (0.25 )       (0.36 )

Year ended 12-31-2020

       5.19       0.10       0.51       0.61       (0.09 )       (0.56 )       (0.65 )

Year ended 12-31-2019

       4.89       0.08       0.79       0.87       (0.14 )       (0.43 )       (0.57 )

Year ended 12-31-2018

       5.40       0.12       (0.31 )       (0.19 )       (0.08 )       (0.24 )       (0.32 )

Year ended 12-31-2017

       5.02       0.07       0.64       0.71       (0.04 )       (0.29 )       (0.33 )

Pathfinder Moderately Aggressive

                            

Class II Shares

                            

Year ended 12-31-2021

       5.18       0.10       0.75       0.85       (0.10 )       (0.27 )       (0.37 )

Year ended 12-31-2020

       5.32       0.10       0.52       0.62       (0.09 )       (0.67 )       (0.76 )

Year ended 12-31-2019

       4.98       0.08       0.92       1.00       (0.15 )       (0.51 )       (0.66 )

Year ended 12-31-2018

       5.59       0.13       (0.37 )       (0.24 )       (0.10 )       (0.27 )       (0.37 )

Year ended 12-31-2017

       5.14       0.09       0.74       0.83       (0.05 )       (0.33 )       (0.38 )

Pathfinder Moderately Conservative

                            

Class II Shares

                            

Year ended 12-31-2021

       5.26       0.12       0.51       0.63       (0.11 )       (0.25 )       (0.36 )

Year ended 12-31-2020

       5.22       0.10       0.50       0.60       (0.10 )       (0.46 )       (0.56 )

Year ended 12-31-2019

       4.90       0.08       0.70       0.78       (0.12 )       (0.34 )       (0.46 )

Year ended 12-31-2018

       5.32       0.11       (0.24 )       (0.13 )       (0.07 )       (0.22 )       (0.29 )

Year ended 12-31-2017

       4.99       0.06       0.56       0.62       (0.04 )       (0.25 )       (0.29 )

 

*

Not shown due to rounding.

 

(1)

Based on average weekly shares outstanding.

 

(2)

Based on net asset value. Total returns do not reflect a sales charge or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

 

(3)

Ratios excluding expense waivers are included only for periods in which the class had waived or reimbursed expenses.

 

(4)

Does not include expenses of underlying Delaware Ivy VIP Portfolios or unaffiliated Portfolio in which the Portfolio invests.

 

(5)

Does not include expenses of the underlying unaffiliated Portfolio in which the Portfolio invests.

 

 

 

32   ANNUAL REPORT   2021  
     

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Net Asset
Value,
Beginning of
Period

   Net
Investment
Income(1)		   Net Realized
and Unrealized
Gain (Loss) on
Investments		   Total from
Investment
Operations		   Distributions
From Net
Investment
Income		   Distributions
From Net
Realized
Gains		   Total
Distributions

Pathfinder Moderate — Managed Volatility

                            

Class II Shares

                            

Year ended 12-31-2021

     $ 5.77     $ 0.11     $ 0.62     $ 0.73     $ (0.10 )     $ (0.07 )     $ (0.17 )

Year ended 12-31-2020

       5.84       0.10       0.34       0.44       (0.08 )       (0.43 )       (0.51 )

Year ended 12-31-2019

       5.33       0.08       0.82       0.90       (0.11 )       (0.28 )       (0.39 )

Year ended 12-31-2018

       5.78       0.11       (0.33 )       (0.22 )       (0.06 )       (0.17 )       (0.23 )

Year ended 12-31-2017

       5.25       0.06       0.65       0.71       (0.03 )       (0.15 )       (0.18 )

Pathfinder Moderately Aggressive —Managed Volatility

                            

Class II Shares

                            

Year ended 12-31-2021

       5.46       0.09       0.73       0.82       (0.09 )       (0.08 )       (0.17 )

Year ended 12-31-2020

       5.63       0.09       0.33       0.42       (0.07 )       (0.52 )       (0.59 )

Year ended 12-31-2019

       5.15       0.07       0.88       0.95       (0.12 )       (0.35 )       (0.47 )

Year ended 12-31-2018

       5.66       0.11       (0.37 )       (0.26 )       (0.07 )       (0.18 )       (0.25 )

Year ended 12-31-2017

       5.06       0.07       0.71       0.78       (0.02 )       (0.16 )       (0.18 )

Pathfinder Moderately Conservative —Managed Volatility

                            

Class II Shares

                            

Year ended 12-31-2021

       5.64       0.12       0.47       0.59       (0.09 )       (0.12 )       (0.21 )

Year ended 12-31-2020

       5.58       0.09       0.39       0.48       (0.08 )       (0.34 )       (0.42 )

Year ended 12-31-2019

       5.19       0.08       0.66       0.74       (0.10 )       (0.25 )       (0.35 )

Year ended 12-31-2018

       5.55       0.10       (0.24 )       (0.14 )       (0.05 )       (0.17 )       (0.22 )

Year ended 12-31-2017

       5.10       0.05       0.53       0.58       (0.02 )       (0.11 )       (0.13 )

Government Money Market

                            

Class II Shares

                            

Year ended 12-31-2021

       1.00       0.00 *       0.00       0.00 *       — *       —       — *

Year ended 12-31-2020

       1.00       0.00 *       0.00       0.00 *       — *       —       — *

Year ended 12-31-2019

       1.00       0.02       0.00       0.02       (0.02 )       — *       (0.02 )

Year ended 12-31-2018

       1.00       0.02       0.00 *       0.02       (0.02 )       — *       (0.02 )

Year ended 12-31-2017

       1.00       0.01       0.00 *       0.01       (0.01 )       — *       (0.01 )

 

See Accompanying Notes to Financial Statements.

 

     
    2021       ANNUAL REPORT       33  

Table of Contents
FINANCIAL HIGHLIGHTS   IVY VIP
 

 

 

 

FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

 

     Net Asset
Value,
End of Period		   Total
Return(2)		   Net Assets,
End of Period
(in millions)		   Ratio of Expenses
to Average Net
Assets Including
Expense Waiver		   Ratio of Net
Investment
Income to
Average
Net Assets
Including
Expense
Waiver		   Ratio of
Expenses to
Average
Net Assets
Excluding
Expense
Waiver(3)		   Ratio of Net
Investment
Income
(Loss) to
Average
Net Assets
Excluding
Expense
Waiver(3)		   Portfolio
Turnover
Rate

Pathfinder Aggressive

 

Class II Shares

 

Year ended 12-31-2021

     $ 5.47       18.93 %     $ 74       0.07 %(4)       1.62 %(4)       — %       — %       18 %

Year ended 12-31-2020

       4.92       15.70       68       0.12 (4)        1.91 (4)        —       —       21

Year ended 12-31-2019

       5.00       23.24       66       0.09 (4)        1.41 (4)        —       —       18

Year ended 12-31-2018

       4.60       -4.27       59       0.09 (4)        2.49 (4)        —       —       51

Year ended 12-31-2017

       5.16       19.83       76       0.07 (4)        1.68 (4)        —       —       20

Pathfinder Conservative

                                

Class II Shares

                                

Year ended 12-31-2021

       5.50       10.18       110       0.06 (4)        2.32 (4)        —       —       27

Year ended 12-31-2020

       5.31       12.67       112       0.08 (4)        2.02 (4)        —       —       41

Year ended 12-31-2019

       5.15       14.66       99       0.07 (4)        1.71 (4)        —       —       31

Year ended 12-31-2018

       4.83       -1.93       94       0.07 (4)        1.89 (4)        —       —       39

Year ended 12-31-2017

       5.16       10.51       109       0.06 (4)        1.06 (4)        —       —       30

Pathfinder Moderate

                                

Class II Shares

                                

Year ended 12-31-2021

       5.51       14.66       635       0.03 (4)        2.05 (4)        —       —       18

Year ended 12-31-2020

       5.15       14.35       656       0.04 (4)        2.05 (4)        —       —       21

Year ended 12-31-2019

       5.19       19.05       680       0.04 (4)        1.62 (4)        —       —       17

Year ended 12-31-2018

       4.89       -3.90       703       0.03 (4)        2.26 (4)        —       —       36

Year ended 12-31-2017

       5.40       14.70       877       0.03 (4)        1.30 (4)        —       —       22

Pathfinder Moderately Aggressive

                                

Class II Shares

                                

Year ended 12-31-2021

       5.66       16.88       777       0.03 (4)        1.88 (4)        —       —       17

Year ended 12-31-2020

       5.18       15.12       799       0.04 (4)        2.02 (4)        —       —       20

Year ended 12-31-2019

       5.32       21.40       829       0.03 (4)        1.56 (4)        —       —       19

Year ended 12-31-2018

       4.98       -4.71       838       0.03 (4)        2.35 (4)        —       —       39

Year ended 12-31-2017

       5.59       16.72       1,052       0.03 (4)        1.66 (4)        —       —       20

Pathfinder Moderately Conservative

 

                            

Class II Shares

                                

Year ended 12-31-2021

       5.53       12.37       187       0.04 (4)        2.17 (4)        —       —       20

Year ended 12-31-2020

       5.26       13.52       195       0.06 (4)        2.09 (4)        —       —       25

Year ended 12-31-2019

       5.22       16.85       202       0.05 (4)        1.67 (4)        —       —       18

Year ended 12-31-2018

       4.90       -2.67       205       0.05 (4)        2.07 (4)        —       —       34

Year ended 12-31-2017

       5.32       12.77       251       0.05 (4)        1.22 (4)        —       —       24

 

 

34   ANNUAL REPORT   2021  
     

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Net Asset
Value,

End of Period

   Total
Return(2)		   Net Assets,
End of Period
(in millions)		   Ratio of Expenses
to Average Net
Assets Including
Expense Waiver		   Ratio of Net
Investment
Income to
Average
Net Assets
Including
Expense
Waiver		   Ratio of
Expenses to
Average
Net Assets
Excluding
Expense
Waiver(3)		   Ratio of Net
Investment
Income
(Loss) to
Average
Net Assets
Excluding
Expense
Waiver(3)		   Portfolio
Turnover
Rate

Pathfinder Moderate — Managed Volatility

                                

Class II Shares

                                

Year ended 12-31-2021

     $ 6.33       12.99 %     $ 530       0.22 %(4)       1.87 %(4)       — %       — %       19 %

Year ended 12-31-2020

       5.77       9.07       729       0.23 (4)        1.78 (4)        —       —       42

Year ended 12-31-2019

       5.84       17.32       707       0.23 (4)        1.39 (4)        —       —       9

Year ended 12-31-2018

       5.33       -4.00       606       0.23 (4)        2.00 (4)        —       —       28

Year ended 12-31-2017

       5.78       13.80       600       0.23 (4)        1.07 (4)        —       —       21

Pathfinder Moderately Aggressive – Managed Volatility

                                

Class II Shares

                                

Year ended 12-31-2021

       6.11       15.24       102       0.26 (4)        1.58 (4)        —       —       18

Year ended 12-31-2020

       5.46       9.71       96       0.29 (4)        1.68 (4)        —       —       41

Year ended 12-31-2019

       5.63       19.29       93       0.27 (4)        1.32 (4)        —       —       16

Year ended 12-31-2018

       5.15       -4.75       84       0.27 (4)        2.04 (4)        —       —       37

Year ended 12-31-2017

       5.66       15.70       92       0.27 (4)        1.38 (4)        —       —       19

Pathfinder Moderately Conservative – Managed Volatility

 

                            

Class II Shares

                                

Year ended 12-31-2021

       6.02       10.72       40       0.26  (4)        2.06 (4)        —       —       24

Year ended 12-31-2020

       5.64       9.61       86       0.30 (4)        1.77 (4)        —       —       45

Year ended 12-31-2019

       5.58       14.89       80       0.27 (4)        1.45 (4)        —       —       14

Year ended 12-31-2018

       5.19       -2.90       73       0.29 (4)        1.79 (4)        —       —       28

Year ended 12-31-2017

       5.55       11.84       74       0.27 (4)        0.96 (4)        —       —       26

Government Money Market

 

Class II Shares

 

Year ended 12-31-2021

       1.00       — *       49       0.08 (5)        — *(5)       0.48 (5)        -0.40 (5)        —

Year ended 12-31-2020

       1.00       0.37       96       0.27 (5)        0.44 (5)        0.44 (5)        0.27 (5)        —

Year ended 12-31-2019

       1.00       1.83       184       0.42       1.82       —       —       —

Year ended 12-31-2018

       1.00       1.53       239       0.40       1.49       —       —       —

Year ended 12-31-2017

       1.00       0.59       317       0.41       0.56       0.42       0.55       —

 

See Accompanying Notes to Financial Statements.

