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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 | 811-07452 |
AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
(Exact name of registrant as specified in charter)
11 Greenway Plaza, Suite 1000 Houston, Texas 77046
(Address of principal executive offices) (Zip code)
Philip A. Taylor 11 Greenway Plaza, Suite 1000 Houston, Texas 77046
(Name and address of agent for service)
Registrant’s telephone number, including area code: | (713) 626-1919 |
Date of fiscal year end: | 12/31 | |||
Date of reporting period: |
06/30/15 |
Item 1. Report to Stockholders.
| ||||
Semiannual Report to Shareholders
| June 30, 2015 | |||
Invesco V.I. American Franchise Fund | ||||
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd. |
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing. | ||
Invesco Distributors, Inc. VK-VIAMFR-SAR-1
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance | ||
Performance summary
Fund vs. Indexes
Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower.
Series I Shares | 2.46 | % | |||
Series II Shares | 2.33 | ||||
S&P 500 Index▼ (Broad Market Index) | 1.23 | ||||
Russell 1000 Growth Index▼ (Style-Specific Index) | 3.96 | ||||
Lipper VUF Large-Cap Growth Funds Indexn (Peer Group Index) | 5.19 | ||||
Source(s): ▼FactSet Research Systems Inc.; nLipper Inc. |
|
The S&P 500® Index is an unmanaged index considered representative of the US stock market.
The Russell 1000® Growth Index is an unmanaged index considered representative of large-cap growth stocks. The Russell 1000 Growth Index is a trademark/ service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
The Lipper VUF Large-Cap Growth Funds Index is an unmanaged index considered representative of large-cap growth variable insurance underlying funds tracked by Lipper.
The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es).
A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
Average Annual Total Returns As of 6/30/15 |
| ||||
Series I Shares | |||||
Inception (7/3/95) | 9.13 | % | |||
10 Years | 8.19 | ||||
5 Years | 15.74 | ||||
1 Year | 6.40 | ||||
Series II Shares | |||||
Inception (9/18/00) | 0.22 | % | |||
10 Years | 7.92 | ||||
5 Years | 15.44 | ||||
1 Year | 6.13 |
Effective June 1, 2010, Class I and Class II shares of the predecessor fund, Van Kampen Life Investment Trust Capital Growth Portfolio, advised by Van Kampen Asset Management were reorganized into Series I and Series II shares, respectively, of Invesco Van Kampen V.I. Capital Growth Fund (renamed Invesco V.I. American Franchise Fund on April 29, 2013). Returns shown above for Series I and Series II shares are blended returns of the predecessor fund and Invesco V.I. American Franchise Fund. Share class returns will differ from the predecessor fund because of different expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 0.95% and 1.20%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. American Franchise Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available
at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
Invesco V.I. American Franchise Fund |
Schedule of Investments(a)
June 30, 2015
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–99.27% |
| |||||||
Aerospace & Defense–2.20% | ||||||||
Honeywell International Inc. | 99,857 | $ | 10,182,418 | |||||
Raytheon Co. | 54,091 | �� | 5,175,427 | |||||
15,357,845 | ||||||||
Airlines–0.81% | ||||||||
Southwest Airlines Co. | 171,543 | 5,676,358 | ||||||
Apparel, Accessories & Luxury Goods–0.28% | ||||||||
Michael Kors Holdings Ltd.(b) | 46,592 | 1,961,057 | ||||||
Application Software–2.73% | ||||||||
Autodesk, Inc.(b) | 71,958 | 3,603,297 | ||||||
salesforce.com, inc.(b) | 222,370 | 15,483,623 | ||||||
19,086,920 | ||||||||
Asset Management & Custody Banks–0.41% | ||||||||
Ameriprise Financial, Inc. | 22,706 | 2,836,661 | ||||||
Biotechnology–12.97% | ||||||||
Alexion Pharmaceuticals, Inc.(b) | 23,081 | 4,172,352 | ||||||
Alkermes PLC(b) | 262,370 | 16,880,886 | ||||||
Amgen Inc. | 36,174 | 5,553,432 | ||||||
Biogen Inc.(b) | 38,036 | 15,364,262 | ||||||
Celgene Corp.(b) | 210,574 | 24,370,782 | ||||||
Gilead Sciences, Inc. | 158,784 | 18,590,431 | ||||||
Vertex Pharmaceuticals Inc.(b) | 45,659 | 5,637,973 | ||||||
90,570,118 | ||||||||
Cable & Satellite–4.25% | ||||||||
Comcast Corp.–Class A | 90,135 | 5,420,719 | ||||||
DISH Network Corp.–Class A(b) | 287,578 | 19,471,906 | ||||||
Time Warner Cable Inc. | 27,026 | 4,815,223 | ||||||
29,707,848 | ||||||||
Communications Equipment–1.38% | ||||||||
Cisco Systems, Inc. | 216,499 | 5,945,063 | ||||||
Palo Alto Networks, Inc.(b) | 21,049 | 3,677,260 | ||||||
9,622,323 | ||||||||
Consumer Electronics–3.08% | ||||||||
Harman International Industries, Inc. | 101,140 | 12,029,592 | ||||||
Sony Corp. (Japan) | 334,900 | 9,502,388 | ||||||
21,531,980 | ||||||||
Consumer Finance–1.00% | ||||||||
American Express Co. | 53,194 | 4,134,237 | ||||||
Capital One Financial Corp. | 32,308 | 2,842,135 | ||||||
6,976,372 | ||||||||
Data Processing & Outsourced Services–4.93% | ||||||||
MasterCard, Inc.–Class A | 305,384 | 28,547,296 | ||||||
Visa Inc.–Class A | 87,478 | 5,874,148 | ||||||
34,421,444 | ||||||||
Distillers & Vintners–0.99% | ||||||||
Constellation Brands, Inc.–Class A | 59,347 | 6,885,439 |
Shares | Value | |||||||
Diversified Chemicals–1.29% | ||||||||
Dow Chemical Co. (The) | 176,281 | $ | 9,020,299 | |||||
Drug Retail–1.47% | ||||||||
CVS Health Corp. | 97,668 | 10,243,420 | ||||||
Environmental & Facilities Services–0.89% | ||||||||
Republic Services, Inc. | 159,570 | 6,250,357 | ||||||
Fertilizers & Agricultural Chemicals–1.32% | ||||||||
Monsanto Co. | 86,431 | 9,212,680 | ||||||
General Merchandise Stores–0.53% | ||||||||
Dollar General Corp. | 48,028 | 3,733,697 | ||||||
Health Care Equipment–0.73% | ||||||||
Medtronic PLC | 68,752 | 5,094,523 | ||||||
Health Care Facilities–1.57% | ||||||||
HCA Holdings, Inc.(b) | 120,579 | 10,938,927 | ||||||
Home Improvement Retail–3.10% | ||||||||
Lowe’s Cos., Inc. | 323,836 | 21,687,297 | ||||||
Hotels, Resorts & Cruise Lines–3.01% | ||||||||
Carnival Corp. | 425,348 | 21,007,938 | ||||||
Household Appliances–1.32% | ||||||||
Whirlpool Corp. | 53,411 | 9,242,774 | ||||||
Industrial Conglomerates–1.61% | ||||||||
Danaher Corp. | 84,394 | 7,223,283 | ||||||
Roper Technologies, Inc. | 23,487 | 4,050,568 | ||||||
11,273,851 | ||||||||
Internet Retail–4.47% | ||||||||
Amazon.com, Inc.(b) | 39,324 | 17,070,155 | ||||||
Netflix Inc.(b) | 5,695 | 3,741,273 | ||||||
Priceline Group Inc. (The)(b) | 9,015 | 10,379,601 | ||||||
31,191,029 | ||||||||
Internet Software & Services–10.45% | ||||||||
Alibaba Group Holding Ltd.–ADR (China)(b) | 77,364 | 6,364,736 | ||||||
Facebook Inc.–Class A(b) | 369,689 | 31,706,377 | ||||||
Google Inc.–Class A(b) | 44,598 | 24,084,704 | ||||||
LinkedIn Corp.–Class A(b) | 48,647 | 10,051,930 | ||||||
Twitter, Inc.(b) | 20,716 | 750,333 | ||||||
72,958,080 | ||||||||
Investment Banking & Brokerage–3.41% | ||||||||
Charles Schwab Corp. (The) | 435,155 | 14,207,811 | ||||||
Morgan Stanley | 248,616 | 9,643,814 | ||||||
23,851,625 | ||||||||
Life Sciences Tools & Services–0.51% | ||||||||
Thermo Fisher Scientific, Inc. | 27,203 | 3,529,861 | ||||||
Managed Health Care–0.79% | ||||||||
UnitedHealth Group Inc. | 45,044 | 5,495,368 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. American Franchise Fund
Shares | Value | |||||||
Movies & Entertainment–1.05% | ||||||||
Twenty-First Century Fox, Inc.–Class A | 109,178 | $ | 3,553,198 | |||||
Walt Disney Co. (The) | 33,159 | 3,784,768 | ||||||
7,337,966 | ||||||||
Oil & Gas Exploration & Production–3.04% | ||||||||
Cimarex Energy Co. | 20,466 | 2,257,604 | ||||||
Devon Energy Corp. | 69,003 | 4,104,989 | ||||||
Pioneer Natural Resources Co. | 38,297 | 5,311,411 | ||||||
Whiting Petroleum Corp.(b) | 284,600 | 9,562,560 | ||||||
21,236,564 | ||||||||
Oil & Gas Storage & Transportation–0.33% | ||||||||
Kinder Morgan Inc. | 60,395 | 2,318,564 | ||||||
Pharmaceuticals–5.72% | ||||||||
Allergan PLC(b) | 92,425 | 28,047,291 | ||||||
Bristol-Myers Squibb Co. | 106,824 | 7,108,069 | ||||||
Mylan N.V.(b) | 70,968 | 4,815,888 | ||||||
39,971,248 | ||||||||
Railroads–0.36% | ||||||||
Canadian Pacific Railway Ltd. (Canada) | 15,526 | 2,487,731 | ||||||
Semiconductor Equipment–0.20% | ||||||||
Lam Research Corp. | 17,217 | 1,400,603 | ||||||
Semiconductors–3.45% | ||||||||
Avago Technologies Ltd. (Singapore) | 40,836 | 5,428,330 | ||||||
NXP Semiconductors N.V. (Netherlands)(b) | 190,101 | 18,667,918 | ||||||
24,096,248 | ||||||||
Soft Drinks–1.03% | ||||||||
Monster Beverage Corp.(b) | 53,568 | 7,179,183 |
Shares | Value | |||||||
Specialized Finance–1.74% | ||||||||
CME Group Inc.–Class A | 72,148 | $ | 6,714,093 | |||||
McGraw Hill Financial, Inc. | 54,031 | 5,427,414 | ||||||
12,141,507 | ||||||||
Specialized REIT’s–0.66% | ||||||||
American Tower Corp. | 49,300 | 4,599,197 | ||||||
Systems Software–2.11% | ||||||||
Check Point Software Technologies Ltd. (Israel)(b) | 75,475 | 6,004,036 | ||||||
ServiceNow, Inc.(b) | 117,426 | 8,725,926 | ||||||
14,729,962 | ||||||||
Technology Hardware, Storage & Peripherals–5.92% | ||||||||
Apple Inc. | 329,503 | 41,327,914 | ||||||
Tobacco–0.87% | ||||||||
Altria Group, Inc. | 124,364 | 6,082,643 | ||||||
Wireless Telecommunication Services–1.29% | ||||||||
Sprint Corp.(b) | 1,973,649 | 8,999,839 | ||||||
Total Common Stocks & Other Equity Interests |
| 693,275,260 | ||||||
Money Market Funds–0.06% |
| |||||||
Liquid Assets Portfolio–Institutional Class(c) | 200,811 | 200,811 | ||||||
Premier Portfolio–Institutional Class(c) | 200,811 | 200,811 | ||||||
Total Money Market Funds |
| 401,622 | ||||||
TOTAL INVESTMENTS–99.33% |
| 693,676,882 | ||||||
OTHER ASSETS LESS LIABILITIES–0.67% |
| 4,679,286 | ||||||
NET ASSETS–100.00% |
| $ | 698,356,168 |
Investment Abbreviations:
ADR | – American Depositary Receipt | |
REIT | – Real Estate Investment Trust |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Non-income producing security. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. |
Portfolio Composition
By sector, based on Net Assets
as of June 30, 2015
Information Technology | 31.2 | % | ||
Consumer Discretionary | 22.8 | |||
Health Care | 22.3 | |||
Industrials | 5.9 | |||
Financials | 5.5 | |||
Consumer Staples | 4.3 | |||
Energy | 3.4 | |||
Materials | 2.6 | |||
Telecommunication Services | 1.3 | |||
Money Market Funds Plus Other Assets Less Liabilities | 0.7 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. American Franchise Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $481,101,266) | $ | 693,275,260 | ||
Investments in affiliated money market funds, at value and cost | 401,622 | |||
Total investments, at value (Cost $481,502,888) | 693,676,882 | |||
Foreign currencies, at value (Cost $5,966) | 6,327 | |||
Receivable for: | ||||
Investments sold | 5,372,033 | |||
Fund shares sold | 180,677 | |||
Dividends | 408,460 | |||
Investment for trustee deferred compensation and retirement plans | 380,611 | |||
Other assets | 387 | |||
Total assets | 700,025,377 | |||
Liabilities: |
| |||
Payable for: | ||||
Fund shares reacquired | 672,486 | |||
Accrued fees to affiliates | 544,619 | |||
Accrued trustees’ and officers’ fees and benefits | 6,781 | |||
Accrued other operating expenses | 28,043 | |||
Trustee deferred compensation and retirement plans | 417,280 | |||
Total liabilities | 1,669,209 | |||
Net assets applicable to shares outstanding | $ | 698,356,168 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 443,037,018 | ||
Undistributed net investment income (loss) | (1,010,328 | ) | ||
Undistributed net realized gain | 44,155,704 | |||
Net unrealized appreciation | 212,173,774 | |||
$ | 698,356,168 | |||
Net Assets: |
| |||
Series I | $ | 513,053,871 | ||
Series II | $ | 185,302,297 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 9,124,922 | |||
Series II | 3,376,749 | |||
Series I: | ||||
Net asset value per share | $ | 56.23 | ||
Series II: | ||||
Net asset value per share | $ | 54.88 |
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $1,556) | $ | 3,144,950 | ||
Dividends from affiliated money market funds (includes securities lending income of $1,578) | 3,151 | |||
Total investment income | 3,148,101 | |||
Expenses: | ||||
Advisory fees | 2,440,610 | |||
Administrative services fees | 936,053 | |||
Custodian fees | 18,636 | |||
Distribution fees — Series II | 243,171 | |||
Transfer agent fees | 47,534 | |||
Trustees’ and officers’ fees and benefits | 16,051 | |||
Other | 34,900 | |||
Total expenses | 3,736,955 | |||
Less: Fees waived | (3,825 | ) | ||
Net expenses | 3,733,130 | |||
Net investment income (loss) | (585,029 | ) | ||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from: | ||||
Investment securities | 43,314,423 | |||
Foreign currencies | 2,600 | |||
43,317,023 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (24,542,165 | ) | ||
Foreign currencies | (469 | ) | ||
(24,542,634 | ) | |||
Net realized and unrealized gain | 18,774,389 | |||
Net increase in net assets resulting from operations | $ | 18,189,360 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. American Franchise Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: |
| |||||||
Net investment income (loss) | $ | (585,029 | ) | $ | (1,908,252 | ) | ||
Net realized gain | 43,317,023 | 115,649,421 | ||||||
Change in net unrealized appreciation (depreciation) | (24,542,634 | ) | (54,154,967 | ) | ||||
Net increase in net assets resulting from operations | 18,189,360 | 59,586,202 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Series I | — | (227,487 | ) | |||||
Share transactions–net: | ||||||||
Series l | (42,343,962 | ) | (82,553,486 | ) | ||||
Series ll | (18,559,437 | ) | (74,143,144 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (60,903,399 | ) | (156,696,630 | ) | ||||
Net increase (decrease) in net assets | (42,714,039 | ) | (97,337,915 | ) | ||||
Net assets: | ||||||||
Beginning of period | 741,070,207 | 838,408,122 | ||||||
End of period (includes undistributed net investment income (loss) of $(1,010,328) and $(425,299), respectively) | $ | 698,356,168 | $ | 741,070,207 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. American Franchise Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is to seek capital growth.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Invesco V.I. American Franchise Fund
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
Invesco V.I. American Franchise Fund
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Securities Lending — The Fund may lend portfolio securities having a market value up to one-third of the Fund’s total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. It is the Fund’s policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if, and to the extent that, the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower failed to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliated money market funds on the Statement of Operations. The aggregate value of securities out on loan, if any, is shown as a footnote on the Statement of Assets and Liabilities. |
J. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
K. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
Invesco V.I. American Franchise Fund
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||||
First $250 million | 0 | .695% | ||||
Next $250 million | 0 | .67% | ||||
Next $500 million | 0 | .645% | ||||
Next $550 million | 0 | .62% | ||||
Next $3.45 billion | 0 | .60% | ||||
Next $250 million | 0 | .595% | ||||
Next $2.25 billion | 0 | .57% | ||||
Next $2.5 billion | 0 | .545% | ||||
Over $10 billion | 0 | .52% |
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.67%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2016, to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2016. The fee waiver agreement cannot be terminated during its term. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash (excluding investments of cash collateral from securities lending) in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $3,825.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $86,193 for accounting and fund administrative services and reimbursed $849,860 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the six months ended June 30, 2015, the Fund incurred $5,985 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
Invesco V.I. American Franchise Fund
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 684,174,494 | $ | 9,502,388 | $ | — | $ | 693,676,882 |
NOTE 4—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 5—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 6—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund did not have a capital loss carryforward as of December 31, 2014.
Invesco V.I. American Franchise Fund
NOTE 7—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $293,978,411 and $358,326,620, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 219,827,538 | ||
Aggregate unrealized (depreciation) of investment securities | (10,288,547 | ) | ||
Net unrealized appreciation of investment securities | $ | 209,538,991 |
Cost of investments for tax purposes is $484,137,891.
NOTE 8—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 99,774 | $ | 5,686,689 | 497,166 | $ | 25,779,760 | ||||||||||
Series II | 73,275 | 4,064,987 | 265,604 | 13,450,608 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 4,272 | 227,487 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (849,276 | ) | (48,030,651 | ) | (2,094,994 | ) | (108,560,733 | ) | ||||||||
Series II | (409,677 | ) | (22,624,424 | ) | (1,752,048 | ) | (87,593,752 | ) | ||||||||
Net increase (decrease) in share activity | (1,085,904 | ) | $ | (60,903,399 | ) | (3,080,000 | ) | $ | (156,696,630 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 23% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 9—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income (loss)(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income (loss) to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||
Series I(d) | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 54.88 | $ | (0.03 | ) | $ | 1.38 | $ | 1.35 | $ | — | $ | 56.23 | 2.46 | % | $ | 513,054 | 0.96 | %(e) | 0.96 | %(e) | �� | (0.10 | )%(e) | 41 | % | ||||||||||||||||||||||
Year ended 12/31/14 | 50.63 | (0.09 | ) | 4.36 | 4.27 | (0.02 | ) | 54.88 | 8.44 | 541,929 | 0.92 | 0.95 | (0.17 | ) | 64 | |||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 36.28 | 0.04 | 14.50 | 14.54 | (0.19 | ) | 50.63 | 40.13 | 580,620 | 0.90 | 0.96 | 0.08 | 75 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 31.90 | 0.19 | 4.19 | 4.38 | — | 36.28 | 13.73 | 496,341 | 0.88 | 0.98 | 0.52 | 190 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 34.00 | (0.05 | ) | (2.05 | ) | (2.10 | ) | — | 31.90 | (6.18 | ) | 122,986 | 0.84 | 0.99 | (0.15 | ) | 126 | |||||||||||||||||||||||||||||||
Year ended 12/31/10 | 28.37 | 0.03 | 5.60 | 5.63 | — | 34.00 | 19.84 | 74,870 | 0.79 | 0.90 | 0.12 | 158 | ||||||||||||||||||||||||||||||||||||
Series II(d) | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 53.63 | (0.09 | ) | 1.34 | 1.25 | — | 54.88 | 2.33 | 185,302 | 1.21 | (e) | 1.21 | (e) | (0.35 | )(e) | 41 | ||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 49.58 | (0.22 | ) | 4.27 | 4.05 | — | 53.63 | 8.17 | 199,141 | 1.17 | 1.20 | (0.42 | ) | 64 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 35.55 | (0.07 | ) | 14.20 | 14.13 | (0.10 | ) | 49.58 | 39.79 | 257,788 | 1.15 | 1.21 | (0.17 | ) | 75 | |||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 31.35 | 0.10 | 4.10 | 4.20 | — | 35.55 | 13.40 | 224,334 | 1.13 | 1.23 | 0.27 | 190 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 33.49 | (0.14 | ) | (2.00 | ) | (2.14 | ) | — | 31.35 | (6.39 | ) | 85,724 | 1.09 | 1.24 | (0.40 | ) | 126 | |||||||||||||||||||||||||||||||
Year ended 12/31/10 | 28.01 | (0.05 | ) | 5.53 | 5.48 | — | 33.49 | 19.56 | 109,920 | 1.04 | 1.15 | (0.18 | ) | 158 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the year ended December 31, 2012, the portfolio turnover calculation excludes the value of securities purchased of $14,357,093 and sold of $15,173,740 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco V.I. Capital Appreciation Fund and Invesco V.I. Leisure Fund into the Fund. For the year ended December 31, 2011, the portfolio turnover calculation excludes the value of securities purchased of $81,993,574 and sold of $49,870,241 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco V.I. Large Cap Growth Fund into the Fund. |
(d) | On June 1, 2010, the predecessor Fund’s former Class I and Class II shares were reorganized into Series I and Series II shares, respectively. |
(e) | Ratios are annualized and based on average daily net assets (000’s omitted) of $537,832 and $196,148 for Series I and Series II, respectively. |
Invesco V.I. American Franchise Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,024.60 | $ | 4.82 | $ | 1,020.03 | $ | 4.81 | 0.96 | % | ||||||||||||
Series II | 1,000.00 | 1,023.30 | 6.07 | 1,018.79 | 6.06 | 1.21 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. American Franchise Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. American Franchise Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ investment
process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Underlying Fund Large-Cap Growth Index. The Board noted that performance of Series I shares of the Fund was in the fourth quintile of its performance universe for the one year period and the third quintile for the three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Series I shares of the
Invesco V.I. American Franchise Fund
Fund was below the performance of the Index for the one year period and above the performance of the Index for the three and five year periods. Invesco Advisers noted that the markets had been challenging for growth-oriented styles that have higher exposures to market sensitivity, volatility and momentum. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series I shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was above the rate of one such mutual fund. The Board also noted how the Fund’s rate compared to the effective sub-adviser fee rate of one mutual fund sub-advised by Invesco Advisers.
The Board also considered the fees charged by Invesco Advisers and the Affiliated Sub-Advisers to other client accounts with investment strategies comparable to those of the Fund. The Board noted that Invesco Advisers or the Affiliated Sub-Advisers may charge lower fees to large institutional clients. Invesco Advisers reviewed with the Board the significantly greater scope of services it provides to the Invesco Funds relative to certain other types of client accounts. These additional services include provision of administrative services, officers and office space, oversight of service providers, preparation of annual registration statement updates and financial information and regulatory compliance under the Investment Company Act of 1940, as amended.
Invesco Advisers also reviewed generally the higher frequency of shareholder purchases and redemptions in the Invesco Funds relative to the
flow of assets for other client accounts. Invesco Advisers advised the Board that advance notice of redemptions is often provided to Invesco Advisers by institutional clients. The Board did note that sub-advisory fee rates charged by the Affiliated Sub-Advisers to manage the Invesco Funds and to manage other client accounts tended to be more comparable, reflecting a similar scope of services. The information received by the Board demonstrated that the aggregate services provided to the Invesco Funds were sufficiently different from those provided to institutional clients to support the difference in fees.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding
fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered that it receives periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to, among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
Invesco V.I. American Franchise Fund
| ||||
Semiannual Report to Shareholders
| June 30, 2015 | |||
Invesco V.I. American Value Fund | ||||
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd. | ||
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing. | ||
Invesco Distributors, Inc. VK-VIAMVA-SAR-1
| ||
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance | ||
Performance summary
|
Fund vs. Indexes Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower.
|
Series I Shares | 5.27 | % | |||
Series II Shares | 5.11 | ||||
S&P 500 Index▼ (Broad Market Index) | 1.23 | ||||
Russell Midcap Value Index▼ (Style-Specific Index) | 0.41 | ||||
Lipper VUF Mid-Cap Value Funds Indexn (Peer Group Index) | 2.61 |
Source(s): ▼FactSet Research Systems Inc.; nLipper Inc. | |||||
The S&P 500® Index is an unmanaged index considered representative of the US stock market. The Russell Midcap® Value Index is an unmanaged index considered representative of mid-cap value stocks. The Russell Midcap Value Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co. The Lipper VUF Mid-Cap Value Funds Index is an unmanaged index considered representative of mid-cap value variable insurance underlying funds tracked by Lipper. The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es). A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
|
Average Annual Total Returns | |||||
As of 6/30/15 |
Series I Shares | |||||
Inception (1/2/97) | 10.74 | % | |||
10 Years | 10.11 | ||||
5 Years | 17.58 | ||||
1 Year | 7.33 | ||||
Series II Shares | |||||
Inception (5/5/03) | 12.10 | % | |||
10 Years | 9.94 | ||||
5 Years | 17.37 | ||||
1 Year | 7.05 |
Effective June 1, 2010, Class I and Class II shares of the predecessor fund, Universal Institutional Funds Mid Cap Value Portfolio, advised by Morgan Stanley Investment Management Inc. were reorganized into Series I and Series II shares, respectively, of Invesco Van Kampen V.I. Mid Cap Value Fund (renamed Invesco V.I. American Value Fund on April 29, 2013). Returns shown above for Series I and Series II shares are blended returns of the predecessor fund and Invesco V.I. American Value Fund. Share class returns will differ from the predecessor fund because of different expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 1.03% and 1.28%, respectively.1 The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 1.04% and 1.29%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. American Value Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2017. See current prospectus for more information. |
Invesco V.I. American Value Fund |
Schedule of Investments(a)
June 30, 2015
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–97.81% |
| |||||||
Aerospace & Defense–2.52% | ||||||||
Textron Inc. | 247,632 | $ | 11,051,816 | |||||
Air Freight & Logistics–1.07% | ||||||||
UTi Worldwide, Inc.(b) | 468,714 | 4,682,453 | ||||||
Alternative Carriers–2.12% | ||||||||
Level 3 Communications, Inc.(b) | 176,198 | 9,280,349 | ||||||
Apparel Retail–2.11% | ||||||||
Ascena Retail Group, Inc.(b) | 555,967 | 9,259,630 | ||||||
Apparel, Accessories & Luxury Goods–1.93% | ||||||||
Fossil Group, Inc.(b) | 122,238 | 8,478,428 | ||||||
Application Software–5.21% | ||||||||
Cadence Design Systems, Inc.(b) | 469,742 | 9,235,128 | ||||||
Citrix Systems, Inc.(b) | 194,016 | 13,612,162 | ||||||
22,847,290 | ||||||||
Asset Management & Custody Banks–4.16% | ||||||||
American Capital Ltd.(b) | 575,371 | 7,796,277 | ||||||
Northern Trust Corp. | 136,713 | 10,453,076 | ||||||
18,249,353 | ||||||||
Auto Parts & Equipment–4.85% | ||||||||
Dana Holding Corp. | 401,209 | 8,256,881 | ||||||
Johnson Controls, Inc. | 262,483 | 13,000,783 | ||||||
21,257,664 | ||||||||
Broadcasting–2.06% | ||||||||
TEGNA Inc. | 281,256 | 9,019,880 | ||||||
Building Products–4.75% | ||||||||
Masco Corp. | 343,797 | 9,169,066 | ||||||
Owens Corning Inc. | 282,516 | 11,653,785 | ||||||
20,822,851 | ||||||||
Communications Equipment–2.47% | ||||||||
Ciena Corp.(b) | 457,339 | 10,829,787 | ||||||
Construction Materials–0.84% | ||||||||
Eagle Materials Inc. | 48,052 | 3,667,809 | ||||||
Diversified Banks–2.58% | ||||||||
Comerica Inc. | 219,955 | 11,288,091 | ||||||
Diversified Chemicals–2.35% | ||||||||
Eastman Chemical Co. | 125,847 | 10,296,802 | ||||||
Education Services–1.23% | ||||||||
DeVry Education Group Inc. | 180,084 | 5,398,918 | ||||||
Electric Utilities–1.72% | ||||||||
Edison International | 135,410 | 7,526,088 |
Shares | Value | |||||||
Environmental & Facilities Services–1.87% | ||||||||
Clean Harbors, Inc.(b) | 152,660 | $ | 8,203,948 | |||||
Health Care Facilities–7.82% | ||||||||
Brookdale Senior Living Inc.(b) | 252,351 | 8,756,580 | ||||||
HealthSouth Corp. | 256,816 | 11,828,945 | ||||||
Universal Health Services, Inc.–Class B | 96,303 | 13,684,656 | ||||||
34,270,181 | ||||||||
Heavy Electrical Equipment–2.17% | ||||||||
Babcock & Wilcox Co. (The) | 283,337 | 9,293,454 | ||||||
Babcock & Wilcox Enterprises, Inc.(b) | 12,181 | 227,297 | ||||||
9,520,751 | ||||||||
Industrial Machinery–4.71% | ||||||||
Ingersoll-Rand PLC | 162,931 | 10,984,808 | ||||||
Pentair PLC (United Kingdom) | 140,189 | 9,637,994 | ||||||
20,622,802 | ||||||||
Insurance Brokers–4.56% | ||||||||
Arthur J. Gallagher & Co. | 130,321 | 6,164,183 | ||||||
Marsh & McLennan Cos., Inc. | 114,144 | 6,471,965 | ||||||
Willis Group Holdings PLC | 156,201 | 7,325,827 | ||||||
19,961,975 | ||||||||
Investment Banking & Brokerage–2.63% | ||||||||
Stifel Financial Corp.(b) | 199,679 | 11,529,465 | ||||||
IT Consulting & Other Services–2.07% | ||||||||
Teradata Corp.(b) | 245,415 | 9,080,355 | ||||||
Life Sciences Tools & Services–2.17% | ||||||||
PerkinElmer, Inc. | 180,379 | 9,495,151 | ||||||
Multi-Utilities–0.72% | ||||||||
CenterPoint Energy, Inc. | 165,457 | 3,148,647 | ||||||
Oil & Gas Equipment & Services–3.96% | ||||||||
Amec Foster Wheeler PLC (United Kingdom) | 580,079 | 7,451,334 | ||||||
Amec Foster Wheeler PLC–ADR (United Kingdom) | 45,677 | 590,147 | ||||||
Baker Hughes Inc. | 150,768 | 9,302,385 | ||||||
17,343,866 | ||||||||
Oil & Gas Storage & Transportation–2.17% | ||||||||
Williams Cos., Inc. (The) | 165,724 | 9,510,900 | ||||||
Packaged Foods & Meats–2.84% | ||||||||
ConAgra Foods, Inc. | 284,924 | 12,456,877 | ||||||
Property & Casualty Insurance–3.68% | ||||||||
ACE Ltd. | 46,545 | 4,732,696 | ||||||
FNF Group | 307,447 | 11,372,464 | ||||||
16,105,160 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. American Value Fund
Shares | Value | |||||||
Publishing–0.00% | ||||||||
Gannett Co., Inc.(b) | 1 | $ | 7 | |||||
Real Estate Operating Companies–2.78% | ||||||||
Forest City Enterprises, Inc.–Class A(b) | 550,767 | 12,171,951 | ||||||
Regional Banks–6.30% | ||||||||
BB&T Corp. | 254,208 | 10,247,124 | ||||||
Wintrust Financial Corp. | 195,628 | 10,442,623 | ||||||
Zions Bancorp. | 217,563 | 6,904,362 | ||||||
27,594,109 | ||||||||
Specialty Chemicals–2.13% | ||||||||
W.R. Grace & Co.(b) | 92,836 | 9,311,451 | ||||||
Technology Hardware, Storage & Peripherals–2.76% | ||||||||
Diebold, Inc. | 138,599 | 4,850,965 | ||||||
NetApp, Inc. | 230,051 | 7,260,410 | ||||||
12,111,375 |
Shares | Value | |||||||
Trucking–0.50% | ||||||||
Swift Transportation Co.(b) | 96,359 | $ | 2,184,458 | |||||
Total Common Stocks & Other Equity Interests |
| 428,580,638 | ||||||
Money Market Funds–2.34% |
| |||||||
Liquid Assets Portfolio–Institutional Class(c) | 5,119,790 | 5,119,790 | ||||||
Premier Portfolio–Institutional Class(c) | 5,119,789 | 5,119,789 | ||||||
Total Money Market Funds |
| 10,239,579 | ||||||
TOTAL INVESTMENTS–100.15% |
| 438,820,217 | ||||||
OTHER ASSETS LESS LIABILITIES–(0.15)% |
| (645,160 | ) | |||||
NET ASSETS–100.00% |
| $ | 438,175,057 |
Investment Abbreviations:
ADR | – American Depositary Receipt |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Non-income producing security. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. |
Portfolio Composition
By sector, based on Net Assets
as of June 30, 2015
Financials | 26.7 | % | ||
Industrials | 17.6 | |||
Information Technology | 12.5 | |||
Consumer Discretionary | 12.2 | |||
Health Care | 10.0 | |||
Energy | 6.1 | |||
Materials | 5.3 | |||
Consumer Staples | 2.9 | |||
Utilities | 2.4 | |||
Telecommunication Services | 2.1 | |||
Money Market Funds Plus Other Assets Less Liabilities | 2.2 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. American Value Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $344,280,623) | $ | 428,580,638 | ||
Investments in affiliated money market funds, at value and cost | 10,239,579 | |||
Total investments, at value (Cost $354,520,202) | 438,820,217 | |||
Foreign currencies, at value (Cost $960) | 950 | |||
Receivable for: | ||||
Investments sold | 1,573,339 | |||
Fund shares sold | 112,929 | |||
Dividends | 860,611 | |||
Investment for trustee deferred compensation and retirement plans | 48,957 | |||
Other assets | 826 | |||
Total assets | 441,417,829 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 2,335,131 | |||
Fund shares reacquired | 291,856 | |||
Amount due custodian | 84,182 | |||
Accrued fees to affiliates | 415,914 | |||
Accrued trustees’ and officers’ fees and benefits | 5,029 | |||
Accrued other operating expenses | 27,627 | |||
Trustee deferred compensation and retirement plans | 55,701 | |||
Unrealized depreciation on forward foreign currency contracts outstanding | 27,332 | |||
Total liabilities | 3,242,772 | |||
Net assets applicable to shares outstanding | $ | 438,175,057 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 289,910,107 | ||
Undistributed net investment income | 587,330 | |||
Undistributed net realized gain | 63,398,913 | |||
Net unrealized appreciation | 84,278,707 | |||
$ | 438,175,057 | |||
Net Assets: |
| |||
Series I | $ | 150,628,598 | ||
Series II | $ | 287,546,459 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 7,184,733 | |||
Series II | 13,851,512 | |||
Series I: | ||||
Net asset value per share | $ | 20.97 | ||
Series II: | ||||
Net asset value per share | $ | 20.76 |
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $10,915) | $ | 2,675,556 | ||
Dividends from affiliated money market funds | 4,310 | |||
Total investment income | 2,679,866 | |||
Expenses: | ||||
Advisory fees | 1,538,503 | |||
Administrative services fees | 521,455 | |||
Custodian fees | 8,931 | |||
Distribution fees — Series II | 345,973 | |||
Transfer agent fees | 11,327 | |||
Trustees’ and officers’ fees and benefits | 12,895 | |||
Other | 24,122 | |||
Total expenses | 2,463,206 | |||
Less: Fees waived | (12,116 | ) | ||
Net expenses | 2,451,090 | |||
Net investment income | 228,776 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 19,164,644 | |||
Foreign currencies | (4,801 | ) | ||
Forward foreign currency contracts | (27,511 | ) | ||
19,132,332 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | 2,258,248 | |||
Foreign currencies | 7,374 | |||
Forward foreign currency contracts | (76,046 | ) | ||
2,189,576 | ||||
Net realized and unrealized gain | 21,321,908 | |||
Net increase in net assets resulting from operations | $ | 21,550,684 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. American Value Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: |
| |||||||
Net investment income | $ | 228,776 | $ | 714,909 | ||||
Net realized gain | 19,132,332 | 74,535,529 | ||||||
Change in net unrealized appreciation (depreciation) | 2,189,576 | (39,221,322 | ) | |||||
Net increase in net assets resulting from operations | 21,550,684 | 36,029,116 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Series I | — | (696,392 | ) | |||||
Series ll | — | (507,414 | ) | |||||
Total distributions from net investment income | — | (1,203,806 | ) | |||||
Distributions to shareholders from net realized gains: | ||||||||
Series l | — | (12,432,585 | ) | |||||
Series ll | — | (21,321,269 | ) | |||||
Total distributions from net realized gains | — | (33,753,854 | ) | |||||
Share transactions–net: | ||||||||
Series l | (9,997,016 | ) | (5,402,205 | ) | ||||
Series ll | 2,774,593 | (49,400,679 | ) | |||||
Net increase (decrease) in net assets resulting from share transactions | (7,222,423 | ) | (54,802,884 | ) | ||||
Net increase (decrease) in net assets | 14,328,261 | (53,731,428 | ) | |||||
Net assets: | ||||||||
Beginning of period | 423,846,796 | 477,578,224 | ||||||
End of period (includes undistributed net investment income of $587,330 and $358,554, respectively) | $ | 438,175,057 | $ | 423,846,796 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. American Value Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is to provide above-average total return over a market cycle of three to five years by investing in common stocks and other equity securities.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Invesco V.I. American Value Fund
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
D. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
Invesco V.I. American Value Fund
E. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $1 billion | 0.72% | |||
Over $1 billion | 0.65% |
For the six months ended June 30, 2015, the effective advisory fee incurred by the Fund was 0.72%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such
Invesco V.I. American Value Fund
Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2016, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2016. The fee waiver agreement cannot be terminated during its term. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $12,116.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $51,626 for accounting and fund administrative services and reimbursed $469,829 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the six months ended June 30, 2015, the Fund incurred $685 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 438,820,217 | $ | — | $ | — | $ | 438,820,217 | ||||||||
Forward Foreign Currency Contracts* | — | (27,332 | ) | — | (27,332 | ) | ||||||||||
Total Investments | $ | 438,820,217 | $ | (27,332 | ) | $ | — | $ | 438,792,885 |
* | Unrealized appreciation (depreciation). |
Invesco V.I. American Value Fund
NOTE 4—Derivative Investments
Value of Derivative Investments at Period-End
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Currency risk: | ||||||||
Forward foreign currency contracts(a) | $ | — | $ | (27,332 | ) |
(a) | Values are disclosed on the Statement of Assets and Liabilities under the caption Unrealized depreciation on forward foreign currency contracts outstanding. |
Effect of Derivative Investments for the six months ended June 30, 2015
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations | ||||
Forward Foreign Currency Contracts | ||||
Realized Gain (Loss): | ||||
Currency risk | $ | (27,511 | ) | |
Change in Net Unrealized Appreciation (Depreciation): | ||||
Currency risk | (76,046 | ) | ||
Total | $ | (103,557 | ) |
The table below summarizes the average notional value of forward foreign currency contracts outstanding during the period.
Forward Foreign Currency Contracts | ||||
Average notional value | $ | 6,304,205 |
Open Forward Foreign Currency Contracts at Period-End | ||||||||||||||||||||||||||
Settlement Date | Contract to | Notional Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||||
Counterparty | Deliver | Receive | ||||||||||||||||||||||||
01/09/15 | Bank of New York Mellon (The) | GBP | 2,041,503 | USD | 3,193,635 | $ | 3,207,343 | $ | (13,708 | ) | ||||||||||||||||
01/09/15 | State Street Bank and Trust Co. | GBP | 2,044,282 | USD | 3,198,085 | 3,211,709 | (13,624 | ) | ||||||||||||||||||
Total open forward foreign currency contracts — Currency Risk | $ | (27,332 | ) |
Currency Abbreviations:
GBP | – British Pound Sterling | |
USD | – U.S. Dollar |
Offsetting Assets and Liabilities
Accounting Standards Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which was subsequently clarified in Financial Accounting Standards Board ASU 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” is intended to enhance disclosures about financial instruments and derivative instruments that are subject to offsetting arrangements on the Statement of Assets and Liabilities and to enable investors to better understand the effect of those arrangements on the Fund’s financial position. In order for an arrangement to be eligible for netting, the Fund must have a basis to conclude that such netting arrangements are legally enforceable. The Fund enters into netting agreements and collateral agreements in an attempt to reduce the Fund’s Counterparty credit risk by providing for a single net settlement with a Counterparty of all financial transactions covered by the agreement in an event of default as defined under such agreement.
There were no derivative instruments subject to a netting agreement for which the Fund is not currently netting. The following tables present derivative instruments that are either subject to an enforceable netting agreement or offset by collateral arrangements as of June 30, 2015.
Liabilities: | ||||||||||||||||||||||||
Gross amounts of Recognized Liabilities | Gross amounts offset in Statement of Assets & Liabilities | Net amounts of liabilities presented in Statement of Assets & Liabilities | Collateral Pledged | Net Amount | ||||||||||||||||||||
Counterparty | Financial
| Cash
| ||||||||||||||||||||||
Bank of New York Mellon (The) | $ | 13,708 | $ | — | $ | 13,708 | $ | — | $ | — | $ | 13,708 | ||||||||||||
State Street Bank and Trust Co. | 13,624 | — | 13,624 | — | — | 13,624 | ||||||||||||||||||
Total | $ | 27,332 | $ | — | $ | 27,332 | $ | — | $ | — | $ | 27,332 |
Invesco V.I. American Value Fund
NOTE 5—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund did not have a capital loss carryforward as of December 31, 2014.
NOTE 8—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $48,566,904 and $49,869,915, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 96,102,859 | ||
Aggregate unrealized (depreciation) of investment securities | (12,246,277 | ) | ||
Net unrealized appreciation of investment securities | $ | 83,856,582 |
Cost of investments for tax purposes is $354,963,635.
Invesco V.I. American Value Fund
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 241,349 | $ | 4,923,662 | 740,950 | $ | 14,637,823 | ||||||||||
Series II | 1,318,522 | 26,631,519 | 4,478,574 | 89,149,298 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 691,727 | 13,128,977 | ||||||||||||
Series II | — | — | 1,159,250 | 21,828,683 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (732,986 | ) | (14,920,678 | ) | (1,642,472 | ) | (33,169,005 | ) | ||||||||
Series II | (1,182,436 | ) | (23,856,926 | ) | (8,183,599 | ) | (160,378,660 | ) | ||||||||
Net increase (decrease) in share activity | (355,551 | ) | $ | (7,222,423 | ) | (2,755,570 | ) | $ | (54,802,884 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 67% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 10—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income(a) | Net gains on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Distributions from net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series I |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 19.92 | $ | 0.03 | $ | 1.02 | $ | 1.05 | $ | — | $ | — | $ | — | $ | 20.97 | 5.27 | % | $ | 150,629 | 0.98 | %(d) | 0.99 | %(d) | 0.26 | %(d) | 12 | % | ||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 19.89 | 0.07 | 1.78 | 1.85 | (0.10 | ) | (1.72 | ) | (1.82 | ) | 19.92 | 9.75 | 152,938 | 0.99 | 1.00 | 0.32 | 48 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 14.91 | 0.07 | 5.03 | 5.10 | (0.12 | ) | — | (0.12 | ) | 19.89 | 34.27 | 156,824 | 0.99 | 1.00 | 0.39 | 42 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 12.81 | 0.12 | 2.08 | 2.20 | (0.10 | ) | — | (0.10 | ) | 14.91 | 17.21 | 131,233 | 0.99 | 1.00 | 0.86 | 26 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 12.79 | 0.10 | 0.01 | 0.11 | (0.09 | ) | — | (0.09 | ) | 12.81 | 1.00 | 129,658 | 0.96 | 0.97 | 0.80 | 30 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 10.56 | 0.08 | 2.25 | 2.33 | (0.10 | ) | — | (0.10 | ) | 12.79 | 22.24 | 162,472 | 1.02 | 1.03 | 0.72 | 40 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series II |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 19.75 | 0.00 | 1.01 | 1.01 | — | — | — | 20.76 | 5.11 | 287,546 | 1.23 | (d) | 1.24 | (d) | 0.01 | (d) | 12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 19.73 | 0.01 | 1.77 | 1.78 | (0.04 | ) | (1.72 | ) | (1.76 | ) | 19.75 | 9.48 | 270,908 | 1.24 | 1.25 | 0.07 | 48 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 14.81 | 0.03 | 4.99 | 5.02 | (0.10 | ) | — | (0.10 | ) | 19.73 | 33.93 | 320,754 | 1.24 | 1.25 | 0.14 | 42 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 12.74 | 0.10 | 2.06 | 2.16 | (0.09 | ) | — | (0.09 | ) | 14.81 | 16.98 | 220,711 | 1.17 | 1.25 | 0.68 | 26 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 12.72 | 0.09 | 0.01 | 0.10 | (0.08 | ) | — | (0.08 | ) | 12.74 | 0.91 | 163,194 | 1.06 | 1.22 | 0.70 | 30 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 10.50 | 0.07 | 2.25 | 2.32 | (0.10 | ) | — | (0.10 | ) | 12.72 | 22.18 | 151,985 | 1.12 | 1.32 | 0.62 | 40 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $151,831 and $279,072 for Series I and Series II shares, respectively. |
Invesco V.I. American Value Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,052.70 | $ | 4.99 | $ | 1,019.93 | $ | 4.91 | 0.98 | % | ||||||||||||
Series II | 1,000.00 | 1,051.10 | 6.26 | 1,018.70 | 6.16 | 1.23 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. American Value Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. American Value Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ investment
process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Underlying Funds Mid-Cap Value Funds Index. The Board noted that performance of Series I shares of the Fund was in the third quintile of its performance universe for the one year period, the fourth quintile for the three year period and the first quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that
Invesco V.I. American Value Fund
performance of Series I shares of the Fund was below the performance of the Index for the one and three year periods and above the performance of the Index for the five year period. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series I shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was above the effective advisory fee rate of one mutual fund advised by Invesco Advisers. The Board also noted how the Fund’s rate compared to the effective sub-adviser fee rate of five mutual funds sub-advised by Invesco Advisers. The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other client accounts using an investment process substantially similar to the investment process used for the Fund.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower
fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered that it receives periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any
securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
Invesco V.I. American Value Fund
| ||||
Semiannual Report to Shareholders
| June 30, 2015 | |||
| ||||
Invesco V.I. Balanced-Risk Allocation Fund | ||||
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
Invesco Distributors, Inc. VIIBRA-SAR-1
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance | ||
Performance summary
|
Fund vs. Indexes |
Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower. |
Series I Shares | 0.57 | % | |||
Series II Shares | 0.41 | ||||
MSCI World Indexq (Broad Market Index) | 2.63 | ||||
Custom V.I. Balanced-Risk Allocation Indexn (Style-Specific Index) | 1.62 | ||||
Lipper VUF Absolute Return Funds Classification Average¿ (Peer Group) | 0.23 |
Source(s): qFactSet Research Systems Inc.; nInvesco, FactSet Research Systems Inc.; ¿Lipper Inc. | |||||
The MSCI World IndexSM is an unmanaged index considered representative of stocks of developed countries. The index is computed using the net return, which withholds applicable taxes for non-resident investors. The Custom V.I. Balanced-Risk Allocation Index, created by Invesco to serve as a benchmark for Invesco V.I. Balanced-Risk Allocation Fund, comprises the following indexes: MSCI World Index (60%) and Barclays U.S. Aggregate Index (40%). The Lipper VUF Absolute Return Funds Classification Average represents an average of all variable insurance underlying funds in the Lipper Absolute Return Funds Classification. The Barclays U.S. Aggregate Index is an unmanaged index considered representative of the US investment-grade, fixed-rate bond market. The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es). A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
|
The returns shown above include the returns of Invesco Van Kampen V.I. Global Tactical Asset Allocation Fund (the first predecessor fund) for the period June 1, 2010, to May 2, 2011, the date the first predecessor fund was reorganized into the Fund, and the returns of Van Kampen Life Investment Trust Global Tactical Asset Allocation Portfolio (the second predecessor fund) for the period prior to June 1, 2010, the date the second predecessor fund was reorganized into the first predecessor fund. The second predecessor fund was advised by Van Kampen Asset Management. Returns shown above for Series I and Series II shares are blended returns of the predecessor funds and Invesco V.I. Balanced-Risk Allocation Fund. Share class returns will differ from the predecessor funds because of different expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial
adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 0.80% and 1.05%, respectively.1,2,3 The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 1.20% and 1.45%, respectively.1 The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. Balanced-Risk Allocation Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing
Average Annual Total Returns | ||
As of 6/30/15 | ||
Series I Shares | ||
Inception (1/23/09) | 10.25% | |
5 Years | 9.30 | |
1 Year | -0.14 | |
Series II Shares | ||
Inception (1/23/09) | 9.96% | |
5 Years | 9.01 | |
1 Year | -0.39 |
variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
1 | The expense ratio includes acquired fund fees and expenses of the underlying funds in which the Fund invests of 0.09% for Invesco V.I. Balanced-Risk Allocation Fund. |
2 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least April 30, 2016. See current prospectus for more information. |
3 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2017. See current prospectus for more information. |
Invesco V.I. Balanced-Risk Allocation Fund
Consolidated Schedule of Investments
June 30, 2015
(Unaudited)
Interest Rate | Maturity Date | Principal Amount | Value | |||||||||||||
U.S. Treasury Securities–12.16% |
| |||||||||||||||
U.S. Treasury Bills–5.72%(a) | ||||||||||||||||
U.S. Treasury Bills(b) | 0.08 | % | 07/09/15 | $ | 4,000,000 | $ | 4,000,009 | |||||||||
U.S. Treasury Bills(b) | 0.08 | % | 07/16/15 | 6,000,000 | 5,999,925 | |||||||||||
U.S. Treasury Bills(b) | 0.07 | % | 07/23/15 | 5,600,000 | 5,600,034 | |||||||||||
U.S. Treasury Bills(b) | 0.07 | % | 07/30/15 | 9,020,000 | 9,019,854 | |||||||||||
U.S. Treasury Bills(b) | 0.06 | % | 12/03/15 | 6,700,000 | 6,698,988 | |||||||||||
U.S. Treasury Bills(b) | 0.08 | % | 12/10/15 | 21,980,000 | 21,975,542 | |||||||||||
U.S. Treasury Bills(b) | 0.10 | % | 12/17/15 | 7,020,000 | 7,018,020 | |||||||||||
60,312,372 | ||||||||||||||||
U.S. Treasury Notes–6.44%(c) | ||||||||||||||||
U.S. Treasury Notes(b) | 0.06 | % | 01/31/16 | 32,480,000 | 32,480,235 | |||||||||||
U.S. Treasury Notes(b)(d) | 0.08 | % | 04/30/16 | 27,725,000 | 27,730,876 | |||||||||||
U.S. Treasury Notes(b) | 0.09 | % | 07/31/16 | 7,750,000 | 7,752,245 | |||||||||||
67,963,356 | ||||||||||||||||
Total U.S. Treasury Securities (Cost $128,261,585) | 128,275,728 | |||||||||||||||
Expiration Date | ||||||||||||||||
Commodity-Linked Securities–2.60% | ||||||||||||||||
Canadian Imperial Bank of Commerce EMTN, U.S. Federal Funds Effective Rate minus 0.04% (linked to the Canadian Imperial Bank of Commerce Custom 3 Agriculture Commodity Index, multiplied by two)(e) | 06/21/16 | 9,050,000 | 10,410,769 | |||||||||||||
Cargill, Inc., Commodity Linked Notes, one month LIBOR rate minus 0.10% (linked to the Monthly Rebalance Commodity Excess Return Index, multiplied by 2)(e) | 06/12/16 | 14,762,003 | 17,079,260 | |||||||||||||
Total Commodity-Linked Securities (Cost $23,812,003) | 27,490,029 | |||||||||||||||
Shares | ||||||||||||||||
Money Market Funds–82.93% | ||||||||||||||||
Government & Agency Portfolio–Institutional Class(f) | 147,710,631 | 147,710,631 | ||||||||||||||
Invesco V.I. Money Market Fund–Series I(f) | 16,640,310 | 16,640,310 | ||||||||||||||
Liquid Assets Portfolio–Institutional Class(f) | 178,048,040 | 178,048,040 | ||||||||||||||
Premier Portfolio–Institutional Class(f) | 118,113,787 | 118,113,787 | ||||||||||||||
STIC (Global Series) PLC–U.S. Dollar Liquidity Portfolio–Institutional Class (Ireland)(f) | 118,383,796 | 118,383,796 | ||||||||||||||
STIC Prime Portfolio–Institutional Class(f) | 133,485,087 | 133,485,087 | ||||||||||||||
Treasury Portfolio–Institutional Class(f) | 162,561,743 | 162,561,743 | ||||||||||||||
Total Money Market Funds (Cost $874,943,394) | 874,943,394 | |||||||||||||||
TOTAL INVESTMENTS–97.69% (Cost $1,027,016,982) | 1,030,709,151 | |||||||||||||||
OTHER ASSETS LESS LIABILITIES–2.31% | 24,332,002 | |||||||||||||||
NET ASSETS–100.00% | $ | 1,055,041,153 |
See accompanying Notes to Consolidated Financial Statements which are an integral part of the financial statements.
Invesco V.I. Balanced-Risk Allocation Fund
Open Futures Contracts(g) | ||||||||||||||||||||||
Futures Contracts | Type of Contract | Number of Contracts | Expiration Month | Notional Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||
Brent Crude | Long | 198 | December-2015 | $ | 13,018,500 | $ | (317,597 | ) | ||||||||||||||
Gasoline Reformulated Blendstock Oxygenate Blending | Long | 211 | August-2015 | 18,161,783 | 99,096 | |||||||||||||||||
Heating Oil | Long | 48 | August-2015 | 3,810,038 | (92,329 | ) | ||||||||||||||||
Natural Gas | Long | 84 | December-2015 | 2,632,560 | (28,646 | ) | ||||||||||||||||
Silver | Long | 332 | September-2015 | 25,864,460 | (440,981 | ) | ||||||||||||||||
WTI Crude | Long | 155 | October-2015 | 9,315,500 | (50,887 | ) | ||||||||||||||||
Subtotal — Commodity Risk | (831,344 | ) | ||||||||||||||||||||
Australia 10 Year Bonds | Long | 1,750 | September-2015 | 169,096,681 | 1,077,726 | |||||||||||||||||
Canada 10 Year Bonds | Long | 1,441 | September-2015 | 161,547,085 | 901,155 | |||||||||||||||||
Euro Bonds | Long | 810 | September-2015 | 137,278,800 | (1,791,788 | ) | ||||||||||||||||
Japan 10 Year Bonds | Long | 108 | September-2015 | 129,679,412 | 234,942 | |||||||||||||||||
Long Gilt | Long | 1,089 | September-2015 | 198,030,892 | (2,005,429 | ) | ||||||||||||||||
U.S. Treasury 20 Year Bonds | Long | 776 | September-2015 | 117,054,750 | (2,125,598 | ) | ||||||||||||||||
Subtotal — Interest Rate Risk | (3,708,992 | ) | ||||||||||||||||||||
Dow Jones EURO STOXX 50 Index | Long | 2,015 | September-2015 | 77,197,471 | (1,036,141 | ) | ||||||||||||||||
E-Mini S&P 500 Index | Long | 605 | September-2015 | 62,145,600 | (1,009,476 | ) | ||||||||||||||||
FTSE 100 Index | Long | 852 | September-2015 | 86,938,269 | (2,522,677 | ) | ||||||||||||||||
Hang Seng Index | Long | 361 | July-2015 | 61,018,938 | (2,430,098 | ) | ||||||||||||||||
Russell 2000 Index Mini | Long | 532 | September-2015 | 66,521,280 | (536,793 | ) | ||||||||||||||||
Tokyo Stock Price Index | Long | 552 | September-2015 | 73,532,353 | (956,242 | ) | ||||||||||||||||
Subtotal — Equity Risk | (8,491,427 | ) | ||||||||||||||||||||
Total Futures Contracts | $ | (13,031,763 | ) | |||||||||||||||||||
Open Over-The-Counter Total Return Swap Agreements | ||||||||||||||||||||||
Swap Agreements | Type of Contract | Counterparty | Number of Contracts | Termination Date | Notional Amount | Unrealized Appreciation (Depreciation) | ||||||||||||||||
Receive a return equal to the Barclays Commodity Strategy 1452 Index and pay the product of (i) 0.33% of the Notional Amount multiplied by (ii) days in the period divided by 365 | Long | Barclays Bank PLC | 21,900 | May-2016 | $ | 10,419,648 | $ | (96,533 | ) | |||||||||||||
Receive a return equal to the Barclays Commodity Strategy 1715 Index and pay the product of (i) 0.45% of the Notional Amount multiplied by (ii) days in the period divided by 365 | Long | Barclays Bank PLC | 1,500 | May-2016 | 431,423 | 50,263 | ||||||||||||||||
Receive a return equal to the Monthly Rebalance Commodity Excess Return Index and pay the product of (i) 0.47% of the Notional Amount multiplied by (ii) days in the period divided by 365 | Long | Cargill, Inc. | 25,300 | May-2016 | 24,079,452 | 0 | ||||||||||||||||
Receive a return equal to the Single Commodity Index Excess Return and pay the product of (i) 0.12% of the Notional Amount multiplied by (ii) days in the period divided by 365 | Long | Cargill, Inc. | 12,150 | January-2016 | 10,338,140 | 0 | ||||||||||||||||
Receive a return equal to the CIBC Dynamic Roll LME Copper Excess Return Index 2 and pay the product of (i) 0.30% of the Notional Amount multiplied by (ii) days in the period divided by 365 | Long | Canadian Imperial Bank of Commerce | 269,000 | April-2016 | 20,166,769 | (386,204 | ) | |||||||||||||||
Receive a return equal to the Goldman Sachs Alpha Basket B784 Excess Return Strategy and pay the product of (i) 0.40% of the Notional Amount multiplied by (ii) days in the period divided by 365 | Long | Goldman Sachs International | 40,300 | May-2016 | 10,775,116 | 0 | ||||||||||||||||
Receive a return equal to the J.P. Morgan Contag Beta Gas Oil Excess Return Index and pay the product of (i) 0.25% of the Notional Amount multiplied by (ii) days in the period divided by 365 | Long | JPMorgan Chase Bank, N.A. | 12,000 | April-2016 | 3,583,692 | 6,095 | ||||||||||||||||
Receive a return equal to the S&P GSCI Gold Index Excess Return and pay the product of (i) 0.09% of the Notional Amount multiplied by (ii) days in the period divided by 365 | Long | JPMorgan Chase Bank, N.A. | 151,000 | April-2016 | $ | 14,975,818 | $ | (155,560 | ) |
See accompanying Notes to Consolidated Financial Statements which are an integral part of the financial statements.
Invesco V.I. Balanced-Risk Allocation Fund
Open Over-The-Counter Total Return Swap Agreements | ||||||||||||||||||||||
Swap Agreements | Type of Contract | Counterparty | Number of Contracts | Termination Date | Notional Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||
Receive a return equal to the MLCX Aluminum Annual Excess Return Index and pay the product of (i) 0.28% of the Notional Amount multiplied by (ii) days in the period divided by 365 | Long | Merrill Lynch International | 13,500 | September-2015 | $ | 1,421,964 | $ | 0 | ||||||||||||||
Receive a return equal to the Merrill Lynch Gold Excess Return Index and pay the product of (i) 0.14% of the Notional Amount multiplied by (ii) days in the period divided by 365 | Long | Merrill Lynch International | 120,300 | June-2016 | 18,504,354 | 0 | ||||||||||||||||
Receive a return equal to the S&P GSCI Aluminum Dynamic Roll Index Excess Return and pay the product of (i) 0.38% of the Notional Amount multiplied by (ii) days in the period divided by 365 | Long | Morgan Stanley Capital Services LLC | 192,300 | October-2015 | 18,909,540 | (317,918 | ) | |||||||||||||||
Subtotal — Commodity Risk | (899,857 | ) | ||||||||||||||||||||
Receive a return equal to the Hang Seng Index Futures multiplied by the Notional Value | Long | Goldman Sachs International | 81 | July-2015 | 13,691,230 | (540,485 | ) | |||||||||||||||
Subtotal — Equity Risk | (540,485 | ) | ||||||||||||||||||||
Total Swap Agreements | $ | (1,440,342 | ) |
Investments Abbreviations:
EMTN | – European Medium-Term Notes | |
LIBOR | – London InterBank Offered Rate |
Index Information:
Canadian Imperial Bank of Commerce Custom 3 Agriculture | – a basket of indices that provide exposure to various components of the agriculture markets. The underlying commodities comprising the indices are: Coffee ‘C’, Corn, Cotton, Sugar, Soybeans, Soybean Meal Soybean Oil, and Wheat. | |
Monthly Rebalance Commodity Excess Return Index | – a commodity index composed of futures contracts on Coffee ‘C’, Corn, Cotton No.2, Soybean Meal, Soybeal Oil, Soybeans, Sugar No.11 and Wheat. | |
Barclays Commodity Strategy 1452 Index | – a commodity index that provides exposure to future contracts on Copper. | |
Barclays Commodity Strategy 1715 Index | – a commodity index that provides exposure to future contracts on Coffee ‘C’, Corn, Cotton, Soybeans, Soybean Meal, Soybean Oil, Sugar, and Wheat. | |
Single Commodity Index Excess Return | – a commodity index composed of future contracts on Gold. | |
Goldman Sachs Alpha Basket B784 Excess Return Strategy | – a basket of eight indices that provide exposure to various components of the agriculture markets. The underlying commodities comprising the indices are: Coffee ‘C’, Corn, Cotton, Soybean Meal, Soybean Oil, Soybeans, Sugar and Wheat |
Notes to Consolidated Schedule of Investments:
(a) | Security traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. |
(b) | All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 1L and Note 4. |
(c) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on June 30, 2015. |
(d) | All or a portion of the value was designated as collateral for swap agreements. See Note 1M and Note 4. |
(e) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at June 30, 2015 was $27,490,029, which represented 2.60% of the Fund’s Net Assets. |
(f) | The money market fund and the Fund are affiliated by having the same investment adviser. |
(g) | Futures contracts collateralized by $22,341,000 cash held with Goldman Sachs & Co., the futures commission merchant. |
Target Risk Allocation and Notional Asset Weights*
By asset class
Asset Class | Risk Allocation** | % of Net Assets as of 06/30/15*** | ||||||
Equities | 44.03 | % | 41.91 | % | ||||
Fixed Income | 35.91 | 84.83 | ||||||
Commodities | 20.06 | 23.83 |
* | Risk contribution is measured as the standard deviation of each asset class as a percentage of total portfolio standard deviation. The risk contribution of each underlying asset determines the dollar-weighting of the asset. Standard deviation measures a fund’s range of total returns and fluctuations over a defined period of time. |
** | Based on the expected market exposure. |
*** | Due to the use of leverage, the percentages may not equal 100%. |
See accompanying Notes to Consolidated Financial Statements which are an integral part of the financial statements.
Invesco V.I. Balanced-Risk Allocation Fund
Consolidated Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $152,073,588) | $ | 155,765,757 | ||
Investments in affiliated money market funds, at value and cost | 874,943,394 | |||
Total investments, at value (Cost $1,027,016,982) | 1,030,709,151 | |||
Receivable for: | ||||
Deposits with brokers | 22,341,000 | |||
Variation margin — futures | 858,278 | |||
Fund shares sold | 851,231 | |||
Dividends and interest | 56,009 | |||
Swaps receivables – OTC | 3,441,429 | |||
Investment for trustee deferred compensation and retirement plans | 90,487 | |||
Unrealized appreciation on swap agreements—OTC | 56,358 | |||
Total assets | 1,058,403,943 | |||
Liabilities: |
| |||
Payable for: | ||||
Fund shares reacquired | 552,018 | |||
Swaps payable – OTC | 134 | |||
Accrued fees to affiliates | 1,148,977 | |||
Accrued trustees’ and officers’ fees and benefits | 8,553 | |||
Accrued other operating expenses | 53,161 | |||
Trustee deferred compensation and retirement plans | 103,120 | |||
Premiums received on swap agreements—OTC | 127 | |||
Unrealized depreciation on swap agreements—OTC | 1,496,700 | |||
Total liabilities | 3,362,790 | |||
Net assets applicable to shares outstanding | $ | 1,055,041,153 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 920,946,989 | ||
Undistributed net investment income | 36,274,514 | |||
Undistributed net realized gain | 108,599,944 | |||
Net unrealized appreciation (depreciation) | (10,780,294 | ) | ||
$ | 1,055,041,153 | |||
Net Assets: |
| |||
Series I | $ | 25,708,222 | ||
Series II | $ | 1,029,332,931 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 2,078,939 | |||
Series II | 84,252,009 | |||
Series I: | ||||
Net asset value and offering price per share | $ | 12.37 | ||
Series II: | ||||
Net asset value per share | $ | 12.22 |
Consolidated Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Investment income: |
| |||
Dividends from affiliated money market funds | $ | 288,321 | ||
Interest | 77,753 | |||
Total investment income | 366,074 | |||
Expenses: | ||||
Advisory fees | 4,800,065 | |||
Administrative services fees | 1,162,646 | |||
Custodian fees | 12,405 | |||
Distribution fees—Series II | 1,284,483 | |||
Transfer agent fees | 10,895 | |||
Trustees’ and officers’ fees and benefits | 18,991 | |||
Other | 49,374 | |||
Total expenses | 7,338,859 | |||
Less: Fees waived | (2,448,706 | ) | ||
Net expenses | 4,890,153 | |||
Net investment income (loss) | (4,524,079 | ) | ||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | (9,334,818 | ) | ||
Foreign currencies | (765,409 | ) | ||
Futures contracts | 40,492,710 | |||
Swap agreements | (2,678,131 | ) | ||
27,714,352 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | 7,597,997 | |||
Foreign currencies | (111 | ) | ||
Futures contracts | (26,512,495 | ) | ||
Swap agreements | (1,127,645 | ) | ||
(20,042,254 | ) | |||
Net realized and unrealized gain | 7,672,098 | |||
Net increase in net assets resulting from operations | $ | 3,148,019 |
See accompanying Notes to Consolidated Financial Statements which are an integral part of the financial statements.
Invesco V.I. Balanced-Risk Allocation Fund
Consolidated Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: |
| |||||||
Net investment income (loss) | $ | (4,524,079 | ) | $ | (11,788,758 | ) | ||
Net realized gain | 27,714,352 | 84,160,472 | ||||||
Change in net unrealized appreciation (depreciation) | (20,042,254 | ) | (4,269,630 | ) | ||||
Net increase in net assets resulting from operations | 3,148,019 | 68,102,084 | ||||||
Distributions to shareholders from net realized gains: | ||||||||
Series l | — | (588,237 | ) | |||||
Series ll | — | (78,667,991 | ) | |||||
Total distributions from net realized gains | — | (79,256,228 | ) | |||||
Share transactions–net: | ||||||||
Series l | 14,427,995 | 2,645,706 | ||||||
Series ll | 23,233,065 | (355,564,687 | ) | |||||
Net increase (decrease) in net assets resulting from share transactions | 37,661,060 | (352,918,981 | ) | |||||
Net increase (decrease) in net assets | 40,809,079 | (364,073,125 | ) | |||||
Net assets: | ||||||||
Beginning of period | 1,014,232,074 | 1,378,305,199 | ||||||
End of period (includes undistributed net investment income of $36,274,514 and $40,798,593, respectively) | $ | 1,055,041,153 | $ | 1,014,232,074 |
Notes to Consolidated Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. Balanced-Risk Allocation Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these consolidated financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund will seek to gain exposure to the commodity markets primarily through investments in the Invesco Cayman Commodity Fund IV Ltd. (the “Subsidiary”), a wholly-owned subsidiary of the Fund organized under the laws of the Cayman Islands. The Subsidiary was organized by the Fund to invest in commodity-linked derivatives. The Fund may invest up to 25% of its total assets in the Subsidiary.
The Fund’s investment objective is total return with a low to moderate correlation to traditional financial market indices.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its consolidated financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net
Invesco V.I. Balanced-Risk Allocation Fund
asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Swap agreements are fair valued using an evaluated quote, if available, provided by an independent pricing service. Evaluated quotes provided by the pricing service are valued based on a model which may include end-of-day net present values, spreads, ratings, industry, company performance and returns of referenced assets.
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the consolidated financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Consolidated Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Consolidated Statement of Operations and the Consolidated Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Consolidated Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Consolidated Statement of Operations and Consolidated Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Consolidated Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Consolidated Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s |
Invesco V.I. Balanced-Risk Allocation Fund
taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the consolidated financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Subsidiary is classified as a controlled foreign corporation under Subchapter N of the Internal Revenue Code. Therefore, the Fund is required to increase its taxable income by its share of the Subsidiary’s income. Net investment losses of the Subsidiary cannot be deducted by the Fund in the current period nor carried forward to offset taxable income in future periods.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The financial statements are prepared on a consolidated basis in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. The accompanying financial statements reflect the financial position of the Fund and its Subsidiary and the results of operations on a consolidated basis. All inter-company accounts and transactions have been eliminated in consolidation. |
In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the consolidated financial statements are released to print.
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust, and under the Subsidiary’s organizational documents, the directors and officers of the Subsidiary, are indemnified against certain liabilities that may arise out of the performance of their duties to the Fund and/or the Subsidiary, respectively. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Consolidated Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Consolidated Statement of Operations.
J. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Consolidated Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Consolidated Statement of Assets and Liabilities.
K. | Structured Securities — The Fund may invest in structured securities. Structured securities are a type of derivative security whose value is determined by reference to changes in the value of underlying securities, currencies, interest rates, commodities, indices or other financial indicators (“reference instruments”). Most structured securities are fixed-income securities that have maturities of three years or less. Structured securities may be positively or negatively indexed (i.e., their principal value or interest rates may increase or decrease if the underlying reference instrument appreciates) and may have return characteristics similar to direct investments in the underlying reference instrument. |
Invesco V.I. Balanced-Risk Allocation Fund
Structured securities may entail a greater degree of market risk than other types of debt securities because the investor bears the risk of the reference instruments. In addition to the credit risk of structured securities and the normal risks of price changes in response to changes in interest rates, the principal amount of structured notes or indexed securities may decrease as a result of changes in the value of the underlying reference instruments. Changes in the daily value of structured securities are recorded as unrealized gains (losses) in the Consolidated Statement of Operations. When the structured securities mature or are sold, the Fund recognizes a realized gain (loss) on the Consolidated Statement of Operations.
L. | Futures Contracts — The Fund may enter into futures contracts to manage exposure to interest rate, equity and market price movements and/or currency risks. A futures contract is an agreement between Counterparties to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Consolidated Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund’s basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Consolidated Statement of Operations. The primary risks associated with futures contracts are market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal Counterparty risk since the exchange’s clearinghouse, as Counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Consolidated Statement of Assets and Liabilities. |
M. | Swap Agreements — The Fund may enter into various swap transactions, including interest rate, total return, index, currency and credit default swap contracts (“CDS”) for investment purposes or to manage interest rate, currency or credit risk. Such transactions are agreements between Counterparties. These agreements may contain among other conditions, events of default and termination events, and various covenants and representations such as provisions that require the Fund to maintain a pre-determined level of net assets, and/or provide limits regarding the decline of the Fund’s NAV over specific periods of time. If the Fund were to trigger such provisions and have open derivative positions at that time, the Counterparty may be able to terminate such agreement and request immediate payment in an amount equal to the net liability positions, if any. |
Interest rate, total return, index, and currency swap agreements are two-party contracts entered into primarily to exchange the returns (or differentials in rates of returns) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or “swapped” between the parties are calculated with respect to a notional amount, i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate or return of an underlying asset, in a particular foreign currency, or in a “basket” of securities representing a particular index. At the maturity date, a net cash flow is exchanged where the total return is equivalent to the return of the underlying reference less a financing rate, if any. As a receiver, the Fund would receive payments based on any positive total return and would owe payments in the event of a negative total return. As the payer, the Fund would owe payments on any net positive total return, and would receive payment in the event of a negative total return.
Changes in the value of swap agreements are recognized as unrealized gains (losses) in the Consolidated Statement of Operations by “marking to market” on a daily basis to reflect the value of the swap agreement at the end of each trading day. Payments received or paid at the beginning of the agreement are reflected as such on the Consolidated Statement of Assets and Liabilities and may be referred to as upfront payments. The Fund accrues for the fixed payment stream and amortizes upfront payments, if any, on swap agreements on a daily basis with the net amount, recorded as a component of realized gain (loss) on the Consolidated Statement of Operations. A liquidation payment received or made at the termination of a swap agreement is recorded as realized gain (loss) on the Consolidated Statement of Operations. The Fund segregates liquid securities having a value at least equal to the amount of the potential obligation of a Fund under any swap transaction. Entering into these agreements involves, to varying degrees, lack of liquidity and elements of credit, market, and Counterparty risk in excess of amounts recognized on the Consolidated Statement of Assets and Liabilities. Such risks involve the possibility that a swap is difficult to sell or liquidate; the Counterparty does not honor its obligations under the agreement and unfavorable interest rates and market fluctuations. It is possible that developments in the swaps market, including potential government regulation, could adversely affect the Fund’s ability to terminate existing swap agreements or to realize amounts to be received under such agreements.
N. | Leverage Risk — Leverage exists when a Fund can lose more than it originally invests because it purchases or sells an instrument or enters into a transaction without investing an amount equal to the full economic exposure of the instrument or transaction. |
O. | Other Risks — The Fund will seek to gain exposure to commodity markets primarily through an investment in the Subsidiary and through investments in exchange traded funds and commodity-linked derivatives. The Subsidiary, unlike the Fund, may invest without limitation in commodities, commodity-linked derivatives and other securities, such as exchange traded notes, that may provide leverage and non-leveraged exposure to commodity markets. The Fund is indirectly exposed to the risks associated with the Subsidiary’s investments. |
The Fund is non-diversified and may invest in securities of fewer issuers than if it were diversified. Thus, the value of the Fund’s shares may vary more widely and the Fund may be subject to greater market and credit risk than if the Fund invested more broadly.
P. | Collateral — To the extent the Fund has designated or segregated a security as collateral and that security is subsequently sold, it is the Fund’s practice to replace such collateral no later than the next business day. |
Invesco V.I. Balanced-Risk Allocation Fund
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser less the amount paid by the Subsidiary to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||||
First $250 million | 0 | .95% | ||||
Next $250 million | 0 | .925% | ||||
Next $500 million | 0 | .90% | ||||
Next $1.5 billion | 0 | .875% | ||||
Next $2.5 billion | 0 | .85% | ||||
Next $2.5 billion | 0 | .825% | ||||
Next $2.5 billion | 0 | .80% | ||||
Over $10 billion | 0 | .775% |
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.92%.
The Subsidiary has entered into a separate contract with the Adviser whereby the Adviser provides investment advisory and other services to the Subsidiary. In consideration of these services, the Subsidiary pays an advisory fee to the Adviser based on the annual rate of the Subsidiary’s average daily net assets as set forth in the table above.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc., Invesco Canada Ltd. and Invesco PowerShares Capital Management LLC (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least April 30, 2016, to waive advisory fees and/or reimburse expenses of shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 0.76% less net Acquired Fund Fees and Expenses and Series II shares to 1.01% less net Acquired Fund Fees and Expenses of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Acquired Fund Fees and Expenses are not operating expenses of the Fund directly, but are fees and expenses, including management fees of the investment companies in which the Fund invests. As a result, the total annual fund operating expenses after expense reimbursement may exceed the expense limits above. Unless Invesco continues the fee waiver agreement, it will terminate on April 30, 2016. The fee waiver agreement cannot be terminated during its term.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $2,448,706.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $122,950 for accounting and fund administrative services and reimbursed $1,039,696 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Consolidated Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Consolidated Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
Invesco V.I. Balanced-Risk Allocation Fund
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the consolidated financial statements may materially differ from the value received upon actual sale of those investments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Money Market Funds | $ | 874,943,394 | $ | — | $ | — | $ | 874,943,394 | ||||||||
U.S. Treasury Securities | — | 128,275,728 | — | 128,275,728 | ||||||||||||
Commodity-Linked Securities | — | 27,490,029 | — | 27,490,029 | ||||||||||||
874,943,394 | 155,765,757 | — | 1,030,709,151 | |||||||||||||
Futures Contracts* | (13,031,763 | ) | — | — | (13,031,763 | ) | ||||||||||
Swap Agreements* | — | (1,440,342 | ) | — | (1,440,342 | ) | ||||||||||
Total Investments | $ | 861,911,631 | $ | 154,325,415 | $ | — | $ | 1,016,237,046 |
* | Unrealized appreciation (depreciation). |
NOTE 4—Derivative Investments
Value of Derivative Investments at Period-End
The table below summarizes the value of the Fund’s derivative investments, detailed by primary risk exposure, held as of June 30, 2015:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Commodity risk: | ||||||||
Futures contracts(a) | $ | 99,096 | $ | (930,440 | ) | |||
Swap agreements(b) | 56,358 | (956,215 | ) | |||||
Interest rate risk: | ||||||||
Futures contracts(a) | 2,213,823 | (5,922,815 | ) | |||||
Equity risk: | ||||||||
Futures contracts(a) | — | (8,491,427 | ) | |||||
Swap agreements(b) | — | (540,485 | ) | |||||
Total | $ | 2,369,277 | $ | (16,841,382 | ) |
(a) | Includes cumulative appreciation (depreciation) of futures contracts. Only current day’s variation margin receivable is reported within the Consolidated Statement of Assets and Liabilities. |
(b) | Values are disclosed on the Consolidated Statement of Assets and Liabilities under the caption Unrealized appreciation on swap agreements—OTC and Unrealized depreciation on swap agreements—OTC. |
Invesco V.I. Balanced-Risk Allocation Fund
Effect of Derivative Investments for the six months ended June 30, 2015
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Consolidated Statement of Operations | ||||||||
Futures Contracts | Swap Agreements | |||||||
Realized Gain (Loss): | ||||||||
Commodity risk | $ | (5,703,632 | ) | $ | (5,545,456 | ) | ||
Interest rate risk | 8,153,374 | 359,032 | ||||||
Equity risk | 38,042,968 | 2,508,293 | ||||||
Change in Net Unrealized Appreciation (Depreciation): | ||||||||
Commodity risk | 7,050,187 | 150,128 | ||||||
Interest rate risk | (19,089,780 | ) | (523,560 | ) | ||||
Equity risk | (14,472,902 | ) | (754,213 | ) | ||||
Total | $ | 13,980,215 | $ | (3,805,776 | ) |
The table below summarizes the average notional value of futures contracts and swap agreements outstanding during the period.