 

     
    2021       ANNUAL REPORT       35  

Table of Contents
NOTES TO FINANCIAL STATEMENTS   IVY VIP

 

 

 

DECEMBER 31, 2021

 

1.   ORGANIZATION

Ivy Variable Insurance Portfolios, a Delaware statutory trust (the “Trust”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. Delaware Ivy VIP Pathfinder Aggressive (formerly known as Ivy VIP Pathfinder Aggressive), Delaware Ivy VIP Pathfinder Conservative (formerly known as Ivy VIP Pathfinder Conservative), Delaware Ivy VIP Pathfinder Moderate (formerly known as Ivy VIP Pathfinder Moderate), Delaware Ivy VIP Pathfinder Moderately Aggressive (formerly known as Ivy VIP Pathfinder Moderately Aggressive) and Delaware Ivy VIP Pathfinder Moderately Conservative (formerly known as Ivy VIP Pathfinder Moderately Conservative) (collectively, the “Pathfinder Portfolios”), Delaware Ivy VIP Pathfinder Moderate – Managed Volatility (formerly known as Ivy VIP Pathfinder Moderate – Managed Volatility), Delaware Ivy VIP Pathfinder Moderately Aggressive – Managed Volatility (formerly known as Ivy VIP Pathfinder Moderately Aggressive – Managed Volatility) and Delaware Ivy VIP Pathfinder Moderately Conservative – Managed Volatility (formerly known as Ivy VIP Pathfinder Moderately Conservative – Managed Volatility) (collectively, the “Managed Volatility Portfolios”) and Delaware Ivy VIP Government Money Market (formerly known as Ivy VIP Government Money Market) (each, a “Portfolio”) are nine series of the Trust and are the only series of the Trust included in the financial statements. The assets belonging to Government Money Market are held separately by the custodian. The assets belonging to each Pathfinder Portfolio and Managed Volatility Portfolio are held separately by the transfer agent for the underlying funds and the custodian. The investment objective, policies and risk factors of each Portfolio are described more fully in the Prospectus and Statement of Additional Information (“SAI”). Each Portfolio’s investment adviser was Ivy Investment Management Company (“IICO”) through April 30, 2021. Effective April 30, 2021, each Portfolio’s investment adviser is Delaware Management Company (“DMC”).

 

2.   SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by each Portfolio.

Security Transactions and Related Investment Income. Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses are calculated on the identified cost basis. Interest income is recorded on the accrual basis and includes paydown gain (loss) and accretion of discounts and amortization of premiums. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Portfolio is informed of the ex-dividend date. All or a portion of the distributions received from a real estate investment trust or publicly traded partnership may be designated as a reduction of cost of the related investment or realized gain. The financial statements reflect an estimate of the reclassification of the distribution character. Income or short-term capital gain distributions received from registered investment companies, if any, are recorded as dividend income. Long-term capital gain distributions received from registered investment companies, if any, are recorded as realized gains.

Foreign Currency Translation. Each Portfolio’s accounting records are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars daily, using foreign exchange rates obtained from an independent pricing service approved by the Board of Trustees of the Trust (the “Board”). Purchases and sales of investment securities and accruals of income and expenses are translated at the rate of exchange prevailing on the date of the transaction. For assets and liabilities other than investments in securities, net realized and unrealized gains and losses from foreign currency translation arise from changes in currency exchange rates. Each Portfolio combines fluctuations from currency exchange rates and fluctuations in value when computing net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments. Foreign exchange rates are typically valued as of the close of the New York Stock Exchange (“NYSE”), normally 4:00 P.M. Eastern time, on each day the NYSE is open for trading.

Dividends and Distributions to Shareholders. Dividends and distributions to shareholders are recorded by each Portfolio on the business day following record date. Net investment income dividends and capital gains distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America (“U.S. GAAP”). If the total dividends and distributions made in any tax year exceeds net investment income and accumulated realized capital gains, a portion of the total distribution may be treated as a tax return of capital.

Income Taxes. It is the policy of each Portfolio to distribute all of its taxable income and capital gains to its shareholders and to otherwise qualify as a regulated investment company under Subchapter M of the Internal Revenue Code. In addition, each Portfolio intends to pay distributions as required to avoid imposition of excise tax. Accordingly, no provision has been made for Federal income taxes. The Portfolios file income tax returns in U.S. federal and applicable state jurisdictions. The Portfolios’ tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax returns. Management of the Trust periodically reviews all tax positions to assess whether it is more likely than not that the position would be sustained upon examination by the relevant tax authority based on the technical merits of each position. As of the date of these financial statements, management believes that no liability for unrecognized tax positions is required.

 

36   ANNUAL REPORT   2021  
     

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Segregation and Collateralization. In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”), the Dodd Frank Wall Street Reform and Consumer Protection Act, or the interpretive rules and regulations of the U.S. Commodities Futures Trading Commission require that a Portfolio either deliver collateral or segregate assets in connection with certain investments (e.g., dollar rolls, financial futures contracts, foreign currency exchange contracts, options written, securities with extended settlement periods, and swaps), the Portfolio will segregate collateral or designate on its books and records, cash or other liquid securities having a value at least equal to the amount that is required to be physically segregated for the benefit of the counterparty. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, each party has requirements to deliver/deposit cash or securities as collateral for certain investments. Certain countries require that cash reserves be held while investing in companies incorporated in that country. These cash reserves and cash collateral that has been pledged to cover obligations of the Portfolios under derivative contracts, if any, will be reported separately on the Statements of Assets and Liabilities as “Due from broker”. Securities collateral pledged for the same purpose, if any, is noted on the Schedule of Investments.

Concentration of Market and Credit Risk. Because each Pathfinder Portfolio and Managed Volatility Portfolio invests substantially all of its assets in Delaware Ivy Variable Insurance Portfolios mutual funds (“Underlying Funds”), the risks associated with investing in the Portfolios are closely related to the risks associated with the securities and other investments held by the Underlying Funds.

In the normal course of business, Government Money Market and the Underlying Funds may invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by Government Money Market and the Underlying Funds may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Underlying Funds; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, Government Money Market and the Underlying Funds may be exposed to counterparty credit risk, or the risk that an entity with which Government Money Market or the Underlying Funds have unsettled or open transactions may fail to or be unable to perform on its commitments. Government Money Market and the Underlying Funds manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Underlying Funds to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties.

Certain Underlying Funds may hold high-yield or non-investment-grade bonds, that may be subject to a greater degree of credit risk. Credit risk relates to the ability of the issuer to meet interest or principal payments or both as they become due. The Underlying Funds may acquire securities in default and are not obligated to dispose of securities whose issuers subsequently default.

Certain Underlying Funds may enter into financial instrument transactions (such as swaps, futures, options and other derivatives) that may have off-balance sheet market risk. Off-balance sheet market risk exists when the maximum potential loss on a particular financial instrument is greater than the value of such financial instrument.

If an Underlying Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in financial derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Underlying Funds, or, in the case of hedging positions, that the Underlying Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad.

There is a risk that changes related to the use of the London Interbank Offered Rate (“LIBOR”) or similar interbank offered rates (“IBORs,” such as the Euro Overnight Index Average (“EONIA”)) could have adverse impacts on financial instruments that reference LIBOR or a similar rate. While some instruments may contemplate a scenario where LIBOR or a similar rate is no longer available by providing for an alternative rate setting methodology, not all instruments have such fallback provisions and the effectiveness of replacement rates is uncertain. The abandonment of LIBOR and similar rates could affect the value and liquidity of instruments that reference such rates, especially those that do not have fallback provisions. The use of alternative reference rate products may impact investment strategy performance.

The global outbreak of COVID-19 (commonly referred to as “coronavirus”) has disrupted economic markets and resulted in travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, prolonged quarantines, cancellations, supply chain disruptions, and lower consumer demand, as well as general concern and uncertainty. The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global

 

     
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economy, individual issuers and capital markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.

Custodian Fees. “Custodian fees” on the Statements of Operations may include interest expense incurred by a Portfolio on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. A Portfolio pays interest to its custodian on such cash overdrafts, to the extent they are not offset by positive cash balances maintained by that Portfolio. The “Earnings credit” line item, if shown, represents earnings on cash balances maintained by that Portfolio during the period. Such interest expense and other custodian fees may be paid with these earnings.

Indemnification. The Trust’s organizational documents provide current and former Trustees and Officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Trust. In the normal course of business, the Trust may also enter into contracts that provide general indemnification. The Trust’s maximum exposure under these arrangements is unknown and is dependent on future claims that may be made against the Trust. The risk of material loss from such claims is considered remote.

Basis of Preparation. Each Portfolio is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 (“ASC 946”). The accompanying financial statements were prepared in accordance with U.S. GAAP, including but not limited to ASC 946. U.S. GAAP requires the use of estimates made by management. Management believes that estimates and valuations are appropriate; however, actual results may differ from those estimates, and the valuations reflected in the accompanying financial statements may differ from the value ultimately realized upon sale or maturity.

Subsequent Events. Management has determined that no material events or transactions occurred subsequent to December 31, 2021, that would require recognition or disclosure in the Portfolios’ financial statements.

 

3.   INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investments in affiliated mutual funds within the Delaware Ivy Variable Insurance Portfolios family are valued at their Net Asset Value (“NAV”) as reported by the Underlying Funds. Investments in Government Money Market are valued on the basis of amortized cost in accordance with rule 2a-7 (which approximates value), whereby a portfolio security is valued at its cost initially, and thereafter valued to reflect a constant amortization to maturity of any discount or premium. Short-term securities with maturities of 60 days or less held in all Portfolios (with the exception of Government Money Market) are valued based on quotes that are obtained from an independent pricing service approved by the Board.

Fair value is defined as the price that each Portfolio would receive upon selling an asset or would pay upon satisfying a liability in an orderly transaction between market participants at the measurement date. For purposes of calculating the NAV, the portfolio securities are valued on each business day using pricing and valuation methods as adopted by the Board. Where market quotes are readily available, fair value is generally determined on the basis of the last reported sales price, or if no sales are reported, based on quotes obtained from a quotation reporting system, established market makers, or pricing services.

Accounting standards establish a framework for measuring fair value and a three-level hierarchy for fair value measurements 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 factors that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

An individual investment’s fair value measurement is assigned a level based upon the observability of the inputs which are significant to the overall valuation.

The three-tier hierarchy of inputs is summarized as follows:

 

•  

Level 1 – Observable inputs such as quoted prices, available in active markets, for identical assets or liabilities.

 

•  

Level 2 – Significant other observable inputs, which may include, but are 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.

 

•  

Level 3 – Significant unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available, which may include assumptions made by the Board or persons acting at its direction that are used in determining the fair value of investments.

 

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A description of the valuation techniques applied to the Portfolios’ major classes of assets and liabilities measured at fair value on a recurring basis follows:

Derivative Instruments. Exchange-traded futures contracts are generally valued at the settlement price.

Listed derivatives that are actively traded are valued based on quoted prices from the exchange and are categorized in Level 1 of the fair value hierarchy. OTC derivative contracts include forward foreign currency contracts, swap agreements, and option contracts related to interest rates, foreign currencies, credit standing of reference entities, equity prices, or commodity prices. Depending on the product and the terms of the transaction, the fair value of the OTC derivative products are modeled taking into account the counterparties’ creditworthiness and using a series of techniques, including simulation models. Many pricing models do not entail material subjectivity because the methodologies employed do not necessitate significant judgments and the pricing inputs are observed from actively quoted markets, as is the case with interest rate swap and option contracts. OTC derivative products valued using pricing models with significant observable inputs are categorized within Level 2 of the fair value hierarchy.

 

4.   DERIVATIVE INSTRUMENTS ($ amounts in thousands unless indicated otherwise)

The following disclosures contain information on why and how the Portfolios use derivative instruments, the associated risks of investing in derivative instruments, and how derivative instruments affect the Portfolios’ financial positions and results of operations.

Futures Contracts. Each Managed Volatility Portfolio is authorized to engage in buying and selling futures contracts. Upon entering into a futures contract, a Portfolio is required to deposit, in a segregated account, an amount equal to a varying specified percentage of the contract amount. This amount is known as the initial margin. Subsequent amounts, known as variation margin, are paid or received by the Portfolio each day, dependent on the daily fluctuations in the value of the underlying debt security or index. Options on futures contracts may also be purchased or sold by a Portfolio.

Futures contracts are reported on a schedule following the Schedule of Investments. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are identified on the Schedule of Investments. Cash held by the broker to cover initial margin requirements on open futures contracts and the receivable and/or payable for the daily mark to market for the variation margin are noted on the Statements of Assets and Liabilities. The net change in unrealized appreciation (depreciation) is reported on the Statements of Operations. Realized gains (losses) are reported on the Statements of Operations at the closing or expiration of futures contracts.

Risks of entering into futures contracts include the possibility of loss of securities or cash held as collateral, that there may be an illiquid market where the Portfolio is unable to close the contract or enter into an offsetting position and, if used for hedging purposes, the risk that the price of the contract will correlate imperfectly with the prices of the Portfolio’s securities.

Pathfinder Moderate – Managed Volatility, Pathfinder Moderately Aggressive – Managed Volatility and Pathfinder Moderately Conservative – Managed Volatility invest in long and/or short positions in futures contracts to gain exposure to, or economically hedge against, changes in the value of equity securities (equity risk).

Additional Disclosure Related to Derivative Instruments

Fair values of derivative instruments as of December 31, 2021:

 

       

Assets

          

Liabilities

  
Portfolio   Type of Risk
Exposure		   Statements of Assets & Liabilities
Location		   Value            Statements of Assets & Liabilities
Location		   Value  
Pathfinder Moderate – Managed Volatility   Equity   Unrealized appreciation on futures contracts*   $ 16             Unrealized depreciation on futures contracts*   $ 492  
Pathfinder Moderately Aggressive – Managed Volatility   Equity   Unrealized appreciation on futures contracts*     2             Unrealized depreciation on futures contracts*     90  
Pathfinder Moderately Conservative – Managed Volatility   Equity   Unrealized appreciation on futures contracts*     1             Unrealized depreciation on futures contracts*     40  

* The value presented includes cumulative gain (loss) on open futures contracts; however, the value reflected on the accompanying Statements of Assets and Liabilities is only the unsettled variation margin receivable (payable) as of December 31, 2021.

 

     
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Amount of realized gain (loss) on derivatives recognized on the Statements of Operations for the year ended December 31, 2021:

 

         Net realized gain (loss) on:         
Portfolio   Type of Risk
Exposure		    Investments in
unaffiliated
securities*		      Swap
agreements		      Futures
contracts		      Written
options		      Forward
foreign
currency
contracts		      Total  
Pathfinder Moderate – Managed Volatility   Equity    $   —      $   —      $ (6,544 )     $   —      $   —      $ (6,544 ) 
Pathfinder Moderately Aggressive –
Managed Volatility		   Equity      —        —        (768 )       —        —        (768 ) 
Pathfinder Moderately Conservative –
Managed Volatility		   Equity      —        —        (821 )       —        —        (821 ) 

* Purchased options are reported as investments in unaffiliated securities and are reflected on the accompanying Schedule of Investments.

Change in unrealized appreciation (depreciation) on derivatives recognized on the Statements of Operations for the year ended December 31, 2021:

 

         Net change in unrealized appreciation (depreciation) on:         
Portfolio   Type of Risk
Exposure		    Investments in
unaffiliated
securities*		      Swap
agreements		      Futures
contracts		      Written
options		      Forward
foreign
currency
contracts		      Total  
Pathfinder Moderate – Managed Volatility   Equity    $   —      $   —      $ 192      $   —      $   —      $ 192  
Pathfinder Moderately Aggressive – Managed Volatility   Equity      —        —        (10 )       —        —        (10 ) 
Pathfinder Moderately Conservative – Managed Volatility   Equity      —        —        44        —        —        44  

* Purchased options are reported as investments in unaffiliated securities and are reflected on the accompanying Schedule of Investments.

During the year ended December 31, 2021, the average derivative volume was as follows:

 

Portfolio   Forward foreign
currency contracts(1)		   Long futures
contracts(2)		   Short futures
contracts(2)		   Swap
agreements(3)		   Purchased
options(2) 		  Written
options(2)

Pathfinder Moderate – Managed Volatility

     $   —     $ 479     $ 15,730     $   —     $   —     $   —

Pathfinder Moderately Aggressive – Managed Volatility

       —       83       1,905       —       —       —

Pathfinder Moderately Conservative – Managed Volatility

       —       50       1,953       —       —       —

 

(1)

Average absolute value of unrealized appreciation/depreciation during the period.

(2)

Average value outstanding during the period.

(3)

Average notional amount outstanding during the period.

 

5.   INVESTMENT MANAGEMENT AND PAYMENTS TO AFFILIATED PERSONS ($ amounts in thousands unless indicated otherwise)

Management Fees. IICO served as each Portfolio’s investment adviser through April 30, 2021. Effective April 30, 2021, DMC serves as each Portfolio’s investment adviser. The management fee is accrued daily by Government Money Market at the following annual rates as a percentage of average daily net assets:

 

Portfolio (M – Millions)    $0 to
$1,000M		     Over
$1,000M		  

Government Money Market

      0.350 %      0.300 % 

Each Managed Volatility Portfolio pays a management fee to DMC for providing investment advice and supervising its investments at the following annual rates as a percentage of average daily net assets:

 

Portfolio (M – Millions)    $0 to
$500M		     $500 to
$1,000M		     Over
$1,000M		  

Pathfinder Moderate – Managed Volatility

      0.200 %      0.170 %      0.150 % 

Pathfinder Moderately Aggressive – Managed Volatility

      0.200       0.170       0.150  

Pathfinder Moderately Conservative – Managed Volatility

      0.200       0.170       0.150  

 

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DMC uses all of the management fee it receives from the Managed Volatility Portfolios to pay Securian Asset Management Inc. (“Securian”). Accordingly, Securian receives a fee based on the average daily net assets of the Managed Volatility Portfolios.

The Pathfinder Portfolios pay no management fees; however, DMC receives management fees from the underlying funds.

DMC has entered into Subadvisory Agreements with the following entity on behalf of certain Portfolios:

Securian serves as subadvisor to the Managed Volatility Portfolios. The subadvisor makes investment decisions in accordance with the Portfolio’s investment objectives, policies and restrictions under the supervision of DMC and the Board of Trustees. DMC pays all applicable costs of the subadvisor.

Independent Trustees and Chief Compliance Officer Fees. Through April 30, 2021, fees paid to the Independent Trustees could be paid in cash or deferred to a later date, at the election of the Trustees according to the Deferred Fee Agreement entered into between the Trust and the Trustee(s). Each Portfolio recorded its portion of the deferred fees as a liability on the Statement of Assets and Liabilities. All fees paid in cash plus any appreciation (depreciation) in the underlying deferred plan are shown on the Statement of Operations. Additionally, fees paid to the Chief Compliance Officer of the Portfolios are shown on the Statement of Operations.

Accounting Services Fees. The Trust has an Accounting and Administrative Services Agreement with Waddell & Reed Services Company (“WRSCO”), doing business as WI Services Company (“WISC”). Under the agreement, WISC acts as the agent in providing bookkeeping and accounting services and assistance to the Trust, including maintenance of Portfolio records, pricing of Portfolio shares and preparation of certain shareholder reports. For these services Government Money Market pays WISC a monthly fee of one-twelfth of the annual fee based on the average net asset levels shown in the following table:

 

(M – Millions)    $0 to
$10M		      $10 to
$25M		      $25 to
$50M		      $50 to
$100M		      $100 to
$200M		      $200 to
$350M		      $350 to
$550M		      $550 to
$750M		      $750 to
$1,000M		      Over
$1,000M		  

Annual Fee Rate

    $ 0.00      $ 11.50      $ 23.10      $ 35.50      $ 48.40      $ 63.20      $ 82.50      $ 96.30      $ 121.60      $ 148.50  

Under the Accounting Services Agreement, each Pathfinder Portfolio and Managed Volatility Portfolio pays WISC a monthly fee of one-twelfth of the annual fee shown in the following table:

 

(M – Millions)    $0 to
$10M		      $10 to
$25M		      $25 to
$50M		      $50 to
$100M		      $100 to
$200M		      $200 to
$350M		      $350 to
$550M		      $550 to
$750M		      $750 to
$1,000M		      Over
$1,000M		  

Annual Fee Rate

    $ 0.00      $ 5.75      $ 11.55      $ 17.75      $ 24.20      $ 31.60      $ 41.25      $ 48.15      $ 60.80      $ 74.25  

Each Portfolio also pays WISC a monthly administrative fee at the annual rate of 0.01%, or one basis point, for the first $1 billion of net assets with no fee charged for net assets in excess of $1 billion. This fee is voluntarily waived by WISC until a Portfolio’s net assets are at least $10 million and is included in “Accounting services fee” on the Statements of Operations.

Shareholder Servicing. Under the Transfer Agency Agreement between the Trust and WISC, each Portfolio reimburses WISC for certain out-of-pocket costs.

Expense Reimbursements and/or Waivers. DMC, the Portfolios’ investment manager, has determined to voluntarily waive and/or reimburse sufficient expenses of Government Money Market to the extent necessary to maintain a yield of not less than zero. There is no guarantee that Class II of Government Money Market will maintain such a yield. DMC may amend or terminate this voluntary waiver and/or reimbursement at any time without prior notice to shareholders. Government Money Market class expense limitations and related waivers/reimbursements for the year ended December 31, 2021 were as follows:

 

Portfolio Name    Share
Class Name		      Type of
Expense
Limit		      Commencement
Date		      End Date      Expense Limit    Amount of
Expense Waiver/
Reimbursement		    Expense
Reduced

Government Money Market

      Class II        Voluntary        N/A        N/A      To maintain
minimum yield		    $262    Investment
Management
Fees and/or
Shareholder
Servicing

Any amounts due to the Portfolios as a reimbursement but not paid as of December 31, 2021 are shown as a receivable from affiliates on the Statements of Assets and Liabilities.