Futures Contracts | Swap Agreements | |||||||
Average notional value | $ | 1,288,407,279 | $ | 146,749,994 |
Offsetting Assets and Liabilities
Accounting Standards Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which was subsequently clarified in Financial Accounting Standards Board ASU 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” is intended to enhance disclosures about financial instruments and derivative instruments that are subject to offsetting arrangements on the Consolidated Statement of Assets and Liabilities and to enable investors to better understand the effect of those arrangements on the Fund’s financial position. In order for an arrangement to be eligible for netting, the Fund must have a basis to conclude that such netting arrangements are legally enforceable. The Fund enters into netting agreements and collateral agreements in an attempt to reduce the Fund’s Counterparty credit risk by providing for a single net settlement with a Counterparty of all financial transactions covered by the agreement in an event of default as defined under such agreement.
There were no derivative instruments subject to a netting agreement for which the Fund is not currently netting. The following tables present derivative instruments that are either subject to an enforceable netting agreement or offset by collateral arrangements as of June 30, 2015.
Assets: | ||||||||||||||||||||||||
Gross amounts of Recognized Assets | Gross amounts offset in Consolidated Statement of Assets & Liabilities | Net amounts of assets presented in Consolidated Statement of Assets & Liabilities | Collateral Received | |||||||||||||||||||||
Counterparty | Financial Instruments | Cash | Net Amount(a) | |||||||||||||||||||||
Subsidiary | ||||||||||||||||||||||||
Barclays Bank PLC | $ | 50,263 | $ | (50,263 | ) | $ | — | $ | — | $ | — | $ | — | |||||||||||
Cargill, Inc. | 2,380,892 | — | 2,380,892 | — | (1,350,000 | ) | 1,030,892 | |||||||||||||||||
Goldman Sachs International | 1,123,460 | — | 1,123,460 | (1,123,460 | ) | — | — | |||||||||||||||||
JPMorgan Chase Bank, N.A. | 6,095 | (6,095 | ) | — | — | — | — | |||||||||||||||||
Total | $ | 3,560,710 | $ | (56,358 | ) | $ | 3,504,352 | $ | (1,123,460 | ) | $ | (1,350,000 | ) | $ | 1,030,892 | |||||||||
Liabilities: | ||||||||||||||||||||||||
Gross amounts of Recognized Liabilities | Gross amounts offset in Consolidated Statement of Assets & Liabilities | Net amounts of liabilities presented in Consolidated Statement of Assets & Liabilities | Collateral Pledged | |||||||||||||||||||||
Counterparty | Financial Instruments | Cash | Net Amount(a) | |||||||||||||||||||||
Fund | ||||||||||||||||||||||||
Goldman Sachs International | $ | 540,620 | $ | — | $ | 540,620 | $ | (540,620 | ) | $ | — | $ | — | |||||||||||
Subsidiary | ||||||||||||||||||||||||
Barclays Bank PLC | 98,118 | (50,263 | ) | 47,855 | (47,855 | ) | — | — | ||||||||||||||||
Canadian Imperial Bank of Commerce | 389,519 | — | 389,519 | (389,519 | ) | — | — | |||||||||||||||||
JPMorgan Chase Bank, N.A. | 156,113 | (6,095 | ) | 150,018 | (150,018 | ) | — | — | ||||||||||||||||
Merrill Lynch International | 54,516 | — | 54,516 | (54,516 | ) | — | — | |||||||||||||||||
Morgan Stanley Capital Services LLC | 320,871 | — | 320,871 | (320,871 | ) | — | — | |||||||||||||||||
Subtotal — Subsidiary | 1,019,137 | (56,358 | ) | 962,779 | (962,779 | ) | — | — | ||||||||||||||||
Total | $ | 1,559,757 | $ | (56,358 | ) | $ | 1,503,399 | $ | (1,503,399 | ) | $ | — | $ | — |
(a) | The Fund and the Subsidiary are recognized as separate legal entities and as such are subject to separate netting arrangements with the Counterparty. |
Invesco V.I. Balanced-Risk Allocation Fund
NOTE 5—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Consolidated Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund did not have a capital loss carryforward as of December 31, 2014.
NOTE 8—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $23,812,003 and $23,515,182, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 3,692,169 | ||
Aggregate unrealized (depreciation) of investment securities | — | |||
Net unrealized appreciation of investment securities | $ | 3,692,169 |
Cost of investments is the same for financial reporting and tax purposes.
Invesco V.I. Balanced-Risk Allocation Fund
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 1,226,361 | $ | 15,351,373 | 316,598 | $ | 4,028,214 | ||||||||||
Series II | 7,671,742 | 95,356,848 | 14,185,151 | 177,408,617 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 48,615 | 588,237 | ||||||||||||
Series II | — | — | 6,566,610 | 78,667,991 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (73,777 | ) | (923,378 | ) | (155,787 | ) | (1,970,745 | ) | ||||||||
Series II | (5,810,113 | ) | (72,123,783 | ) | (50,545,455 | ) | (611,641,295 | ) | ||||||||
Net increase (decrease) in share activity | 3,014,213 | $ | 37,661,060 | (29,584,268 | ) | $ | (352,918,981 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 86% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 10—Consolidated Financial Highlights
The following schedule presents consolidated financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income (loss)(a) | Net gains on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Distributions from net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income (loss) to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Series I |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 12.30 | $ | (0.04 | ) | $ | 0.11 | $ | 0.07 | $ | — | $ | — | $ | — | $ | 12.37 | 0.57 | % | $ | 25,708 | 0.69 | %(d)(e) | 1.16 | %(d) | (0.62 | )%(d) | 25 | % | |||||||||||||||||||||||||||
Year ended 12/31/14 | 12.30 | (0.08 | ) | 0.80 | 0.72 | — | (0.72 | ) | (0.72 | ) | 12.30 | 5.91 | 11,397 | 0.69 | (e) | 1.11 | (0.65 | ) | 60 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 12.65 | (0.08 | ) | 0.30 | 0.22 | (0.21 | ) | (0.36 | ) | (0.57 | ) | 12.30 | 1.70 | 8,821 | 0.70 | 1.11 | (0.65 | ) | 76 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 11.53 | (0.07 | ) | 1.34 | 1.27 | (0.11 | ) | (0.04 | ) | (0.15 | ) | 12.65 | 10.98 | 10,354 | 0.70 | (e) | 1.15 | (0.59 | ) | 188 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/11(f) | 13.09 | (0.04 | ) | 1.28 | 1.24 | (0.10 | ) | (2.70 | ) | (2.80 | ) | 11.53 | 11.00 | 4,472 | 0.71 | (e) | 1.22 | (0.32 | ) | 142 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/10(g) | 12.00 | 0.10 | 1.15 | 1.25 | (0.02 | ) | (0.14 | ) | (0.16 | ) | 13.09 | 10.57 | 17 | 0.89 | 1.29 | 0.88 | (h) | 444 | ||||||||||||||||||||||||||||||||||||||
Series II |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 12.17 | (0.05 | ) | 0.10 | 0.05 | — | — | — | 12.22 | 0.41 | 1,029,333 | 0.94 | (d)(e) | 1.41 | (d) | (0.87 | )(d) | 25 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 12.21 | (0.12 | ) | 0.80 | 0.68 | — | (0.72 | ) | (0.72 | ) | 12.17 | 5.62 | 1,002,835 | 0.94 | (e) | 1.36 | (0.90 | ) | 60 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 12.57 | (0.11 | ) | 0.30 | 0.19 | (0.19 | ) | (0.36 | ) | (0.55 | ) | 12.21 | 1.50 | 1,369,485 | 0.95 | 1.36 | (0.90 | ) | 76 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 11.49 | (0.10 | ) | 1.32 | 1.22 | (0.10 | ) | (0.04 | ) | (0.14 | ) | 12.57 | 10.64 | 1,343,806 | 0.95 | (e) | 1.40 | (0.84 | ) | 188 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/11(f) | 13.05 | (0.07 | ) | 1.27 | 1.20 | (0.06 | ) | (2.70 | ) | (2.76 | ) | 11.49 | 10.61 | 257,898 | 0.96 | (e) | 1.47 | (0.57 | ) | 142 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/10(g) | 12.10 | 0.07 | 1.04 | 1.11 | (0.02 | ) | (0.14 | ) | (0.16 | ) | 13.05 | 9.32 | 75 | 1.14 | 1.54 | 0.59 | (h) | 444 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $20,148 and $1,036,102 for Series I and Series II shares, respectively. |
(e) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the Fund invests. Because the underlying funds have varied expenses and fee levels and the Fund may own different proportions at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. Estimated underlying fund expenses are not expenses that are incurred directly by the Fund. They are expenses that are incurred directly by the underlying funds and are deducted from the value of the funds the Fund invests in. The effect of the estimated underlying fund expenses that the Fund bears indirectly is included in the Fund’s total return. Estimated acquired fund fees from underlying funds were 0.09%, 0.09%, 0.02% and 0.04% for the six months ended June 30, 2015, for the years ended December 31, 2014, 2012 and 2011, respectively. |
(f) | Prior to May 2, 2011, the Fund operated as Invesco Van Kampen V.I. Global Tactical Asset Allocation Fund (the “Predecessor Fund”). On such date, holders of the Predecessor Fund’s Series I and Series II shares received Series I and Series II shares, respectively, of the Fund. |
(g) | On June 1, 2010, the Class I and Class II shares of the Invesco Van Kampen Life Investment Trust Global Tactical Asset Allocation Portfolio were reorganized into Series I and Series II shares, respectively, of the Predecessor Fund. |
(h) | Ratio of net investment income (loss) to average net assets without fee waivers and/or expenses absorbed for the year ended December 31, 2010 was 0.48% for Series I shares and 0.19% for Series II shares. |
Invesco V.I. Balanced-Risk Allocation Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the Fund invests. The amount of fees and expenses incurred indirectly by the Fund will vary because the underlying funds have varied expenses and fee levels and the Fund may own different proportions of the underlying funds at different times. Estimated underlying fund expenses are not expenses that are incurred directly by the Fund. They are expenses that are incurred directly by the underlying funds and are deducted from the value of the underlying funds the Fund invests in. The effect of the estimated underlying fund expenses that the Fund bears indirectly are included in the Fund’s total return.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,005.70 | $ | 3.43 | $ | 1,021.37 | $ | 3.46 | 0.69 | % | ||||||||||||
Series II | 1,000.00 | 1,004.10 | 4.67 | 1,020.13 | 4.71 | 0.94 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. Balanced-Risk Allocation Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. Balanced-Risk Allocation Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports form the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s
consideration of Invesco Advisers’ investment process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe. The Board noted that performance of Series I shares of the Fund was in the first quintile of its performance universe for the one year period and that no comparative quintile information was available for the three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board also noted that there was no comparative Index.
Invesco V.I. Balanced-Risk Allocation Fund
The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the Fund’s contractual management fee rate for Series I shares of the Fund was above the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least April 30, 2016 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund.
The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other funds or client accounts with investment strategies comparable to those of the Fund.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The
Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. Invesco Advisers noted that the Fund does not execute brokerage transaction through “soft dollar” arrangements to any significant degree.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
Invesco V.I. Balanced-Risk Allocation Fund
| ||||
Semiannual Report to Shareholders
|
June 30, 2015
| |||
Invesco V.I. Comstock Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd. | ||
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
Invesco Distributors, Inc. VK-VICOM-SAR-1
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance | ||
Performance summary
Fund vs. Indexes
Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower.
Series I Shares | 0.94 | % | |||
Series II Shares | 0.79 | ||||
S&P 500 Indexq (Broad Market Index) | 1.23 | ||||
Russell 1000 Value Indexq (Style-Specific Index) | -0.61 | ||||
Lipper VUF Large-Cap Value Funds Indexn (Peer Group Index) | 0.95 | ||||
Source(s): qFactSet Research Systems Inc.; nLipper Inc. |
The S&P 500® Index is an unmanaged index considered representative of the US stock market.
The Russell 1000® Value Index is an unmanaged index considered representative of large-cap value stocks. The Russell 1000 Value Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
The Lipper VUF Large-Cap Value Funds Index is an unmanaged index considered representative of large-cap value variable insurance underlying funds tracked by Lipper.
The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es).
A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
Average Annual Total Returns |
| ||||
As of 6/30/15 |
| ||||
Series I Shares | |||||
Inception (4/30/99) | 7.01 | % | |||
10 Years | 7.32 | ||||
5 Years | 16.67 | ||||
1 Year | 3.59 | ||||
Series II Shares | |||||
Inception (9/18/00) | 7.09 | % | |||
10 Years | 7.05 | ||||
5 Years | 16.38 | ||||
1 Year | 3.30 |
Effective June 1, 2010, Class I and Class II shares of the predecessor fund, Van Kampen Life Investment Trust Comstock Portfolio, advised by Van Kampen Asset Management were reorganized into Series I and Series II shares, respectively, of Invesco Van Kampen V.I. Comstock Fund (renamed Invesco V.I. Comstock Fund on April 29, 2013). Returns shown above for Series I and Series II shares are blended returns of the predecessor fund and Invesco V.I. Comstock Fund. Share class returns will differ from the predecessor fund because of different expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 0.78% and 1.03%, respectively.1 The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 0.83% and 1.08%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. Comstock Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges,
expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least April 30, 2016. See current prospectus for more information. |
Invesco V.I. Comstock Fund |
Schedule of Investments(a)
June 30, 2015
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–97.45% |
| |||||||
Aerospace & Defense–1.75% | ||||||||
Honeywell International Inc. | 124,958 | $ | 12,741,967 | |||||
Textron Inc. | 545,415 | 24,341,872 | ||||||
37,083,839 | ||||||||
Aluminum–0.57% | ||||||||
Alcoa Inc. | 1,094,908 | 12,208,224 | ||||||
Apparel, Accessories & Luxury Goods–0.32% | ||||||||
Fossil Group, Inc.(b) | 98,301 | 6,818,157 | ||||||
Application Software–1.52% | ||||||||
Autodesk, Inc.(b) | 122,530 | 6,135,690 | ||||||
Citrix Systems, Inc.(b) | 372,902 | 26,162,804 | ||||||
32,298,494 | ||||||||
Asset Management & Custody Banks–3.25% | ||||||||
Bank of New York Mellon Corp. (The) | 788,585 | 33,096,912 | ||||||
State Street Corp. | 466,366 | 35,910,182 | ||||||
69,007,094 | ||||||||
Auto Parts & Equipment–1.85% | ||||||||
Johnson Controls, Inc. | 791,837 | 39,219,687 | ||||||
Automobile Manufacturers–1.76% | ||||||||
General Motors Co. | 1,123,275 | 37,438,756 | ||||||
Broadcasting–0.46% | ||||||||
CBS Corp.–Class B | 176,065 | 9,771,608 | ||||||
Cable & Satellite–2.91% | ||||||||
Comcast Corp.–Class A | 536,470 | 32,263,306 | ||||||
Time Warner Cable Inc. | 166,308 | 29,631,096 | ||||||
61,894,402 | ||||||||
Communications Equipment–1.93% | ||||||||
Cisco Systems, Inc. | 1,489,346 | 40,897,441 | ||||||
Consumer Finance–0.45% | ||||||||
Ally Financial Inc.(b) | 425,865 | 9,552,152 | ||||||
Department Stores–1.49% | ||||||||
Kohl’s Corp. | 505,702 | 31,662,002 | ||||||
Diversified Banks–13.52% | ||||||||
Bank of America Corp. | 3,265,881 | 55,585,294 | ||||||
Citigroup Inc. | 1,883,512 | 104,045,203 | ||||||
JPMorgan Chase & Co. | 1,148,879 | 77,848,041 | ||||||
U.S. Bancorp | 190,087 | 8,249,776 | ||||||
Wells Fargo & Co. | 738,433 | 41,529,472 | ||||||
287,257,786 | ||||||||
Drug Retail–0.46% | ||||||||
CVS Health Corp. | 92,947 | 9,748,281 | ||||||
Electric Utilities–0.44% | ||||||||
FirstEnergy Corp. | 284,427 | 9,258,099 | ||||||
Electrical Components & Equipment–1.06% | ||||||||
Emerson Electric Co. | 407,378 | 22,580,963 |
Shares | Value | |||||||
Electronic Components–0.65% | ||||||||
Corning Inc. | 697,980 | $ | 13,771,145 | |||||
General Merchandise Stores–1.13% | ||||||||
Target Corp. | 292,968 | 23,914,978 | ||||||
Health Care Equipment–0.67% | ||||||||
Medtronic PLC | 193,344 | 14,326,790 | ||||||
Health Care Services–0.84% | ||||||||
Express Scripts Holding Co.(b) | 200,038 | 17,791,380 | ||||||
Hotels, Resorts & Cruise Lines–2.46% | ||||||||
Carnival Corp. | 1,059,159 | 52,311,863 | ||||||
Housewares & Specialties–0.76% | ||||||||
Newell Rubbermaid Inc. | 391,788 | 16,106,405 | ||||||
Hypermarkets & Super Centers–0.55% | ||||||||
Wal-Mart Stores, Inc. | 165,150 | 11,714,089 | ||||||
Industrial Conglomerates–2.52% | ||||||||
General Electric Co. | 2,011,398 | 53,442,845 | ||||||
Industrial Machinery–1.04% | ||||||||
Ingersoll-Rand PLC | 329,145 | 22,190,956 | ||||||
Integrated Oil & Gas–7.63% | ||||||||
BP PLC–ADR (United Kingdom) | 967,021 | 38,642,159 | ||||||
Chevron Corp. | 218,619 | 21,090,175 | ||||||
Occidental Petroleum Corp. | 252,197 | 19,613,361 | ||||||
Royal Dutch Shell PLC–Class A–ADR (United Kingdom) | 700,694 | 39,946,565 | ||||||
Suncor Energy, Inc. (Canada) | 1,554,539 | 42,780,913 | ||||||
162,073,173 | ||||||||
Integrated Telecommunication Services–0.64% | ||||||||
Frontier Communications Corp. | 2,765,316 | 13,688,314 | ||||||
Internet Software & Services–2.24% | ||||||||
eBay Inc.(b) | 621,913 | 37,464,039 | ||||||
Yahoo! Inc.(b) | 255,863 | 10,052,857 | ||||||
47,516,896 | ||||||||
Investment Banking & Brokerage–2.88% | ||||||||
Goldman Sachs Group, Inc. (The) | 117,433 | 24,518,836 | ||||||
Morgan Stanley | 947,358 | 36,748,017 | ||||||
61,266,853 | ||||||||
Life & Health Insurance–2.50% | ||||||||
Aflac, Inc. | 334,970 | 20,835,134 | ||||||
MetLife, Inc. | 577,613 | 32,340,552 | ||||||
53,175,686 | ||||||||
Managed Health Care–1.03% | ||||||||
Anthem, Inc. | 132,691 | 21,779,901 | ||||||
Movies & Entertainment–3.46% | ||||||||
Time Warner Inc. | 165,172 | 14,437,685 | ||||||
Twenty-First Century Fox, Inc.–Class B | 788,746 | 25,413,396 | ||||||
Viacom Inc.–Class B | 521,443 | 33,706,075 | ||||||
73,557,156 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Comstock Fund
Shares | Value | |||||||
Multi-Utilities–0.52% | ||||||||
PG&E Corp. | 223,250 | $ | 10,961,575 | |||||
Oil & Gas Drilling–0.60% | ||||||||
Noble Corp. PLC | 827,735 | 12,738,842 | ||||||
Oil & Gas Equipment & Services–2.81% | ||||||||
Halliburton Co. | 465,928 | 20,067,519 | ||||||
Weatherford International PLC(b) | 3,224,888 | 39,569,376 | ||||||
59,636,895 | ||||||||
Oil & Gas Exploration & Production–3.49% | ||||||||
Devon Energy Corp. | 409,582 | 24,366,033 | ||||||
Hess Corp. | 190,433 | 12,736,159 | ||||||
Murphy Oil Corp. | 497,111 | 20,664,904 | ||||||
QEP Resources Inc. | 884,595 | 16,373,854 | ||||||
74,140,950 | ||||||||
Packaged Foods & Meats–3.29% | ||||||||
ConAgra Foods, Inc. | 968,308 | 42,334,426 | ||||||
Mondelez International Inc.–Class A | 414,185 | 17,039,571 | ||||||
Unilever N.V.–New York Shares (United Kingdom) | 251,797 | 10,535,186 | ||||||
69,909,183 | ||||||||
Paper Products–0.83% | ||||||||
International Paper Co. | 368,376 | 17,531,014 | ||||||
Pharmaceuticals–9.05% | ||||||||
AbbVie Inc. | 284,645 | 19,125,297 | ||||||
Bristol-Myers Squibb Co. | 150,570 | 10,018,928 | ||||||
GlaxoSmithKline PLC–ADR (United Kingdom) | 182,986 | 7,621,367 | ||||||
Merck & Co., Inc. | 717,346 | 40,838,508 | ||||||
Novartis AG (Switzerland) | 347,750 | 34,350,090 | ||||||
Pfizer Inc. | 1,026,224 | 34,409,291 | ||||||
Roche Holding AG–ADR (Switzerland) | 494,921 | 17,343,813 | ||||||
Sanofi–ADR (France) | 574,673 | 28,463,554 | ||||||
192,170,848 |
Shares | Value | |||||||
Property & Casualty Insurance–1.18% | ||||||||
Allstate Corp. (The) | 385,726 | $ | 25,022,046 | |||||
Regional Banks–3.72% | ||||||||
Citizens Financial Group Inc. | 494,434 | 13,502,993 | ||||||
Fifth Third Bancorp | 1,428,136 | 29,733,791 | ||||||
PNC Financial Services Group, Inc. (The) | 373,772 | 35,751,292 | ||||||
78,988,076 | ||||||||
Semiconductors–0.92% | ||||||||
Intel Corp. | 644,760 | 19,610,375 | ||||||
Soft Drinks–1.05% | ||||||||
Coca-Cola Co. (The) | 566,173 | 22,210,967 | ||||||
Systems Software–2.76% | ||||||||
Microsoft Corp. | 632,659 | 27,931,895 | ||||||
Symantec Corp. | 1,319,072 | 30,668,424 | ||||||
58,600,319 | ||||||||
Technology Hardware, Storage & Peripherals–2.49% | ||||||||
Hewlett-Packard Co. | 934,551 | 28,045,876 | ||||||
NetApp, Inc. | 789,190 | 24,906,836 | ||||||
52,952,712 | ||||||||
Total Common Stocks & Other Equity Interests (Cost $1,761,372,383) |
| 2,069,799,217 | ||||||
Money Market Funds–2.61% |
| |||||||
Liquid Assets Portfolio–Institutional Class(c) | 27,713,118 | 27,713,118 | ||||||
Premier Portfolio–Institutional Class(c) | 27,713,118 | 27,713,118 | ||||||
Total Money Market Funds |
| 55,426,236 | ||||||
TOTAL INVESTMENTS–100.06% | 2,125,225,453 | |||||||
OTHER ASSETS LESS LIABILITIES–(0.06)% |
| (1,272,276 | ) | |||||
NET ASSETS–100.00% | $ | 2,123,953,177 |
Investment Abbreviations:
ADR | – American Depositary Receipt |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Non-income producing security. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. |
Portfolio Composition
By sector, based on Net Assets
as of June 30, 2015
Financials | 27.5 | % | ||
Consumer Discretionary | 16.6 | |||
Energy | 14.5 | |||
Information Technology | 12.5 | |||
Health Care | 11.6 | |||
Industrials | 6.4 | |||
Consumer Staples | 5.3 | |||
Materials | 1.4 | |||
Utilities | 1.0 | |||
Telecommunication Services | 0.6 | |||
Money Market Funds Plus Other Assets Less Liabilities | 2.6 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Comstock Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: | ||||
Investments, at value (Cost $1,761,372,383) | $ | 2,069,799,217 | ||
Investments in affiliated money market funds, at value and cost | 55,426,236 | |||
Total investments, at value (Cost $1,816,798,619) | 2,125,225,453 | |||
Cash | 108,787 | |||
Foreign currencies, at value (Cost $223) | 222 | |||
Receivable for: | ||||
Investments sold | 3,876,418 | |||
Fund shares sold | 462,766 | |||
Dividends | 3,451,251 | |||
Fund expenses absorbed | 62,758 | |||
Investment for trustee deferred compensation and retirement plans | 183,984 | |||
Unrealized appreciation on forward foreign currency contracts outstanding | 1,862,948 | |||
Total assets | 2,135,234,587 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 4,003,781 | |||
Fund shares reacquired | 4,577,597 | |||
Accrued fees to affiliates | 2,414,454 | |||
Accrued trustees’ and officers’ fees and benefits | 14,270 | |||
Accrued other operating expenses | 59,171 | |||
Trustee deferred compensation and retirement plans | 212,137 | |||
Total liabilities | 11,281,410 | |||
Net assets applicable to shares outstanding | $ | 2,123,953,177 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 1,684,992,844 | ||
Undistributed net investment income | 46,730,850 | |||
Undistributed net realized gain | 81,945,346 | |||
Net unrealized appreciation | 310,284,137 | |||
$ | 2,123,953,177 | |||
Net Assets: | ||||
Series I | $ | 355,506,956 | ||
Series II | $ | 1,768,446,221 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 18,383,139 | |||
Series II | 91,941,368 | |||
Series I: | ||||
Net asset value per share | $ | 19.34 | ||
Series II: | ||||
Net asset value per share | $ | 19.23 |
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $709,218) | $ | 24,593,782 | ||
Dividends from affiliated money market funds | 24,929 | |||
Total investment income | 24,618,711 | |||
Expenses: | ||||
Advisory fees | 6,041,532 | |||
Administrative services fees | 2,703,333 | |||
Custodian fees | 48,373 | |||
Distribution fees — Series II | 2,257,932 | |||
Transfer agent fees | 19,490 | |||
Trustees’ and officers’ fees and benefits | 28,613 | |||
Other | 48,273 | |||
Total expenses | 11,147,546 | |||
Less: Fees waived | (565,398 | ) | ||
Net expenses | 10,582,148 | |||
Net investment income | 14,036,563 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 73,340,732 | |||
Foreign currencies | (77,830 | ) | ||
Forward foreign currency contracts | 7,929,837 | |||
81,192,739 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (75,523,357 | ) | ||
Foreign currencies | 26,790 | |||
Forward foreign currency contracts | (1,837,152 | ) | ||
(77,333,719 | ) | |||
Net realized and unrealized gain | 3,859,020 | |||
Net increase in net assets resulting from operations | $ | 17,895,583 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Comstock Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: | ||||||||
Net investment income | $ | 14,036,563 | $ | 33,347,426 | ||||
Net realized gain | 81,192,739 | 260,573,406 | ||||||
Change in net unrealized appreciation (depreciation) | (77,333,719 | ) | (101,857,544 | ) | ||||
Net increase in net assets resulting from operations | 17,895,583 | 192,063,288 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Series I | — | (4,492,631 | ) | |||||
Series ll | — | (20,122,085 | ) | |||||
Total distributions from net investment income | — | (24,614,716 | ) | |||||
Share transactions–net: | ||||||||
Series l | 14,296,591 | 1,255,194 | ||||||
Series ll | (87,192,013 | ) | (217,613,521 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (72,895,422 | ) | (216,358,327 | ) | ||||
Net increase (decrease) in net assets | (54,999,839 | ) | (48,909,755 | ) | ||||
Net assets: | ||||||||
Beginning of period | 2,178,953,016 | 2,227,862,771 | ||||||
End of period (includes undistributed net investment income of $46,730,850 and $32,694,287, respectively) | $ | 2,123,953,177 | $ | 2,178,953,016 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. Comstock Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is to seek capital growth and income through investments in equity securities, including common stocks, preferred stocks and securities convertible into common and preferred stocks.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual
Invesco V.I. Comstock Fund
trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
Invesco V.I. Comstock Fund
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $500 million | 0.60% | |||
Over $500 million | 0.55% |
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.56%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least April 30, 2016, to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 0.78% and Series II shares to 1.03% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause total annual operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales;
Invesco V.I. Comstock Fund
(4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on April 30, 2016. The fee waiver agreement cannot be terminated during its term. To the extent that the annualized expense ratio does not exceed the expense limitation, the Adviser will retain its ability to be reimbursed for such fee waivers or reimbursements prior to the end of each fiscal year.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $565,398.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $216,733 for accounting and fund administrative services and reimbursed $2,486,600 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the six months ended June 30, 2015, the Fund incurred $450 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 2,073,531,550 | $ | 51,693,903 | $ | — | $ | 2,125,225,453 | ||||||||
Forward Foreign Currency Contracts* | — | 1,862,948 | — | 1,862,948 | ||||||||||||
Total Investments | $ | 2,073,531,550 | $ | 53,556,851 | $ | — | $ | 2,127,088,401 |
* | Unrealized appreciation. |
NOTE 4—Derivative Investments
Value of Derivative Investments at Period-End
The table below summarizes the value of the Fund’s derivative investments, detailed by primary risk exposure, held as of June 30, 2015:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Currency risk: | ||||||||
Forward foreign currency contracts(a) | $ | 2,404,998 | $ | (542,050 | ) |
(a) | Values are disclosed on the Statement of Assets and Liabilities under the caption Unrealized appreciation on forward foreign currency contracts outstanding. |
Invesco V.I. Comstock Fund
Effect of Derivative Investments for the six months ended June 30, 2015
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations | ||||
Forward Foreign Currency Contracts | ||||
Realized Gain: | $ | 7,929,837 | ||
Change in Net Unrealized Appreciation (Depreciation): | (1,837,152 | ) | ||
Total | $ | 6,092,685 |
The table below summarizes the average notional value of forward foreign currency contracts, agreements outstanding during the period.
Forward Foreign Currency Contracts | ||||
Average notional value | $ | 209,787,213 |
Open Forward Foreign Currency Contracts at Period-End | ||||||||||||||||||||||||||
Settlement Date | Counterparty | Contract to | Notional Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||
Deliver | Receive | |||||||||||||||||||||||||
07/14/15 | Canadian Imperial Bank of Commerce | CAD | 11,827,885 | USD | 9,685,540 | $ | 9,469,338 | $ | 216,202 | |||||||||||||||||
07/14/15 | Deutsche Bank Securities Inc. | CAD | 11,810,425 | USD | 9,667,918 | 9,455,359 | 212,559 | |||||||||||||||||||
07/14/15 | Goldman Sachs International | CAD | 11,810,426 | USD | 9,667,048 | 9,455,360 | 211,688 | |||||||||||||||||||
07/14/15 | RBC Capital Markets Corp. | CAD | 11,810,425 | USD | 9,668,670 | 9,455,359 | 213,311 | |||||||||||||||||||
07/14/15 | Canadian Imperial Bank of Commerce | CHF | 10,853,207 | USD | 11,719,640 | 11,615,118 | 104,522 | |||||||||||||||||||
07/14/15 | Deutsche Bank Securities Inc. | CHF | 10,866,298 | USD | 11,737,578 | 11,629,128 | 108,450 | |||||||||||||||||||
07/14/15 | Goldman Sachs International | CHF | 10,853,206 | USD | 11,719,892 | 11,615,117 | 104,775 | |||||||||||||||||||
07/14/15 | RBC Capital Markets Corp. | CHF | 10,853,207 | USD | 11,719,640 | 11,615,118 | 104,522 | |||||||||||||||||||
07/14/15 | Barclays Bank PLC | EUR | 11,956,808 | USD | 13,558,088 | 13,334,129 | 223,959 | |||||||||||||||||||
07/14/15 | Canadian Imperial Bank of Commerce | EUR | 11,956,808 | USD | 13,564,221 | 13,334,129 | 230,092 | |||||||||||||||||||
07/14/15 | Deutsche Bank Securities Inc. | EUR | 11,956,808 | USD | 13,561,651 | 13,334,129 | 227,522 | |||||||||||||||||||
07/14/15 | Goldman Sachs International | EUR | 11,957,069 | USD | 13,562,784 | 13,334,420 | 228,364 | |||||||||||||||||||
07/14/15 | RBC Capital Markets Corp. | EUR | 11,956,808 | USD | 13,553,161 | 13,334,129 | 219,032 | |||||||||||||||||||
07/14/15 | Barclays Bank PLC | GBP | 6,513,735 | USD | 10,112,118 | 10,234,156 | (122,038 | ) | ||||||||||||||||||
07/14/15 | Canadian Imperial Bank of Commerce | GBP | 6,448,310 | USD | 10,002,167 | 10,131,363 | (129,196 | ) | ||||||||||||||||||
07/14/15 | Deutsche Bank Securities Inc. | GBP | 6,448,310 | USD | 10,006,616 | 10,131,363 | (124,747 | ) | ||||||||||||||||||
07/14/15 | Goldman Sachs International | GBP | 6,448,309 | USD | 10,002,166 | 10,131,361 | (129,195 | ) | ||||||||||||||||||
07/14/15 | Canadian Imperial Bank of Commerce | USD | 1,408,343 | CAD | 1,734,937 | 1,388,981 | (19,362 | ) | ||||||||||||||||||
07/14/15 | Deutsche Bank Securities Inc. | USD | 1,862,986 | CHF | 1,724,417 | 1,845,474 | (17,512 | ) | ||||||||||||||||||
Total forward foreign currency contracts — Currency Risk | $ | 1,862,948 |
Currency Abbreviations:
CAD | – Canadian Dollar | |
CHF | – Swiss Franc | |
EUR | – Euro | |
GBP | – British Pound Sterling | |
USD | – U.S. Dollar |
Offsetting Assets and Liabilities
Accounting Standards Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which was subsequently clarified in Financial Accounting Standards Board ASU 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” is intended to enhance disclosures about financial instruments and derivative instruments that are subject to offsetting arrangements on the Statement of Assets and Liabilities and to enable investors to better understand the effect of those arrangements on the Fund’s financial position. In order for an arrangement to be eligible for netting, the Fund must have a basis to conclude that such netting arrangements are legally enforceable. The Fund enters into netting agreements and collateral agreements in an attempt to reduce the Fund’s Counterparty credit risk by providing for a single net settlement with a Counterparty of all financial transactions covered by the agreement in an event of default as defined under such agreement.
Invesco V.I. Comstock Fund
There were no derivative instruments subject to a netting agreement for which the Fund is not currently netting. The following tables present derivative instruments that are either subject to an enforceable netting agreement or offset by collateral arrangements as of June 30, 2015.
Assets: | ||||||||||||||||||||||||
Gross amounts of Recognized Assets | Gross amounts offset in Statement of Assets & Liabilities | Net amounts of assets presented in Statement of Assets & Liabilities | Collateral Received | |||||||||||||||||||||
Counterparty | Financial Instruments | Cash | Net Amount | |||||||||||||||||||||
Barclays Bank PLC | $ | 223,959 | $ | (122,038 | ) | $ | 101,921 | $ | — | $ | — | $ | 101,921 | |||||||||||
Canadian Imperial Bank of Commerce | 550,816 | (148,558 | ) | 402,258 | — | — | 402,258 | |||||||||||||||||
Deutsche Bank Securities Inc. | 548,531 | (142,259 | ) | 406,272 | — | — | 406,272 | |||||||||||||||||
Goldman Sachs International | 544,827 | (129,195 | ) | 415,632 | — | — | 415,632 | |||||||||||||||||
RBC Capital Markets Corp. | 536,865 | — | 536,865 | — | — | 536,865 | ||||||||||||||||||
Total | $ | 2,404,998 | $ | (542,050 | ) | $ | 1,862,948 | $ | — | $ | — | $ | 1,862,948 | |||||||||||
Liabilities: | ||||||||||||||||||||||||
Gross amounts of Recognized Liabilities | Gross amounts offset in Statement of Assets & Liabilities | Net amounts of liabilities Statement of Assets | Collateral Pledged | |||||||||||||||||||||
Counterparty | Financial Instruments | Cash | Net Amount | |||||||||||||||||||||
Barclays Bank PLC | $ | 122,038 | $ | (122,038 | ) | $ | — | $ | — | $ | — | $ | — | |||||||||||
Canadian Imperial Bank of Commerce | 148,558 | (148,558 | ) | — | — | — | — | |||||||||||||||||
Deutsche Bank Securities Inc. | 142,259 | (142,259 | ) | — | — | — | — | |||||||||||||||||
Goldman Sachs International | 129,195 | (129,195 | ) | — | — | — | — | |||||||||||||||||
Total | $ | 542,050 | $ | (542,050 | ) | $ | — | $ | — | $ | — | $ | — |
NOTE 5—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund did not have a capital loss carryforward as of December 31, 2014.
Invesco V.I. Comstock Fund
NOTE 8—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $188,567,964 and $196,503,352, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 443,900,910 | ||
Aggregate unrealized (depreciation) of investment securities | (136,625,233 | ) | ||
Net unrealized appreciation of investment securities | $ | 307,275,677 |
Cost of investments for tax purposes is $1,817,949,776.
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 2,198,384 | $ | 42,541,873 | 4,721,043 | $ | 87,225,388 | ||||||||||
Series II | 2,637,287 | 50,536,003 | 5,163,219 | 94,533,512 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 239,991 | 4,492,632 | ||||||||||||
Series II | — | — | 1,078,354 | 20,122,085 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (1,462,322 | ) | (28,245,282 | ) | (4,881,994 | ) | (90,462,826 | ) | ||||||||
Series II | (7,160,162 | ) | (137,728,016 | ) | (18,159,674 | ) | (332,269,118 | ) | ||||||||
Net increase (decrease) in share activity | (3,786,813 | ) | $ | (72,895,422 | ) | (11,839,061 | ) | $ | (216,358,327 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 57% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 10—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Distributions from net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of net assets | Ratio of assets without | Ratio of net to average | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Series I(d) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 19.16 | $ | 0.15 | $ | 0.03 | $ | 0.18 | $ | — | $ | — | $ | — | $ | 19.34 | 0.94 | % | $ | 355,507 | 0.77 | %(e) | 0.83 | %(e) | 1.52 | %(e) | 9 | % | ||||||||||||||||||||||||||||
Year ended 12/31/14 | 17.75 | 0.32 | 1.34 | 1.66 | (0.25 | ) | — | (0.25 | ) | 19.16 | 9.39 | 338,159 | 0.78 | 0.83 | 1.73 | 19 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 13.27 | 0.22 | 4.53 | 4.75 | (0.27 | ) | — | (0.27 | ) | 17.75 | 35.97 | 311,837 | 0.76 | 0.84 | 1.36 | 11 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 11.32 | 0.23 | 1.94 | 2.17 | (0.22 | ) | — | (0.22 | ) | 13.27 | 19.23 | 250,995 | 0.67 | 0.85 | 1.81 | 14 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 11.71 | 0.20 | (0.40 | ) | (0.20 | ) | (0.19 | ) | — | (0.19 | ) | 11.32 | (1.84 | ) | 262,319 | 0.62 | 0.80 | 1.75 | 24 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 10.11 | 0.17 | 1.44 | 1.61 | (0.01 | ) | (0.00 | ) | (0.01 | ) | 11.71 | 15.98 | 223,354 | 0.61 | 0.73 | 1.58 | 21 | |||||||||||||||||||||||||||||||||||||||
Series II(d) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 19.08 | 0.12 | 0.03 | 0.15 | — | — | — | 19.23 | 0.79 | 1,768,446 | 1.02 | (e) | 1.08 | (e) | 1.27 | (e) | 9 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 17.68 | 0.27 | 1.33 | 1.60 | (0.20 | ) | — | (0.20 | ) | 19.08 | 9.10 | 1,840,794 | 1.03 | 1.08 | 1.48 | 19 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 13.22 | 0.17 | 4.52 | 4.69 | (0.23 | ) | — | (0.23 | ) | 17.68 | 35.65 | 1,916,026 | 1.01 | 1.09 | 1.11 | 11 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 11.28 | 0.19 | 1.94 | 2.13 | (0.19 | ) | — | (0.19 | ) | 13.22 | 18.92 | 1,640,627 | 0.92 | 1.10 | 1.56 | 14 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 11.67 | 0.17 | (0.40 | ) | (0.23 | ) | (0.16 | ) | — | (0.16 | ) | 11.28 | (2.11 | ) | 1,528,067 | 0.87 | 1.05 | 1.50 | 24 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 10.10 | 0.14 | 1.44 | 1.58 | (0.01 | ) | (0.00 | ) | (0.01 | ) | 11.67 | 15.70 | 1,664,751 | 0.86 | 0.98 | 1.32 | 21 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the period ended December 31, 2011, the portfolio turnover calculation excludes the value of securities purchased of $21,084,025 and sold of $6,434,519 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco Van Kampen V.I. Value Fund into the Fund. |
(d) | On June 1, 2010, the Class I and Class II shares of the Predecessor Fund were reorganized into Series I and Series II shares, respectively of the Fund. |
(e) | Ratios are annualized and based on average daily net assets (000’s omitted) of $348,357and $1,821,316 for Series I and Series II shares, respectively. |
Invesco V.I. Comstock Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,009.40 | $ | 3.84 | $ | 1,020.98 | $ | 3.86 | 0.77 | % | ||||||||||||
Series II | 1,000.00 | 1,007.90 | 5.08 | 1,019.74 | 5.11 | 1.02 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. Comstock Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. Comstock Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports form the Sub-Committees and Investments Committee throughout the year in considering approval of, the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ investment process oversight, independent credit analysis
and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Underlying Funds Large-Cap Value Funds Index. The Board noted that performance of Series I shares of the Fund was in the fourth quintile for the one year period and in the first quintile for the three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Series I shares of the Fund was below the performance of the Index for the one year
Invesco V.I. Comstock Fund
period and above the performance of the Index for the three and five year periods. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series I shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least April 30, 2016 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was above the rate of one such mutual fund and below the rate of an offshore fund advised by Invesco Advisers using a similar investment process. The Board also noted how the Fund’s rate compared to the effective sub-adviser fee rate of seven mutual funds sub-advised by Invesco Advisers.
The Board also considered the fees charged by Invesco Advisers and the Affiliated Sub-Advisers to other client accounts with investment strategies comparable to those of the Fund. The Board noted that Invesco Advisers or the Affiliated Sub-Advisers may charge lower fees to large institutional clients. Invesco Advisers reviewed with the Board the significantly greater scope of services it provides to the Invesco Funds relative to certain other types of client accounts. These additional services include provision of administrative services, officers and office space, oversight of service providers, preparation of annual registration statement updates and financial information and regulatory compliance under the Investment Company Act of 1940, as amended.
Invesco Advisers also reviewed generally the higher frequency of shareholder purchases and redemptions in the Invesco Funds relative to the flow of assets for other client accounts. Invesco Advisers advised the Board that advance notice of redemptions is often provided to Invesco Advisers by institutional clients. The Board did note that sub-advisory fee rates charged by the Affiliated Sub-Advisers to manage the Invesco Funds and to manage other client accounts tended to be more comparable, reflecting a similar scope of services. The information received by the Board demonstrated that the aggregate services provided to the Invesco Funds were sufficiently different from those provided to institutional clients to support the difference in fees.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including
the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered that it receives periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
Invesco V.I. Comstock Fund
| ||||
Semiannual Report to Shareholders
| June 30, 2015 | |||
Invesco V.I. Core Equity Fund | ||||
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd. | ||||
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
Invesco Distributors, Inc. VICEQ-SAR-1
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance | ||
Performance summary
|
Fund vs. Indexes Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower.
|
Series I Shares | 0.22 | % | |||
Series II Shares | 0.10 | ||||
S&P 500 Index▼ (Broad Market Index) | 1.23 | ||||
Russell 1000 Index▼ (Style-Specific Index) | 1.71 | ||||
Lipper VUF Large-Cap Core Funds Indexn (Peer Group Index) | 1.70 |
Source(s): ▼FactSet Reseach Systems Inc.; nLipper Inc.
The S&P 500® Index is an unmanaged index considered representative of the US stock market. The Russell 1000® Index is an unmanaged index considered representative of large-cap stocks. The Russell 1000 Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co. The Lipper VUF Large-Cap Core Funds Index is an unmanaged index considered representative of large-cap core variable insurance underlying funds tracked by Lipper. The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es). A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
|
Average Annual Total Returns As of 6/30/15 |
Series I Shares |
| ||||
Inception (5/2/94) | 8.32 | % | |||
10 Years | 7.70 | ||||
5 Years | 13.48 | ||||
1 Year | -0.09 | ||||
Series II Shares | |||||
Inception (10/24/01) | 6.78 | % | |||
10 Years | 7.44 | ||||
5 Years | 13.20 | ||||
1 Year | -0.33 |
The performance of the Fund’s Series I and Series II share classes will differ primarily due to different class expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 0.90% and 1.15%, respectively.1 The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 0.92% and 1.17%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. Core Equity Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2017. See current prospectus for more information. |
Invesco V.I. Core Equity Fund |
Schedule of Investments(a)
June 30, 2015
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–90.54% |
| |||||||
Advertising–1.14% | ||||||||
Publicis Groupe S.A. (France) | 187,822 | $ | 13,873,336 | |||||
Apparel, Accessories & Luxury Goods–2.15% | ||||||||
LVMH Moet Hennessy Louis Vuitton S.E. (France) | 77,377 | 13,558,172 | ||||||
PVH Corp. | 110,505 | 12,730,176 | ||||||
26,288,348 | ||||||||
Asset Management & Custody Banks–1.70% | ||||||||
Northern Trust Corp. | 272,105 | 20,805,148 | ||||||
Auto Parts & Equipment–1.19% | ||||||||
Johnson Controls, Inc. | 293,862 | 14,554,985 | ||||||
Biotechnology–1.75% | ||||||||
Celgene Corp.(b) | 184,672 | 21,373,014 | ||||||
Brewers–0.96% | ||||||||
Molson Coors Brewing Co.–Class B | 168,718 | 11,778,204 | ||||||
Cable & Satellite–1.32% | ||||||||
Comcast Corp.–Class A | 269,044 | 16,180,306 | ||||||
Casinos & Gaming–1.02% | ||||||||
Las Vegas Sands Corp. | 236,574 | 12,436,695 | ||||||
Communications Equipment–4.57% | ||||||||
Cisco Systems, Inc. | 584,320 | 16,045,427 | ||||||
F5 Networks, Inc.(b) | 134,986 | 16,245,565 | ||||||
QUALCOMM, Inc. | 376,658 | 23,590,091 | ||||||
55,881,083 | ||||||||
Consumer Finance–2.65% | ||||||||
American Express Co. | 416,866 | 32,398,826 | ||||||
Department Stores–1.36% | ||||||||
Macy’s, Inc. | 246,934 | 16,660,637 | ||||||
Distillers & Vintners–1.23% | ||||||||
Diageo PLC (United Kingdom) | 517,521 | 15,001,542 | ||||||
Diversified Banks–2.96% | ||||||||
Svenska Handelsbanken AB–Class A (Sweden) | 988,524 | 14,410,487 | ||||||
U.S. Bancorp | 500,816 | 21,735,414 | ||||||
36,145,901 | ||||||||
Electric Utilities–0.99% | ||||||||
Duke Energy Corp. | 170,556 | 12,044,665 | ||||||
Electrical Components & Equipment–1.64% | ||||||||
Eaton Corp. PLC | 296,855 | 20,034,744 | ||||||
Electronic Manufacturing Services–2.34% | ||||||||
TE Connectivity Ltd. (Switzerland) | 444,065 | 28,553,379 |
Shares | Value | |||||||
Food Retail–0.68% | ||||||||
Kroger Co. (The) | 115,046 | $ | 8,341,985 | |||||
Health Care Facilities–1.57% | ||||||||
HCA Holdings, Inc.(b) | 212,080 | 19,239,898 | ||||||
Health Care Services–1.68% | ||||||||
Express Scripts Holding Co.(b) | 231,277 | �� | 20,569,776 | |||||
Heavy Electrical Equipment–1.69% | ||||||||
ABB Ltd. (Switzerland) | 984,698 | 20,622,940 | ||||||
Home Improvement Retail–1.21% | ||||||||
Lowe’s Cos., Inc. | 220,948 | 14,796,888 | ||||||
Hypermarkets & Super Centers–0.75% | ||||||||
Wal-Mart Stores, Inc. | 129,680 | 9,198,202 | ||||||
Industrial Conglomerates–1.71% | ||||||||
General Electric Co. | 785,978 | 20,883,435 | ||||||
Industrial Machinery–4.39% | ||||||||
FANUC Corp. (Japan) | 26,000 | 5,307,143 | ||||||
Illinois Tool Works Inc. | 115,769 | 10,626,436 | ||||||
Sandvik AB (Sweden) | 1,291,956 | 14,285,790 | ||||||
Stanley Black & Decker Inc. | 222,653 | 23,432,002 | ||||||
53,651,371 | ||||||||
Insurance Brokers–2.29% | ||||||||
Marsh & McLennan Cos., Inc. | 493,879 | 28,002,939 | ||||||
Internet Software & Services–0.76% | ||||||||
Google Inc.–Class C(b) | 17,744 | 9,235,929 | ||||||
Investment Banking & Brokerage–1.50% | ||||||||
Charles Schwab Corp. (The) | 561,307 | 18,326,674 | ||||||
IT Consulting & Other Services–1.77% | ||||||||
International Business Machines Corp. | 132,589 | 21,566,927 | ||||||
Life Sciences Tools & Services–1.04% | ||||||||
Thermo Fisher Scientific, Inc. | 97,904 | 12,704,023 | ||||||
Movies & Entertainment–1.22% | ||||||||
Twenty-First Century Fox, Inc.–Class A | 459,611 | 14,958,040 | ||||||
Multi-Sector Holdings–2.08% | ||||||||
Berkshire Hathaway Inc.–Class A(b) | 124 | 25,401,400 | ||||||
Oil & Gas Equipment & Services–1.12% | ||||||||
Halliburton Co. | 318,040 | 13,697,983 | ||||||
Oil & Gas Exploration & Production–5.06% | ||||||||
Anadarko Petroleum Corp. | 147,923 | 11,546,869 | ||||||
Cabot Oil & Gas Corp. | 499,188 | 15,744,390 | ||||||
Concho Resources Inc.(b) | 137,356 | 15,639,354 | ||||||
EOG Resources, Inc. | 215,814 | 18,894,516 | ||||||
61,825,129 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Equity Fund
Shares | Value | |||||||
Packaged Foods & Meats–1.07% | ||||||||
Danone (France) | 202,978 | $ | 13,124,324 | |||||
Pharmaceuticals–14.23% | ||||||||
AbbVie Inc. | 427,454 | 28,720,634 | ||||||
Allergan PLC(b) | 67,254 | 20,408,899 | ||||||
Eli Lilly and Co. | 257,154 | 21,469,787 | ||||||
GlaxoSmithKline PLC–ADR (United Kingdom) | 338,356 | 14,092,527 | ||||||
Merck & Co., Inc. | 328,981 | 18,728,888 | ||||||
Mylan N.V.(b) | 87,781 | 5,956,819 | ||||||
Roche Holding AG (Switzerland) | 83,323 | 23,394,473 | ||||||
Shire PLC–ADR (Ireland) | 79,057 | 19,091,475 | ||||||
Teva Pharmaceutical Industries Ltd.–ADR (Israel) | 372,535 | 22,016,819 | ||||||
173,880,321 | ||||||||
Property & Casualty Insurance–4.17% | ||||||||
Allstate Corp. (The) | 225,540 | 14,630,780 | ||||||
Progressive Corp. (The) | 1,304,001 | 36,290,348 | ||||||
50,921,128 | ||||||||
Semiconductor Equipment–1.21% | ||||||||
Applied Materials, Inc. | 766,873 | 14,739,299 | ||||||
Semiconductors–4.71% | ||||||||
Analog Devices, Inc. | 471,838 | 30,284,922 | ||||||
Taiwan Semiconductor Manufacturing Co. Ltd. (Taiwan) | 6,047,823 | 27,234,361 | ||||||
57,519,283 |
Shares | Value | |||||||
Systems Software–2.31% | ||||||||
Microsoft Corp. | 343,026 | $ | 15,144,598 | |||||
Oracle Corp. | 325,909 | 13,134,133 | ||||||
28,278,731 | ||||||||
Technology Hardware, Storage & Peripherals–1.97% | ||||||||
EMC Corp. | 909,937 | 24,013,237 | ||||||
Wireless Telecommunication Services–1.38% | ||||||||
Vodafone Group PLC–ADR | 463,529 | 16,895,632 | ||||||
Total Common Stocks & Other Equity Interests (Cost $828,037,810) |
| 1,106,406,307 | ||||||
Money Market Funds–9.79% |
| |||||||
Liquid Assets Portfolio–Institutional Class(c) | 59,837,757 | 59,837,757 | ||||||
Premier Portfolio–Institutional Class(c) | 59,837,758 | 59,837,758 | ||||||
Total Money Market Funds |
| 119,675,515 | ||||||
TOTAL INVESTMENTS–100.33% |
| 1,226,081,822 | ||||||
OTHER ASSETS LESS LIABILITIES–(0.33)% |
| (4,080,326 | ) | |||||
NET ASSETS–100.00% |
| $ | 1,222,001,496 |
Investment Abbreviations:
ADR | – American Depositary Receipt |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Non-income producing security. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. |
Portfolio Composition
By sector, based on Net Assets
as of June 30, 2015
Health Care | 20.3 | % | ||
Information Technology | 19.6 | |||
Financials | 17.3 | |||
Consumer Discretionary | 12.5 | |||
Industrials | 7.5 | |||
Energy | 6.2 | |||
Consumer Staples | 4.7 | |||
Telecommunication Services | 1.4 | |||
Utilities | 1.0 | |||
Money Market Funds Plus Other Assets Less Liabilities | 9.5 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Equity Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: | ||||
Investments, at value (Cost $828,037,810) | $ | 1,106,406,307 | ||
Investments in affiliated money market funds, at value and cost | 119,675,515 | |||
Total investments, at value (Cost $947,713,325) | 1,226,081,822 | |||
Foreign currencies, at value (Cost $382,938) | 384,211 | |||
Receivable for: | ||||
Investments sold | 2,648,110 | |||
Fund shares sold | 801,689 | |||
Dividends | 3,140,424 | |||
Investment for trustee deferred compensation and retirement plans | 438,364 | |||
Other assets | 191 | |||
Total assets | 1,233,494,811 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 9,292,713 | |||
Fund shares reacquired | 787,059 | |||
Accrued fees to affiliates | 872,212 | |||
Accrued trustees’ and officers’ fees and benefits | 6,763 | |||
Accrued other operating expenses | 35,963 | |||
Trustee deferred compensation and retirement plans | 498,605 | |||
Total liabilities | 11,493,315 | |||
Net assets applicable to shares outstanding | $ | 1,222,001,496 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 739,285,826 | ||
Undistributed net investment income | 18,666,697 | |||
Undistributed net realized gain | 185,685,990 | |||
Net unrealized appreciation | 278,362,983 | |||
$ | 1,222,001,496 | |||
Net Assets: | ||||
Series I | $ | 1,028,950,419 | ||
Series II | $ | 193,051,077 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 25,035,879 | |||
Series II | 4,757,128 | |||
Series I: | ||||
Net asset value per share | $ | 41.10 | ||
Series II: | ||||
Net asset value per share | $ | 40.58 |
Investment income: | ||||
Dividends (net of foreign withholding taxes of $682,909) | $ | 12,241,271 | ||
Dividends from affiliated money market funds | 40,116 | |||
Total investment income | 12,281,387 | |||
Expenses: | ||||
Advisory fees | 3,817,783 | |||
Administrative services fees | 1,649,714 | |||
Custodian fees | 39,147 | |||
Distribution fees — Series II | 237,942 | |||
Transfer agent fees | 22,794 | |||
Trustees’ and officers’ fees and benefits | 17,897 | |||
Other | 24,093 | |||
Total expenses | 5,809,370 | |||
Less: Fees waived | (101,314 | ) | ||
Net expenses | 5,708,056 | |||
Net investment income | 6,573,331 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities (includes net gains from securities sold to affiliates of $613,257) | 67,022,973 | |||
Foreign currencies | (276,953 | ) | ||
66,746,020 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (70,052,659 | ) | ||
Foreign currencies | 200,707 | |||
(69,851,952 | ) | |||
Net realized and unrealized gain (loss) | (3,105,932 | ) | ||
Net increase in net assets resulting from operations | $ | 3,467,399 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Equity Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: |
| |||||||
Net investment income | $ | 6,573,331 | $ | 12,706,538 | ||||
Net realized gain | 66,746,020 | 122,820,866 | ||||||
Change in net unrealized appreciation (depreciation) | (69,851,952 | ) | (33,694,337 | ) | ||||
Net increase in net assets resulting from operations | 3,467,399 | 101,833,067 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Series I | — | (9,589,714 | ) | |||||
Series ll | — | (1,212,906 | ) | |||||
Total distributions from net investment income | — | (10,802,620 | ) | |||||
Distributions to shareholders from net realized gains: | ||||||||
Series l | — | (5,354,120 | ) | |||||
Series ll | — | (863,267 | ) | |||||
Total distributions from net realized gains | — | (6,217,387 | ) | |||||
Share transactions–net: | ||||||||
Series l | (70,544,522 | ) | (144,895,006 | ) | ||||
Series ll | 7,454,259 | 15,983,835 | ||||||
Net increase (decrease) in net assets resulting from share transactions | (63,090,263 | ) | (128,911,171 | ) | ||||
Net increase (decrease) in net assets | (59,622,864 | ) | (44,098,111 | ) | ||||
Net assets: | ||||||||
Beginning of period | 1,281,624,360 | 1,325,722,471 | ||||||
End of period (includes undistributed net investment income of $18,666,697 and $12,093,366, respectively) | $ | 1,222,001,496 | $ | 1,281,624,360 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. Core Equity Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is long-term growth of capital.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Invesco V.I. Core Equity Fund
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain
Invesco V.I. Core Equity Fund
tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $250 million | 0.65% | |||
Over $250 million | 0.60% |
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.61%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2016, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed
Invesco V.I. Core Equity Fund
below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2016. The fee waiver agreement cannot be terminated during its term. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $101,314.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $146,452 for accounting and fund administrative services and reimbursed $1,503,262 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the six months ended June 30, 2015, the Fund incurred $306 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During June 30, 2015, there were transfers from Level 1 to Level 2 of $57,576,494, due to foreign fair value adjustments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 1,126,860,481 | $ | 99,221,341 | $ | — | $ | 1,226,081,822 |
NOTE 4—Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the six months ended June 30, 2015, the Fund engaged in securities purchases of $270,833 and securities sales of $906,764, which resulted in net realized gains of $613,257.
Invesco V.I. Core Equity Fund
NOTE 5—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund did not have a capital loss carryforward as of December 31, 2014.
NOTE 8—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $260,675,990 and $304,863,043, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 287,480,446 | ||
Aggregate unrealized (depreciation) of investment securities | (13,044,524 | ) | ||
Net unrealized appreciation of investment securities | $ | 274,435,922 |
Cost of investments for tax purposes is $951,645,900.
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 530,214 | $ | 21,897,024 | 867,189 | $ | 35,223,181 | ||||||||||
Series II | 378,692 | 15,455,450 | 844,518 | 33,538,747 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 367,532 | 14,921,814 | ||||||||||||
Series II | — | — | 51,685 | 2,076,173 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (2,232,666 | ) | (92,441,546 | ) | (4,860,851 | ) | (195,040,001 | ) | ||||||||
Series II | (195,874 | ) | (8,001,191 | ) | (495,254 | ) | (19,631,085 | ) | ||||||||
Net increase (decrease) in share activity | (1,519,634 | ) | $ | (63,090,263 | ) | (3,225,181 | ) | $ | (128,911,171 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 48% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
Invesco V.I. Core Equity Fund
NOTE 10—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Distributions from net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Series I |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 41.00 | $ | 0.22 | $ | (0.12 | ) | $ | 0.10 | $ | — | $ | — | $ | — | $ | 41.10 | 0.24 | % | $ | 1,028,950 | 0.87 | %(d) | 0.89 | %(d) | 1.09 | %(d) | 23 | % | |||||||||||||||||||||||||||
Year ended 12/31/14 | 38.43 | 0.40 | 2.72 | 3.12 | (0.35 | ) | (0.20 | ) | (0.55 | ) | 41.00 | 8.12 | 1,096,219 | 0.88 | 0.90 | 1.01 | 35 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 30.14 | 0.31 | 8.47 | 8.78 | (0.49 | ) | — | (0.49 | ) | 38.43 | 29.25 | 1,167,023 | 0.88 | 0.90 | 0.89 | 25 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 26.72 | 0.37 | 3.34 | 3.71 | (0.29 | ) | — | (0.29 | ) | 30.14 | 13.88 | 1,033,655 | 0.88 | 0.90 | 1.29 | 44 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 27.03 | 0.24 | (0.28 | ) | (0.04 | ) | (0.27 | ) | — | (0.27 | ) | 26.72 | (0.06 | ) | 1,091,171 | 0.87 | 0.89 | 0.86 | 35 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 24.92 | 0.22 | 2.14 | 2.36 | (0.25 | ) | — | (0.25 | ) | 27.03 | 9.56 | 1,345,658 | 0.87 | 0.89 | 0.87 | 47 | ||||||||||||||||||||||||||||||||||||||||
Series II |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 40.53 | 0.17 | (0.12 | ) | 0.05 | — | — | — | 40.58 | 0.12 | 193,051 | 1.12 | (d) | 1.14 | (d) | 0.84 | (d) | 23 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 38.03 | 0.30 | 2.67 | 2.97 | (0.27 | ) | (0.20 | ) | (0.47 | ) | 40.53 | 7.82 | 185,406 | 1.13 | 1.15 | 0.76 | 35 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 29.86 | 0.22 | 8.39 | 8.61 | (0.44 | ) | — | (0.44 | ) | 38.03 | 28.94 | 158,700 | 1.13 | 1.15 | 0.64 | 25 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 26.51 | 0.30 | 3.31 | 3.61 | (0.26 | ) | — | (0.26 | ) | 29.86 | 13.61 | 109,213 | 1.13 | 1.15 | 1.04 | 44 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 26.82 | 0.17 | (0.27 | ) | (0.10 | ) | (0.21 | ) | — | (0.21 | ) | 26.51 | (0.29 | ) | 51,132 | 1.12 | 1.14 | 0.61 | 35 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 24.75 | 0.15 | 2.12 | 2.27 | (0.20 | ) | — | (0.20 | ) | 26.82 | 9.25 | 35,025 | 1.12 | 1.14 | 0.62 | 47 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $1,070,376 and $191,931 for Series I and Series II shares, respectively. |
Invesco V.I. Core Equity Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,002,20 | $ | 4.32 | $ | 1,020.48 | $ | 4.36 | 0.87 | % | ||||||||||||
Series II | 1,000.00 | 1,001.00 | 5.56 | 1,019.24 | 5.61 | 1.12 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. Core Equity Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. Core Equity Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports form the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s
consideration of Invesco Advisers’ investment process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Underlying Funds Large-Cap Core Index. The Board noted that performance of Series I shares of the Fund was in the fifth quintile of its performance universe for the one, three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Series I shares
Invesco V.I. Core Equity Fund
of the Fund was below the performance of the Index for the one, three and five year periods. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series I shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was the same as the rate of one mutual fund advised by Invesco Advisers.
The Board also considered the fees charged by Invesco Advisers and the Affiliated Sub-Advisers to other client accounts with investment strategies comparable to those of the Fund. The Board noted that Invesco Advisers or the Affiliated Sub-Advisers may charge lower fees to large institutional clients. Invesco Advisers reviewed with the Board the significantly greater scope of services it provides to the Invesco Funds relative to certain other types of client accounts. These additional services include provision of administrative services, officers and office space, oversight of service providers, preparation of annual registration statement updates and financial information and regulatory compliance under the Investment Company Act of 1940, as amended.
Invesco Advisers also reviewed generally the higher frequency of shareholder purchases and redemptions in the Invesco Funds relative to the flow of assets for other client accounts. Invesco Advisers advised the Board that advance notice of redemptions is often provided to Invesco Advisers by institutional clients. The Board did note that sub-advisory fee rates charged by the Affiliated Sub-Advisers to manage the Invesco Funds and to manage other client accounts
tended to be more comparable, reflecting a similar scope of services. The information received by the Board demonstrated that the aggregate services provided to the Invesco Funds were sufficiently different from those provided to institutional clients to support the difference in fees.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that
these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered that it receives periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
Invesco V.I. Core Equity Fund
| ||||
Semiannual Report to Shareholders
| June 30, 2015 | |||
| ||||
Invesco V.I. Core Plus Bond Fund | ||||
Effective April 30, 2015, Invesco V.I. Diversified Income Fund was renamed Invesco V.I. Core Plus Bond Fund. |
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd. | ||||
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
Invesco Distributors, Inc. VICPB-SAR-1
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance | ||
Performance summary
Fund vs. Indexes
Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower.
Series I Shares | 0.47 | % | |||
Series II Shares | 0.31 | ||||
Barclays U.S. Aggregate Indexq (Broad Market/Style-Specific Index)* | -0.10 | ||||
Barclays U.S. Credit Indexq (Former Style-Specific Index)* | -0.78 | ||||
Lipper VUF Core Plus Bond Funds Index¢ (Peer Group Index)* | 0.12 | ||||
Lipper VUF Corporate Debt BBB-Rated Funds Index¢ (Former Peer Group Index)* | -0.07 | ||||
Source(s): qFactSet Research Systems Inc.; ¢Lipper Inc. |
* | The Fund has elected to use the Barclays U.S. Aggregate Index rather than the Barclays U.S. Credit Index as its style-specific index because the Barclays U.S. Aggregate Index more closely represents the performance of the types of securities in which the Fund invests. Also, the Fund has elected to use the Lipper VUF Core Plus Bond Funds Index rather than the Lipper VUF Corporate Debt BBB-Rated Funds Index as its peer group index because the Lipper VUF Core Plus Bond Funds Index more closely represents the performance of the types of securities in which the Fund invests. |
The Barclays U.S. Aggregate Index is an unmanaged index considered representative of the US investment-grade, fixed-rate bond market.
The Barclays U.S. Credit Index is an unmanaged index considered representative of publicly issued, SEC-registered US corporate and specified foreign debentures and secured notes.
The Lipper VUF Core Plus Bond Funds Index is an unmanaged index considered representative of variable insurance underlying funds that invest at least 65% in domestic investment-grade debt issues (rated in the top four grades) with any remaining investment in non-benchmark sectors such as high-yield, global and emerging-market debt tracked by Lipper.
The Lipper VUF Corporate Debt BBB-Rated Funds Index is an unmanaged index considered representative of corporate debt BBB-rated variable insurance underlying funds tracked by Lipper.
The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es).
A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
The performance of the Fund’s Series I and Series II share classes will differ primarily due to different class expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date
of this report for Series I and Series II shares was 0.61% and 0.86%, respectively.1 The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 1.62% and 1.87%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. Core Plus Bond Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly.