 

     
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6.   INTERFUND LENDING PROGRAM

Pursuant to an exemptive order issued by the SEC (“Order”), the Delaware Ivy Funds, Delaware Ivy Variable Insurance Portfolios and InvestEd Portfolios (collectively, the “Funds” only for purposes of this footnote 6) have the ability to lend money to, and borrow money from, each other pursuant to a master interfund lending agreement (“Interfund Lending Program”). Under the Interfund Lending Program, the Funds may lend or borrow money for temporary purposes directly to or from one another (each an “Interfund Loan”), subject to meeting the conditions of the Order. The interest rate to be charged on an Interfund Loan is the average of the overnight repurchase agreement rate and the short-term bank loan rate. The Funds have not utilized the Interfund Lending Program from the period January 1, 2021 to December 31, 2021. Additionally, no interfund loans are outstanding as of December 31, 2021.

 

7.   AFFILIATED COMPANY TRANSACTIONS (All amounts in thousands)

A summary of the transactions in affiliated companies during the year ended December 31, 2021 follows:

 

     12-31-20
Value		     Gross
Additions		     Gross
Reductions		     Realized
Gain/(Loss)		     Net Change
in Unrealized
Appreciation/
(Depreciation)		     12-31-21
Value		     Distributions
Received		     Capital Gain
Distributions		  

Pathfinder Aggressive

                

Delaware Ivy VIP Core Equity, Class II

   $ 8,944     $ 642     $ 2,294     $ 559     $ 1,328     $ 9,179     $ 47     $ 331  

Delaware Ivy VIP Corporate Bond, Class II

     6,381       1,922       658       57       (516 )      7,186       297       119  

Delaware Ivy VIP Global Equity Income, Class II

     8,957       972       1,206       216       1,046       9,985       207       —  

Delaware Ivy VIP Growth, Class II

     10,826       4,238       2,897       618       1,714       14,499       201       1,115  

Delaware Ivy VIP High Income, Class I

     165       38       18       1       (1 )      185       11       —  

Delaware Ivy VIP International Core Equity, Class II

     11,035       1,229       1,744       38       1,350       11,908       119       —  

Delaware Ivy VIP Limited-Term Bond, Class II

     3,265       828       337       3       (88 )      3,671       67       —  

Delaware Ivy VIP Mid Cap Growth, Class I

     6,809       1,608       1,553       636       (349 )      7,151       91       722  

Delaware Ivy VIP Small Cap Growth, Class I

     1,744       432       331       17       (159 )      1,703       28       186  

Delaware Ivy VIP Smid Cap Core, Class II

     852       39       609       (1 )      163       444       —       —  

Delaware Ivy VIP Value, Class II

     7,942       537       2,630       300       1,710       7,859       140       —  
 

 

 

        

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  $ 66,920         $ 2,444     $ 6,198     $ 73,770     $ 1,208     $ 2,473  
 

 

 

        

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

     12-31-20
Value		   Gross
Additions		   Gross
Reductions		   Realized
Gain/(Loss)		   Net Change
in Unrealized
Appreciation/
(Depreciation)		   12-31-21
Value		   Distributions
Received		   Capital Gain
Distributions

Pathfinder Conservative

                                

Delaware Ivy VIP Core Equity, Class II

     $ 9,317     $ 1,125     $ 4,141     $ 961     $ 818     $ 8,080     $ 45     $ 313

Delaware Ivy VIP Corporate Bond, Class II

       28,194       11,353       6,018       401       (2,424 )       31,506       1,323       531

Delaware Ivy VIP Global Equity Income, Class II

       4,994       740       1,454       239       428       4,947       110       —

Delaware Ivy VIP Growth, Class II

       11,324       5,615       5,059       828       1,532       14,240       212       1,175

Delaware Ivy VIP High Income, Class I

       1,377       294       297       17       (17 )       1,374       84       —

Delaware Ivy VIP International Core Equity, Class II

       6,156       894       1,902       124       628       5,900       63       —

Delaware Ivy VIP Limited-Term Bond, Class II

       27,299       6,144       5,481       44       (714 )       27,292       534       —

Delaware Ivy VIP Mid Cap Growth, Class I

       7,980       2,199       3,051       978       (662 )       7,444       101       807

Delaware Ivy VIP Small Cap Growth, Class I

       1,754       453       563       54       (180 )       1,518       27       178

Delaware Ivy VIP Smid Cap Core, Class II

       285       23       229       (9 )       62       132       —       —

Delaware Ivy VIP Value, Class II

       8,857       898       4,577       734       1,322       7,234       139       —

Ivy VIP Government Money Market, Class II

       3,259       108       3,367       —       —       —       — *       —
   

 

 

              

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  
    $ 110,796             $ 4,371     $ 793     $ 109,667     $ 2,638     $ 3,004
   

 

 

              

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

 

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     12-31-20
Value		   Gross
Additions		   Gross
Reductions		   Realized
Gain/(Loss)		   Net Change
in Unrealized
Appreciation/
(Depreciation)		   12-31-21
Value		   Distributions
Received		   Capital Gain
Distributions

Pathfinder Moderate

                                

Delaware Ivy VIP Core Equity, Class II

     $ 71,387     $ 3,491     $ 26,117     $ 6,338     $ 7,654     $ 62,753     $ 350     $ 2,456

Delaware Ivy VIP Corporate Bond, Class II

       111,081       40,277       21,248       1,635       (9,896 )       121,849       5,457       2,190

Delaware Ivy VIP Global Equity Income, Class II

       58,729       4,381       13,831       2,321       5,546       57,146       1,285       —

Delaware Ivy VIP Growth, Class II

       86,549       31,383       32,091       6,235       11,323       103,399       1,552       8,617

Delaware Ivy VIP High Income, Class I

       4,860       800       907       41       (34 )       4,760       293       —

Delaware Ivy VIP International Core Equity, Class II

       72,378       4,961       18,076       1,161       7,719       68,143       741       —

Delaware Ivy VIP Limited-Term Bond, Class II

       96,327       17,493       16,906       172       (2,508 )       94,578       1,872       —

Delaware Ivy VIP Mid Cap Growth, Class I

       56,948       11,463       18,541       6,649       (4,335 )       52,184       716       5,714

Delaware Ivy VIP Small Cap Growth, Class I

       13,739       2,721       3,804       266       (1,235 )       11,687       212       1,385

Delaware Ivy VIP Smid Cap Core, Class II

       5,033       161       3,841       (383 )       1,319       2,289       —       —

Delaware Ivy VIP Value, Class II

       65,081       2,049       27,996       4,093       11,409       54,636       1,058       —

Ivy VIP Government Money Market, Class II

       12,806       — *       12,806       —       —       —       — *       —
   

 

 

              

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  
    $ 654,918             $ 28,528     $ 26,962     $ 633,424     $ 13,536     $ 20,362
   

 

 

              

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  
     12-31-20
Value		   Gross
Additions		   Gross
Reductions		   Realized
Gain/(Loss)		   Net Change
in Unrealized
Appreciation/
(Depreciation)		   12-31-21
Value		   Distributions
Received		   Capital Gain
Distributions

Pathfinder Moderately Aggressive

                                

Delaware Ivy VIP Core Equity, Class II

     $ 96,797     $ 4,975     $ 34,311     $ 8,369     $ 10,833     $ 86,663     $ 486     $ 3,405

Delaware Ivy VIP Corporate Bond, Class II

       107,576       33,896       21,369       1,810       (9,562 )       112,351       5,049       2,027

Delaware Ivy VIP Global Equity Income, Class II

       89,182       7,203       20,953       3,542       8,459       87,433       1,974       —

Delaware Ivy VIP Growth, Class II

       117,250       42,422       43,764       8,283       15,342       139,533       2,102       11,672

Delaware Ivy VIP High Income, Class I

       3,936       726       783       32       (27 )       3,884       240       —

Delaware Ivy VIP International Core Equity, Class II

       109,893       8,654       27,837       970       12,575       104,255       1,138       —

Delaware Ivy VIP Limited-Term Bond, Class II

       78,021       15,935       14,862       111       (2,025 )       77,180       1,533       —

Delaware Ivy VIP Mid Cap Growth, Class I

       75,272       15,607       24,371       8,701       (5,704 )       69,505       958       7,644

Delaware Ivy VIP Small Cap Growth, Class I

       18,767       3,945       5,261       365       (1,724 )       16,092       293       1,914

Delaware Ivy VIP Smid Cap Core, Class II

       8,150       278       6,214       (612 )       2,133       3,735       —       —

Delaware Ivy VIP Value, Class II

       86,974       3,389       36,608       5,480       15,505       74,740       1,453       —

Ivy VIP Government Money Market, Class II

       5,821       6       5,827       —       —       —       — *       —
   

 

 

              

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  
    $ 797,639             $ 37,051     $ 45,805     $ 775,371     $ 15,226     $ 26,662
   

 

 

              

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

 

     
    2021       ANNUAL REPORT       43  

Table of Contents
           

 

 

 

     12-31-20
Value		   Gross
Additions		   Gross
Reductions		   Realized
Gain/(Loss)		   Net Change
in Unrealized
Appreciation/
(Depreciation)		   12-31-21
Value		   Distributions
Received		   Capital Gain
Distributions

Pathfinder Moderately Conservative

                                

Delaware Ivy VIP Core Equity, Class II

     $ 18,753     $ 1,082     $ 7,335     $ 1,763     $ 1,847     $ 16,110     $ 90     $ 630

Delaware Ivy VIP Corporate Bond, Class II

       41,631       13,823       7,758       534       (3,503 )       44,727       1,940       779

Delaware Ivy VIP Global Equity Income, Class II

       13,093       1,059       3,272       543       1,199       12,622       284       —

Delaware Ivy VIP Growth, Class II

       22,760       8,866       8,924       1,674       2,955       27,331       410       2,277

Delaware Ivy VIP High Income, Class I

       1,926       302       363       14       (10 )       1,869       115       —

Delaware Ivy VIP International Core Equity, Class II

       16,138       1,204       4,255       97       1,869       15,053       164       —

Delaware Ivy VIP Limited-Term Bond, Class II

       38,177       6,537       6,668       68       (986 )       37,128       734       —

Delaware Ivy VIP Mid Cap Growth, Class I

       15,431       3,201       5,243       1,858       (1,233 )       14,014       192       1,534

Delaware Ivy VIP Small Cap Growth, Class I

       3,574       709       1,024       49       (296 )       3,012       54       357

Delaware Ivy VIP Smid Cap Core, Class II

       998       37       771       (77 )       262       449       —       —

Delaware Ivy VIP Value, Class II

       17,409       707       7,995       1,117       2,960       14,198       275       —

Ivy VIP Government Money Market, Class II

       4,287       14       4,301       —       —       —       — *       —
   

 

 

              

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  
    $ 194,177             $ 7,640     $ 5,064     $ 186,513     $ 4,258     $ 5,577
   

 

 

              

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

 

     12-31-20
Value		   Gross
Additions		   Gross
Reductions		   Realized
Gain/(Loss)		   Net Change
in Unrealized
Appreciation/
(Depreciation)		   12-31-21
Value		   Distributions
Received		   Capital Gain
Distributions

Pathfinder Moderate – Managed Volatility

                                

Delaware Ivy VIP Core Equity, Class II

     $ 77,125     $ 4,503     $ 46,406     $ 13,079     $ 2,567     $ 50,868     $ 395     $ 2,772

Delaware Ivy VIP Corporate Bond, Class II

       120,020       41,383       53,823       2,938       (12,084 )       98,434       6,158       2,472

Delaware Ivy VIP Global Equity Income, Class II

       63,455       5,435       31,504       5,338       3,263       45,987       1,450       —

Delaware Ivy VIP Growth, Class II

       93,502       35,674       64,789       14,414       5,203       84,004       1,752       9,726