Average Annual Total Returns
As of 6/30/15
Series I Shares | |||||
Inception (5/5/93) | 4.41 | % | |||
10 Years | 3.49 | ||||
5 Years | 6.07 | ||||
1 Year | 1.68 | ||||
Series II Shares | |||||
Inception (3/14/02) | 3.95 | % | |||
10 Years | 3.23 | ||||
5 Years | 5.78 | ||||
1 Year | 1.31 |
Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least April 30, 2016. See current prospectus for more information. |
Invesco V.I. Core Plus Bond Fund |
Schedule of Investments(a)
June 30, 2015
(Unaudited)
Principal Amount | Value | |||||||
Bonds and Notes–70.40% |
| |||||||
Aerospace & Defense–1.25% | ||||||||
Aerojet Rocketdyne Holdings, Inc., Sec. Gtd. Second Lien Global Notes, 7.13%, 03/15/21 | $ | 9,000 | $ | 9,630 | ||||
Bombardier Inc. (Canada), | 4,000 | 3,660 | ||||||
Unsec. Notes, 5.50%, 09/15/18(b) | 2,000 | 1,990 | ||||||
DigitalGlobe Inc., Sr. Unsec. Gtd. Bonds, 5.25%, 02/01/21(b) | 3,000 | 2,955 | ||||||
Embraer Netherlands Finance B.V. (Brazil), Sr. Unsec. Gtd. Global Notes, 5.05%, 06/15/25 | 5,000 | 4,989 | ||||||
L-3 Communications Corp., | 105,000 | 102,091 | ||||||
Sr. Unsec. Gtd. Notes, 4.95%, 02/15/21 | 60,000 | 64,048 | ||||||
Moog Inc., Sr. Unsec. Gtd. Notes, 5.25%, 12/01/22(b) | 6,000 | 6,135 | ||||||
TransDigm Inc., | 7,000 | 6,983 | ||||||
Sr. Unsec. Gtd. Sub. Notes, 6.50%, 05/15/25(b) | 8,000 | 8,000 | ||||||
210,481 | ||||||||
Agricultural & Farm Machinery–0.04% | ||||||||
Titan International Inc., Sr. Sec. Gtd. First Lien Global Notes, 6.88%, 10/01/20 | 7,000 | 6,440 | ||||||
Agricultural Products–0.02% | ||||||||
Darling Ingredients, Inc., Sr. Unsec. Gtd. Global Notes, 5.38%, 01/15/22 | 3,000 | 3,011 | ||||||
Airlines–1.83% | ||||||||
Air Canada (Canada), | 4,000 | 4,430 | ||||||
Sr. Unsec. Gtd. Notes, | 10,000 | 10,749 | ||||||
Continental Airlines Pass Through Trust, | 85,769 | 91,344 | ||||||
Series 2009-2, Class B, Sec. Second Lien Global Pass Through Ctfs., 9.25%, 05/10/17 | 6,497 | 7,077 | ||||||
Delta Air Lines Pass Through Trust, Series 2010-2, Class A, Sr. Sec. First Lien Pass Through Ctfs., 4.95%, 05/23/19 | 37,839 | 39,991 | ||||||
Latam Airlines Group S.A. Pass Through Trust (Chile), Series 2015-1A, Sec. Pass Through Ctfs., 4.20%, 11/15/27(b) | 104,000 | 103,149 | ||||||
United Airlines Pass Through Trust, Series 2014-2, Class B, Sec. Second Lien Pass Through Ctfs., 4.63%, 09/03/22 | 50,000 | 51,031 |
Principal Amount | Value | |||||||
Airlines–(continued) | ||||||||
US Airways Pass Through Trust, Series 2012-1, Class B, Sec. Second Lien Pass Through Ctfs., 8.00%, 10/01/19 | $ | 865 | $ | 981 | ||||
308,752 | ||||||||
Alternative Carriers–0.16% | ||||||||
Level 3 Communications, Inc., Sr. Unsec. Global Notes, 5.75%, 12/01/22 | 12,000 | 12,000 | ||||||
Level 3 Financing, Inc., Sr. Unsec. Gtd. Global Notes, 5.38%, 08/15/22 | 15,000 | 15,225 | ||||||
27,225 | ||||||||
Apparel Retail–0.20% | ||||||||
Hot Topic, Inc., Sr. Sec. Gtd. First Lien Notes, 9.25%, 06/15/21(b) | 19,000 | 19,926 | ||||||
Men’s Wearhouse Inc. (The), Sr. Unsec. Gtd. Global Notes, 7.00%, 07/01/22 | 9,000 | 9,709 | ||||||
Neiman Marcus Group Ltd. LLC, Sr. Unsec. Gtd. Notes, | 4,000 | 4,265 | ||||||
33,900 | ||||||||
Apparel, Accessories & Luxury Goods–0.04% | ||||||||
William Carter Co. (The), Sr. Unsec. Gtd. Global Notes, 5.25%, 08/15/21 | 7,000 | 7,236 | ||||||
Application Software–0.05% | ||||||||
Nuance Communications Inc., Sr. Unsec. Gtd. Notes, 5.38%, 08/15/20(b) | 7,000 | 7,088 | ||||||
SS&C Technologies Holdings, Inc., Sr. Unsec. Notes, 5.88%, 07/15/23(b) | 2,000 | 2,025 | ||||||
9,113 | ||||||||
Asset Management & Custody Banks–1.08% | ||||||||
Alphabet Holding Co., Inc., Sr. Unsec. Global PIK Notes, 7.75%, 11/01/17(c) | 15,000 | 15,056 | ||||||
Blackstone Holdings Finance Co. LLC, Sr. Unsec. Gtd. Notes, | 90,000 | 89,588 | ||||||
Carlyle Holdings II Finance LLC, Sr. Sec. Gtd. Notes, 5.63%, 03/30/43(b) | 75,000 | 78,014 | ||||||
182,658 | ||||||||
Auto Parts & Equipment–0.25% | ||||||||
CTP Transportation Products LLC/CTP Finance Inc., Sr. Sec. Notes, 8.25%, 12/15/19(b) | 12,000 | 12,795 | ||||||
Dana Holding Corp., Sr. Unsec. Notes, 5.50%, 12/15/24 | 5,000 | 4,963 | ||||||
Stackpole International Intermediate Co. S.A./Stackpole International Powder Metal (Canada), Sr. Sec. Gtd. First Lien Notes, 7.75%, 10/15/21(b) | 15,000 | 14,850 | ||||||
Tenneco Inc., Sr. Unsec. Gtd. Global Notes, 5.38%, 12/15/24 | 9,000 | 9,292 | ||||||
41,900 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
Principal Amount | Value | |||||||
Automobile Manufacturers–0.98% | ||||||||
General Motors Co., Sr. Unsec. Global Notes, 3.50%, 10/02/18 | $ | 80,000 | $ | 82,720 | ||||
General Motors Financial Co., Inc., Sr. Unsec. Gtd. Notes, 3.15%, 01/15/20 | 54,000 | 54,259 | ||||||
3.50%, 07/10/19 | 27,000 | 27,591 | ||||||
164,570 | ||||||||
Automotive Retail–0.10% | ||||||||
Advance Auto Parts, Inc., Sr. Unsec. Gtd. Notes, 5.75%, 05/01/20 | 12,000 | 13,379 | ||||||
CST Brands, Inc., Sr. Unsec. Gtd. Global Notes, 5.00%, 05/01/23 | 3,000 | 2,996 | ||||||
16,375 | ||||||||
Broadcasting–0.11% | ||||||||
Clear Channel Worldwide Holdings Inc., Series B, Sr. Unsec. Gtd. Global Notes, 6.50%, 11/15/22 | 4,000 | 4,180 | ||||||
iHeartCommunications, Inc., | 5,000 | 4,538 | ||||||
Sr. Sec. Gtd. First Lien Notes, 10.63%, 03/15/23(b) | 2,000 | 1,900 | ||||||
Sinclair Television Group Inc., Sr. Unsec. Gtd. Notes, 5.63%, 08/01/24(b) | 8,000 | 7,860 | ||||||
18,478 | ||||||||
Building Products–0.32% | ||||||||
Builders FirstSource Inc., Sr. Sec. First Lien Notes, 7.63%, 06/01/21(b) | 15,000 | 15,562 | ||||||
Building Materials Holding Corp., Sr. Sec. Notes, 9.00%, 09/15/18(b) | 14,000 | 15,085 | ||||||
Gibraltar Industries Inc., Sr. Unsec. Gtd. Sub. Global Notes, 6.25%, 02/01/21 | 9,000 | 9,315 | ||||||
Hardwoods Acquisition, Inc., Sr. Sec. Gtd. First Lien Notes, 7.50%, 08/01/21(b) | 4,000 | 3,895 | ||||||
NCI Building Systems, Inc., Sr. Unsec. Gtd. Notes, 8.25%, 01/15/23(b) | 2,000 | 2,133 | ||||||
Norbord Inc. (Canada), Sr. Sec. First Lien Notes, 5.38%, 12/01/20(b) | 8,000 | 8,066 | ||||||
54,056 | ||||||||
Cable & Satellite–2.13% | ||||||||
CCO Holdings LLC/CCO Holdings Capital Corp., | 20,000 | 19,800 | ||||||
Sr. Unsec. Gtd. Notes, | 2,000 | 1,953 | ||||||
Cox Communications, Inc., Sr. Unsec. Notes, 9.38%, 01/15/19(b) | 140,000 | 171,433 | ||||||
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc., Sr. Unsec. Gtd. Notes, 4.45%, 04/01/24 | 30,000 | 30,723 | ||||||
DISH DBS Corp., Sr. Unsec. Gtd. Global Notes, 5.88%, 11/15/24 | 20,000 | 19,300 | ||||||
Intelsat Jackson Holdings S.A. (Luxembourg), Sr. Unsec. Gtd. Global Bonds, 5.50%, 08/01/23 | 15,000 | 13,350 |
Principal Amount | Value | |||||||
Cable & Satellite–(continued) | ||||||||
Time Warner Cable, Inc., | $ | 55,000 | $ | 61,413 | ||||
Sr. Unsec. Gtd. Notes, 5.00%, 02/01/20 | 38,000 | 40,953 | ||||||
358,925 | ||||||||
Casinos & Gaming–0.05% | ||||||||
Boyd Gaming Corp., Sr. Unsec. Gtd. Global Notes, 9.00%, 07/01/20 | 2,000 | 2,180 | ||||||
MGM Resorts International, Sr. Unsec. Gtd. Notes, 7.75%, 03/15/22 | 5,000 | 5,519 | ||||||
7,699 | ||||||||
Catalog Retail–1.57% | ||||||||
QVC, Inc., Sr. Sec. Gtd. First Lien Global Notes, | 80,000 | 77,156 | ||||||
4.85%, 04/01/24 | 52,000 | 51,967 | ||||||
5.45%, 08/15/34 | 150,000 | 136,246 | ||||||
265,369 | ||||||||
Commercial Printing–0.04% | ||||||||
Multi-Color Corp., Sr. Unsec. Gtd. Notes, 6.13%, 12/01/22(b) | 6,000 | 6,150 | ||||||
Communications Equipment–0.08% | ||||||||
Avaya Inc., Sr. Sec. Gtd. First Lien Notes, 9.00%, 04/01/19(b) | 13,000 | 13,455 | ||||||
Computer & Electronics Retail–0.06% | ||||||||
Rent-A-Center, Inc., Sr. Unsec. Gtd. Global Notes, 4.75%, 05/01/21 | 12,000 | 10,605 | ||||||
Construction & Engineering–0.04% | ||||||||
AECOM, Sr. Unsec. Gtd. Notes, 5.75%, 10/15/22(b) | 7,000 | 7,131 | ||||||
Construction Machinery & Heavy Trucks–0.48% | ||||||||
Allied Specialty Vehicles, Inc., Sr. Sec. Notes, 8.50%, 11/01/19(b) | 18,000 | 18,900 | ||||||
Commercial Vehicle Group Inc., Sec. Gtd. Second Lien Global Notes, 7.88%, 04/15/19 | 20,000 | 20,600 | ||||||
Meritor Inc., Sr. Unsec. Gtd. Notes, | 3,000 | 3,000 | ||||||
6.75%, 06/15/21 | 5,000 | 5,206 | ||||||
Navistar International Corp., Sr. Unsec. Gtd. Notes, 8.25%, 11/01/21 | 16,000 | 15,360 | ||||||
Oshkosh Corp., Sr. Unsec. Gtd. Global Notes, | 15,000 | 15,487 | ||||||
5.38%, 03/01/25 | 3,000 | 3,053 | ||||||
81,606 | ||||||||
Construction Materials–0.16% | ||||||||
Building Materials Corp. of America, Sr. Unsec. Notes, 5.38%, 11/15/24(b) | 15,000 | 14,869 | ||||||
CPG Merger Sub LLC, Sr. Unsec. Gtd. Notes, 8.00%, 10/01/21(b) | 3,000 | 3,094 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
Principal Amount | Value | |||||||
Construction Materials–(continued) | ||||||||
Shea Homes L.P./Shea Homes Funding Corp., Sr. Unsec. Notes, 5.88%, 04/01/23(b) | $ | 2,000 | $ | 2,025 | ||||
Unifrax I LLC/Unifrax Holding Co., Sr. Unsec. Gtd. Notes, | 4,000 | 4,050 | ||||||
7.50%, 02/15/19(b) | 3,000 | 3,037 | ||||||
27,075 | ||||||||
Consumer Finance–0.56% | ||||||||
Ally Financial Inc., Sr. Unsec. Global Notes, | 15,000 | 14,400 | ||||||
5.13%, 09/30/24 | 3,000 | 3,015 | ||||||
Navient Corp., Sr. Unsec. Medium-Term Global Notes, 6.25%, 01/25/16 | 75,000 | 76,594 | ||||||
94,009 | ||||||||
Data Processing & Outsourced Services–0.28% | ||||||||
Computer Sciences Corp., Sr. Unsec. Global Notes, 4.45%, 09/15/22 | 30,000 | 30,820 | ||||||
First Data Corp., Sr. Unsec. Gtd. Sub. Global Notes, 11.75%, 08/15/21 | 15,000 | 16,912 | ||||||
47,732 | ||||||||
Diversified Banks–5.38% | ||||||||
Banco Inbursa S.A. Institucion de Banca Multiple (Mexico), Sr. Unsec. Notes, 4.13%, 06/06/24(b) | 200,000 | 193,278 | ||||||
Bank of America Corp., Series Z, Jr. Unsec. Sub. Notes, 6.50%(d) | 85,000 | 88,400 | ||||||
BBVA Bancomer S.A. (Mexico), Unsec. Sub. Notes, 6.75%, 09/30/22(b) | 150,000 | 165,200 | ||||||
Crédit Agricole S.A. (France), Unsec. Sub. Notes, 4.38%, 03/17/25(b) | 200,000 | 192,287 | ||||||
HSBC Holdings PLC (United Kingdom), Sr. Unsec. Global Notes, 4.00%, 03/30/22 | 45,000 | 47,211 | ||||||
JPMorgan Chase & Co., | 120,000 | 119,700 | ||||||
Series V, Jr. Unsec. Sub. Global Notes, 5.00%(d) | 40,000 | 39,250 | ||||||
Wells Fargo & Co., Series U, Jr. Unsec. Sub. Global Notes, 5.88%(d) | 60,000 | 61,500 | ||||||
906,826 | ||||||||
Diversified Metals & Mining–1.58% | ||||||||
Rio Tinto Finance USA Ltd. (United Kingdom), Sr. Unsec. Gtd. Global Notes, 7.13%, 07/15/28 | 20,000 | 25,456 | ||||||
Southern Copper Corp. (Mexico), Sr. Unsec. Global Notes, 5.25%, 11/08/42 | 54,000 | 46,879 | ||||||
Teck Resources Ltd. (Canada), | 66,000 | 56,785 | ||||||
5.20%, 03/01/42 | 35,000 | 25,768 | ||||||
Sr. Unsec. Gtd. Yankee Notes, 4.50%, 01/15/21 | 116,000 | 111,474 | ||||||
266,362 |
Principal Amount | Value | |||||||
Drug Retail–1.04% | ||||||||
CVS Pass Through Trust, Sr. Sec. First Lien Mortgage Pass Through Ctfs., 5.77%, 01/10/33(b) | $ | 155,124 | $ | 174,706 | ||||
Electric Utilities–1.52% | ||||||||
Electricite de France S.A. (France), | 100,000 | 101,520 | ||||||
Sr. Unsec. Notes, 6.00%, 01/22/14(b) | 145,000 | 154,459 | ||||||
255,979 | ||||||||
Electrical Components & Equipment–0.03% | ||||||||
Sensata Technologies B.V. (Netherlands), Sr. Unsec. Gtd. Notes, 4.88%, 10/15/23(b) | 5,000 | 5,025 | ||||||
Environmental & Facilities Services–0.04% | ||||||||
ADS Waste Holdings, Inc., Sr. Unsec. Gtd. Global Notes, 8.25%, 10/01/20 | 6,000 | 6,210 | ||||||
Food Retail–0.43% | ||||||||
Kraft Heinz Co. (The), Sr. Unsec. Gtd. Notes, | 45,000 | 44,959 | ||||||
3.95%, 07/15/25(b) | 27,000 | 27,182 | ||||||
72,141 | ||||||||
Gas Utilities–0.07% | ||||||||
Ferrellgas L.P./Ferrellgas Finance Corp., | 3,000 | 3,045 | ||||||
Sr. Unsec. Gtd. Notes, 6.75%, 06/15/23(b) | 3,000 | 3,030 | ||||||
Suburban Propane Partners, L.P./Suburban Energy Finance Corp., Sr. Unsec. Global Notes, 5.50%, 06/01/24 | 5,000 | 5,063 | ||||||
11,138 | ||||||||
General Merchandise Stores–0.14% | ||||||||
Family Tree Escrow LLC, Sr. Sec. Notes, 5.75%, 03/01/23(b) | 23,000 | 24,207 | ||||||
Gold–0.68% | ||||||||
Kinross Gold Corp. (Canada), Sr. Unsec. Gtd. Global Notes, 5.95%, 03/15/24 | 75,000 | 71,272 | ||||||
Yamana Gold Inc. (Canada), Sr. Unsec. Global Notes, 4.95%, 07/15/24 | 45,000 | 43,387 | ||||||
114,659 | ||||||||
Health Care Equipment–0.73% | ||||||||
Becton, Dickinson and Co., | 45,000 | 44,893 | ||||||
Sr. Unsec. Global Notes, 3.88%, 05/15/24 | 30,000 | 30,149 | ||||||
Universal Hospital Services Inc., Sec. Gtd. Second Lien Global Notes, 7.63%, 08/15/20 | 3,000 | 2,805 | ||||||
Zimmer Biomet Holdings, Inc., Sr. Unsec. Global Notes, 2.70%, 04/01/20 | 46,000 | 45,756 | ||||||
123,603 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
Principal Amount | Value | |||||||
Health Care Facilities–0.69% | ||||||||
Acadia Healthcare Co., Inc., Sr. Unsec. Gtd. Notes, 5.63%, 02/15/23(b) | $ | 7,000 | $ | 7,140 | ||||
Community Health Systems, Inc., Sr. Unsec. Gtd. Global Notes, 6.88%, 02/01/22 | 6,917 | 7,332 | ||||||
HCA Holdings, Inc., Sr. Unsec. Notes, 6.25%, 02/15/21 | 18,000 | 19,485 | ||||||
HCA, Inc., | 9,000 | 9,785 | ||||||
6.50%, 02/15/20 | 19,000 | 21,268 | ||||||
Sr. Sec. Gtd. First Lien Notes, 5.25%, 04/15/25 | 4,000 | 4,175 | ||||||
Sr. Unsec. Gtd. Notes, 5.38%, 02/01/25 | 5,000 | 5,087 | ||||||
Surgical Care Affiliates, Inc., Sr. Unsec. Gtd. Notes, 6.00%, 04/01/23(b) | 12,000 | 12,090 | ||||||
Tenet Healthcare Corp., | 10,000 | 10,525 | ||||||
8.13%, 04/01/22 | 15,000 | 16,500 | ||||||
Sr. Unsec. Notes, 6.75%, 06/15/23(b) | 3,000 | 3,075 | ||||||
116,462 | ||||||||
Health Care REIT’s–0.45% | ||||||||
Senior Housing Properties Trust, Sr. Unsec. Notes, 4.30%, 01/15/16 | 75,000 | 75,797 | ||||||
Health Care Services–0.82% | ||||||||
Laboratory Corp. of America Holdings, Sr. Unsec. Notes, 3.60%, 02/01/25 | 83,000 | 79,308 | ||||||
MPH Acquisition Holdings LLC, Sr. Unsec. Gtd. Notes, 6.63%, 04/01/22(b) | 15,000 | 15,450 | ||||||
Omnicare Inc., Sr. Unsec. Gtd. Notes, 5.00%, 12/01/24 | 7,000 | 7,604 | ||||||
Orlando Lutheran Towers Inc., Unsec. Bonds, 8.00%, 07/01/17 | 35,000 | 35,553 | ||||||
137,915 | ||||||||
Health Care Supplies–0.01% | ||||||||
Alere Inc., Sr. Unsec. Gtd. Sub. Notes, 6.38%, 07/01/23(b) | 2,000 | 2,038 | ||||||
Home Improvement Retail–0.11% | ||||||||
Hillman Group Inc. (The), Sr. Unsec. Notes, 6.38%, 07/15/22(b) | 19,000 | 18,050 | ||||||
Homebuilding–1.34% | ||||||||
Ashton Woods USA LLC/Ashton Woods Finance Co., Sr. Unsec. Notes, 6.88%, 02/15/21(b) | 23,000 | 21,562 | ||||||
Beazer Homes USA Inc., Sr. Unsec. Gtd. Global Notes, 7.50%, 09/15/21 | 20,000 | 20,275 | ||||||
K. Hovnanian Enterprises Inc., | 6,000 | 6,180 | ||||||
Sr. Unsec. Gtd. Notes, | 10,000 | 9,137 | ||||||
8.00%, 11/01/19(b) | 4,000 | 3,670 |
Principal Amount | Value | |||||||
Homebuilding–(continued) | ||||||||
KB Home, Sr. Unsec. Gtd. Notes, 7.00%, 12/15/21 | $ | 4,000 | $ | 4,140 | ||||
Lennar Corp., Sr. Unsec. Gtd. Global Notes, 4.75%, 11/15/22 | 5,000 | 4,944 | ||||||
MDC Holdings, Inc., Sr. Unsec. Gtd. Notes, 6.00%, 01/15/43 | 165,000 | 141,072 | ||||||
Meritage Homes Corp., | 2,000 | 2,153 | ||||||
Sr. Unsec. Gtd. Notes, | 3,000 | 3,008 | ||||||
Ryland Group Inc. (The), Sr. Unsec. Gtd. Notes, 5.38%, 10/01/22 | 10,000 | 10,100 | ||||||
226,241 | ||||||||
Hotels, Resorts & Cruise Lines–0.40% | ||||||||
Carnival Corp., Sr. Unsec. Gtd. Global Notes, 3.95%, 10/15/20 | 60,000 | 63,046 | ||||||
Choice Hotels International, Inc., Sr. Unsec. Gtd. Notes, 5.75%, 07/01/22 | 4,000 | 4,350 | ||||||
67,396 | ||||||||
Household Products–0.02% | ||||||||
Springs Industries, Inc., Sr. Sec. Global Bonds, 6.25%, 06/01/21 | 3,000 | 2,989 | ||||||
Independent Power Producers & Energy Traders–0.13% | ||||||||
Calpine Corp., | 2,000 | 2,130 | ||||||
Sr. Unsec. Global Notes, 5.38%, 01/15/23 | 14,000 | 13,702 | ||||||
5.50%, 02/01/24 | 6,000 | 5,865 | ||||||
21,697 | ||||||||
Industrial Machinery–0.53% | ||||||||
Optimas OE Solutions Holding, LLC/Optimas OE Solutions, Inc., Sr. Sec. Notes, 8.63%, 06/01/21(b) | 5,000 | 5,100 | ||||||
Valmont Industries, Inc., Sr. Unsec. Gtd. Global Notes, 5.25%, 10/01/54 | 75,000 | 67,157 | ||||||
Waterjet Holdings, Inc., Sr. Sec. Gtd. Notes, 7.63%, 02/01/20(b) | 16,000 | 16,700 | ||||||
88,957 | ||||||||
Industrial REIT’s–0.30% | ||||||||
Prologis L.P., Sr. Unsec. Gtd. Global Notes, 4.25%, 08/15/23 | 49,000 | 50,290 | ||||||
Integrated Oil & Gas–0.16% | ||||||||
California Resources Corp., Sr. Unsec. Gtd. Global Notes, 5.50%, 09/15/21 | 10,000 | 8,725 | ||||||
Ecopetrol S.A. (Colombia), Sr. Unsec. Global Notes, 4.13%, 01/16/25 | 6,000 | 5,505 | ||||||
Petrobras Global Finance B.V. (Brazil), Sr. Unsec. Gtd. Global Notes, | 10,000 | 9,662 | ||||||
6.85%, 06/05/2115 | 3,000 | 2,479 | ||||||
26,371 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
Principal Amount | Value | |||||||
Integrated Telecommunication Services–1.52% | ||||||||
AT&T Inc., Sr. Unsec. Global Notes, | $ | 24,000 | $ | 22,072 | ||||
4.75%, 05/15/46 | 44,000 | 40,153 | ||||||
Telefonica Emisiones SAU (Spain), Sr. Unsec. Gtd. Global Notes, 5.46%, 02/16/21 | 90,000 | 99,510 | ||||||
Verizon Communications Inc., Sr. Unsec. Global Notes, | 58,000 | 52,949 | ||||||
5.15%, 09/15/23 | 25,000 | 27,433 | ||||||
6.40%, 09/15/33 | 13,000 | 14,886 | ||||||
257,003 | ||||||||
Internet Retail–0.03% | ||||||||
Netflix, Inc., Sr. Unsec. Global Notes, 5.75%, 03/01/24 | 5,000 | 5,213 | ||||||
Internet Software & Services–3.52% | ||||||||
Alibaba Group Holding Ltd. (China), Sr. Unsec. Gtd. Notes, | 200,000 | 197,560 | ||||||
3.60%, 11/28/24(b) | 200,000 | 191,989 | ||||||
4.50%, 11/28/34(b) | 200,000 | 191,718 | ||||||
EarthLink Holdings Corp., | 5,000 | 5,225 | ||||||
Sr. Unsec. Gtd. Global Notes, 8.88%, 05/15/19 | 2,000 | 2,085 | ||||||
Equinix Inc., Sr. Unsec. Notes, 5.38%, 01/01/22 | 5,000 | 5,038 | ||||||
593,615 | ||||||||
Investment Banking & Brokerage–1.35% | ||||||||
Cantor Fitzgerald, L.P., Unsec. Notes, 6.50%, 06/17/22(b) | 74,000 | 76,413 | ||||||
Charles Schwab Corp. (The), Series A, Jr. Unsec. Sub. Notes, 7.00%(d) | 45,000 | 52,088 | ||||||
Goldman Sachs Group, Inc. (The), | 45,000 | 43,338 | ||||||
Series L, Jr. Unsec. Sub. Notes, | 55,000 | 55,412 | ||||||
227,251 | ||||||||
Life & Health Insurance–2.70% | ||||||||
MetLife, Inc., Series C, Jr. Unsec. Sub. Global Notes, 5.25%(d) | 65,000 | 64,756 | ||||||
Nationwide Financial Services, Inc., Sr. Unsec. Notes, 5.38%, 03/25/21(b) | 165,000 | 181,731 | ||||||
Prudential Financial, Inc., Jr. Unsec. Sub. Global Notes, 8.88%, 06/15/38 | 130,000 | 152,263 | ||||||
TIAA Asset Management Finance Co. LLC, Sr. Unsec. Notes, 4.13%, 11/01/24(b) | 55,000 | 55,494 | ||||||
454,244 | ||||||||
Managed Health Care–0.29% | ||||||||
Cigna Corp., Sr. Unsec. Notes, 4.50%, 03/15/21 | 45,000 | 49,053 |
Principal Amount | Value | |||||||
Marine–1.18% | ||||||||
Navios Maritime Acquisition Corp./Navios Acquisition Finance U.S. Inc., Sr. Sec. Gtd. First Lien Mortgage Notes, 8.13%, 11/15/21(b) | $ | 12,000 | $ | 11,820 | ||||
PT Pelabuhan Indonesia II (Indonesia), Sr. Unsec. Bonds, 4.25%, 05/05/25(b) | 200,000 | 187,750 | ||||||
199,570 | ||||||||
Metal & Glass Containers–0.10% | ||||||||
Berry Plastics Corp., Sec. Gtd. Second Lien Notes, 5.50%, 05/15/22 | 14,000 | 14,140 | ||||||
Owens-Brockway Glass Container Inc., Sr. Unsec. Gtd. Notes, | 3,000 | 3,000 | ||||||
17,140 | ||||||||
Movies & Entertainment–0.04% | ||||||||
DreamWorks Animation SKG, Inc., Sr. Unsec. Gtd. Notes, | 7,000 | 6,991 | ||||||
Multi-Line Insurance–1.91% | ||||||||
American Financial Group, Inc., Sr. Unsec. Notes, 9.88%, 06/15/19 | 180,000 | 225,160 | ||||||
Nationwide Mutual Insurance Co., Unsec. Sub. Notes, 4.95%, 04/22/44(b) | 100,000 | 96,136 | ||||||
321,296 | ||||||||
Multi-Sector Holdings–0.44% | ||||||||
BNSF Railway Co., Pass Through Trust, Series 2015-1, Sr. Sec. First Lien Pass-Through Ctfs., 3.44%, 06/16/28(b) | 74,000 | 73,516 | ||||||
Multi-Utilities–0.41% | ||||||||
Enable Midstream Partners L.P., Sr. Unsec. Notes, 3.90%, 05/15/24(b) | 75,000 | 69,720 | ||||||
Office REIT’s–0.30% | ||||||||
CyrusOne L.P./CyrusOne Finance Corp., Sr. Unsec. Gtd. Notes, | 6,000 | 6,195 | ||||||
Piedmont Operating Partnership L.P., Sr. Unsec. Gtd. Global Notes, 4.45%, 03/15/24 | 45,000 | 44,907 | ||||||
51,102 | ||||||||
Office Services & Supplies–0.21% | ||||||||
Pitney Bowes Inc., Sr. Unsec. Global Notes, 4.63%, 03/15/24 | 35,000 | 35,315 | ||||||
Oil & Gas Drilling–0.46% | ||||||||
Pioneer Energy Services Corp., Sr. Unsec. Gtd. Global Notes, 6.13%, 03/15/22 | 5,000 | 4,100 | ||||||
Rowan Cos., Inc., Sr. Unsec. Gtd. Notes, 5.85%, 01/15/44 | 86,000 | 72,835 | ||||||
76,935 | ||||||||
Oil & Gas Equipment & Services–0.37% | ||||||||
Ecopetrol S.A. (Colombia), Sr. Unsec. Global Notes, 5.38%, 06/26/26 | 6,000 | 5,963 | ||||||
Exterran Partners, L.P./EXLP Finance Corp., Sr. Unsec. Gtd. Global Notes, 6.00%, 04/01/21 | 13,000 | 12,610 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
Principal Amount | Value | |||||||
Oil & Gas Equipment & Services–(continued) | ||||||||
Key Energy Services, Inc., Sr. Unsec. Gtd. Notes, 6.75%, 03/01/21 | $ | 6,000 | $ | 3,540 | ||||
Petrofac Ltd. (United Kingdom), Sr. Unsec. Gtd. Notes, | 41,000 | 40,668 | ||||||
62,781 | ||||||||
Oil & Gas Exploration & Production–2.09% | ||||||||
Antero Resources Corp., Sr. Unsec. Gtd. Global Notes, 6.00%, 12/01/20 | 3,000 | 3,030 | ||||||
Carrizo Oil & Gas, Inc., Sr. Unsec. Gtd. Global Notes, 6.25%, 04/15/23 | 8,000 | 8,060 | ||||||
Chaparral Energy, Inc., Sr. Unsec. Gtd. Global Notes, 9.88%, 10/01/20 | 10,000 | 8,050 | ||||||
Chesapeake Energy Corp., | 19,000 | 17,480 | ||||||
Sr. Unsec. Gtd. Global Notes, 6.88%, 11/15/20 | 5,000 | 4,925 | ||||||
Sr. Unsec. Gtd. Notes, 6.63%, 08/15/20 | 5,000 | 4,900 | ||||||
Cimarex Energy Co., Sr. Unsec. Gtd. Notes, 4.38%, 06/01/24 | 7,000 | 6,934 | ||||||
Concho Resources Inc., Sr. Unsec. Gtd. Global Notes, | 2,000 | 2,000 | ||||||
5.50%, 04/01/23 | 9,000 | 9,045 | ||||||
Denbury Resources Inc., Sr. Unsec. Gtd. Sub. Notes, 5.50%, 05/01/22 | 9,000 | 8,100 | ||||||
Halcón Resources Corp., Sec. Gtd. Second Lien Notes, 8.63%, 02/01/20(b) | 12,000 | 11,910 | ||||||
KazMunaiGaz National Co. JSC (Kazakhstan), Sr. Unsec. Notes, 4.88%, 05/07/25(b) | 200,000 | 183,500 | ||||||
Laredo Petroleum, Inc., | 8,000 | 8,440 | ||||||
Sr. Unsec. Gtd. Notes, 6.25%, 03/15/23 | 11,000 | 11,193 | ||||||
Parsley Energy LLC/Parsley Finance Corp., Sr. Unsec. Notes, 7.50%, 02/15/22(b) | 8,000 | 8,200 | ||||||
QEP Resources Inc., Sr. Unsec. Notes, 5.38%, 10/01/22 | 13,000 | 12,642 | ||||||
Range Resources Corp., Sr. Unsec. Gtd. Sub. Notes, 5.00%, 08/15/22 | 10,000 | 9,800 | ||||||
SandRidge Energy, Inc., | 6,000 | 5,490 | ||||||
Sr. Unsec. Gtd. Global Notes, 7.50%, 03/15/21 | 8,000 | 3,480 | ||||||
8.13%, 10/15/22 | 2,000 | 860 | ||||||
SM Energy Co., | 11,000 | 11,523 | ||||||
6.50%, 01/01/23 | 4,000 | 4,120 | ||||||
Sr. Unsec. Notes, 6.13%, 11/15/22(b) | 9,000 | 9,270 | ||||||
352,952 |
Principal Amount | Value | |||||||
Oil & Gas Storage & Transportation–3.63% | ||||||||
Crestwood Midstream Partners L.P./Crestwood Midstream Finance Corp., Sr. Unsec. Gtd. Global Notes, 6.00%, 12/15/20 | $ | 13,000 | $ | 13,520 | ||||
Energy Transfer Equity, L.P., Sr. Sec. First Lien Notes, 5.50%, 06/01/27 | 3,000 | 3,000 | ||||||
Energy Transfer Partners, L.P., Sr. Unsec. Notes, 5.15%, 03/15/45 | 51,000 | 45,147 | ||||||
Enterprise Products Operating LLC, Sr. Unsec. Gtd. Notes, 3.75%, 02/15/25 | 74,000 | 72,893 | ||||||
EQT Midstream Partners L.P., Sr. Unsec. Gtd. Notes, 4.00%, 08/01/24 | 65,000 | 61,540 | ||||||
Kinder Morgan Energy Partners LP, Sr. Unsec. Gtd. Notes, 4.25%, 09/01/24 | 85,000 | 82,806 | ||||||
5.40%, 09/01/44 | 100,000 | 90,884 | ||||||
MarkWest Energy Partners, L.P./MarkWest Energy Finance Corp., Sr. Unsec. Gtd. Notes, 4.88%, 06/01/25 | 5,000 | 4,900 | ||||||
Regency Energy Partners L.P./Regency Energy Finance Corp., Sr. Unsec. Gtd. Global Notes, 5.75%, 09/01/20 | 20,000 | 21,763 | ||||||
Spectra Energy Partners, L.P., Sr. Unsec. Global Notes, | 59,000 | 56,518 | ||||||
4.50%, 03/15/45 | 48,000 | 42,546 | ||||||
Teekay Corp. (Bermuda), Sr. Unsec. Global Notes, 8.50%, 01/15/20 | 5,000 | 5,588 | ||||||
Teekay Offshore Partners L.P./Teekay Offshore Finance Corp. (Bermuda), Sr. Unsec. Global Notes, 6.00%, 07/30/19 | 3,000 | 2,711 | ||||||
Tesoro Logistics L.P./Tesoro Logistics Finance Corp., Sr. Unsec. Gtd. Notes, 6.25%, 10/15/22(b) | 2,000 | 2,080 | ||||||
Williams Partners L.P., Sr. Unsec. Global Notes, 5.10%, 09/15/45 | 89,000 | 79,008 | ||||||
Williams Partners L.P./ACMP Finance Corp., Sr. Unsec. Global Notes, 4.88%, 05/15/23 | 27,000 | 26,696 | ||||||
611,600 | ||||||||
Other Diversified Financial Services–0.99% | ||||||||
Football Trust V, Sec. Pass Through Ctfs., 5.35%, 10/05/20(b) | 100,000 | 110,373 | ||||||
Voya Financial, Inc., Jr. Unsec. Gtd. Sub. Global Notes, 5.65%, 05/15/53 | 55,000 | 56,306 | ||||||
166,679 | ||||||||
Packaged Foods & Meats–0.24% | ||||||||
Diamond Foods Inc., Sr. Unsec. Gtd. Notes, 7.00%, 03/15/19(b) | 21,000 | 21,656 | ||||||
Post Holdings Inc., | 3,000 | 3,068 | ||||||
Sr. Unsec. Gtd. Notes, | 3,000 | 3,004 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
Principal Amount | Value | |||||||
Packaged Foods & Meats–(continued) | ||||||||
Smithfield Foods Inc., Sr. Unsec. Notes, | $ | 2,000 | $ | 2,090 | ||||
6.63%, 08/15/22 | 4,000 | 4,260 | ||||||
WhiteWave Foods Co. (The), Sr. Unsec. Gtd. Notes, 5.38%, 10/01/22 | 6,000 | 6,367 | ||||||
40,445 | ||||||||
Paper Packaging–1.18% | ||||||||
Graphic Packaging International Inc., Sr. Unsec. Gtd. Notes, | 2,000 | 2,040 | ||||||
4.88%, 11/15/22 | 2,000 | 2,035 | ||||||
Klabin Finance S.A. (Brazil), Sr. Unsec. Gtd. Notes, 5.25%, 07/16/24(b) | 200,000 | 194,630 | ||||||
198,705 | ||||||||
Paper Products–0.53% | ||||||||
International Paper Co., Sr. Unsec. Global Notes, | 18,000 | 17,694 | ||||||
5.15%, 05/15/46 | 63,000 | 60,827 | ||||||
Mercer International Inc., Sr. Unsec. Gtd. Global Notes, 7.00%, 12/01/19 | 5,000 | 5,288 | ||||||
PH Glatfelter Co., Sr. Unsec. Gtd. Global Notes, 5.38%, 10/15/20 | 5,000 | 5,163 | ||||||
88,972 | ||||||||
Pharmaceuticals–1.41% | ||||||||
AbbVie Inc., Sr. Unsec. Global Notes, 3.60%, 05/14/25 | 50,000 | 49,393 | ||||||
Actavis Funding SCS, Sr. Unsec. Gtd. Global Notes, 4.85%, 06/15/44 | 60,000 | 57,909 | ||||||
Bristol-Myers Squibb Co., Sr. Unsec. Deb., 6.88%, 08/01/97 | 74,000 | 98,031 | ||||||
Quintiles Transnational Corp., Sr. Unsec. Gtd. Notes, 4.88%, 05/15/23(b) | 2,000 | 2,023 | ||||||
Valeant Pharmaceuticals International, Inc., | 10,000 | 10,125 | ||||||
5.63%, 12/01/21(b) | 14,000 | 14,367 | ||||||
5.88%, 05/15/23(b) | 3,000 | 3,090 | ||||||
Sr. Unsec. Notes, 6.13%, 04/15/25(b) | 3,000 | 3,105 | ||||||
238,043 | ||||||||
Property & Casualty Insurance–2.20% | ||||||||
Allstate Corp. (The), Unsec. Sub. Global Deb., 5.75%, 08/15/53 | 75,000 | 79,687 | ||||||
CNA Financial Corp., Sr. Unsec. Notes, 7.35%, 11/15/19 | 160,000 | 189,828 | ||||||
Liberty Mutual Group Inc., Jr. Unsec. Gtd. Sub. Bonds, 7.80%, 03/15/37(b) | 45,000 | 54,000 | ||||||
W.R. Berkley Corp., Sr. Unsec. Notes, 7.38%, 09/15/19 | 40,000 | 47,611 | ||||||
371,126 | ||||||||
Publishing–0.01% | ||||||||
Tribune Media Co. (The), Sr. Unsec. Gtd. Notes, 5.88%, 07/15/22(b) | 2,000 | 2,030 |
Principal Amount | Value | |||||||
Railroads–0.30% | ||||||||
Burlington Northern Santa Fe, LLC, Sr. Unsec. Global Deb., 3.00%, 04/01/25 | $ | 52,000 | $ | 49,793 | ||||
Real Estate Development–0.03% | ||||||||
AV Homes, Inc., Sr. Unsec. Gtd. Global Notes, 8.50%, 07/01/19 | 5,000 | 4,856 | ||||||
Real Estate Services–0.02% | ||||||||
Kennedy-Wilson Inc., Sr. Unsec. Gtd. Notes, 5.88%, 04/01/24 | 4,000 | 4,030 | ||||||
Regional Banks–1.56% | ||||||||
CIT Group Inc., Sr. Unsec. Global Notes, 5.00%, 08/15/22 | 3,000 | 2,985 | ||||||
Citizens Financial Group, Inc., Jr. Unsec. Sub. Notes, 5.50%(b)(d) | 110,000 | 106,975 | ||||||
Fifth Third Bancorp, | 55,000 | 56,853 | ||||||
Series J, Jr. Unsec. Sub. Bonds, | 45,000 | 43,088 | ||||||
First Niagara Financial Group Inc., Unsec. Sub. Notes, 7.25%, 12/15/21 | 35,000 | 38,928 | ||||||
SunTrust Banks, Inc., Jr. Unsec. Sub. Notes, 5.63%(d) | 5,000 | 5,056 | ||||||
Synovus Financial Corp., Sr. Unsec. Global Notes, 7.88%, 02/15/19 | 8,000 | 9,040 | ||||||
262,925 | ||||||||
Reinsurance–0.38% | ||||||||
Reinsurance Group of America, Inc., Sr. Unsec. Medium-Term Notes, 4.70%, 09/15/23 | 60,000 | 63,972 | ||||||
Renewable Electricity–0.25% | ||||||||
Oglethorpe Power Corp., Sr. Sec. First Mortgage Bonds, 4.55%, 06/01/44 | 36,000 | 35,486 | ||||||
TerraForm Power Operating, LLC, Sr. Unsec. Gtd. Notes, | 7,000 | 7,175 | ||||||
42,661 | ||||||||
Residential REIT’s–0.68% | ||||||||
Essex Portfolio L.P., Sr. Unsec. Gtd. Global Notes, 3.63%, 08/15/22 | 115,000 | 115,261 | ||||||
Restaurants–0.77% | ||||||||
1011778 BC ULC/ New Red Finance, Inc. (Canada), | 117,000 | 120,802 | ||||||
Sr. Sec. Gtd. First Lien Notes, 4.63%, 01/15/22(b) | 2,000 | 1,983 | ||||||
Carrols Restaurant Group, Inc., Sec. Second Lien Notes, 8.00%, 05/01/22(b) | 7,000 | 7,332 | ||||||
130,117 | ||||||||
Security & Alarm Services–0.04% | ||||||||
ADT Corp. (The), Sr. Unsec. Global Notes, 6.25%, 10/15/21 | 7,000 | 7,438 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
Principal Amount | Value | |||||||
Semiconductor Equipment–0.01% | ||||||||
Amkor Technology Inc., Sr. Unsec. Global Notes, 6.38%, 10/01/22 | $ | 2,000 | $ | 2,035 | ||||
Semiconductors–1.37% | ||||||||
Micron Technology, Inc., | 17,000 | 17,510 | ||||||
Sr. Unsec. Notes, 5.25%, 08/01/23(b) | 5,000 | 4,819 | ||||||
NXP BV/NXP Funding LLC (Netherlands), Sr. Unsec. Gtd. Notes, | 200,000 | 208,500 | ||||||
230,829 | ||||||||
Specialized Consumer Services–0.05% | ||||||||
ServiceMaster Co., LLC (The), Sr. Unsec. Notes, 7.45%, 08/15/27 | 8,000 | 8,140 | ||||||
Specialized Finance–2.73% | ||||||||
Aircastle Ltd., Sr. Unsec. Notes, | 6,000 | 6,075 | ||||||
5.50%, 02/15/22 | 5,000 | 5,138 | ||||||
CME Group Inc., Sr. Unsec. Global Notes, 5.30%, 09/15/43 | 45,000 | 49,908 | ||||||
International Lease Finance Corp., Sr. Unsec. Global Notes, 5.88%, 08/15/22 | 10,000 | 10,825 | ||||||
Moody’s Corp., | 110,000 | 123,685 | ||||||
Sr. Unsec. Global Notes, 2.75%, 07/15/19 | 45,000 | 45,439 | ||||||
4.88%, 02/15/24 | 158,000 | 170,028 | ||||||
5.25%, 07/15/44 | 35,000 | 35,951 | ||||||
MSCI Inc., Sr. Unsec. Gtd. Notes., 5.25%, 11/15/24(b) | 13,000 | 13,228 | ||||||
460,277 | ||||||||
Specialized REIT’s–2.09% | ||||||||
Crown Castle International Corp., | 9,000 | 9,113 | ||||||
Sr. Unsec. Notes, 4.88%, 04/15/22 | 9,000 | 9,090 | ||||||
EPR Properties, Sr. Unsec. Gtd. Global Notes, 4.50%, 04/01/25 | 43,000 | 42,370 | ||||||
7.75%, 07/15/20 | 245,000 | 291,062 | ||||||
351,635 | ||||||||
Specialty Chemicals–0.06% | ||||||||
PolyOne Corp., Sr. Unsec. Global Notes, 5.25%, 03/15/23 | 10,000 | 9,925 | ||||||
Specialty Stores–0.17% | ||||||||
Tiffany & Co., Sr. Unsec. Global Notes, 3.80%, 10/01/24 | 29,000 | 28,493 | ||||||
Steel–0.23% | ||||||||
ArcelorMittal (Luxembourg), Sr. Unsec. Global Notes, 7.00%, 02/25/22 | 5,000 | 5,425 |
Principal Amount | Value | |||||||
Steel–(continued) | ||||||||
FMG Resources (August 2006) Pty. Ltd. (Australia), Sr. Unsec. Gtd. Notes, | $ | 17,000 | $ | 12,091 | ||||
8.25%, 11/01/19(b) | 4,000 | 3,410 | ||||||
Steel Dynamics, Inc., Sr. Unsec. Gtd. Global Notes, | 2,000 | 2,013 | ||||||
5.50%, 10/01/24 | 9,000 | 9,045 | ||||||
SunCoke Energy Partners L.P./SunCoke Energy Partners Finance Corp., Sr. Unsec. Gtd. Notes, | 7,000 | 7,096 | ||||||
39,080 | ||||||||
Technology Hardware, Storage & Peripherals–0.49% | ||||||||
Seagate HDD Cayman, | 45,000 | 44,944 | ||||||
Sr. Unsec. Gtd. Notes, | 38,000 | 37,335 | ||||||
82,279 | ||||||||
Tobacco–1.20% | ||||||||
Altria Group, Inc., Sr. Unsec. Gtd. Global Notes, 4.75%, 05/05/21 | 55,000 | 59,610 | ||||||
B.A.T. International Finance PLC (United Kingdom), Sr. Unsec. Gtd. Notes, 2.75%, 06/15/20(b) | 35,000 | 35,178 | ||||||
Philip Morris International Inc., Sr. Unsec. Global Notes, 4.25%, 11/10/44 | 72,000 | 67,410 | ||||||
Reynolds American, Inc., Sr. Unsec. Gtd. Global Notes, 4.45%, 06/12/25 | 39,000 | 39,727 | ||||||
201,925 | ||||||||
Trading Companies & Distributors–0.57% | ||||||||
Air Lease Corp., Sr. Unsec. Global Notes, 3.88%, 04/01/21 | 85,000 | 86,009 | ||||||
United Rentals North America Inc., Sr. Unsec. Gtd. Notes, 6.13%, 06/15/23 | 10,000 | 10,175 | ||||||
96,184 | ||||||||
Wireless Telecommunication Services–1.81% | ||||||||
Crown Castle Towers LLC, Sr. Sec. Gtd. First Lien Notes, 4.88%, 08/15/20(b) | 120,000 | 131,197 | ||||||
Rogers Communications Inc. (Canada), Sr. Unsec. Gtd. Global Notes, 3.00%, 03/15/23 | 50,000 | 48,299 | ||||||
4.50%, 03/15/43 | 30,000 | 27,758 | ||||||
SBA Communications Corp., Sr. Unsec. Global Notes, 4.88%, 07/15/22 | 18,000 | 17,595 | ||||||
Sprint Capital Corp., Sr. Unsec. Gtd. Global Notes, 6.88%, 11/15/28 | 15,000 | 12,975 | ||||||
Sprint Communications Inc., | 2,000 | 2,365 | ||||||
Sr. Unsec. Gtd. Notes, | 27,000 | 29,464 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
Principal Amount | Value | |||||||
Wireless Telecommunication Services–(continued) | ||||||||
Sprint Corp., Sr. Unsec. Gtd. Global Notes, | $ | 10,000 | $ | 9,450 | ||||
7.88%, 09/15/23 | 6,000 | 5,865 | ||||||
T-Mobile USA, Inc., Sr. Unsec. Gtd. Global Notes, 6.38%, 03/01/25 | 20,000 | 20,500 | ||||||
305,468 | ||||||||
Total Bonds and Notes |
| 11,867,630 | ||||||
U.S. Government Sponsored Agency Mortgage-Backed Securities–29.54% |
| |||||||
Collateralized Mortgage Obligations–0.61% | ||||||||
Ginnie Mae REMICs, | 340,670 | 37,269 | ||||||
1.69%, 12/20/64, IO(e) | 576,333 | 65,918 | ||||||
103,187 | ||||||||
Federal Home Loan Mortgage Corp. (FHLMC)–6.20% | ||||||||
Pass Through Ctfs., | 2,636 | 3,007 | ||||||
6.00%, 05/01/17 to 12/01/31 | 29,631 | 33,370 | ||||||
5.50%, 09/01/17 | 3,742 | 3,862 | ||||||
Pass Through Ctfs., TBA, 4.00%, 07/01/45(f) | 950,000 | 1,004,718 | ||||||
1,044,957 | ||||||||
Federal National Mortgage Association (FNMA)–20.81% | ||||||||
Pass Through Ctfs., | 11,724 | 12,472 | ||||||
6.50%, 05/01/16 to 09/01/31 | 1,760 | 2,007 | ||||||
5.00%, 11/01/18 | 7,511 | 7,961 | ||||||
7.50%, 04/01/29 | 3,717 | 4,222 | ||||||
8.00%, 04/01/32 | 1,235 | 1,247 | ||||||
Pass Through Ctfs., TBA, 2.50%, 07/01/30(f) | 206,000 | 208,512 | ||||||
3.00%, 07/01/30 to 07/01/45(f) | 655,000 | 659,760 | ||||||
4.50%, 07/01/44(f) | 600,000 | 648,750 | ||||||
3.50%, 07/01/45 to 08/01/45(f) | 1,908,000 | 1,963,714 | ||||||
3,508,645 | ||||||||
Government National Mortgage Association (GNMA)–1.92% | ||||||||
Pass Through Ctfs., | 3,509 | 3,837 | ||||||
8.50%, 11/15/24 | 1,243 | 1,248 | ||||||
7.00%, 07/15/31 to 08/15/31 | 1,409 | 1,667 | ||||||
6.50%, 11/15/31 to 03/15/32 | 2,869 | 3,282 | ||||||
6.00%, 11/15/32 | 1,325 | 1,546 | ||||||
Pass Through Ctfs., TBA, 3.50%, 07/01/45(f) | 300,000 | 311,379 | ||||||
322,959 | ||||||||
Total U.S. Government Sponsored Agency Mortgage-Backed Securities |
| 4,979,748 |
Principal Amount | Value | |||||||
U.S. Treasury Securities–9.64% |
| |||||||
U.S. Treasury Bills–0.50% | ||||||||
0.00%, 08/20/15(g)(h) | $ | 45,000 | $ | 45,000 | ||||
0.08%, 08/20/15(g)(h) | 25,000 | 25,000 | ||||||
0.09%, 08/20/15(g)(h) | 15,000 | 15,000 | ||||||
85,000 | ||||||||
U.S. Treasury Notes–6.38% | ||||||||
1.63%, 06/30/20 | 443,900 | 443,537 | ||||||
2.13%, 05/15/25 | 644,700 | 631,946 | ||||||
1,075,483 | ||||||||
U.S. Treasury Bonds–2.76% | ||||||||
2.50%, 02/15/45 | 530,900 | 465,318 | ||||||
Total U.S. Treasury Securities |
| 1,625,801 | ||||||
Asset-Backed Securities–6.48% |
| |||||||
Barclays Bank Commercial Mortgage Securities Trust, Series 2015-RRI, Class D, Floating Rate Pass Through Ctfs., 3.09%, 05/15/32(b)(e) | 230,000 | 230,580 | ||||||
Bear Stearns Adjustable Rate Mortgage Trust, Series 2005-2, Class A1, Floating Rate Pass Through Ctfs., 2.68%, 03/25/35(e) | 136,119 | 137,636 | ||||||
Commercial Mortgage Trust, | 100,000 | 99,961 | ||||||
Series 2015-CR23, Class CMB, Pass Through Ctfs., 3.81%, 05/10/48(b) | 150,000 | 152,960 | ||||||
Credit Suisse Mortgage Trust, Series 2009-2R, Class 1A11, Floating Rate Pass Through Ctfs., 2.72%, 09/26/34(b)(e) | 15,630 | 15,679 | ||||||
GMACM Mortgage Loan Trust, Series 2006-AR1, Class 1A1, Floating Rate Pass Through Ctfs., 3.03%, 04/19/36(e) | 148,878 | 134,170 | ||||||
MAPS CLO Fund II Ltd. (Cayman Islands), Series 2007-2A, Class A2, Floating Rate Pass Through Ctfs., | 250,000 | 240,629 | ||||||
Wells Fargo Mortgage Backed Securities Trust, Series 2004-Z, Class 2A1, Floating Rate Pass Through Ctfs., 2.61%, 12/25/34(e) | 79,911 | 80,490 | ||||||
Total Asset-Backed Securities |
| 1,092,105 | ||||||
Shares | ||||||||
Preferred Stocks–1.11% |
| |||||||
Investment Banking & Brokerage–0.79% | ||||||||
Morgan Stanley, Series F, 6.88% Pfd. | 5,000 | 133,400 | ||||||
Reinsurance–0.32% | ||||||||
Reinsurance Group of America, Inc., 6.20% Sr. Unsec. Sub. Pfd. | 2,000 | 54,460 | ||||||
Total Preferred Stocks |
| 187,860 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
Principal Amount | Value | |||||||
Municipal Obligations–0.94% |
| |||||||
Florida Development Finance Corp. (Palm Bay Academy Inc.); Series 2006 B, Taxable RB, 7.50%, 05/15/17(i) | $ | 65,000 | $ | 41,600 | ||||
Florida Hurricane Catastrophe Fund Finance Corp.; Series 2013 A, RB, 3.00%, 07/01/20 | 55,000 | 55,961 | ||||||
Georgia (State of) Municipal Electric Authority (Plant Vogtle Units 3 & 4 Project J); Series 2010 A, Taxable Build America RB, 6.64%, 04/01/57 | 50,000 | 60,134 | ||||||
Total Municipal Obligations |
| 157,695 | ||||||
Shares | ||||||||
Common Stocks & Other Equity Interests–0.01% |
| |||||||
Broadcasting–0.01% | ||||||||
Adelphia Communications Corp.(j) | 900 | 675 | ||||||
Adelphia Recovery Trust–Series ACC-1(j) | 87,412 | 175 | ||||||
850 |
Shares | Value | |||||||
Paper Products–0.00% | ||||||||
Verso Corp.(k) | 53 | $ | 35 | |||||
Total Common Stocks & Other Equity Interests |
| 885 | ||||||
Money Market Funds–9.40% |
| |||||||
Liquid Assets Portfolio–Institutional | 792,178 | 792,178 | ||||||
Premier Portfolio–Institutional Class(l) | 792,178 | 792,178 | ||||||
Total Money Market Funds |
| 1,584,356 | ||||||
TOTAL INVESTMENTS–127.52% |
| 21,496,080 | ||||||
OTHER ASSETS LESS LIABILITIES–(27.52)% |
| (4,638,956 | ) | |||||
NET ASSETS–100.00% |
| $ | 16,857,124 |
Investment Abbreviations:
Ctfs. | – Certificates | |
Deb. | – Debentures | |
Gtd. | – Guaranteed | |
IO | – Interest Only | |
Jr. | – Junior |
Pfd. | – Preferred | |
PIK | – Payment in Kind | |
RB | – Revenue Bonds | |
REIT | – Real Estate Investment Trust | |
REMICs | – Real Estate Mortgage Investment Conduits |
Sec. | – Secured | |
Sr. | – Senior | |
Sub. | – Subordinated | |
TBA | �� | – To Be Announced |
Unsec. | – Unsecured |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at June 30, 2015 was $5,424,382, which represented 32.18% of the Fund’s Net Assets. |
(c) | All or a portion of this security is Payment-in-Kind. |
Issuer | Cash Rate | PIK Rate | ||||||
Alphabet Holding Co., Inc., Sr. Unsec. Global PIK Notes | — | 8.50 | % |
(d) | Perpetual bond with no specified maturity date. |
(e) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on June 30, 2015. |
(f) | Security purchased on a forward commitment basis. This security is subject to dollar roll transactions. See Note 1K. |
(g) | Security traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. |
(h) | All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 1J and Note 4. |
(i) | Defaulted security. Currently, the issuer is partially or fully in default with respect to interest payments. The value of this security at June 30, 2015 represented less than 1% of the Fund’s Net Assets. |
(j) | Non-income producing security acquired as part of the Adelphia Communications bankruptcy reorganization. |
(k) | Non-income producing security. |
(l) | The money market fund and the Fund are affiliated by having the same investment adviser. |
Portfolio Composition
By security type, based on Total Investments,
as of June 30, 2015
Bonds and Notes | 55.2 | % | ||
U.S. Government Sponsored Agency Mortgage-Backed Securities | 23.2 | |||
U.S. Treasury Securities | 7.5 | |||
Asset-Backed Securities | 5.1 | |||
Security Types Each Less Than 1% of Portfolio | 1.6 | |||
Money Market Funds | 7.4 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $19,781,206) | $ | 19,911,724 | ||
Investments in affiliated money market funds, at value and cost | 1,584,356 | |||
Total investments, at value (Cost $21,365,562) | 21,496,080 | |||
Cash | 190,754 | |||
Receivable for: | ||||
Investments sold | 300,076 | |||
Variation margin — futures | 816 | |||
Fund shares sold | 6,880 | |||
Dividends and interest | 190,497 | |||
Principal paydowns | 835 | |||
Premiums paid on swap agreements | 7,950 | |||
Investment for trustee deferred compensation and retirement plans | 63,805 | |||
Other assets | 369 | |||
Total assets | 22,258,062 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 5,259,563 | |||
Fund shares reacquired | 1,847 | |||
Swaps payable | 62 | |||
Accrued fees to affiliates | 10,679 | |||
Accrued trustees’ and officers’ fees and benefits | 4,284 | |||
Accrued other operating expenses | 47,667 | |||
Trustee deferred compensation and retirement plans | 65,876 | |||
Unrealized depreciation on swap agreements — OTC | 10,960 | |||
Total liabilities | 5,400,938 | |||
Net assets applicable to shares outstanding | $ | 16,857,124 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 23,462,440 | ||
Undistributed net investment income | 984,851 | |||
Undistributed net realized gain (loss) | (7,784,505 | ) | ||
Net unrealized appreciation | 194,338 | |||
$ | 16,857,124 | |||
Net Assets: |
| |||
Series I | $ | 16,697,733 | ||
Series II | $ | 159,391 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 2,601,833 | |||
Series II | 24,985 | |||
Series I: | ||||
Net asset value per share | $ | 6.42 | ||
Series II: | ||||
Net asset value per share | $ | 6.38 |
Investment income: |
| |||
Interest | $ | 403,935 | ||
Dividends | 5,847 | |||
Dividends from affiliated money market funds | 227 | |||
Total investment income | 410,009 | |||
Expenses: | ||||
Advisory fees | 48,094 | |||
Administrative services fees | 42,649 | |||
Custodian fees | 11,414 | |||
Distribution fees — Series II | 201 | |||
Transfer agent fees | 4,307 | |||
Trustees’ and officers’ fees and benefits | 10,619 | |||
Professional services fees | 22,242 | |||
Other | 18,392 | |||
Total expenses | 157,918 | |||
Less: Fees waived and expenses reimbursed | (96,454 | ) | ||
Net expenses | 61,464 | |||
Net investment income | 348,545 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 235,910 | |||
Futures contracts | 12,842 | |||
Swap agreements | (3,189 | ) | ||
245,563 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (606,484 | ) | ||
Futures contracts | 93,251 | |||
Swap agreements | 2,592 | |||
(510,641 | ) | |||
Net realized and unrealized gain (loss) | (265,078 | ) | ||
Net increase in net assets resulting from operations | $ | 83,467 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: |
| |||||||
Net investment income | $ | 348,545 | $ | 774,721 | ||||
Net realized gain | 245,563 | 520,545 | ||||||
Change in net unrealized appreciation (depreciation) | (510,641 | ) | 231,954 | |||||
Net increase in net assets resulting from operations | 83,467 | 1,527,220 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Series I | — | (933,648 | ) | |||||
Series ll | — | (7,576 | ) | |||||
Total distributions from net investment income | — | (941,224 | ) | |||||
Share transactions–net: | ||||||||
Series l | (1,206,715 | ) | (2,430,969 | ) | ||||
Series ll | (1,648 | ) | (16,001 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (1,208,363 | ) | (2,446,970 | ) | ||||
Net increase (decrease) in net assets | (1,124,896 | ) | (1,860,974 | ) | ||||
Net assets: | ||||||||
Beginning of period | 17,982,020 | 19,842,994 | ||||||
End of period (includes undistributed net investment income of $984,851 and $636,306, respectively) | $ | 16,857,124 | $ | 17,982,020 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. Core Plus Bond Fund, formerly Invesco V.I. Diversified Income Fund, (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is total return, comprised of current income and capital appreciation.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Invesco V.I. Core Plus Bond Fund
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Swap agreements are fair valued using an evaluated quote, if available, provided by an independent pricing service. Evaluated quotes provided by the pricing service are valued based on a model which may include end-of-day net present values, spreads, ratings, industry, company performance and returns of referenced assets.
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Paydown gains and losses on mortgage and asset-backed securities are recorded as adjustments to interest income. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
Invesco V.I. Core Plus Bond Fund
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Lower-Rated Securities — The Fund may invest in lower-quality debt securities, i.e., “junk bonds”. Investments in lower-rated securities or unrated securities of comparable quality tend to be more sensitive to economic conditions than higher rated securities. Junk bonds involve a greater risk of default by the issuer because such securities are generally unsecured and are often subordinated to other creditors’ claims. |
J. | Futures Contracts — The Fund may enter into futures contracts to manage exposure to interest rate, equity and market price movements and/or currency risks. A futures contract is an agreement between Counterparties to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund’s basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Statement of Operations. The primary risks associated with futures contracts are market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal Counterparty risk since the exchange’s clearinghouse, as Counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. |
K. | Dollar Rolls and Forward Commitment Transactions — The Fund may enter into dollar roll transactions to enhance the Fund’s performance. The Fund executes its dollar roll transactions in the to be announced (“TBA”) market whereby the Fund makes a forward commitment to purchase a security and, instead of accepting delivery, the position is offset by the sale of the security with a simultaneous agreement to repurchase at a future date. |
The Fund accounts for dollar roll transactions as purchases and sales and realizes gains and losses on these transactions. These transactions increase the Fund’s portfolio turnover rate. The Fund will segregate liquid assets in an amount equal to its dollar roll commitments. Dollar roll transactions are considered borrowings under the 1940 Act.
Dollar roll transactions involve the risk that a Counterparty to the transaction may fail to complete the transaction. If this occurs, the Fund may lose the opportunity to purchase or sell the security at the agreed upon price. Dollar rolls transactions also involve the risk that the value of the securities retained by the Fund may decline below the price of the securities that the Fund has sold but is obligated to purchase under the agreement.
L. | Swap Agreements — The Fund may enter into various swap transactions, including interest rate, total return, index, currency and credit default swap contracts (“CDS”) for investment purposes or to manage interest rate, currency or credit risk. Such transactions are agreements between Counterparties. These agreements may contain among other conditions, events of default and termination events, and various covenants and representations such as provisions that require the Fund to maintain a pre-determined level of net assets, and/or provide limits regarding the decline of the Fund’s NAV over specific periods of time. If the Fund were to trigger such provisions and have open derivative positions at that time, the Counterparty may be able to terminate such agreement and request immediate payment in an amount equal to the net liability positions, if any. |
Interest rate, total return, index, and currency swap agreements are two-party contracts entered into primarily to exchange the returns (or differentials in rates of returns) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or “swapped” between the parties are calculated with respect to a notional amount, i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate or return of an underlying asset, in a particular foreign currency, or in a “basket” of securities representing a particular index.
A CDS is an agreement between Counterparties to exchange the credit risk of an issuer. A buyer of a CDS is said to buy protection by paying a fixed payment over the life of the agreement and in some situations an upfront payment to the seller of the CDS. If a defined credit event occurs (such as payment default or bankruptcy), the Fund as a protection buyer would cease paying its fixed payment, the Fund would deliver eligible
Invesco V.I. Core Plus Bond Fund
bonds issued by the reference entity to the seller, and the seller would pay the full notional value, or the “par value”, of the referenced obligation to the Fund. A seller of a CDS is said to sell protection and thus would receive a fixed payment over the life of the agreement and an upfront payment, if applicable. If a credit event occurs, the Fund as a protection seller would cease to receive the fixed payment stream, the Fund would pay the buyer “par value” or the full notional value of the referenced obligation, and the Fund would receive the eligible bonds issued by the reference entity. In turn, these bonds may be sold in order to realize a recovery value. Alternatively, the seller of the CDS and its Counterparty may agree to net the notional amount and the market value of the bonds and make a cash payment equal to the difference to the buyer of protection. If no credit event occurs, the Fund receives the fixed payment over the life of the agreement. As the seller, the Fund would effectively add leverage to its portfolio because, in addition to its total net assets, the Fund would be subject to investment exposure on the notional amount of the CDS. In connection with these agreements, cash and securities may be identified as collateral in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default under the swap agreement or bankruptcy/insolvency of a party to the swap agreement. If a Counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, the Fund may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. The Fund may obtain only limited recovery or may obtain no recovery in such circumstances. The Fund’s maximum risk of loss from Counterparty risk, either as the protection seller or as the protection buyer, is the value of the contract. The risk may be mitigated by having a master netting arrangement between the Fund and the Counterparty and by the designation of collateral by the Counterparty to cover the Fund’s exposure to the Counterparty.
Implied credit spreads represent the current level at which protection could be bought or sold given the terms of the existing CDS contract and serve as an indicator of the current status of the payment/performance risk of the CDS. An implied spread that has widened or increased since entry into the initial contract may indicate a deteriorating credit profile and increased risk of default for the reference entity. A declining or narrowing spread may indicate an improving credit profile or decreased risk of default for the reference entity. Alternatively, credit spreads may increase or decrease reflecting the general tolerance for risk in the credit markets.
An interest rate swap is an agreement between Counterparties pursuant to which the parties exchange a floating rate payment for a fixed rate payment based on a specified notional amount.
Changes in the value of swap agreements are recognized as unrealized gains (losses) in the Statement of Operations by “marking to market” on a daily basis to reflect the value of the swap agreement at the end of each trading day. Payments received or paid at the beginning of the agreement are reflected as such on the Statement of Assets and Liabilities and may be referred to as upfront payments. The Fund accrues for the fixed payment stream and amortizes upfront payments, if any, on swap agreements on a daily basis with the net amount, recorded as a component of realized gain (loss) on the Statement of Operations. A liquidation payment received or made at the termination of a swap agreement is recorded as realized gain (loss) on the Statement of Operations. The Fund segregates liquid securities having a value at least equal to the amount of the potential obligation of a Fund under any swap transaction. Entering into these agreements involves, to varying degrees, lack of liquidity and elements of credit, market, and Counterparty risk in excess of amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that a swap is difficult to sell or liquidate; the Counterparty does not honor its obligations under the agreement and unfavorable interest rates and market fluctuations. It is possible that developments in the swaps market, including potential government regulation, could adversely affect the Fund’s ability to terminate existing swap agreements or to realize amounts to be received under such agreements.
Notional amounts of each individual credit default swap agreement outstanding as of June 30, 2015 for which the Fund is the seller of protection are disclosed in the open swap agreements table. These potential amounts would be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into by the Fund for the same referenced entity or entities.
M. | Leverage Risk — Leverage exists when a Fund can lose more than it originally invests because it purchases or sells an instrument or enters into a transaction without investing an amount equal to the full economic exposure of the instrument or transaction. |
N. | Collateral — To the extent the Fund has designated or segregated a security as collateral and that security is subsequently sold, it is the Fund’s practice to replace such collateral no later than the next business day. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
Effective April 30, 2015, the Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||||
First $500 million | 0 | .45% | ||||
Next $500 million | 0 | .425% | ||||
Next $1.5 billion | 0 | .40% | ||||
Next $2.5 billion | 0 | .375% | ||||
Over $5 billion | 0 | .35% |
Prior to April 30, 2015, the Fund paid an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $250 million | 0.60% | |||
Over $250 million | 0.55% |
Invesco V.I. Core Plus Bond Fund
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.55%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
Effective April 30, 2015, the Adviser has contractually agreed, through at least April 30, 2016, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 0.61% and Series II shares to 0.86% of average daily net assets. Prior to April 30, 2015, the Adviser had contractually agreed to waive advisory fees and/or reimburse expenses of Series I shares to 0.75% and Series II shares to 1.00% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on April 30, 2016. The fee waiver agreement cannot be terminated during its term. To the extent that the annualized expense ratio does not exceed the expense limitation, the Adviser will retain its ability to be reimbursed for such waivers or reimbursements prior to the end of each fiscal year.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees and reimbursed Fund level expenses of $96,454.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $24,795 for accounting and fund administrative services and reimbursed $17,854 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
Invesco V.I. Core Plus Bond Fund
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 1,772,251 | $ | 850 | $ | — | $ | 1,773,101 | ||||||||
U.S. Treasury Securities | — | 1,625,801 | — | 1,625,801 | ||||||||||||
Corporate Debt Securities | — | 11,867,630 | — | 11,867,630 | ||||||||||||
U.S. Government Sponsored Agency Securities | — | 4,979,748 | — | 4,979,748 | ||||||||||||
Asset-Backed Securities | — | 1,092,105 | — | 1,092,105 | ||||||||||||
Municipal Obligations | — | 157,695 | — | 157,695 | ||||||||||||
1,772,251 | 19,723,829 | — | 21,496,080 | |||||||||||||
Futures Contracts* | 74,780 | — | — | 74,780 | ||||||||||||
Swap Agreements* | — | (10,960 | ) | — | (10,960 | ) | ||||||||||
Total Investments | $ | 1,847,031 | $ | 19,712,869 | $ | — | $ | 21,559,900 |
* | Unrealized appreciation (depreciation). |
NOTE 4—Derivative Investments
Value of Derivative Investments at Period-End
The table below summarizes the value of the Fund’s derivative investments, detailed by primary risk exposure, held as of June 30, 2015:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Credit risk: | ||||||||
Swap agreements(a) | $ | — | $ | (10,960 | ) | |||
Interest rate risk: | ||||||||
Futures contracts(b) | 75,722 | (942 | ) | |||||
Total | $ | 75,722 | $ | (11,902 | ) |
(a) | Values are disclosed on the Statement of Assets and Liabilities under the caption Unrealized depreciation on swap agreements—OTC. |
(b) | Includes cumulative appreciation (depreciation) of futures contracts. Only current day’s variation margin receivable is reported within the Statement of Assets and Liabilities. |
Effect of Derivative Investments for the six months ended June 30, 2015
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations | ||||||||
Futures Contracts | Swap Agreements | |||||||
Realized Gain (Loss): | ||||||||
Credit risk | $ | — | $ | (3,189 | ) | |||
Interest rate risk | 12,842 | — | ||||||
Change in Net Unrealized Appreciation: | ||||||||
Credit risk | — | 2,592 | ||||||
Interest rate risk | 93,251 | — | ||||||
Total | $ | 106,093 | $ | (597 | ) |
The table below summarizes the average notional value of futures contracts and swap agreements outstanding during the period.
Futures Contracts | Swap Agreements | |||||||||||||||
Average notional value | $ | 7,176,154 | $ | 250,000 |
Invesco V.I. Core Plus Bond Fund
Open Futures Contracts | ||||||||||||||||||||
Futures Contracts | Type of Contract | Number of Contracts | Expiration Month | Notional Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
U.S. Treasury 2 Year Notes | Long | 6 | September-2015 | 1,313,625 | $ | 2,049 | ||||||||||||||
U.S. Treasury 5 Year Notes | Long | 13 | September-2015 | 1,550,352 | (942 | ) | ||||||||||||||
U.S. Treasury Long Bonds | Short | 1 | September-2015 | (150,844 | ) | 3,904 | ||||||||||||||
U.S. Ultra Bond | Short | 9 | September-2015 | (1,386,563 | ) | 50,043 | ||||||||||||||
U.S. Treasury 10 Year Notes | Short | 21 | September-2015 | (2,649,609 | ) | 19,726 | ||||||||||||||
Total Futures Contracts — Interest Rate Risk | $ | 74,780 |
Open Credit Default Swap Agreements – Credit Risk | ||||||||||||||||||||||||||||||
Counterparty | Reference Entity | Buy/Sell Protection | (Pay)/Receive Fixed Rate | Expiration Date | Implied Credit | Notional Value | Upfront Payments | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||
Bank of America Merrill Lynch | Citigroup Inc. | Buy | (1.00 | )% | 06/20/17 | 0.39 | % | $ | 250,000 | $ | 7,950 | $ | (10,960 | ) |
(a) | Implied credit spreads represent the current level as of June 30, 2015 at which protection could be bought or sold given the terms of the existing credit default swap contract and serve as an indicator of the current status of the payment/performance risk of the credit default swap contract. An implied credit spread that has widened or increased since entry into the initial contract may indicate a deteriorating credit profile and increased risk of default for the reference entity. A declining or narrowing spread may indicate an improving credit profile or decreased risk of default for the reference entity. Alternatively, credit spreads may increase or decrease reflecting the general tolerance for risk in the credit markets generally. |
Offsetting Assets and Liabilities
Accounting Standards Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which was subsequently clarified in Financial Accounting Standards Board ASU 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” is intended to enhance disclosures about financial instruments and derivative instruments that are subject to offsetting arrangements on the Statement of Assets and Liabilities and to enable investors to better understand the effect of those arrangements on the Fund’s financial position. In order for an arrangement to be eligible for netting, the Fund must have a basis to conclude that such netting arrangements are legally enforceable. The Fund enters into netting agreements and collateral agreements in an attempt to reduce the Fund’s Counterparty credit risk by providing for a single net settlement with a Counterparty of all financial transactions covered by the agreement in an event of default as defined under such agreement.
There were no derivative instruments subject to a netting agreement for which the Fund is not currently netting. The following tables present derivative instruments that are either subject to an enforceable netting agreement or offset by collateral arrangements as of June 30, 2015.
Assets: | ||||||||||||||||||||||||
Gross amounts of Recognized Assets | Gross amounts offset in Statement of Assets & Liabilities | Net amounts of assets presented in Statement of Assets & Liabilities | Collateral Received | |||||||||||||||||||||
Counterparty | Financial Instruments | Cash | Net Amount | |||||||||||||||||||||
Bank of America Merrill Lynch | $ | 7,950 | $ | (7,950 | ) | $ | — | $ | — | $ | — | $ | — | |||||||||||
Liabilities: | ||||||||||||||||||||||||
Gross amounts of Recognized Liabilities | Gross amounts offset in Statement of Assets & Liabilities | Net amounts of liabilities presented in Statement of Assets & Liabilities | Collateral Pledged | |||||||||||||||||||||
Counterparty | Financial Instruments | Cash | Net Amount | |||||||||||||||||||||
Bank of America Merrill Lynch | $ | 11,022 | $ | (7,950 | ) | $ | 3,072 | $ | — | $ | — | $ | 3,072 |
NOTE 5—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
Invesco V.I. Core Plus Bond Fund
NOTE 6—Cash Balances
The Fund may borrow for leveraging in an amount up to 5% of the Fund’s total assets (excluding the amount borrowed) at the time the borrowing is made. In doing so, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate. A Fund may not purchase additional securities when any borrowings from banks exceeds 5% of the Fund’s total assets.
NOTE 7—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of December 31, 2014, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
December 31, 2016 | $ | 683,517 | $ | — | $ | 683,517 | ||||||
December 31, 2017 | 7,359,092 | — | 7,359,092 | |||||||||
$ | 8,042,609 | $ | — | $ | 8,042,609 |
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code and may be further limited depending upon a variety of factors, including the realization of net unrealized gains or losses as of the date of any reorganization. |
NOTE 8—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $25,454,254 and $24,463,210, respectively. During the same period, purchases and sales of U.S. Treasury obligations were $9,222,954 and $8,153,015, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 471,958 | ||
Aggregate unrealized (depreciation) of investment securities | (341,517 | ) | ||
Net unrealized appreciation of investment securities | $ | 130,441 |
Cost of investments for tax purposes is $21,365,639.
Invesco V.I. Core Plus Bond Fund
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 37,627 | $ | 244,895 | 102,838 | $ | 668,280 | ||||||||||
Series II | — | — | 1,535 | 10,010 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 147,963 | 933,648 | ||||||||||||
Series II | — | — | 1,128 | 7,097 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (223,134 | ) | (1,451,610 | ) | (622,528 | ) | (4,032,897 | ) | ||||||||
Series II | (255 | ) | (1,648 | ) | (5,168 | ) | (33,108 | ) | ||||||||
Net increase (decrease) in share activity | (185,762 | ) | $ | (1,208,363 | ) | (374,232 | ) | $ | (2,446,970 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 85% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 10—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||
Series I | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 6.39 | $ | 0.13 | $ | (0.10 | ) | $ | 0.03 | $ | — | $ | 6.42 | 0.47 | % | $ | 16,698 | 0.70 | %(d) | 1.80 | %(d) | 3.99 | %(d) | 177 | % | |||||||||||||||||||||||
Year ended 12/31/14 | 6.23 | 0.26 | 0.24 | 0.50 | (0.34 | ) | 6.39 | 8.03 | 17,821 | 0.75 | 1.77 | 4.04 | 255 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 6.54 | 0.27 | (0.27 | ) | 0.00 | (0.31 | ) | 6.23 | 0.05 | 19,671 | 0.75 | 1.76 | 4.18 | 150 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 6.19 | 0.27 | 0.39 | 0.66 | (0.31 | ) | 6.54 | 10.71 | 22,741 | 0.75 | 1.49 | 4.19 | 66 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 6.10 | 0.29 | 0.13 | 0.42 | (0.33 | ) | 6.19 | 7.02 | 22,333 | 0.75 | 1.46 | 4.71 | 59 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 5.88 | 0.31 | 0.28 | 0.59 | (0.37 | ) | 6.10 | 10.05 | 23,229 | 0.75 | 1.36 | 5.03 | 87 | |||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 6.36 | 0.12 | (0.10 | ) | 0.02 | — | 6.38 | 0.31 | 159 | 0.95 | (d) | 2.05 | (d) | 3.74 | (d) | 177 | ||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 6.19 | 0.24 | 0.24 | 0.48 | (0.31 | ) | 6.36 | 7.85 | 161 | 1.00 | 2.02 | 3.79 | 255 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 6.50 | 0.25 | (0.27 | ) | (0.02 | ) | (0.29 | ) | 6.19 | (0.26 | ) | 172 | 1.00 | 2.01 | 3.93 | 150 | ||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 6.16 | 0.25 | 0.38 | 0.63 | (0.29 | ) | 6.50 | 10.38 | 277 | 1.00 | 1.74 | 3.94 | 66 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 6.07 | 0.28 | 0.13 | 0.41 | (0.32 | ) | 6.16 | 6.72 | 227 | 1.00 | 1.71 | 4.46 | 59 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 5.85 | 0.29 | 0.28 | 0.57 | (0.35 | ) | 6.07 | 9.70 | 232 | 1.00 | 1.61 | 4.78 | 87 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $17,469 and $162 for Series I and Series II shares, respectively. |
Invesco V.I. Core Plus Bond Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2,3 | Ending Account Value (06/30/15) | Expenses Paid During Period2,4 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,004.70 | $ | 3.48 | $ | 1,021.32 | $ | 3.51 | 0.70 | % | ||||||||||||
Series II | 1,000.00 | 1,003.10 | 4.72 | 1,020.08 | 4.76 | 0.95 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. Effective April 30, 2015, the Fund’s adviser has contractually agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual fund operating expense of Series I and Series II to 0.61% and 0.86% of average daily net assets, respectively. The annualized expense ratios restated as if these agreements had been in effect throughout the entire most recent fiscal half year are 0.61% and 0.86% for Series I and Series II shares, respectively. |
3 | The actual expenses paid restated as if the changes discussed above had been in effect throughout the entire most recent fiscal half year are $3.03 and $4.27 for Series I and Series II shares, respectively. |
4 | The hypothetical expenses paid restated as if the changes discussed above had been in effect throughout the entire most recent fiscal half year are $3.06 and $4.31for Series I and Series II shares, respectively. |
Invesco V.I. Core Plus Bond Fund
Approval of Investment Advisory and Sub-Advisory Contracts
(Invesco V.I. Core Plus Bond Fund)
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. Core Plus Bond Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ investment
process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Annuity Underlying Funds Corporate Debt BBB-Rated Index. The Board noted that performance of Series I shares of the Fund was in the first quintile of its performance universe for the one and three, and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Series I shares of the Fund was above the
Invesco V.I. Core Plus Bond Fund
performance of the Index for the one, three, and five year periods. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series I shares of the Fund was above the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least April 30, 2016 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was above the rates of two funds, one an open end fund and the other a closed end fund.
The Board also considered the fees charged by Invesco Advisers and the Affiliated Sub-Advisers to other client accounts with investment strategies comparable to those of the Fund. The Board noted that Invesco Advisers or the Affiliated Sub-Advisers may charge lower fees to large institutional clients. Invesco Advisers reviewed with the Board the significantly greater scope of services it provides to the Invesco Funds relative to certain other types of client accounts. These additional services include provision of administrative services, officers and office space, oversight of service providers, preparation of annual registration statement updates and financial information and regulatory compliance under the Investment Company Act of 1940, as amended.
Invesco Advisers also reviewed generally the higher frequency of shareholder purchases and redemptions in the Invesco Funds relative to the flow of assets for other client accounts. Invesco Advisers advised the Board that advance notice of redemptions is often provided to Invesco
Advisers by institutional clients. The Board did note that sub-advisory fee rates charged by the Affiliated Sub-Advisers to manage the Invesco Funds and to manage other client accounts tended to be more comparable, reflecting a similar scope of services. The information received by the Board demonstrated that the aggregate services provided to the Invesco Funds were sufficiently different from those provided to institutional clients to support the difference in fees.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds. The Board noted that although Invesco Advisers received a minimal amount of revenues from advising the Fund, Invesco Advisers and its subsidiaries did not make a profit from managing the Fund. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the
performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. Invesco Advisers noted that the Fund does not execute brokerage transactions through “soft dollar” arrangements to any significant degree.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
Invesco V.I. Core Plus Bond Fund
| ||||
Semiannual Report to Shareholders
|
June 30, 2015
| |||
| ||||
Invesco V.I. Diversified Dividend Fund | ||||
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
Invesco Distributors, Inc. VIDDI-SAR-1
| ||
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance | ||
Performance summary
|
| |||
Fund vs. Indexes Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower. |
| |||
Series I Shares | 2.11 | % | ||
Series II Shares | 2.03 | |||
S&P 500 Indexq (Broad Market Index) | 1.23 | |||
Russell 1000 Value Indexq (Style-Specific Index) | -0.61 | |||
Lipper VUF Large-Cap Value Funds Indexn (Peer Group Index) | 0.95 | |||
Source(s): qFactSet Research Systems Inc.; nLipper Inc. |
The S&P 500® Index is an unmanaged index considered representative of the US stock market.
The Russell 1000® Value Index is an unmanaged index considered representative of large-cap value stocks. The Russell 1000 Value Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
The Lipper VUF Large-Cap Value Funds Index is an unmanaged index considered representative of large-cap value variable insurance underlying funds tracked by Lipper.
The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es).
A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
Average Annual Total Returns |
| |||
As of 6/30/15 | ||||
Series I Shares | ||||
Inception (3/1/90) | 8.15 | % | ||
10 Years | 6.89 | |||
5 Years | 16.40 | |||
1 Year | 6.56 | |||
Series II Shares | ||||
Inception (6/5/00) | 5.21 | % | ||
10 Years | 6.62 | |||
5 Years | 16.09 | |||
1 Year | 6.31 |
Effective June 1, 2010, Class X and Class Y shares of the predecessor fund, Morgan Stanley Variable Investment Dividend Growth Portfolio, advised by Morgan Stanley Investment Advisors Inc. were reorganized into Series I and Series II shares, respectively, of Invesco V.I. Dividend Growth Fund (renamed Invesco V.I. Diversified Dividend Fund on April 30, 2012). Returns shown above for Series I and Series II shares are blended returns of the predecessor fund and Invesco V.I. Diversified Dividend Fund. Share class returns will differ from the predecessor fund because of different expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 0.73% and 0.98%, respectively.1 The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 0.74% and 0.99%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. Diversified Dividend Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined by the
variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2017. See current prospectus for more information. |
Invesco V.I. Diversified Dividend Fund |
Schedule of Investments(a)
June 30, 2015
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–90.88% |
| |||||||
Aerospace & Defense–3.34% | ||||||||
General Dynamics Corp. | 60,627 | $ | 8,590,240 | |||||
Raytheon Co. | 68,169 | 6,522,410 | ||||||
15,112,650 | ||||||||
Air Freight & Logistics–0.73% | ||||||||
United Parcel Service, Inc.–Class B | 33,824 | 3,277,884 | ||||||
Apparel Retail–0.95% | ||||||||
Guess?, Inc. | 62,569 | 1,199,448 | ||||||
TJX Cos., Inc. (The) | 47,086 | 3,115,680 | ||||||
4,315,128 | ||||||||
Apparel, Accessories & Luxury Goods–1.71% | ||||||||
Coach, Inc. | 111,317 | 3,852,681 | ||||||
Columbia Sportswear Co. | 64,027 | 3,871,073 | ||||||
7,723,754 | ||||||||
Asset Management & Custody Banks–2.20% | ||||||||
Federated Investors, Inc.–Class B | 159,129 | 5,329,230 | ||||||
Legg Mason, Inc. | 89,714 | 4,622,963 | ||||||
9,952,193 | ||||||||
Auto Parts & Equipment–0.87% | ||||||||
Johnson Controls, Inc. | 78,957 | 3,910,740 | ||||||
Brewers–2.30% | ||||||||
Heineken N.V. (Netherlands) | 136,607 | 10,401,591 | ||||||
Building Products–1.24% | ||||||||
Masco Corp. | 210,508 | 5,614,248 | ||||||
Construction Machinery & Heavy Trucks–0.92% | ||||||||
Joy Global Inc. | 115,249 | 4,172,014 | ||||||
Data Processing & Outsourced Services–0.93% | ||||||||
Automatic Data Processing, Inc. | 52,544 | 4,215,605 | ||||||
Department Stores–1.06% | ||||||||
Marks & Spencer Group PLC (United Kingdom) | 568,647 | 4,795,371 | ||||||
Drug Retail–2.10% | ||||||||
Walgreens Boots Alliance, Inc. | 112,478 | 9,497,642 | ||||||
Electric Utilities–7.46% | ||||||||
American Electric Power Co., Inc. | 94,250 | 4,992,422 | ||||||
Duke Energy Corp. | 84,106 | 5,939,566 | ||||||
Entergy Corp. | 38,636 | 2,723,838 | ||||||
Exelon Corp. | 220,918 | 6,941,243 | ||||||
Pepco Holdings, Inc. | 230,157 | 6,200,430 | ||||||
PPL Corp. | 235,795 | 6,948,879 | ||||||
33,746,378 | ||||||||
Food Distributors–1.54% | ||||||||
Sysco Corp. | 192,642 | 6,954,376 | ||||||
Gas Utilities–0.88% | ||||||||
AGL Resources Inc. | 85,632 | 3,987,026 | ||||||
General Merchandise Stores–1.92% | ||||||||
Target Corp. | 106,612 | 8,702,738 |
Shares | Value | |||||||
Health Care Equipment–1.25% | ||||||||
Stryker Corp. | 58,975 | $ | 5,636,241 | |||||
Heavy Electrical Equipment–1.16% | ||||||||
ABB Ltd. (Switzerland) | 250,833 | 5,253,300 | ||||||
Hotels, Resorts & Cruise Lines–1.92% | ||||||||
Accor S.A. (France) | 105,010 | 5,312,029 | ||||||
Marriott International Inc.–Class A | 45,392 | 3,376,711 | ||||||
8,688,740 | ||||||||
Household Products–2.88% | ||||||||
Kimberly-Clark Corp. | 59,708 | 6,327,257 | ||||||
Procter & Gamble Co. (The) | 85,818 | 6,714,400 | ||||||
13,041,657 | ||||||||
Housewares & Specialties–1.88% | ||||||||
Newell Rubbermaid Inc. | 206,238 | 8,478,452 | ||||||
Industrial Machinery–0.84% | ||||||||
Pentair PLC (United Kingdom) | 55,119 | 3,789,431 | ||||||
Integrated Oil & Gas–2.58% | ||||||||
Royal Dutch Shell PLC–Class B (United Kingdom) | 183,336 | 5,213,969 | ||||||
TOTAL S.A. (France) | 132,798 | 6,462,483 | ||||||
11,676,452 | ||||||||
Integrated Telecommunication Services–3.31% | ||||||||
AT&T Inc. | 281,632 | 10,003,568 | ||||||
Deutsche Telekom AG (Germany) | 289,172 | 4,981,494 | ||||||
14,985,062 | ||||||||
Investment Banking & Brokerage–1.26% | ||||||||
Charles Schwab Corp. (The) | 174,973 | 5,712,868 | ||||||
Life & Health Insurance–1.91% | ||||||||
Lincoln National Corp. | 57,312 | 3,394,017 | ||||||
StanCorp Financial Group, Inc. | 69,095 | 5,224,273 | ||||||
8,618,290 | ||||||||
Motorcycle Manufacturers–0.26% | ||||||||
Harley-Davidson, Inc. | 21,187 | 1,193,887 | ||||||
Movies & Entertainment–1.04% | ||||||||
Time Warner Inc. | 53,886 | 4,710,175 | ||||||
Multi-Line Insurance–1.00% | ||||||||
Hartford Financial Services Group, Inc. (The) | 109,169 | 4,538,155 | ||||||
Multi-Utilities–2.67% | ||||||||
Consolidated Edison, Inc. | 101,088 | 5,850,973 | ||||||
Dominion Resources, Inc. | 41,300 | 2,761,731 | ||||||
Sempra Energy | 34,952 | 3,458,151 | ||||||
12,070,855 | ||||||||
Oil & Gas Drilling–1.11% | ||||||||
Nabors Industries Ltd. | 348,645 | 5,030,947 | ||||||
Oil & Gas Equipment & Services–1.12% | ||||||||
Baker Hughes Inc. | 82,395 | 5,083,772 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Diversified Dividend Fund
Shares | Value | |||||||
Packaged Foods & Meats–10.25% | ||||||||
Campbell Soup Co. | 245,840 | $ | 11,714,276 | |||||
General Mills, Inc. | 275,821 | 15,368,746 | ||||||
Kraft Foods Group, Inc. | 128,758 | 10,962,456 | ||||||
Mead Johnson Nutrition Co. | 31,449 | 2,837,329 | ||||||
Mondelez International Inc.–Class A | 133,706 | 5,500,665 | ||||||
46,383,472 | ||||||||
Paper Packaging–1.31% | ||||||||
Avery Dennison Corp. | 49,347 | 3,007,206 | ||||||
Sonoco Products Co. | 68,469 | 2,934,582 | ||||||
5,941,788 | ||||||||
Paper Products–0.48% | ||||||||
International Paper Co. | 45,502 | 2,165,440 | ||||||
Personal Products–0.71% | ||||||||
L’Oreal S.A. (France) | 17,974 | 3,206,562 | ||||||
Pharmaceuticals–4.54% | ||||||||
Bristol-Myers Squibb Co. | 56,484 | 3,758,445 | ||||||
Eli Lilly and Co. | 114,077 | 9,524,289 | ||||||
Johnson & Johnson | 51,981 | 5,066,068 | ||||||
Novartis AG (Switzerland) | 22,202 | 2,193,072 | ||||||
20,541,874 | ||||||||
Property & Casualty Insurance–0.75% | ||||||||
Travelers Cos., Inc. (The) | 34,998 | 3,382,907 | ||||||
Regional Banks–7.19% | ||||||||
Cullen/Frost Bankers, Inc. | 22,086 | 1,735,518 | ||||||
Fifth Third Bancorp | 184,717 | 3,845,808 | ||||||
KeyCorp | 545,538 | 8,193,981 | ||||||
M&T Bank Corp. | 36,652 | 4,578,934 | ||||||
SunTrust Banks, Inc. | 85,512 | 3,678,726 | ||||||
Zions Bancorp. | 330,865 | 10,500,001 | ||||||
32,532,968 |
Shares | Value | |||||||
Restaurants–1.75% | ||||||||
Darden Restaurants, Inc. | 111,241 | $ | 7,907,010 | |||||
Semiconductors–1.14% | ||||||||
Linear Technology Corp. | 89,175 | 3,944,210 | ||||||
Texas Instruments Inc. | 23,285 | 1,199,411 | ||||||
5,143,621 | ||||||||
Soft Drinks–2.15% | ||||||||
Coca-Cola Co. (The) | 248,350 | 9,742,771 | ||||||
Specialized REIT’s–0.51% | ||||||||
Weyerhaeuser Co. | 72,800 | 2,293,200 | ||||||
Systems Software–0.36% | ||||||||
Microsoft Corp. | 36,288 | 1,602,115 | ||||||
Thrifts & Mortgage Finance–1.47% | ||||||||
Hudson City Bancorp, Inc. | 673,231 | 6,651,522 | ||||||
Tobacco–1.93% | ||||||||
Altria Group, Inc. | 90,788 | 4,440,441 | ||||||
Philip Morris International Inc. | 53,408 | 4,281,719 | ||||||
8,722,160 | ||||||||
Total Common Stocks & Other Equity Interests |
| 411,105,032 | ||||||
Money Market Funds–7.56% |
| |||||||
Liquid Assets Portfolio–Institutional Class(b) | 17,090,484 | 17,090,484 | ||||||
Premier Portfolio–Institutional Class(b) | 17,090,484 | 17,090,484 | ||||||
Total Money Market Funds |
| 34,180,968 | ||||||
TOTAL INVESTMENTS–98.44% |
| 445,286,000 | ||||||
OTHER ASSETS LESS LIABILITIES–1.56% |
| 7,067,887 | ||||||
NET ASSETS–100.00% |
| $ | 452,353,887 |
Investment Abbreviations:
REIT | – Real Estate Investment Trust |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | The money market fund and the Fund are affiliated by having the same investment adviser. |
Portfolio Composition
By sector, based on Net Assets
as of June 30, 2015
Consumer Staples | 23.9 | % | ||
Financials | 16.3 | |||
Consumer Discretionary | 13.4 | |||
Utilities | 11.0 | |||
Industrials | 8.2 | |||
Health Care | 5.8 | |||
Energy | 4.8 | |||
Telecommunication Services | 3.3 | |||
Information Technology | 2.4 | |||
Materials | 1.8 | |||
Money Market Funds Plus Other Assets Less Liabilities | 9.1 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Diversified Dividend Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $299,948,016) | $ | 411,105,032 | ||
Investments in affiliated money market funds, at value and cost | 34,180,968 | |||
Total investments, at value (Cost $334,128,984) | 445,286,000 | |||
Foreign currencies, at value (Cost $399,638) | 393,973 | |||
Receivable for: | ||||
Investments sold | 577,839 | |||
Fund shares sold | 6,568,592 | |||
Dividends | 884,880 | |||
Investment for trustee deferred compensation and retirement plans | 79,058 | |||
Total assets | 453,790,342 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 829,411 | |||
Fund shares reacquired | 179,690 | |||
Accrued fees to affiliates | 261,647 | |||
Accrued trustees’ and officers’ fees and benefits | 5,079 | |||
Accrued other operating expenses | 36,786 | |||
Trustee deferred compensation and retirement plans | 109,976 | |||
Unrealized depreciation on forward foreign currency contracts outstanding | 13,866 | |||
Total liabilities | 1,436,455 | |||
Net assets applicable to shares outstanding | $ | 452,353,887 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 349,595,082 | ||
Undistributed net investment income | 11,008,881 | |||
Undistributed net realized gain (loss) | (19,389,785 | ) | ||
Net unrealized appreciation | 111,139,709 | �� | ||
$ | 452,353,887 | |||
Net Assets: |
| |||
Series I | $ | 336,124,044 | ||
Series II | $ | 116,229,843 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 14,180,821 | |||
Series II | 4,930,142 | |||
Series I: | ||||
Net asset value per share | $ | 23.70 | ||
Series II: | ||||
Net asset value per share | $ | 23.58 |
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $77,484) | $ | 5,760,585 | ||
Dividends from affiliated money market funds | 9,063 | |||
Total investment income | 5,769,648 | |||
Expenses: | ||||
Advisory fees | 1,077,130 | |||
Administrative services fees | 417,929 | |||
Custodian fees | 16,272 | |||
Distribution fees — Series II | 137,130 | |||
Transfer agent fees | 13,406 | |||
Trustees’ and officers’ fees and benefits | 13,727 | |||
Other | 24,336 | |||
Total expenses | 1,699,930 | |||
Less: Fees waived | (19,739 | ) | ||
Net expenses | 1,680,191 | |||
Net investment income | 4,089,457 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 8,844,142 | |||
Foreign currencies | (8,432 | ) | ||
Forward foreign currency contracts | 1,560,485 | |||
10,396,195 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (5,014,048 | ) | ||
Foreign currencies | 436 | |||
Forward foreign currency contracts | (429,114 | ) | ||
(5,442,726 | ) | |||
Net realized and unrealized gain | 4,953,469 | |||
Net increase in net assets resulting from operations | $ | 9,042,926 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Diversified Dividend Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: |
| |||||||
Net investment income | $ | 4,089,457 | $ | 7,354,416 | ||||
Net realized gain | 10,396,195 | 27,832,198 | ||||||
Change in net unrealized appreciation (depreciation) | (5,442,726 | ) | 15,137,416 | |||||
Net increase in net assets resulting from operations | 9,042,926 | 50,324,030 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Series I | — | (5,512,687 | ) | |||||
Series ll | — | (1,491,240 | ) | |||||
Total distributions from net investment income | — | (7,003,927 | ) | |||||
Share transactions–net: | ||||||||
Series l | (1,214,513 | ) | (24,086,977 | ) | ||||
Series ll | 8,342,383 | (2,258,538 | ) | |||||
Net increase (decrease) in net assets resulting from share transactions | 7,127,870 | (26,345,515 | ) | |||||
Net increase in net assets | 16,170,796 | 16,974,588 | ||||||
Net assets: | ||||||||
Beginning of period | 436,183,091 | 419,208,503 | ||||||
End of period (includes undistributed net investment income of $11,008,881 and $6,919,424, respectively) | $ | 452,353,887 | $ | 436,183,091 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. Diversified Dividend Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is to provide reasonable current income and long-term growth of income and capital.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual
Invesco V.I. Diversified Dividend Fund
trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
Invesco V.I. Diversified Dividend Fund
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||||
First $250 million | 0 | .545% | ||||
Next $750 million | 0 | .42% | ||||
Next $1 billion | 0 | .395% | ||||
Over $2 billion | 0 | .37% |
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.49%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2016, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed
Invesco V.I. Diversified Dividend Fund
below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2016. The fee waiver agreement cannot be terminated during its term. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $19,739.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $52,979 for accounting and fund administrative services and reimbursed $364,950 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the six months ended June 30, 2015, the Fund incurred $46 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the six months ended June 30, 2015, there were transfers from Level 1 to Level 2 of $29,164,546 and from Level 2 to Level 1 of $4,981,494, due to foreign fair value adjustments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 410,907,485 | $ | 34,378,515 | $ | — | $ | 445,286,000 | ||||||||
Forward Foreign Currency Contracts* | — | (13,866 | ) | — | (13,866 | ) | ||||||||||
Total Investments | $ | 410,907,485 | $ | 34,364,649 | $ | — | $ | 445,272,134 |
* | Unrealized appreciation (depreciation). |
Invesco V.I. Diversified Dividend Fund
NOTE 4—Derivative Investments
Value of Derivative Investments at Period-End
The table below summarizes the value of the Fund’s derivative investments, detailed by primary risk exposure, held as of June 30, 2015:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Currency risk: | ||||||||
Forward foreign currency contracts(a) | $ | — | $ | (13,866 | ) |
(a) | Values are disclosed on the Statement of Assets and Liabilities under the caption Unrealized depreciation on forward foreign currency contracts outstanding. |
Effect of Derivative Investments for the six months ended June 30, 2015
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations | ||||
Forward Foreign Currency Contracts | ||||
Realized Gain: | ||||
Currency risk | $ | 1,560,485 | ||
Change in Net Unrealized Appreciation (Depreciation): | ||||
Currency risk | (429,114 | ) | ||
Total | $ | 1,131,371 |
The table below summarizes the six month average notional value of forward foreign currency contracts outstanding during the period.
Forward Foreign Currency Contracts | ||||
Average notional value | $ | 14,497,947 |
Open Forward Foreign Currency Contracts at Period End | ||||||||||||||||||||||||||
Settlement
| Counterparty | Contract to | Notional Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||
Deliver | Receive | |||||||||||||||||||||||||
07/17/15 | Citigroup Global Markets Inc. | EUR | 6,714,563 | USD | 7,481,367 | $ | 7,488,298 | $ | (6,931 | ) | ||||||||||||||||
07/17/15 | Deutsche Bank Securities Inc. | EUR | 6,809,992 | USD | 7,587,788 | 7,594,723 | (6,935 | ) | ||||||||||||||||||
Total Forward Foreign Currency Contracts — Currency Risk | $ | (13,866 | ) |
Currency Abbreviations:
EUR | – Euro | |
USD | – U.S. Dollar |
Offsetting Assets and Liabilities
Accounting Standards Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which was subsequently clarified in Financial Accounting Standards Board ASU 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” is intended to enhance disclosures about financial instruments and derivative instruments that are subject to offsetting arrangements on the Statement of Assets and Liabilities and to enable investors to better understand the effect of those arrangements on the Fund’s financial position. In order for an arrangement to be eligible for netting, the Fund must have a basis to conclude that such netting arrangements are legally enforceable. The Fund enters into netting agreements and collateral agreements in an attempt to reduce the Fund’s Counterparty credit risk by providing for a single net settlement with a Counterparty of all financial transactions covered by the agreement in an event of default as defined under such agreement.
There were no derivative instruments subject to a netting agreement for which the Fund is not currently netting. The following tables present derivative instruments that are either subject to an enforceable netting agreement or offset by collateral arrangements as of June 30, 2015.
Liabilities: | ||||||||||||||||||||||||
Gross amounts of Recognized Liabilities | Gross amounts offset in Statement of Assets & Liabilities | Net amounts of liabilities presented in | Collateral Pledged | Net Amount | ||||||||||||||||||||
Counterparty | Financial Instruments | Cash | ||||||||||||||||||||||
Citigroup Global Markets Inc. | $ | (6,931 | ) | $ | — | $ | (6,931 | ) | $ | — | $ | — | $ | (6,931 | ) | |||||||||
Deutsche Bank Securities Inc. | (6,935 | ) | — | (6,935 | ) | — | — | (6,935 | ) | |||||||||||||||
Total | $ | (13,866 | ) | $ | — | $ | (13,866 | ) | $ | — | $ | — | $ | (13,866 | ) |
Invesco V.I. Diversified Dividend Fund
NOTE 5—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of December 31, 2014, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
December 31, 2016 | $ | 2,667,775 | $ | — | $ | 2,667,775 | ||||||
December 31, 2017 | 26,081,934 | — | 26,081,934 | |||||||||
$ | 28,749,709 | $ | — | $ | 28,749,709 |
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code and may be further limited depending upon a variety of factors, including the realization of net unrealized gains or losses as of the date of any reorganization. |
NOTE 8—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $19,114,441 and $22,996,550, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 119,790,996 | ||
Aggregate unrealized (depreciation) of investment securities | (255,002 | ) | ||
Net unrealized appreciation of investment securities | $ | 119,535,994 |
Cost of investments for tax purposes is $334,750,006.
Invesco V.I. Diversified Dividend Fund
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 1,364,845 | $ | 32,296,852 | 2,417,493 | $ | 53,705,907 | ||||||||||
Series II | 784,900 | 18,508,400 | 860,331 | 18,781,741 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 252,066 | 5,512,687 | ||||||||||||
Series II | — | — | 68,405 | 1,491,240 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (1,418,702 | ) | (33,511,365 | ) | (3,800,793 | ) | (83,305,571 | ) | ||||||||
Series II | (432,864 | ) | (10,166,017 | ) | (1,033,108 | ) | (22,531,519 | ) | ||||||||
Net increase (decrease) in share activity | 298,179 | $ | 7,127,870 | (1,235,606 | ) | $ | (26,345,515 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 71% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 10—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||
Series I |
| |||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 23.21 | $ | 0.23 | $ | 0.26 | $ | 0.49 | $ | — | $ | 23.70 | 2.11 | % | $ | 336,124 | 0.70 | %(d) | 0.71 | %(d) | 1.93 | %(d) | 5 | % | ||||||||||||||||||||||||
Year ended 12/31/14 | 20.93 | 0.40 | 2.26 | 2.66 | (0.38 | ) | 23.21 | 12.83 | 330,370 | 0.72 | 0.73 | 1.80 | 6 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 16.34 | 0.33 | 4.70 | 5.03 | (0.44 | ) | 20.93 | 31.04 | 321,581 | 0.71 | 0.72 | 1.76 | 20 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 14.04 | 0.35 | 2.27 | 2.62 | (0.32 | ) | 16.34 | 18.72 | 271,407 | 0.67 | 0.68 | 2.29 | 11 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 14.24 | 0.31 | (0.27 | ) | 0.04 | (0.24 | ) | 14.04 | 0.20 | 253,850 | 0.66 | 0.67 | 2.24 | 38 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 13.13 | 0.21 | 1.14 | 1.35 | (0.24 | ) | 14.24 | 10.48 | 179,518 | 0.68 | 0.79 | 1.59 | 78 | |||||||||||||||||||||||||||||||||||
Series II |
| |||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 23.11 | 0.20 | 0.27 | 0.47 | — | 23.58 | 2.03 | 116,230 | 0.95 | (d) | 0.96 | (d) | 1.68 | (d) | 5 | |||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 20.85 | 0.34 | 2.25 | 2.59 | (0.33 | ) | 23.11 | 12.54 | 105,813 | 0.97 | 0.98 | 1.55 | 6 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 16.28 | 0.29 | 4.69 | 4.98 | (0.41 | ) | 20.85 | 30.76 | 97,628 | 0.96 | 0.97 | 1.51 | 20 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 14.00 | 0.31 | 2.26 | 2.57 | (0.29 | ) | 16.28 | 18.37 | 72,641 | 0.92 | 0.93 | 2.04 | 11 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 14.20 | 0.28 | (0.28 | ) | 0.00 | (0.20 | ) | 14.00 | (0.06 | ) | 68,424 | 0.91 | 0.92 | 1.99 | 38 | |||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 13.09 | 0.19 | 1.12 | 1.31 | (0.20 | ) | 14.20 | 10.20 | 51,394 | 0.93 | 1.04 | 1.34 | 78 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the period ended December 31, 2011, the portfolio turnover calculation excludes the value of securities purchased of $134,975,378 and sold of $57,441,776 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco V.I. Select Dimensions Dividend Growth Fund and Invesco V.I. Financial Services Fund into the Fund. |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $332,151 and $110,614 for Series I and Series II shares, respectively. |
Invesco V.I. Diversified Dividend Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,021.10 | $ | 3.51 | $ | 1,021.32 | $ | 3.51 | 0.70 | % | ||||||||||||
Series II | 1,000.00 | 1,020.30 | 4.76 | 1,020.08 | 4.76 | 0.95 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. Diversified Dividend Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. Diversified Dividend Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s
consideration of Invesco Advisers’ investment process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Underlying Funds Large-Cap Value Funds Index. The Board noted that performance of Series I shares of the Fund was in the first quintile of its performance universe for the one year period and the second quintile for the three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The
Invesco V.I. Diversified Dividend Fund
Board noted that performance of Series I shares of the Fund was above the performance of the Index for the one, three and five year periods. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series I shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was above the rate of one mutual fund and below the rate of an offshore fund advised by Invesco Advisers using a similar investment process.
The Board also considered the fees charged by Invesco Advisers and the Affiliated Sub-Advisers to other client accounts with investment strategies comparable to those of the Fund. The Board noted that Invesco Advisers or the Affiliated Sub-Advisers may charge lower fees to large institutional clients. Invesco Advisers reviewed with the Board the significantly greater scope of services it provides to the Invesco Funds relative to certain other types of client accounts. These additional services include provision of administrative services, officers and office space, oversight of service providers, preparation of annual registration statement updates and financial information and regulatory compliance under the Investment Company Act of 1940, as amended.
Invesco Advisers also reviewed generally the higher frequency of shareholder purchases and redemptions in the Invesco Funds relative to the flow of assets for other client accounts. Invesco Advisers advised the Board that advance notice of redemptions is often provided to Invesco Advisers by institutional clients. The Board did note that sub-advisory fee rates charged by the
Affiliated Sub-Advisers to manage the Invesco Funds and to manage other client accounts tended to be more comparable, reflecting a similar scope of services. The information received by the Board demonstrated that the aggregate services provided to the Invesco Funds were sufficiently different from those provided to institutional clients to support the difference in fees.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed
and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered that it receives periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
Invesco V.I. Diversified Dividend Fund
| ||||
Semiannual Report to Shareholders
| June 30, 2015 | |||
Invesco V.I. Equally-Weighted S&P 500 Fund | ||||
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd. | ||
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing. | ||
Invesco Distributors, Inc. MS-VIEWSP-SAR-1
| ||
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance | ||
Performance summary
Fund vs. Indexes
Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower.
Series I Shares | 0.45 | % | |||
Series II Shares | 0.31 | ||||
S&P 500 Indexq (Broad Market Index) | 1.23 | ||||
S&P 500 Equal Weight Indexq (Style-Specific Index) | 0.70 | ||||
Lipper VUF Multi-Cap Core Funds Indexn (Peer Group Index) | 1.71 | ||||
Source(s): qFactSet Research Systems Inc.; nLipper Inc. |
The S&P 500® Index is an unmanaged index considered representative of the US stock market.
The S&P 500® Equal Weight Index is the equally weighted version of the S&P 500 Index.
The Lipper VUF Multi-Cap Core Funds Index is an unmanaged index considered representative of multi-cap core variable insurance underlying funds tracked by Lipper.
A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
Average Annual Total Returns
As of 6/30/15
Series I Shares | |||||
Inception (11/9/94) | 10.88 | % | |||
10 Years | 9.19 | ||||
5 Years | 17.90 | ||||
1 Year | 5.57 | ||||
Series II Shares | |||||
Inception (7/24/00) | 8.55 | % | |||
10 Years | 8.91 | ||||
5 Years | 17.60 | ||||
1 Year | 5.32 |
Effective June 1, 2010, Class X and Class Y shares of the predecessor fund, Morgan Stanley V.I. Select Dimensions Equally-Weighted S&P 500 Fund, advised by Morgan Stanley Investment Advisors Inc. were reorganized into Series I and Series II shares, respectively, of Invesco V.I. Select Dimensions Equally-Weighted S&P 500 Fund (renamed Invesco V.I. Equally-Weighted S&P 500 Fund on April 30, 2012). Returns shown above for Series I and Series II shares are blended returns of the predecessor fund and Invesco V.I. Equally-Weighted S&P 500 Fund. Share class returns will differ from the predecessor fund because of different expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 0.59% and 0.84%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. Equally-Weighted S&P 500 Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
Invesco V.I. Equally-Weighted S&P 500 Fund |
Schedule of Investments(a)
June 30, 2015
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–98.42% |
| |||||||
Advertising–0.39% | ||||||||
Interpublic Group of Cos., Inc. (The) | 7,199 | $ | 138,725 | |||||
Omnicom Group Inc. | 1,983 | 137,798 | ||||||
276,523 | ||||||||
Aerospace & Defense–2.14% | ||||||||
Boeing Co. (The) | 1,006 | 139,552 | ||||||
General Dynamics Corp. | 1,012 | 143,390 | ||||||
Honeywell International Inc. | 1,381 | 140,821 | ||||||
L-3 Communications Holdings, Inc. | 1,238 | 140,364 | ||||||
Lockheed Martin Corp. | 752 | 139,797 | ||||||
Northrop Grumman Corp. | 897 | 142,291 | ||||||
Precision Castparts Corp. | 691 | 138,110 | ||||||
Raytheon Co. | 1,413 | 135,196 | ||||||
Rockwell Collins, Inc. | 1,527 | 141,018 | ||||||
Textron Inc. | 3,128 | 139,603 | ||||||
United Technologies Corp. | 1,222 | 135,557 | ||||||
1,535,699 | ||||||||
Agricultural & Farm Machinery–0.21% | ||||||||
Deere & Co. | 1,553 | 150,719 | ||||||
Agricultural Products–0.19% | ||||||||
Archer-Daniels-Midland Co. | 2,770 | 133,569 | ||||||
Air Freight & Logistics–0.77% | ||||||||
C.H. Robinson Worldwide, Inc. | 2,257 | 140,814 | ||||||
Expeditors International of Washington, Inc. | 2,990 | 137,854 | ||||||
FedEx Corp. | 782 | 133,253 | ||||||
United Parcel Service, Inc.–Class B | 1,435 | 139,066 | ||||||
550,987 | ||||||||
Airlines–0.59% | ||||||||
American Airlines Group Inc. | 3,533 | 141,090 | ||||||
Delta Air Lines, Inc. | 3,496 | 143,616 | ||||||
Southwest Airlines Co. | 4,109 | 135,967 | ||||||
420,673 | ||||||||
Alternative Carriers–0.19% | ||||||||
Level 3 Communications, Inc.(b) | 2,626 | 138,311 | ||||||
Aluminum–0.19% | ||||||||
Alcoa Inc. | 11,926 | 132,975 | ||||||
Apparel Retail–1.00% | ||||||||
Gap, Inc. (The) | 3,757 | 143,405 | ||||||
L Brands, Inc. | 1,697 | 145,484 | ||||||
Ross Stores, Inc. | 2,963 | 144,031 | ||||||
TJX Cos., Inc. (The) | 2,200 | 145,574 | ||||||
Urban Outfitters, Inc.(b) | 4,047 | 141,645 | ||||||
720,139 | ||||||||
Apparel, Accessories & Luxury Goods–1.58% | ||||||||
Coach, Inc. | 4,095 | 141,728 | ||||||
Fossil Group, Inc.(b) | 2,020 | 140,107 | ||||||
Hanesbrands, Inc. | 4,401 | 146,641 |
Shares | Value | |||||||
Apparel, Accessories & Luxury Goods–(continued) | ||||||||
Michael Kors Holdings Ltd.(b) | 2,981 | $ | 125,470 | |||||
PVH Corp. | 1,275 | 146,880 | ||||||
Ralph Lauren Corp. | 1,062 | 140,566 | ||||||
Under Armour, Inc.–Class A(b) | 1,760 | 146,855 | ||||||
VF Corp. | 2,078 | 144,920 | ||||||
1,133,167 | ||||||||
Application Software–0.97% | ||||||||
Adobe Systems Inc.(b) | 1,801 | 145,899 | ||||||
Autodesk, Inc.(b) | 2,660 | 133,199 | ||||||
Citrix Systems, Inc.(b) | 2,000 | 140,320 | ||||||
Intuit Inc. | 1,372 | 138,256 | ||||||
salesforce.com, inc.(b) | 2,004 | 139,539 | ||||||
697,213 | ||||||||
Asset Management & Custody Banks–1.95% | ||||||||
Affiliated Managers Group, Inc.(b) | 648 | 141,653 | ||||||
Ameriprise Financial, Inc. | 1,120 | 139,922 | ||||||
Bank of New York Mellon Corp. (The) | 3,292 | 138,165 | ||||||
BlackRock, Inc. | 406 | 140,468 | ||||||
Franklin Resources, Inc. | 2,873 | 140,863 | ||||||
Invesco Ltd.(c) | 3,644 | 136,614 | ||||||
Legg Mason, Inc. | 2,720 | 140,162 | ||||||
Northern Trust Corp. | 1,853 | 141,680 | ||||||
State Street Corp. | 1,783 | 137,291 | ||||||
T. Rowe Price Group Inc. | 1,836 | 142,712 | ||||||
1,399,530 | ||||||||
Auto Parts & Equipment–0.57% | ||||||||
BorgWarner, Inc. | 2,377 | 135,108 | ||||||
Delphi Automotive PLC (United Kingdom) | 1,641 | 139,633 | ||||||
Johnson Controls, Inc. | 2,747 | 136,059 | ||||||
410,800 | ||||||||
Automobile Manufacturers–0.38% | ||||||||
Ford Motor Co. | 9,444 | 141,754 | ||||||
General Motors Co. | 4,027 | 134,220 | ||||||
275,974 | ||||||||
Automotive Retail–0.78% | ||||||||
AutoNation, Inc.(b) | 2,281 | 143,657 | ||||||
AutoZone, Inc.(b) | 210 | 140,049 | ||||||
CarMax, Inc.(b) | 1,974 | 130,699 | ||||||
O’Reilly Automotive, Inc.(b) | 637 | 143,949 | ||||||
558,354 | ||||||||
Biotechnology–1.43% | ||||||||
Alexion Pharmaceuticals, Inc.(b) | 850 | 153,654 | ||||||
Amgen Inc. | 917 | 140,778 | ||||||
Biogen Inc.(b) | 369 | 149,054 | ||||||
Celgene Corp.(b) | 1,291 | 149,414 | ||||||
Gilead Sciences, Inc. | 1,221 | 142,955 | ||||||
Regeneron Pharmaceuticals, Inc.(b) | 292 | 148,958 | ||||||
Vertex Pharmaceuticals Inc.(b) | 1,156 | 142,743 | ||||||
1,027,556 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equally-Weighted S&P 500 Fund
Shares | Value | |||||||
Brewers–0.19% | ||||||||
Molson Coors Brewing Co.–Class B | 1,976 | $ | 137,945 | |||||
Broadcasting–0.81% | ||||||||
CBS Corp.–Class B | 2,458 | 136,419 | ||||||
Discovery Communications, Inc.–Class A(b) | 1,689 | 56,176 | ||||||
Discovery Communications, Inc.–Class C(b) | 2,925 | 90,909 | ||||||
Scripps Networks Interactive Inc.–Class A | 2,156 | 140,938 | ||||||
TEGNA Inc. | 4,907 | 157,367 | ||||||
581,809 | ||||||||
Building Products–0.40% | ||||||||
Allegion PLC | 2,353 | 141,510 | ||||||
Masco Corp.(b) | 5,891 | 142,444 | ||||||
283,954 | ||||||||
Cable & Satellite–0.81% | ||||||||
Cablevision Systems Corp.–Class A | 6,008 | 143,832 | ||||||
Comcast Corp.–Class A | 2,468 | 148,425 | ||||||
DIRECTV(b) | 1,560 | 144,752 | ||||||
Time Warner Cable Inc. | 804 | 143,249 | ||||||
580,258 | ||||||||
Casinos & Gaming–0.19% | ||||||||
Wynn Resorts Ltd. | 1,398 | 137,941 | ||||||
Coal & Consumable Fuels–0.17% | ||||||||
CONSOL Energy Inc. | 5,694 | 123,788 | ||||||
Commodity Chemicals–0.20% | ||||||||
LyondellBasell Industries N.V.–Class A | 1,378 | 142,651 | ||||||
Communications Equipment–1.16% | ||||||||
Cisco Systems, Inc. | 5,065 | 139,085 | ||||||
F5 Networks, Inc.(b) | 1,148 | 138,162 | ||||||
Harris Corp. | 1,838 | 141,361 | ||||||
Juniper Networks, Inc. | 5,251 | 136,368 | ||||||
Motorola Solutions, Inc. | 2,494 | 143,006 | ||||||
QUALCOMM, Inc. | 2,145 | 134,341 | ||||||
832,323 | ||||||||
Computer & Electronics Retail–0.39% | ||||||||
Best Buy Co., Inc. | 4,205 | 137,125 | ||||||
GameStop Corp.–Class A | 3,347 | 143,787 | ||||||
280,912 | ||||||||
Construction & Engineering–0.58% | ||||||||
Fluor Corp. | 2,611 | 138,409 | ||||||
Jacobs Engineering Group, Inc.(b) | 3,335 | 135,468 | ||||||
Quanta Services, Inc.(b) | 4,835 | 139,345 | ||||||
TopBuild Corp.(b) | 1 | 22 | ||||||
413,244 | ||||||||
Construction Machinery & Heavy Trucks–0.77% | ||||||||
Caterpillar Inc. | 1,636 | 138,766 | ||||||
Cummins Inc. | 1,048 | 137,487 | ||||||
Joy Global Inc. | 3,702 | 134,012 | ||||||
PACCAR Inc. | 2,212 | 141,148 | ||||||
551,413 |
Shares | Value | |||||||
Construction Materials–0.38% | ||||||||
Martin Marietta Materials, Inc. | 972 | $ | 137,548 | |||||
Vulcan Materials Co. | 1,617 | 135,715 | ||||||
273,263 | ||||||||
Consumer Electronics–0.39% | ||||||||
Garmin Ltd. | 3,210 | 141,015 | ||||||
Harman International Industries, Inc. | 1,192 | 141,777 | ||||||
282,792 | ||||||||
Consumer Finance–0.78% | ||||||||
American Express Co. | 1,808 | 140,518 | ||||||
Capital One Financial Corp. | 1,641 | 144,359 | ||||||
Discover Financial Services | 2,423 | 139,613 | ||||||
Navient Corp. | 7,441 | 135,500 | ||||||
559,990 | ||||||||
Data Processing & Outsourced Services–2.15% | ||||||||
Alliance Data Systems Corp.(b) | 476 | 138,964 | ||||||
Automatic Data Processing, Inc. | 1,714 | 137,514 | ||||||
Computer Sciences Corp. | 2,122 | 139,288 | ||||||
Fidelity National Information Services, Inc. | 2,273 | 140,471 | ||||||
Fiserv, Inc.(b) | 1,790 | 148,266 | ||||||
MasterCard, Inc.–Class A | 1,533 | 143,305 | ||||||
Paychex, Inc. | 2,996 | 140,453 | ||||||
Total System Services, Inc. | 3,456 | 144,357 | ||||||
Visa Inc.–Class A | 2,074 | 139,269 | ||||||
Western Union Co. (The) | 6,698 | 136,170 | ||||||
Xerox Corp. | 12,877 | 137,011 | ||||||
1,545,068 | ||||||||
Department Stores–0.60% | ||||||||
Kohl’s Corp. | 2,294 | 143,627 | ||||||
Macy’s, Inc. | 2,066 | 139,393 | ||||||
Nordstrom, Inc. | 1,944 | 144,828 | ||||||
427,848 | ||||||||
Distillers & Vintners–0.40% | ||||||||
Brown-Forman Corp.–Class B | 1,464 | 146,663 | ||||||
Constellation Brands, Inc.–Class A | 1,192 | 138,296 | ||||||
284,959 | ||||||||
Distributors–0.20% | ||||||||
Genuine Parts Co. | 1,582 | 141,636 | ||||||
Diversified Banks–1.18% | ||||||||
Bank of America Corp. | 8,223 | 139,956 | ||||||
Citigroup Inc. | 2,518 | 139,094 | ||||||
Comerica Inc. | 2,760 | 141,643 | ||||||
JPMorgan Chase & Co. | 2,107 | 142,770 | ||||||
U.S. Bancorp | 3,195 | 138,663 | ||||||
Wells Fargo & Co. | 2,519 | 141,669 | ||||||
843,795 | ||||||||
Diversified Chemicals–0.79% | ||||||||
Dow Chemical Co. (The) | 2,774 | 141,946 | ||||||
E. I. du Pont de Nemours and Co.(b) | 2,187 | 134,501 | ||||||
Eastman Chemical Co. | 1,848 | 151,203 | ||||||
FMC Corp. | 2,611 | 137,208 | ||||||
564,858 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equally-Weighted S&P 500 Fund
Shares | Value | |||||||
Diversified Metals & Mining–0.19% | ||||||||
Freeport-McMoRan Inc. | 7,260 | $ | 135,181 | |||||
Diversified Support Services–0.20% | ||||||||
Cintas Corp. | 1,670 | 141,265 | ||||||
Drug Retail–0.40% | ||||||||
CVS Health Corp. | 1,406 | 147,461 | ||||||
Walgreens Boots Alliance, Inc. | 1,689 | 142,619 | ||||||
290,080 | ||||||||
Electric Utilities–2.56% | ||||||||
American Electric Power Co., Inc. | 2,666 | 141,218 | ||||||
Duke Energy Corp. | 1,983 | 140,039 | ||||||
Edison International | 2,514 | 139,728 | ||||||
Entergy Corp. | 2,034 | 143,397 | ||||||
Eversource Energy | 3,119 | 141,634 | ||||||
Exelon Corp. | 4,242 | 133,284 | ||||||
FirstEnergy Corp. | 4,271 | 139,021 | ||||||
NextEra Energy, Inc. | 1,448 | 141,947 | ||||||
Pepco Holdings, Inc. | 5,383 | 145,018 | ||||||
Pinnacle West Capital Corp. | 2,523 | 143,534 | ||||||
PPL Corp. | 4,792 | 141,220 | ||||||
Southern Co. (The) | 3,399 | 142,418 | ||||||
Xcel Energy, Inc. | 4,398 | 141,528 | ||||||
1,833,986 | ||||||||
Electrical Components & Equipment–0.77% | ||||||||
AMETEK, Inc. | 2,615 | 143,250 | ||||||
Eaton Corp. PLC | 2,001 | 135,047 | ||||||
Emerson Electric Co. | 2,411 | 133,642 | ||||||
Rockwell Automation, Inc. | 1,142 | 142,339 | ||||||
554,278 | ||||||||
Electronic Components–0.39% | ||||||||
Amphenol Corp.–Class A | 2,492 | 144,461 | ||||||
Corning Inc. | 6,931 | 136,749 | ||||||
281,210 | ||||||||
Electronic Equipment & Instruments–0.20% | ||||||||
FLIR Systems, Inc. | 4,638 | 142,943 | ||||||
Electronic Manufacturing Services–0.19% | ||||||||
TE Connectivity Ltd. (Switzerland) | 2,093 | 134,580 | ||||||
Environmental & Facilities Services–0.58% | ||||||||
Republic Services, Inc. | 3,572 | 139,915 | ||||||
Stericycle, Inc.(b) | 1,058 | 141,677 | ||||||
Waste Management, Inc. | 2,968 | 137,567 | ||||||
419,159 | ||||||||
Fertilizers & Agricultural Chemicals–0.60% | ||||||||
CF Industries Holdings, Inc. | 2,274 | 146,172 | ||||||
Monsanto Co. | 1,259 | 134,197 | ||||||
Mosaic Co. (The) | 3,228 | 151,232 | ||||||
431,601 | ||||||||
Food Distributors–0.20% | ||||||||
Sysco Corp. | 3,895 | 140,610 |
Shares | Value | |||||||
Food Retail–0.40% | ||||||||
Kroger Co. (The) | 2,007 | $ | 145,527 | |||||
Whole Foods Market, Inc. | 3,563 | 140,525 | ||||||
286,052 | ||||||||
Footwear–0.21% | ||||||||
NIKE, Inc.–Class B | 1,385 | 149,608 | ||||||
Gas Utilities–0.20% | ||||||||
AGL Resources Inc. | 3,006 | 139,959 | ||||||
General Merchandise Stores–0.81% | ||||||||
Dollar General Corp. | 1,848 | 143,663 | ||||||
Dollar Tree, Inc.(b) | 1,828 | 144,394 | ||||||
Family Dollar Stores, Inc. | 1,830 | 144,222 | ||||||
Target Corp. | 1,809 | 147,669 | ||||||
579,948 | ||||||||
Gold–0.20% | ||||||||
Newmont Mining Corp. | 6,107 | 142,660 | ||||||
Health Care Distributors–0.97% | ||||||||
AmerisourceBergen Corp. | 1,305 | 138,774 | ||||||
Cardinal Health, Inc. | 1,617 | 135,262 | ||||||
Henry Schein, Inc.(b) | 1,011 | 143,683 | ||||||
McKesson Corp. | 611 | 137,359 | ||||||
Patterson Cos. Inc. | 2,971 | 144,539 | ||||||
699,617 | ||||||||
Health Care Equipment–2.60% | ||||||||
Abbott Laboratories | 2,954 | 144,982 | ||||||
Baxalta Inc.(b) | 4,275 | 136,544 | ||||||
Baxter International Inc.(b) | 3,982 | 151,316 | ||||||
Becton, Dickinson and Co. | 1,029 | 145,758 | ||||||
Boston Scientific Corp.(b) | 8,190 | 144,963 | ||||||
C.R. Bard, Inc. | 843 | 143,900 | ||||||
Edwards Lifesciences Corp.(b) | 1,076 | 153,255 | ||||||
Intuitive Surgical, Inc.(b) | 290 | 140,505 | ||||||
Medtronic PLC | 1,904 | 141,086 | ||||||
St. Jude Medical, Inc. | 1,934 | 141,317 | ||||||
Stryker Corp. | 1,502 | 143,546 | ||||||
Varian Medical Systems, Inc.(b) | 1,675 | 141,253 | ||||||
Zimmer Biomet Holdings, Inc. | 1,281 | 139,924 | ||||||
1,868,349 | ||||||||
Health Care Facilities–0.66% | ||||||||
HCA Holdings, Inc.(b) | 1,744 | 158,216 | ||||||
Tenet Healthcare Corp.(b) | 2,775 | 160,617 | ||||||
Universal Health Services, Inc.–Class B | 1,103 | 156,736 | ||||||
475,569 | ||||||||
Health Care REIT’s–0.58% | ||||||||
HCP, Inc. | 3,779 | 137,820 | ||||||
Health Care REIT, Inc. | 2,116 | 138,873 | ||||||
Ventas, Inc. | 2,248 | 139,579 | ||||||
416,272 | ||||||||
Health Care Services–0.80% | ||||||||
DaVita HealthCare Partners Inc.(b) | 1,767 | 140,423 | ||||||
Express Scripts Holding Co.(b) | 1,638 | 145,684 | ||||||
Laboratory Corp. of America Holdings(b) | 1,199 | 145,343 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equally-Weighted S&P 500 Fund
Shares | Value | |||||||
Health Care Services–(continued) | ||||||||
Quest Diagnostics Inc. | 1,969 | $ | 142,792 | |||||
574,242 | ||||||||
Health Care Supplies–0.20% | ||||||||
DENTSPLY International Inc. | 2,759 | 142,226 | ||||||
Health Care Technology–0.20% | ||||||||
Cerner Corp.(b) | 2,119 | 146,338 | ||||||
Home Entertainment Software–0.21% | ||||||||
Electronic Arts Inc.(b) | 2,292 | 152,418 | ||||||
Home Furnishings–0.40% | ||||||||
Leggett & Platt, Inc. | 2,942 | 143,216 | ||||||
Mohawk Industries, Inc.(b) | 754 | 143,939 | ||||||
287,155 | ||||||||
Home Improvement Retail–0.40% | ||||||||
Home Depot, Inc. (The) | 1,299 | 144,358 | ||||||
Lowe’s Cos., Inc. | 2,083 | 139,498 | ||||||
283,856 | ||||||||
Homebuilding–0.63% | ||||||||
D.R. Horton, Inc. | 5,371 | 146,950 | ||||||
Lennar Corp.–Class A | 3,029 | 154,600 | ||||||
PulteGroup Inc. | 7,464 | 150,400 | ||||||
451,950 | ||||||||
Homefurnishing Retail–0.20% | ||||||||
Bed Bath & Beyond Inc.(b) | 2,055 | 141,754 | ||||||
Hotel and Resort REIT’s–0.20% | ||||||||
Host Hotels & Resorts Inc. | 7,220 | 143,173 | ||||||
Hotels, Resorts & Cruise Lines–1.00% | ||||||||
Carnival Corp. | 3,022 | 149,256 | ||||||
Marriott International Inc.–Class A | 1,877 | 139,630 | ||||||
Royal Caribbean Cruises Ltd. | 1,872 | 147,308 | ||||||
Starwood Hotels & Resorts Worldwide, Inc. | 1,751 | 141,989 | ||||||
Wyndham Worldwide Corp. | 1,699 | 139,165 | ||||||
717,348 | ||||||||
Household Appliances–0.19% | ||||||||
Whirlpool Corp. | 772 | 133,595 | ||||||
Household Products–0.79% | ||||||||
Clorox Co. (The) | 1,369 | 142,403 | ||||||
Colgate-Palmolive Co. | 2,169 | 141,874 | ||||||
Kimberly-Clark Corp. | 1,346 | 142,636 | ||||||
Procter & Gamble Co. (The) | 1,829 | 143,101 | ||||||
570,014 | ||||||||
Housewares & Specialties–0.20% | ||||||||
Newell Rubbermaid Inc. | 3,495 | 143,679 | ||||||
Human Resource & Employment Services–0.20% | ||||||||
Robert Half International, Inc. | 2,548 | 141,414 | ||||||
Hypermarkets & Super Centers–0.39% | ||||||||
Costco Wholesale Corp. | 1,035 | 139,787 | ||||||
Wal-Mart Stores, Inc. | 1,985 | 140,796 | ||||||
280,583 |
Shares | Value | |||||||
Independent Power Producers & Energy Traders–0.39% | ||||||||
AES Corp. (The) | 10,774 | $ | 142,863 | |||||
NRG Energy, Inc. | 5,930 | 135,679 | ||||||
278,542 | ||||||||
Industrial Conglomerates–0.79% | ||||||||
3M Co. | 909 | 140,259 | ||||||
Danaher Corp. | 1,690 | 144,647 | ||||||
General Electric Co.(d) | 5,251 | 139,519 | ||||||
Roper Technologies, Inc. | 817 | 140,900 | ||||||
565,325 | ||||||||
Industrial Gases–0.58% | ||||||||
Air Products and Chemicals, Inc. | 991 | 135,598 | ||||||
Airgas, Inc. | 1,365 | 144,390 | ||||||
Praxair, Inc. | 1,167 | 139,515 | ||||||
419,503 | ||||||||
Industrial Machinery–2.00% | ||||||||
Dover Corp. | 1,966 | 137,974 | ||||||
Flowserve Corp. | 2,650 | 139,549 | ||||||
Illinois Tool Works Inc. | 1,534 | 140,806 | ||||||
Ingersoll-Rand PLC | 2,058 | 138,750 | ||||||
Pall Corp. | 1,153 | 143,491 | ||||||
Parker Hannifin Corp. | 1,201 | 139,712 | ||||||
Pentair PLC (United Kingdom) | 2,320 | 159,500 | ||||||
Snap-on Inc. | 916 | 145,873 | ||||||
Stanley Black & Decker Inc. | 1,352 | 142,284 | ||||||
Xylem, Inc. | 3,936 | 145,908 | ||||||
1,433,847 | ||||||||
Industrial REIT’s–0.19% | ||||||||
Prologis, Inc. | 3,660 | 135,786 | ||||||
Insurance Brokers–0.39% | ||||||||
Aon PLC | 1,406 | 140,150 | ||||||
Marsh & McLennan Cos., Inc. | 2,422 | 137,328 | ||||||
277,478 | ||||||||
Integrated Oil & Gas–0.59% | ||||||||
Chevron Corp. | 1,439 | 138,820 | ||||||
Exxon Mobil Corp. | 1,711 | 142,355 | ||||||
Occidental Petroleum Corp. | 1,844 | 143,408 | ||||||
424,583 | ||||||||
Integrated Telecommunication Services–0.78% | ||||||||
AT&T Inc. | 4,150 | 147,408 | ||||||
CenturyLink Inc. | 4,417 | 129,772 | ||||||
Frontier Communications Corp. | 29,000 | 143,550 | ||||||
Verizon Communications Inc. | 3,043 | 141,834 | ||||||
562,564 | ||||||||
Internet Retail–1.03% | ||||||||
Amazon.com, Inc.(b) | 334 | 144,986 | ||||||
Expedia, Inc. | 1,334 | 145,873 | ||||||
Netflix Inc.(b) | 217 | 142,556 | ||||||
Priceline Group Inc. (The)(b) | 122 | 140,467 | ||||||
TripAdvisor Inc.(b) | 1,890 | 164,695 | ||||||
738,577 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equally-Weighted S&P 500 Fund
Shares | Value | |||||||
Internet Software & Services–1.38% | ||||||||
Akamai Technologies, Inc.(b) | 1,958 | $ | 136,708 | |||||
eBay Inc.(b) | 2,396 | 144,335 | ||||||
Equinix, Inc. | 551 | 139,954 | ||||||
Facebook Inc.–Class A(b) | 1,764 | 151,289 | ||||||
Google Inc.–Class A(b) | 132 | 71,285 | ||||||
Google Inc.–Class C(b) | 133 | 69,228 | ||||||
VeriSign, Inc.(b) | 2,284 | 140,969 | ||||||
Yahoo! Inc.(b) | 3,549 | 139,440 | ||||||
993,208 | ||||||||
Investment Banking & Brokerage–0.78% | ||||||||
Charles Schwab Corp. (The) | 4,311 | 140,754 | ||||||
E*TRADE Financial Corp.(b) | 4,678 | 140,106 | ||||||
Goldman Sachs Group, Inc. (The) | 674 | 140,724 | ||||||
Morgan Stanley | 3,631 | 140,847 | ||||||
562,431 | ||||||||
IT Consulting & Other Services–0.78% | ||||||||
Accenture PLC–Class A | 1,495 | 144,686 | ||||||
Cognizant Technology Solutions Corp.–Class A(b) | 2,261 | 138,124 | ||||||
International Business Machines Corp. | 860 | 139,888 | ||||||
Teradata Corp.(b) | 3,729 | 137,973 | ||||||
560,671 | ||||||||
Leisure Products–0.40% | ||||||||
Hasbro, Inc. | 1,975 | 147,710 | ||||||
Mattel, Inc. | 5,504 | 141,398 | ||||||
289,108 | ||||||||
Life & Health Insurance–1.38% | ||||||||
Aflac, Inc. | 2,298 | 142,936 | ||||||
Lincoln National Corp. | 2,349 | 139,108 | ||||||
MetLife, Inc. | 2,578 | 144,342 | ||||||
Principal Financial Group, Inc. | 2,732 | 140,124 | ||||||
Prudential Financial, Inc. | 1,610 | 140,907 | ||||||
Torchmark Corp. | 2,471 | 143,862 | ||||||
Unum Group | 3,895 | 139,246 | ||||||
990,525 | ||||||||
Life Sciences Tools & Services–0.79% | ||||||||
Agilent Technologies, Inc. | 3,610 | 139,274 | ||||||
PerkinElmer, Inc. | 2,762 | 145,392 | ||||||
Thermo Fisher Scientific, Inc. | 1,110 | 144,033 | ||||||
Waters Corp.(b) | 1,069 | 137,238 | ||||||
565,937 | ||||||||
Managed Health Care–1.05% | ||||||||
Aetna Inc. | 1,240 | 158,051 | ||||||
Anthem, Inc. | 893 | 146,577 | ||||||
Cigna Corp. | 1,046 | 169,452 | ||||||
Humana Inc. | 676 | 129,305 | ||||||
UnitedHealth Group Inc. | 1,227 | 149,694 | ||||||
753,079 | ||||||||
Metal & Glass Containers–0.38% | ||||||||
Ball Corp. | 1,994 | 139,879 | ||||||
Owens-Illinois, Inc.(b) | 5,916 | 135,713 | ||||||
275,592 |
Shares | Value | |||||||
Motorcycle Manufacturers–0.21% | ||||||||
Harley-Davidson, Inc. | 2,637 | $ | 148,595 | |||||
Movies & Entertainment–0.81% | ||||||||
Time Warner Inc. | 1,671 | 146,062 | ||||||
Twenty-First Century Fox, Inc.–Class A | 4,399 | 143,166 | ||||||
Viacom Inc.–Class B | 2,177 | 140,721 | ||||||
Walt Disney Co. (The) | 1,307 | 149,181 | ||||||
579,130 | ||||||||
Multi-Line Insurance–0.98% | ||||||||
American International Group, Inc. | 2,323 | 143,608 | ||||||
Assurant, Inc. | 2,152 | 144,184 | ||||||
Genworth Financial Inc.–Class A(b) | 18,093 | 136,964 | ||||||
Hartford Financial Services Group, Inc. (The) | 3,407 | 141,629 | ||||||
Loews Corp. | 3,595 | 138,443 | ||||||
704,828 | ||||||||
Multi-Sector Holdings–0.40% | ||||||||
Berkshire Hathaway Inc.–Class B(b) | 1,024 | 139,377 | ||||||
Leucadia National Corp. | 5,948 | 144,417 | ||||||
283,794 | ||||||||
Multi-Utilities–2.58% | ||||||||
Ameren Corp. | 3,808 | 143,486 | ||||||
CenterPoint Energy, Inc. | 7,468 | 142,116 | ||||||
CMS Energy Corp. | 4,454 | 141,815 | ||||||
Consolidated Edison, Inc. | 2,499 | 144,642 | ||||||
Dominion Resources, Inc. | 2,153 | 143,971 | ||||||
DTE Energy Co. | 1,941 | 144,876 | ||||||
NiSource Inc. | 3,128 | 142,606 | ||||||
PG&E Corp. | 2,862 | 140,524 | ||||||
Public Service Enterprise Group Inc. | 3,623 | 142,311 | ||||||
SCANA Corp. | 2,857 | 144,707 | ||||||
Sempra Energy | 1,397 | 138,219 | ||||||
TECO Energy, Inc. | 8,080 | 142,693 | ||||||
WEC Energy Group, Inc. | 3,155 | 141,902 | ||||||
1,853,868 | ||||||||
Office REIT’s–0.58% | ||||||||
Boston Properties, Inc. | 1,140 | 137,986 | ||||||
SL Green Realty Corp. | 1,250 | 137,363 | ||||||
Vornado Realty Trust | 1,466 | 139,167 | ||||||
414,516 | ||||||||
Office Services & Supplies–0.19% | ||||||||
Pitney Bowes Inc. | 6,615 | 137,658 | ||||||
Oil & Gas Drilling–0.93% | ||||||||
Diamond Offshore Drilling, Inc. | 5,051 | 130,366 | ||||||
Ensco PLC–Class A | 6,110 | 136,070 | ||||||
Helmerich & Payne, Inc. | 1,956 | 137,742 | ||||||
Noble Corp. PLC | 8,770 | 134,970 | ||||||
Transocean Ltd. | 8,094 | 130,475 | ||||||
669,623 | ||||||||
Oil & Gas Equipment & Services–1.17% | ||||||||
Baker Hughes Inc. | 2,242 | 138,331 | ||||||
Cameron International Corp.(b) | 2,688 | 140,771 | ||||||
FMC Technologies, Inc.(b) | 3,361 | 139,448 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equally-Weighted S&P 500 Fund
Shares | Value | |||||||
Oil & Gas Equipment & Services–(continued) | ||||||||
Halliburton Co. | 3,161 | $ | 136,144 | |||||
National Oilwell Varco Inc. | 2,985 | 144,116 | ||||||
Schlumberger Ltd. | 1,594 | 137,387 | ||||||
836,197 | ||||||||
Oil & Gas Exploration & Production–3.26% | ||||||||
Anadarko Petroleum Corp. | 1,729 | 134,966 | ||||||
Apache Corp. | 2,484 | 143,153 | ||||||
Cabot Oil & Gas Corp. | 4,255 | 134,203 | ||||||
Chesapeake Energy Corp. | 11,741 | 131,147 | ||||||
Cimarex Energy Co. | 1,216 | 134,137 | ||||||
ConocoPhillips | 2,264 | 139,032 | ||||||
Devon Energy Corp. | 2,324 | 138,255 | ||||||
EOG Resources, Inc. | 1,605 | 140,518 | ||||||
EQT Corp. | 1,704 | 138,603 | ||||||
Hess Corp. | 2,125 | 142,120 | ||||||
Marathon Oil Corp. | 5,429 | 144,086 | ||||||
Murphy Oil Corp. | 3,314 | 137,763 | ||||||
Newfield Exploration Co.(b) | 3,922 | 141,662 | ||||||
Noble Energy, Inc. | 3,101 | 132,351 | ||||||
Pioneer Natural Resources Co. | 974 | 135,084 | ||||||
Range Resources Corp. | 2,721 | 134,363 | ||||||
Southwestern Energy Co.(b) | 6,233 | 141,676 | ||||||
2,343,119 | ||||||||
Oil & Gas Refining & Marketing–0.83% | ||||||||
Marathon Petroleum Corp. | 2,818 | 147,410 | ||||||
Phillips 66 | 1,852 | 149,197 | ||||||
Tesoro Corp. | 1,720 | 145,185 | ||||||
Valero Energy Corp. | 2,443 | 152,932 | ||||||
594,724 | ||||||||
Oil & Gas Storage & Transportation–0.85% | ||||||||
Kinder Morgan Inc. | 3,695 | 141,851 | ||||||
ONEOK, Inc. | 3,704 | 146,234 | ||||||
Spectra Energy Corp. | 4,366 | 142,332 | ||||||
Williams Cos., Inc. (The) | 3,067 | 176,015 | ||||||
606,432 | ||||||||
Packaged Foods & Meats–2.63% | ||||||||
Campbell Soup Co. | 3,077 | 146,619 | ||||||
ConAgra Foods, Inc. | 3,774 | 164,999 | ||||||
General Mills, Inc. | 2,618 | 145,875 | ||||||
Hershey Co. (The) | 1,579 | 140,263 | ||||||
Hormel Foods Corp. | 2,547 | 143,574 | ||||||
JM Smucker Co. (The) | 1,291 | 139,957 | ||||||
Kellogg Co. | 2,314 | 145,088 | ||||||
Keurig Green Mountain Inc. | 1,714 | 131,344 | ||||||
Kraft Foods Group, Inc. | 1,697 | 144,483 | ||||||
McCormick & Co., Inc. | 1,866 | 151,053 | ||||||
Mead Johnson Nutrition Co. | 1,583 | 142,818 | ||||||
Mondelez International Inc.–Class A | 3,554 | 146,211 | ||||||
Tyson Foods, Inc.–Class A | 3,457 | 147,372 | ||||||
1,889,656 | ||||||||
Paper Packaging–0.59% | ||||||||
Avery Dennison Corp. | 2,316 | 141,137 | ||||||
MeadWestvaco Corp. | 2,896 | 136,662 |
Shares | Value | |||||||
Paper Packaging–(continued) | ||||||||
Sealed Air Corp. | 2,839 | $ | 145,868 | |||||
423,667 | ||||||||
Paper Products–0.19% | ||||||||
International Paper Co. | 2,811 | 133,776 | ||||||
Personal Products–0.20% | ||||||||
Estee Lauder Cos. Inc. (The)–Class A | 1,652 | 143,162 | ||||||
Pharmaceuticals–2.57% | ||||||||
AbbVie Inc. | 2,145 | 144,122 | ||||||
Allergan PLC(b) | 480 | 145,661 | ||||||
Bristol-Myers Squibb Co. | 2,203 | 146,588 | ||||||
Eli Lilly and Co. | 1,707 | 142,517 | ||||||
Endo International PLC(b) | 1,785 | 142,175 | ||||||
Hospira, Inc.(b) | 1,629 | 144,509 | ||||||
Johnson & Johnson | 1,461 | 142,389 | ||||||
Mallinckrodt PLC(b) | 1,159 | 136,437 | ||||||
Merck & Co., Inc. | 2,485 | 141,471 | ||||||
Mylan N.V.(b) | 1,951 | 132,395 | ||||||
Perrigo Co. PLC | 778 | 143,798 | ||||||
Pfizer Inc. | 4,204 | 140,960 | ||||||
Zoetis Inc. | 2,930 | 141,285 | ||||||
1,844,307 | ||||||||
Property & Casualty Insurance–1.37% | ||||||||
ACE Ltd. | 1,366 | 138,895 | ||||||
Allstate Corp. (The) | 2,134 | 138,432 | ||||||
Chubb Corp. (The) | 1,479 | 140,712 | ||||||
Cincinnati Financial Corp. | 2,807 | 140,855 | ||||||
Progressive Corp. (The) | 5,178 | 144,104 | ||||||
Travelers Cos., Inc. (The) | 1,445 | 139,674 | ||||||
XL Group PLC | 3,811 | 141,769 | ||||||
984,441 | ||||||||
Publishing–0.20% | ||||||||
News Corp.–Class A(b) | 9,984 | 145,667 | ||||||
Railroads–0.76% | ||||||||
CSX Corp. | 4,147 | 135,400 | ||||||
Kansas City Southern | 1,526 | 139,171 | ||||||
Norfolk Southern Corp. | 1,567 | 136,893 | ||||||
Union Pacific Corp. | 1,430 | 136,379 | ||||||
547,843 | ||||||||
Real Estate Services–0.20% | ||||||||
CBRE Group, Inc.–Class A(b) | 3,857 | 142,709 | ||||||
Regional Banks–1.97% | ||||||||
BB&T Corp. | 3,502 | 141,166 | ||||||
Fifth Third Bancorp | 6,793 | 141,430 | ||||||
Huntington Bancshares Inc. | 12,486 | 141,217 | ||||||
KeyCorp | 9,358 | 140,557 | ||||||
M&T Bank Corp. | 1,139 | 142,295 | ||||||
People’s United Financial Inc. | 8,967 | 145,355 | ||||||
PNC Financial Services Group, Inc. (The) | 1,460 | 139,649 | ||||||
Regions Financial Corp. | 13,595 | 140,844 | ||||||
SunTrust Banks, Inc. | 3,287 | 141,407 | ||||||
Zions Bancorp. | 4,501 | 142,839 | ||||||
1,416,759 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equally-Weighted S&P 500 Fund
Shares | Value | |||||||
Research & Consulting Services–0.59% | ||||||||
Dun & Bradstreet Corp. (The) | 1,113 | $ | 135,786 | |||||
Equifax Inc. | 1,458 | 141,557 | ||||||
Nielsen N.V. | 3,199 | 143,219 | ||||||
420,562 | ||||||||
Residential REIT’s–0.79% | ||||||||
Apartment Investment & Management Co.–Class A | 3,868 | 142,845 | ||||||
AvalonBay Communities, Inc. | 884 | 141,325 | ||||||
Equity Residential | 2,010 | 141,042 | ||||||
Essex Property Trust, Inc. | 670 | 142,375 | ||||||
567,587 | ||||||||
Restaurants–1.01% | ||||||||
Chipotle Mexican Grill, Inc.(b) | 235 | 142,173 | ||||||
Darden Restaurants, Inc. | 2,111 | 150,050 | ||||||
McDonald’s Corp. | 1,512 | 143,746 | ||||||
Starbucks Corp. | 2,732 | 146,476 | ||||||
Yum! Brands, Inc. | 1,577 | 142,056 | ||||||
724,501 | ||||||||
Retail REIT’s–0.96% | ||||||||
General Growth Properties, Inc. | 5,369 | 137,768 | ||||||
Kimco Realty Corp. | 6,180 | 139,297 | ||||||
Macerich Co. (The) | 1,773 | 132,266 | ||||||
Realty Income Corp. | 3,171 | 140,761 | ||||||
Simon Property Group, Inc. | 812 | 140,492 | ||||||
690,584 | ||||||||
Security & Alarm Services–0.37% | ||||||||
ADT Corp. (The)(d) | 3,921 | 131,628 | ||||||
Tyco International PLC | 3,571 | 137,376 | ||||||
269,004 | ||||||||
Semiconductor Equipment–0.60% | ||||||||
Applied Materials, Inc. | 7,331 | 140,902 | ||||||
KLA-Tencor Corp. | 2,573 | 144,628 | ||||||
Lam Research Corp. | 1,765 | 143,583 | ||||||
429,113 | ||||||||
Semiconductors–2.66% | ||||||||
Altera Corp. | 2,787 | 142,695 | ||||||
Analog Devices, Inc. | 2,170 | 139,282 | ||||||
Avago Technologies Ltd. (Singapore) | 1,023 | 135,987 | ||||||
Broadcom Corp.–Class A | 2,662 | 137,066 | ||||||
First Solar, Inc.(b) | 2,848 | 133,799 | ||||||
Intel Corp.(d) | 4,576 | 139,179 | ||||||
Linear Technology Corp. | 3,140 | 138,882 | ||||||
Microchip Technology Inc. | 3,036 | 143,982 | ||||||
Micron Technology, Inc.(b) | 5,723 | 107,821 | ||||||
NVIDIA Corp. | 6,813 | 137,010 | ||||||
Qorvo, Inc.(b) | 1,721 | 138,145 | ||||||
Skyworks Solutions, Inc. | 1,369 | 142,513 | ||||||
Texas Instruments Inc. | 2,712 | 139,695 | ||||||
Xilinx, Inc. | 3,082 | 136,101 | ||||||
1,912,157 | ||||||||
Soft Drinks–1.00% | ||||||||
Coca-Cola Co. (The) | 3,599 | 141,189 | ||||||
Coca-Cola Enterprises, Inc. | 3,281 | 142,527 |
Shares | Value | |||||||
Soft Drinks–(continued) | ||||||||
Dr Pepper Snapple Group, Inc. | 1,955 | $ | 142,520 | |||||
Monster Beverage Corp.(b) | 1,119 | 149,968 | ||||||
PepsiCo, Inc. | 1,533 | 143,090 | ||||||
719,294 | ||||||||
Specialized Consumer Services–0.19% | ||||||||
H&R Block, Inc. | 4,697 | 139,266 | ||||||
Specialized Finance–0.97% | ||||||||
CME Group Inc.–Class A | 1,483 | 138,008 | ||||||
Intercontinental Exchange, Inc. | 602 | 134,613 | ||||||
McGraw Hill Financial, Inc. | 1,386 | 139,224 | ||||||
Moody’s Corp. | 1,322 | 142,723 | ||||||
NASDAQ OMX Group, Inc. (The) | 2,834 | 138,328 | ||||||
692,896 | ||||||||
Specialized REIT’s–1.18% | ||||||||
American Tower Corp. | 1,542 | 143,853 | ||||||
Crown Castle International Corp. | 1,739 | 139,642 | ||||||
Iron Mountain Inc. | 4,491 | 139,221 | ||||||
Plum Creek Timber Co., Inc. | 3,509 | 142,360 | ||||||
Public Storage | 769 | 141,781 | ||||||
Weyerhaeuser Co. | 4,486 | 141,309 | ||||||
848,166 | ||||||||
Specialty Chemicals–0.99% | ||||||||
Ecolab Inc. | 1,258 | 142,242 | ||||||
International Flavors & Fragrances Inc. | 1,303 | 142,405 | ||||||
PPG Industries, Inc. | 1,232 | 141,335 | ||||||
Sherwin-Williams Co. (The) | 511 | 140,535 | ||||||
Sigma-Aldrich Corp. | 1,033 | 143,949 | ||||||
710,466 | ||||||||
Specialty Stores–0.59% | ||||||||
Staples, Inc. | 8,840 | 135,340 | ||||||
Tiffany & Co. | 1,561 | 143,300 | ||||||
Tractor Supply Co. | 1,593 | 143,275 | ||||||
421,915 | ||||||||
Steel–0.36% | ||||||||
Allegheny Technologies, Inc. | 4,341 | 131,098 | ||||||
Nucor Corp. | 2,959 | 130,403 | ||||||
261,501 | ||||||||
Systems Software–0.96% | ||||||||
CA, Inc. | 4,771 | 139,743 | ||||||
Microsoft Corp. | 3,128 | 138,101 | ||||||
Oracle Corp. | 3,243 | 130,693 | ||||||
Red Hat, Inc.(b) | 1,839 | 139,635 | ||||||
Symantec Corp. | 6,059 | 140,872 | ||||||
689,044 | ||||||||
Technology Hardware, Storage & Peripherals–1.29% | ||||||||
Apple Inc. | 1,130 | 141,730 | ||||||
EMC Corp. | 5,313 | 140,210 | ||||||
Hewlett-Packard Co. | 4,437 | 133,154 | ||||||
NetApp, Inc. | 4,295 | 135,550 | ||||||
SanDisk Corp. | 2,175 | 126,629 | ||||||
Seagate Technology PLC | 2,685 | 127,538 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equally-Weighted S&P 500 Fund
Shares | Value | |||||||
Technology Hardware, Storage & Peripherals–(continued) | ||||||||
Western Digital Corp. | 1,545 | $ | 121,159 | |||||
925,970 | ||||||||
Thrifts & Mortgage Finance–0.20% | ||||||||
Hudson City Bancorp, Inc. | 14,441 | 142,677 | ||||||
Tires & Rubber–0.19% | ||||||||
Goodyear Tire & Rubber Co. (The) | 4,567 | 137,695 | ||||||
Tobacco–0.61% | ||||||||
Altria Group, Inc. | 2,993 | 146,387 | ||||||
Philip Morris International Inc. | 1,757 | 140,859 | ||||||
Reynolds American Inc. | 1,997 | 149,096 | ||||||
436,342 | ||||||||
Trading Companies & Distributors–0.59% | ||||||||
Fastenal Co. | 3,421 | 144,298 | ||||||
United Rentals, Inc.(b) | 1,572 | 137,738 |
Shares | Value | |||||||
Trading Companies & Distributors–(continued) | ||||||||
W.W. Grainger, Inc. | 603 | $ | 142,700 | |||||
424,736 | ||||||||
Trucking–0.38% | ||||||||
J.B. Hunt Transport Services, Inc. | 1,731 | 142,098 | ||||||
Ryder System, Inc. | 1,531 | 133,763 | ||||||
275,861 | ||||||||
Total Common Stocks & Other Equity Interests |
| 70,635,872 | ||||||
Money Market Funds–1.61% | ||||||||
Liquid Assets Portfolio–Institutional | 578,854 | 578,854 | ||||||
Premier Portfolio–Institutional | 578,854 | 578,854 | ||||||
Total Money Market Funds | 1,157,708 | |||||||
TOTAL INVESTMENTS–100.03% | 71,793,580 | |||||||
OTHER ASSETS LESS LIABILITIES–(0.03)% |
| (18,752 | ) | |||||
NET ASSETS–100.00% | $ | 71,774,828 |
Investment Abbreviations:
REIT | – Real Estate Investment Trust |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Non-income producing security. |
(c) | The Fund’s Adviser is a subsidiary of Invesco Ltd. and therefore, Invesco Ltd. is considered to be affiliated with the Fund. See Note 4. |
(d) | All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 1I and Note 5. |
(e) | The money market fund and the Fund are affiliated by having the same investment adviser. |
Portfolio Composition
By sector, based on Net Assets
as of June 30, 2015
Financials | 17.2 | % | ||
Consumer Discretionary | 16.7 | |||
Industrials | 12.9 | |||
Information Technology | 12.8 | |||
Health Care | 11.3 | |||
Energy | 7.8 | |||
Consumer Staples | 7.4 | |||
Utilities | 5.7 | |||
Materials | 5.6 | |||
Telecommunication Services | 1.0 | |||
Money Market Funds Plus Other Assets Less Liabilities | 1.6 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equally-Weighted S&P 500 Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $29,923,685) | $ | 70,499,258 | ||
Investments in affiliates, at value (Cost $1,218,720) | 1,294,322 | |||
Total investments, at value (Cost $31,142,405) | 71,793,580 | |||
Receivable for: | ||||
Investments sold | 326,841 | |||
Variation margin – futures | 1,818 | |||
Fund shares sold | 11,342 | |||
Dividends | 81,113 | |||
Investment for trustee deferred compensation and retirement plans | 27,228 | |||
Other assets | 8,970 | |||
Total assets | 72,250,892 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 335,990 | |||
Fund shares reacquired | 3,858 | |||
Accrued fees to affiliates | 61,735 | |||
Accrued trustees’ and officers’ fees and benefits | 4,304 | |||
Accrued other operating expenses | 41,345 | |||
Trustee deferred compensation and retirement plans | 28,832 | |||
Total liabilities | 476,064 | |||
Net assets applicable to shares outstanding | $ | 71,774,828 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 16,817,058 | ||
Undistributed net investment income | 1,201,742 | |||
Undistributed net realized gain | 13,122,995 | |||
Net unrealized appreciation | 40,633,033 | |||
$ | 71,774,828 | |||
Net Assets: |
| |||
Series I | $ | 31,316,761 | ||
Series II | $ | 40,458,067 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 1,560,484 | |||
Series II | 2,057,835 | |||
Series I: | ||||
Net asset value per share | $ | 20.07 | ||
Series II: | ||||
Net asset value per share | $ | 19.66 |
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $149) | $ | 624,223 | ||
Dividends from affiliates | 2,126 | |||
Total investment income | 626,349 | |||
Expenses: | ||||
Advisory fees | 43,000 | |||
Administrative services fees | 95,492 | |||
Custodian fees | 17,013 | |||
Distribution fees — Series II | 48,332 | |||
Transfer agent fees | 1,812 | |||
Trustees’ and officers’ fees and benefits | 10,711 | |||
Professional services fees | 20,585 | |||
Other | 14,959 | |||
Total expenses | 251,904 | |||
Less: Fees waived | (694 | ) | ||
Net expenses | 251,210 | |||
Net investment income | 375,139 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from: | ||||
Investment securities | 2,641,320 | |||
Futures contracts | 25,714 | |||
2,667,034 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (2,764,935 | ) | ||
Futures contracts | (5,861 | ) | ||
(2,770,796 | ) | |||
Net realized and unrealized gain (loss) | (103,762 | ) | ||
Net increase in net assets resulting from operations | $ | 271,377 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equally-Weighted S&P 500 Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: |
| |||||||
Net investment income | $ | 375,139 | $ | 885,227 | ||||
Net realized gain | 2,667,034 | 11,761,906 | ||||||
Change in net unrealized appreciation (depreciation) | (2,770,796 | ) | (3,351,115 | ) | ||||
Net increase in net assets resulting from operations | 271,377 | 9,296,018 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Series I | — | (495,550 | ) | |||||
Series ll | — | (445,613 | ) | |||||
Total distributions from net investment income | — | (941,163 | ) | |||||
Distributions to shareholders from net realized gains: | ||||||||
Series l | — | (5,378,347 | ) | |||||
Series ll | — | (5,883,707 | ) | |||||
Total distributions from net realized gains | — | (11,262,054 | ) | |||||
Share transactions-net: | ||||||||
Series l | (2,754,478 | ) | (2,983,654 | ) | ||||
Series ll | 3,175,198 | (29,503 | ) | |||||
Net increase (decrease) in net assets resulting from share transactions | 420,720 | (3,013,157 | ) | |||||
Net increase (decrease) in net assets | 692,097 | (5,920,356 | ) | |||||
Net assets: | ||||||||
Beginning of period | 71,082,731 | 77,003,087 | ||||||
End of period (includes undistributed net investment income of $1,201,742 and $826,603, respectively) | $ | 71,774,828 | $ | 71,082,731 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. Equally-Weighted S&P 500 Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is to achieve a high level of total return on its assets through a combination of capital appreciation and current income.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Invesco V.I. Equally-Weighted S&P 500 Fund
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s |
Invesco V.I. Equally-Weighted S&P 500 Fund
taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Futures Contracts — The Fund may enter into futures contracts to manage exposure to interest rate, equity and market price movements and/or currency risks. A futures contract is an agreement between two parties (“Counterparties”) to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund’s basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Statement of Operations. The primary risks associated with futures contracts are market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal Counterparty risk since the exchange’s clearinghouse, as Counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. |
J. | Collateral — To the extent the Fund has designated or segregated a security as collateral and that security is subsequently sold, it is the Fund’s practice to replace such collateral no later than the next business day. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $2 billion | 0.12% | |||
Over $2 billion | 0.10% |
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.12%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2016, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2016. The fee waiver agreement cannot be terminated during its term. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Invesco V.I. Equally-Weighted S&P 500 Fund
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $694.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $24,794 for accounting and fund administrative services and reimbursed $70,698 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 71,793,580 | $ | — | $ | — | $ | 71,793,580 | ||||||||
Futures Contracts* | (18,142 | ) | — | — | (18,142 | ) | ||||||||||
Total Investments | $ | 71,775,438 | $ | — | $ | — | $ | 71,775,438 |
* | Unrealized appreciation (depreciation). |
NOTE 4—Investments in Affiliates
The Fund’s Adviser is a subsidiary of Invesco Ltd. and therefore, Invesco Ltd. is considered to be affiliated with the Fund. The following is a summary of the transactions in, and earnings from, investments in Invesco Ltd. for the six months ended June 30, 2015.