Delaware Ivy VIP High Income, Class I

       5,251       861       2,266       (4 )       3       3,845       331       —

Delaware Ivy VIP International Core Equity, Class II

       78,199       5,851       39,378       7,407       2,961       55,040       836       —

Delaware Ivy VIP Limited-Term Bond, Class II

       104,080       17,015       42,182       42       (2,649 )       76,306       2,112       —

Delaware Ivy VIP Mid Cap Growth, Class I

       61,521       13,285       35,851       13,180       (9,772 )       42,363       809       6,453

Delaware Ivy VIP Small Cap Growth, Class I

       14,839       3,169       7,763       579       (1,442 )       9,382       239       1,563

Delaware Ivy VIP Smid Cap Core, Class II

       5,437       212       4,854       (346 )       1,392       1,841       —       —

Delaware Ivy VIP Value, Class II

       70,322       2,771       46,022       9,212       7,954       44,237       1,194       —

Ivy VIP Government Money Market, Class II

       13,830       47       13,877       —       —       —       — *       —
   

 

 

              

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  
    $ 707,581             $ 65,839     $ (2,604 )     $ 512,307     $ 15,276     $ 22,986
   

 

 

              

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

 

44   ANNUAL REPORT   2021  
     

Table of Contents
           

 

 

 

     12-31-20
Value		   Gross
Additions		   Gross
Reductions		   Realized
Gain/(Loss)		   Net Change
in Unrealized
Appreciation/
(Depreciation)		   12-31-21
Value		   Distributions
Received		   Capital Gain
Distributions

Pathfinder Moderately Aggressive – Managed Volatility

                                

Delaware Ivy VIP Core Equity, Class II

     $ 11,340     $ 743     $ 3,410     $ 841     $ 1,494     $ 11,008     $ 59     $ 412

Delaware Ivy VIP Corporate Bond, Class II

       12,602       4,242       1,655       142       (1,065 )       14,266       610       245

Delaware Ivy VIP Global Equity Income, Class II

       10,448       1,011       1,803       328       1,126       11,110       239       —

Delaware Ivy VIP Growth, Class II

       13,736       5,269       4,192       844       2,062       17,719       254       1,410

Delaware Ivy VIP High Income, Class I

       461       94       62       6       (6 )       493       29       —

Delaware Ivy VIP International Core Equity, Class II

       12,875       1,228       2,471       366       1,252       13,250       138       —

Delaware Ivy VIP Limited-Term Bond, Class II

       9,140       2,048       1,154       9       (242 )       9,801       185       —

Delaware Ivy VIP Mid Cap Growth, Class I

       8,821       1,991       2,342       871       (508 )       8,833       116       924

Delaware Ivy VIP Small Cap Growth, Class I

       2,198       504       484       37       (209 )       2,046       35       231

Delaware Ivy VIP Smid Cap Core, Class II

       955       41       701       (61 )       241       475       —       —

Delaware Ivy VIP Value, Class II

       10,192       521       3,747       643       1,887       9,496       175       —

Ivy VIP Government Money Market, Class II

       675       1       676       —       —       —       — *       —
   

 

 

              

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  
    $ 93,443             $ 4,026     $ 6,032     $ 98,497     $ 1,840     $ 3,222
   

 

 

              

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  
     12-31-20
Value		   Gross
Additions		   Gross
Reductions		   Realized
Gain/(Loss)		   Net Change
in Unrealized
Appreciation/
(Depreciation)		   12-31-21
Value		   Distributions
Received		   Capital Gain
Distributions

Pathfinder Moderately Conservative – Managed Volatility

                                

Delaware Ivy VIP Core Equity, Class II

     $ 8,041     $ 751     $ 6,995     $ 1,961     $ (374 )     $ 3,384     $ 41     $ 286

Delaware Ivy VIP Corporate Bond, Class II

       17,851       6,253       13,467       441       (1,752 )       9,326       879       353

Delaware Ivy VIP Global Equity Income, Class II

       5,615       665       4,422       117       624       2,599       128       —

Delaware Ivy VIP Growth, Class II

       9,760       4,298       10,287       1,991       16       5,778       186       1,031

Delaware Ivy VIP High Income, Class I

       826       155       591       (23 )       22       389       52       —

Delaware Ivy VIP International Core Equity, Class II

       6,920       768       5,512       728       222       3,126       74       —

Delaware Ivy VIP Limited-Term Bond, Class II

       16,370       3,034       11,288       (32 )       (370 )       7,714       333       —

Delaware Ivy VIP Mid Cap Growth, Class I

       6,618       1,653       5,738       2,030       (1,617 )       2,946       87       695

Delaware Ivy VIP Small Cap Growth, Class I

       1,533       368       1,218       17       (86 )       614       25       162

Delaware Ivy VIP Smid Cap Core, Class II

       428       30       449       (32 )       115       92       —       —

Delaware Ivy VIP Value, Class II

       7,466       563       6,841       1,330       453       2,971       124       —

Ivy VIP Government Money Market, Class II

       1,835       61       1,896       —       —       —       — *       —
   

 

 

              

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  
    $ 83,263             $ 8,528     $ (2,747 )     $ 38,939     $ 1,929     $ 2,527
   

 

 

              

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

 

     
    2021       ANNUAL REPORT       45  

Table of Contents
           

 

 

 

8.   INVESTMENT SECURITIES TRANSACTIONS ($ amounts in thousands)

The cost of purchases and the proceeds from maturities and sales of investment securities (excluding short-term securities) for the year ended December 31, 2021, were as follows:

 

    Purchases      Sales  
     U.S.
Government		      Other
Issuers		      U.S.
Government		      Other
Issuers		  

Pathfinder Aggressive

   $   —      $ 12,485      $   —      $ 14,277  

Pathfinder Conservative

     —        29,846        —        36,139  

Pathfinder Moderate

     —        119,180        —        196,164  

Pathfinder Moderately Aggressive

     —        137,036        —        242,160  

Pathfinder Moderately Conservative

     —        37,541        —        57,909  

Pathfinder Moderate – Managed Volatility

     —        130,206        —        388,715  

Pathfinder Moderately Aggressive – Managed Volatility

     —        17,693        —        22,697  

Pathfinder Moderately Conservative – Managed Volatility

     —        18,599        —        68,704  

Government Money Market

     —        —        —        —  

 

9.   CAPITAL SHARE TRANSACTIONS (All amounts in thousands)

The Trust has authorized an unlimited number of no par value shares of beneficial interest. Transactions in shares of beneficial interest were as follows:

 

    Pathfinder Aggressive            Pathfinder Conservative  
    Year ended
12-31-21		     Year ended
12-31-20		            Year ended
12-31-21		     Year ended
12-31-20		  
    Shares     Value     Shares     Value            Shares     Value     Shares     Value  

Shares issued from sale of shares:

 

Class II

     219     $ 1,154       455     $ 2,017          1,423     $ 7,734       4,945     $ 24,739  

Shares issued in reinvestment of distributions to shareholders:

                   

Class II

     918       4,619       2,257       8,768          1,303       6,783       1,739       7,983  

Shares redeemed:

                   

Class II

     (1,420 )      (7,371 )      (2,118 )      (9,369 )         (3,766 )      (20,261 )      (4,826 )      (24,087 ) 
 

 

 

       

 

 

  

Net increase (decrease)

     (283 )    $ (1,598 )      594     $ 1,416          (1,040 )    $ (5,744 )      1,858     $ 8,635  
 

 

 

       

 

 

  
    Pathfinder Moderate            Pathfinder Moderately Aggressive  
    Year ended
12-31-21		     Year ended
12-31-20		            Year ended
12-31-21		     Year ended
12-31-20		  
    Shares     Value     Shares     Value            Shares     Value     Shares     Value  

Shares issued from sale of shares:

 

Class II

     335     $ 1,792       189     $ 894          880     $ 4,843       848     $ 4,022  

Shares issued in reinvestment of distributions to shareholders:

                   

Class II

     8,318       42,760       18,744       79,596          10,161       53,201       26,249       109,757  

Shares redeemed:

                   

Class II

     (21,049 )      (112,413 )      (22,309 )      (107,020 )         (27,863 )      (151,625 )      (28,732 )      (138,904 ) 
 

 

 

       

 

 

  

Net decrease

     (12,396 )    $ (67,861 )      (3,376 )    $ (26,530 )         (16,822 )    $ (93,581 )      (1,635 )    $ (25,125 ) 
 

 

 

       

 

 

  
    Pathfinder Moderately Conservative            Pathfinder Moderate – Managed Volatility  
    Year ended
12-31-21		     Year ended
12-31-20		            Year ended
12-31-21		     Year ended
12-31-20		  
    Shares     Value     Shares     Value            Shares     Value     Shares     Value  

Shares issued from sale of shares:

 

Class II

     516     $ 2,783       558     $ 2,801          2,921     $ 17,825       1,390     $ 7,539  

Shares issued in reinvestment of distributions to shareholders:

                   

Class II

     2,403       12,483       4,529       20,114          3,585       21,327       12,381       60,610  

Shares redeemed:

                   

Class II

     (6,094 )      (32,902 )      (6,674 )      (32,894 )         (49,189 )      (310,118 )      (8,561 )      (46,346 ) 
 

 

 

       

 

 

  

Net increase (decrease)

     (3,175 )    $ (17,636 )      (1,587 )    $ (9,979 )         (42,683 )    $ (270,966 )      5,210     $ 21,803  
 

 

 

       

 

 

  

 

46   ANNUAL REPORT   2021  
     

Table of Contents
           

 

 

 

    Pathfinder Moderately Aggressive –
Managed Volatility		            Pathfinder Moderately
Conservative – Managed Volatility		  
    Year ended
12-31-21		     Year ended
12-31-20		            Year ended
12-31-21		     Year ended
12-31-20		  
    Shares     Value     Shares     Value            Shares     Value     Shares     Value  

Shares issued from sale of shares:

 

Class II

     571     $ 3,343       1,089     $ 5,429          1,065     $ 6,192       1,268     $ 6,624  

Shares issued in reinvestment of distributions to shareholders:

                   

Class II

     506       2,886       2,141       9,697          567       3,230       1,234       6,043  

Shares redeemed:

 

Class II

     (2,011 )      (11,700 )      (2,203 )      (11,187 )         (10,182 )      (61,136 )      (1,716 )      (9,067 ) 
 

 

 

       

 

 

  

Net increase (decrease)

     (934 )    $ (5,471 )      1,027     $ 3,939          (8,550 )    $ (51,714 )      786     $ 3,600  
 

 

 

       

 

 

  
    Government Money Market                                 
    Year ended
12-31-21		     Year ended
12-31-20		                                 
    Shares     Value     Shares     Value                                 

Shares issued from sale of shares:

 

           

Class II

     36,424     $ 36,424       68,026     $ 68,026             

Shares issued in reinvestment of distributions to shareholders:

                   

Class II

     3       3       616       616             

Shares redeemed:

 

           

Class II

     (83,218 )      (83,218 )      (156,759 )      (156,759 )            
 

 

 

             

Net decrease

     (46,791 )    $ (46,791 )      (88,117 )    $ (88,117 )            
 

 

 

             

 

10.   OTHER FUND INFORMATION

At a meeting held on January 12, 2021, the Trustees, upon recommendation of the Audit Committee, selected PricewaterhouseCoopers LLP (“PwC”), contingent on PwC finalizing their independence assessment, to serve as the independent registered public accounting firm for the Trust for the fiscal year ending December 31, 2021. PwC affirmed their independence as an independent registered public accounting firm on February 18, 2021. During the fiscal year ended December 31, 2020, Deloitte & Touche LLP’s (“Deloitte”) audit report on the financial statements of each Portfolio in the Trust did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. In addition, there were no disagreements between the Trust and Deloitte on accounting principles, financial statements disclosures or audit scope, which, if not resolved to the satisfaction of Deloitte, would have caused them to make reference to the disagreement in their reports. Neither the Trust nor anyone on its behalf has consulted with PwC at any time prior to their selection with respect to the application of accounting principles to a specified transaction, either completed or proposed or the type of audit opinion that might be rendered on each Portfolio’s financial statements.

 

11.   FEDERAL INCOME TAX MATTERS ($ amounts in thousands)

For Federal income tax purposes, cost of investments owned at December 31, 2021 and the related unrealized appreciation (depreciation) were as follows:

 

Portfolio    Cost of
Investments		      Gross
Appreciation		      Gross
Depreciation		      Net
Unrealized
Appreciation		  

Pathfinder Aggressive

    $ 66,656      $ 8,518      $ 1,195      $ 7,323  

Pathfinder Conservative

      105,052        7,062        2,137        4,925  

Pathfinder Moderate

      586,007        62,306        13,641        48,665  

Pathfinder Moderately Aggressive

      707,027        85,007        15,461        69,546  

Pathfinder Moderately Conservative

      175,700        15,565        3,775        11,790  

Pathfinder Moderate — Managed Volatility

      498,307        47,405        17,549        29,856  

Pathfinder Moderately Aggressive — Managed Volatility

      93,406        10,367        2,261        8,106  

Pathfinder Moderately Conservative — Managed Volatility

      39,211        2,384        1,597        787  

Government Money Market

      48,862        —        —        —  

 

     
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For Federal income tax purposes, the Portfolios’ undistributed earnings and profit for the year ended December 31, 2021 and the post-October and late-year ordinary activity updated with information available through the date of this report were as follows:

 

Portfolio   Undistributed
Ordinary
Income		      Undistributed
Long-Term
Capital Gains		      Tax Return
of Capital		      Post-
October
Capital
Losses
Deferred		      Late-
Year
Ordinary
Losses
Deferred		  

Pathfinder Aggressive

   $ 1,492      $ 4,571      $ —      $ —      $ —  

Pathfinder Conservative

     3,005        6,883        —        —        —  

Pathfinder Moderate

     14,564        47,460        —        —        —  

Pathfinder Moderately Aggressive

     16,465        61,951        —        —        —  

Pathfinder Moderately Conservative

     4,457        12,866        —        —        —  

Pathfinder Moderate — Managed Volatility

     15,026        80,668        —        —        —  

Pathfinder Moderately Aggressive — Managed Volatility

     1,609        6,427        —        —        —  

Pathfinder Moderately Conservative — Managed Volatility

     2,162        9,817        —        —        —  

Government Money Market

     3        —        —        —        —  

Internal Revenue Code regulations permit each Portfolio to elect to defer into its next fiscal year capital losses and certain specified ordinary items incurred between each November 1 and the end of its fiscal year. Each Portfolio is also permitted to defer into its next fiscal certain ordinary losses that are generated between January 1 and the end of its fiscal year.

The tax character of dividends and distributions paid during the two fiscal years ended December 31, 2021 and 2020 were as follows:

 

     December 31, 2021             December 31, 2020  
Portfolio    Distributed
Ordinary
Income(1)		      Distributed
Long-Term
Capital Gains		              Distributed
Ordinary
Income(1)		      Distributed
Long-Term
Capital Gains		  

Pathfinder Aggressive

    $ 1,597      $ 3,022         $ 1,191      $ 7,578  

Pathfinder Conservative

      3,023        3,760           2,101        5,882  

Pathfinder Moderate

      16,715        26,046           14,439        65,157  

Pathfinder Moderately Aggressive

      20,766        32,434           17,246        92,511  

Pathfinder Moderately Conservative

      5,195        7,288           4,264        15,850  

Pathfinder Moderate — Managed Volatility

      12,123        9,204           9,296        51,313  

Pathfinder Moderately Aggressive — Managed Volatility

      1,487        1,399           1,202        8,495  

Pathfinder Moderately Conservative — Managed Volatility

      1,532        1,698           1,133        4,910  

Government Money Market

      3        —           623        —  

 

(1)

Includes short-term capital gains distributed, if any.

Dividends from net investment income and short-term capital gains are treated as ordinary income dividends for federal income tax purposes.

Net investment income dividends and capital gains distributions are determined in accordance with income tax regulations which may differ from U.S. GAAP. These differences are due to differing treatments for items such as deferral of wash sales, post-October losses, late-year ordinary losses, foreign currency transactions, net operating losses, income from passive foreign investment companies (PFICs) and partnership transactions.

 

48   ANNUAL REPORT   2021  
     

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   IVY VIP

 

 

 

To the Board of Trustees of Ivy Variable Insurance Portfolios and Shareholders of Delaware Ivy VIP Pathfinder Aggressive, Delaware Ivy VIP Pathfinder Conservative, Delaware Ivy VIP Pathfinder Moderate, Delaware Ivy VIP Pathfinder Moderately Aggressive, Delaware Ivy VIP Pathfinder Moderately Conservative, Delaware Ivy VIP Pathfinder Moderate — Managed Volatility, Delaware Ivy VIP Pathfinder Moderately Aggressive — Managed Volatility, Delaware Ivy VIP Pathfinder Moderately Conservative — Managed Volatility and Delaware Ivy VIP Government Money Market

Opinions on the Financial Statements

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Delaware Ivy VIP Pathfinder Aggressive, Delaware Ivy VIP Pathfinder Conservative, Delaware Ivy VIP Pathfinder Moderate, Delaware Ivy VIP Pathfinder Moderately Aggressive, Delaware Ivy VIP Pathfinder Moderately Conservative, Delaware Ivy VIP Pathfinder Moderate — Managed Volatility, Delaware Ivy VIP Pathfinder Moderately Aggressive — Managed Volatility, Delaware Ivy VIP Pathfinder Moderately Conservative — Managed Volatility and Delaware Ivy VIP Government Money

Market (formerly known as Ivy VIP Pathfinder Aggressive, Ivy VIP Pathfinder Conservative, Ivy VIP Pathfinder Moderate, Ivy VIP Pathfinder Moderately Aggressive, Ivy VIP Pathfinder Moderately Conservative, Ivy VIP Pathfinder Moderate — Managed Volatility, Ivy VIP Pathfinder Moderately Aggressive — Managed Volatility, Ivy VIP Pathfinder Moderately Conservative — Managed Volatility, and Ivy VIP Government Money Market, respectively) (nine of the series constituting Ivy Variable Insurance Portfolios, hereafter collectively referred to as the “Portfolios”) as of December 31, 2021, and the related statements of operations and of changes in net assets, including the related notes, and the financial highlights for the year ended December 31, 2021 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Portfolios as of December 31, 2021, and the results of each of their operations, changes in each of their net assets, and each of the financial highlights for the year ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

The financial statements of the Portfolios as of and for the year ended December 31, 2020 and the financial highlights for each of the periods ended on or prior to December 31, 2020 (not presented herein, other than the statements of changes in net assets and the financial highlights) were audited by other auditors whose report dated February 12, 2021 expressed an unqualified opinion on those financial statements and financial highlights.

Basis for Opinions

These financial statements are the responsibility of the Portfolios’ management. Our responsibility is to express an opinion on the Portfolios’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Portfolios in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian and transfer agents. We believe that our audits provide a reasonable basis for our opinions.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 17, 2022

We have served as the auditor of one or more investment companies in Delaware Funds by Macquarie® since 2010.

 

     
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INCOME TAX INFORMATION   IVY VIP

 

 

 

AMOUNTS NOT ROUNDED (UNAUDITED)

 

The Portfolios hereby designate the following amounts of dividends paid from net ordinary income as dividends qualifying for the 70% dividends received deduction and Section 163(j) interest dividends eligible to be treated as interest income for purposes of Section 163(j) for corporations for the tax period ended December 31, 2021:

 

     Dividends
Received
Deduction for
Corporations		     Section 163(j)
Interest
Dividends for
Corporations		  

Pathfinder Aggressive

   $ 477,090     $ —  

Pathfinder Conservative

     454,529       —  

Pathfinder Moderate

     3,908,192       —  

Pathfinder Moderately Aggressive

     5,294,874       —  

Pathfinder Moderately Conservative

     1,030,241       —  

Pathfinder Moderate — Managed Volatility

     4,069,192       —  

Pathfinder Moderately Aggressive — Managed Volatility

     595,277       —  

Pathfinder Moderately Conservative — Managed Volatility

     420,976       —  

Government Money Market

     —       2,686  

The Portfolio hereby designate the following amounts as distributions of long-term capital gains:

 

Pathfinder Aggressive

    $ 3,021,972  

Pathfinder Conservative

      3,760,172  

Pathfinder Moderate

      26,045,525  

Pathfinder Moderately Aggressive

      32,434,315  

Pathfinder Moderately Conservative

      7,287,721  

Pathfinder Moderate — Managed Volatility

      9,203,657  

Pathfinder Moderately Aggressive — Managed Volatility

      1,398,938  

Pathfinder Moderately Conservative — Managed Volatility

      1,698,210  

Government Money Market

      —  

Internal Revenue Code regulations permit each qualifying Portfolio to elect to pass through a foreign tax credit to shareholders with respect to foreign taxes paid by the Portfolio. Each Portfolio elected to pass the following amounts of creditable foreign taxes through to their shareholders:

 

      Foreign
Tax
Credit		      Foreign
Derived
Income		  

Pathfinder Aggressive

    $ 27,702      $ 247,453  

Pathfinder Conservative

      14,729        131,565  

Pathfinder Moderate

      172,027        1,536,656  

Pathfinder Moderately Aggressive

      264,209        2,360,088  

Pathfinder Moderately Conservative

      37,971        339,181  

Pathfinder Moderate — Managed Volatility

      194,127        1,734,070  

Pathfinder Moderately Aggressive — Managed Volatility

      31,925        285,173  

Pathfinder Moderately Conservative — Managed Volatility

      17,199        153,632  
 

 

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BOARD OF TRUSTEES / DIRECTORS AND OFFICERS ADDENDUM   IVY VIP

 

 

 

(UNAUDITED)

 

Interested Trustee

 

Name, Address, and
Birth Date		   Position(s)
Held with
the Fund		   Length of Time
Served		   Principal Occupation(s)
During the Past Five Years		   Number of
Portfolios in
Fund Complex
Overseen
by Trustee
or Officer		   Other Directorships Held by
Trustee or Officer

Shawn K. Lytle1
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

February 1970

   President, Chief Executive Officer, and Trustee  

President and Chief Executive Officer since August 2015

 

Trustee since September 2015

   Global Head of Macquarie Investment Management2 (January 2019-Present); Head of Americas of Macquarie Group (December 2017-Present); Deputy Global Head of Macquarie Investment Management (2017-2019); Head of Macquarie Investment Management Americas (2015-2017)   150   Trustee — UBS Relationship Funds, SMA Relationship Trust, and UBS Funds (May 2010-April 2015)
Independent Trustees

Jerome D. Abernathy3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

July 1959

   Trustee   Since January 2019   Managing Member, Stonebrook Capital Management, LLC (financial technology: macro factors and databases) (January 1993-Present)   150   None

Thomas L. Bennett3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

October 1947

   Chair and Trustee  

Trustee since March 2005

 

Chair since March 2015

   Private Investor (March 2004-Present)   150   None

Ann D. Borowiec3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

November 1958

   Trustee   Since March 2015   Chief Executive Officer, Private Wealth Management (2011-2013) and Market Manager, New Jersey Private Bank (2005-2011) — J.P. Morgan Chase & Co.   150  

Director — Banco Santander International (October 2016-December 2019)

Director — Santander Bank, N.A. (December 2016-December 2019)