Value 12/31/14 | Purchases at Cost | Proceeds from Sales | Change in Unrealized Appreciation (Depreciation) | Realized Gain | Value 06/30/15 | Dividend Income | ||||||||||||||||||||||
Invesco Ltd. | $ | 138,004 | $ | 7,746 | $ | (1,799 | ) | $ | (7,341 | ) | $ | 4 | $ | 136,614 | $ | 1,819 |
Invesco V.I. Equally-Weighted S&P 500 Fund
NOTE 5—Derivative Investments
Value of Derivative Investments at Period-End
The table below summarizes the value of the Fund’s derivative investments, detailed by primary risk exposure, held as of June 30, 2015:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Equity risk: | ||||||||
Futures contracts(a) | $ | — | $ | (18,142 | ) |
(a) | Includes cumulative appreciation (depreciation) of futures contracts. Only current day’s variation margin receivable is reported within the Statement of Assets and Liabilities. |
Effect of Derivative Investments for the six months ended June 30, 2015
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations | ||||
Futures Contracts | ||||
Realized Gain: | ||||
Equity risk | $ | 25,714 | ||
Change in Net Unrealized Appreciation (Depreciation): | ||||
Equity risk | (5,861 | ) | ||
Total | $ | 19,853 |
The table below summarizes the average notional value of futures contracts outstanding during the period.
Futures Contracts | ||||
Average notional value | $ | 944,158 |
Open Futures Contracts — Equity Risk | ||||||||||||||||||||
Futures Contracts | Type of Contract | Number of Contracts | Expiration Month | Notional Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
E-Mini S&P 500 Index | Long | 11 | September-2015 | $ | 1,129,920 | $ | (18,142 | ) |
NOTE 6—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 7—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 8—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date
Invesco V.I. Equally-Weighted S&P 500 Fund
will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund did not have a capital loss carryforward as of December 31, 2014.
NOTE 9—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $8,433,645 and $7,371,739, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 40,423,007 | ||
Aggregate unrealized (depreciation) of investment securities | (811,610 | ) | ||
Net unrealized appreciation of investment securities | $ | 39,611,397 |
Cost of investments for tax purposes is $32,182,183.
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 5,702 | $ | 115,601 | 34,739 | $ | 771,203 | ||||||||||
Series II | 338,344 | 6,738,265 | 94,541 | 1,914,075 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 311,944 | 5,873,897 | ||||||||||||
Series II | — | — | 342,496 | 6,329,320 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (140,683 | ) | (2,870,079 | ) | (452,140 | ) | (9,628,754 | ) | ||||||||
Series II | (178,786 | ) | (3,563,067 | ) | (403,403 | ) | (8,272,898 | ) | ||||||||
Net increase (decrease) in share activity | 24,577 | $ | 420,720 | (71,823 | ) | $ | (3,013,157 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 98% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
Invesco V.I. Equally-Weighted S&P 500 Fund
NOTE 11—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Distributions from net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Series I |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 19.98 | $ | 0.12 | $ | (0.03 | ) | $ | 0.09 | $ | — | $ | — | $ | — | $ | 20.07 | 0.45 | % | $ | 31,317 | 0.57 | %(d) | 0.57 | %(d) | 1.18 | %(d) | 10 | % | |||||||||||||||||||||||||||
Year ended 12/31/14 | 21.18 | 0.29 | 2.41 | 2.70 | (0.33 | ) | (3.57 | ) | (3.90 | ) | 19.98 | 13.88 | 33,878 | 0.59 | 0.59 | 1.34 | 18 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 18.23 | 0.24 | 5.94 | 6.18 | (0.38 | ) | (2.85 | ) | (3.23 | ) | 21.18 | 35.42 | 38,144 | 0.59 | 0.59 | 1.16 | 18 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 18.33 | 0.33 | 2.73 | 3.06 | (0.37 | ) | (2.79 | ) | (3.16 | ) | 18.23 | 17.09 | 34,914 | 0.46 | 0.59 | 1.69 | 23 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 18.78 | 0.29 | (0.40 | ) | (0.11 | ) | (0.34 | ) | — | (0.34 | ) | 18.33 | (0.36 | ) | 35,998 | 0.37 | 0.51 | 1.50 | 21 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 15.69 | 0.26 | 3.07 | 3.33 | (0.24 | ) | — | (0.24 | ) | 18.78 | 21.51 | 43,669 | 0.35 | 0.40 | 1.59 | 21 | ||||||||||||||||||||||||||||||||||||||||
Series II |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 19.60 | 0.09 | (0.03 | ) | 0.06 | — | — | — | 19.66 | 0.31 | 40,458 | 0.82 | (d) | 0.82 | (d) | 0.93 | (d) | 10 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 20.84 | 0.23 | 2.37 | 2.60 | (0.27 | ) | (3.57 | ) | (3.84 | ) | 19.60 | 13.61 | 37,205 | 0.84 | 0.84 | 1.09 | 18 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 17.98 | 0.19 | 5.84 | 6.03 | (0.32 | ) | (2.85 | ) | (3.17 | ) | 20.84 | 35.04 | 38,860 | 0.84 | 0.84 | 0.91 | 18 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 18.09 | 0.27 | 2.71 | 2.98 | (0.30 | ) | (2.79 | ) | (3.09 | ) | 17.98 | 16.88 | 36,362 | 0.71 | 0.84 | 1.44 | 23 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 18.53 | 0.23 | (0.38 | ) | (0.15 | ) | (0.29 | ) | — | (0.29 | ) | 18.09 | (0.66 | ) | 41,523 | 0.62 | 0.76 | 1.25 | 21 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 15.49 | 0.22 | 3.03 | 3.25 | (0.21 | ) | — | (0.21 | ) | 18.53 | 21.19 | 55,646 | 0.60 | 0.65 | 1.34 | 21 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $33,274 and $38,986 for Series I and Series II shares, respectively. |
Invesco V.I. Equally-Weighted S&P 500 Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,004.50 | $ | 2.83 | $ | 1,021.97 | $ | 2.86 | 0.57 | % | ||||||||||||
Series II | 1,000.00 | 1,003.10 | 4.07 | 1,020.73 | 4.11 | 0.82 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. Equally-Weighted S&P 500 Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. Equally-Weighted S&P 500 Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ investment
process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Underlying Fund Multi-Cap Core Index. The Board noted that performance of Series I shares of the Fund was in the first quintile of its performance universe for the one, three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Series I shares of the Fund was above the performance of the Index
Invesco V.I. Equally-Weighted S&P 500 Fund
for the one, three and five year periods. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series I shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was below the rate of one such mutual fund.
The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other client accounts with investment strategies comparable to those of the Fund.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its
affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered that it receives periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to
waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to, among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
Invesco V.I. Equally-Weighted S&P 500 Fund
| ||||
Semiannual Report to Shareholders
|
June 30, 2015 | |||
Invesco V.I. Equity and Income Fund | ||||
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. | ||
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. | ||
Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. | ||
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd. | ||
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing. | ||
Invesco Distributors, Inc. | ||
VK-VIEQI-SAR-1 | ||
| ||
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance | ||
Performance summary
Fund vs. Indexes
Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower.
Series I Shares | 1.37 | % | |||
Series II Shares | 1.22 | ||||
Barclays U.S. Government/Credit Indexq (Style-Specific Index) | -0.30 | ||||
Russell 1000 Value Indexq (Style-Specific Index) | -0.61 | ||||
Lipper VUF Mixed-Asset Target Allocation Growth Indexn (Peer Group Index)* | 1.86 | ||||
Source(s): qFactSet Research Systems Inc.; nLipper Inc. | |||||
* During the reporting period, the Lipper VUF Mixed-Asset Target Allocation Growth Index became the Fund’s Peer Group Index. |
|
The Barclays U.S. Government/Credit Index includes treasuries and agencies that represent the government portion of the index, and includes publicly issued US corporate and foreign debentures and secured notes that meet specified maturity, liquidity and quality requirements.
The Russell 1000® Value Index is an unmanaged index considered representative of large-cap value stocks. The Russell 1000 Value Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
The Lipper VUF Mixed-Asset Target Allocation Growth Index is an unmanaged index considered representative of mixed-asset target allocation growth variable insurance underlying funds tracked by Lipper.
The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es).
A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
Average Annual Total Returns
As of 6/30/15
Series I Shares | ||
10 Years | 7.26% | |
5 Years | 12.56 | |
1 Year | 4.14 | |
Series II Shares | ||
Inception (4/30/03) | 8.32% | |
10 Years | 7.16 | |
5 Years | 12.35 | |
1 Year | 3.92 |
Effective June 1, 2010, Class II shares of the predecessor fund, Universal Institutional Funds Equity and Income Portfolio, advised by Morgan Stanley Investment Management Inc. were reorganized into Series II shares of Invesco Van Kampen V.I. Equity and Income Fund (renamed Invesco V.I. Equity and Income Fund on April 29, 2013). Returns shown above for Series II shares are blended returns of the predecessor fund and Invesco V.I. Equity and Income Fund. Share class returns will differ from the predecessor fund because of different expenses.
Series I shares incepted on June 1, 2010. Series I shares performance shown prior to that date is that of the predecessor fund’s Class II shares and includes the 12b-1 fees applicable to the predecessor fund’s Class II shares.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable
product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 0.67% and 0.92%, respectively.1 The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 0.68% and 0.93%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. Equity and Income Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing
variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2017. See current prospectus for more information. |
Invesco V.I. Equity and Income Fund
Schedule of Investments(a)
June 30, 2015
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–63.92% |
| |||||||
Aerospace & Defense–0.96% | ||||||||
General Dynamics Corp. | 93,543 | $ | 13,254,108 | |||||
Agricultural Products–0.72% | ||||||||
Archer-Daniels-Midland Co. | 208,415 | 10,049,771 | ||||||
Application Software–1.12% | ||||||||
Adobe Systems Inc.(b) | 96,470 | 7,815,035 | ||||||
Citrix Systems, Inc.(b) | 109,359 | 7,672,627 | ||||||
15,487,662 | ||||||||
Asset Management & Custody Banks–1.71% | ||||||||
Northern Trust Corp. | 134,097 | 10,253,057 | ||||||
State Street Corp. | 175,711 | 13,529,747 | ||||||
23,782,804 | ||||||||
Automobile Manufacturers–0.73% | ||||||||
General Motors Co. | 302,720 | 10,089,657 | ||||||
Biotechnology–0.49% | ||||||||
Amgen Inc. | 44,156 | 6,778,829 | ||||||
Broadcasting–0.17% | ||||||||
CBS Corp.–Class B | 42,008 | 2,331,444 | ||||||
Cable & Satellite–1.89% | ||||||||
Comcast Corp.–Class A | 261,727 | 15,740,262 | ||||||
Time Warner Cable Inc. | 58,732 | 10,464,280 | ||||||
26,204,542 | ||||||||
Communications Equipment–1.03% | ||||||||
Cisco Systems, Inc. | 522,622 | 14,351,200 | ||||||
Construction Machinery & Heavy Trucks–0.50% | ||||||||
Caterpillar Inc. | 81,368 | 6,901,634 | ||||||
Diversified Banks–8.68% | ||||||||
Bank of America Corp. | 1,370,528 | 23,326,387 | ||||||
Citigroup Inc. | 793,558 | 43,836,144 | ||||||
Comerica Inc. | 194,185 | 9,965,574 | ||||||
JPMorgan Chase & Co. | 639,154 | 43,309,075 | ||||||
120,437,180 | ||||||||
Diversified Chemicals–0.36% | ||||||||
Dow Chemical Co. (The) | 98,286 | 5,029,295 | ||||||
Electric Utilities–0.34% | ||||||||
FirstEnergy Corp. | 144,938 | 4,717,732 | ||||||
Electronic Components–0.61% | ||||||||
Corning Inc. | 429,376 | 8,471,588 | ||||||
Fertilizers & Agricultural Chemicals–0.37% | ||||||||
Mosaic Co. (The) | 108,928 | 5,103,277 |
Shares | Value | |||||||
General Merchandise Stores–1.27% | ||||||||
Target Corp. | 216,608 | $ | 17,681,711 | |||||
Health Care Equipment–1.45% | ||||||||
Baxter International Inc. | 122,736 | 8,582,928 | ||||||
Medtronic PLC | 155,748 | 11,540,927 | ||||||
20,123,855 | ||||||||
Health Care Services–0.55% | ||||||||
Express Scripts Holding Co.(b) | 85,223 | 7,579,734 | ||||||
Hotels, Resorts & Cruise Lines–1.14% | ||||||||
Carnival Corp. | 319,932 | 15,801,441 | ||||||
Household Products–0.72% | ||||||||
Procter & Gamble Co. (The) | 127,790 | 9,998,290 | ||||||
Hypermarkets & Super Centers–0.91% | ||||||||
Wal-Mart Stores, Inc. | 178,286 | 12,645,826 | ||||||
Industrial Conglomerates–2.00% | ||||||||
General Electric Co. | 1,043,698 | 27,731,056 | ||||||
Industrial Machinery–0.83% | ||||||||
Ingersoll-Rand PLC | 170,542 | 11,497,942 | ||||||
Insurance Brokers–2.03% | ||||||||
Aon PLC | 99,403 | 9,908,491 | ||||||
Marsh & McLennan Cos., Inc. | 175,881 | 9,972,453 | ||||||
Willis Group Holdings PLC | 175,191 | 8,216,458 | ||||||
28,097,402 | ||||||||
Integrated Oil & Gas–3.28% | ||||||||
Exxon Mobil Corp. | 97,228 | 8,089,370 | ||||||
Occidental Petroleum Corp. | 100,321 | 7,801,964 | ||||||
Royal Dutch Shell PLC–Class A (United Kingdom) | 678,330 | 19,071,293 | ||||||
TOTAL S.A. (France) | 215,295 | 10,477,118 | ||||||
45,439,745 | ||||||||
Integrated Telecommunication Services–1.09% | ||||||||
Koninklijke KPN N.V. (Netherlands) | 650,026 | 2,495,073 | ||||||
Orange S.A. (France) | 145,308 | 2,248,644 | ||||||
Telecom Italia S.p.A. (Italy)(b) | 1,357,513 | 1,722,508 | ||||||
Telefónica, S.A. (Spain) | 105,612 | 1,505,334 | ||||||
Verizon Communications Inc. | 154,138 | 7,184,372 | ||||||
15,155,931 | ||||||||
Internet Software & Services–1.12% | ||||||||
eBay Inc.(b) | 257,832 | 15,531,800 | ||||||
Investment Banking & Brokerage–3.22% | ||||||||
Charles Schwab Corp. (The) | 333,803 | 10,898,668 | ||||||
Goldman Sachs Group, Inc. (The) | 51,774 | 10,809,893 | ||||||
Morgan Stanley | 592,648 | 22,988,816 | ||||||
44,697,377 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
Shares | Value | |||||||
IT Consulting & Other Services–0.71% | ||||||||
Amdocs Ltd. | 180,410 | $ | 9,848,582 | |||||
Managed Health Care–1.20% | ||||||||
Anthem, Inc. | 57,107 | 9,373,543 | ||||||
UnitedHealth Group Inc. | 60,206 | 7,345,132 | ||||||
16,718,675 | ||||||||
Movies & Entertainment–0.87% | ||||||||
Time Warner Inc. | 71,154 | 6,219,571 | ||||||
Viacom Inc.–Class B | 89,586 | 5,790,839 | ||||||
12,010,410 | ||||||||
Multi-Utilities–0.41% | ||||||||
PG&E Corp. | 115,082 | 5,650,526 | ||||||
Oil & Gas Drilling–0.30% | ||||||||
Ensco PLC–Class A | 187,105 | 4,166,828 | ||||||
Oil & Gas Equipment & Services–0.72% | ||||||||
Baker Hughes Inc. | 162,549 | 10,029,273 | ||||||
Oil & Gas Exploration & Production–1.76% | ||||||||
Anadarko Petroleum Corp. | 77,819 | 6,074,551 | ||||||
Apache Corp. | 187,592 | 10,810,927 | ||||||
Canadian Natural Resources Ltd. (Canada) | 277,753 | 7,539,900 | ||||||
24,425,378 | ||||||||
Other Diversified Financial Services–1.01% | ||||||||
Voya Financial, Inc. | 302,932 | 14,077,250 | ||||||
Packaged Foods & Meats–0.81% | ||||||||
Mondelez International Inc.–Class A | 271,483 | 11,168,811 | ||||||
Pharmaceuticals–5.16% | ||||||||
Eli Lilly and Co. | 141,460 | 11,810,495 | ||||||
Merck & Co., Inc. | 280,688 | 15,979,568 | ||||||
Novartis AG (Switzerland) | 129,781 | 12,819,523 | ||||||
Novartis AG–ADR (Switzerland) | 9,637 | 947,702 | ||||||
Pfizer Inc. | 280,662 | 9,410,597 | ||||||
Sanofi (France) | 97,139 | 9,584,760 | ||||||
Teva Pharmaceutical Industries Ltd.–ADR (Israel) | 186,446 | 11,018,959 | ||||||
71,571,604 | ||||||||
Publishing–0.51% | ||||||||
Thomson Reuters Corp. | 186,789 | 7,113,777 | ||||||
Railroads–0.69% | ||||||||
CSX Corp. | 291,974 | 9,532,951 | ||||||
Regional Banks–3.81% | ||||||||
BB&T Corp. | 198,775 | 8,012,620 | ||||||
Citizens Financial Group Inc. | 432,803 | 11,819,850 | ||||||
Fifth Third Bancorp | 452,872 | 9,428,795 | ||||||
First Horizon National Corp. | 427,121 | 6,692,986 | ||||||
PNC Financial Services Group, Inc. (The) | 176,040 | 16,838,226 | ||||||
52,792,477 |
Shares | Value | |||||||
Security & Alarm Services–0.65% | ||||||||
Tyco International PLC | 233,967 | $ | 9,000,710 | |||||
Semiconductor Equipment–0.71% | ||||||||
Applied Materials, Inc. | 515,603 | 9,909,890 | ||||||
Semiconductors–1.28% | ||||||||
Broadcom Corp.–Class A | 143,098 | 7,368,116 | ||||||
Intel Corp. | 342,718 | 10,423,768 | ||||||
17,791,884 | ||||||||
Specialized Finance–0.45% | ||||||||
CME Group Inc.–Class A | 67,479 | 6,279,596 | ||||||
Systems Software–1.53% | ||||||||
Microsoft Corp. | 227,457 | 10,042,226 | ||||||
Symantec Corp. | 478,959 | 11,135,797 | ||||||
21,178,023 | ||||||||
Technology Hardware, Storage & Peripherals–0.52% | ||||||||
NetApp, Inc. | 228,008 | 7,195,932 | ||||||
Tobacco–0.85% | ||||||||
Philip Morris International Inc. | 147,634 | 11,835,818 | ||||||
Wireless Telecommunication Services–0.68% | ||||||||
Vodafone Group PLC–ADR (United Kingdom) | 258,343 | 9,416,602 | ||||||
Total Common Stocks & Other Equity Interests |
| 886,687,830 | ||||||
Principal Amount | ||||||||
Bonds & Notes–20.48% |
| |||||||
Advertising–0.03% | ||||||||
Interpublic Group of Cos., Inc. (The), Sr. Unsec. Global Notes, | $ | 370,000 | 373,279 | |||||
Aerospace & Defense–0.12% | ||||||||
Boeing Capital Corp., Sr. Unsec. Notes, 2.13%, 08/15/16 | 670,000 | 680,310 | ||||||
L-3 Communications Corp., Sr. Unsec. Gtd. Global Notes, 3.95%, 05/28/24 | 435,000 | 422,950 | ||||||
Northrop Grumman Corp., Sr. Unsec. Global Notes, 3.85%, 04/15/45 | 190,000 | 167,834 | ||||||
Precision Castparts Corp., Sr. Unsec. Global Notes, 2.50%, 01/15/23 | 365,000 | 349,971 | ||||||
1,621,065 | ||||||||
Agricultural & Farm Machinery–0.09% | ||||||||
Deere & Co., Sr. Unsec. Notes, | 1,275,000 | 1,255,241 | ||||||
Agricultural Products–0.19% | ||||||||
Bunge Ltd. Finance Corp., Sr. Unsec. Gtd. Global Notes, 5.10%, 07/15/15 | 2,360,000 | 2,362,510 | ||||||
Ingredion Inc., Sr. Unsec. Notes, 6.63%, 04/15/37 | 255,000 | 303,870 | ||||||
2,666,380 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
Principal Amount | Value | |||||||
Air Freight & Logistics–0.32% | ||||||||
FedEx Corp., | $ | 440,000 | $ | 456,889 | ||||
Sr. Unsec. Gtd. Notes, | 910,000 | 937,792 | ||||||
UTi Worldwide Inc., Sr. Unsec. Conv. Bonds, 4.50%, 03/01/19 | 2,912,000 | 2,988,440 | ||||||
4,383,121 | ||||||||
Airlines–0.18% | ||||||||
American Airlines Pass Through Trust, Series 2014-1, Class A, Sr. Sec. First Lien Pass Through Ctfs., 3.70%, 10/01/26 | 436,811 | 436,538 | ||||||
Continental Airlines Pass Through Trust, | 251,775 | 266,881 | ||||||
Series 2012-1, Class A, Sr. Sec. First Lien Pass Through Ctfs., 4.15%, 04/11/24 | 459,797 | 470,717 | ||||||
Delta Air Lines Pass Through Trust, Series 2010-1, Class A, Sr. Sec. First Lien Pass Through Ctfs., 6.20%, 07/02/18 | 154,624 | 167,864 | ||||||
United Airlines Pass Through Trust, Series 2014-2, Class A, Sr. Sec. First Lien Pass Through Ctfs., 3.75%, 09/03/26 | 545,000 | 541,935 | ||||||
Virgin Australia Pass Through Trust (Australia), Series 2013-1, Class A, Sec. Gtd. Pass Through Ctfs., 5.00%, 10/23/23(c) | 571,704 | 592,428 | ||||||
2,476,363 | ||||||||
Apparel Retail–0.02% | ||||||||
Ross Stores, Inc., Sr. Unsec. Notes, 3.38%, 09/15/24 | 358,000 | 353,441 | ||||||
Application Software–0.37% | ||||||||
Adobe Systems, Inc., Sr. Unsec. Global Notes, 4.75%, 02/01/20 | 185,000 | 203,625 | ||||||
Citrix Systems, Inc., Sr. Unsec. Conv. Bonds, 0.50%, 04/15/19 | 4,600,000 | 4,881,750 | ||||||
5,085,375 | ||||||||
Asset Management & Custody Banks–0.05% | ||||||||
Apollo Management Holdings L.P., Sr. Unsec. Gtd. Notes, 4.00%, 05/30/24(c) | 425,000 | 426,384 | ||||||
KKR Group Finance Co. III LLC, Sr. Unsec. Gtd. Bonds, | 315,000 | 302,825 | ||||||
729,209 | ||||||||
Automobile Manufacturers–0.26% | ||||||||
Daimler Finance North America LLC (Germany), Sr. Unsec. Gtd. Notes, 1.88%, 01/11/18(c) | 555,000 | 556,472 |
Principal Amount | Value | |||||||
Automobile Manufacturers–(continued) | ||||||||
Ford Motor Co., Sr. Unsec. Global Notes, 4.75%, 01/15/43 | $ | 1,000,000 | $ | 965,725 | ||||
Ford Motor Credit Co. LLC, Sr. Unsec. Global Notes, 2.50%, 01/15/16 | 2,030,000 | 2,046,563 | ||||||
3,568,760 | ||||||||
Automotive Retail–0.08% | ||||||||
Advance Auto Parts, Inc., Sr. Unsec. Gtd. Notes, | 660,000 | 684,379 | ||||||
5.75%, 05/01/20 | 399,000 | 444,849 | ||||||
1,129,228 | ||||||||
Biotechnology–0.43% | ||||||||
BioMarin Pharmaceutical Inc., Sr. Unsec. Sub. Conv. Notes, | 2,182,000 | 3,485,745 | ||||||
Celgene Corp., Sr. Unsec. Global Notes, | 485,000 | 496,189 | ||||||
4.63%, 05/15/44 | 1,390,000 | 1,327,073 | ||||||
Gilead Sciences, Inc., Sr. Unsec. Global Notes, 2.05%, 04/01/19 | 645,000 | 648,847 | ||||||
5,957,854 | ||||||||
Brewers–0.02% | ||||||||
Anheuser-Busch InBev Worldwide, Inc. (Belgium), Sr. Unsec. Gtd. Global Notes, 0.80%, 07/15/15 | 325,000 | 325,047 | ||||||
Broadcasting–0.44% | ||||||||
Grupo Televisa S.A.B. (Mexico), Sr. Unsec. Global Notes, | 350,000 | 334,273 | ||||||
Liberty Media Corp., Sr. Unsec. Conv. Bonds, 1.38%, 10/15/23 | 6,063,000 | 5,790,165 | ||||||
6,124,438 | ||||||||
Cable & Satellite–0.19% | ||||||||
Comcast Corp., | 115,000 | 112,357 | ||||||
5.70%, 05/15/18 | 445,000 | 495,746 | ||||||
Sr. Unsec. Gtd. Notes, | 720,000 | 714,314 | ||||||
6.45%, 03/15/37 | 305,000 | 376,602 | ||||||
Cox Communications, Inc., | 440,000 | 378,758 | ||||||
8.38%, 03/01/39(c) | 80,000 | 101,196 | ||||||
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc., Sr. Unsec. Gtd. Global Notes, 5.15%, 03/15/42 | 90,000 | 85,130 | ||||||
NBCUniversal Media LLC, Sr. Unsec. Gtd. Global Notes, | 175,000 | 196,595 | ||||||
5.95%, 04/01/41 | 215,000 | 252,714 | ||||||
2,713,412 | ||||||||
Catalog Retail–0.23% | ||||||||
Liberty Interactive LLC, Sr. Unsec. Conv. Global Deb., | 1,526,000 | 2,436,831 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
Principal Amount | Value | |||||||
Catalog Retail–(continued) | ||||||||
QVC, Inc., Sr. Sec. Gtd. First Lien Global Notes, 5.45%, 08/15/34 | $ | 880,000 | $ | 799,312 | ||||
3,236,143 | ||||||||
Commodity Chemicals–0.07% | ||||||||
Montell Finance Co. B.V. (Netherlands), Sr. Unsec. Gtd. Deb., | 745,000 | 986,960 | ||||||
Communications Equipment–0.42% | ||||||||
Ciena Corp., Sr. Unsec. Conv. Notes, 4.00%, 12/15/20(c) | 1,610,000 | 2,271,106 | ||||||
JDS Uniphase Corp., Sr. Unsec. Conv. Deb., 0.63%, 08/15/18(d) | 3,098,000 | 3,057,339 | ||||||
QUALCOMM Inc., Sr. Unsec. Global Notes, 3.00%, 05/20/22 | 460,000 | 457,217 | ||||||
5,785,662 | ||||||||
Consumer Finance–0.31% | ||||||||
American Express Co., Unsec. Sub. Global Notes, 3.63%, 12/05/24 | 336,000 | 328,952 | ||||||
American Express Credit Corp., Sr. Unsec. Medium-Term Notes, 2.75%, 09/15/15 | 2,240,000 | 2,248,945 | ||||||
Capital One Financial Corp., Sr. Unsec. Global Notes, 1.00%, 11/06/15 | 1,740,000 | 1,739,492 | ||||||
4,317,389 | ||||||||
Data Processing & Outsourced Services–0.08% | ||||||||
Computer Sciences Corp., Sr. Unsec. Global Notes, 4.45%, 09/15/22 | 490,000 | 503,389 | ||||||
Xerox Corp., Sr. Unsec. Global Notes, 4.80%, 03/01/35 | 714,000 | 675,692 | ||||||
1,179,081 | ||||||||
Distillers & Vintners–0.02% | ||||||||
Brown-Forman Corp., Sr. Unsec. Notes, 2.25%, 01/15/23 | 310,000 | 292,273 | ||||||
Diversified Banks–1.75% | ||||||||
Abbey National Treasury Services PLC (United Kingdom), Sr. Unsec. Gtd. Global Notes, 4.00%, 04/27/16 | 2,180,000 | 2,231,180 | ||||||
ABN AMRO Bank N.V. (Netherlands), Sr. Unsec. Notes, | 1,955,000 | 1,961,373 | ||||||
Australia and New Zealand Banking Group Ltd. (Australia), Sr. Unsec. Global Notes, 0.90%, 02/12/16 | 955,000 | 956,835 | ||||||
Banco Inbursa S.A. Institucion de Banca Multiple (Mexico), Sr. Unsec. Notes, 4.13%, 06/06/24(c) | 480,000 | 463,868 | ||||||
Bank of America Corp., | 975,000 | 1,063,264 | ||||||
Sr. Unsec. Medium-Term Notes, 1.25%, 01/11/16 | 600,000 | 601,357 | ||||||
Series L, Sr. Unsec. Medium-Term Global Notes, 5.65%, 05/01/18 | 350,000 | 384,724 |
Principal Amount | Value | |||||||
Diversified Banks–(continued) | ||||||||
Barclays Bank PLC (United Kingdom), Series BKNT, Sr. Unsec. Global Notes, 6.75%, 05/22/19 | $ | 510,000 | $ | 591,875 | ||||
BBVA Bancomer S.A. (Mexico), Sr. Unsec. Notes, | 700,000 | 710,502 | ||||||
Bear Stearns Cos., LLC (The), Sr. Unsec. Global Notes, | 340,000 | 385,613 | ||||||
BNP Paribas S.A. (France), Unsec. Sub. Notes, 4.25%, 10/15/24 | 530,000 | 524,842 | ||||||
Citigroup Inc., Unsec. Sub. Global Notes, | 250,000 | 253,319 | ||||||
6.68%, 09/13/43 | 815,000 | 987,546 | ||||||
Credit Suisse AG (Switzerland), Unsec. Sub. Notes, 6.50%, 08/08/23(c) | 686,000 | 749,060 | ||||||
Danske Bank AS (Denmark), Sr. Unsec. Notes, 3.88%, 04/14/16(c) | 565,000 | 577,663 | ||||||
HBOS PLC (United Kingdom), Unsec. Sub. Medium-Term Global Notes, 6.75%, 05/21/18(c) | 325,000 | 360,575 | ||||||
HSBC Finance Corp., Sr. Unsec. Global Notes, 5.50%, 01/19/16 | 1,655,000 | 1,694,772 | ||||||
JPMorgan Chase & Co., | 80,000 | 85,670 | ||||||
Series S, Jr. Unsec. Sub. | 195,000 | 207,675 | ||||||
Series V, Jr. Unsec. Sub. Global | 640,000 | 628,000 | ||||||
Series X, Jr. Unsec. Sub. Global | 1,080,000 | 1,086,750 | ||||||
Series Z, Jr. Unsec. Sub. Global | 695,000 | 693,263 | ||||||
Korea Development Bank (The) (South Korea), Sr. Unsec. Global Notes, 4.38%, 08/10/15 | 200,000 | 200,647 | ||||||
Lloyds Bank PLC (United Kingdom), Sr. Unsec. Gtd. Global Notes, | 550,000 | 556,615 | ||||||
Mizuho Financial Group Cayman 3 Ltd. (Japan), Unsec. Gtd. Sub. Notes, 4.60%, 03/27/24(c) | 200,000 | 205,811 | ||||||
Santander Holdings USA Inc., Sr. Unsec. Global Notes, | 1,410,000 | 1,413,961 | ||||||
Societe Generale S.A. (France), Unsec. Sub. Notes, 5.00%, 01/17/24(c) | 735,000 | 738,634 | ||||||
Standard Chartered PLC (United Kingdom), Unsec. Sub. Notes, 5.70%, 03/26/44(c) | 420,000 | 440,077 | ||||||
U.S. Bank N.A., Unsec. Sub. Notes, 2.28%, 04/29/20 | 450,000 | 450,315 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
Principal Amount | Value | |||||||
Diversified Banks–(continued) | ||||||||
Wells Fargo & Co., | $ | 180,000 | $ | 180,193 | ||||
Sr. Unsec. Notes, | 1,415,000 | 1,274,162 | ||||||
Unsec. Sub. Medium-Term Notes, | 450,000 | 449,670 | ||||||
4.65%, 11/04/44 | 1,200,000 | 1,153,501 | ||||||
24,263,312 | ||||||||
Diversified Chemicals–0.06% | ||||||||
Eastman Chemical Co., Sr. Unsec. Global Notes, 2.70%, 01/15/20 | 795,000 | 792,656 | ||||||
Diversified Metals & Mining–0.13% | ||||||||
Glencore Finance Canada Ltd. (Switzerland), Sr. Unsec. Gtd. Notes, 2.05%, 10/23/15(c) | 420,000 | 421,130 | ||||||
2.70%, 10/25/17(c) | 420,000 | 424,673 | ||||||
Rio Tinto Finance USA Ltd. (United Kingdom), Sr. Unsec. Gtd. Global Notes, | 200,000 | 254,556 | ||||||
9.00%, 05/01/19 | 295,000 | 366,863 | ||||||
Southern Copper Corp. (Mexico), Sr. Unsec. Global Notes, | 349,000 | 302,975 | ||||||
6.75%, 04/16/40 | 10,000 | 10,341 | ||||||
1,780,538 | ||||||||
Diversified Real Estate Activities–0.05% | ||||||||
Brookfield Asset Management Inc. (Canada), Sr. Unsec. Notes, | 755,000 | 746,271 | ||||||
Diversified Support Services–0.03% | ||||||||
Cintas Corp. No. 2, Sr. Unsec. Gtd. Notes, 2.85%, 06/01/16 | 380,000 | 386,357 | ||||||
Drug Retail–0.17% | ||||||||
CVS Health Corp., Sr. Unsec. Global Bonds, 3.38%, 08/12/24 | 375,000 | 368,548 | ||||||
CVS Pass Through Trust, Sr. Sec. First Lien Global Pass Through Ctfs., 6.04%, 12/10/28 | 925,954 | 1,046,033 | ||||||
Walgreens Boots Alliance Inc., Sr. Unsec. Gtd. Global Notes, | 602,000 | 598,447 | ||||||
4.50%, 11/18/34 | 444,000 | 418,213 | ||||||
2,431,241 | ||||||||
Electric Utilities–0.43% | ||||||||
Electricite de France S.A. (France), | 965,000 | 979,668 | ||||||
Sr. Unsec. Notes, | 150,000 | 164,577 | ||||||
4.88%, 01/22/44(c) | 930,000 | 970,253 | ||||||
Georgia Power Co., Sr. Unsec. Notes, 3.00%, 04/15/16 | 875,000 | 890,123 |
Principal Amount | Value | |||||||
Electric Utilities–(continued) | ||||||||
Louisville Gas & Electric Co., Sr. Sec. First Mortgage Global Bonds, 1.63%, 11/15/15 | $ | 405,000 | $ | 406,483 | ||||
NextEra Energy Capital Holdings Inc., Sr. Unsec. Gtd. Deb., | 1,305,000 | 1,309,576 | ||||||
Ohio Power Co., Series M, Sr. Unsec. Notes, 5.38%, 10/01/21 | 200,000 | 228,194 | ||||||
PPL Electric Utilities Corp., Sr. Sec. First Mortgage Bonds, | 50,000 | 63,490 | ||||||
Southern Co. (The), Series A, Sr. Unsec. Notes, 2.38%, 09/15/15 | 980,000 | 983,468 | ||||||
Virginia Electric & Power Co., Sr. Unsec. Notes, 5.00%, 06/30/19 | 15,000 | 16,655 | ||||||
6,012,487 | ||||||||
Electrical Components & Equipment–0.05% | ||||||||
Eaton Corp., Sr. Unsec. Gtd. Global Notes, 0.95%, 11/02/15 | 740,000 | 740,617 | ||||||
Environmental & Facilities Services–0.03% | ||||||||
Waste Management, Inc., Sr. Unsec. Gtd. Global Notes, 3.90%, 03/01/35 | 469,000 | 434,256 | ||||||
Fertilizers & Agricultural Chemicals–0.04% | ||||||||
Monsanto Co., Sr. Unsec. Global Notes, 2.13%, 07/15/19 | 305,000 | 303,615 | ||||||
3.38%, 07/15/24 | 210,000 | 201,399 | ||||||
505,014 | ||||||||
Food Retail–0.08% | ||||||||
Kraft Heinz Co. (The), Sr. Unsec. Gtd. Notes, 1.60%, 06/30/17(c) | 1,080,000 | 1,080,974 | ||||||
General Merchandise Stores–0.19% | ||||||||
Dollar General Corp., Sr. Unsec. Global Notes, 3.25%, 04/15/23 | 365,000 | 347,834 | ||||||
Target Corp., | 760,000 | 770,034 | ||||||
Sr. Unsec. Notes, | 1,440,000 | 1,514,850 | ||||||
2,632,718 | ||||||||
Gold–0.01% | ||||||||
Newmont Mining Corp., Sr. Unsec. Gtd. Global Notes, 3.50%, 03/15/22 | 129,000 | 123,062 | ||||||
Health Care Distributors–0.15% | ||||||||
AmerisourceBergen Corp., Sr. Unsec. Notes, 3.40%, 05/15/24 | 940,000 | 934,420 | ||||||
McKesson Corp., Sr. Unsec. Global Notes, 2.28%, 03/15/19 | 1,095,000 | 1,095,005 | ||||||
2,029,425 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
Principal Amount | Value | |||||||
Health Care Equipment–0.62% | ||||||||
Becton, Dickinson and Co., | $ | 750,000 | $ | 748,224 | ||||
Sr. Unsec. Global Notes, | 685,000 | 688,395 | ||||||
Sr. Unsec. Notes, | 314,000 | 314,329 | ||||||
Edwards Lifesciences Corp., Sr. Unsec. Global Notes, 2.88%, 10/15/18 | 731,000 | 749,021 | ||||||
Medtronic Inc., | 525,000 | 486,754 | ||||||
4.63%, 03/15/44 | 525,000 | 529,557 | ||||||
Sr. Unsec. Gtd. Notes, | 1,076,000 | 1,079,324 | ||||||
4.38%, 03/15/35(c) | 382,000 | 378,740 | ||||||
NuVasive Inc., Sr. Unsec. Conv. Notes, 2.75%, 07/01/17 | 1,104,000 | 1,407,600 | ||||||
Wright Medical Group, Inc., Sr. Unsec. Conv. Notes, 2.00%, 02/15/20(c) | 2,063,000 | 2,199,674 | ||||||
8,581,618 | ||||||||
Health Care Facilities–0.53% | ||||||||
Brookdale Senior Living Inc., Sr. Unsec. Conv. Notes, 2.75%, 06/15/18 | 2,241,000 | 2,931,508 | ||||||
HealthSouth Corp., Sr. Unsec. Sub. Conv. Notes, 2.00%, 12/01/20(d) | 3,465,000 | 4,424,372 | ||||||
7,355,880 | ||||||||
Health Care REIT’s–0.14% | ||||||||
HCP, Inc., Sr. Unsec. Global Notes, 3.88%, 08/15/24 | 505,000 | 494,612 | ||||||
4.20%, 03/01/24 | 480,000 | 485,608 | ||||||
Senior Housing Properties Trust, Sr. Unsec. Notes, 4.30%, 01/15/16 | 495,000 | 500,259 | ||||||
Ventas Realty L.P., Sr. Unsec. Gtd. Notes, 5.70%, 09/30/43 | 215,000 | 232,141 | ||||||
Ventas Realty L.P./Ventas Capital Corp., Sr. Unsec. Gtd. Notes, 4.25%, 03/01/22 | 200,000 | 207,286 | ||||||
1,919,906 | ||||||||
Health Care Services–0.26% | ||||||||
Express Scripts Holding Co., | 940,000 | 934,601 | ||||||
Sr. Unsec. Gtd. Notes, | 1,590,000 | 1,616,817 | ||||||
Laboratory Corp. of America Holdings, | 602,000 | 593,975 | ||||||
4.70%, 02/01/45 | 264,000 | 241,938 | ||||||
Medco Health Solutions Inc., Sr. Unsec. Gtd. Notes, 2.75%, 09/15/15 | 220,000 | 220,945 | ||||||
3,608,276 |
Principal Amount | Value | |||||||
Homebuilding–0.06% | ||||||||
MDC Holdings, Inc., Sr. Unsec. Gtd. Notes, 6.00%, 01/15/43 | $ | 1,050,000 | $ | 897,733 | ||||
Hotels, Resorts & Cruise Lines–0.02% | ||||||||
Wyndham Worldwide Corp., Sr. Unsec. Notes, 2.95%, 03/01/17 | 335,000 | 340,123 | ||||||
Housewares & Specialties–0.09% | ||||||||
Tupperware Brands Corp., Sr. Unsec. Gtd. Global Notes, 4.75%, 06/01/21 | 1,160,000 | 1,222,157 | ||||||
Hypermarkets & Super Centers–0.03% | ||||||||
Wal-Mart Stores, Inc., Sr. Unsec. | 360,000 | 364,577 | ||||||
6.50%, 08/15/37 | 50,000 | 64,034 | ||||||
428,611 | ||||||||
Industrial Conglomerates–0.13% | ||||||||
General Electric Co., Sr. Unsec. Global Notes, 0.85%, 10/09/15 | 1,800,000 | 1,802,747 | ||||||
Industrial Machinery–0.16% | ||||||||
Pentair Finance S.A., Sr. Unsec. Gtd. Global Notes, 5.00%, 05/15/21 | 690,000 | 755,531 | ||||||
Valmont Industries, Inc., Sr. Unsec. Gtd. Global Notes, | 250,000 | 226,527 | ||||||
5.25%, 10/01/54 | 1,321,000 | 1,182,860 | ||||||
2,164,918 | ||||||||
Insurance Brokers–0.03% | ||||||||
Marsh & McLennan Cos., Inc., Sr. Unsec. Global Notes, | 410,000 | 426,572 | ||||||
Integrated Oil & Gas–0.23% | ||||||||
BP Capital Markets PLC (United Kingdom), Sr. Unsec. Gtd. Global Notes, 2.24%, 05/10/19 | 552,000 | 556,041 | ||||||
Chevron Corp., Sr. Unsec. Global Notes, | 1,428,000 | 1,425,706 | ||||||
1.72%, 06/24/18 | 520,000 | 522,723 | ||||||
Husky Energy Inc. (Canada), Sr. Unsec. Global Notes, 3.95%, 04/15/22 | 300,000 | 301,508 | ||||||
Suncor Energy Inc. (Canada), Sr. Unsec. Notes, | 334,000 | 334,308 | ||||||
3,140,286 | ||||||||
Integrated Telecommunication Services–0.46% | ||||||||
AT&T Corp., Sr. Unsec. Gtd. Global Notes, 8.00%, 11/15/31 | 4,000 | 5,413 | ||||||
AT&T Inc., Sr. Unsec. Global Notes, 3.00%, 06/30/22 | 520,000 | 502,465 | ||||||
3.40%, 05/15/25 | 545,000 | 519,489 | ||||||
4.50%, 05/15/35 | 463,000 | 425,812 | ||||||
5.35%, 09/01/40 | 101,000 | 100,715 | ||||||
6.15%, 09/15/34 | 140,000 | 154,033 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
Principal Amount | Value | |||||||
Integrated Telecommunication Services–(continued) | ||||||||
British Telecommunications PLC (United Kingdom), Sr. Unsec. Global Notes, 1.25%, 02/14/17 | $ | 550,000 | $ | 549,287 | ||||
Telefonica Emisiones S.A.U. (Spain), Sr. Unsec. Gtd. Global Notes, 7.05%, 06/20/36 | 360,000 | 445,110 | ||||||
Verizon Communications Inc., | 325,000 | 303,676 | ||||||
5.01%, 08/21/54 | 694,000 | 633,556 | ||||||
5.15%, 09/15/23 | 450,000 | 493,789 | ||||||
6.40%, 09/15/33 | 140,000 | 160,313 | ||||||
6.40%, 02/15/38 | 300,000 | 344,459 | ||||||
Sr. Unsec. Notes, | 1,988,000 | 1,744,646 | ||||||
6,382,763 | ||||||||
Internet Retail–0.15% | ||||||||
Amazon.com, Inc., Sr. Unsec. Global Notes, 0.65%, 11/27/15 | 2,125,000 | 2,125,788 | ||||||
Investment Banking & Brokerage–1.44% | ||||||||
Goldman Sachs Group, Inc. (The), | 535,000 | 539,909 | ||||||
5.25%, 07/27/21 | 400,000 | 444,756 | ||||||
6.15%, 04/01/18 | 550,000 | 610,667 | ||||||
Sr. Unsec. Medium-Term Global Notes, 3.70%, 08/01/15 | 65,000 | 65,133 | ||||||
Unsec. Sub. Global Notes, | 385,000 | 451,772 | ||||||
Series 0000, Sr. Unsec. Exchangeable Basket-Linked Conv. Medium-Term Notes, | 3,328,000 | 4,821,407 | ||||||
1.00%, 09/28/20(c)(g) | 6,230,000 | 6,620,808 | ||||||
Jefferies Group LLC, Sr. Unsec. Conv. Deb., 3.88%, 11/01/17(d) | 3,060,000 | 3,134,588 | ||||||
Lazard Group LLC, Sr. Unsec. Global Notes, 3.75%, 02/13/25 | 1,142,000 | 1,087,073 | ||||||
Morgan Stanley, | 705,000 | 857,476 | ||||||
Sr. Unsec. Medium-Term Global Notes, 4.00%, 07/24/15 | 610,000 | 611,016 | ||||||
Sr. Unsec. Notes, | 715,000 | 721,709 | ||||||
19,966,314 | ||||||||
Life & Health Insurance–0.15% | ||||||||
Aegon N.V. (Netherlands), Sr. Unsec. Global Bonds, 4.63%, 12/01/15 | 1,205,000 | 1,221,731 | ||||||
Prudential Financial, Inc., | 410,000 | 419,888 | ||||||
Series D, | 255,000 | 256,939 | ||||||
Sr. Unsec. Medium-Term Notes, 6.63%, 12/01/37 | 110,000 | 132,908 | ||||||
2,031,466 |
Principal Amount | Value | |||||||
Managed Health Care–0.19% | ||||||||
Aetna, Inc., Sr. Unsec. Global Notes, | $ | 605,000 | $ | 643,000 | ||||
Anthem, Inc., Sr. Unsec. Global Notes, 1.25%, 09/10/15 | 2,010,000 | 2,012,544 | ||||||
2,655,544 | ||||||||
Movies & Entertainment–0.11% | ||||||||
Live Nation Entertainment, Inc., | 1,130,000 | 1,222,519 | ||||||
Viacom Inc., Sr. Unsec. Global Deb., 4.85%, 12/15/34 | 347,000 | 321,431 | ||||||
1,543,950 | ||||||||
Multi-Line Insurance–0.20% | ||||||||
American International Group, Inc., | 385,000 | 385,474 | ||||||
4.38%, 01/15/55 | 720,000 | 646,177 | ||||||
Farmers Exchange Capital III, Unsec. Sub. Notes, 5.45%, 10/15/54(c) | 930,000 | 908,674 | ||||||
Nationwide Financial Services Inc., | 910,000 | 893,978 | ||||||
2,834,303 | ||||||||
Multi-Utilities–0.03% | ||||||||
Enable Midstream Partners L.P., | 440,000 | 424,396 | ||||||
Office REIT’s–0.04% | ||||||||
Piedmont Operating Partnership L.P., | 605,000 | 603,754 | ||||||
Office Services & Supplies–0.04% | ||||||||
Pitney Bowes Inc., Sr. Unsec. Global Notes, 4.63%, 03/15/24 | 500,000 | 504,494 | ||||||
Oil & Gas Drilling–0.08% | ||||||||
Noble Holding International Ltd., | 150,000 | 150,558 | ||||||
Rowan Cos., Inc., Sr. Unsec. Gtd. Notes, | 361,000 | 292,845 | ||||||
5.85%, 01/15/44 | 804,000 | 680,918 | ||||||
1,124,321 | ||||||||
Oil & Gas Equipment & Services–0.08% | ||||||||
Helix Energy Solutions Group, Inc., | 1,126,000 | 1,071,107 | ||||||
Oil & Gas Exploration & Production–0.77% | ||||||||
Cobalt International Energy Inc., | 1,902,000 | 1,406,291 | ||||||
ConocoPhillips Co., Sr. Unsec. Gtd. Global Notes, | 859,000 | 866,000 | ||||||
4.15%, 11/15/34 | 921,000 | 897,019 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
Principal Amount | Value | |||||||
Oil & Gas Exploration & Production–(continued) | ||||||||
Devon Energy Corp., Sr. Unsec. Global Notes, | $ | 430,000 | $ | 431,393 | ||||
3.25%, 05/15/22 | 167,000 | 165,091 | ||||||
Marathon Oil Corp., Sr. Unsec. Notes, 0.90%, 11/01/15 | 2,130,000 | 2,129,589 | ||||||
Noble Energy, Inc., Sr. Unsec. Global Notes, 5.25%, 11/15/43 | 830,000 | 817,897 | ||||||
Petroleos Mexicanos (Mexico), | 570,000 | 594,569 | ||||||
Southwestern Energy Co., Sr. Unsec. Global Notes, 4.10%, 03/15/22 | 555,000 | 546,102 | ||||||
Stone Energy Corp., Sr. Unsec. Gtd. Conv. Notes, 1.75%, 03/01/17 | 3,053,000 | 2,803,036 | ||||||
10,656,987 | ||||||||
Oil & Gas Storage & Transportation–0.68% | ||||||||
Energy Transfer Partners, L.P., | 357,000 | 322,256 | ||||||
Enterprise Products Operating LLC, | 25,000 | 28,324 | ||||||
Sr. Unsec. Gtd. Global Notes, | 155,000 | 172,143 | ||||||
Sr. Unsec. Gtd. Notes, | 370,000 | 370,148 | ||||||
3.20%, 02/01/16 | 2,150,000 | 2,177,106 | ||||||
Series N, Sr. Unsec. Gtd. Notes, 6.50%, 01/31/19 | 245,000 | 279,571 | ||||||
Kinder Morgan Inc., Sr. Unsec. Gtd. Notes, 5.30%, 12/01/34 | 533,000 | 492,828 | ||||||
Plains All American Pipeline L.P./ PAA Finance Corp., Sr. Unsec. Global Notes, 3.65%, 06/01/22 | 355,000 | 356,973 | ||||||
Spectra Energy Capital LLC, Sr. Unsec. Gtd. Notes, 7.50%, 09/15/38 | 120,000 | 136,283 | ||||||
Spectra Energy Partners, L.P., | 536,000 | 475,092 | ||||||
Sr. Unsec. Notes, | 1,065,000 | 1,079,900 | ||||||
Sunoco Logistics Partners Operations L.P., Sr. Unsec. Gtd. Notes, | 645,000 | 589,193 | ||||||
5.50%, 02/15/20 | 535,000 | 591,430 | ||||||
Texas Eastern Transmission L.P., Sr. Unsec. Notes, 7.00%, 07/15/32 | 185,000 | 229,751 | ||||||
Western Gas Partners L.P., Sr. Unsec. Notes, 5.45%, 04/01/44 | 600,000 | 598,216 | ||||||
Williams Partners L.P., Sr. Unsec. Global Notes, | 883,000 | 783,866 | ||||||
5.40%, 03/04/44 | 890,000 | 824,127 | ||||||
9,507,207 | ||||||||
Other Diversified Financial Services–0.07% | ||||||||
ERAC USA Finance LLC, Sr. Unsec. Gtd. Notes, 2.35%, 10/15/19(c) | 935,000 | 928,289 |
Principal Amount | Value | |||||||
Packaged Foods & Meats–0.30% | ||||||||
General Mills, Inc., Sr. Unsec. Global Notes, | $ | 905,000 | $ | 905,986 | ||||
2.20%, 10/21/19 | 850,000 | 844,824 | ||||||
Grupo Bimbo S.A.B. de C.V. (Mexico), | 765,000 | 755,991 | ||||||
Mondelez International, Inc., Sr. Unsec. Global Notes, 4.13%, 02/09/16 | 1,200,000 | 1,222,535 | ||||||
Tyson Foods, Inc., Sr. Unsec. Gtd. Global Bonds, | 214,000 | 216,249 | ||||||
5.15%, 08/15/44 | 220,000 | 227,427 | ||||||
4,173,012 | ||||||||
Paper Packaging–0.08% | ||||||||
Packaging Corp. of America, Sr. Unsec. Global Notes, 4.50%, 11/01/23 | 1,139,000 | 1,174,995 | ||||||
Paper Products–0.02% | ||||||||
International Paper Co., Sr. Unsec. Global Notes, 6.00%, 11/15/41 | 245,000 | 264,794 | ||||||
Pharmaceuticals–1.17% | ||||||||
AbbVie Inc., Sr. Unsec. Global Notes, 1.20%, 11/06/15 | 2,825,000 | 2,828,634 | ||||||
4.50%, 05/14/35 | 720,000 | 706,973 | ||||||
Actavis Funding S.C.S., | 272,000 | 260,848 | ||||||
4.85%, 06/15/44 | 950,000 | 916,897 | ||||||
Sr. Unsec. Sub. Gtd. Global Notes, | 909,000 | 914,560 | ||||||
Allergan, Inc., Sr. Unsec. Gtd. Global Notes, 5.75%, 04/01/16 | 905,000 | 937,659 | ||||||
Bayer US Finance LLC (Germany), Sr. Unsec. Gtd. Notes, | 590,000 | 593,848 | ||||||
GlaxoSmithKline Capital Inc. (United Kingdom), Sr. Unsec. Gtd. Global Bonds, | 75,000 | 83,669 | ||||||
6.38%, 05/15/38 | 70,000 | 88,498 | ||||||
Jazz Investments I Ltd., Sr. Unsec. Gtd. Conv. Notes, 1.88%, 08/15/21(c) | 1,455,000 | 1,699,622 | ||||||
Merck & Co., Inc., Sr. Unsec. Global Notes, 0.70%, 05/18/16 | 1,930,000 | 1,930,353 | ||||||
Merck Sharp & Dohme Corp., Sr. Unsec. Gtd. Global Notes, | 280,000 | 311,853 | ||||||
Perrigo Co. PLC, Sr. Unsec. Global Notes, 2.30%, 11/08/18 | 405,000 | 405,907 | ||||||
Sanofi (France), Sr. Unsec. Global Notes, 2.63%, 03/29/16 | 1,685,000 | 1,711,461 | ||||||
Zoetis Inc., Sr. Unsec. Global Notes, | 2,545,000 | 2,545,805 | ||||||
4.70%, 02/01/43 | 365,000 | 348,174 | ||||||
16,284,761 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
Principal Amount | Value | |||||||
Property & Casualty Insurance–0.26% | ||||||||
CNA Financial Corp., | $ | 325,000 | $ | 370,876 | ||||
Sr. Unsec. Notes, | 25,000 | 29,661 | ||||||
Liberty Mutual Group Inc., Sr. Unsec. Gtd. Bonds, 4.85%, 08/01/44(c) | 730,000 | 713,854 | ||||||
Markel Corp., Sr. Unsec. Notes, 5.00%, 03/30/43 | 385,000 | 380,144 | ||||||
Old Republic International Corp., Sr. Unsec. Conv. Notes, 3.75%, 03/15/18 | 855,000 | 1,013,709 | ||||||
Travelers Cos., Inc. (The), Sr. Unsec. Global Notes, 4.60%, 08/01/43 | 665,000 | 692,352 | ||||||
WR Berkley Corp., Sr. Unsec. Global Notes, 4.63%, 03/15/22 | 420,000 | 445,302 | ||||||
3,645,898 | ||||||||
Railroads–0.27% | ||||||||
Burlington Northern Santa Fe, LLC, | 1,990,000 | 2,135,384 | ||||||
CSX Corp., Sr. Unsec. Notes, | 380,000 | 423,898 | ||||||
Union Pacific Corp., | 101,000 | 103,995 | ||||||
Sr. Unsec. Notes, | 440,000 | 421,210 | ||||||
4.85%, 06/15/44 | 570,000 | 608,819 | ||||||
3,693,306 | ||||||||
Regional Banks–0.38% | ||||||||
BB&T Corp., Series A, Sr. Unsec. Medium-Term Notes, | 815,000 | 827,018 | ||||||
Fifth Third Bancorp, Sr. Unsec. Notes, 3.63%, 01/25/16 | 2,730,000 | 2,767,520 | ||||||
PNC Bank, N.A., Sr. Unsec. Bank Notes, 1.30%, 10/03/16 | 1,610,000 | 1,617,070 | ||||||
5,211,608 | ||||||||
Reinsurance–0.06% | ||||||||
Reinsurance Group of America, Inc., | 780,000 | 831,640 | ||||||
Renewable Electricity–0.04% | ||||||||
Oglethorpe Power Corp., Sr. Sec. First Mortgage Bonds, | 581,000 | 572,699 | ||||||
Research & Consulting Services–0.04% | ||||||||
Verisk Analytics, Inc., Sr. Unsec. Global Notes, 5.50%, 06/15/45 | 505,000 | 497,632 |
Principal Amount | Value | |||||||
Semiconductor Equipment–0.35% | ||||||||
Lam Research Corp., | $ | 600,000 | $ | 584,848 | ||||
Series B, Sr. Unsec. Conv. Notes, | 3,026,000 | 4,306,376 | ||||||
4,891,224 | ||||||||
Semiconductors–0.82% | ||||||||
Microchip Technology Inc., | 1,803,000 | 1,827,791 | ||||||
Micron Technology, Inc., Series G, | 3,239,000 | 2,941,417 | ||||||
NVIDIA Corp., Sr. Unsec. Conv. Bonds, 1.00%, 12/01/18 | 4,339,000 | 4,992,562 | ||||||
ON Semiconductor Corp., Sr. Unsec. Gtd. Conv. Notes, | 1,564,000 | 1,555,202 | ||||||
11,316,972 | ||||||||
Soft Drinks–0.36% | ||||||||
Coca-Cola Co. (The), Sr. Unsec. Global Notes, 1.80%, 09/01/16 | 1,735,000 | 1,756,694 | ||||||
PepsiCo, Inc., | 659,000 | 679,872 | ||||||
Sr. Unsec. Notes, | 2,525,000 | 2,565,047 | ||||||
5,001,613 | ||||||||
Specialized Finance–0.09% | ||||||||
Moody’s Corp., Sr. Unsec. Global Notes, 4.50%, 09/01/22 | 935,000 | 994,402 | ||||||
National Rural Utilities Cooperative Finance Corp., Sr. Sec. Collateral Trust Bonds, 3.05%, 02/15/22 | 195,000 | 195,832 | ||||||
1,190,234 | ||||||||
Steel–0.14% | ||||||||
ArcelorMittal (Luxembourg), | 446,000 | 535,200 | ||||||
Sr. Unsec. Global Notes, | 585,000 | 586,462 | ||||||
6.13%, 06/01/18 | 15,000 | 16,088 | ||||||
7.50%, 03/01/41 | 115,000 | 113,712 | ||||||
Vale Overseas Ltd. (Brazil), Sr. Unsec. Gtd. Global Notes, | 660,000 | 712,075 | ||||||
1,963,537 | ||||||||
Systems Software–0.31% | ||||||||
FireEye, Inc., | 463,000 | 496,568 | ||||||
Series B, Sr. Unsec. Conv. Notes, 1.63%, 06/01/22(c)(d) | 405,000 | 433,856 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
Principal Amount | Value | |||||||
Systems Software–(continued) | ||||||||
Microsoft Corp., Sr. Unsec. Global Notes, 3.50%, 02/12/35 | $ | 403,000 | $ | 368,590 | ||||
NetSuite Inc., Sr. Unsec. Conv. Notes, 0.25%, 06/01/18 | 2,326,000 | 2,433,577 | ||||||
Oracle Corp., Sr. Unsec. Global Notes, 4.30%, 07/08/34 | 600,000 | 588,908 | ||||||
4,321,499 | ||||||||
Technology Hardware, Storage & Peripherals–0.53% | ||||||||
Apple Inc., Sr. Unsec. Global Notes, 2.15%, 02/09/22 | 716,000 | 683,647 | ||||||
SanDisk Corp., Sr. Unsec. Conv. Bonds, 0.50%, 10/15/20 | 5,776,000 | 5,627,990 | ||||||
Seagate HDD Cayman, | 325,000 | 324,594 | ||||||
Sr. Unsec. Gtd. Notes, | 702,000 | 689,715 | ||||||
7,325,946 | ||||||||
Thrifts & Mortgage Finance–0.93% | ||||||||
MGIC Investment Corp., Sr. Unsec. Conv. Notes, | 710,000 | 1,185,700 | ||||||
5.00%, 05/01/17 | 6,201,000 | 7,150,528 | ||||||
Radian Group Inc., Sr. Unsec. Conv. Notes, | 412,000 | 733,102 | ||||||
3.00%, 11/15/17 | 2,275,000 | 3,790,719 | ||||||
12,860,049 | ||||||||
Tobacco–0.21% | ||||||||
Altria Group, Inc., Sr. Unsec. Gtd. Global Notes, 4.13%, 09/11/15 | 470,000 | 472,838 | ||||||
B.A.T. International Finance PLC (United Kingdom), Sr. Unsec. Gtd. Bonds, 3.95%, 06/15/25(c) | 721,000 | 721,100 | ||||||
Philip Morris International Inc., | 405,000 | 411,191 | ||||||
4.88%, 11/15/43 | 1,210,000 | 1,250,637 | ||||||
2,855,766 | ||||||||
Trading Companies & Distributors–0.03% | ||||||||
Air Lease Corp., Sr. Unsec. Global Notes, 4.25%, 09/15/24 | 430,000 | 429,462 | ||||||
Trucking–0.05% | ||||||||
Penske Truck Leasing Co., L.P./PTL Finance Corp., Sr. Unsec. Notes, 2.50%, 03/15/16(c) | 670,000 | 675,263 | ||||||
Wireless Telecommunication Services–0.16% | ||||||||
America Movil S.A.B. de C.V. (Mexico), | 600,000 | 556,608 | ||||||
Sr. Unsec. Gtd. Global Notes, | 255,000 | 258,345 | ||||||
Crown Castle Towers LLC, Sr. Sec. Gtd. First Lien Notes, 6.11%, 01/15/20(c) | 770,000 | 872,987 |
Principal Amount | Value | |||||||
Wireless Telecommunication Services–(continued) | ||||||||
Rogers Communications Inc. (Canada), Sr. Unsec. Gtd. Global Notes, 4.50%, 03/15/43 | $ | 585,000 | $ | 541,285 | ||||
2,229,225 | ||||||||
Total Bonds & Notes |
| 284,179,294 | ||||||
U.S. Treasury Securities–7.91% |
| |||||||
U.S. Treasury Bills–0.01% | ||||||||
0.00%, 08/20/15(h)(i) | 15,000 | 15,000 | ||||||
0.08%, 08/20/15(h)(i) | 130,000 | 130,000 | ||||||
145,000 | ||||||||
U.S. Treasury Notes–7.49% | ||||||||
2.25%, 03/31/16 | 2,000,000 | 2,030,076 | ||||||
0.63%, 06/30/17 | 18,873,000 | 18,865,555 | ||||||
0.75%, 06/30/17 | 9,000,000 | 9,017,544 | ||||||
0.75%, 02/28/18 | 6,200,000 | 6,173,484 | ||||||
1.13%, 06/15/18 | 22,045,000 | 22,123,187 | ||||||
1.25%, 01/31/19 | 8,000,000 | 7,998,548 | ||||||
3.63%, 08/15/19 | 1,525,000 | 1,659,074 | ||||||
3.38%, 11/15/19 | 300,000 | 323,705 | ||||||
3.63%, 02/15/20 | 46,000 | 50,203 | ||||||
1.63%, 06/30/20 | 17,241,700 | 17,227,595 | ||||||
2.63%, 11/15/20 | 600,000 | 626,235 | ||||||
2.13%, 05/15/25 | 18,200,600 | 17,840,532 | ||||||
103,935,738 | ||||||||
U.S. Treasury Bonds–0.41% | ||||||||
5.38%, 02/15/31 | 1,720,000 | 2,307,815 | ||||||
4.50%, 08/15/39 | 40,000 | 49,885 | ||||||
4.38%, 05/15/40 | 80,000 | 98,095 | ||||||
2.50%, 02/15/45 | 3,698,500 | 3,241,625 | ||||||
5,697,420 | ||||||||
Total U.S. Treasury Securities |
| 109,778,158 | ||||||
Shares | ||||||||
Preferred Stocks–0.91% |
| |||||||
Asset Management & Custody Banks–0.22% | ||||||||
AMG Capital Trust II, $2.58 Jr. Unsec. Gtd. Sub. Conv. Pfd. | 43,000 | 2,598,813 | ||||||
State Street Corp., Series D, | 18,470 | 474,125 | ||||||
3,072,938 | ||||||||
Diversified Banks–0.02% | ||||||||
Wells Fargo & Co., 5.85% Pfd. | 12,000 | 306,000 | ||||||
Oil & Gas Storage & Transportation–0.39% | ||||||||
El Paso Energy Capital Trust I, $2.38 Jr. Unsec. Gtd. Sub. Conv. Pfd. | 95,499 | 5,327,889 | ||||||
Regional Banks–0.28% | ||||||||
KeyCorp, Series A, $7.75 Conv. Pfd. | 30,290 | 3,937,700 | ||||||
Total Preferred Stocks |
| 12,644,527 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
Principal Amount | Value | |||||||
U.S. Government Sponsored Agency Securities–0.41% |
| |||||||
Federal Home Loan Mortgage Corp. (FHLMC)–0.29% | ||||||||
Unsec. Global Notes, | $ | 1,500,000 | $ | 1,615,929 | ||||
5.50%, 08/23/17 | 140,000 | 154,005 | ||||||
4.88%, 06/13/18 | 1,000,000 | 1,111,305 | ||||||
6.75%, 03/15/31 | 750,000 | 1,075,928 | ||||||
3,957,167 | ||||||||
Federal National Mortgage Association (FNMA)–0.12% | ||||||||
Unsec. Global Notes, | 1,700,000 | 1,720,872 | ||||||
Total U.S. Government Sponsored Agency Securities |
| 5,678,039 | ||||||
U.S. Government Sponsored Agency Mortgage-Backed Securities–0.00% |
| |||||||
Federal Home Loan Mortgage Corp. (FHLMC)–0.00% | ||||||||
Pass Through Ctfs., | 314 | 360 | ||||||
5.50%, 02/01/37 | 88 | 98 | ||||||
458 |
Principal Amount | Value | |||||||
Federal National Mortgage Association (FNMA)–0.00% | ||||||||
Pass Through Ctfs., | $ | 228 | $ | 234 | ||||
5.50%, 03/01/21 | 174 | 188 | ||||||
8.00%, 08/01/21 | 1,720 | 1,825 | ||||||
9.50%, 04/01/30 | 4,749 | 5,665 | ||||||
7,912 | ||||||||
Total U.S. Government Sponsored Agency Mortgage-Backed Securities |
| 8,370 | ||||||
Shares | ||||||||
Money Market Funds–5.01% |
| |||||||
Liquid Assets Portfolio–Institutional Class(j) | 34,754,381 | 34,754,381 | ||||||
Premier Portfolio–Institutional Class(j) | 34,754,381 | 34,754,381 | ||||||
Total Money Market Funds |
| 69,508,762 | ||||||
TOTAL INVESTMENTS–98.64% |
| 1,368,484,980 | ||||||
OTHER ASSETS LESS LIABILITIES–1.36% |
| 18,800,664 | ||||||
NET ASSETS–100.00% |
| $ | 1,387,285,644 |
Investment Abbreviations:
ADR | – American Depositary Receipt | |
Conv. | – Convertible | |
Ctfs. | – Certificates | |
Deb. | – Debentures | |
Disc. | – Discounted |
Gtd. | – Guaranteed | |
Jr. | – Junior | |
Pfd. | – Preferred | |
REIT | – Real Estate Investment Trust | |
Sec. | – Secured |
Sr. | – Senior | |
Sub. | – Subordinated | |
Unsec. | – Unsecured |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Non-income producing security. |
(c) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at June 30, 2015 was $47,225,294, which represented 3.40% of the Fund’s Net Assets. |
(d) | Security has an irrevocable call by the issuer or mandatory put by the holder. Maturity date reflects such call or put. |
(e) | Perpetual bond with no specified maturity date. |
(f) | Exchangeable for a basket of four common stocks and one ordinary share. |
(g) | Exchangeable for a basket of five common stocks. |
(h) | Security traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. |
(i) | All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 1K and Note 4. |
(j) | The money market fund and the Fund are affiliated by having the same investment adviser. |
Portfolio Composition
By security type, based on Net Assets
as of June 30, 2015
Common Stocks & Other Equity Interests | 63.9 | % | ||
Bonds & Notes | 20.5 | |||
U.S. Treasury Securities | 7.9 | |||
Security Types Each Less Than 1% of Portfolio | 1.3 | |||
Money Market Funds Plus Other Assets Less Liabilities | 6.4 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $1,080,420,539) | $ | 1,298,976,218 | ||
Investments in affiliated money market funds, at value and cost | 69,508,762 | |||
Total investments, at value (Cost $1,149,929,301) | 1,368,484,980 | |||
Cash | 18,922,848 | |||
Foreign currencies, at value (Cost $330,756) | 327,820 | |||
Receivable for: | ||||
Investments sold | 1,004,309 | |||
Variation margin—futures | 3,320 | |||
Fund shares sold | 572,724 | |||
Dividends and interest | 4,530,781 | |||
Investment for trustee deferred compensation and retirement plans | 145,373 | |||
Unrealized appreciation on forward foreign currency contracts outstanding | 126,741 | |||
Total assets | 1,394,118,896 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 4,297,338 | |||
Fund shares reacquired | 637,282 | |||
Accrued fees to affiliates | 1,654,970 | |||
Accrued trustees’ and officers’ fees and benefits | 7,553 | |||
Accrued other operating expenses | 73,840 | |||
Trustee deferred compensation and retirement plans | 162,269 | |||
Total liabilities | 6,833,252 | |||
Net assets applicable to shares outstanding | $ | 1,387,285,644 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 994,070,196 | ||
Undistributed net investment income | 33,178,061 | |||
Undistributed net realized gain | 141,255,540 | |||
Net unrealized appreciation | 218,781,847 | |||
$ | 1,387,285,644 | |||
Net Assets: |
| |||
Series I | $ | 83,608,917 | ||
Series II | $ | 1,303,676,727 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 4,356,919 | |||
Series II | 68,287,836 | |||
Series I: | ||||
Net asset value per share | $ | 19.19 | ||
Series II: | ||||
Net asset value per share | $ | 19.09 |
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $336,591) | $ | 10,572,985 | ||
Dividends from affiliated money market funds | 32,405 | |||
Interest | 4,623,779 | |||
Total investment income | 15,229,169 | |||
Expenses: | ||||
Advisory fees | 2,586,770 | |||
Administrative services fees | 1,781,667 | |||
Custodian fees | 35,889 | |||
Distribution fees — Series II | 1,619,313 | |||
Transfer agent fees | 17,669 | |||
Trustees’ and officers’ fees and benefits | 19,215 | |||
Other | 47,568 | |||
Total expenses | 6,108,091 | |||
Less: Fees waived | (81,522 | ) | ||
Net expenses | 6,026,569 | |||
Net investment income | 9,202,600 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 29,637,264 | |||
Foreign currencies | (9,983 | ) | ||
Forward foreign currency contracts | 2,902,444 | |||
Futures contracts | (189,517 | ) | ||
32,340,208 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (23,401,909 | ) | ||
Foreign currencies | 11,913 | |||
Forward foreign currency contracts | (1,374,449 | ) | ||
Futures contracts | 220,012 | |||
(24,544,433 | ) | |||
Net realized and unrealized gain | 7,795,775 | |||
Net increase in net assets resulting from operations | $ | 16,998,375 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: |
| |||||||
Net investment income | $ | 9,202,600 | $ | 22,445,326 | ||||
Net realized gain | 32,340,208 | 121,129,530 | ||||||
Change in net unrealized appreciation (depreciation) | (24,544,433 | ) | (32,934,416 | ) | ||||
Net increase in net assets resulting from operations | 16,998,375 | 110,640,440 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Series I | — | (1,165,658 | ) | |||||
Series ll | — | (19,943,171 | ) | |||||
Total distributions from net investment income | — | (21,108,829 | ) | |||||
Distributions to shareholders from net realized gains: | ||||||||
Series l | — | (3,150,794 | ) | |||||
Series ll | — | (61,507,641 | ) | |||||
Total distributions from net realized gains | — | (64,658,435 | ) | |||||
Share transactions–net: | ||||||||
Series l | 10,255,897 | 11,041,950 | ||||||
Series ll | (3,279,730 | ) | 23,062,524 | |||||
Net increase in net assets resulting from share transactions | 6,976,167 | 34,104,474 | ||||||
Net increase in net assets | 23,974,542 | 58,977,650 | ||||||
Net assets: | ||||||||
Beginning of period | 1,363,311,102 | 1,304,333,452 | ||||||
End of period (includes undistributed net investment income of $33,178,061 and $23,975,461, respectively) | $ | 1,387,285,644 | $ | 1,363,311,102 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. Equity and Income Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objectives are both capital appreciation and current income.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not
Invesco V.I. Equity and Income Fund
listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Paydown gains and losses on mortgage and asset-backed securities are recorded as adjustments to interest income. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
Invesco V.I. Equity and Income Fund
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
K. | Futures Contracts — The Fund may enter into futures contracts to manage exposure to interest rate, equity and market price movements and/or currency risks. A futures contract is an agreement between Counterparties to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund’s basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Statement of Operations. The primary risks associated with futures contracts are market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal Counterparty risk since the exchange’s clearinghouse, as |
Invesco V.I. Equity and Income Fund
Counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. |
L. | Collateral — To the extent the Fund has designated or segregated a security as collateral and that security is subsequently sold, it is the Fund’s practice to replace such collateral no later than the next business day. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $150 million | 0.50% | |||
Next $100 million | 0.45% | |||
Next $100 million | 0.40% | |||
Over $350 million | 0.35% |
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.38%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2016, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 1.50% and Series II shares to 1.75% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2016. The fee waiver agreement cannot be terminated during its term. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $81,522.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $160,247 for accounting and fund administrative services and reimbursed $1,621,420 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the six months ended June 30, 2015, the Fund incurred $1,693 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
Invesco V.I. Equity and Income Fund
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 908,040,562 | $ | 60,800,557 | $ | — | $ | 968,841,119 | ||||||||
U.S. Treasury Securities | — | 109,778,158 | — | 109,778,158 | ||||||||||||
Corporate Debt Securities | — | 284,179,294 | — | 284,179,294 | ||||||||||||
U.S. Government Sponsored Agency Securities | — | 5,686,409 | — | 5,686,409 | ||||||||||||
908,040,562 | 460,444,418 | — | 1,368,484,980 | |||||||||||||
Forward Foreign Currency Contracts* | — | 126,741 | — | 126,741 | ||||||||||||
Futures Contracts* | 104,360 | — | — | 104,360 | ||||||||||||
Total Investments | $ | 908,144,922 | $ | 460,571,159 | $ | — | $ | 1,368,716,081 |
* | Unrealized appreciation. |
NOTE 4—Derivative Investments
Value of Derivative Investments at Period-End
The table below summarizes the value of the Fund’s derivative investments, detailed by primary risk exposure, held as of June 30, 2015:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Currency risk: | ||||||||
Forward foreign currency contracts(a) | $ | 361,587 | $ | (234,846 | ) | |||
Interest rate risk: | ||||||||
Futures contracts(b) | 104,360 | — | ||||||
Total | $ | 465,947 | $ | (234,846 | ) |
(a) | Values are disclosed on the Statement of Assets and Liabilities under the caption Unrealized appreciation on forward foreign currency contracts outstanding. |
(b) | Includes cumulative appreciation of futures contracts. Only current day’s variation margin receivable is reported within the Statement of Assets and Liabilities. |
Effect of Derivative Investments for the six months ended June 30, 2015
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations | ||||||||
Forward Foreign Currency Contracts | Futures Contracts | |||||||
Realized Gain (Loss): | ||||||||
Currency risk | $ | 2,902,444 | $ | — | ||||
Interest rate risk | — | (189,517 | ) | |||||
Change in Net Unrealized Appreciation (Depreciation): | ||||||||
Currency risk | (1,374,449 | ) | — | |||||
Interest rate risk | — | 220,012 | ||||||
Total | $ | 1,527,995 | $ | 30,495 |
Invesco V.I. Equity and Income Fund
The table below summarizes the average notional value of forward foreign currency contracts and futures contracts outstanding during the period.
Forward Foreign Currency Contracts | Futures Contracts | |||||||
Average notional value | $ | 78,766,195 | $ | 10,858,432 |
Open Forward Foreign Currency Contracts | ||||||||||||||||||||||||||
Settlement
| Counterparty | Contract to | Notional Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||
Deliver | Receive | |||||||||||||||||||||||||
07/24/15 | Bank of New York Mellon (The) | CAD | 7,024,827 | USD | 5,700,813 | $ | 5,623,162 | $ | 77,651 | |||||||||||||||||
07/24/15 | State Street Bank and Trust Co. | CAD | 7,038,009 | USD | 5,710,393 | 5,633,713 | 76,680 | |||||||||||||||||||
07/24/15 | Bank of New York Mellon (The) | CHF | 4,894,658 | USD | 5,256,855 | 5,240,259 | 16,596 | |||||||||||||||||||
07/24/15 | State Street Bank and Trust Co. | CHF | 4,910,440 | USD | 5,273,834 | 5,257,156 | 16,678 | |||||||||||||||||||
07/24/15 | Bank of New York Mellon (The) | EUR | 9,392,655 | USD | 10,562,792 | 10,475,891 | 86,901 | |||||||||||||||||||
07/24/15 | State Street Bank and Trust Co. | EUR | 9,407,023 | USD | 10,578,997 | 10,491,916 | 87,081 | |||||||||||||||||||
07/24/15 | Bank of New York Mellon (The) | GBP | 6,974,015 | USD | 10,909,835 | 10,956,663 | (46,828 | ) | ||||||||||||||||||
07/24/15 | State Street Bank and Trust Co. | GBP | 6,983,512 | USD | 10,925,041 | 10,971,583 | (46,542 | ) | ||||||||||||||||||
07/24/15 | Bank of New York Mellon (The) | ILS | 15,150,264 | USD | 3,943,841 | 4,013,804 | (69,963 | ) | ||||||||||||||||||
07/24/15 | State Street Bank and Trust Co. | ILS | 15,150,268 | USD | 3,942,292 | 4,013,805 | (71,513 | ) | ||||||||||||||||||
Total Forward Foreign Currency Contracts — Currency Risk |
| $ | 126,741 |
Currency Abbreviations:
CAD | – Canadian Dollar | |
CHF | – Swiss Franc |
EUR | – Euro | |
GBP | – British Pound Sterling |
ILS | – Israeli Shekel | |
USD | – U.S. Dollar |
Open Futures Contracts | ||||||||||||||||||||
Futures Contracts | Type of Contract | Number of Contracts | Expiration Month | Notional Value | Unrealized Appreciation | |||||||||||||||
U.S. Treasury 5 Year Notes | Short | 37 | September-2015 | $ | (4,412,539 | ) | $ | 3,388 | ||||||||||||
U.S. Treasury 10 Year Notes | Short | 24 | September-2015 | (3,028,125 | ) | 25,636 | ||||||||||||||
U.S. Treasury Long Bond | Short | 18 | September-2015 | (2,715,188 | ) | 75,336 | ||||||||||||||
Total Futures Contracts — Interest Rate Risk | $ | 104,360 |
Offsetting Assets and Liabilities
Accounting Standards Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which was subsequently clarified in Financial Accounting Standards Board ASU 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” is intended to enhance disclosures about financial instruments and derivative instruments that are subject to offsetting arrangements on the Statement of Assets and Liabilities and to enable investors to better understand the effect of those arrangements on the Fund’s financial position. In order for an arrangement to be eligible for netting, the Fund must have a basis to conclude that such netting arrangements are legally enforceable. The Fund enters into netting agreements and collateral agreements in an attempt to reduce the Fund’s Counterparty credit risk by providing for a single net settlement with a Counterparty of all financial transactions covered by the agreement in an event of default as defined under such agreement.
There were no derivative instruments subject to a netting agreement for which the Fund is not currently netting. The following tables present derivative instruments that are either subject to an enforceable netting agreement or offset by collateral arrangements as of June 30, 2015.
Assets: | ||||||||||||||||||||||||
Gross amounts of Recognized Assets | Gross amounts offset in Statement of Assets & Liabilities | Net amounts of assets presented in Statement of Assets & Liabilities | Collateral Received | |||||||||||||||||||||
Counterparty | Financial Instruments | Cash | Net Amount | |||||||||||||||||||||
Bank of New York Mellon (The) | $ | 181,148 | $ | (116,791 | ) | $ | 64,357 | $ | — | $ | — | $ | 64,357 | |||||||||||
State Street Bank and Trust Co. | 180,439 | (118,055 | ) | 62,384 | — | — | 62,384 | |||||||||||||||||
Total | $ | 361,587 | $ | (234,846 | ) | $ | 126,741 | $ | — | $ | — | $ | 126,741 | |||||||||||
Liabilities: | ||||||||||||||||||||||||
Gross amounts of Recognized Liabilities | Gross amounts offset in Statement of Assets & Liabilities | Net amounts of liabilities presented in Statement of Assets & Liabilities | Collateral Pledged | |||||||||||||||||||||
Counterparty | Financial Instruments | Cash | Net Amount | |||||||||||||||||||||
Bank of New York Mellon (The) | $ | 116,791 | $ | (116,791 | ) | $ | — | $ | — | $ | — | $ | — | |||||||||||
State Street Bank and Trust Co. | 118,055 | (118,055 | ) | — | — | — | — | |||||||||||||||||
Total | $ | 234,846 | $ | (234,846 | ) | $ | — | $ | — | $ | — | $ | — |
Invesco V.I. Equity and Income Fund
NOTE 5—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of December 31, 2014, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
December 31, 2016 | $ | 2,827,777 | $ | — | $ | 2,827,777 | ||||||
December 31, 2017 | 524,023 | — | 524,023 | |||||||||
$ | 3,351,800 | $ | — | $ | 3,351,800 |
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code and may be further limited depending upon a variety of factors, including the realization of net unrealized gains or losses as of the date of any reorganization. |
NOTE 8—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $193,047,236 and $165,757,891, respectively. During the same period, purchases and sales of U.S. Treasury obligations were $393,527,002 and $384,407,330, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 246,016,006 | ||
Aggregate unrealized (depreciation) of investment securities | (31,324,544 | ) | ||
Net unrealized appreciation of investment securities | $ | 214,691,462 |
Cost of investments for tax purposes is $1,153,793,518.
Invesco V.I. Equity and Income Fund
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 1,017,884 | $ | 19,496,468 | 1,020,293 | $ | 19,539,518 | ||||||||||
Series II | 2,725,956 | 51,635,908 | 5,344,545 | 100,231,484 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 232,944 | 4,316,452 | ||||||||||||
Series II | — | — | 4,409,898 | 81,450,812 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (484,265 | ) | (9,240,571 | ) | (673,937 | ) | (12,814,020 | ) | ||||||||
Series II | (2,886,194 | ) | (54,915,638 | ) | (8,476,370 | ) | (158,619,772 | ) | ||||||||
Net increase in share activity | 373,381 | $ | 6,976,167 | 1,857,373 | $ | 34,104,474 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 76% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 10—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Distributions from net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Series I |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 18.93 | $ | 0.15 | $ | 0.11 | $ | 0.26 | $ | — | $ | — | $ | — | $ | 19.19 | 1.37 | % | $ | 83,609 | 0.64 | %(d) | 0.65 | %(d) | 1.58 | %(d) | 43 | % | ||||||||||||||||||||||||||||
Year ended 12/31/14 | 18.58 | 0.37 | (e) | 1.28 | 1.65 | (0.35 | ) | (0.95 | ) | (1.30 | ) | 18.93 | 9.03 | 72,391 | 0.66 | 0.67 | 1.92 | (e) | 85 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 15.08 | 0.27 | 3.51 | 3.78 | (0.28 | ) | — | (0.28 | ) | 18.58 | 25.18 | 60,288 | 0.66 | 0.67 | 1.59 | 41 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 13.65 | 0.28 | 1.42 | 1.70 | (0.27 | ) | — | (0.27 | ) | 15.08 | 12.49 | 53,990 | 0.66 | 0.67 | 1.85 | 31 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 14.06 | 0.25 | (0.41 | ) | (0.16 | ) | (0.25 | ) | — | (0.25 | ) | 13.65 | (1.19 | ) | 56,053 | 0.66 | 0.67 | 1.83 | 28 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/10(f) | 12.27 | 0.13 | 1.66 | 1.79 | — | — | — | 14.06 | 14.59 | 46 | 0.69 | (g) | 0.70 | (g) | 1.73 | (g) | 34 | |||||||||||||||||||||||||||||||||||||||
Series II |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 18.86 | 0.13 | 0.10 | 0.23 | — | — | — | 19.09 | 1.22 | 1,303,677 | 0.89 | (d) | 0.90 | (d) | 1.33 | (d) | 43 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 18.52 | 0.32 | (e) | 1.28 | 1.60 | (0.31 | ) | (0.95 | ) | (1.26 | ) | 18.86 | 8.77 | 1,290,920 | 0.91 | 0.92 | 1.67 | (e) | 85 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 15.05 | 0.23 | 3.50 | 3.73 | (0.26 | ) | — | (0.26 | ) | 18.52 | 24.88 | 1,244,045 | 0.91 | 0.92 | 1.34 | 41 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 13.63 | 0.25 | 1.44 | 1.69 | (0.27 | ) | — | (0.27 | ) | 15.05 | 12.39 | 962,938 | 0.81 | 0.92 | 1.70 | 31 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 14.05 | 0.25 | (0.42 | ) | (0.17 | ) | (0.25 | ) | — | (0.25 | ) | 13.63 | (1.30 | ) | 864,716 | 0.71 | 0.92 | 1.78 | 28 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 12.80 | 0.22 | 1.29 | 1.51 | (0.26 | ) | — | (0.26 | ) | 14.05 | 12.03 | 800,414 | 0.74 | 0.98 | 1.68 | 34 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the period ended December 31, 2011, the portfolio turnover calculation excludes the value of securities purchased of $84,964,454 and sold of $24,142,395 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco V.I. Basic Balanced Fund, Invesco V.I. Income Builder Fund and Invesco V.I. Select Dimensions Balanced Fund into the Fund. |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $77,075 and $1,306,186 for Series I and Series II shares, respectively. |
(e) | Net investment income per share and the ratio of net investment income to average net assets includes significant dividends received during the period. Net investment income per share and the ratio of net investment income to average net assets excluding the significant dividends are $0.27 and 1.41%, $0.22 and 1.16% for Series I and Series II shares, respectively. |
(f) | Commencement date of June 1, 2010. |
(g) | Annualized. |
Invesco V.I. Equity and Income Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,013.70 | $ | 3.20 | $ | 1,021.62 | $ | 3.21 | 0.64 | % | ||||||||||||
Series II | 1,000.00 | 1,012.20 | 4.44 | 1,020.38 | 4.46 | 0.89 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. Equity and Income Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. Equity and Income Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports form the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s
consideration of Invesco Advisers’ investment process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Underlying Funds Mixed-Asset Target Allocation Growth Funds Index. The Board noted that performance of Series II shares of the Fund was in the first quintile of its performance universe for the one and three year periods and the second quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing
Invesco V.I. Equity and Income Fund
funds). The Board noted that performance of Series II shares of the Fund was above the performance of the Index for the one, three and five year periods. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series II shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was above the rate of one such mutual fund. The Board also noted how the Fund’s rate compared to the effective sub-adviser fee rate of three mutual funds sub-advised by Invesco Advisers. The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not advise other client accounts that are managed using an investment process substantially similar to the investment process used for the Fund.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco
Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services . The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered that it receives periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds
attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
Invesco V.I. Equity and Income Fund
| ||||
Semiannual Report to Shareholders
| June 30, 2015
| |||
Invesco V.I. Global Core Equity Fund | ||||
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
Invesco Distributors, Inc. VIGCE-SAR-1
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance | ||
Performance summary
Fund vs. Indexes
Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower.
Series I Shares | 4.25 | % | |||
Series II Shares | 4.03 | ||||
MSCI World Index▼ (Broad Market/Style-Specific Index) | 2.63 | ||||
Lipper VUF Global Multi-Cap Value Funds Classification Averagen (Peer Group) | 2.47 | ||||
Source(s): ▼FactSet Research Systems Inc.; nLipper Inc. |
The MSCI World IndexSM is an unmanaged index considered representative of stocks of developed countries. The index is computed using the net return, which withholds applicable taxes for non-resident investors.
The Lipper VUF Global Multi-Cap Value Funds Classification Average represents an average of all variable insurance underlying funds in the Lipper Global Multi-Cap Value Funds classification.
The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es).
A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
Average Annual Total Returns
As of 6/30/15
Series I Shares | |||||
Inception (1/2/97) | 4.98 | % | |||
10 Years | 3.35 | ||||
5 Years | 9.79 | ||||
1 Year | 0.11 | ||||
Series II Shares | |||||
10 Years | 3.09 | % | |||
5 Years | 9.54 | ||||
1 Year | -0.11 |
Effective June 1, 2010, Class I shares of the predecessor fund, Universal Funds Global Value Equity Portfolio, advised by Morgan Stanley Investment Management Inc. were reorganized into Series I shares of Invesco Van Kampen V.I. Global Value Equity Fund (renamed Invesco V.I. Global Core Equity Fund on April 30, 2012). Returns shown above for Series I shares are blended returns of the predecessor fund and Invesco V.I. Global Value Equity Fund. Share class returns will differ from the predecessor fund because of different expenses.
Series II shares incepted on June 1, 2010. Series II share performance shown prior to that date is that of the predecessor fund’s Class I shares restated to reflect the higher 12b-1 fees applicable to Series II shares.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 1.06% and 1.31%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. Global Core Equity Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
Invesco V.I. Global Core Equity Fund |
Schedule of Investments
June 30, 2015
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–99.34% |
| |||||||
Canada–1.20% | ||||||||
Toronto-Dominion Bank (The) | 12,649 | $ | 537,238 | |||||
Vermilion Energy, Inc. | 12,548 | 542,092 | ||||||
1,079,330 | ||||||||
China–0.85% | ||||||||
Baidu, Inc.–ADR(a) | 3,853 | 767,055 | ||||||
Finland–1.38% | ||||||||
Sampo Oyj -Class A | 26,256 | 1,239,357 | ||||||
France–8.30% | ||||||||
Casino Guichard-Perrachon S.A. | 17,219 | 1,304,585 | ||||||
Danone | 36,075 | 2,332,568 | ||||||
LVMH Moet Hennessy Louis Vuitton S.E. | 6,388 | 1,119,320 | ||||||
Orange S.A. | 37,638 | 582,449 | ||||||
Publicis Groupe S.A. | 21,894 | 1,617,184 | ||||||
Rexel S.A. | 31,630 | 510,740 | ||||||
7,466,846 | ||||||||
Ireland–1.95% | ||||||||
Shire PLC–ADR | 7,282 | 1,758,530 | ||||||
Israel–0.70% | ||||||||
Teva Pharmaceutical Industries Ltd.–ADR | 10,669 | 630,538 | ||||||
Japan–8.35% | ||||||||
FANUC Corp. | 2,600 | 530,714 | ||||||
Hitachi, Ltd. | 132,000 | 870,078 | ||||||
Honda Motor Co., Ltd. | 8,900 | 288,050 | ||||||
KDDI Corp. | 40,600 | 976,305 | ||||||
Komatsu Ltd. | 70,500 | 1,412,629 | ||||||
Mitsubishi UFJ Financial Group, Inc. | 197,800 | 1,415,268 | ||||||
ORIX Corp. | 62,100 | 927,040 | ||||||
Toyota Motor Corp. | 16,400 | 1,096,718 | ||||||
7,516,802 | ||||||||
Netherlands–6.01% | ||||||||
GrandVision N.V.(a)(b) | 51,170 | 1,267,071 | ||||||
Koninklijke Ahold N.V. | 61,808 | 1,162,443 | ||||||
Koninklijke DSM N.V. | 16,556 | 962,589 | ||||||
Koninklijke Philips N.V. | 46,649 | 1,190,783 | ||||||
Randstad Holding N.V. | 12,643 | 826,670 | ||||||
5,409,556 | ||||||||
Sweden–0.70% | ||||||||
Sandvik AB | 56,573 | 625,555 | ||||||
Switzerland–5.20% | ||||||||
ABB Ltd. | 70,589 | 1,478,375 | ||||||
Roche Holding AG | 5,922 | 1,662,711 | ||||||
Sunrise Communications Group AG(a)(b) | 8,839 | 738,868 | ||||||
TE Connectivity Ltd. | 12,362 | 794,877 | ||||||
4,674,831 |
Shares | Value | |||||||
Taiwan–1.36% | ||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 271,000 | $ | 1,220,359 | |||||
United Kingdom–11.73% | ||||||||
British American Tobacco PLC | 13,305 | 715,075 | ||||||
Diageo PLC | 64,107 | 1,858,289 | ||||||
Kingfisher PLC | 184,801 | 1,006,775 | ||||||
Liberty Global PLC–Series A(a) | 14,901 | 805,697 | ||||||
Liberty Global PLC–Series C(a) | 33,216 | 1,681,726 | ||||||
Rio Tinto PLC | 25,097 | 1,032,249 | ||||||
SABMiller PLC | 10,154 | 526,436 | ||||||
Standard Chartered PLC | 56,341 | 902,107 | ||||||
Vodafone Group PLC–ADR | 55,513 | 2,023,449 | ||||||
10,551,803 | ||||||||
United States–51.61% | ||||||||
Aaron’s Inc. | 12,565 | 454,979 | ||||||
AbbVie Inc. | 8,576 | 576,221 | ||||||
ACE Ltd. | 7,297 | 741,959 | ||||||
Allergan PLC(a) | 5,458 | 1,656,285 | ||||||
American Express Co. | 32,658 | 2,538,180 | ||||||
Amphenol Corp.–Class A | 13,981 | 810,479 | ||||||
Apple Inc. | 6,668 | 836,334 | ||||||
Archer-Daniels-Midland Co. | 16,816 | 810,867 | ||||||
Berkshire Hathaway Inc.–Class A(a) | 11 | 2,253,350 | ||||||
Cabot Oil & Gas Corp. | 15,812 | 498,710 | ||||||
Celgene Corp.(a) | 11,227 | 1,299,357 | ||||||
Cisco Systems, Inc. | 19,280 | 529,429 | ||||||
Coca-Cola Co. (The) | 24,636 | 966,470 | ||||||
Comcast Corp.–Class A | 15,380 | 924,953 | ||||||
Concho Resources Inc.(a) | 4,568 | 520,112 | ||||||
Dick’s Sporting Goods, Inc. | 12,337 | 638,686 | ||||||
Eaton Corp. PLC | 9,525 | 642,842 | ||||||
Eli Lilly and Co. | 18,842 | 1,573,119 | ||||||
EMC Corp. | 44,127 | 1,164,512 | ||||||
EOG Resources, Inc. | 11,786 | 1,031,864 | ||||||
Express Scripts Holding Co.(a) | 7,500 | 667,050 | ||||||
First Republic Bank | 33,393 | 2,104,761 | ||||||
GameStop Corp.–Class A | 13,729 | 589,798 | ||||||
General Electric Co. | 67,107 | 1,783,033 | ||||||
Google Inc.–Class C(a) | 3,319 | 1,727,573 | ||||||
Halliburton Co. | 15,502 | 667,671 | ||||||
HCA Holdings, Inc.(a) | 10,774 | 977,417 | ||||||
Hertz Global Holdings, Inc.(a) | 43,130 | 781,516 | ||||||
International Business Machines Corp. | 15,219 | 2,475,523 | ||||||
Las Vegas Sands Corp. | 8,828 | 464,088 | ||||||
Linear Technology Corp. | 15,385 | 680,479 | ||||||
ManpowerGroup Inc. | 12,543 | 1,121,093 | ||||||
Marsh & McLennan Cos., Inc. | 18,956 | 1,074,805 | ||||||
Microsoft Corp. | 9,022 | 398,321 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Core Equity Fund
Shares | Value | |||||||
United States–(continued) | ||||||||
Moody’s Corp. | 10,891 | $ | 1,175,792 | |||||
Mylan N.V.(a) | 9,128 | 619,426 | ||||||
Northern Trust Corp. | 18,985 | 1,451,593 | ||||||
Philip Morris International Inc. | 10,884 | 872,570 | ||||||
Priceline Group Inc. (The)(a) | 669 | 770,267 | ||||||
Progressive Corp. (The) | 64,140 | 1,785,016 | ||||||
QUALCOMM, Inc. | 24,552 | 1,537,692 | ||||||
ResMed Inc. | 16,401 | 924,524 | ||||||
Rite Aid Corp.(a) | 104,389 | 871,648 | ||||||
Wal-Mart Stores, Inc. | 6,377 | 452,321 | ||||||
46,442,685 | ||||||||
Total Common Stocks & Other Equity Interests |
| 89,383,247 |
Shares | Value | |||||||
Money Market Funds–0.29% | ||||||||
Liquid Assets Portfolio–Institutional Class(c) | 130,962 | $ | 130,962 | |||||
Premier Portfolio–Institutional Class(c) | 130,963 | 130,963 | ||||||
Total Money Market Funds |
| 261,925 | ||||||
TOTAL INVESTMENTS–99.63% |
| 89,645,172 | ||||||
OTHER ASSETS LESS LIABILITIES–0.37% |
| 337,094 | ||||||
NET ASSETS–100.00% |
| $ | 89,982,266 |
Investment Abbreviations:
ADR | – American Depositary Receipt |
Notes to Schedule of Investments:
(a) | Non-income producing security. |
(b) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at June 30, 2015 was $2,005,939, which represented 2.23% of the Fund’s Net Assets. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. |
Portfolio Composition
By country, based on Net Assets
as of June 30, 2015
United States | 51.6 | % | ||
United Kingdom | 11.7 | |||
Japan | 8.4 | |||
France | 8.3 | |||
Netherlands | 6.0 | |||
Switzerland | 5.2 | |||
Countries each less than 2.0% of portfolio | 8.1 | |||
Money Market Funds Plus Other Assets Less Liabilities | 0.7 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Core Equity Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $85,732,229) | $ | 89,383,247 | ||
Investments in affiliated money market funds, at value and cost | 261,925 | |||
Total investments, at value (Cost $85,994,154) | 89,645,172 | |||
Foreign currencies, at value (Cost $207,054) | 206,599 | |||
Receivable for: | ||||
Fund shares sold | 7,390 | |||
Dividends | 295,301 | |||
Investment for trustee deferred compensation and retirement plans | 32,567 | |||
Total assets | 90,187,029 | |||
Liabilities: | ||||
Payable for: |
| |||
Fund shares reacquired | 77,124 | |||
Accrued fees to affiliates | 56,746 | |||
Accrued trustees’ and officers’ fees and benefits | 4,496 | |||
Accrued other operating expenses | 31,805 | |||
Trustee deferred compensation and retirement plans | 34,592 | |||
Total liabilities | 204,763 | |||
Net assets applicable to shares outstanding | $ | 89,982,266 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 86,839,717 | ||
Undistributed net investment income | 1,657,960 | |||
Undistributed net realized gain (loss) | (2,164,843 | ) | ||
Net unrealized appreciation | 3,649,432 | |||
$ | 89,982,266 | |||
Net Assets: |
| |||
Series I | $ | 74,836,707 | ||
Series II | $ | 15,145,559 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 8,032,031 | |||
Series II | 1,629,771 | |||
Series I: | ||||
Net asset value per share | $ | 9.32 | ||
Series II: | ||||
Net asset value per share | $ | 9.29 |
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $95,613) | $ | 1,179,421 | ||
Dividends from affiliated money market funds | 197 | |||
Total investment income | 1,179,618 | |||
Expenses: | ||||
Advisory fees | 303,228 | |||
Administrative services fees | 115,948 | |||
Custodian fees | 17,002 | |||
Distribution fees — Series II | 19,876 | |||
Transfer agent fees | 5,758 | |||
Trustees’ and officers’ fees and benefits | 11,251 | |||
Other | 27,779 | |||
Total expenses | 500,842 | |||
Less: Fees waived | (540 | ) | ||
Net expenses | 500,302 | |||
Net investment income | 679,316 | |||
Realized and unrealized gain from: | ||||
Net realized gain from: | ||||
Investment securities | 1,674,566 | |||
Foreign currencies | 11,208 | |||
1,685,774 | ||||
Change in net unrealized appreciation of: | ||||
Investment securities | 1,334,857 | |||
Foreign currencies | 3,271 | |||
1,338,128 | ||||
Net realized and unrealized gain | 3,023,902 | |||
Net increase in net assets resulting from operations | $ | 3,703,218 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Core Equity Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: |
| |||||||
Net investment income | $ | 679,316 | $ | 1,192,210 | ||||
Net realized gain | 1,685,774 | 16,897,503 | ||||||
Change in net unrealized appreciation (depreciation) | 1,338,128 | (17,272,407 | ) | |||||
Net increase in net assets resulting from operations | 3,703,218 | 817,306 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Series I | — | (1,568,741 | ) | |||||
Series ll | — | (282,838 | ) | |||||
Total distributions from net investment income | — | (1,851,579 | ) | |||||
Share transactions–net: | ||||||||
Series l | (2,012,116 | ) | (9,243,389 | ) | ||||
Series ll | (1,534,822 | ) | (5,156,863 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (3,546,938 | ) | (14,400,252 | ) | ||||
Net increase (decrease) in net assets | 156,280 | (15,434,525 | ) | |||||
Net assets: | ||||||||
Beginning of period | 89,825,986 | 105,260,511 | ||||||
End of period (includes undistributed net investment income of $1,657,960 and $978,644, respectively) | $ | 89,982,266 | $ | 89,825,986 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. Global Core Equity Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is long-term capital appreciation by investing primarily in equity securities of issuers throughout the world, including U.S. issuers.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual
Invesco V.I. Global Core Equity Fund
trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
Invesco V.I. Global Core Equity Fund
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||||
First $1 billion | 0 | .67% | ||||
Next $500 million | 0 | .645% | ||||
Next $1 billion | 0 | .62% | ||||
Next $1 billion | 0 | .595% | ||||
Next $1 billion | 0 | .57% | ||||
Over $4.5 billion | 0 | .545% |
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.67%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
Invesco V.I. Global Core Equity Fund
The Adviser has contractually agreed, through at least June 30, 2016, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.25% and Series II shares to 2.50% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2016. The fee waiver agreement cannot be terminated during its term. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash (excluding investments of cash collateral from securities lending) in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $540.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $24,795 for accounting and fund administrative services and reimbursed $91,153 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the six months ended June 30, 2015, the Fund incurred $282 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Invesco V.I. Global Core Equity Fund
During the six months ended June 30, 2015, there were transfers from Level 1 to Level 2 of $13,920,752 and from Level 2 to Level 1 of $3,076,770, due to foreign fair value adjustments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Canada | $ | 1,079,330 | $ | — | $ | — | $ | 1,079,330 | ||||||||
China | 767,055 | — | — | 767,055 | ||||||||||||
Finland | — | 1,239,357 | — | 1,239,357 | ||||||||||||
France | 4,756,473 | 2,710,373 | — | 7,466,846 | ||||||||||||
Ireland | 1,758,530 | — | — | 1,758,530 | ||||||||||||
Israel | 630,538 | — | — | 630,538 | ||||||||||||
Japan | 1,158,128 | 6,358,674 | — | 7,516,802 | ||||||||||||
Netherlands | — | 5,409,556 | — | 5,409,556 | ||||||||||||
Sweden | 625,555 | — | — | 625,555 | ||||||||||||
Switzerland | 3,012,120 | 1,662,711 | — | 4,674,831 | ||||||||||||
Taiwan | — | 1,220,359 | — | 1,220,359 | ||||||||||||
United Kingdom | 5,412,979 | 5,138,824 | — | 10,551,803 | ||||||||||||
United States | 46,704,610 | — | — | 46,704,610 | ||||||||||||
Total Investments | $ | 65,905,318 | $ | 23,739,854 | $ | — | $ | 89,645,172 |
NOTE 4—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 5—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 6—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of December 31, 2014, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
December 31, 2017 | $ | 6,769,047 | $ | — | $ | 6,769,047 |
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code and may be further limited depending upon a variety of factors, including the realization of net unrealized gains or losses as of the date of any reorganization. |
Invesco V.I. Global Core Equity Fund
NOTE 7—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $37,300,772 and $40,031,887, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 7,563,423 | ||
Aggregate unrealized (depreciation) of investment securities | (3,958,441 | ) | ||
Net unrealized appreciation of investment securities | $ | 3,604,982 |
Cost of investments for tax purposes is $86,040,190.
NOTE 8—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 440,999 | $ | 4,160,111 | 549,322 | $ | 5,025,349 | ||||||||||
Series II | 10,600 | 95,440 | 18,390 | 164,182 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 172,959 | 1,568,741 | ||||||||||||
Series II | — | — | 31,158 | 282,599 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (663,820 | ) | (6,172,227 | ) | (1,740,296 | ) | (15,837,479 | ) | ||||||||
Series II | (173,701 | ) | (1,630,262 | ) | (610,889 | ) | (5,603,644 | ) | ||||||||
Net increase (decrease) in share activity | (385,922 | ) | $ | (3,546,938 | ) | (1,579,356 | ) | $ | (14,400,252 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 85% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
Invesco V.I. Global Core Equity Fund
NOTE 9—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||
Series I |
| |||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 8.94 | $ | 0.07 | $ | 0.31 | $ | 0.38 | $ | — | $ | 9.32 | 4.25 | % | $ | 74,837 | 1.06 | %(d) | 1.06 | %(d) | 1.55 | %(d) | 42 | % | ||||||||||||||||||||||||
Year ended 12/31/14 | 9.06 | 0.12 | (0.05 | ) | 0.07 | (0.19 | ) | 8.94 | 0.69 | 73,816 | 1.06 | 1.06 | 1.26 | 123 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 7.54 | 0.15 | 1.54 | 1.69 | (0.17 | ) | 9.06 | 22.50 | 83,982 | 1.08 | 1.08 | 1.81 | 32 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 6.80 | 0.14 | 0.79 | 0.93 | (0.19 | ) | 7.54 | 13.75 | 74,517 | 1.00 | 1.08 | 1.98 | 23 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 7.87 | 0.20 | (1.02 | ) | (0.82 | ) | (0.25 | ) | 6.80 | (10.89 | ) | 78,125 | 0.97 | 1.00 | 2.70 | 62 | ||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 7.24 | 0.15 | 0.62 | 0.77 | (0.14 | ) | 7.87 | 10.95 | 44,717 | 1.12 | 1.15 | 2.04 | 130 | |||||||||||||||||||||||||||||||||||
Series II |
| |||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 8.93 | 0.06 | 0.30 | 0.36 | — | 9.29 | 4.03 | 15,146 | 1.31 | (d) | 1.31 | (d) | 1.30 | (d) | 42 | |||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 9.04 | 0.10 | (0.05 | ) | 0.05 | (0.16 | ) | 8.93 | 0.48 | 16,010 | 1.31 | 1.31 | 1.01 | 123 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 7.52 | 0.13 | 1.53 | 1.66 | (0.14 | ) | 9.04 | 22.25 | 21,279 | 1.33 | 1.33 | 1.56 | 32 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 6.79 | 0.12 | 0.78 | 0.90 | (0.17 | ) | 7.52 | 13.41 | 21,001 | 1.25 | 1.33 | 1.73 | 23 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 7.86 | 0.18 | (1.02 | ) | (0.84 | ) | (0.23 | ) | 6.79 | (11.12 | ) | 21,742 | 1.22 | 1.25 | 2.45 | 62 | ||||||||||||||||||||||||||||||||
Year ended 12/31/10(e) | 6.52 | 0.07 | 1.27 | 1.34 | — | 7.86 | 20.55 | 12 | 1.40 | (f) | 1.45 | (f) | 1.76 | (f) | 130 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the period ended December 31, 2011, the portfolio turnover calculation excludes the value of securities purchased of $68,458,544 and sold of $8,561,566 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco V.I. Dividend Growth Fund into the Fund. |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $75,233 and $16,033 for Series I and Series II, respectively. |
(e) | Commencement date of June 1, 2010. |
(f) | Annualized. |
Invesco V.I. Global Core Equity Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,042.50 | $ | 5.37 | $ | 1,019.54 | $ | 5.31 | 1.06 | % | ||||||||||||
Series II | 1,000.00 | 1,040.30 | 6.63 | 1,018.30 | 6.56 | 1.31 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. Global Core Equity Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. Global Core Equity Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports form the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s
consideration of Invesco Advisers’ investment process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe. The Board noted that performance of Series I shares of the Fund was in the fifth quintile of its performance universe for the one, three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). Invesco Advisers noted that changes to the portfolio management team had been made in February 2014. The Trustees also reviewed
Invesco V.I. Global Core Equity Fund
more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series I shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was below the rate of one such mutual fund.
The Board also considered the fees charged by Invesco Advisers and the Affiliated Sub-Advisers to other client accounts with investment strategies comparable to those of the Fund. The Board noted that Invesco Advisers or the Affiliated Sub-Advisers may charge lower fees to large institutional clients. Invesco Advisers reviewed with the Board the significantly greater scope of services it provides to the Invesco Funds relative to certain other types of client accounts. These additional services include provision of administrative services, officers and office space, oversight of service providers, preparation of annual registration statement updates and financial information and regulatory compliance under the Investment Company Act of 1940, as amended.
Invesco Advisers also reviewed generally the higher frequency of shareholder purchases and redemptions in the Invesco Funds relative to the flow of assets for other client accounts. Invesco Advisers advised the Board that advance notice of redemptions is often provided to Invesco Advisers by institutional clients. The Board did note that sub-advisory fee rates charged by the Affiliated Sub-Advisers to manage the Invesco Funds and to manage other client accounts tended to be more comparable, reflecting a similar scope of services. The information received by the Board demonstrated that the aggregate services provided to the Invesco
Funds were sufficiently different from those provided to institutional clients to support the difference in fees.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board;
and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered that it receives periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
Invesco V.I. Global Core Equity Fund
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Semiannual Report to Shareholders
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June 30, 2015
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Invesco V.I. Global Health Care Fund | ||||
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. | ||
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. | ||
Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. | ||
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd. | ||
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing. | ||
Invesco Distributors, Inc. I-VIGHC-SAR-1
| ||
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance | ||
Performance summary
Fund vs. Indexes |
Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower.
Series I Shares | 11.40 | % | |||
Series II Shares | 11.22 | ||||
MSCI World Indexq (Broad Market Index) | 2.63 | ||||
MSCI World Health Care Indexq (Style-Specific Index) | 9.94 | ||||
Lipper VUF Health/Biotechnology Funds Classification Averagen (Peer Group) | 15.04 | ||||
Source(s): qFactSet Research Systems Inc.; nLipper Inc. |
The MSCI World IndexSM is an unmanaged index considered representative of stocks of developed countries. The index is computed using the net return, which withholds applicable taxes for non-resident investors.
The MSCI World Health Care Index is an unmanaged index considered representative of health care stocks of developed countries. The index is computed using the net return, which withholds applicable taxes for non-resident investors.
The Lipper VUF Health/Biotechnology Funds Classification Average represents an average of the variable insurance underlying funds in the Lipper Health/Biotechnology Funds classification.
The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es).
A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
Average Annual Total Returns |
| ||||
As of 6/30/15 |
| ||||
Series I Shares | |||||
Inception (5/21/97) | 10.02 | % | |||
10 Years | 11.27 | ||||
5 Years | 21.81 | ||||
1 Year | 22.11 | ||||
Series II Shares | |||||
Inception (4/30/04) | 10.02 | % | |||
10 Years | 10.99 | ||||
5 Years | 21.50 | ||||
1 Year | 21.77 |
The performance of the Fund’s Series I and Series II share classes will differ primarily due to different class expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 1.09% and 1.34%, respectively.1 The total annual Fund operating
expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 1.10% and 1.35%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. Global Health Care Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges,
expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2017. See current prospectus for more information. |
Invesco V.I. Global Health Care Fund |
Schedule of Investments(a)
June 30, 2015
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–96.17% |
| |||||||
Biotechnology–27.33% | ||||||||
ACADIA Pharmaceuticals Inc.(b) | 50,257 | $ | 2,104,763 | |||||
Alder Biopharmaceuticals, Inc.(b) | 62,419 | 3,306,334 | ||||||
Alexion Pharmaceuticals, Inc.(b) | 27,580 | 4,985,637 | ||||||
Alnylam Pharmaceuticals Inc.(b) | 13,635 | 1,634,427 | ||||||
AMAG Pharmaceuticals, Inc.(b) | 34,007 | 2,348,523 | ||||||
Amgen Inc. | 30,197 | 4,635,843 | ||||||
ARIAD Pharmaceuticals, Inc.(b) | 182,434 | 1,508,729 | ||||||
Avalanche Biotechnologies, Inc.(b) | 43,774 | 710,890 | ||||||
Biogen Inc.(b) | 17,735 | 7,163,876 | ||||||
BioMarin Pharmaceutical Inc.(b) | 58,473 | 7,997,937 | ||||||
Bluebird Bio, Inc.(b) | 24,590 | 4,140,218 | ||||||
Celgene Corp.(b) | 76,223 | 8,821,669 | ||||||
Celldex Therapeutics Inc.(b) | 62,415 | 1,574,106 | ||||||
Dyax Corp.(b) | 47,895 | 1,269,218 | ||||||
Gilead Sciences, Inc. | 46,577 | 5,453,235 | ||||||
Heron Therapeutics, Inc.(b) | 101,754 | 3,170,655 | ||||||
Incyte Corp.(b) | 66,248 | 6,903,704 | ||||||
Keryx Biopharmaceuticals, Inc.(b) | 171,938 | 1,715,941 | ||||||
Medivation Inc.(b) | 26,802 | 3,060,788 | ||||||
Neurocrine Biosciences, Inc.(b) | 41,363 | 1,975,497 | ||||||
Prothena Corp. PLC (Ireland)(b) | 28,656 | 1,509,312 | ||||||
Puma Biotechnology, Inc.(b) | 4,358 | 508,797 | ||||||
Receptos, Inc.(b) | 11,270 | 2,141,864 | ||||||
Sarepta Therapeutics, Inc.(b) | 28,119 | 855,661 | ||||||
Spark Therapeutics, Inc.(b) | 39,502 | 2,380,786 | ||||||
Synergy Pharmaceuticals, Inc.(b) | 220,767 | 1,832,366 | ||||||
Tekmira Pharmaceuticals Corp. (Canada)(b) | 48,592 | 576,301 | ||||||
United Therapeutics Corp.(b) | 19,054 | 3,314,443 | ||||||
Vanda Pharmaceuticals Inc.(b) | 116,244 | 1,475,136 | ||||||
Vertex Pharmaceuticals Inc.(b) | 54,424 | 6,720,276 | ||||||
95,796,932 | ||||||||
Drug Retail–1.44% | ||||||||
Raia Drogasil S.A. (Brazil) | 148,860 | 1,919,338 | ||||||
Rite Aid Corp.(b) | 373,363 | 3,117,581 | ||||||
5,036,919 | ||||||||
Health Care Distributors–1.87% | ||||||||
Cardinal Health, Inc. | 38,001 | 3,178,784 | ||||||
McKesson Corp. | 14,953 | 3,361,584 | ||||||
6,540,368 | ||||||||
Health Care Equipment–4.19% | ||||||||
DBV Technologies S.A.–ADR (France) (b) | 87,863 | 2,616,560 | ||||||
Olympus Corp. (Japan) | 98,500 | 3,395,582 | ||||||
ResMed Inc. | 68,936 | 3,885,922 | ||||||
Wright Medical Group, Inc.(b) | 182,535 | 4,793,369 | ||||||
14,691,433 |
Shares | Value | |||||||
Health Care Facilities–5.05% | ||||||||
Community Health Systems Inc.(b) | 84,139 | $ | 5,298,233 | |||||
HCA Holdings, Inc.(b) | 59,364 | 5,385,502 | ||||||
Tenet Healthcare Corp.(b) | 52,942 | 3,064,283 | ||||||
Universal Health Services, Inc.–Class B | 27,711 | 3,937,733 | ||||||
17,685,751 | ||||||||
Health Care Services–2.15% | ||||||||
Air Methods Corp.(b) | 46,991 | 1,942,608 | ||||||
Express Scripts Holding Co.(b) | 59,956 | 5,332,486 | ||||||
InnovaCare Inc. (Puerto Rico)(b)(c) | 122,652 | 245,304 | ||||||
7,520,398 | ||||||||
Life Sciences Tools & Services–1.72% | ||||||||
Agilent Technologies, Inc. | 46,191 | 1,782,049 | ||||||
Thermo Fisher Scientific, Inc. | 32,846 | 4,262,097 | ||||||
6,044,146 | ||||||||
Managed Health Care–5.10% | ||||||||
Aetna Inc. | 49,605 | 6,322,653 | ||||||
Humana Inc. | 26,147 | 5,001,398 | ||||||
Qualicorp S.A. (Brazil) | 109,000 | 686,750 | ||||||
UnitedHealth Group Inc. | 48,107 | 5,869,054 | ||||||
17,879,855 | ||||||||
Pharmaceuticals–47.32% | ||||||||
AbbVie Inc. | 169,230 | 11,370,564 | ||||||
Agile Therapeutics, Inc.(b) | 71,921 | 617,801 | ||||||
Akorn, Inc.(b) | 58,143 | 2,538,523 | ||||||
Allergan PLC(b) | 53,272 | 16,165,921 | ||||||
AstraZeneca PLC–ADR (United Kingdom) | 119,628 | 7,621,500 | ||||||
Bayer AG (Germany) | 36,021 | 5,042,517 | ||||||
Bristol-Myers Squibb Co. | 124,580 | 8,289,553 | ||||||
Cempra, Inc.(b) | 28,345 | 973,934 | ||||||
DepoMed, Inc.(b) | 169,281 | 3,632,770 | ||||||
Eli Lilly and Co. | 80,656 | 6,733,970 | ||||||
Endo International PLC(b) | 60,096 | 4,786,647 | ||||||
GlaxoSmithKline PLC–ADR (United Kingdom) | 81,899 | 3,411,093 | ||||||
Hikma Pharmaceuticals PLC (Jordan) | 90,408 | 2,749,956 | ||||||
Jazz Pharmaceuticals PLC(b) | 29,212 | 5,143,357 | ||||||
Johnson & Johnson | 105,550 | 10,286,903 | ||||||
Lipocine Inc.(b) | 121,754 | 1,044,649 | ||||||
Medicines Co. (The)(b) | 60,102 | 1,719,518 | ||||||
Merck & Co., Inc. | 176,086 | 10,024,576 | ||||||
Mylan N.V.(b) | 75,010 | 5,090,179 | ||||||
Nippon Shinyaku Co., Ltd. (Japan) | 94,000 | 2,879,902 | ||||||
Novartis AG–ADR (Switzerland) | 84,031 | 8,263,609 | ||||||
Pfizer Inc. | 154,913 | 5,194,233 | ||||||
Roche Holding AG (Switzerland) | 46,919 | 13,173,377 | ||||||
Sanofi–ADR (France) | 150,275 | 7,443,121 | ||||||
Shire PLC–ADR (Ireland) | 53,498 | 12,919,232 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Health Care Fund
Shares | Value | |||||||
Pharmaceuticals–(continued) | ||||||||
Supernus Pharmaceuticals Inc.(b) | 133,231 | $ | 2,262,262 | |||||
Teva Pharmaceutical Industries Ltd.–ADR (Israel) | 86,393 | 5,105,826 | ||||||
XenoPort Inc.(b) | 72,907 | 446,920 | ||||||
Zogenix, Inc.(b) | 556,851 | 935,510 | ||||||
165,867,923 | ||||||||
Total Common Stocks & Other Equity Interests |
| 337,063,725 |
Shares | Value | |||||||
Money Market Funds–3.56% |
| |||||||
Liquid Assets Portfolio–Institutional Class(d) | 6,241,972 | $ | 6,241,972 | |||||
Premier Portfolio–Institutional Class(d) | 6,241,972 | 6,241,972 | ||||||
Total Money Market Funds |
| 12,483,944 | ||||||
TOTAL INVESTMENTS–99.73% |
| 349,547,669 | ||||||
OTHER ASSETS LESS LIABILITIES–0.27% |
| 951,503 | ||||||
NET ASSETS–100.00% |
| $ | 350,499,172 |
Investment Abbreviations:
ADR | – American Depositary Receipt |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Non-income producing security. |
(c) | Security purchased or received in transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The value of this security at June 30, 2015 represented less than 1% of the Fund’s Net Assets. |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. |
Portfolio Composition
By country, based on Net Assets
as of June 30, 2015
United States | 73.5 | % | ||
Switzerland | 6.1 | |||
Ireland | 4.1 | |||
United Kingdom | 3.1 | |||
France | 2.9 | |||
Countries each less than 2.0% of portfolio | 6.5 | |||
Money Market Funds Plus Other Assets Less Liabilities | 3.8 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Health Care Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $241,665,783) | $ | 337,063,725 | ||
Investments in affiliated money market funds, at value and cost | 12,483,944 | |||
Total investments, at value (Cost $254,149,727) | 349,547,669 | |||
Foreign currencies, at value (Cost $41,393) | 40,935 | |||
Receivable for: | ||||
Investments sold | 86,214 | |||
Fund shares sold | 794,522 | |||
Dividends | 493,992 | |||
Investment for trustee deferred compensation and retirement plans | 69,539 | |||
Unrealized appreciation on forward foreign currency contracts outstanding | 48,791 | |||
Other assets | 74,784 | |||
Total assets | 351,156,446 | |||
Liabilities: |
| |||
Payable for: | ||||
Fund shares reacquired | 255,768 | |||
Accrued fees to affiliates | 279,075 | |||
Accrued trustees’ and officers’ fees and benefits | 4,556 | |||
Accrued other operating expenses | 39,164 | |||
Trustee deferred compensation and retirement plans | 78,711 | |||
Total liabilities | 657,274 | |||
Net assets applicable to shares outstanding | $ | 350,499,172 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 189,598,719 | ||
Undistributed net investment income | 217,011 | |||
Undistributed net realized gain | 65,240,323 | |||
Net unrealized appreciation | 95,443,119 | |||
$ | 350,499,172 | |||
Net Assets: |
| |||
Series I | $ | 247,400,500 | ||
Series II | $ | 103,098,672 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 6,574,964 | |||
Series II | 2,825,909 | |||
Series I: | ||||
Net asset value per share | $ | 37.63 | ||
Series II: | ||||
Net asset value per share | $ | 36.48 |
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $164,226) | $ | 2,110,943 | ||
Dividends from affiliated money market funds | 6,257 | |||
Total investment income | 2,117,200 | |||
Expenses: | ||||
Advisory fees | 1,213,793 | |||
Administrative services fees | 444,732 | |||
Custodian fees | 10,525 | |||
Distribution fees — Series II | 113,727 | |||
Transfer agent fees | 20,744 | |||
Trustees’ and officers’ fees and benefits | 11,860 | |||
Other | 27,154 | |||
Total expenses | 1,842,535 | |||
Less: Fees waived | (16,871 | ) | ||
Net expenses | 1,825,664 | |||
Net investment income | 291,536 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 35,626,231 | |||
Foreign currencies | (6,391 | ) | ||
Forward foreign currency contracts | 259,977 | |||
35,879,817 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (1,814,017 | ) | ||
Foreign currencies | 9,288 | |||
Forward foreign currency contracts | (321,494 | ) | ||
(2,126,223 | ) | |||
Net realized and unrealized gain | 33,753,594 | |||
Net increase in net assets resulting from operations | $ | 34,045,130 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Health Care Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: |
| |||||||
Net investment income (loss) | $ | 291,536 | $ | (199,494 | ) | |||
Net realized gain | 35,879,817 | 29,406,927 | ||||||
Change in net unrealized appreciation (depreciation) | (2,126,223 | ) | 17,172,506 | |||||
Net increase in net assets resulting from operations | 34,045,130 | 46,379,939 | ||||||
Distributions to shareholders from net realized gains: | ||||||||
Series l | — | (7,510,881 | ) | |||||
Series ll | — | (2,701,370 | ) | |||||
Total distributions from net realized gains | — | (10,212,251 | ) | |||||
Share transactions–net: | ||||||||
Series l | 2,065,618 | 12,895,089 | ||||||
Series ll | 15,757,670 | 10,544,688 | ||||||
Net increase in net assets resulting from share transactions | 17,823,288 | 23,439,777 | ||||||
Net increase in net assets | 51,868,418 | 59,607,465 | ||||||
Net assets: | ||||||||
Beginning of period | 298,630,754 | 239,023,289 | ||||||
End of period (includes undistributed net investment income (loss) of $217,011 and $(74,525), respectively) | $ | 350,499,172 | $ | 298,630,754 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. Global Health Care Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is long-term growth of capital.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual
Invesco V.I. Global Health Care Fund
trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
Invesco V.I. Global Health Care Fund
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
K. | Other Risks — The Fund’s performance is vulnerable to factors affecting the health care industry, including government regulation, obsolescence caused by scientific advances and technological innovations. |
The Fund has invested in non-publicly traded companies, some of which are in the startup or development stages. These investments are inherently risky, as the market for the technologies or products these companies are developing are typically in the early stages and may never materialize. The Fund could lose its entire investment in these companies. These investments are valued at fair value as determined in good faith in accordance with procedures approved by the Board of Trustees. Investments in privately held venture capital securities are illiquid.
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $250 million | 0.75% | |||
Next $250 million | 0.74% | |||
Next $500 million | 0.73% | |||
Next $1.5 billion | 0.72% | |||
Next $2.5 billion | 0.71% | |||
Next $2.5 billion | 0.70% | |||
Next $2.5 billion | 0.69% | |||
Over $10 billion | 0.68% |
Invesco V.I. Global Health Care Fund
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.75%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2016, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2016. The fee waiver agreement cannot be terminated during its term. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $16,871.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $39,820 for accounting and fund administrative services and reimbursed $404,912 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the six months ended June 30, 2015, the Fund incurred $154 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Invesco V.I. Global Health Care Fund
During the six months ended June 30, 2015, there were transfers from Level 1 to Level 2 of $13,173,377 and from Level 2 to Level 1 of $5,042,517, due to foreign fair value adjustments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 329,983,450 | $ | 19,318,915 | $ | 245,304 | $ | 349,547,669 | ||||||||
Forward Foreign Currency Contracts* | — | 48,791 | — | 48,791 | ||||||||||||
Total Investments | $ | 329,983,450 | $ | 19,367,706 | $ | 245,304 | $ | 349,596,460 |
* | Unrealized appreciation. |
NOTE 4—Derivative Investments
Value of Derivative Investments at Period-End
The table below summarizes the value of the Fund’s derivative investments, detailed by primary risk exposure, held as of June 30, 2015:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Currency risk: | ||||||||
Forward foreign currency contracts(a) | $ | 48,791 | $ | — |
(a) | Values are disclosed on the Statement of Assets and Liabilities under the caption Unrealized appreciation on forward foreign currency contracts outstanding. |
Effect of Derivative Investments for the six months ended June 30, 2015
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations | ||||
Forward Foreign Currency Contracts | ||||
Realized Gain: | ||||
Currency risk | $ | 259,977 | ||
Change in Net Unrealized Appreciation (Depreciation): | ||||
Currency risk | (321,494 | ) | ||
Total | $ | (61,517 | ) |
The table below summarizes the average notional value of forward foreign currency contracts outstanding during the period.
Forward Foreign Currency Contracts | ||||
Average notional value | $ | 11,335,500 |
Open Forward Foreign Currency Contracts at Period-End | ||||||||||||||||||||||||||
Settlement Date
| Contract to | Notional Value | Unrealized Appreciation | |||||||||||||||||||||||
Counterparty | Deliver | Receive | ||||||||||||||||||||||||
7/22/2015 | Citibank Global Markets Inc. | CHF | 3,048,000 | USD | 3,291,790 | $ | 3,262,965 | $ | 28,825 | |||||||||||||||||
7/22/2015 | Citibank Global Markets Inc. | EUR | 1,974,000 | USD | 2,221,570 | 2,201,604 | 19,966 | |||||||||||||||||||
Total Open Forward Foreign Currency Contracts — Currency Risk | $ | 48,791 |
Currency Abbreviations:
CHF | – Swiss Franc | |
EUR | – Euro | |
USD | – U.S. Dollar |
Offsetting Assets and Liabilities
Accounting Standards Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which was subsequently clarified in Financial Accounting Standards Board ASU 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” is intended to enhance disclosures about financial instruments and derivative instruments that are subject to offsetting arrangements on the Statement of Assets and Liabilities and to enable investors to better understand the effect of those arrangements on the Fund’s financial position. In order for an arrangement to be eligible for netting, the Fund must have a basis to conclude that such netting arrangements are legally enforceable. The Fund enters into netting agreements and collateral agreements in an attempt to reduce the Fund’s Counterparty credit risk by providing for a single net settlement with a Counterparty of all financial transactions covered by the agreement in an event of default as defined under such agreement.
Invesco V.I. Global Health Care Fund
There were no derivative instruments subject to a netting agreement for which the Fund is not currently netting. The following tables present derivative instruments that are either subject to an enforceable netting agreement or offset by collateral arrangements as of June 30, 2015.
Assets: | ||||||||||||||||||||||||
Gross amounts of Recognized Assets | Gross amounts offset in Statement of Assets & Liabilities | Net amounts of assets presented in Statement of Assets & Liabilities | Collateral Received | |||||||||||||||||||||
Counterparty | Financial Instruments | Cash | Net Amount | |||||||||||||||||||||
Citigroup Global Markets Inc. | $ | 48,791 | $ | — | $ | 48,791 | $ | — | $ | — | $ | 48,791 |
NOTE 5—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund did not have a capital loss carryforward as of December 31, 2014.
NOTE 8—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $122,675,146 and $85,887,394, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 102,473,067 | ||
Aggregate unrealized (depreciation) of investment securities | (7,075,125 | ) | ||
Net unrealized appreciation of investment securities | $ | 95,397,942 |
Cost of investments is the same for tax and financial reporting purposes.
Invesco V.I. Global Health Care Fund
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 1,081,362 | $ | 39,389,114 | 1,630,036 | $ | 52,263,554 | ||||||||||
Series II | 504,917 | 17,872,679 | 460,983 | 14,311,931 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 232,319 | 7,510,881 | ||||||||||||
Series II | — | — | 86,004 | 2,701,370 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (1,035,223 | ) | (37,323,496 | ) | (1,490,077 | ) | (46,879,346 | ) | ||||||||
Series II | (59,472 | ) | (2,115,009 | ) | (213,643 | ) | (6,468,613 | ) | ||||||||
Net increase in share activity | 491,584 | $ | 17,823,288 | 705,622 | $ | 23,439,777 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 56% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 10—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income (loss)(a) | Net gains on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Distributions from net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income (loss) to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Series I |
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Six months ended 06/30/15 | $ | 33.78 | $ | 0.05 | $ | 3.80 | $ | 3.85 | $ | — | $ | — | $ | — | $ | 37.63 | 11.40 | % | $ | 247,401 | 1.05 | %(d) | 1.06 | %(d) | 0.25 | %(d) | 28 | % | ||||||||||||||||||||||||||||
Year ended 12/31/14 | 29.32 | (0.00 | ) | 5.71 | 5.71 | — | (1.25 | ) | (1.25 | ) | 33.78 | 19.67 | 220,561 | 1.08 | 1.09 | (0.01 | ) | 29 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 21.00 | 0.01 | 8.49 | 8.50 | (0.18 | ) | — | (0.18 | ) | 29.32 | 40.54 | 180,535 | 1.09 | 1.10 | 0.03 | 32 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 17.37 | 0.12 | (e) | 3.51 | 3.63 | — | — | — | 21.00 | 20.90 | 128,898 | 1.12 | 1.13 | 0.63 | (e) | 43 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 16.71 | 0.00 | 0.66 | 0.66 | — | — | — | 17.37 | 3.95 | 114,476 | 1.11 | 1.12 | 0.03 | 42 | ||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 15.87 | (0.03 | ) | 0.87 | 0.84 | — | — | — | 16.71 | 5.29 | 124,441 | 1.11 | 1.12 | (0.18 | ) | 16 | ||||||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 32.80 | (0.00 | ) | 3.68 | 3.68 | — | — | — | 36.48 | 11.22 | 103,099 | 1.30 | (d) | 1.31 | (d) | (0.00 | )(d) | 28 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 28.57 | (0.08 | ) | 5.56 | 5.48 | — | (1.25 | ) | (1.25 | ) | 32.80 | 19.38 | 78,070 | 1.33 | 1.34 | (0.26 | ) | 29 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 20.49 | (0.05 | ) | 8.27 | 8.22 | (0.14 | ) | — | (0.14 | ) | 28.57 | 40.16 | 58,488 | 1.34 | 1.35 | (0.22 | ) | 32 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 16.99 | 0.07 | (e) | 3.43 | 3.50 | — | — | — | 20.49 | 20.60 | 32,823 | 1.37 | 1.38 | 0.38 | (e) | 43 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 16.38 | (0.04 | ) | 0.65 | 0.61 | — | — | — | 16.99 | 3.72 | 27,448 | 1.36 | 1.37 | (0.22 | ) | 42 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 15.60 | (0.07 | ) | 0.85 | 0.78 | — | — | — | 16.38 | 5.00 | 26,063 | 1.36 | 1.37 | (0.43 | ) | 16 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are annualized based on average daily net assets (000’s omitted) of $235,657 and $91,735, for Series I and Series II shares, respectively. |
(e) | Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets includes significant dividends received during the period. Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets excluding the significant dividends are $(0.01) and (0.02)% and $(0.06) and (0.27)% for Series I and Series II shares, respectively. |
Invesco V.I. Global Health Care Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period 2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,114.00 | $ | 5.53 | $ | 1,019.56 | $ | 5.28 | 1.05 | % | ||||||||||||
Series II | 1,000.00 | 1,112.20 | 6.81 | 1,018.35 | 6.51 | 1.30 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. Global Health Care Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. Global Health Care Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports form the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s
consideration of Invesco Advisers’ investment process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Underlying Funds Health/Biotechnology Index. The Board noted that performance of Series I shares of the Fund was in the fifth quintile of its performance universe for the one, three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Series I shares
Invesco V.I. Global Health Care Fund
of the Fund was below the performance of the Index for the one, three and five year periods. Invesco Advisers noted that the Fund was under allocated to Pharmaceuticals. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee for Series I shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was below the rates of one such mutual fund.
The Board also considered the fees charged by Invesco Advisers and the Affiliated Sub-Advisers to other client accounts with investment strategies comparable to those of the Fund. The Board noted that Invesco Advisers or the Affiliated Sub-Advisers may charge lower fees to large institutional clients. Invesco Advisers reviewed with the Board the significantly greater scope of services it provides to the Invesco Funds relative to certain other types of client accounts. These additional services include provision of administrative services, officers and office space, oversight of service providers, preparation of annual registration statement updates and financial information and regulatory compliance under the Investment Company Act of 1940, as amended.
Invesco Advisers also reviewed generally the higher frequency of shareholder purchases and redemptions in the Invesco Funds relative to the flow of assets for other client accounts. Invesco Advisers advised the Board that advance notice of redemptions is often provided to Invesco Advisers by institutional clients. The Board did note that sub-advisory fee rates charged by the Affiliated Sub-Advisers to manage the Invesco Funds and to manage other client accounts
tended to be more comparable, reflecting a similar scope of services. The information received by the Board demonstrated that the aggregate services provided to the Invesco Funds were sufficiently different from those provided to institutional clients to support the difference in fees.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that
these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered that it receives periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
Invesco V.I. Global Health Care Fund
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Semiannual Report to Shareholders
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June 30, 2015
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Invesco V.I. Global Real Estate Fund | ||||||
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
Invesco Distributors, Inc. VIGRE-SAR-1
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NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance |
Performance summary
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Fund vs. Indexes Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower.
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Series I Shares | -1.97 | % | |||
Series II Shares | -2.09 | ||||
MSCI World Indexq (Broad Market Index) | 2.63 | ||||
Custom Global Real Estate Indexn (Style-Specific Index)* | -2.31 | ||||
FTSE EPRA/NAREIT Developed Index (net)q (Former Style-Specific Index)* | -3.20 | ||||
Lipper VUF Real Estate Funds Classification Average¿ (Peer Group) | -6.01 |
Source(s): qFactSet Research Systems Inc.; nInvesco, FactSet Research Systems Inc.; ¿Lipper Inc.
*The Fund has elected to use the Custom Global Real Estate Index rather than the FTSE EPRA/NAREIT Developed Index (net) as its style-specific benchmark because the Custom Global Real Estate Index more closely reflects the performance of the types of securities in which the Fund invests.
The MSCI World IndexSM is an unmanaged index considered representative of stocks of developed countries. The index is computed using the net return, which withholds applicable taxes for non-resident investors.
The Custom Global Real Estate Index is composed of the FTSE EPRA/NAREIT Developed Index (gross) from Fund inception through February 17, 2005; the FTSE EPRA/NAREIT Developed Index (net) from February 18, 2005, through June 30, 2014; and the FTSE EPRA/NAREIT Global Index (net) since July 1, 2014.
The FTSE EPRA/NAREIT Developed Index (net) is an unmanaged index considered representative of global real estate companies and real estate investment trusts (REITs). The index is computed using the net return, which withholds taxes for non-resident investors.
The Lipper VUF Real Estate Funds Classification Average represents an average of all of the variable insurance underlying funds in the Lipper Real Estate Funds classification.
The FTSE EPRA/NAREIT Developed Index (gross) is an unmanaged index considered representative of global real estate companies and REITs. The index is computed using the gross return, which does not withhold taxes for non-resident investors.
The FTSE EPRA/NAREIT Global Index is designed to track the performance of listed real estate companies and REITs in both developed and emerging markets. The index is computed using the net return, which withholds taxes for non-resident investors.
The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es).
A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
The performance of the Fund’s Series I and Series II share classes will differ primarily due to different class expenses. The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return | and principal value will fluctuate so that you may have a gain or loss when you sell shares. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 1.10% and 1.35%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
Average Annual Total Returns | ||
As of 6/30/15 | ||
Series I Shares | ||
Inception (3/31/98) | 8.30% | |
10 Years | 5.61 | |
5 Years | 11.56 | |
1 Year | 0.53 | |
Series II Shares | ||
Inception (4/30/04) | 8.50% | |
10 Years | 5.36 | |
5 Years | 11.30 | |
1 Year | 0.31 |
Invesco V.I. Global Real Estate Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
Invesco V.I. Global Real Estate Fund
Schedule of Investments
June 30, 2015
(Unaudited)
Shares | Value | |||||||
Real Estate Investment Trusts, Common Stocks & Other Equity Interests–98.92% |
| |||||||
Australia–5.37% | ||||||||
Federation Centres | 2,055,400 | $ | 4,621,870 | |||||
Goodman Group | 919,385 | 4,435,501 | ||||||
Scentre Group | 1,079,674 | 3,117,680 | ||||||
Stockland | 1,551,027 | 4,873,678 | ||||||
Westfield Corp. | 747,719 | 5,219,193 | ||||||
22,267,922 | ||||||||
Brazil–0.44% | ||||||||
BR Malls Participacoes S.A. | 79,400 | 375,384 | ||||||
Even Construtora e Incorporadora S.A. | 255,800 | 272,311 | ||||||
EZ Tec Empreendimentos e Participacoes S.A. | 56,947 | 266,851 | ||||||
Multiplan Empreendimentos Imobiliarios S.A. | 58,100 | 898,604 | ||||||
1,813,150 | ||||||||
Canada–2.07% | ||||||||
Allied Properties REIT | 134,100 | 3,805,657 | ||||||
Canadian REIT | 68,500 | 2,328,495 | ||||||
H&R REIT | 136,100 | 2,445,615 | ||||||
8,579,767 | ||||||||
China–5.13% | ||||||||
Beijing Capital Land Ltd.–Class H | 1,488,000 | 1,140,345 | ||||||
China Overseas Land & Investment Ltd. | 1,546,000 | 5,454,899 | ||||||
China Resources Land Ltd. | 1,174,444 | 3,781,756 | ||||||
CIFI Holdings (Group) Co. Ltd. | 4,398,000 | 1,144,383 | ||||||
Dalian Wanda Commercial Properties Co. Ltd.–Class H(a) | 225,500 | 1,804,049 | ||||||
Franshion Properties China Ltd. | 2,186,000 | 777,189 | ||||||
Greentown China Holdings Ltd. | 913,000 | 1,166,073 | ||||||
KWG Property Holding Ltd. | 629,000 | 530,699 | ||||||
Longfor Properties Co. Ltd. | 648,000 | 1,025,194 | ||||||
Poly Property Group Co., Ltd. | 409,000 | 196,124 | ||||||
Shenzhen Investment Ltd. | 3,196,000 | 1,574,584 | ||||||
Shimao Property Holdings Ltd. | 249,000 | 490,287 | ||||||
Shui On Land Ltd. | 677,000 | 190,518 | ||||||
Sino-Ocean Land Holdings Ltd. | 2,669,000 | 2,017,744 | ||||||
21,293,844 | ||||||||
Finland–0.03% | ||||||||
Sponda Oyj | 31,625 | 116,870 | ||||||
France–3.31% | ||||||||
ICADE | 16,057 | 1,146,902 | ||||||
Klepierre | 24,470 | 1,076,492 | ||||||
Mercialys S.A. | 67,870 | 1,514,636 | ||||||
Unibail-Rodamco S.E. | 39,296 | 9,972,641 | ||||||
13,710,671 |
Shares | Value | |||||||
Germany–2.10% | ||||||||
Deutsche Wohnen AG | 235,227 | $ | 5,391,126 | |||||
LEG Immobilien AG | 47,551 | 3,304,167 | ||||||
8,695,293 | ||||||||
Hong Kong–7.37% | ||||||||
Cheung Kong Property Holdings Ltd.(b) | 127,500 | 1,057,648 | ||||||
Henderson Land Development Co. Ltd. | 31,489 | 215,163 | ||||||
Hongkong Land Holdings Ltd. | 777,600 | 6,361,017 | ||||||
Kerry Properties Ltd. | 512,000 | 1,997,770 | ||||||
Link REIT (The) | 702,000 | 4,111,618 | ||||||
New World Development Co. Ltd. | 2,937,000 | 3,834,943 | ||||||
Sun Hung Kai Properties Ltd. | 536,000 | 8,685,089 | ||||||
Swire Properties Ltd. | 847,600 | 2,695,334 | ||||||
Wharf Holdings Ltd. (The) | 240,000 | 1,597,647 | ||||||
30,556,229 | ||||||||
Indonesia–0.58% | ||||||||
PT Bumi Serpong Damai Tbk | 3,608,300 | 450,922 | ||||||
PT Ciputra Development Tbk | 2,963,000 | 280,315 | ||||||
PT Lippo Karawaci Tbk | 4,123,900 | 364,810 | ||||||
PT Pakuwon Jati Tbk | 13,089,600 | 421,200 | ||||||
PT Summarecon Agung Tbk | 7,203,800 | 880,849 | ||||||
2,398,096 | ||||||||
Japan–11.16% | ||||||||
Activia Properties, Inc. | 245 | 2,075,694 | ||||||
Daiwa House REIT Investment Corp. | 136 | 573,333 | ||||||
Japan Hotel REIT Investment Corp. | 4,624 | 3,073,827 | ||||||
Japan Prime Realty Investment Corp. | 32 | 99,637 | ||||||
Japan Real Estate Investment Corp. | 536 | 2,432,076 | ||||||
Japan Retail Fund Investment Corp. | 1,316 | 2,633,075 | ||||||
Kenedix Office Investment Corp. | 273 | 1,369,461 | ||||||
Kenedix Retail REIT Corp.(b) | 565 | 1,340,952 | ||||||
Mitsubishi Estate Co. Ltd. | 545,000 | 11,706,941 | ||||||
Mitsui Fudosan Co., Ltd. | 436,000 | 12,171,349 | ||||||
Mori Hills REIT Investment Corp. | 1,177 | 1,523,176 | ||||||
Nippon Prologis REIT Inc. | 470 | 865,507 | ||||||
Nomura Real Estate Office Fund, Inc. | 146 | 662,010 | ||||||
Sumitomo Realty & Development Co., Ltd. | 47,000 | 1,648,648 | ||||||
Tokyu Fudosan Holdings, Corp. | 388,800 | 3,008,604 | ||||||
United Urban Investment Corp. | 773 | 1,093,189 | ||||||
46,277,479 | ||||||||
Malaysia–0.40% | ||||||||
IGB REIT | 1,079,300 | 380,428 | ||||||
KLCCP Stapled Group | 245,200 | 452,281 | ||||||
Mah Sing Group Berhad | 1,131,113 | 494,616 | ||||||
Mah Sing Group Berhad–Wts. expiring 02/21/20(b) | 75,409 | 3,697 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Real Estate Fund
Shares | Value | |||||||
Malaysia–(continued) | ||||||||
SP Setia Berhad Group | 391,500 | $ | 323,240 | |||||
1,654,262 | ||||||||
Malta–0.00% | ||||||||
BGP Holdings PLC | 3,053,090 | 0 | ||||||
Mexico–0.73% | ||||||||
Fibra Uno Administracion S.A. de C.V. | 1,115,500 | 2,653,045 | ||||||
Macquarie Mexico Real Estate Management S.A. de C.V. | 287,900 | 399,149 | ||||||
3,052,194 | ||||||||
Netherlands–0.58% | ||||||||
Wereldhave N.V. | 42,105 | 2,397,492 | ||||||
Philippines–0.83% | ||||||||
Ayala Land, Inc. | 1,928,700 | 1,594,886 | ||||||
Megaworld Corp. | 5,009,100 | 528,594 | ||||||
Robinsons Land Corp. | 1,044,300 | 678,342 | ||||||
SM Prime Holdings Inc. | 1,425,900 | 631,598 | ||||||
3,433,420 | ||||||||
Singapore–2.25% | ||||||||
Ascendas REIT | 1,290,800 | 2,354,876 | ||||||
CapitaLand Ltd. | 1,604,300 | 4,164,079 | ||||||
Global Logistic Properties Ltd. | 871,800 | 1,634,581 | ||||||
Mapletree Industrial Trust | 1,007,100 | 1,168,507 | ||||||
9,322,043 | ||||||||
South Africa–1.39% | ||||||||
Capital Property Fund | 986,574 | 1,156,799 | ||||||
Growthpoint Properties Ltd. | 1,074,078 | 2,331,576 | ||||||
Hyprop Investments Ltd. | 144,300 | 1,431,564 | ||||||
Resilient Property Income Fund Ltd. | 108,614 | 858,877 | ||||||
5,778,816 | ||||||||
Sweden–1.36% | ||||||||
Castellum AB | 148,671 | 2,087,615 | ||||||
Fabege AB | 131,440 | 1,791,555 | ||||||
Wihlborgs Fastigheter AB | 109,259 | 1,779,570 | ||||||
5,658,740 | ||||||||
Switzerland–0.52% | ||||||||
Swiss Prime Site AG | 28,279 | 2,146,106 | ||||||
Thailand–0.41% | ||||||||
Amata Corp. PCL | 447,100 | 198,423 | ||||||
Central Pattana PCL | 625,200 | 877,047 | ||||||
Land and Houses PCL–NVDR | 1,195,500 | 312,481 | ||||||
Pruksa Real Estate PCL | 420,600 | 314,780 | ||||||
1,702,731 | ||||||||
Turkey–0.26% | ||||||||
Emlak Konut Gayrimenkul Yatirim Ortakligi A.S. | 1,063,558 | 1,087,006 |
Shares | Value | |||||||
United Arab Emirates–0.97% | ||||||||
Emaar Malls Group PJSC(b) | 1,077,988 | $ | 980,283 | |||||
Emaar Properties PJSC | 1,427,962 | 3,050,527 | ||||||
4,030,810 | ||||||||
United Kingdom–6.39% | ||||||||
Big Yellow Group PLC | 126,083 | 1,262,978 | ||||||
Derwent London PLC | 60,525 | 3,235,402 | ||||||
Great Portland Estates PLC | 408,783 | 4,990,564 | ||||||
Hammerson PLC | 302,865 | 2,932,916 | ||||||
Land Securities Group PLC | 586,711 | 11,099,664 | ||||||
Quintain Estates & Development PLC(b) | 529,637 | 882,152 | ||||||
UNITE Group PLC (The) | 231,664 | 2,080,338 | ||||||
26,484,014 | ||||||||
United States–45.27% | ||||||||
American Campus Communities, Inc. | 59,500 | 2,242,555 | ||||||
American Tower Corp. | 16,800 | 1,567,272 | ||||||
AvalonBay Communities, Inc. | 93,821 | 14,999,163 | ||||||
Boston Properties, Inc. | 76,720 | 9,286,189 | ||||||
Brixmor Property Group, Inc. | 224,420 | 5,190,835 | ||||||
Cousins Properties, Inc. | 428,245 | 4,445,183 | ||||||
DDR Corp. | 154,758 | 2,392,559 | ||||||
DiamondRock Hospitality Co. | 217,800 | 2,790,018 | ||||||
EastGroup Properties, Inc. | 32,100 | 1,804,983 | ||||||
Empire State Realty Trust Inc.–Class A | 270,551 | 4,615,600 | ||||||
Equinix, Inc. | 15,000 | 3,810,000 | ||||||
Essex Property Trust, Inc. | 31,645 | 6,724,562 | ||||||
Extra Space Storage Inc. | 101,500 | 6,619,830 | ||||||
Federal Realty Investment Trust | 79,773 | 10,218,123 | ||||||
Health Care REIT, Inc. | 41,427 | 2,718,854 | ||||||
Healthcare Realty Trust, Inc. | 151,348 | 3,520,354 | ||||||
Healthcare Trust of America, Inc.–Class A | 215,902 | 5,170,853 | ||||||
Hilton Worldwide Holdings Inc.(b) | 162,356 | 4,472,908 | ||||||
Hudson Pacific Properties Inc. | 111,807 | 3,171,964 | ||||||
InfraREIT Inc. | 47,999 | 1,361,252 | ||||||
Kilroy Realty Corp. | 35,500 | 2,383,825 | ||||||
LaSalle Hotel Properties | 112,970 | 4,005,916 | ||||||
Mid-America Apartment Communities, Inc. | 92,707 | 6,749,997 | ||||||
National Health Investors, Inc. | 39,500 | 2,460,850 | ||||||
National Retail Properties Inc. | 56,383 | 1,973,969 | ||||||
Paramount Group, Inc. | 156,319 | 2,682,434 | ||||||
Piedmont Office Realty Trust Inc.–Class A | 156,700 | 2,756,353 | ||||||
Prologis, Inc. | 315,320 | 11,698,372 | ||||||
Public Storage | 24,802 | 4,572,745 | ||||||
Realty Income Corp. | 95,625 | 4,244,794 | ||||||
Retail Opportunity Investments Corp. | 209,363 | 3,270,250 | ||||||
Rexford Industrial Realty, Inc. | 116,059 | 1,692,140 | ||||||
RLJ Lodging Trust | 97,128 | 2,892,472 | ||||||
Simon Property Group, Inc. | 115,006 | 19,898,338 | ||||||
Strategic Hotels & Resorts, Inc.(b) | 186,500 | 2,260,380 | ||||||
Taubman Centers, Inc. | 52,600 | 3,655,700 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Real Estate Fund
Shares | Value | |||||||
United States–(continued) | ||||||||
UDR, Inc. | 35,755 | $ | 1,145,233 | |||||
Ventas, Inc. | 138,300 | 8,587,047 | ||||||
Washington REIT | 46,700 | 1,211,865 | ||||||
Weingarten Realty Investors | 74,900 | 2,448,481 | ||||||
187,714,218 | ||||||||
Total Real Estate Investment Trusts, Common Stocks & Other Equity Interests |
| 410,171,173 |
Shares | Value | |||||||
Money Market Funds–0.60% |
| |||||||
Liquid Assets Portfolio–Institutional Class(c) | 1,241,475 | $ | 1,241,475 | |||||
Premier Portfolio–Institutional Class(c) | 1,241,474 | 1,241,474 | ||||||
Total Money Market Funds |
| 2,482,949 | ||||||
TOTAL INVESTMENTS–99.52% |
| 412,654,122 | ||||||
OTHER ASSETS LESS LIABILITIES–0.48% |
| 1,997,928 | ||||||
NET ASSETS–100.00% |
| $ | 414,652,050 |
Investment Abbreviations:
NVDR | – Non-Voting Depositary Receipt | |
REIT | – Real Estate Investment Trust | |
Wts. | – Warrants |
Notes to Schedule of Investments:
(a) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at June 30, 2015 was $1,804,049, which represented less than 1% of the Fund’s Net Assets. |
(b) | Non-income producing security. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. |
Portfolio Composition
By country, based on Net Assets
as of June 30, 2015
United States | 45.3 | % | ||
Japan | 11.1 | |||
Hong Kong | 7.4 | |||
United Kingdom | 6.4 | |||
Australia | 5.4 | |||
China | 5.1 | |||
France | 3.3 | |||
Singapore | 2.2 | |||
Germany | 2.1 | |||
Canada | 2.1 | |||
Countries each less than 2.0% of portfolio | 8.5 | |||
Money Market Funds Plus Other Assets Less Liabilities | 1.1 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Real Estate Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $364,969,209) | $ | 410,171,173 | ||
Investments in affiliated money market funds, at value and cost | 2,482,949 | |||
Total investments, at value (Cost $367,452,158) | 412,654,122 | |||
Foreign currencies, at value (Cost $1,583,363) | 1,534,355 | |||
Receivable for: | ||||
Investments sold | 3,918,733 | |||
Fund shares sold | 425,437 | |||
Dividends | 1,688,347 | |||
Investment for trustee deferred compensation and retirement plans | 61,749 | |||
Other assets | 902 | |||
Total assets | 420,283,645 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 4,495,556 | |||
Fund shares reacquired | 571,044 | |||
Accrued foreign taxes | 1,249 | |||
Accrued fees to affiliates | 410,910 | |||
Accrued trustees’ and officers’ fees and benefits | 5,458 | |||
Accrued other operating expenses | 78,330 | |||
Trustee deferred compensation and retirement plans | 69,048 | |||
Total liabilities | 5,631,595 | |||
Net assets applicable to shares outstanding | $ | 414,652,050 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 360,578,324 | ||
Undistributed net investment income | 7,819,931 | |||
Undistributed net realized gain | 1,118,244 | |||
Net unrealized appreciation | 45,135,551 | |||
$ | 414,652,050 | |||
Net Assets: |
| |||
Series I | $ | 211,550,575 | ||
Series II | $ | 203,101,475 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 12,517,477 | |||
Series II | 12,355,446 | |||
Series I: | ||||
Net asset value per share | $ | 16.90 | ||
Series II: | ||||
Net asset value per share | $ | 16.44 |
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $326,926) | $ | 7,131,252 | ||
Dividends from affiliated money market funds | 1,877 | |||
Total investment income | 7,133,129 | |||
Expenses: | ||||
Advisory fees | 1,619,190 | |||
Administrative services fees | 590,189 | |||
Custodian fees | 114,447 | |||
Distribution fees: | ||||
Distribution fees — Series II | 271,463 | |||
Transfer agent fees | 20,942 | |||
Trustees’ and officers’ fees and benefits | 13,332 | |||
Other | 34,158 | |||
Total expenses | 2,663,721 | |||
Less: Fees waived | (5,222 | ) | ||
Net expenses | 2,658,499 | |||
Net investment income | 4,474,630 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from: | ||||
Investment securities | 16,482,084 | |||
Foreign currencies | 48,387 | |||
16,530,471 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities (net of foreign taxes on holdings of $1,249) | (30,584,532 | ) | ||
Foreign currencies | (32,889 | ) | ||
(30,617,421 | ) | |||
Net realized and unrealized gain (loss) | (14,086,950 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (9,612,320 | ) |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Real Estate Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: | ||||||||
Net investment income | $ | 4,474,630 | $ | 7,143,594 | ||||
Net realized gain | 16,530,471 | 11,244,543 | ||||||
Change in net unrealized appreciation (depreciation) | (30,617,421 | ) | 31,597,399 | |||||
Net increase (decrease) in net assets resulting from operations | (9,612,320 | ) | 49,985,536 | |||||
Distributions to shareholders from net investment income: | ||||||||
Series I | — | (3,251,796 | ) | |||||
Series ll | — | (2,549,836 | ) | |||||
Total distributions from net investment income | — | (5,801,632 | ) | |||||
Share transactions–net: | ||||||||
Series l | 6,102,688 | (3,501,175 | ) | |||||
Series ll | 8,033,364 | 9,465,501 | ||||||
Net increase in net assets resulting from share transactions | 14,136,052 | 5,964,326 | ||||||
Net increase in net assets | 4,523,732 | 50,148,230 | ||||||
Net assets: | ||||||||
Beginning of period | 410,128,318 | 359,980,088 | ||||||
End of period (includes undistributed net investment income of $7,819,931 and $3,345,301, respectively) | $ | 414,652,050 | $ | 410,128,318 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. Global Real Estate Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is total return through growth of capital and current income.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual
Invesco V.I. Global Real Estate Fund
trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
The Fund recharacterizes distributions received from REIT investments based on information provided by the REIT into the following categories: ordinary income, long-term and short-term capital gains, and return of capital. If information is not available on a timely basis from the REIT, the recharacterization will be based on available information which may include the previous year’s allocation. If new or additional information becomes available from the REIT at a later date, a recharacterization will be made in the following year. The Fund records as dividend income the amount recharacterized as ordinary income and as realized gain the amount recharacterized as capital gain in the Statement of Operations, and the amount recharacterized as return of capital as a reduction to the cost of investments in the Statement of Assets and Liabilities. These recharacterizations are reflected in the accompanying financial statements.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s |
Invesco V.I. Global Real Estate Fund
taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
K. | Other Risks — The Fund’s investments are concentrated in a comparatively narrow segment of the economy. Consequently, the Fund may tend to be more volatile than other mutual funds, and the value of the Fund’s investments may tend to rise and fall more rapidly. |
Because, the Fund concentrates its assets in the real estate industry, an investment in the Fund will be closely linked to the performance of the real estate markets. Property values may fall due to increasing vacancies or declining rents resulting from economic, legal, cultural or technological developments.