Joseph W. Chow3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

January 1953

   Trustee   Since January 2013   Private Investor (April 2011-Present)   150   Director and Audit Committee Member — Hercules Technology Growth Capital, Inc. (July 2004-July 2014)

H. Jeffrey Dobbs
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

May 1955

   Trustee   Since April 2019   Global Sector Chairman, Industrial Manufacturing, KPMG LLP (2010-2015)   150  

Director, Valparaiso University (2012-Present)

 

Director, TechAccel LLC (2015-Present) (Tech R&D)

 

Board Member, Kansas City Repertory Theatre (2015-Present)

 

Board Member, PatientsVoices, Inc. (healthcare) (2018-Present)

 

Kansas City Campus for Animal Care (2018-Present)

 

Director, National Association of Manufacturers (2010-2015)

 

Director, The Children’s Center (2003-2015)

 

Director, Metropolitan Affairs Coalition (2003-2015)

 

Director, Michigan Roundtable for Diversity and Inclusion (2003-2015)

 

Trustee, Ivy Funds Complex (2019-2021)

 

     
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Name, Address, and
Birth Date		   Position(s)
Held with
the Fund		   Length of Time
Served		   Principal Occupation(s)
During the Past Five Years		   Number of
Portfolios in
Fund Complex
Overseen
by Trustee
or Officer		   Other Directorships Held by
Trustee or Officer

John A. Fry3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

May 1960

   Trustee   Since January 2001  

President — Drexel University (August 2010-Present)

 

President — Franklin & Marshall College (July 2002-June 2010)

   150  

Director; Compensation Committee and Governance Committee Member — Community Health Systems (May 2004-Present)

 

Director — Drexel Morgan & Co. (2015- 2019)

 

Director and Audit Committee Member — vTv Therapeutics Inc. (2017-Present)

 

Director and Audit Committee Member — FS Credit Real Estate Income Trust, Inc. (2018-Present)

 

Director — Federal Reserve Bank of Philadelphia (January 2020-Present)

Joseph Harroz, Jr.
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

January 1967

   Trustee   Since November 1998   President (2020-Present), Interim President (2019-2020), Vice President (2010-2019) and Dean (2010-2019), College of Law, University of Oklahoma; Managing Member, Harroz Investments, LLC, (commercial enterprises) (1998-2019); Managing Member, St. Clair, LLC (commercial enterprises) (2019-Present)   150  

Director, OU Medicine, Inc. (2020-present); Director and Shareholder, Valliance Bank (2007-Present)

 

Director, Foundation Healthcare (formerly Graymark HealthCare) (2008-2017)

 

Trustee, the Mewbourne Family Support Organization (2006-Present) (non-profit)

 

Independent Director, LSQ Manager, Inc. (real estate) (2007-2016)

 

Director, Oklahoma Foundation for Excellence (non-profit) (2008-Present)

 

Trustee, Ivy Funds Complex (1998-2021)

 

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Name, Address, and
Birth Date		   Position(s)
Held with
the Fund		   Length of Time
Served		   Principal Occupation(s)
During the Past Five Years		   Number of
Portfolios in
Fund Complex
Overseen
by Trustee
or Officer		   Other Directorships Held by
Trustee or Officer

Sandra A.J. Lawrence
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

September 1957

   Trustee   Since April 2019   Chief Administrative Officer, Children’s Mercy Hospitals and Clinics (2016-2019); CFO, Children’s Mercy Hospitals and Clinics (2005-2016)   150  

Director, Hall Family Foundation (1993-Present)

 

Director, Westar Energy (utility) (2004-2018)

 

Trustee, Nelson-Atkins Museum of Art (non-profit) (2021-Present) (2007-2020)

 

Director, Turn the Page KC (non-profit) (2012-2016)

 

Director, Kansas Metropolitan Business and Healthcare Coalition (non-profit) (2017-2019)

 

Director, National Association of Corporate Directors (non-profit) National Board (2022-Present); Regional Board (2017-2021)

 

Director, American Shared Hospital Services (medical device) (2017-2021)

 

Director, Evergy, Inc., Kansas City Power & Light Company, KCP&L Greater Missouri Operations Company, Westar Energy, Inc. and Kansas Gas and Electric Company (related utility companies) (2018-Present)

 

Director, Stowers (research) (2018)

Co-Chair, Women Corporate Directors (director education) (2018-2020)

Trustee, Ivy Funds Complex (2019-2021)

 

Director, Brixmor Property Group Inc. (2021-Present)

 

Director, Sera Prognostics Inc. (biotechnology) (2021-Present)

 

Director, Recology (resource recovery) (2021-Present)

Frances A. Sevilla-Sacasa3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

January 1956

   Trustee   Since September 2011  

Private Investor (January 2017-Present)

 

Chief Executive Officer — Banco Itaú International (April 2012-December 2016)

 

Executive Advisor to Dean (August 2011-March 2012) and Interim Dean (January 2011-July 2011) — University of Miami School of Business Administration

 

President — U.S. Trust, Bank of America Private Wealth Management (Private Banking) (July 2007-December 2008)

   150  

Trust Manager and Audit Committee Chair — Camden Property Trust (August 2011-Present)

 

Director; Audit & Compensation Committee Member — Callon Petroleum Company (December 2019-Present)

 

Director; Audit Committee Member — New Senior Investment Group Inc. (January 2021-September 2021)

 

Director; Audit Committee Member — Carrizo Oil & Gas, Inc. (March 2018- December 2019)

Thomas K. Whitford3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

March 1956

   Trustee   Since January 2013   Vice Chairman (2010-April 2013) — PNC Financial Services Group   150  

Director — HSBC North America Holdings Inc. (December 2013-Present)

 

Director — HSBC USA Inc. (July 2014-Present)

 

Director — HSBC Bank USA, National Association (July 2014-March 2017)

 

Director — HSBC Finance Corporation (December 2013-April 2018)

 

     
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Name, Address, and
Birth Date		   Position(s)
Held with
the Fund		   Length of Time
Served		   Principal Occupation(s)
During the Past Five Years		   Number of
Portfolios in
Fund Complex
Overseen
by Trustee
or Officer		   Other Directorships Held by
Trustee or Officer

Christianna Wood3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

August 1959

   Trustee   Since January 2019   Chief Executive Officer and President — Gore Creek Capital, Ltd. (August 2009-Present)   150  

Director; Finance Committee and Audit Committee Member — H&R Block Corporation (July 2008-Present)

 

Director; Investments Committee, Capital and Finance Committee and Audit Committee Member — Grange Insurance (2013-Present)

 

Trustee; Chair of Nominating and Governance Committee and Member of Audit Committee — The Merger Fund (2013-October 2021), The Merger Fund VL (2013-October 2021), WCM Alternatives: Event-Driven Fund (2013-October 2021), and WCM Alternatives: Credit Event Fund (December 2017-October 2021)

 

Director; Chair of Governance Committee and Audit Committee Member — International Securities Exchange (2010-2016)

Janet L. Yeomans3
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

July 1948

   Trustee   Since April 1999   Vice President and Treasurer (January 2006-July 2012) Vice President — Mergers & Acquisitions (January 2003-January 2006), and Vice President and Treasurer (July 1995-January 2003) — 3M Company   150   Director; Personnel and Compensation Committee Chair; Member of Nominating, Investments, and Audit Committees for various periods throughout directorship — Okabena Company (2009-2017)

Officers

 

Name, Address, and
Birth Date		   Position(s) Held with the
Trust		   Length of Time Served   Principal Occupation(s)
During the Past Five Years

David F. Connor4
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

December 1963

   Senior Vice President, General Counsel, and Secretary   Senior Vice President, General Counsel, and Secretary since April 2021   David F. Connor has served in various capacities at different times at Macquarie Investment Management.

Daniel V. Geatens4
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

October 1972

   Senior Vice President and Treasurer   Senior Vice President and Treasurer since April 2021   Daniel V. Geatens has served in various capacities at different times at Macquarie Investment Management.

Richard Salus
100 Independence,
610 Market Street
Philadelphia, PA 19106-2354

October 1963

   Senior Vice President and Chief Financial Officer   Senior Vice President and Chief Financial Officer since April 2021   Richard Salus has served in various capacities at different times at Macquarie Investment Management.

1 Shawn K. Lytle is considered to be an “Interested Trustee” because he is an executive officer of the Manager. Mr. Lytle was appointed as Trustee of the Trust effective April 30, 2021.

2 Macquarie Investment Management is the marketing name for certain companies comprising the asset management division of Macquarie Group, including the Funds’ Manager, principal underwriter, and transfer agent.

3 Messrs. Abernathy, Bennett, Chow, Fry, Whitford, and Mss. Borowiec, Sevilla-Sacasa, Wood, Yeomans were appointed as Trustees of the Trust effective April 30, 2021.

4 David F. Connor and Daniel V. Geatens serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment manager and principal underwriter as the Funds. Mr. Geatens also serves as the Chief Financial Officer of the Optimum Fund Trust, and he is the Chief Financial Officer and Treasurer for Macquarie Global Infrastructure Total Return Fund Inc., which has the same investment manager as the Funds.

The Statement of Additional Information for the Portfolios includes additional information about the Trustees and Officers and is available, without charge, upon request by calling 888-923-3355.

 

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ANNUAL PRIVACY NOTICE   IVY VIP

 

 

 

(UNAUDITED)

 

FACTS    What does Ivy Variable Insurance Portfolios do with your personal information?
Why?    Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share and protect your personal information. Please read this notice carefully to understand what we do.
What?    The types of personal information we collect and share depend on the product or service you have with us. The information can include:
    

•    Social Security Number and income,

    

•    Assets and transaction history, and

    

•    Checking account information and wire transfer instructions.

     When you are no longer our customer, we continue to share your information as described in this notice.
How?    All financial companies need to share customers’ personal information to conduct everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information, the reasons Ivy Variable Insurance Portfolios chooses to share, and whether you can limit this sharing.

 

Reasons we can share your personal information    Does Ivy Variable
Insurance Portfolios
share?		    Can you limit this
sharing?
For our everyday business purposes – such as to process your transactions, maintain your accounts, respond to court orders and legal investigations or report to credit bureaus    Yes    No
For our marketing purposes – to offer our products and services to you    Yes    No
For joint marketing with other financial companies    No    We don’t share
For our affiliates’ everyday business purposes – information about your transactions and experiences    Yes    No
For our affiliates everyday business purposes – information about your creditworthiness    No    We don’t share
For our affiliates to market to you    No    We don’t share
For non-affiliates to market to you    No    We don’t share

 

Questions?    Call 1(800) 777-6472 with questions about this notice. Client service representatives are available Monday through Friday from 7:30 am to 5:00 pm CST. You may also go to www.ivyinvestments.com/privacy_policy.
     If we serve you through an investment professional, such as a registered representative of a broker-dealer or an investment adviser representative (each, a “financial advisor”), please contact them directly. Specific internet addresses, mailing addresses and telephone numbers are listed on your statements and other correspondence.

 

Who we are      
Who is providing this notice?    Ivy Variable Insurance Portfolios
    

    

What we do      
How does Ivy Variable Insurance Portfolios protect my personal information?    To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.
How does Ivy Variable Insurance Portfolios collect my personal information?    We collect your personal information, for example, when you:
    

•    Give us your contact information or other personal information,

    

•    Open an account, or

    

•    Make deposits to an account or withdrawals from an account.

     We also collect your personal information from our affiliates.
         
Why can’t I limit all sharing?    Federal law gives you the right to limit only:
    

•    Sharing for affiliates’ everyday business purposes – information about your creditworthiness,

    

•    Affiliates from using your information to market to you, and

    

•    Sharing for non-affiliates to market to you.

     State laws and individual companies may give you additional rights to limit sharing.