Invesco V.I. Global Real Estate Fund
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $250 million | 0.75% | |||
Next $250 million | 0.74% | |||
Next $500 million | 0.73% | |||
Next $1.5 billion | 0.72% | |||
Next $2.5 billion | 0.71% | |||
Next $2.5 billion | 0.70% | |||
Next $2.5 billion | 0.69% | |||
Over $10 billion | 0.68% |
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.75%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management L imited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2016, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2016. The fee waiver agreement cannot be terminated during its term. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $5,222.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $52,420 for accounting and fund administrative services and reimbursed $537,769 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
Invesco V.I. Global Real Estate Fund
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the six months ended June 30, 2015, there were transfers from Level 1 to Level 2 of $55,271,144 and from Level 2 to Level 1 of $29,983,081, due to foreign fair value adjustments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Australia | $ | — | $ | 22,267,922 | $ | — | $ | 22,267,922 | ||||||||
Brazil | 1,813,150 | — | — | 1,813,150 | ||||||||||||
Canada | 8,579,767 | — | — | 8,579,767 | ||||||||||||
China | 9,169,415 | 12,124,429 | — | 21,293,844 | ||||||||||||
Finland | — | 116,870 | — | 116,870 | ||||||||||||
France | 3,738,030 | 9,972,641 | — | 13,710,671 | ||||||||||||
Germany | 8,695,293 | — | — | 8,695,293 | ||||||||||||
Hong Kong | 15,452,002 | 15,104,227 | — | 30,556,229 | ||||||||||||
Indonesia | 364,810 | 2,033,286 | — | 2,398,096 | ||||||||||||
Japan | 13,785,045 | 32,492,434 | — | 46,277,479 | ||||||||||||
Malaysia | 1,331,023 | 323,239 | — | 1,654,262 | ||||||||||||
Malta | — | — | 0 | 0 | ||||||||||||
Mexico | 3,052,194 | — | — | 3,052,194 | ||||||||||||
Netherlands | — | 2,397,492 | — | 2,397,492 | ||||||||||||
Philippines | 3,433,420 | — | — | 3,433,420 | ||||||||||||
Singapore | — | 9,322,043 | — | 9,322,043 | ||||||||||||
South Africa | — | 5,778,816 | — | 5,778,816 | ||||||||||||
Sweden | 1,779,570 | 3,879,170 | — | 5,658,740 | ||||||||||||
Switzerland | 2,146,106 | — | — | 2,146,106 | ||||||||||||
Thailand | 198,423 | 1,504,308 | — | 1,702,731 | ||||||||||||
Turkey | — | 1,087,006 | — | 1,087,006 | ||||||||||||
United Arab Emirates | 980,283 | 3,050,527 | — | 4,030,810 | ||||||||||||
United Kingdom | 18,560,534 | 7,923,480 | — | 26,484,014 | ||||||||||||
United States | 190,197,167 | — | — | 190,197,167 | ||||||||||||
Total Investments | $ | 283,276,232 | $ | 129,377,890 | $ | — | $ | 412,654,122 |
NOTE 4—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
Invesco V.I. Global Real Estate Fund
NOTE 5—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 6—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of December 31, 2014, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
December 31, 2017 | $ | 11,038,760 | $ | — | $ | 11,038,760 |
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code and may be further limited depending upon a variety of factors, including the realization of net unrealized gains or losses as of the date of any reorganization. |
NOTE 7—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $148,385,204 and $125,553,781, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 43,426,002 | ||
Aggregate unrealized (depreciation) of investment securities | (11,759,335 | ) | ||
Net unrealized appreciation of investment securities | $ | 31,666,667 |
Cost of investments for tax purposes is $380,987,455.
NOTE 8—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 1,750,325 | $ | 31,145,834 | 3,252,789 | $ | 54,247,717 | ||||||||||
Series II | 1,659,411 | 28,916,764 | 3,484,973 | 56,243,205 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 200,852 | 3,251,796 | ||||||||||||
Series II | — | — | 161,586 | 2,549,836 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (1,404,374 | ) | (25,043,146 | ) | (3,695,733 | ) | (61,000,688 | ) | ||||||||
Series II | (1,234,594 | ) | (20,883,400 | ) | (3,133,157 | ) | (49,327,540 | ) | ||||||||
Net increase in share activity | 770,768 | $ | 14,136,052 | 271,310 | $ | 5,964,326 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 67% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
Invesco V.I. Global Real Estate Fund
NOTE 9—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||
Series I | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 17.24 | $ | 0.19 | $ | (0.53 | ) | $ | (0.34 | ) | $ | — | $ | 16.90 | (1.97 | )% | $ | 211,551 | 1.10 | %(d) | 1.10 | %(d) | 2.19 | %(d) | 30 | % | ||||||||||||||||||||||
Year ended 12/31/14 | 15.29 | 0.33 | 1.89 | 2.22 | (0.27 | ) | 17.24 | 14.62 | 209,829 | 1.10 | 1.10 | 1.99 | 44 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 15.47 | 0.22 | 0.21 | 0.43 | (0.61 | ) | 15.29 | 2.71 | 189,835 | 1.10 | 1.10 | 1.41 | 49 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 12.14 | 0.27 | 3.14 | 3.41 | (0.08 | ) | 15.47 | 28.12 | 176,933 | 1.14 | 1.14 | 1.94 | 51 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 13.58 | 0.24 | (1.16 | ) | (0.92 | ) | (0.52 | ) | 12.14 | (6.51 | ) | 134,254 | 1.14 | 1.14 | 1.77 | 47 | ||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 12.14 | 0.35 | 1.74 | 2.09 | (0.65 | ) | 13.58 | 17.51 | 131,462 | 1.20 | 1.20 | 2.82 | 87 | |||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 16.79 | 0.17 | (0.52 | ) | (0.35 | ) | — | 16.44 | (2.09 | ) | 203,101 | 1.35 | (d) | 1.35 | (d) | 1.94 | (d) | 30 | ||||||||||||||||||||||||||||||
Year ended 12/31/14 | 14.90 | 0.28 | 1.84 | 2.12 | (0.23 | ) | 16.79 | 14.34 | 200,299 | 1.35 | 1.35 | 1.74 | 44 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 15.11 | 0.18 | 0.20 | 0.38 | (0.59 | ) | 14.90 | 2.44 | 170,145 | 1.35 | 1.35 | 1.16 | 49 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 11.87 | 0.23 | 3.07 | 3.30 | (0.06 | ) | 15.11 | 27.85 | 124,219 | 1.39 | 1.39 | 1.69 | 51 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 13.31 | 0.20 | (1.13 | ) | (0.93 | ) | (0.51 | ) | 11.87 | (6.73 | ) | 62,349 | 1.39 | 1.39 | 1.52 | 47 | ||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 11.93 | 0.32 | 1.70 | 2.02 | (0.64 | ) | 13.31 | 17.24 | 34,014 | 1.45 | 1.45 | 2.57 | 87 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are annualized based on average daily net assets (000’s omitted) of $218,897 and $218,970 for Series I and Series II shares, respectively. |
Invesco V.I. Global Real Estate Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 980.30 | $ | 5.40 | $ | 1,019.34 | $ | 5.51 | 1.10 | % | ||||||||||||
Series II | 1,000.00 | 979.10 | 6.62 | 1,018.10 | 6.76 | 1.35 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. Global Real Estate Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. Global Real Estate Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide
advisory services included the Board’s consideration of Invesco Advisers’ investment process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement as well as the sub-advisory contracts for the Fund, as Invesco Asset Management Limited currently manages certain assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Underlying Funds Global Real Estate Index. The Board noted that performance of Series I shares of the Fund was in the second quintile of its performance universe for the one year period and the third quintile for the three and five year periods (the first quintile being the
Invesco V.I. Global Real Estate Fund
best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Series I shares of the Fund was above the performance of the Index for the one year period and below the performance of the Index for the three and five year periods. Invesco Advisers noted that the Fund is expected to outperform when high quality REITs outperform. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series I shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was above the rate of one such mutual fund. The Board also noted how the Fund’s rate compared to the effective sub-adviser fee rate of other mutual funds sub-advised by Invesco Advisers.
The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other client accounts with investment strategies comparable to those of the Fund.
The Board also considered the services provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board noted that Invesco Advisers retains overall responsibility for, and provides services to, sub-advised Invesco Funds, including oversight of the Affiliated Sub-Advisers as well as the additional services described herein other than day-to-day portfolio management. The Board also noted that the sub-advisory fees are not paid directly
by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and
that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered that it receives periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to, among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
Invesco V.I. Global Real Estate Fund
| ||||
Semiannual Report to Shareholders
| June 30, 2015
| |||
| ||||
Invesco V.I. Government Securities Fund | ||||
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
Invesco Distributors, Inc. VIGOV-SAR-1
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance |
Performance summary
| ||
Fund vs. Indexes | ||
Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower.
| ||
Series I Shares | 0.09% | |
Series II Shares | -0.09 | |
Barclays U.S. Aggregate Indexq (Broad Market Index) | -0.10 | |
Barclays U.S. Government Indexq (Style-Specific Index) | 0.08 | |
Lipper VUF General U.S. Government Funds Indexn (Peer Group Index) | 0.32 | |
Source(s): qFactSet Research Systems Inc.; nLipper Inc. | ||
The Barclays U.S. Aggregate Index is an unmanaged index considered representative of the US investment-grade, fixed-rate bond market. The Barclays U.S. Government Index is an unmanaged index considered representative of fixed income obligations issued by the US Treasury, government agencies and quasi-federal corporations. The Lipper VUF General U.S. Government Funds Index is an unmanaged index considered representative of general US government variable insurance underlying funds tracked by Lipper. The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es). A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
|
Average Annual Total Returns | ||
As of 6/30/15 | ||
Series I Shares | ||
Inception (5/5/93) | 4.55% | |
10 Years | 3.93 | |
5 Years | 2.38 | |
1 Year | 1.86 | |
Series II Shares | ||
Inception (9/19/01) | 3.63% | |
10 Years | 3.66 | |
5 Years | 2.11 | |
1 Year
| 1.59
|
The performance of the Fund’s Series I and Series II share classes will differ primarily due to different class expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 0.78% and 1.03%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. Government Securities Fund, a series portfolio of AIM Variable
Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
Invesco V.I. Government Securities Fund |
Schedule of Investments
June 30, 2015
(Unaudited)
Principal Amount | Value | |||||||
U.S. Government Sponsored Agency Mortgage-Backed Securities–60.23% |
| |||||||
Collateralized Mortgage Obligations–23.27% | ||||||||
Fannie Mae REMICs, | ||||||||
4.00%, 07/25/18 to 07/25/40 | $ | 5,314,877 | $ | 5,629,105 | ||||
5.00%, 08/25/19 | 1,520,928 | 1,579,606 | ||||||
4.25%, 06/25/22 to 02/25/37 | 2,454,640 | 2,583,715 | ||||||
4.50%, 10/25/22 | 263,971 | 266,370 | ||||||
3.00%, 10/25/25 to 09/25/36 | 2,821,007 | 2,875,653 | ||||||
2.50%, 03/25/26 | 1,757,631 | 1,789,382 | ||||||
7.00%, 09/18/27 | 472,962 | 530,950 | ||||||
6.50%, 03/25/32 | 1,290,171 | 1,485,553 | ||||||
5.75%, 10/25/35 | 769,627 | 857,800 | ||||||
0.49%, 05/25/36(a) | 4,964,123 | 4,978,420 | ||||||
0.69%, 03/25/37 to 05/25/41(a) | 9,411,883 | 9,471,169 | ||||||
0.59%, 06/25/38(a) | 7,963,573 | 8,001,213 | ||||||
6.56%, 06/25/39(a) | 5,143,066 | 6,040,142 | ||||||
0.74%, 02/25/41(a) | 5,602,784 | 5,654,610 | ||||||
0.71%, 11/25/41(a) | 2,252,785 | 2,273,374 | ||||||
Federal Home Loan Bank, | ||||||||
5.07%, 10/20/15 | 616,399 | 624,900 | ||||||
5.46%, 11/27/15 | 8,587,864 | 8,756,658 | ||||||
5.77%, 03/23/18 | 1,171,387 | 1,278,975 | ||||||
Freddie Mac REMICs, | ||||||||
4.00%, 12/15/17 to 06/15/39 | 4,171,282 | 4,356,347 | ||||||
5.00%, 02/15/18 to 04/15/19 | 1,566,784 | 1,623,243 | ||||||
4.50%, 07/15/18 | 447,903 | 464,565 | ||||||
3.00%, 10/15/18 to 04/15/26 | 3,910,967 | 4,014,623 | ||||||
3.75%, 10/15/18 | 398,100 | 399,634 | ||||||
3.50%, 12/15/27 | 134,940 | 135,549 | ||||||
0.69%, 12/15/35 to 03/15/40(a) | 7,682,441 | 7,754,691 | ||||||
0.49%, 03/15/36(a) | 4,745,960 | 4,779,801 | ||||||
0.53%, 11/15/36(a) | 7,469,511 | 7,486,665 | ||||||
0.59%, 05/15/37 to 06/15/37(a) | 5,963,900 | 5,996,902 | ||||||
1.05%, 11/15/39(a) | 1,535,144 | 1,568,202 | ||||||
0.64%, 03/15/40 to 02/15/42(a) | 17,849,971 | 17,973,374 | ||||||
Ginnie Mae REMICs, | ||||||||
6.00%, 01/16/25 | 788,700 | 876,794 | ||||||
4.75%, 09/20/32 | 144 | 144 | ||||||
4.00%, 04/16/33 to 02/20/38 | 1,548,206 | 1,575,227 | ||||||
4.50%, 01/16/34 to 09/16/34 | 1,416,412 | 1,449,613 | ||||||
5.74%, 08/20/34(a) | 1,820,029 | 2,064,391 | ||||||
5.87%, 01/20/39(a) | 6,115,969 | 6,963,810 | ||||||
0.98%, 09/16/39(a) | 2,265,822 | 2,323,269 | ||||||
4.51%, 07/20/41(a) | 1,425,192 | 1,526,071 | ||||||
1.66%, 09/20/41(a) | 6,071,281 | 6,291,271 | ||||||
1.59%, 09/20/64, IO(a) | 11,403,373 | 1,247,529 | ||||||
1.64%, 11/20/64, IO(a) | 7,443,697 | 849,326 | ||||||
1.69%, 12/20/64, IO(a) | 19,313,109 | 2,208,937 | ||||||
148,607,573 |
Principal Amount | Value | |||||||
Federal Deposit Insurance Co. (FDIC)–0.04% | ||||||||
Series 2010-S1, Class 1A, Floating Rate Notes , 0.73%, 02/25/48(a)(b) | $ | 264,300 | $ | 264,408 | ||||
Federal Home Loan Mortgage Corp. (FHLMC)–11.33% | ||||||||
Pass Through Ctfs., | ||||||||
8.00%, 12/01/15 to 09/01/36 | 2,231,961 | 2,544,774 | ||||||
6.00%, 02/01/16 to 07/01/38 | 1,608,081 | 1,756,565 | ||||||
6.50%, 03/01/16 to 12/01/35 | 4,651,812 | 5,364,986 | ||||||
7.00%, 12/01/16 to 12/01/37 | 5,538,164 | 6,395,389 | ||||||
5.00%, 07/01/18 to 01/01/40 | 2,567,429 | 2,824,500 | ||||||
10.50%, 08/01/19 | 220 | 222 | ||||||
4.50%, 09/01/20 to 08/01/41 | 14,705,204 | 16,046,582 | ||||||
8.50%, 09/01/20 to 08/01/31 | 601,886 | 692,113 | ||||||
10.00%, 03/01/21 | 19,897 | 21,755 | ||||||
9.00%, 06/01/21 to 06/01/22 | 135,211 | 145,266 | ||||||
7.50%, 09/01/22 to 08/01/36 | 1,776,876 | 2,050,152 | ||||||
5.50%, 12/01/22 | 758,530 | 812,039 | ||||||
3.50%, 08/01/26 | 1,332,436 | 1,412,149 | ||||||
3.00%, 05/01/27 | 2,008,094 | 2,096,844 | ||||||
7.05%, 05/20/27 | 140,582 | 161,167 | ||||||
6.03%, 10/20/30 | 1,097,859 | 1,274,591 | ||||||
Pass Through Ctfs., ARM, | ||||||||
2.40%, 09/01/35(a) | 8,179,515 | 8,728,351 | ||||||
2.48%, 07/01/36(a) | 6,060,904 | 6,488,489 | ||||||
2.05%, 10/01/36(a) | 3,707,790 | 3,935,440 | ||||||
2.41%, 10/01/36(a) | 268,255 | 288,350 | ||||||
2.53%, 11/01/37(a) | 2,970,368 | 3,195,032 | ||||||
2.66%, 01/01/38(a) | 134,751 | 145,891 | ||||||
2.43%, 06/01/43(a) | 5,714,395 | 5,947,136 | ||||||
72,327,783 | ||||||||
Federal National Mortgage Association (FNMA)–21.34% | ||||||||
Pass Through Ctfs., | ||||||||
8.00%, 10/01/15 to 11/01/37 | 5,001,482 | 5,996,350 | ||||||
7.00%, 11/01/15 to 06/01/36 | 7,244,581 | 8,032,576 | ||||||
7.50%, 11/01/15 to 08/01/37 | 6,991,299 | 8,115,299 | ||||||
6.50%, 03/01/16 to 11/01/37 | 4,989,608 | 5,601,985 | ||||||
6.00%, 09/01/17 to 10/01/38 | 3,833,297 | 4,334,371 | ||||||
5.00%, 11/01/17 to 12/01/33 | 578,398 | 621,046 | ||||||
8.50%, 11/01/17 to 08/01/37 | 1,623,244 | 1,902,073 | ||||||
4.50%, 04/01/19 to 08/01/41 | 11,746,139 | 12,633,182 | ||||||
5.50%, 03/01/21 to 05/01/35 | 2,559,142 | 2,912,856 | ||||||
6.75%, 07/01/24 | 558,847 | 642,230 | ||||||
6.95%, 10/01/25 | 22,277 | 23,248 | ||||||
3.50%, 03/01/27 to 08/01/27 | 14,338,258 | 15,162,945 | ||||||
3.00%, 05/01/27 to 08/01/27 | 6,655,566 | 6,907,496 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Government Securities Fund
Principal Amount | Value | |||||||
Federal National Mortgage Association (FNMA)–(continued) | ||||||||
Pass Through Ctfs., ARM, | ||||||||
2.49%, 10/01/34(a) | $ | 3,418,388 | $ | 3,662,810 | ||||
2.38%, 05/01/35(a) | 604,612 | 644,909 | ||||||
2.32%, 03/01/38(a) | 152,147 | 162,826 | ||||||
2.81%, 02/01/42(a) | 2,650,691 | 2,788,262 | ||||||
2.30%, 06/01/43(a) | 4,156,678 | 4,205,593 | ||||||
2.26%, 08/01/43(a) | 3,968,279 | 4,049,041 | ||||||
Pass Through Ctfs., TBA, | ||||||||
3.50%, 07/01/45 to 08/01/45(c) | 46,500,000 | 47,865,695 | ||||||
136,264,793 | ||||||||
Government National Mortgage Association (GNMA)–4.25% | ||||||||
Pass Through Ctfs., | ||||||||
6.50%, 05/20/16 to 01/15/37 | 5,181,758 | 5,898,159 | ||||||
7.50%, 03/15/17 to 10/15/35 | 3,351,241 | 3,887,049 | ||||||
7.00%, 04/15/17 to 12/15/36 | 1,572,697 | 1,745,319 | ||||||
8.00%, 05/15/17 to 01/15/37 | 1,844,879 | 2,209,413 | ||||||
10.50%, 09/15/17 | 273 | 274 | ||||||
8.50%, 12/15/17 to 01/15/37 | 207,994 | 217,665 | ||||||
10.00%, 06/15/19 | 8,887 | 9,615 | ||||||
6.00%, 09/15/20 to 08/15/33 | 860,308 | 966,176 | ||||||
5.00%, 02/15/25 | 260,357 | 288,335 | ||||||
6.95%, 08/20/25 to 08/20/27 | 344,117 | 355,259 | ||||||
6.38%, 10/20/27 to 04/20/28 | 381,887 | 435,683 | ||||||
6.10%, 12/20/33 | 5,176,006 | 6,018,642 | ||||||
3.50%, 10/20/42 | 5,006,625 | 5,129,749 | ||||||
27,161,338 | ||||||||
Total U.S. Government Sponsored Agency Mortgage-Backed Securities |
| 384,625,895 | ||||||
U.S. Treasury Securities–18.01% |
| |||||||
U.S. Treasury Bills–0.44%(d)(e) | ||||||||
0.00%, 08/20/15 | 540,000 | 540,000 | ||||||
0.04%, 08/20/15 | 275,000 | 275,000 | ||||||
0.07%, 08/20/15 | 105,000 | 105,000 | ||||||
0.08%, 08/20/15 | 1,535,000 | 1,535,000 | ||||||
0.09%, 08/20/15 | 100,000 | 100,000 | ||||||
0.10%, 08/20/15 | 90,000 | 90,000 | ||||||
0.11%, 08/20/15 | 85,000 | 85,000 | ||||||
0.12%, 08/20/15 | 120,000 | 120,000 | ||||||
2,850,000 | ||||||||
U.S. Treasury Notes–12.27% | ||||||||
0.63%, 08/31/17 | 8,400,000 | 8,383,613 | ||||||
0.75%, 12/31/17 | 5,000,000 | 4,988,743 | ||||||
0.88%, 01/31/18 | 5,400,000 | 5,400,516 | ||||||
1.13%, 06/15/18 | 13,400,000 | 13,447,526 | ||||||
1.50%, 12/31/18 | 5,500,000 | 5,552,270 | ||||||
1.63%, 06/30/19 | 4,000,000 | 4,035,389 | ||||||
1.63%, 07/31/19 | 5,200,000 | 5,242,766 | ||||||
1.75%, 09/30/19 | 5,000,000 | 5,056,766 | ||||||
1.00%, 11/30/19 | 4,000,000 | 3,909,795 | ||||||
3.63%, 02/15/20 | 2,000,000 | 2,182,734 |
Principal Amount | Value | |||||||
U.S. Treasury Notes–(continued) | ||||||||
1.38%, 04/30/20 | $ | 2,000,000 | $ | 1,976,793 | ||||
2.00%, 09/30/20 | 5,000,000 | 5,069,380 | ||||||
2.13%, 06/30/21 | 4,500,000 | 4,551,263 | ||||||
2.13%, 08/15/21 | 2,700,000 | 2,727,390 | ||||||
2.00%, 10/31/21 | 2,500,000 | 2,501,542 | ||||||
2.00%, 11/15/21 | 3,300,000 | 3,302,039 | ||||||
78,328,525 | ||||||||
U.S. Treasury Bonds–2.74% | ||||||||
8.75%, 05/15/20 | 3,500,000 | 4,666,423 | ||||||
7.88%, 02/15/21 | 1,100,000 | 1,458,705 | ||||||
5.38%, 02/15/31 | 3,800,000 | 5,098,661 | ||||||
3.38%, 05/15/44 | 6,000,000 | 6,274,273 | ||||||
17,498,062 | ||||||||
U.S. Treasury Inflation—Indexed Bonds–2.56% | ||||||||
0.63%, 01/15/24 | 13,181,220 | (f) | 13,389,959 | |||||
0.25%, 01/15/25 | 2,996,580 | (f) | 2,935,466 | |||||
16,325,425 | ||||||||
Total U.S. Treasury Securities |
| 115,002,012 | ||||||
U.S. Government Sponsored Agency Securities–8.92% |
| |||||||
Federal Agricultural Mortgage Corp. (FAMC)–3.00% | ||||||||
Sr. Unsec. Medium-Term Notes, 2.00%, 07/27/16 | 4,000,000 | 4,069,002 | ||||||
Series 2007-1, Sec. Gtd. Notes, | 14,000,000 | 15,107,652 | ||||||
19,176,654 | ||||||||
Federal Farm Credit Bank (FFCB)–0.42% | ||||||||
Unsec. Medium-Term Notes, | 2,100,000 | 2,661,668 | ||||||
Federal Home Loan Bank (FHLB)–1.62% | ||||||||
Unsec. Bonds, | ||||||||
3.38%, 06/12/20 | 6,220,000 | 6,698,620 | ||||||
2.88%, 09/11/20 | 3,455,000 | 3,632,267 | ||||||
10,330,887 | ||||||||
Federal Home Loan Mortgage Corp. (FHLMC)–0.79% | ||||||||
Unsec. Global Notes, | 5,000,000 | 5,059,300 | ||||||
Financing Corp (FICO)–0.53% | ||||||||
Sec. Bonds, 9.80%, 04/06/18 | 700,000 | 862,196 | ||||||
Series E, Sec. Bonds, | 1,985,000 | 2,521,796 | ||||||
3,383,992 | ||||||||
Tennessee Valley Authority (TVA)–2.56% | ||||||||
Sr. Unsec. Global Bonds, | 13,553,000 | 14,404,420 | ||||||
Sr. Unsec. Global Notes, | 2,000,000 | 1,931,718 | ||||||
16,336,138 | ||||||||
Total U.S. Government Sponsored Agency Securities |
| 56,948,639 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Government Securities Fund
Principal Amount | Value | |||||||
Non-U.S. Government Sponsored Agency Securities–18.93% |
| |||||||
Collateralized Mortgage Obligations–13.83% | ||||||||
Barclays Bank Commercial Mortgage Securities Trust, Series 2015-RRI, Class D, Floating Rate Pass Through Ctfs., 3.09%, 05/15/32(a)(b) | $ | 2,460,000 | $ | 2,466,205 | ||||
Citibank Credit Card Issuance Trust, Series 2014-A5, Class A5, Pass Through Ctfs., 2.68%, 06/07/23 | 7,000,000 | 7,155,393 | ||||||
Citigroup Commercial Mortgage Trust, Series 2014-388G, Class B, Floating Rate Pass Through Ctfs., 1.24%, 06/15/33(a)(b) | 6,100,000 | 6,066,267 | ||||||
Commercial Mortgage Trust, | 5,900,000 | 5,892,076 | ||||||
Series 2015-CR23, Class CMB, Pass Through Ctfs., 3.81%, 05/10/48(b) | 4,620,000 | 4,711,178 | ||||||
Credit Suisse Mortgage Capital, Series 2015- TOWN, Class B, Floating Rate Pass Through Ctfs., 2.09%, 03/15/17(a)(b) | 7,100,000 | 7,089,023 | ||||||
La Hipotecaria El Salvadorian Mortgage Trust (El Salvador), Series 2013-1A, Class A, Pass Through Ctfs., 3.50%, 10/25/41 (Acquired 04/22/13; Cost $10,996,530) (b) | 10,624,667 | 11,165,463 | ||||||
La Hipotecaria Panamanian Mortgage Trust (El Salvador), Series 2010-1GA, Class A, Floating Rate Pass Through Ctfs., 2.50%, 09/08/39 (Acquired 11/05/10; Cost $18,838,918)(a)(b) | 18,234,887 | 18,924,166 | ||||||
LB-UBS Commercial Mortgage Trust, Series 2005-C7, Class AJ, Pass Through Ctfs., 5.32%, 11/15/40 | 775,000 | 780,498 | ||||||
LSTAR Commercial Mortgage Trust, Series 2014-2, Class A2, Pass Through Ctfs., 2.77%, 01/20/41(b) | 6,300,000 | 6,399,619 | ||||||
Towd Point Mortgage Trust, | 5,567,612 | 5,609,447 | ||||||
Wells Fargo Commercial Mortgage Trust, Series 2015-C28, Class B, Variable Rate Pass Through Ctfs., | 5,900,000 | 5,988,108 | ||||||
Series 2015-C29, Class C, | ||||||||
Pass Through Ctfs., | ||||||||
4.22%, 06/15/48 | 6,224,000 | 6,058,028 | ||||||
88,305,471 |
Principal Amount | Value | |||||||
Bonds & Notes–3.33% | ||||||||
Israel Government Agency for International Development (AID) Bond, Unsec. Gtd. Global Bonds, 5.13%, 11/01/24 | $ | 3,800,000 | $ | 4,504,539 | ||||
Private Export Funding Corp., | 1,540,000 | 1,723,002 | ||||||
Series DD, Sec. Gtd. Notes, | 5,000,000 | 5,069,598 | ||||||
Series FF, Sec. Gtd. Notes, | 5,000,000 | 5,045,145 | ||||||
Series HH, Sr. Sec. Gtd. Notes, | 5,000,000 | 4,928,115 | ||||||
21,270,399 | ||||||||
Structured Agency Credit Risk Notes (STACR)–1.77% | ||||||||
Freddie Mac, | 4,300,000 | 4,308,503 | ||||||
Series 2014-DN2, Class M2, | ||||||||
Floating Rate STACR® Debt Notes, | ||||||||
1.84%, 04/25/24(a)(g) | 6,050,000 | 5,913,425 | ||||||
Series 2014-DN4, Class M2, Floating Rate STACR® Debt Notes, | 1,100,000 | 1,104,529 | ||||||
11,326,457 | ||||||||
Total Non-U.S. Government Sponsored Agency Securities |
| 120,902,327 | ||||||
Shares | ||||||||
Money Market Funds–1.07% |
| |||||||
Government & Agency Portfolio–Institutional Class | 6,810,273 | 6,810,273 | ||||||
Options Purchased–0.06% | ||||||||
(Cost $482,500)(i) | 357,102 | |||||||
TOTAL INVESTMENTS–107.22% | 684,646,248 | |||||||
OTHER ASSETS LESS LIABILITIES–(7.22)% | (46,089,902 | ) | ||||||
NET ASSETS–100.00% | $ | 638,556,346 |
Investment Abbreviations:
ARM | – Adjustable Rate Mortgage | |
Ctfs. | – Certificates | |
Gtd. | – Guaranteed | |
IO | – Interest only | |
REMICs | – Real Estate Mortgage Investment Conduits |
Sec. | – Secured | |
Sr. | – Senior | |
TBA | – To Be Announced | |
Unsec. | – Unsecured |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Government Securities Fund
Notes to Schedule of Investments:
(a) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on June 30, 2015. |
(b) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at June 30, 2015 was $83,959,912, which represented 13.15% of the Fund’s Net Assets. |
(c) | Security purchased on a forward commitment basis. This security is subject to dollar roll transactions. See Note 1L. |
(d) | Security traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. |
(e) | All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 1K and Note 4. |
(f) | Principal amount of security and interest payments are adjusted for inflation. |
(g) | Principal payments are determined by the delinquency and principal payment experience on the STACR® reference pool. Freddie Mac transfers credit risk from the mortgages in the reference pool to credit investors who invest in the STACR® debt notes. |
(h) | The money market fund and the Fund are affiliated by having the same investment adviser |
(i) | The table below details Options Purchased: |
Open Over-The-Counter Swaptions Purchased | ||||||||||||||||||||||||||||
Description | Type of Contract | Counterparty | Exercise Rate | Pay/Receive Exercise Rate | Floating Rate Index | Expiration Date | Notional Value | Value | ||||||||||||||||||||
30 Year Interest Rate Swap | Put | Citigroup Global Markets Inc. | 1.45 | % | Pay | 3 Month USD LIBOR | 10/22/15 | $ | 110,000,000 | $ | 100,632 | |||||||||||||||||
30 Year Interest Rate Swap | Put | Deutsche Bank Securities Inc. | 2.25 | % | Pay | 3 Month USD LIBOR | 11/02/15 | 60,000,000 | 256,470 | |||||||||||||||||||
Total Swaptions Purchased — Interest Rate Risk (Cost $482,500) |
| $ | 357,102 |
Currency Abbreviations:
LIBOR | – London Interbank Offered Rate | |
USD | – U.S. Dollar |
Portfolio Composition
By security type, based on Total Investments
as of June 30, 2015
U.S. Government Sponsored Agency Mortgage-Backed Securities | 56.2 | % | ||
Non-U.S. Government Sponsored Agency Securities | 17.6 | |||
U.S. Treasury Securities | 16.8 | |||
U.S. Government Sponsored Agency Securities | 8.3 | |||
Swaptions Purchased | 0.1 | |||
Money Market Funds | 1.0 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Government Securities Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $665,049,527) | $ | 677,835,975 | ||
Investments in affiliated money market funds, at value and cost | 6,810,273 | |||
Total investments, at value (Cost $671,859,800) | 684,646,248 | |||
Cash | 131,636 | |||
Receivable for: | ||||
Fund shares sold | 219,378 | |||
Dividends and interest | 2,125,832 | |||
Principal paydowns | 535,465 | |||
Investment for trustee deferred compensation and retirement plans | 234,558 | |||
Other assets | 381 | |||
Total assets | 687,893,498 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 48,190,703 | |||
Fund shares reacquired | 239,945 | |||
Variation margin — futures | 39,274 | |||
Variation margin — centrally cleared swap agreements | 5,641 | |||
Accrued fees to affiliates | 520,582 | |||
Accrued trustees’ and officers’ fees and benefits | 6,058 | |||
Accrued other operating expenses | 69,281 | |||
Trustee deferred compensation and retirement plans | 265,668 | |||
Total liabilities | 49,337,152 | |||
Net assets applicable to shares outstanding | $ | 638,556,346 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 628,010,184 | ||
Undistributed net investment income | 18,788,523 | |||
Undistributed net realized gain (loss) | (20,630,909 | ) | ||
Net unrealized appreciation | 12,388,548 | |||
$ | 638,556,346 | |||
Net Assets: |
| |||
Series I | $ | 442,468,107 | ||
Series II | $ | 196,088,239 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 37,671,712 | |||
Series II | 16,863,706 | |||
Series I: | ||||
Net asset value per share | $ | 11.75 | ||
Series II: | ||||
Net asset value per share | $ | 11.63 |
Investment income: |
| |||
Interest | $ | 9,242,324 | ||
Dividends from affiliated money market funds | 2,059 | |||
Total investment income | 9,244,383 | |||
Expenses: | ||||
Advisory fees | 1,538,908 | |||
Administrative services fees | 870,424 | |||
Custodian fees | 13,369 | |||
Distribution fees — Series II | 253,460 | |||
Transfer agent fees | 14,603 | |||
Trustees’ and officers’ fees and benefits | 14,678 | |||
Other | 62,446 | |||
Total expenses | 2,767,888 | |||
Less: Fees waived | (1,603 | ) | ||
Net expenses | 2,766,285 | |||
Net investment income | 6,478,098 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | (515,760 | ) | ||
Futures contracts | 883,459 | |||
Securities sold short | (190,695 | ) | ||
Swap agreements | (558 | ) | ||
176,446 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (2,892,561 | ) | ||
Futures contracts | (3,497,413 | ) | ||
Swap agreements | (55,441 | ) | ||
(6,445,415 | ) | |||
Net realized and unrealized gain (loss) | (6,268,969 | ) | ||
Net increase in net assets resulting from operations | $ | 209,129 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Government Securities Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: |
| |||||||
Net investment income | $ | 6,478,098 | $ | 9,666,678 | ||||
Net realized gain | 176,446 | 9,333,238 | ||||||
Change in net unrealized appreciation (depreciation) | (6,445,415 | ) | 11,266,181 | |||||
Net increase in net assets resulting from operations | 209,129 | 30,266,097 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Series I | — | (16,177,318 | ) | |||||
Series ll | — | (6,330,149 | ) | |||||
Total distributions from net investment income | — | (22,507,467 | ) | |||||
Share transactions–net: | ||||||||
Series l | (32,385,441 | ) | (96,681,441 | ) | ||||
Series ll | (16,611,507 | ) | (16,660,069 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (48,996,948 | ) | (113,341,510 | ) | ||||
Net increase (decrease) in net assets | (48,787,819 | ) | (105,582,880 | ) | ||||
Net assets: | ||||||||
Beginning of period | 687,344,165 | 792,927,045 | ||||||
End of period (includes undistributed net investment income of $18,788,523 and $12,310,425, respectively) | $ | 638,556,346 | $ | 687,344,165 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. Government Securities Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is total return, comprised of current income and capital appreciation.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Invesco V.I. Government Securities Fund
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Paydown gains and losses on mortgage and asset-backed securities are recorded as adjustments to interest income. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
Invesco V.I. Government Securities Fund
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Treasury Inflation-Protected Securities — The Fund may invest in Treasury Inflation-Protected Securities (“TIPS”). TIPS are fixed income securities whose principal value is periodically adjusted to the rate of inflation. The principal value of TIPS will be adjusted upward or downward, and any increase or decrease in the principal amount of TIPS will be included as interest income in the Statement of Operations, even though investors do not receive their principal until maturity. |
J. | Securities Sold Short — The Fund may enter into short sales of securities which it concurrently holds (“covered”) or for which it holds no corresponding position (“not covered”). Securities sold short represent a liability of the Fund to acquire specific securities at prevailing market prices at a future date in order to satisfy the obligation to deliver the securities sold. The liability is recorded on the books of the Fund at the market value of the common stock determined each day in accordance with the Fund’s security valuations policy. The Fund will incur a loss if the price of the security increases between the date of short sale and the date on which the Fund replaces the borrowed security. The Fund realizes a gain if the price of the security declines between those dates. For positions not covered, there is no ceiling on the ultimate price paid for the securities to cover the short position and therefore, the loss could exceed the amount of proceeds received. |
The Fund is required to segregate cash or securities as collateral in margin accounts with the broker at a level that is equal to the obligation to the broker who delivered such securities to the buyer on behalf of the Fund. The short stock rebate presented in the Statement of Operations represents the net income earned on short sale proceeds held on deposit with the broker and margin interest earned or incurred on short sale transactions. The Fund may also earn or incur margin interest on short sale transactions. Margin interest is the income earned (or expenses incurred) as a result of the market value of securities sold short being less than (or greater than) the proceeds received on the short sales.
K. | Futures Contracts — The Fund may enter into futures contracts to manage exposure to interest rate, equity and market price movements and/or currency risks. A futures contract is an agreement between two parties (“Counterparties”) to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund’s basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Statement of Operations. The primary risks associated with futures contracts are market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal Counterparty risk since the exchange’s clearinghouse, as Counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. |
L. | Dollar Rolls and Forward Commitment Transactions — The Fund may enter into dollar roll transactions to enhance the Fund’s performance. The Fund executes its dollar roll transactions in the to be announced (“TBA”) market whereby the Fund makes a forward commitment to purchase a security and, instead of accepting delivery, the position is offset by the sale of the security with a simultaneous agreement to repurchase at a future date. |
The Fund accounts for dollar roll transactions as purchases and sales and realizes gains and losses on these transactions. These transactions increase the Fund’s portfolio turnover rate. The Fund will segregate liquid assets in an amount equal to its dollar roll commitments. Dollar roll transactions are considered borrowings under the 1940 Act.
Dollar roll transactions involve the risk that a Counterparty to the transaction may fail to complete the transaction. If this occurs, the Fund may lose the opportunity to purchase or sell the security at the agreed upon price. Dollar rolls transactions also involve the risk that the value of the securities retained by the Fund may decline below the price of the securities that the Fund has sold but is obligated to purchase under the agreement.
M. | Put Options Purchased — The Fund may purchase put options including options on securities indexes, or foreign currency and/or futures contracts. By purchasing a put option, the Fund obtains the right (but not the obligation) to sell the option’s underlying instrument at a fixed strike price. In return for this right, the Fund pays an option premium. The option’s underlying instrument may be a security, securities index, or a futures contract. |
Additionally, the Fund may enter into an option on a swap agreement, also called a “swaption”. A swaption is an option that gives the buyer the right, but not the obligation, to enter into a swap on a future date in exchange for paying a market-based premium. A receiver swaption gives the owner the right to receive the total return of a specified asset, reference rate or index. Swaptions also include options that allow an existing swap to be terminated or extended by one of the Counterparties.
Put options may be used by the Fund to hedge securities it owns by locking in a minimum price at which the Fund can sell. If security prices fall, the put option could be exercised to offset all or a portion of the Fund’s resulting losses. At the same time, because the maximum the Fund has at
Invesco V.I. Government Securities Fund
risk is the cost of the option, purchasing put options does not eliminate the potential for the Fund to profit from an increase in the value of the securities hedged. Realized and unrealized gains and losses on these contracts are included in the Statement of Operations as Net realized gain from Investment securities. A risk in buying an option is that the Fund pays a premium whether or not the option is exercised. In addition, there can be no assurance that a liquid secondary market will exist for any option purchased.
N. | Swap Agreements — The Fund may enter into various swap transactions, including interest rate, total return, index, currency and credit default swap contracts (“CDS”) for investment purposes or to manage interest rate, currency or credit risk. Such transactions are agreements between two parties (“Counterparties”). A swap agreement may be negotiated bilaterally and traded over-the-counter (OTC) between two parties (‘uncleared/OTC”) or, in some instances, must be transacted through a future commission merchant (FCM) and cleared through a clearinghouse that serves as a central Counterparty (“centrally cleared swap”). These agreements may contain among other conditions, events of default and termination events, and various covenants and representations such as provisions that require the Fund to maintain a pre-determined level of net assets, and/or provide limits regarding the decline of the Fund’s NAV over specific periods of time. If the Fund were to trigger such provisions and have open derivative positions at that time, the Counterparty may be able to terminate such agreement and request immediate payment in an amount equal to the net liability positions, if any. |
Interest rate, total return, index, and currency swap agreements are two-party contracts entered into primarily to exchange the returns (or differentials in rates of returns) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or “swapped” between the parties are calculated with respect to a notional amount, i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate or return of an underlying asset, in a particular foreign currency, or in a “basket” of securities representing a particular index.
In a centrally cleared swap, the Fund’s ultimate Counterparty is a central clearinghouse. The Fund initially will enter into centrally cleared swaps through an executing broker. When a Fund enters into a centrally cleared swap, it must deliver to the central Counterparty (via the FCM) an amount referred to as “initial margin.” Initial margin requirements are determined by the central Counterparty, but an FCM may require additional initial margin above the amount required by the central Counterparty. Initial margin deposits required upon entering into centrally cleared swaps are satisfied by cash or securities as collateral at the FCM. Securities deposited as initial margin are designated on the Schedule of Investments and cash deposited is recorded on the Statement of Assets and Liabilities. During the term of a cleared swap agreement, a “variation margin” amount may be required to be paid by the Fund or may be received by the Fund, based on the daily change in price of the underlying reference instrument subject to the swap agreement and is recorded as a receivable or payable for variation margin in the Statement of Assets and Liabilities until the centrally cleared swap is terminated at which time a realized gain or loss is recorded.
A CDS is an agreement between Counterparties to exchange the credit risk of an issuer. A buyer of a CDS is said to buy protection by paying a fixed payment over the life of the agreement and in some situations an upfront payment to the seller of the CDS. If a defined credit event occurs (such as payment default or bankruptcy), the Fund as a protection buyer would cease paying its fixed payment, the Fund would deliver eligible bonds issued by the reference entity to the seller, and the seller would pay the full notional value, or the “par value”, of the referenced obligation to the Fund. A seller of a CDS is said to sell protection and thus would receive a fixed payment over the life of the agreement and an upfront payment, if applicable. If a credit event occurs, the Fund as a protection seller would cease to receive the fixed payment stream, the Fund would pay the buyer “par value” or the full notional value of the referenced obligation, and the Fund would receive the eligible bonds issued by the reference entity. In turn, these bonds may be sold in order to realize a recovery value. Alternatively, the seller of the CDS and its Counterparty may agree to net the notional amount and the market value of the bonds and make a cash payment equal to the difference to the buyer of protection. If no credit event occurs, the Fund receives the fixed payment over the life of the agreement. As the seller, the Fund would effectively add leverage to its portfolio because, in addition to its total net assets, the Fund would be subject to investment exposure on the notional amount of the CDS. In connection with these agreements, cash and securities may be identified as collateral in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default under the swap agreement or bankruptcy/insolvency of a party to the swap agreement. If a Counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, the Fund may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. The Fund may obtain only limited recovery or may obtain no recovery in such circumstances. The Fund’s maximum risk of loss from Counterparty risk, either as the protection seller or as the protection buyer, is the value of the contract. The risk may be mitigated by having a master netting arrangement between the Fund and the Counterparty and by the designation of collateral by the Counterparty to cover the Fund’s exposure to the Counterparty.
Implied credit spreads represent the current level at which protection could be bought or sold given the terms of the existing CDS contract and serve as an indicator of the current status of the payment/performance risk of the CDS. An implied spread that has widened or increased since entry into the initial contract may indicate a deteriorating credit profile and increased risk of default for the reference entity. A declining or narrowing spread may indicate an improving credit profile or decreased risk of default for the reference entity. Alternatively, credit spreads may increase or decrease reflecting the general tolerance for risk in the credit markets.
An interest rate swap is an agreement between Counterparties pursuant to which the parties exchange a floating rate payment for a fixed rate payment based on a specified notional amount.
Changes in the value of centrally cleared and OTC swap agreements are recognized as unrealized gains (losses) in the Statement of Operations by “marking to market” on a daily basis to reflect the value of the swap agreement at the end of each trading day. Payments received or paid at the beginning of the agreement are reflected as such on the Statement of Assets and Liabilities and may be referred to as upfront payments. The Fund accrues for the fixed payment stream and amortizes upfront payments, if any, on swap agreements on a daily basis with the net amount, recorded as a component of realized gain (loss) on the Statement of Operations. A liquidation payment received or made at the termination of a swap agreement is recorded as realized gain (loss) on the Statement of Operations. The Fund segregates liquid securities having a value at least equal to the amount of the potential obligation of a Fund under any swap transaction. Entering into these agreements involves, to varying degrees, lack of liquidity and elements of credit, market, and Counterparty risk in excess of amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that a swap is difficult to sell or liquidate; the Counterparty does not honor its obligations under the agreement and unfavorable interest rates and market fluctuations. It is possible that developments in the swaps market, including potential government regulation, could adversely affect the Fund’s ability to terminate existing swap agreements or to realize amounts to be received under such agreements.
Invesco V.I. Government Securities Fund
Notional amounts of each individual credit default swap agreement outstanding as of June 30, 2015 for which the Fund is the seller of protection are disclosed in the open swap agreements table. These potential amounts would be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into by the Fund for the same referenced entity or entities.
O. | Other Risks — The Fund may invest in obligations issued by agencies and instrumentalities of the U.S. Government that may vary in the level of support they receive from the government. The government may choose not to provide financial support to government sponsored agencies or instrumentalities if it is not legally obligated to do so. In this case, if the issuer defaulted, the Fund may not be able to recover its investment in such issuer from the U.S. Government. Many securities purchased by the Fund are not guaranteed by the U.S. Government. |
P. | Collateral — To the extent the Fund has designated or segregated a security as collateral and that security is subsequently sold, it is the Fund’s practice to replace such collateral no later than the next business day. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $250 million | 0.50% | |||
Over $250 million | 0.45% |
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.47%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2016, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waivers and/or expense reimbursements (excluding certain items discussed below) of Series I shares to 1.50% and Series II shares to 1.75% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waivers and/or expense reimbursements to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2016. The fee waiver agreement cannot be terminated during its term. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $1,603.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $77,967 for accounting and fund administrative services and reimbursed $792,457 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
Invesco V.I. Government Securities Fund
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 – | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 – | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 6,810,273 | $ | — | $ | — | $ | 6,810,273 | ||||||||
U.S. Treasury Securities | — | 115,002,012 | — | 115,002,012 | ||||||||||||
U.S. Government Sponsored Agency Securities | — | 441,574,534 | — | 441,574,534 | ||||||||||||
Structured Agency Credit Risk Notes | — | 11,326,457 | — | 11,326,457 | ||||||||||||
Corporate Debt Securities | — | 16,765,860 | — | 16,765,860 | ||||||||||||
Collateralized Mortgage Obligations | — | 88,305,471 | — | 88,305,471 | ||||||||||||
Foreign Sovereign Debt Securities | — | 4,504,539 | — | 4,504,539 | ||||||||||||
Options Purchased | — | 357,102 | — | 357,102 | ||||||||||||
6,810,273 | 677,835,975 | — | 684,646,248 | |||||||||||||
Futures Contracts* | (342,459 | ) | — | — | (342,459 | ) | ||||||||||
Swap Agreements* | — | (55,441 | ) | — | (55,441 | ) | ||||||||||
Total Investments | $ | 6,467,814 | $ | 677,780,534 | $ | — | $ | 684,248,348 |
* | Unrealized appreciation (depreciation). |
NOTE 4—Derivative Investments
Value of Derivative Investments at Period-End
The table below summarizes the value of the Fund’s derivative investments, detailed by primary risk exposure, held as of June 30, 2015:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Interest rate risk: | ||||||||
Futures contracts(a) | $ | 259,351 | $ | (601,810 | ) | |||
Options purchased(b) | 357,102 | — | ||||||
Swap agreements(c) | 11,187 | (66,628 | ) | |||||
Total | $ | 627,640 | $ | (668,438 | ) |
(a) | Includes cumulative appreciation (depreciation) of futures contracts. Only current day’s variation margin receivable (payable) is reported within the Statement of Assets and Liabilities. |
(b) | Options purchased at value as reported in the Schedule of Investments. |
(c) | Includes cumulative appreciation (depreciation) of centrally cleared swap agreements. Only current day’s variation margin receivable (payable) is reported within the Statement of Assets and Liabilities. |
Invesco V.I. Government Securities Fund
Effect of Derivative Investments for the six months ended June 30, 2015
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations | ||||||||||||
Futures Contracts | Options(a) | Swap Agreements | ||||||||||
Realized Gain (Loss): | ||||||||||||
Interest rate risk | $ | 883,459 | $ | 198,756 | $ | (558 | ) | |||||
Change in Net Unrealized Appreciation (Depreciation): | ||||||||||||
Interest rate risk | (3,497,413 | ) | 47,579 | (55,441 | ) | |||||||
Total | $ | (2,613,954 | ) | $ | 246,335 | $ | (55,999 | ) |
(a) | Options purchased are included in the net realized gain (loss) from investment securities and change in net unrealized appreciation (depreciation) on investment securities. |
The table below summarizes the six month average notional value of futures contracts and options purchased and the three month average notional value of swap agreements during the period.
Futures Contracts | Options Purchased | Swap Agreements | ||||||||||
Average notional value | $ | 144,601,031 | $ | 83,166,667 | $ | 37,500,000 |
Open Futures Contracts | ||||||||||||||||||||
Futures Contracts | Type of Contract | Number of Contracts | Expiration Month | Notional Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
U.S Treasury 2 Year Notes | Long | 90 | September-2015 | $ | 19,704,375 | $ | 33,554 | |||||||||||||
U.S Treasury 5 Year Notes | Long | 304 | September-2015 | 36,254,375 | (25,335 | ) | ||||||||||||||
U.S Treasury 10 Year Notes | Long | 4 | September-2015 | 504,688 | 1,554 | |||||||||||||||
U.S Ultra Bonds | Long | 336 | September-2015 | 51,765,000 | (576,475 | ) | ||||||||||||||
U.S Treasury 30 Year Notes | Short | 89 | September-2015 | (13,425,094 | ) | 224,243 | ||||||||||||||
Total Futures Contracts — Interest Rate Risk |
| $ | (342,459 | ) |
Open Centrally Cleared Interest Rate Swap Agreements | ||||||||||||||||||||||||
Counterparty/Clearinghouse | Pay/Receive Floating Rate | Floating Rate Index | Fixed Rate | Termination Date | Notional Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||||
Credit Suisse Securities (USA) LLC/CME | Pay | 3 Month LIBOR | 1.15 | % | October-2017 | $ | 27,500,000 | $ | 11,187 | |||||||||||||||
Credit Suisse Securities (USA) LLC/CME | Pay | 3 Month LIBOR | 1.87 | November-2020 | 15,000,000 | (66,628 | ) | |||||||||||||||||
Total Centrally Cleared Interest Rate Swap Agreements — Interest Rate Risk |
| $ | (55,441 | ) |
Abbreviations:
CME | – Chicago Mercantile Exchange | |
LIBOR | – London Interbank Offered Rate |
Offsetting Assets and Liabilities
Accounting Standards Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which was subsequently clarified in Financial Accounting Standards Board ASU 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” is intended to enhance disclosures about financial instruments and derivative instruments that are subject to offsetting arrangements on the Statement of Assets and Liabilities and to enable investors to better understand the effect of those arrangements on the Fund’s financial position. In order for an arrangement to be eligible for netting, the Fund must have a basis to conclude that such netting arrangements are legally enforceable. The Fund enters into netting agreements and collateral agreements in an attempt to reduce the Fund’s Counterparty credit risk by providing for a single net settlement with a Counterparty of all financial transactions covered by the agreement in an event of default as defined under such agreement.
There were no derivative instruments subject to a netting agreement for which the Fund is not currently netting. The following tables present derivative instruments that are either subject to an enforceable netting agreement or offset by collateral arrangements as of June 30, 2015.
Assets: | ||||||||||||||||||||||||
Gross amounts of Recognized Assets | Gross amounts offset in Statement of Assets & Liabilities | Net amounts of assets presented in Statement of Assets & Liabilities | Collateral Received | |||||||||||||||||||||
Counterparty | Financial Instruments | Cash | Net Amount | |||||||||||||||||||||
Credit Suisse Securities (USA) LLC(a) | $ | 11,187 | $ | (11,187 | ) | $ | — | $ | — | $ | — | $ | — | |||||||||||
Invesco V.I. Government Securities Fund
Liabilities: | ||||||||||||||||||||||||
Gross amounts of Recognized Liabilities | Gross amounts offset in Statement of Assets & Liabilities | Net amounts of liabilities presented in Statement of Assets & Liabilities | Collateral Pledged | |||||||||||||||||||||
Counterparty | Financial Instruments | Cash | Net Amount | |||||||||||||||||||||
Credit Suisse Securities (USA) LLC(a) | $ | 66,628 | $ | (11,187 | ) | $ | 55,441 | $ | — | $ | — | $ | 55,441 |
(a) | Only current day’s variation margin receivable (payable) is reported within the Statement of Assets and Liabilities. |
NOTE 5—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6—Cash Balances
The Fund may borrow for leveraging in an amount up to 5% of the Fund’s total assets (excluding the amount borrowed) at the time the borrowing is made. In doing so, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate. A Fund may not purchase additional securities when any borrowings from banks exceeds 5% of the Fund’s total assets.
NOTE 7—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of December 31, 2014, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
December 31, 2017 | $ | 3,845,839 | $ | — | $ | 3,845,839 | ||||||
Not subject to expiration | 9,291,880 | 4,154,087 | 13,445,967 | |||||||||
$ | 13,137,719 | $ | 4,154,087 | $ | 17,291,806 |
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code and may be further limited depending upon a variety of factors, including the realization of net unrealized gains or losses as of the date of any reorganization. |
NOTE 8—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $126,797,225 and $98,530,685, respectively. During the same period, purchases and sales of U.S. Treasury obligations were $40,228,408 and $68,708,281, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 14,358,326 | ||
Aggregate unrealized (depreciation) of investment securities | (1,630,856 | ) | ||
Net unrealized appreciation of investment securities | $ | 12,727,470 |
Cost of investments for tax purposes is $671,918,778.
Invesco V.I. Government Securities Fund
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 2,619,001 | $ | 31,049,540 | 3,780,129 | $ | 44,538,169 | ||||||||||
Series II | 451,082 | 5,305,289 | 2,344,721 | 27,332,900 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 1,398,212 | 16,177,318 | ||||||||||||
Series II | — | — | 551,407 | 6,330,149 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (5,361,877 | ) | (63,434,981 | ) | (13,365,628 | ) | (157,396,928 | ) | ||||||||
Series II | (1,869,385 | ) | (21,916,796 | ) | (4,310,995 | ) | (50,323,118 | ) | ||||||||
Net increase (decrease) in share activity | (4,161,179 | ) | $ | (48,996,948 | ) | (9,602,154 | ) | $ | (113,341,510 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 80% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 10—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||
Series I | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 11.74 | $ | 0.12 | $ | (0.11 | ) | $ | 0.01 | $ | — | $ | 11.75 | 0.09 | % | $ | 442,468 | 0.77 | %(d) | 0.77 | %(d) | 2.05 | %(d) | 25 | % | |||||||||||||||||||||||
Year ended 12/31/14 | 11.64 | 0.16 | 0.32 | 0.48 | (0.38 | ) | 11.74 | 4.14 | 474,556 | 0.78 | 0.78 | 1.36 | 55 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 12.40 | 0.13 | (0.45 | ) | (0.32 | ) | (0.44 | ) | 11.64 | (2.62 | ) | 565,690 | 0.74 | 0.76 | 1.10 | 139 | ||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 12.49 | 0.19 | 0.12 | 0.31 | (0.40 | ) | 12.40 | 2.47 | 873,212 | 0.65 | 0.76 | 1.49 | 118 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 12.00 | 0.25 | 0.67 | 0.92 | (0.43 | ) | 12.49 | 7.91 | 970,029 | 0.63 | 0.75 | 2.03 | 85 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 11.95 | 0.24 | 0.41 | 0.65 | (0.60 | ) | 12.00 | 5.40 | 1,072,405 | 0.73 | 0.75 | 1.98 | 61 | |||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 11.64 | 0.10 | (0.11 | ) | (0.01 | ) | — | 11.63 | (0.09 | ) | 196,088 | 1.02 | (d) | 1.02 | (d) | 1.80 | (d) | 25 | ||||||||||||||||||||||||||||||
Year ended 12/31/14 | 11.54 | 0.13 | 0.31 | 0.44 | (0.34 | ) | 11.64 | 3.88 | 212,788 | 1.03 | 1.03 | 1.11 | 55 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 12.29 | 0.10 | (0.45 | ) | (0.35 | ) | (0.40 | ) | 11.54 | (2.85 | ) | 227,237 | 0.99 | 1.01 | 0.85 | 139 | ||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 12.39 | 0.16 | 0.12 | 0.28 | (0.38 | ) | 12.29 | 2.22 | 261,083 | 0.90 | 1.01 | 1.24 | 118 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 11.92 | 0.21 | 0.67 | 0.88 | (0.41 | ) | 12.39 | 7.63 | 295,318 | 0.88 | 1.00 | 1.78 | 85 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 11.88 | 0.22 | 0.40 | 0.62 | (0.58 | ) | 11.92 | 5.10 | 24,074 | 0.98 | 1.00 | 1.73 | 61 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the period ended December 31, 2011, the portfolio turnover calculation excludes the value of securities purchased of $309,171,077 and sold of $25,033,352 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco Van Kampen V.I. Government Fund into the Fund. |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $457,401 and $204,449 for Series I and Series II shares, respectively. |
Invesco V.I. Government Securities Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,000.90 | $ | 3.82 | $ | 1,020.98 | $ | 3.86 | 0.77 | % | ||||||||||||
Series II | 1,000.00 | 999.10 | 5.06 | 1,019.74 | 5.11 | 1.02 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. Government Securities Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. Government Securities Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ investment
process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Annuity Underlying Funds General U.S. Government Funds Index. The Board noted that performance of Series I shares of the Fund was in the fourth quintile of its performance universe for the one and three year periods and the third quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Series I shares of the Fund was above the performance of the Index for the one year period and below the Index for the three and five year periods. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
Invesco V.I. Government Securities Fund
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series I shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other mutual funds or client accounts with investment strategies comparable to those of the Fund.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and
extent of the services provided. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. Invesco Advisers noted that the Fund does not execute brokerage transactions through “soft dollar” arrangements to any significant degree.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
Invesco V.I. Government Securities Fund
| ||||
Semiannual Report to Shareholders
| June 30, 2015 | |||
| ||||
Invesco V.I. Growth and Income Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
Invesco Distributors, Inc. VK-VIGRI-SAR-1
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance | ||
Performance summary
Fund vs. Indexes
Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower.
Series I Shares | 2.03 | % | |||
Series II Shares | 1.91 | ||||
S&P 500 Indexq (Broad Market Index) | 1.23 | ||||
Russell 1000 Value Indexq (Style-Specific Index) | -0.61 | ||||
Lipper VUF Large-Cap Value Funds Indexn (Peer Group Index) | 0.95 |
Source(s): qFactSet Research Systems Inc.; nLipper Inc.
The S&P 500® Index is an unmanaged index considered representative of the US stock market.
The Russell 1000® Value Index is an unmanaged index considered representative of large-cap value stocks. The Russell 1000 Value Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
The Lipper VUF Large-Cap Value Funds Index is an unmanaged index considered representative of large-cap value variable insurance underlying funds tracked by Lipper.
The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es).
A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
Average Annual Total Returns
As of 6/30/15
Series I Shares | |||||
Inception (12/23/96) | 9.05 | % | |||
10 Years | 7.55 | ||||
5 Years | 15.76 | ||||
1 Year | 5.42 | ||||
Series II Shares | |||||
Inception (9/18/00) | 6.48 | % | |||
10 Years | 7.29 | ||||
5 Years | 15.48 | ||||
1 Year | 5.13 |
Effective June 1, 2010, Class I and Class II shares of the predecessor fund, Van Kampen Life Investment Trust Growth and Income Portfolio, advised by Van Kampen Asset Management were reorganized into Series I and Series II shares, respectively, of Invesco Van Kampen V.I. Growth and Income Fund (renamed Invesco V.I. Growth and Income Fund on April 29, 2013). Returns shown above for Series I and Series II shares are blended returns of the predecessor fund and Invesco V.I. Growth and Income Fund. Share class returns will differ from the predecessor fund because of different expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 0.78% and 1.03%, respectively.1 The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 0.83% and 1.08%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. Growth and Income Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least April 30, 2016. See current prospectus for more information. |
Invesco V.I. Growth and Income Fund |
Schedule of Investments(a)
June 30, 2015
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–96.33% |
| |||||||
Aerospace & Defense–1.40% | ||||||||
General Dynamics Corp. | 198,386 | $ | 28,109,312 | |||||
Agricultural Products–1.03% | ||||||||
Archer-Daniels-Midland Co. | 431,336 | 20,799,022 | ||||||
Application Software–1.66% | ||||||||
Adobe Systems Inc.(b) | 207,331 | 16,795,885 | ||||||
Citrix Systems, Inc.(b) | 235,714 | 16,537,694 | ||||||
33,333,579 | ||||||||
Asset Management & Custody Banks–2.63% | ||||||||
Northern Trust Corp. | 313,968 | 24,005,993 | ||||||
State Street Corp. | 375,115 | 28,883,855 | ||||||
52,889,848 | ||||||||
Automobile Manufacturers–1.08% | ||||||||
General Motors Co. | 652,753 | 21,756,257 | ||||||
Biotechnology–0.74% | ||||||||
Amgen Inc. | 97,374 | 14,948,856 | ||||||
Broadcasting–0.24% | ||||||||
CBS Corp.–Class B | 87,306 | 4,845,483 | ||||||
Cable & Satellite–2.82% | ||||||||
Comcast Corp.–Class A | 573,852 | 34,511,459 | ||||||
Time Warner Cable Inc. | 125,232 | 22,312,586 | ||||||
56,824,045 | ||||||||
Communications Equipment–1.53% | ||||||||
Cisco Systems, Inc. | 1,123,190 | 30,842,797 | ||||||
Construction Machinery & Heavy Trucks–0.73% | ||||||||
Caterpillar Inc. | 172,541 | 14,634,928 | ||||||
Diversified Banks–12.96% | ||||||||
Bank of America Corp. | 2,930,266 | 49,873,127 | ||||||
Citigroup Inc. | 1,700,712 | 93,947,331 | ||||||
Comerica Inc. | 440,819 | 22,622,831 | ||||||
JPMorgan Chase & Co. | 1,395,647 | 94,569,041 | ||||||
261,012,330 | ||||||||
Diversified Chemicals–0.54% | ||||||||
Dow Chemical Co. (The) | 210,969 | 10,795,284 | ||||||
Electric Utilities–0.51% | ||||||||
FirstEnergy Corp. | 318,573 | 10,369,551 | ||||||
Electronic Components–0.91% | ||||||||
Corning Inc. | 928,328 | 18,315,911 | ||||||
Fertilizers & Agricultural Chemicals–0.54% | ||||||||
Mosaic Co. (The) | 230,679 | 10,807,311 |
Shares | Value | |||||||
General Merchandise Stores–1.89% | ||||||||
Target Corp. | 465,927 | $ | 38,033,621 | |||||
Health Care Equipment–2.17% | ||||||||
Baxter International Inc. | 261,996 | 18,321,380 | ||||||
Medtronic PLC | 341,440 | 25,300,704 | ||||||
43,622,084 | ||||||||
Health Care Services–0.81% | ||||||||
Express Scripts Holding Co.(b) | 183,362 | 16,308,216 | ||||||
Hotels, Resorts & Cruise Lines–1.86% | ||||||||
Carnival Corp. | 760,064 | 37,539,561 | ||||||
Household Products–1.05% | ||||||||
Procter & Gamble Co. (The) | 270,841 | 21,190,600 | ||||||
Hypermarkets & Super Centers–1.35% | ||||||||
Wal-Mart Stores, Inc. | 384,536 | 27,275,138 | ||||||
Industrial Conglomerates–2.97% | ||||||||
General Electric Co. | 2,253,317 | 59,870,633 | ||||||
Industrial Machinery–1.21% | ||||||||
Ingersoll-Rand PLC | 362,743 | 24,456,133 | ||||||
Insurance Brokers–2.96% | ||||||||
Aon PLC | 213,251 | 21,256,859 | ||||||
Marsh & McLennan Cos., Inc. | 374,391 | 21,227,970 | ||||||
Willis Group Holdings PLC | 367,439 | 17,232,889 | ||||||
59,717,718 | ||||||||
Integrated Oil & Gas–5.16% | ||||||||
Exxon Mobil Corp. | 219,859 | 18,292,269 | ||||||
Occidental Petroleum Corp. | 239,267 | 18,607,794 | ||||||
Royal Dutch Shell PLC–Class A (United Kingdom) | 1,539,597 | 43,285,871 | ||||||
TOTAL S.A. (France) | 488,639 | 23,779,134 | ||||||
103,965,068 | ||||||||
Integrated Telecommunication Services–1.61% | ||||||||
Koninklijke KPN N.V. (Netherlands) | 1,411,282 | 5,417,094 | ||||||
Orange S.A. (France) | 304,119 | 4,706,247 | ||||||
Telecom Italia S.p.A. (Italy)(b) | 2,841,192 | 3,605,103 | ||||||
Telefónica, S.A. (Spain) | 227,768 | 3,246,477 | ||||||
Verizon Communications Inc. | 330,680 | 15,412,995 | ||||||
32,387,916 | ||||||||
Internet Software & Services–1.65% | ||||||||
eBay Inc.(b) | 552,693 | 33,294,226 | ||||||
Investment Banking & Brokerage–4.95% | ||||||||
Charles Schwab Corp. (The) | 719,481 | 23,491,055 | ||||||
Goldman Sachs Group, Inc. (The) | 113,510 | 23,699,753 | ||||||
Morgan Stanley | 1,354,323 | 52,534,189 | ||||||
99,724,997 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Growth and Income Fund
Shares | Value | |||||||
IT Consulting & Other Services–1.24% | ||||||||
Amdocs Ltd. | 456,257 | $ | 24,907,070 | |||||
Managed Health Care–1.83% | ||||||||
Anthem, Inc. | 119,603 | 19,631,636 | ||||||
UnitedHealth Group Inc. | 141,895 | 17,311,190 | ||||||
36,942,826 | ||||||||
Movies & Entertainment–1.35% | ||||||||
Time Warner Inc. | 167,141 | 14,609,795 | ||||||
Viacom Inc.–Class B | 193,145 | 12,484,893 | ||||||
27,094,688 | ||||||||
Multi-Utilities–0.64% | ||||||||
PG&E Corp. | 262,585 | 12,892,924 | ||||||
Oil & Gas Drilling–0.43% | ||||||||
Ensco PLC–Class A | 389,351 | 8,670,847 | ||||||
Oil & Gas Equipment & Services–1.16% | ||||||||
Baker Hughes Inc. | 379,172 | 23,394,912 | ||||||
Oil & Gas Exploration & Production–2.83% | ||||||||
Anadarko Petroleum Corp. | 183,818 | 14,348,833 | ||||||
Apache Corp. | 413,589 | 23,835,134 | ||||||
Canadian Natural Resources Ltd. (Canada) | 694,757 | 18,859,916 | ||||||
57,043,883 | ||||||||
Other Diversified Financial Services–1.50% | ||||||||
Voya Financial, Inc. | 649,646 | 30,189,050 | ||||||
Packaged Foods & Meats–1.18% | ||||||||
Mondelez International Inc.–Class A | 579,002 | 23,820,142 | ||||||
Pharmaceuticals–7.85% | ||||||||
Eli Lilly and Co. | 304,823 | 25,449,672 | ||||||
Merck & Co., Inc. | 604,841 | 34,433,598 | ||||||
Novartis AG (Switzerland) | 313,615 | 30,978,299 | ||||||
Novartis AG–ADR (Switzerland) | 25,163 | 2,474,530 | ||||||
Pfizer Inc. | 618,918 | 20,752,321 | ||||||
Sanofi (France) | 204,575 | 20,185,530 | ||||||
Teva Pharmaceutical Industries Ltd.– ADR (Israel) | 403,989 | 23,875,750 | ||||||
158,149,700 | ||||||||
Publishing–0.75% | ||||||||
Thomson Reuters Corp. | 395,000 | 15,043,402 | ||||||
Railroads–1.01% | ||||||||
CSX Corp. | 620,224 | 20,250,314 |
Shares | Value | |||||||
Regional Banks–5.65% | ||||||||
BB&T Corp. | 440,389 | $ | 17,752,081 | |||||
Citizens Financial Group Inc. | 927,357 | 25,326,120 | ||||||
Fifth Third Bancorp | 979,128 | 20,385,445 | ||||||
First Horizon National Corp. | 861,669 | 13,502,353 | ||||||
PNC Financial Services Group, Inc. (The) | 385,973 | 36,918,317 | ||||||
113,884,316 | ||||||||
Security & Alarm Services–0.94% | ||||||||
Tyco International PLC | 494,299 | 19,015,683 | ||||||
Semiconductor Equipment–1.06% | ||||||||
Applied Materials, Inc. | 1,114,754 | 21,425,572 | ||||||
Semiconductors–1.90% | ||||||||
Broadcom Corp.–Class A | 307,542 | 15,835,338 | ||||||
Intel Corp. | 737,304 | 22,425,101 | ||||||
38,260,439 | ||||||||
Specialized Finance–0.67% | ||||||||
CME Group Inc.–Class A | 143,908 | 13,392,078 | ||||||
Systems Software–2.38% | ||||||||
Microsoft Corp. | 491,770 | 21,711,645 | ||||||
Symantec Corp. | 1,132,304 | 26,326,068 | ||||||
48,037,713 | ||||||||
Technology Hardware, Storage & Peripherals–0.76% | ||||||||
NetApp, Inc. | 487,010 | 15,370,036 | ||||||
Tobacco–1.25% | ||||||||
Philip Morris International Inc. | 314,777 | 25,235,672 | ||||||
Wireless Telecommunication Services–0.99% | ||||||||
Vodafone Group PLC–ADR (United Kingdom) | 545,206 | 19,872,759 | ||||||
Total Common Stocks & Other Equity Interests |
| 1,940,564,451 | ||||||
Money Market Funds–4.30% |
| |||||||
Liquid Assets Portfolio–Institutional Class(c) | 43,291,370 | 43,291,370 | ||||||
Premier Portfolio–Institutional Class(c) | 43,291,370 | 43,291,370 | ||||||
Total Money Market Funds |
| 86,582,740 | ||||||
TOTAL INVESTMENTS–100.63% |
| 2,027,147,191 | ||||||
OTHER ASSETS LESS LIABILITIES–(0.63)% |
| (12,589,863 | ) | |||||
NET ASSETS–100.00% |
| $ | 2,014,557,328 |
Investment Abbreviations:
ADR | – American Depositary Receipt |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Non-income producing security. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Growth and Income Fund
Portfolio Composition
By sector, based on Net Assets
as of June 30, 2015
Financials | 31.3 | % | ||
Health Care | 13.4 | |||
Information Technology | 13.1 | |||
Consumer Discretionary | 10.0 | |||
Energy | 9.6 | |||
Industrials | 8.2 | |||
Consumer Staples | 5.9 | |||
Telecommunication Services | 2.6 | |||
Materials | 1.1 | |||
Utilities | 1.1 | |||
Money Market Funds Plus Other Assets Less Liabilities | 3.7 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Growth and Income Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $1,573,428,546) | $ | 1,940,564,451 | ||
Investments in affiliated money market funds, at value and cost | 86,582,740 | |||
Total investments, at value (Cost $1,660,011,286) | 2,027,147,191 | |||
Cash | 105,195 | |||
Foreign currencies, at value (Cost $733,999) | 729,055 | |||
Receivable for: | ||||
Investments sold | 981,441 | |||
Fund shares sold | 635,300 | |||
Dividends | 4,512,426 | |||
Fund expenses absorbed | 55,446 | |||
Investment for trustee deferred compensation and retirement plans | 186,959 | |||
Unrealized appreciation on forward foreign currency contracts outstanding | 301,136 | |||
Total assets | 2,034,654,149 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 4,722,666 | |||
Fund shares reacquired | 12,687,918 | |||
Accrued fees to affiliates | 2,393,039 | |||
Accrued trustees’ and officers’ fees and benefits | 11,658 | |||
Accrued other operating expenses | 64,690 | |||
Trustee deferred compensation and retirement plans | 216,850 | |||
Total liabilities | 20,096,821 | |||
Net assets applicable to shares outstanding | $ | 2,014,557,328 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 1,276,649,951 | ||
Undistributed net investment income | 51,763,447 | |||
Undistributed net realized gain | 318,718,837 | |||
Net unrealized appreciation | 367,425,093 | |||
$ | 2,014,557,328 | |||
Net Assets: |
| |||
Series I | $ | 161,291,044 | ||
Series II | $ | 1,853,266,284 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 6,285,522 | |||
Series II | 72,472,505 | |||
Series I: | ||||
Net asset value per share | $ | 25.66 | ||
Series II: | ||||
Net asset value per share | $ | 25.57 |
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $754,447) | $ | 22,528,996 | ||
Dividends from affiliated money market funds | 24,824 | |||
Total investment income | 22,553,820 | |||
Expenses: | ||||
Advisory fees | 5,612,984 | |||
Administrative services fees | 2,565,864 | |||
Custodian fees | 44,916 | |||
Distribution fees — Series II | 2,294,223 | |||
Transfer agent fees | 15,615 | |||
Trustees’ and officers’ fees and benefits | 24,539 | |||
Other | 49,686 | |||
Total expenses | 10,607,827 | |||
Less: Fees waived | (588,045 | ) | ||
Net expenses | 10,019,782 | |||
Net investment income | 12,534,038 | |||
Realized and unrealized gain (loss) from: |
| |||
Net realized gain (loss) from: | ||||
Investment securities | 61,785,865 | |||
Foreign currencies | (43,529 | ) | ||
Forward foreign currency contracts | 6,554,300 | |||
68,296,636 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (40,324,929 | ) | ||
Foreign currencies | 37,467 | |||
Forward foreign currency contracts | (3,082,101 | ) | ||
(43,369,563 | ) | |||
Net realized and unrealized gain | 24,927,073 | |||
Net increase in net assets resulting from operations | $ | 37,461,111 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Growth and Income Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: |
| |||||||
Net investment income | $ | 12,534,038 | $ | 42,740,162 | ||||
Net realized gain | 68,296,636 | 395,204,349 | ||||||
Change in net unrealized appreciation (depreciation) | (43,369,563 | ) | (249,263,259 | ) | ||||
Net increase in net assets resulting from operations | 37,461,111 | 188,681,252 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Series I | — | (2,868,324 | ) | |||||
Series ll | — | (27,337,329 | ) | |||||
Total distributions from net investment income | — | (30,205,653 | ) | |||||
Distributions to shareholders from net realized gains: | ||||||||
Series l | — | (18,653,014 | ) | |||||
Series ll | — | (213,598,375 | ) | |||||
Total distributions from net realized gains | — | (232,251,389 | ) | |||||
Share transactions–net: | ||||||||
Series l | (3,850,345 | ) | (3,091,739 | ) | ||||
Series ll | (9,773,016 | ) | (438,796,408 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (13,623,361 | ) | (441,888,147 | ) | ||||
Net increase (decrease) in net assets | 23,837,750 | (515,663,937 | ) | |||||
Net assets: | ||||||||
Beginning of period | 1,990,719,578 | 2,506,383,515 | ||||||
End of period (includes undistributed net investment income of $51,763,447 and $39,229,409, respectively) | $ | 2,014,557,328 | $ | 1,990,719,578 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. Growth and Income Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is to seek long-term growth of capital and income.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Invesco V.I. Growth and Income Fund
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain
Invesco V.I. Growth and Income Fund
tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $500 million | 0.60% | |||
Over $500 million | 0.55% |
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.56%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
Invesco V.I. Growth and Income Fund
The Adviser has contractually agreed, through at least April 30, 2016, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 0.78% and Series II shares to 1.03% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on April 30, 2016. The fee waiver agreement cannot be terminated during its term. To the extent that the annualized expense ratio does not exceed the expense limitation, the Adviser will retain its ability to be reimbursed for such fee waivers or reimbursements prior to the end of each fiscal year.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $588,045.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $206,603 for accounting and fund administrative services and reimbursed $2,359,261 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the six months ended June 30, 2015, the Fund incurred $3,186 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 1,895,548,539 | $ | 131,598,652 | $ | — | $ | 2,027,147,191 | ||||||||
Forward Foreign Currency Contracts* | — | 301,136 | — | 301,136 | ||||||||||||
Total Investments | $ | 1,895,548,539 | $ | 131,899,788 | $ | — | $ | 2,027,448,327 |
* | Unrealized appreciation. |
Invesco V.I. Growth and Income Fund
NOTE 4—Derivative Investments
Value of Derivative Investments at Period-End
The table below summarizes the value of the Fund’s derivative investments, detailed by primary risk exposure, held as of June 30, 2015:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Currency risk | ||||||||
Forward foreign currency contracts(a) | $ | 811,658 | $ | (510,522 | ) |
(a) | Values are disclosed on the Statement of Assets and Liabilities under the caption Unrealized appreciation on forward foreign currency contracts outstanding. |
Effect of Derivative Investments for the six months ended June 30, 2015
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations | ||||
Forward Foreign Currency Contracts | ||||
Realized Gain: | ||||
Currency risk | $ | 6,554,300 | ||
Change in Net Unrealized Appreciation (Depreciation): | ||||
Currency risk | (3,082,101 | ) | ||
Total | $ | 3,472,199 |
The table below summarizes the average notional value of forward foreign currency contracts outstanding during the period.