 

     
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Definitions      
Affiliates    Companies related by common ownership or control. They can be financial and nonfinancial companies.
    

•    Affiliates of Ivy Funds include Waddell & Reed Services Company, Ivy Distributors, Inc., and Ivy       Investment Management Company.

Non-affiliates    Companies not related by common ownership or control. They can be financial and nonfinancial companies.
    

•    Ivy Funds does not share your personal information with non-affiliates so they can market to you.

Joint marketing    A formal agreement between non-affiliated financial companies that together market financial products or services to you.
    

•    Ivy Funds does not jointly market.

    

    

Other important information      
     If you own shares of Ivy Variable Insurance Portfolios in the name of a third party, such as a bank or a broker-dealer, the third party’s privacy policy may apply to you in addition to ours.
     If you are working with a financial advisor, and the financial advisor leaves their firm and joins another non-affiliated broker-dealer or registered investment adviser, then the financial advisor may be permitted to use limited information to contact you. The information that the financial advisor may use is comprised of your name, address, email address, telephone number and account title.

 

56   ANNUAL REPORT   2021  
     

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PROXY VOTING INFORMATION   IVY VIP

 

 

 

(UNAUDITED)

 

Proxy Voting Guidelines

A description of the policies and procedures Ivy Variable Insurance Portfolios uses to determine how to vote proxies relating to portfolio securities is available (i) without charge, upon request, by calling 1.888.923.3355 and (ii) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.

Proxy Voting Records

Information regarding how the Portfolio voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on Form N-PX at www.ivyinvestments.com and on the SEC’s website at www.sec.gov.

 

     
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QUARTERLY PORTFOLIO SCHEDULE INFORMATION   IVY VIP

 

 

 

(UNAUDITED)

 

Portfolio holdings can be found on the Trust’s website at www.ivyinvestments.com. Alternatively, a complete schedule of portfolio holdings of each Portfolio for the first and third quarters of each fiscal year is filed with the SEC and can be found as an exhibit to the Trust’s Form N-PORT. These holdings may be viewed in the following ways:

 

•  

On the SEC’s website at www.sec.gov.

 

•  

For review and copy at the SEC’s Public Reference Room in Washington, DC. Information on the operations of the Public Reference Room may be obtained by calling 1.800.SEC.0330.

 

58   ANNUAL REPORT   2021  
     

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DELAWARE FUNDS BY MACQUARIE FAMILY       

 

 

 

Global/International Portfolios

Delaware Ivy VIP Global Equity Income

Delaware Ivy VIP Global Growth

Delaware Ivy VIP International Core Equity

Domestic Equity Portfolios

Delaware Ivy VIP Core Equity

Delaware Ivy VIP Growth

Delaware Ivy VIP Mid Cap Growth

Delaware Ivy VIP Small Cap Growth

Delaware Ivy VIP Smid Cap Core

Delaware Ivy VIP Value

Fixed Income Portfolios

Delaware Ivy VIP Corporate Bond

Delaware Ivy VIP Global Bond

Delaware Ivy VIP High Income

Delaware Ivy VIP Limited-Term Bond

Money Market Portfolio

Delaware Ivy VIP Government Money Market

Specialty Portfolios

Delaware Ivy VIP Asset Strategy

Delaware Ivy VIP Balanced

Delaware Ivy VIP Energy

Delaware Ivy VIP Natural Resources

Delaware Ivy VIP Pathfinder Aggressive

Delaware Ivy VIP Pathfinder Conservative

Delaware Ivy VIP Pathfinder Moderate

Delaware Ivy VIP Pathfinder Moderately Aggressive

Delaware Ivy VIP Pathfinder Moderately Conservative

Delaware Ivy VIP Pathfinder Moderate — Managed Volatility

Delaware Ivy VIP Pathfinder Moderately Aggressive — Managed Volatility

Delaware Ivy VIP Pathfinder Moderately Conservative — Managed Volatility

Delaware Ivy VIP Science and Technology

Delaware Ivy VIP Securian Real Estate Securities

 

 

The underlying portfolios discussed in this report are only available as investment options in variable annuity and variable life insurance contracts issued by life insurance companies. They are not offered or made available directly to the general public.

This report is submitted for the general information of the shareholders of Ivy Variable Insurance Portfolios. It is not authorized for distribution to prospective investors in a Portfolio unless accompanied with or preceded by the current Portfolio prospectus as well as the variable product prospectus.

 

     
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ANN-VIP-PF (12/21)

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ITEM  2.  CODE OF ETHICS

 

(a)

As of December 31, 2021, the Registrant has adopted a code of ethics (the Code), as defined in Item 2 of Form N-CSR, that applies to the Principal Executive Officer and Principal Financial Officer or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. A copy of this code of ethics is filed as an exhibit to this Form N-CSR.

 

(b)

There have been no amendments, during the period covered by this report, to a provision of the Code that applies to the registrant’s Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer or Controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the Code.

 

(c)

During the period covered by this report, the registrant did not grant any waivers, including an implicit waiver, from a provision of the Code that applies to the registrant’s Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer or Controller, or persons performing similar functions, regardless of whether those individuals were employed by the registrant or a third party, that related to one or more of the items set forth in paragraph (b) of this item’s instructions.

ITEM  3.  AUDIT COMMITTEE FINANCIAL EXPERT

The Board of Trustees of the Registrant has determined that each of H. Jeffrey Dobbs, John A. Fry, Sandra A.J. Lawrence and Frances A. Sevilla-Sacasa (Chair) is an audit committee financial expert, as defined in Item 3 of Form N-CSR, serving on its audit committee. Each of Mr. Dobbs, Mr. Fry, Ms. Lawrence and Ms. Sevilla-Sacasa is independent for purposes of Item 3 of Form N-CSR. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liability that are greater than the

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duties, obligations, and liability imposed on such person as a member of the audit committee and board of trustees in the absence of such designation or identification. The designation or identification of a person as an audit committee financial expert does not affect the duties, obligations, or liability of any other member of the audit committee or board of trustees.

ITEM  4.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

(a)

Audit Fees

The aggregate fees billed for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for each of the last two fiscal years are as follows:

 

   2020       $428,600   
   2021       743,661   

 

(b)

Audit-Related Fees

The aggregate fees billed for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s annual financial statements and are not reported under paragraph (a) of this Item are as follows:

 

   2020       $0   
   2021       0   

These fees are related to the review of Form N-1A.

 

(c)

Tax Fees

The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning are as follows:

 

   2020       $167,120   
   2021       0   

These fees are related to the review of the registrant’s tax returns.

 

(d)

All Other Fees

The aggregate fees billed for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this item are as follows:

 

   2020       $41,907   
   2021       58,131   

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These fees are related to the review of internal control.

 

(e)    (1)

Registrant’s audit committee considers with the principal accountants all audit services to be provided by the principal accountants and pre-approves all such audit services.

The audit committee shall pre-approve all non-audit services to be provided by the principal accountants to the registrant; provided that the pre-approval requirement does not apply to non-audit services that (i) were not identified as such at the time of the pre-approval and (ii) do not aggregate more than 5% of total fees paid to the principal accountants by the registrant during the fiscal year in which the services are provided, if the audit committee approves the provision of such non-audit services prior to the completion of the audit.

The audit committee shall pre-approve all non-audit services to be provided by the principal accountants to the investment adviser (not including any subadvisor whose role is primarily portfolio management and is subcontracted and overseen by the investment advisor) or any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant if the engagement relates directly to the operations or financial reporting of the registrant; provided that the pre-approval requirement does not apply to non-audit services that (i) were not identified as such at the time of the pre-approval and (ii) do not aggregate more than 5% of total fees paid to the principal accountants by the registrant for all services and by the registrant’s investment adviser for non-audit services if the engagement relates directly to the operations or financial reporting of the registrant during the fiscal year in which those services are provided, if the audit committee approves the provision of such non-audit services prior to the completion of the audit.

 

(e)    (2)

None of the services described in each of paragraphs (b) through (d) of this Item were approved by the audit committee pursuant to the waiver provisions of paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

 

(f)

Not applicable

 

(g)

$209,027 and $58,131 are the aggregate non-audit fees billed in each of the last two fiscal years for services rendered by the principal accountant to the registrant. $53,250 and $34,900 are the aggregate non-audit fees billed in each of the last two fiscal years for services rendered by the principal accountant to the investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant.

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(h)

Not Applicable.

ITEM  5.  AUDIT COMMITTEE OF LISTED REGISTRANTS

Not applicable.

ITEM  6.  SCHEDULE OF INVESTMENTS.

(a)    See Item 1 Shareholder Report.

(b)    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

There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s board of trustees.

ITEM  11.  CONTROLS AND PROCEDURES.

(a)    Assessment of the Registrant’s Control Environment

The Registrant’s disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that the Registrant files under the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to the Registrant’s management (“Management”), including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Management, including the principal executive officer and principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

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In accordance with Rule 30a-3 under the 1940 Act, within 90 days prior to the filing date of this report on Form N-CSR, management, with the participation of the principal executive officer and principal financial officer, evaluated the effectiveness of the disclosure controls and procedures of the Registrant. Based on its evaluation, the principal executive officer and principal financial officer have determined that, as of a date within 90 days of the filing date of this report, the Registrant’s disclosure controls and procedures were effective.

Remediation of Material Weakness in Internal Control over Financial Reporting

Management has completed the remediation efforts relating to a previously reported material weakness in the Registrant’s internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. As of June 30, 2021, management concluded that it did not design or maintain controls to evaluate the valuation model and available observable inputs related to the fair valuation of certain private equity securities provided by a third-party valuation service. Certain private equity securities that were valued by third party valuation services were not subject to Valuation Committee review. This material weakness did not result in a misstatement of previously issued financial statements. This material weakness resulted in adjustments which were reflected in the financial statements to decrease investments in unaffiliated securities at value and net change in unrealized appreciation (depreciation) on investments in unaffiliated securities for the period ended June 30, 2021.

The steps management took to remediate this material weakness included implementing enhancements to the existing fair valuation process as follows: (i) investment teams will review all reasonably available observable inputs and other information relevant to the valuation of each private equity security valuation prepared by a third-party appraiser/expert and provide this information to the Valuation Committee for consideration; and (ii) management will escalate each private equity security valuation prepared by a third-party appraiser/expert to the Valuation Committee and the Valuation Committee will review and approve those valuations only after ensuring that they incorporate U.S. GAAP considerations for fair value, specifically the consideration of observable inputs, as applicable.

As a result of these remediation activities, management has determined that the Registrant’s internal controls over financial reporting are designed appropriately and at a sufficient level of precision and have been operating effectively for a sufficient period of time, such that the material weakness previously identified as of June 30, 2021, has been remediated as of December 31, 2021.

(b)    Changes in Internal Control

Other than the enhancements to controls noted above, there have been no changes in the Registrant’s internal controls or in other factors that could

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materially affect the internal controls over financial reporting subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR.

ITEM  12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM  13.  EXHIBITS.

(a) (1) The Code described in Item 2 of this Form N-CSR.

Attached hereto as Exhibit 99.CODE.

(a)  (2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)).

Attached hereto as Exhibit 99.CERT.

(b)     A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)).

Attached hereto as Exhibit 99.906CERT.

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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.

 

IVY VARIABLE INSURANCE PORTFOLIOS

(Registrant)

By

   

/s/David F. Connor

  

David F. Connor, Secretary

Date: 

   

March 3, 2022

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.

 

By

   

/s/Shawn K. Lytle

  

Shawn K. Lytle, Principal Executive Officer

Date:

   

March 3, 2022

By

   

/s/Richard Salus

  

Richard Salus, Principal Financial Officer

Date: 

   

March 3, 2022