Forward Foreign Currency Contracts | ||||
Average notional value | $ | 175,609,762 |
Open Forward Foreign Currency Contracts at Period-End | ||||||||||||||||||||||||||
Settlement | Counterparty | Contract to | Notional Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||
Deliver | Receive | |||||||||||||||||||||||||
07/24/15 | Bank of New York Mellon (The) | CAD | 16,166,057 | USD | 13,119,137 | $ | 12,940,440 | $ | 178,697 | |||||||||||||||||
07/24/15 | State Street Bank and Trust Co. | CAD | 16,196,392 | USD | 13,141,185 | 12,964,722 | 176,463 | |||||||||||||||||||
07/24/15 | Bank of New York Mellon (The) | CHF | 11,820,628 | USD | 12,695,337 | 12,655,257 | 40,080 | |||||||||||||||||||
07/24/15 | State Street Bank and Trust Co. | CHF | 11,858,743 | USD | 12,736,341 | 12,696,064 | 40,277 | |||||||||||||||||||
07/24/15 | Bank of New York Mellon (The) | EUR | 20,306,559 | USD | 22,836,350 | 22,648,474 | 187,876 | |||||||||||||||||||
07/24/15 | State Street Bank and Trust Co. | EUR | 20,337,621 | USD | 22,871,383 | 22,683,118 | 188,265 | |||||||||||||||||||
07/24/15 | Bank of New York Mellon (The) | GBP | 15,376,092 | USD | 24,053,667 | 24,156,911 | (103,244 | ) | ||||||||||||||||||
07/24/15 | State Street Bank and Trust Co. | GBP | 15,397,030 | USD | 24,087,191 | 24,189,806 | (102,615 | ) | ||||||||||||||||||
07/24/15 | Bank of New York Mellon (The) | ILS | 32,625,394 | USD | 8,492,879 | 8,643,542 | (150,663 | ) | ||||||||||||||||||
07/24/15 | State Street Bank and Trust Co. | ILS | 32,625,401 | USD | 8,489,544 | 8,643,544 | (154,000 | ) | ||||||||||||||||||
Total open forward foreign currency contracts — Currency Risk | $ | 301,136 |
Currency Abbreviations:
CAD | – Canadian Dollar | |
CHF | – Swiss Franc |
EUR | – Euro | |
GBP | – British Pound Sterling |
ILS | – Israeli Shekel | |
USD | – U.S. Dollar |
Offsetting Assets and Liabilities
Accounting Standards Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which was subsequently clarified in Financial Accounting Standards Board ASU 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” is intended to enhance disclosures about financial instruments and derivative instruments that are subject to offsetting arrangements on the Statement of Assets and Liabilities and to enable investors to better understand the effect of those arrangements on the Fund’s financial position. In order for an arrangement to be eligible for netting, the Fund must have a basis to conclude that such netting arrangements are legally enforceable. The Fund enters into netting agreements and collateral agreements in an attempt to reduce the Fund’s Counterparty credit risk by providing for a single net settlement with a Counterparty of all financial transactions covered by the agreement in an event of default as defined under such agreement.
Invesco V.I. Growth and Income Fund
There were no derivative instruments subject to a netting agreement for which the Fund is not currently netting. The following tables present derivative instruments that are either subject to an enforceable netting agreement or offset by collateral arrangements as of June 30, 2015.
Assets: | ||||||||||||||||||||||||
Gross amounts of Recognized Assets | Gross amounts offset in Statement of Assets & Liabilities | Net amounts of assets presented in Statement of Assets & Liabilities | Collateral Received | |||||||||||||||||||||
Counterparty | Financial Instruments | Cash | Net Amount | |||||||||||||||||||||
Bank of New York Mellon (The) | $ | 406,653 | $(253,907) | $ | 152,746 | $ | — | $ | — | $ | 152,746 | |||||||||||||
State Street Bank and Trust Co. | 405,005 | (256,615 | ) | 148,390 | — | — | 148,390 | |||||||||||||||||
Total | $ | 811,658 | $ (510,522) | $ | 301,136 | $ | — | $ | — | $ | 301,136 | |||||||||||||
Liabilities: | ||||||||||||||||||||||||
Gross amounts of Recognized Liabilities | Gross amounts offset in Statement of Assets & Liabilities | Net amounts of liabilities presented in Statement of Assets & Liabilities | Collateral Pledged | |||||||||||||||||||||
Counterparty | Financial Instruments | Cash | Net Amount | |||||||||||||||||||||
Bank of New York Mellon (The) | $ | 253,907 | $ | (253,907 | ) | $ | — | $ | — | $ | — | $ | — | |||||||||||
State Street Bank and Trust Co. | 256,615 | (256,615 | ) | — | — | — | — | |||||||||||||||||
Total | $ | 510,522 | $ | (510,522 | ) | $ | — | $ | — | $ | — | $ | — |
NOTE 5—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund did not have a capital loss carryforward as of December 31, 2014.
NOTE 8—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $193,809,144 and $198,390,739, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 430,809,561 | ||
Aggregate unrealized (depreciation) of investment securities | (64,199,706 | ) | ||
Net unrealized appreciation of investment securities | $ | 366,609,855 |
Cost of investments for tax purposes is $1,660,537,336.
Invesco V.I. Growth and Income Fund
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 437,807 | $ | 11,079,455 | 581,688 | $ | 15,339,280 | ||||||||||
Series II | 4,417,150 | 111,253,353 | 4,416,406 | 110,573,933 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 878,063 | 21,521,338 | ||||||||||||
Series II | — | — | 9,846,167 | 240,935,704 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (588,854 | ) | (14,929,800 | ) | (1,513,399 | ) | (39,952,357 | ) | ||||||||
Series II | (4,830,746 | ) | (121,026,369 | ) | (30,433,883 | ) | (790,306,045 | ) | ||||||||
Net increase (decrease) in share activity | (564,643 | ) | $ | (13,623,361 | ) | (16,224,958 | ) | $ | (441,888,147 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 84% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 11—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income(a) | Net gains (losses) (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Distributions from net realized | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Series I(f) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 25.15 | $ | 0.19 | $ | 0.32 | $ | 0.51 | $ | — | $ | — | $ | — | $ | 25.66 | 2.03 | % | $ | 161,291 | 0.77 | %(e) | 0.83 | %(e) | 1.49 | %(e) | 10 | % | ||||||||||||||||||||||||||||
Year ended 12/31/14 | 26.29 | 0.59 | (d) | 2.02 | 2.61 | (0.50 | ) | (3.25 | ) | (3.75 | ) | 25.15 | 10.28 | 161,866 | 0.78 | 0.83 | 2.22 | (d) | 31 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 20.07 | 0.32 | 6.47 | 6.79 | (0.36 | ) | (0.21 | ) | (0.57 | ) | 26.29 | 34.08 | 170,637 | 0.75 | 0.83 | 1.37 | 29 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 17.77 | 0.33 | 2.27 | 2.60 | (0.30 | ) | — | (0.30 | ) | 20.07 | 14.63 | 139,947 | 0.66 | 0.84 | 1.72 | 31 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 18.40 | 0.30 | (0.70 | ) | (0.40 | ) | (0.23 | ) | — | (0.23 | ) | 17.77 | (2.01 | ) | 156,617 | 0.61 | 0.84 | 1.65 | 28 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 16.37 | 0.24 | 1.81 | 2.05 | (0.02 | ) | — | (0.02 | ) | 18.40 | 12.51 | 154,488 | 0.61 | 0.74 | 1.42 | 30 | ||||||||||||||||||||||||||||||||||||||||
Series II(f) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 25.09 | 0.16 | 0.32 | 0.48 | — | — | — | 25.57 | 1.91 | 1,853,266 | 1.02 | (e) | 1.08 | (e) | 1.24 | (e) | 10 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 26.23 | 0.52 | (d) | 2.01 | 2.53 | (0.42 | ) | (3.25 | ) | (3.67 | ) | 25.09 | 9.96 | 1,828,854 | 1.03 | 1.08 | 1.97 | (d) | 31 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 20.03 | 0.26 | 6.46 | 6.72 | (0.31 | ) | (0.21 | ) | (0.52 | ) | 26.23 | 33.77 | 2,335,747 | 1.00 | 1.08 | 1.12 | 29 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 17.74 | 0.28 | 2.27 | 2.55 | (0.26 | ) | — | (0.26 | ) | 20.03 | 14.35 | 1,946,286 | 0.91 | 1.09 | 1.47 | 31 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 18.37 | 0.25 | (0.69 | ) | (0.44 | ) | (0.19 | ) | — | (0.19 | ) | 17.74 | (2.26 | ) | 1,724,830 | 0.86 | 1.09 | 1.40 | 28 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 16.39 | 0.20 | 1.80 | 2.00 | (0.02 | ) | — | (0.02 | ) | 18.37 | 12.19 | 1,725,378 | 0.86 | 0.99 | 1.17 | 30 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Net investment income per share and the ratio of net investment income to average net assets include significant dividends received during the period. Net investment income per share and the ratio of net investment income to average net assets excluding the special dividends are $0.35 and 1.29%, $0.28 and 1.04%, for Series I and Series II, respectively. |
(e) | Ratios are annualized and based on average daily net assets (000’s omitted) of $161,957 and $1,850,589 for Series I and Series II shares, respectively. |
(f) | On June 1, 2010, the Class I and Class II shares of the Van Kampen Life Investment Trust Growth and Income Portfolio were reorganized into Series I and Series II shares, respectively of the Fund. |
Invesco V.I. Growth and Income Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,020.30 | $ | 3.86 | $ | 1,020.98 | $ | 3.86 | 0.77 | % | ||||||||||||
Series II | 1,000.00 | 1,019.10 | 5.11 | 1,019.74 | 5.11 | 1.02 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. Growth and Income Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. Growth and Income Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports form the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s
consideration of Invesco Advisers’ investment process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Underlying Funds Large-Cap Value Funds Index. The Board noted that performance of Series I shares of the Fund was in the third quintile of its performance universe for the one year period and the fourth quintile for the three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board
Invesco V.I. Growth and Income Fund
noted that performance of Series I shares of the Fund was below the performance of the Index for the one, three and five year periods. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series I shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board noted that Invesco Advisers has contractually agreed to waive fees and/or limit expenses of the Fund through at least April 30, 2016 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was above the rate of one such mutual fund. The Board also noted how the Fund’s rate compared to the effective sub-adviser fee rate of two mutual funds sub-advised by Invesco Advisers.
The Board also considered the fees charged by Invesco Advisers and the Affiliated Sub-Advisers to other client accounts with investment strategies comparable to those of the Fund. The Board noted that Invesco Advisers or the Affiliated Sub-Advisers may charge lower fees to large institutional clients. Invesco Advisers reviewed with the Board the significantly greater scope of services it provides to the Invesco Funds relative to certain other types of client accounts. These additional services include provision of administrative services, officers and office space, oversight of service providers, preparation of annual registration statement updates and financial information and regulatory compliance under the Investment Company Act of 1940, as amended.
Invesco Advisers also reviewed generally the higher frequency of shareholder purchases and redemptions in the Invesco Funds relative to the flow of assets for other client accounts. Invesco Advisers advised the Board that advance notice of redemptions is often provided to Invesco Advisers by institutional clients. The Board did note that sub-advisory fee rates charged by the Affiliated Sub-Advisers to manage the Invesco Funds and to manage other client accounts tended to be more comparable, reflecting a similar scope of services. The information received by the Board demonstrated that the aggregate services provided to the Invesco Funds were sufficiently different from those provided to institutional clients to support the difference in fees.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including
the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered that it receives periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
Invesco V.I. Growth and Income Fund
| ||||
Semiannual Report to Shareholders | June 30, 2015
| |||
Invesco V.I. High Yield Fund | ||||
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
Invesco Distributors, Inc. VIHYI-SAR-1
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance |
Performance summary
Fund vs. Indexes
Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower.
Series I Shares | 2.53 | % | |||
Series II Shares | 2.36 | ||||
Barclays U.S. Aggregate Indexq (Broad Market Index) | -0.10 | ||||
Barclays U.S. Corporate High Yield 2% Issuer Cap Indexq (Style-Specific Index) | 2.53 | ||||
Lipper VUF High Current Yield Bond Funds Classification Averagen (Peer Group) | 2.49 |
Source(s): qFactSet Research Systems Inc.; nLipper Inc.
The Barclays U.S. Aggregate Index is an unmanaged index considered representative of the US investment-grade, fixed-rate bond market.
The Barclays U.S. Corporate High Yield 2% Issuer Cap Index is an unmanaged index comprising US corporate, fixed-rate, noninvestment-grade debt with at least one year to maturity and at least $150 million in par outstanding. Index weights for each issuer are capped at 2%.
The Lipper VUF High Current Yield Bond Funds Classification Average represents an average of all variable insurance underlying funds in the Lipper High Current Yield Bond Funds classification.
The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es).
A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
Average Annual Total Returns
As of 6/30/15
Series I Shares | |||||
Inception (5/1/98) | 4.32 | % | |||
10 Years | 6.82 | ||||
5 Years | 7.67 | ||||
1 Year | -0.91 | ||||
Series II Shares | |||||
Inception (3/26/02) | 7.38 | % | |||
10 Years | 6.56 | ||||
5 Years | 7.42 | ||||
1 Year | -1.07 |
The performance of the Fund’s Series I and Series II share classes will differ primarily due to different class expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 0.98% and 1.23%, respectively.1 The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 0.99% and 1.24%, respectively. The expense ratios presented above may vary from the expense
ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. High Yield Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2017. See current prospectus for more information. |
Invesco V.I. High Yield Fund |
Schedule of Investments(a)
June 30, 2015
(Unaudited)
Principal Amount | Value | |||||||
U.S. Dollar Denominated Bonds & Notes–93.27% |
| |||||||
Aerospace & Defense–2.91% | ||||||||
Aerojet Rocketdyne Holdings, Inc., Sec. Gtd. Second Lien Global Notes, 7.13%, 03/15/21 | $ | 661,000 | $ | 707,270 | ||||
Bombardier Inc. (Canada), Sr. Unsec. Notes, | 515,000 | 538,819 | ||||||
7.50%, 03/15/25(b) | 432,000 | 395,280 | ||||||
7.75%, 03/15/20(b) | 797,000 | 807,958 | ||||||
Unsec. Notes, 5.50%, 09/15/18(b) | 190,000 | 189,050 | ||||||
Moog Inc., Sr. Unsec. Gtd. Notes, 5.25%, 12/01/22(b) | 500,000 | 511,250 | ||||||
TransDigm Inc., | 520,000 | 518,700 | ||||||
Sr. Unsec. Gtd. Sub. Notes, 6.50%, 05/15/25(b) | 797,000 | 797,000 | ||||||
4,465,327 | ||||||||
Agricultural & Farm Machinery–0.34% | ||||||||
Titan International Inc., Sr. Sec. Gtd. First Lien Global Notes, 6.88%, 10/01/20 | 564,000 | 518,880 | ||||||
Agricultural Products–0.34% | ||||||||
Darling Ingredients, Inc., Sr. Unsec. Gtd. Global Notes, 5.38%, 01/15/22 | 513,000 | 514,924 | ||||||
Airlines–0.59% | ||||||||
Air Canada (Canada), | 180,000 | 199,350 | ||||||
Sr. Unsec. Gtd. Notes, 7.75%, 04/15/21(b) | 590,000 | 634,191 | ||||||
US Airways Pass Through Trust, Series 1998-1, Class C, Sec. Third Lien Pass Through Ctfs., 6.82%, 01/30/19 | 66,109 | 66,439 | ||||||
899,980 | ||||||||
Alternative Carriers–2.13% | ||||||||
EarthLink Holdings Corp., | 420,000 | 438,900 | ||||||
Sr. Unsec. Gtd. Global Notes, 8.88%, 05/15/19 | 310,000 | 323,175 | ||||||
Level 3 Communications, Inc., Sr. Unsec. Global Notes, 5.75%, 12/01/22 | 1,122,000 | 1,122,000 | ||||||
Level 3 Financing, Inc., Sr. Unsec. Gtd. Global Notes, 5.38%, 08/15/22 | 1,355,000 | 1,375,325 | ||||||
3,259,400 | ||||||||
Apparel Retail–1.64% | ||||||||
Hot Topic, Inc., Sr. Sec. Gtd. First Lien Notes, 9.25%, 06/15/21(b) | 1,192,000 | 1,250,110 | ||||||
Men’s Wearhouse Inc. (The), Sr. Unsec. Gtd. Global Notes, 7.00%, 07/01/22 | 988,000 | 1,065,805 |
Principal Amount | Value | |||||||
Apparel Retail–(continued) | ||||||||
Neiman Marcus Group Ltd. LLC, Sr. Unsec. Gtd. Notes, 8.00%, 10/15/21(b) | $ | 185,000 | $ | 197,256 | ||||
2,513,171 | ||||||||
Apparel, Accessories & Luxury Goods–0.16% | ||||||||
William Carter Co. (The), Sr. Unsec. Gtd. Global Notes, 5.25%, 08/15/21 | 244,000 | 252,235 | ||||||
Application Software–0.37% | ||||||||
Nuance Communications Inc., Sr. Unsec. Gtd. Notes, 5.38%, 08/15/20(b) | 304,000 | 307,800 | ||||||
SS&C Technologies Holdings, Inc., Sr. Unsec. Gtd. Notes, 5.88%, 07/15/23(b) | 257,000 | 260,213 | ||||||
568,013 | ||||||||
Asset Management & Custody Banks–1.28% | ||||||||
Alphabet Holding Co., Inc., Sr. Unsec. Global PIK Notes, 8.50%, 11/01/17(c) | 1,322,000 | 1,326,957 | ||||||
DJO Finance LLC/Corp., Sec. Second Lien Notes, 8.13%, 06/15/21(b) | 611,000 | 632,385 | ||||||
1,959,342 | ||||||||
Auto Parts & Equipment–1.92% | ||||||||
CTP Transportation Products LLC/CTP Finance Inc., Sr. Sec. Notes, 8.25%, 12/15/19(b) | 670,000 | 714,387 | ||||||
Dana Holding Corp., Sr. Unsec. Notes, | 133,000 | 136,658 | ||||||
5.50%, 12/15/24 | 223,000 | 221,327 | ||||||
Gestamp Funding Luxembourg S.A. (Spain), Sr. Sec. Gtd. First Lien Notes, 5.63%, 05/31/20(b) | 220,000 | 226,050 | ||||||
Nexteer Automotive Group Ltd., Sr. Unsec. Gtd. Notes, 5.88%, 11/15/21(b) | 150,000 | 154,125 | ||||||
Stackpole International Intermediate Co. S.A./Stackpole International Powder Metal (Canada), Sr. Sec. Gtd. First Lien Notes, 7.75%, 10/15/21(b) | 1,128,000 | 1,116,720 | ||||||
Tenneco Inc., Sr. Unsec. Gtd. Global Notes, 5.38%, 12/15/24 | 368,000 | 379,960 | ||||||
2,949,227 | ||||||||
Automotive Retail–0.19% | ||||||||
CST Brands, Inc., Sr. Unsec. Gtd. Global Notes, 5.00%, 05/01/23 | 291,000 | 290,636 | ||||||
Biotechnology–0.00% | ||||||||
Savient Pharmaceuticals, Inc., Sr. Unsec. Conv. Notes, 4.75%, 02/01/18(d) | 120,000 | 0 | ||||||
Broadcasting–1.45% | ||||||||
Clear Channel Worldwide Holdings Inc., Series B, Sr. Unsec. Gtd. Global Notes, 6.50%, 11/15/22 | 258,000 | 269,610 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
Principal Amount | Value | |||||||
Broadcasting–(continued) | ||||||||
iHeartCommunications, Inc., | $ | 317,000 | $ | 287,678 | ||||
Sr. Sec. Gtd. First Lien Notes, 10.63%, 03/15/23(b) | 462,000 | 438,900 | ||||||
LIN Television Corp., Sr. Unsec. Gtd. Global Notes, 6.38%, 01/15/21 | 388,000 | 399,640 | ||||||
Sinclair Television Group Inc., Sr. Unsec. Gtd. Notes, 5.63%, 08/01/24(b) | 835,000 | 820,387 | ||||||
2,216,215 | ||||||||
Building Products–2.81% | ||||||||
Builders FirstSource Inc., Sr. Sec. First Lien Notes, 7.63%, 06/01/21(b) | 1,210,000 | 1,255,375 | ||||||
Building Materials Holding Corp., Sr. Sec. Notes, 9.00%, 09/15/18(b) | 742,000 | 799,505 | ||||||
Gibraltar Industries Inc., Sr. Unsec. Gtd. Sub. Global Notes, 6.25%, 02/01/21 | 1,010,000 | 1,045,350 | ||||||
Hardwoods Acquisition, Inc., Sr. Sec. Gtd. First Lien Notes, 7.50%, 08/01/21(b) | 215,000 | 209,356 | ||||||
NCI Building Systems, Inc., Sr. Unsec. Gtd. Notes, 8.25%, 01/15/23(b) | 150,000 | 159,938 | ||||||
Norbord Inc. (Canada), | 449,000 | 452,727 | ||||||
Sr. Sec. Gtd. First Lien Notes, 6.25%, 04/15/23(b) | 375,000 | 379,486 | ||||||
4,301,737 | ||||||||
Business Equipment & Services–0.20% | ||||||||
ADT Corp. (The), Sr. Unsec. Global Notes, 6.25%, 10/15/21 | 292,000 | 310,250 | ||||||
Cable & Satellite–5.63% | ||||||||
CCO Holdings LLC/CCO Holdings Capital Corp., | 245,000 | 242,550 | ||||||
Sr. Unsec. Gtd. Notes, 5.13%, 05/01/23(b) | 1,784,000 | 1,741,630 | ||||||
DigitalGlobe Inc., Sr. Unsec. Gtd. Bonds, 5.25%, 02/01/21(b) | 333,000 | 328,005 | ||||||
DISH DBS Corp., Sr. Unsec. Gtd. Global Notes, | 770,000 | 776,737 | ||||||
5.88%, 11/15/24 | 1,295,000 | 1,249,675 | ||||||
Hughes Satellite Systems Corp., Sr. Unsec. Gtd. Global Notes, 7.63%, 06/15/21 | 237,000 | 261,885 | ||||||
Intelsat Jackson Holdings S.A. (Luxembourg), Sr. Unsec. Gtd. Global Bonds, 5.50%, 08/01/23 | 1,030,000 | 916,700 | ||||||
Intelsat Luxembourg S.A. (Luxembourg), Sr. Unsec. Gtd. Global Bonds, 7.75%, 06/01/21 | 485,000 | 407,400 | ||||||
Numericable-SFR S.A.S. (France), Sr. Sec. Gtd. First Lien Bonds, 6.00%, 05/15/22(b) | 1,420,000 | 1,402,250 |
Principal Amount | Value | |||||||
Cable & Satellite–(continued) | ||||||||
Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH (Germany), Sr. Sec. Gtd. Bonds, 5.00%, 01/15/25(b) | $ | 490,000 | $ | 486,325 | ||||
VTR Finance B.V. (Chile), Sr. Sec. Notes, 6.88%, 01/15/24(b) | 590,000 | 606,225 | ||||||
Ziggo Bond B.V. (Netherlands), | 200,000 | 198,426 | ||||||
8,617,808 | ||||||||
Casinos & Gaming–0.66% | ||||||||
Boyd Gaming Corp., Sr. Unsec. Gtd. Global Notes, 9.00%, 07/01/20 | 402,000 | 438,180 | ||||||
Isle of Capri Casinos, Inc., Sr. Unsec. Gtd. Global Notes, 5.88%, 03/15/21 | 207,000 | 213,728 | ||||||
MGM Resorts International, Sr. Unsec. Gtd. Notes, 7.75%, 03/15/22 | 319,000 | 352,096 | ||||||
1,004,004 | ||||||||
Coal & Consumable Fuels–0.71% | ||||||||
CONSOL Energy Inc., Sr. Unsec. Gtd. Global Notes, 5.88%, 04/15/22 | 1,275,000 | 1,093,313 | ||||||
Commercial Printing–0.47% | ||||||||
Multi-Color Corp., Sr. Unsec. Gtd. Notes, 6.13%, 12/01/22 | 698,000 | 715,450 | ||||||
Communications Equipment–0.59% | ||||||||
Avaya Inc., Sr. Sec. Gtd. First Lien Notes, | 400,000 | 391,500 | ||||||
9.00%, 04/01/19(b) | 498,000 | 515,430 | ||||||
906,930 | ||||||||
Computer & Electronics Retail–0.44% | ||||||||
Rent-A-Center, Inc., Sr. Unsec. Gtd. Global Notes, 4.75%, 05/01/21 | 760,000 | 671,650 | ||||||
Construction & Engineering–0.52% | ||||||||
AECOM, Sr. Unsec. Gtd. Notes, 5.75%, 10/15/22(b) | 780,000 | 794,623 | ||||||
Construction Machinery & Heavy Trucks–3.37% | ||||||||
Allied Specialty Vehicles, Inc., Sr. Sec. Notes, 8.50%, 11/01/19(b) | 982,000 | 1,031,100 | ||||||
Commercial Vehicle Group Inc., Sec. Gtd. Second Lien Global Notes, 7.88%, 04/15/19 | 1,215,000 | 1,251,450 | ||||||
Meritor Inc., Sr. Unsec. Gtd. Notes, | 186,000 | 186,000 | ||||||
6.75%, 06/15/21 | 377,000 | 392,551 | ||||||
Navistar International Corp., | 770,000 | 739,200 | ||||||
Sr. Unsec. Sub. Conv. Bonds, 4.75%, 04/15/19 | 455,000 | 391,584 | ||||||
Oshkosh Corp., Sr. Unsec. Gtd. Global Notes, | 958,000 | 989,135 | ||||||
5.38%, 03/01/25 | 179,000 | 182,133 | ||||||
5,163,153 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
Principal Amount | Value | |||||||
Construction Materials–1.81% | ||||||||
Building Materials Corp. of America, Sr. Unsec. Notes, 5.38%, 11/15/24(b) | $ | 1,115,000 | $ | 1,105,244 | ||||
Cemex S.A.B. de C.V. (Mexico), Sr. Sec. Gtd. First Lien Notes, 5.88%, 03/25/19(b) | 630,000 | 651,262 | ||||||
CPG Merger Sub LLC, Sr. Unsec. Gtd. Notes, 8.00%, 10/01/21(b) | 120,000 | 123,750 | ||||||
Shea Homes L.P./Shea Homes Funding Corp., Sr. Unsec. Notes, 5.88%, 04/01/23(b) | 143,000 | 144,788 | ||||||
Unifrax I LLC/Unifrax Holding Co., Sr. Unsec. Gtd. Notes, | 372,000 | 376,650 | ||||||
7.50%, 02/15/19(b) | 370,000 | 374,625 | ||||||
2,776,319 | ||||||||
Consumer Finance–1.36% | ||||||||
Ally Financial Inc., Sr. Unsec. Global Notes, | 1,574,000 | 1,511,040 | ||||||
5.13%, 09/30/24 | 176,000 | 176,880 | ||||||
Credit Acceptance Corp., Sr. Unsec. Gtd. Notes, 7.38%, 03/15/23(b) | 380,000 | 395,200 | ||||||
2,083,120 | ||||||||
Data Processing & Outsourced Services–1.08% | ||||||||
First Data Corp., Sr. Unsec. Gtd. Sub. Global Notes, 11.75%, 08/15/21 | 1,470,000 | 1,657,425 | ||||||
Diversified Chemicals–0.15% | ||||||||
Tronox Finance LLC, Sr. Unsec. Gtd. Notes, 7.50%, 03/15/22(b) | 244,000 | 232,410 | ||||||
Diversified Metals & Mining–0.97% | ||||||||
Compass Minerals International, Inc., Sr. Unsec. Gtd. Notes, | 350,000 | 345,625 | ||||||
FMG Resources (August 2006) Pty. Ltd. (Australia), Sr. Unsec. Gtd. Notes, | 583,000 | 414,659 | ||||||
8.25%, 11/01/19(b) | 845,000 | 720,362 | ||||||
1,480,646 | ||||||||
Electrical Components & Equipment–0.97% | ||||||||
EnerSys, Sr. Unsec. Gtd. Notes, 5.00%, 04/30/23(b) | 858,000 | 852,638 | ||||||
Sensata Technologies B.V. (Netherlands), Sr. Unsec. Gtd. Notes, | 270,000 | 271,350 | ||||||
5.00%, 10/01/25(b) | 370,000 | 361,675 | ||||||
1,485,663 | ||||||||
Environmental & Facilities Services–0.18% | ||||||||
ADS Waste Holdings, Inc., Sr. Unsec. Gtd. Global Notes, 8.25%, 10/01/20 | 271,000 | 280,485 | ||||||
Food Retail–1.05% | ||||||||
1011778 BC ULC/ New Red Finance, Inc. (Canada), Sec. Gtd. Second Lien Notes, 6.00%, 04/01/22(b) | 1,551,000 | 1,601,407 |
Principal Amount | Value | |||||||
Forest Products–0.00% | ||||||||
Emerald Plantation Holdings Ltd. (Cayman Islands), Sr. Sec. Gtd. First Lien Global PIK Notes, 8.00%, 01/30/20(c)(e) | $ | 5,751 | $ | 5,162 | ||||
Sino-Forest Corp. (Hong Kong), Sr. Unsec. Gtd. Notes, 6.25%, 10/21/17(b)(d)(e) | 40,000 | 200 | ||||||
5,362 | ||||||||
Gas Utilities–1.10% | ||||||||
Ferrellgas L.P./Ferrellgas Finance Corp., | 425,000 | 429,250 | ||||||
6.75%, 01/15/22 | 127,000 | 128,905 | ||||||
Sr. Unsec. Gtd. Notes, 6.75%, 06/15/23(b) | 308,000 | 311,080 | ||||||
Suburban Propane Partners, L.P./Suburban Energy Finance Corp., Sr. Unsec. Global Notes, 5.50%, 06/01/24 | 813,000 | 823,162 | ||||||
1,692,397 | ||||||||
General Merchandise Stores–1.07% | ||||||||
Dollar Tree, Inc., Sr. Unsec. Gtd. Notes, 5.75%, 03/01/23(b) | 1,564,000 | 1,646,110 | ||||||
Health Care Equipment–0.13% | ||||||||
Universal Hospital Services Inc., Sec. Gtd. Second Lien Global Notes, 7.63%, 08/15/20 | 213,000 | 199,155 | ||||||
Health Care Facilities–5.15% | ||||||||
Acadia Healthcare Co., Inc., Sr. Unsec. Gtd. Notes, 5.63%, 02/15/23(b) | 223,000 | 227,460 | ||||||
Community Health Systems, Inc., Sr. Unsec. Gtd. Global Notes, 6.88%, 02/01/22 | 742,202 | 786,734 | ||||||
HCA Holdings, Inc., Sr. Unsec. Notes, 6.25%, 02/15/21 | 509,000 | 550,993 | ||||||
HCA, Inc., | 801,000 | 870,837 | ||||||
Sr. Sec. Gtd. First Lien Notes, 5.25%, 04/15/25 | 288,000 | 300,600 | ||||||
Sr. Unsec. Gtd. Global Notes, 7.50%, 02/15/22 | 334,000 | 385,353 | ||||||
Sr. Unsec. Gtd. Notes, 5.38%, 02/01/25 | 1,663,000 | 1,692,102 | ||||||
Surgical Care Affiliates, Inc., Sr. Unsec. Gtd. Notes, 6.00%, 04/01/23(b) | 770,000 | 775,775 | ||||||
Tenet Healthcare Corp., | 395,000 | 422,156 | ||||||
Sr. Unsec. Global Notes, 6.75%, 02/01/20 | 360,000 | 378,900 | ||||||
8.13%, 04/01/22 | 1,125,000 | 1,237,500 | ||||||
Sr. Unsec. Notes, 6.75%, 06/15/23(b) | 249,000 | 255,225 | ||||||
7,883,635 | ||||||||
Health Care Services–0.99% | ||||||||
MPH Acquisition Holdings LLC, Sr. Unsec. Gtd. Notes, 6.63%, 04/01/22(b) | 1,145,000 | 1,179,350 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
Principal Amount | Value | |||||||
Health Care Services–(continued) | ||||||||
Omnicare Inc., Sr. Unsec. Gtd. Notes, 5.00%, 12/01/24 | $ | 305,000 | $ | 331,306 | ||||
1,510,656 | ||||||||
Health Care Supplies–0.09% | ||||||||
Alere Inc., Sr. Unsec. Gtd. Sub. Notes, 6.38%, 07/01/23(b) | 139,000 | 141,606 | ||||||
Home Improvement Retail–0.85% | ||||||||
Hillman Group Inc. (The), Sr. Unsec. Notes, 6.38%, 07/15/22(b) | 1,365,000 | 1,296,750 | ||||||
Homebuilding–4.28% | ||||||||
Ashton Woods USA LLC/Ashton Woods Finance Co., Sr. Unsec. Notes, 6.88%, 02/15/21(b) | 1,502,000 | 1,408,125 | ||||||
AV Homes, Inc., Sr. Unsec. Gtd. Global Notes, 8.50%, 07/01/19 | 270,000 | 262,238 | ||||||
Beazer Homes USA Inc., Sr. Unsec. Gtd. Global Notes, 7.50%, 09/15/21 | 1,075,000 | 1,089,781 | ||||||
K. Hovnanian Enterprises Inc., | 92,000 | 94,760 | ||||||
Sr. Unsec. Gtd. Notes, 7.00%, 01/15/19(b) | 770,000 | 703,587 | ||||||
8.00%, 11/01/19(b) | 990,000 | 908,325 | ||||||
KB Home, Sr. Unsec. Gtd. Notes, 7.00%, 12/15/21 | 181,000 | 187,335 | ||||||
7.50%, 09/15/22 | 105,000 | 109,725 | ||||||
Meritage Homes Corp., | 270,000 | 290,588 | ||||||
Sr. Unsec. Gtd. Notes, 6.00%, 06/01/25(b) | 305,000 | 305,763 | ||||||
Ryland Group Inc. (The), Sr. Unsec. Gtd. Notes, 5.38%, 10/01/22 | 784,000 | 791,840 | ||||||
Taylor Morrison Communities Inc./ Monarch Communities Inc., Sr. Unsec. Gtd. Notes, 5.88%, 04/15/23(b) | 408,000 | 402,900 | ||||||
6,554,967 | ||||||||
Hotels, Resorts & Cruise Lines–0.22% | ||||||||
Interval Acquisition Corp., Sr. Unsec. Gtd. Notes, 5.63%, 04/15/23(b) | 330,000 | 335,775 | ||||||
Household Products–0.66% | ||||||||
Reynolds Group Issuer Inc./LLC (New Zealand), | 357,000 | 367,264 | ||||||
Sr. Unsec. Gtd. Global Notes, 8.25%, 02/15/21 | 618,000 | 643,492 | ||||||
1,010,756 | ||||||||
Independent Power Producers & Energy Traders–1.57% | ||||||||
AES Corp., | 754,000 | 830,342 | ||||||
Sr. Unsec. Notes, 5.50%, 04/15/25 | 320,000 | 312,000 |
Principal Amount | Value | |||||||
Independent Power Producers & Energy Traders–(continued) | ||||||||
Calpine Corp., | $ | 73,000 | $ | 77,745 | ||||
Sr. Unsec. Global Notes, 5.38%, 01/15/23 | 386,000 | 377,797 | ||||||
5.50%, 02/01/24 | 367,000 | 358,743 | ||||||
NRG Energy Inc., Sr. Unsec. Gtd. Global Notes, 6.25%, 07/15/22 | 298,000 | 305,450 | ||||||
Red Oak Power LLC, Series A, Sr. Sec. First Lien Bonds, 8.54%, 11/30/19 | 128,273 | 138,856 | ||||||
2,400,933 | ||||||||
Industrial Machinery–0.92% | ||||||||
Optimas OE Solutions Holding, LLC/Optimas OE Solutions, Inc., Sr. Sec. Notes, 8.63%, 06/01/21(b) | 606,000 | 618,120 | ||||||
Waterjet Holdings, Inc., Sr. Sec. Gtd. Notes, 7.63%, 02/01/20(b) | 755,000 | 788,031 | ||||||
1,406,151 | ||||||||
Integrated Oil & Gas–0.59% | ||||||||
California Resources Corp., Sr. Unsec. Gtd. Global Notes, 5.50%, 09/15/21 | 1,031,000 | 899,548 | ||||||
Integrated Telecommunication Services–0.63% | ||||||||
Telecom Italia S.p.A. (Italy), Sr. Unsec. Notes, 5.30%, 05/30/24(b) | 972,000 | 972,000 | ||||||
Internet Retail–0.28% | ||||||||
Netflix, Inc., Sr. Unsec. Global Notes, 5.75%, 03/01/24 | 411,000 | 428,468 | ||||||
Internet Software & Services–1.22% | ||||||||
CyrusOne L.P./CyrusOne Finance Corp., | 505,000 | 526,462 | ||||||
Sr. Unsec. Gtd. Notes, 6.38%, 11/15/22(b) | 207,000 | 213,728 | ||||||
Equinix Inc., Sr. Unsec. Notes, | 481,000 | 484,607 | ||||||
5.38%, 04/01/23 | 641,000 | 641,000 | ||||||
1,865,797 | ||||||||
Marine–0.86% | ||||||||
Navios Maritime Acquisition Corp./ Navios Acquisition Finance U.S. Inc., Sr. Sec. Gtd. First Lien Mortgage Notes, 8.13%, 11/15/21(b) | 1,338,000 | 1,317,930 | ||||||
Metal & Glass Containers–0.88% | ||||||||
Berry Plastics Corp., Sec. Gtd. Second Lien Notes, 5.50%, 05/15/22 | 887,000 | 895,870 | ||||||
Coveris Holdings S.A. (Luxembourg), Sr. Unsec. Gtd. Notes, 7.88%, 11/01/19(b) | 249,000 | 250,245 | ||||||
Owens-Brockway Glass Container Inc., Sr. Unsec. Gtd. Notes, 5.00%, 01/15/22(b) | 200,000 | 200,000 | ||||||
1,346,115 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
Principal Amount | Value | |||||||
Movies & Entertainment–0.23% | ||||||||
DreamWorks Animation SKG, Inc., Sr. Unsec. Gtd. Notes, 6.88%, 08/15/20(b) | $ | 360,000 | $ | 359,550 | ||||
Oil & Gas Drilling–0.31% | ||||||||
Pioneer Energy Services Corp., Sr. Unsec. Gtd. Global Notes, 6.13%, 03/15/22 | 574,000 | 470,680 | ||||||
Oil & Gas Equipment & Services–0.95% | ||||||||
Bristow Group, Inc., Sr. Unsec. Gtd. Notes, 6.25%, 10/15/22 | 443,000 | 441,893 | ||||||
Exterran Partners, L.P./EXLP Finance Corp., Sr. Unsec. Gtd. Global Notes, 6.00%, 04/01/21 | 657,000 | 637,290 | ||||||
Key Energy Services, Inc., Sr. Unsec. Gtd. Notes, 6.75%, 03/01/21 | 634,000 | 374,060 | ||||||
1,453,243 | ||||||||
Oil & Gas Exploration & Production–6.21% | ||||||||
Antero Resources Corp., Sr. Unsec. Gtd. Global Notes, | 339,000 | 328,830 | ||||||
6.00%, 12/01/20 | 250,000 | 252,500 | ||||||
Approach Resources Inc., Sr. Unsec. Gtd. Global Notes, 7.00%, 06/15/21 | 583,000 | 530,530 | ||||||
Carrizo Oil & Gas, Inc., | 470,000 | 473,525 | ||||||
Sr. Unsec. Gtd. Notes, 7.50%, 09/15/20 | 209,000 | 221,018 | ||||||
Chaparral Energy, Inc., Sr. Unsec. Gtd. Global Notes, | 324,000 | 241,380 | ||||||
9.88%, 10/01/20 | 716,000 | 576,380 | ||||||
Chesapeake Energy Corp., Sr. Unsec. Gtd. Notes, 6.63%, 08/15/20 | 409,000 | 400,820 | ||||||
Concho Resources Inc., Sr. Unsec. Gtd. Global Notes, | 114,000 | 114,000 | ||||||
5.50%, 04/01/23 | 550,000 | 552,750 | ||||||
Denbury Resources Inc., Sr. Unsec. Gtd. Sub. Notes, 5.50%, 05/01/22 | 852,000 | 766,800 | ||||||
Halcón Resources Corp., Sec. Gtd. Second Lien Notes, | 956,000 | 948,830 | ||||||
Laredo Petroleum, Inc., | 428,000 | 451,540 | ||||||
Sr. Unsec. Gtd. Notes, 6.25%, 03/15/23 | 409,000 | 416,157 | ||||||
Parsley Energy LLC/Parsley Finance Corp., Sr. Unsec. Notes, 7.50%, 02/15/22(b) | 509,000 | 521,725 | ||||||
QEP Resources Inc., | 215,000 | 209,625 | ||||||
Sr. Unsec. Notes, 5.38%, 10/01/22 | 226,000 | 219,785 | ||||||
Rice Energy Inc., Sr. Unsec. Gtd. Notes, 7.25%, 05/01/23(b) | 1,016,000 | 1,046,480 |
Principal Amount | Value | |||||||
Oil & Gas Exploration & Production–(continued) | ||||||||
SandRidge Energy, Inc., | $ | 500,000 | $ | 457,500 | ||||
Sr. Unsec. Gtd. Global Notes, 7.50%, 03/15/21 | 515,000 | 224,025 | ||||||
SM Energy Co., | 143,000 | 147,290 | ||||||
Sr. Unsec. Notes, 6.13%, 11/15/22(b) | 403,000 | 415,090 | ||||||
9,516,580 | ||||||||
Oil & Gas Storage & Transportation–2.00% | ||||||||
Crestwood Midstream Partners L.P./Crestwood Midstream Finance Corp., Sr. Unsec. Gtd. Global Notes, 6.00%, 12/15/20 | 538,000 | 559,520 | ||||||
Energy Transfer Equity, L.P., Sr. Sec. First Lien Notes, 5.50%, 06/01/27 | 307,000 | 307,000 | ||||||
MarkWest Energy Partners, L.P./MarkWest Energy Finance Corp., Sr. Unsec. Gtd. Notes, | 595,000 | 583,100 | ||||||
5.50%, 02/15/23 | 413,000 | 425,390 | ||||||
NGL Energy Partners L.P./NGL Energy Finance Corp., Sr. Unsec. Gtd. Global Notes, 6.88%, 10/15/21 | 316,000 | 331,800 | ||||||
Sabine Pass Liquefaction LLC, Sr. Sec. First Lien Global Notes, 5.63%, 04/15/23 | 125,000 | 125,000 | ||||||
Teekay Corp. (Bermuda), Sr. Unsec. Global Notes, 8.50%, 01/15/20 | 316,000 | 353,130 | ||||||
Teekay Offshore Partners L.P./Teekay Offshore Finance Corp. (Bermuda), Sr. Unsec. Global Notes, 6.00%, 07/30/19 | 414,000 | 374,152 | ||||||
3,059,092 | ||||||||
Packaged Foods & Meats–3.43% | ||||||||
Diamond Foods Inc., Sr. Unsec. Gtd. Notes, 7.00%, 03/15/19(b) | 1,505,000 | 1,552,031 | ||||||
FAGE Dairy Industry S.A./FAGE USA Dairy Industry, Inc. (Greece), Sr. Unsec. Gtd. Notes, 9.88%, 02/01/20(b) | 620,000 | 643,250 | ||||||
JBS Investments GmbH (Brazil), | 900,000 | 930,375 | ||||||
REGS, Sr. Unsec. Gtd. Euro Notes, 7.25%, 04/03/24(b) | 1,015,000 | 1,053,063 | ||||||
Post Holdings Inc., | 192,000 | 196,320 | ||||||
Sr. Unsec. Gtd. Notes, 6.75%, 12/01/21(b) | 114,000 | 114,143 | ||||||
Smithfield Foods Inc., Sr. Unsec. Notes, | 100,000 | 104,500 | ||||||
6.63%, 08/15/22 | 331,000 | 352,515 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
Principal Amount | Value | |||||||
Packaged Foods & Meats–(continued) | ||||||||
WhiteWave Foods Co. (The), Sr. Unsec. Gtd. Notes, 5.38%, 10/01/22 | $ | 293,000 | $ | 310,946 | ||||
5,257,143 | ||||||||
Paper Packaging–0.38% | ||||||||
Graphic Packaging International Inc., Sr. Unsec. Gtd. Notes, 4.75%, 04/15/21 | 27,000 | 27,540 | ||||||
4.88%, 11/15/22 | 550,000 | 559,625 | ||||||
587,165 | ||||||||
Paper Products–0.77% | ||||||||
Mercer International Inc., Sr. Unsec. Gtd. Global Notes, 7.00%, 12/01/19 | 396,000 | 418,770 | ||||||
PH Glatfelter Co., Sr. Unsec. Gtd. Global Notes, 5.38%, 10/15/20 | 735,000 | 758,888 | ||||||
1,177,658 | ||||||||
Personal Products–0.16% | ||||||||
NBTY Inc., Sr. Unsec. Gtd. Global Notes, 9.00%, 10/01/18 | 237,000 | 244,406 | ||||||
Pharmaceuticals–3.57% | ||||||||
Concordia Healthcare Corp. (Canada), Sr. Unsec. Gtd. Notes, 7.00%, 04/15/23(b) | 1,113,000 | 1,118,565 | ||||||
Endo Finance LLC/ Endo Ltd./Endo Finco Inc., Sr. Unsec. Gtd. Notes, 6.00%, 02/01/25(b) | 970,000 | 990,613 | ||||||
Quintiles Transnational Corp., Sr. Unsec. Gtd. Notes, 4.88%, 05/15/23(b) | 137,000 | 138,541 | ||||||
Valeant Pharmaceuticals International, Inc., Sr. Unsec. Gtd. Notes, | 388,000 | 392,850 | ||||||
5.63%, 12/01/21(b) | 956,000 | 981,095 | ||||||
5.88%, 05/15/23(b) | 200,000 | 206,000 | ||||||
6.13%, 04/15/25(b) | 1,580,000 | 1,635,300 | ||||||
5,462,964 | ||||||||
Real Estate Services–0.19% | ||||||||
Kennedy-Wilson Inc., Sr. Unsec. Gtd. Notes, 5.88%, 04/01/24 | 288,000 | 290,160 | ||||||
Regional Banks–0.48% | ||||||||
Synovus Financial Corp., Sr. Unsec. Global Notes, 7.88%, 02/15/19 | 655,000 | 740,150 | ||||||
Renewable Electricity–0.29% | ||||||||
TerraForm Power Operating, LLC, Sr. Unsec. Gtd. Notes, 5.88%, 02/01/23(b) | 431,000 | 441,775 | ||||||
Restaurants–0.41% | ||||||||
Carrols Restaurant Group, Inc., Sec. Second Lien Notes, | 596,000 | 624,310 | ||||||
Semiconductor Equipment–0.50% | ||||||||
Amkor Technology Inc., Sr. Unsec. Global Notes, 6.38%, 10/01/22 | 749,000 | 762,108 |
Principal Amount | Value | |||||||
Semiconductors–0.61% | ||||||||
Micron Technology, Inc., | $ | 613,000 | $ | 631,390 | ||||
Sr. Unsec. Notes, 5.25%, 08/01/23(b) | 320,000 | 308,400 | ||||||
939,790 | ||||||||
Specialized Consumer Services–0.72% | ||||||||
ServiceMaster Co., LLC (The), Sr. Unsec. Notes, 7.45%, 08/15/27 | 1,086,000 | 1,105,005 | ||||||
Specialized Finance–2.68% | ||||||||
Aircastle Ltd., | 152,000 | 173,660 | ||||||
Sr. Unsec. Notes, | 555,000 | 561,937 | ||||||
5.50%, 02/15/22 | 420,000 | 431,550 | ||||||
CIT Group Inc., Sr. Unsec. Global Notes, | 371,000 | 369,145 | ||||||
5.00%, 08/01/23 | 270,000 | 270,675 | ||||||
Fly Leasing Ltd. (Ireland), Sr. Unsec. Global Notes, 6.75%, 12/15/20 | 621,000 | 648,945 | ||||||
International Lease Finance Corp., | 850,000 | 920,125 | ||||||
Sr. Unsec. Notes, 8.25%, 12/15/20 | 60,000 | 71,475 | ||||||
MSCI Inc., Sr. Unsec. Gtd. Notes., 5.25%, 11/15/24(b) | 640,000 | 651,200 | ||||||
4,098,712 | ||||||||
Specialized REIT’s–0.74% | ||||||||
Crown Castle International Corp., | 810,000 | 820,125 | ||||||
Sr. Unsec. Notes, 4.88%, 04/15/22 | 313,000 | 316,130 | ||||||
1,136,255 | ||||||||
Specialty Chemicals–0.57% | ||||||||
PolyOne Corp., Sr. Unsec. Global Notes, 5.25%, 03/15/23 | 880,000 | 873,400 | ||||||
Specialty Stores–0.42% | ||||||||
Michaels Stores Inc., Sr. Unsec. Gtd. Sub. Notes, 5.88%, 12/15/20(b) | 615,000 | 641,137 | ||||||
Steel–1.56% | ||||||||
ArcelorMittal (Luxembourg), Sr. Unsec. Global Notes, | 260,000 | 274,950 | ||||||
7.00%, 02/25/22 | 405,000 | 439,425 | ||||||
Steel Dynamics, Inc., Sr. Unsec. Gtd. Global Notes, | 291,000 | 292,819 | ||||||
5.50%, 10/01/24 | 788,000 | 791,940 | ||||||
SunCoke Energy Partners L.P./SunCoke Energy Partners Finance Corp., Sr. Unsec. Gtd. Notes, 7.38%, 02/01/20(b) | 583,000 | 591,016 | ||||||
2,390,150 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
Principal Amount | Value | |||||||
Trading Companies & Distributors–0.62% | ||||||||
AerCap Ireland Capital Ltd./AerCap Global Aviation Trust (Netherlands), Sr. Unsec. Gtd. Notes, 5.00%, 10/01/21(b) | $ | 345,000 | $ | 356,644 | ||||
United Rentals North America Inc., | 41,000 | 39,924 | ||||||
Sr. Unsec. Gtd. Notes, 6.13%, 06/15/23 | 555,000 | 564,712 | ||||||
961,280 | ||||||||
Wireless Telecommunication Services–7.69% | ||||||||
Altice S.A. (Luxembourg), Sr. Unsec. Gtd. Notes, 7.75%, 05/15/22(b) | 1,220,000 | 1,186,450 | ||||||
Digicel Group Ltd. (Jamaica), Sr. Unsec. Notes, 8.25%, 09/30/20(b) | 400,000 | 403,000 | ||||||
Digicel Ltd. (Jamaica), | 500,000 | 491,250 | ||||||
Sr. Unsec. Notes, 6.00%, 04/15/21(b) | 600,000 | 579,000 | ||||||
SBA Communications Corp., Sr. Unsec. Global Notes, 4.88%, 07/15/22 | 1,297,000 | 1,267,817 | ||||||
Sprint Capital Corp., Sr. Unsec. Gtd. Global Notes, 6.88%, 11/15/28 | 865,000 | 748,225 | ||||||
Sprint Communications Inc., Sr. Unsec. Global Notes, | 500,000 | 458,750 | ||||||
11.50%, 11/15/21 | 150,000 | 177,375 | ||||||
Sprint Corp., Sr. Unsec. Gtd. Global Notes, | 292,000 | 288,715 | ||||||
7.63%, 02/15/25 | 1,295,000 | 1,223,775 | ||||||
7.88%, 09/15/23 | 865,000 | 845,537 | ||||||
T-Mobile USA, Inc., Sr. Unsec. Gtd. Global Notes, | 1,132,000 | 1,160,300 | ||||||
6.63%, 04/01/23 | 706,000 | 736,005 | ||||||
6.84%, 04/28/23 | 287,000 | 300,633 | ||||||
Wind Acquisition Finance S.A. (Italy), | 1,345,000 | 1,365,175 | ||||||
Sr. Sec. Gtd. First Lien Notes, 4.75%, 07/15/20(b) | 350,000 | 348,457 | ||||||
REGS, Sr. Sec. Gtd. First Lien Euro Notes, 6.50%, 04/30/20(b) | 200,000 | 209,750 | ||||||
11,790,214 | ||||||||
Total U.S. Dollar Denominated Bonds & Notes (Cost $151,792,200) |
| 142,880,781 | ||||||
Non-U.S. Dollar Denominated Bonds & |
| |||||||
Auto Parts & Equipment–0.46% | ||||||||
Alliance Automotive Finance PLC (United Kingdom), Sr. Sec. Gtd. First Lien Notes, 6.25%, 12/01/21(b) | EUR | 250,000 | 291,991 |
Principal Amount | Value | |||||||
Auto Parts & Equipment–(continued) | ||||||||
Autodis S.A. (France), Sr. Sec. Gtd. First Lien Notes, 6.50%, 02/01/19(b) | EUR | 360,000 | $ | 418,459 | ||||
710,450 | ||||||||
Cable & Satellite–0.15% | ||||||||
Virgin Media Secured Finance PLC (United Kingdom), Sr. Sec. Gtd. Notes, 4.88%, 01/15/27(b) | GBP | 150,000 | 227,593 | |||||
Casinos & Gaming–0.64% | ||||||||
Gala Electric Casinos PLC (United Kingdom), REGS, Sec. Gtd. Second Lien Euro Notes, 11.50%, 06/01/19(b) | GBP | 300,000 | 502,855 | |||||
Gala Group Finance PLC (United Kingdom), REGS, Sr. Sec. Gtd. First Lien Euro Notes, 8.88%, 09/01/18(b) | GBP | 198,000 | 327,140 | |||||
William Hill PLC (United Kingdom), Sr. Unsec. Gtd. Euro Notes, 4.25%, 06/05/20 | GBP | 100,000 | 156,341 | |||||
986,336 | ||||||||
Construction & Engineering–0.35% | ||||||||
Abengoa Finance S.A.U. (Spain), | EUR | 200,000 | 211,850 | |||||
REGS, Sr. Unsec. Gtd. Medium-Term Euro Notes, 8.88%, 02/05/18(b) | EUR | 275,000 | 323,489 | |||||
535,339 | ||||||||
Diversified Support Services–0.15% | ||||||||
AA Bond Co. Ltd. (United Kingdom), Sec. Second Lien Notes, 5.50%, 07/31/22(b) | GBP | 150,000 | 234,729 | |||||
Environmental & Facilities Services–0.21% | ||||||||
Waste Italia S.p.A. (Italy), Sr. Sec. Gtd. First Lien Notes, 10.50%, 11/15/19(b) | EUR | 325,000 | 317,096 | |||||
Home Furnishings–0.23% | ||||||||
Magnolia BC S.A. (Luxembourg), REGS, Sr. Sec. Gtd. First Lien Medium-Term Euro Notes, 9.00%, 08/01/20(b) | EUR | 300,000 | 357,079 | |||||
Hotels, Resorts & Cruise Lines–0.40% | ||||||||
Thomas Cook Finance PLC (United Kingdom), Sr. Unsec. Gtd. Bonds, 6.75%, 06/15/21(b) | EUR | 231,000 | 269,155 | |||||
Thomas Cook Group PLC (United Kingdom), Sr. Unsec. Gtd. Medium-Term Euro Notes, 7.75%, 06/22/17 | GBP | 200,000 | 337,830 | |||||
606,985 | ||||||||
Industrial Machinery–0.08% | ||||||||
SIG Combibloc Holdings S.C.A. (Luxembourg), Sr. Unsec. Bonds, 7.75%, 02/15/23(b) | EUR | 100,000 | 116,317 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
Principal Amount | Value | |||||||
Internet Software & Services–0.22% | ||||||||
United Group B.V. (Serbia), REGS, Sr. Sec. Gtd. Euro Notes, 7.88%, 11/15/20(b) | EUR | 280,000 | $ | 330,969 | ||||
Marine–0.14% | ||||||||
CMA CGM S.A. (France), Sr. Unsec. Notes, 7.75%, 01/15/21(b) | EUR | 200,000 | 223,558 | |||||
Multi-Sector Holdings–1.24% | ||||||||
Novalis S.A.S. (France), Sr. Unsec. Gtd. Bonds, 3.00%, 04/30/22(b) | EUR | 390,000 | 421,048 | |||||
Odeon & UCI Finco PLC (United Kingdom), | GBP | 110,000 | 180,189 | |||||
REGS, Sr. Sec. Gtd. First Lien Medium-Term Euro Notes, 9.00%, 08/01/18(b) | GBP | 795,000 | 1,302,274 | |||||
1,903,511 | ||||||||
Other Diversified Financial Services–0.72% | ||||||||
Boats Investments Netherlands B.V. (Netherlands), REGS, Series 97, Sr. Sec. Medium-Term Mortgage Euro PIK Notes, 11.00%, 03/31/17(b)(c) | EUR | 119,066 | 40,073 | |||||
Cabot Financial Luxembourg S.A. (United Kingdom), REGS, Sr. Sec. Gtd. First Lien Euro Notes, 10.38%, 10/01/19(b) | GBP | 115,000 | 197,541 | |||||
Financiere Gaillon 8 S.A.S. (France), Sr. Sec. First Lien Notes, 7.00%, 09/30/19(b) | EUR | 280,000 | 318,444 | |||||
Lowell Group Financing PLC (United Kingdom), REGS, Sr. Sec. Gtd. First Lien Euro Notes, 10.75%, 04/01/19(b) | GBP | 320,000 | 544,298 | |||||
1,100,356 | ||||||||
Packaged Foods & Meats–0.48% | ||||||||
Hydra Dutch Holdings 2 B.V. (Netherlands), Sr. Sec. Gtd. First Lien Notes, 8.00%, 04/15/19(b) | EUR | 290,000 | 333,050 | |||||
Moy Park (Bondco) PLC (United Kingdom), Sr. Unsec. Gtd. Notes, 6.25%, 05/29/21(b) | GBP | 250,000 | 404,610 | |||||
737,660 | ||||||||
Total Non-U.S. Dollar Denominated Bonds & Notes |
| 8,387,978 | ||||||
Variable Rate Senior Loan Interests–0.91%(g) |
| |||||||
Application Software–0.27% | ||||||||
SS&C Technologies Holdings, Inc., Term Loan, 0.00%, 02/02/16(h) | 405,000 | 405,000 | ||||||
Diversified Support Services–0.64% | ||||||||
Laureate Education, Inc., Sr. Sec. Gtd. Term Loan, 4.02%, 06/16/18 | 1,051,103 | 984,095 | ||||||
Total Variable Rate Senior Loan Interests (Cost $1,428,721) |
| 1,389,095 |
Shares | Value | |||||||
Common Stocks & Other Equity Interests–0.61% |
| |||||||
Automobile Manufacturers–0.46% | ||||||||
General Motors Co.(i) | 13,101 | $ | 436,656 | |||||
General Motors Co., Wts. expiring 07/10/16(i)(j) | 6,025 | 143,214 | ||||||
General Motors Co., Wts. expiring 07/10/19(i)(j) | 6,025 | 96,701 | ||||||
Motors Liquidation Co. GUC Trust | 1,538 | 29,607 | ||||||
706,178 | ||||||||
Broadcasting–0.00% | ||||||||
Adelphia Communications Corp.(j)(k) | 3,280 | 2,460 | ||||||
Adelphia Recovery Trust, Series ACC-1(j)(k) | 318,570 | 637 | ||||||
Adelphia Recovery Trust, Series Arahova(j)(k) | 109,170 | 1,212 | ||||||
4,309 | ||||||||
Casinos & Gaming–0.06% | ||||||||
MGM Resorts International(j) | 5,113 | 93,312 | ||||||
Forest Products–0.00% | ||||||||
Emerald Plantation Holdings Ltd. (Cayman Islands)(e)(j) | 6,205 | 2,110 | ||||||
Integrated Telecommunication Services–0.09% | ||||||||
Hawaiian Telcom Holdco Inc., Wts. expiring 10/28/15(j)(l) | 1,527 | 19,088 | ||||||
Largo Ltd., Class A (Luxembourg)(j) | 17,563 | 11,123 | ||||||
Largo Ltd., Class B (Luxembourg)(j) | 158,069 | 100,108 | ||||||
130,319 | ||||||||
Paper Products–0.00% | ||||||||
Verso Corp.(j) | 2,150 | 1,419 | ||||||
Total Common Stocks & Other Equity Interests |
| 937,647 | ||||||
Principal Amount | ||||||||
U.S. Treasury Bills–0.34%(m)(n) |
| |||||||
0.00%, 08/20/15 | $ | 80,000 | 80,000 | |||||
0.06%, 08/20/15 | 20,000 | 20,000 | ||||||
0.07%, 08/20/15 | 225,000 | 225,000 | ||||||
0.08%, 08/20/15 | 90,000 | 90,000 | ||||||
0.09%, 08/20/15 | 100,000 | 100,000 | ||||||
Total U.S. Treasury Bills |
| 515,000 | ||||||
TOTAL INVESTMENTS–100.60% |
| 154,110,501 | ||||||
OTHER ASSETS LESS LIABILITIES–(0.60)% |
| (918,560 | ) | |||||
NET ASSETS–100.00% |
| $ | 153,191,941 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
Investment Abbreviations:
Conv. | – Convertible | |
Ctfs. | – Certificates | |
EUR | – Euro | |
GBP | – British Pound Sterling | |
Gtd. | – Guaranteed | |
PIK | – Payment-in-Kind | |
REGS | – Regulation S | |
REIT | – Real Estate Investment Trust | |
Sec. | – Secured | |
Sr. | – Senior | |
Sub. | – Subordinated | |
Unsec. | – Unsecured | |
Wts. | – Warrants |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at June 30, 2015 was $73,046,239, which represented 47.68% of the Fund’s Net Assets. |
(c) | All or a portion of this security is Payment-in-Kind. |
Issuer | Cash Rate | PIK Rate | ||||||
Alphabet Holding Co., Inc., Sr. Unsec. Global PIK Notes | — | % | 8.50 | % | ||||
Boats Investments Netherlands B.V., REGS, Series 97, Sr. Sec. Medium-Term Mortgage Euro PIK Notes | — | 11.00 | ||||||
Emerald Plantation Holdings Ltd., Sr. Sec. Gtd. First Lien Global PIK Notes | 6.00 | 8.00 |
(d) | Defaulted security. Currently, the issuer is partially or fully in default with respect to interest payments. The aggregate value of these securities at June 30, 2015 was $200, which represented less than 1% of the Fund’s Net Assets. |
(e) | Acquired as part of the Sino-Forest Corp. reorganization. |
(f) | Foreign denominated security. Principal amount is denominated in the currency indicated. |
(g) | Variable rate senior loan interests are, at present, not readily marketable, not registered under the 1933 Act, and may be subject to contractual and legal restrictions on sale. Variable rate senior loan interests in the Fund’s portfolio generally have variable rates which adjust to a base, such as the London Interbank Offered Rate (“LIBOR”), on set dates, typically every 30 days but not greater than one year; and/or have interest rates that float at a margin above a widely recognized base lending rate such as the Prime Rate of a designated U.S. bank. |
(h) | All or a portion of this holding is subject to unfunded loan commitments. Interest rate will be determined at the time of funding. See Note 8. |
(i) | Acquired as part of the General Motors reorganization. |
(j) | Non-income producing security. |
(k) | Acquired as part of the Adelphia Communications bankruptcy reorganization. |
(l) | Acquired as part of the Hawaiian Telcom bankruptcy reorganization. |
(m) | Security may be traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. |
(n) | All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts and swap agreements. See Note 1M, Note 1N and Note 4. |
Portfolio Composition†
By credit quality, based on Total Investments*
as of June 30, 2015
BBB | 1.8 | % | ||
BB | 43.3 | |||
B | 43.9 | |||
CCC | 9.7 | |||
Non-Rated | 1.3 |
† | Source: Standard & Poor’s. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities, money market instruments or other debts. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest); ratings are subject to change without notice. “Non-Rated” indicates the debtor was not rated, and should not be interpreted as indicating low quality. For more information on Standard and Poor’s rating methodology, please visit standardandpoors.com and select “Understanding Ratings” under Rating Resources on the homepage. |
* | Excluding U.S. Treasury Bills and money market fund holdings, if any. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $164,267,253) | $ | 154,110,501 | ||
Foreign currencies, at value (Cost $73,424) | 74,466 | |||
Receivable for: | ||||
Investments sold | 623,000 | |||
Variation margin — futures | 2,969 | |||
Fund shares sold | 609,227 | |||
Dividends and interest | 2,632,139 | |||
Investment for trustee deferred compensation and retirement plans | 80,564 | |||
Unrealized appreciation on forward foreign currency contracts outstanding | 58,591 | |||
Total assets | 158,191,457 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 1,685,013 | |||
Fund shares reacquired | 390,544 | |||
Amount due custodian | 2,511,586 | |||
Variation margin — centrally cleared swap agreements | 16,622 | |||
Accrued fees to affiliates | 142,935 | |||
Accrued trustees’ and officers’ fees and benefits | 4,618 | |||
Accrued other operating expenses | 63,870 | |||
Trustee deferred compensation and retirement plans | 84,293 | |||
Unrealized depreciation on forward foreign currency contracts outstanding | 100,035 | |||
Total liabilities | 4,999,516 | |||
Net assets applicable to shares outstanding | $ | 153,191,941 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 160,238,207 | ||
Undistributed net investment income | 11,328,856 | |||
Undistributed net realized gain (loss) | (8,286,515 | ) | ||
Net unrealized appreciation (depreciation) | (10,088,607 | ) | ||
$ | 153,191,941 | |||
Net Assets: |
| |||
Series I | $ | 83,663,579 | ||
Series II | $ | 69,528,362 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 14,752,348 | |||
Series II | 12,345,143 | |||
Series I: | ||||
Net asset value per share | $ | 5.67 | ||
Series II: | ||||
Net asset value per share | $ | 5.63 |
Investment income: |
| |||
Interest (net of foreign withholding taxes of $ 1,237) | $ | 5,040,699 | ||
Dividends | 8,647 | |||
Dividends from affiliated money market funds | 1,433 | |||
Total investment income | 5,050,779 | |||
Expenses: | ||||
Advisory fees | 515,214 | |||
Administrative services fees | 211,597 | |||
Custodian fees | 10,753 | |||
Distribution fees — Series II | 84,866 | |||
Transfer agent fees | 15,110 | |||
Trustees’ and officers’ fees and benefits | 11,474 | |||
Professional services fees | 83,526 | |||
Other | 17,334 | |||
Total expenses | 949,874 | |||
Less: Fees waived | (4,192 | ) | ||
Net expenses | 945,682 | |||
Net investment income | 4,105,097 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities (includes net gains from securities sold to affiliates of $5,226) | (1,406,481 | ) | ||
Foreign currencies | (33,158 | ) | ||
Forward foreign currency contracts | 292,862 | |||
Futures contracts | (29,575 | ) | ||
Swap agreements | (33,818 | ) | ||
(1,210,170 | ) | |||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | 1,222,751 | |||
Foreign currencies | 8,913 | |||
Forward foreign currency contracts | (133,097 | ) | ||
Futures contracts | 115,910 | |||
Swap agreements | 19,875 | |||
1,234,352 | ||||
Net realized and unrealized gain | 24,182 | |||
Net increase in net assets resulting from operations | $ | 4,129,279 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: |
| |||||||
Net investment income | $ | 4,105,097 | $ | 7,724,559 | ||||
Net realized gain (loss) | (1,210,170 | ) | 2,534,012 | |||||
Change in net unrealized appreciation (depreciation) | 1,234,352 | (8,227,254 | ) | |||||
Net increase in net assets resulting from operations | 4,129,279 | 2,031,317 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Series I | — | (4,795,964 | ) | |||||
Series ll | — | (2,707,280 | ) | |||||
Total distributions from net investment income | — | (7,503,244 | ) | |||||
Share transactions–net: | ||||||||
Series l | (13,225,560 | ) | (946,144 | ) | ||||
Series ll | 8,259,619 | 17,576,271 | ||||||
Net increase (decrease) in net assets resulting from share transactions | (4,965,941 | ) | 16,630,127 | |||||
Net increase (decrease) in net assets | (836,662 | ) | 11,158,200 | |||||
Net assets: | ||||||||
Beginning of period | 154,028,603 | 142,870,403 | ||||||
End of period (includes undistributed net investment income of $11,328,856 and $7,223,759, respectively) | $ | 153,191,941 | $ | 154,028,603 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. High Yield Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is total return, comprised of current income and capital appreciation.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Senior secured floating rate loans and senior secured floating rate debt securities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may reflect appropriate factors such as ratings, tranche type, industry, company performance, spread, individual trading characteristics, institution-size trading in similar groups of securities and other market data.
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Invesco V.I. High Yield Fund
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Swap agreements are fair valued using an evaluated quote, if available, provided by an independent pricing service. Evaluated quotes provided by the pricing service are valued based on a model which may include end-of-day net present values, spreads, ratings, industry, company performance and returns of referenced assets.
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
Invesco V.I. High Yield Fund
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Lower-Rated Securities — The Fund normally invests at least 80% of its net assets in lower-quality debt securities, i.e., “junk bonds”. Investments in lower-rated securities or unrated securities of comparable quality tend to be more sensitive to economic conditions than higher rated securities. Junk bonds involve a greater risk of default by the issuer because such securities are generally unsecured and are often subordinated to other creditors’ claims. |
J. | Securities Purchased on a When-Issued and Delayed Delivery Basis — The Fund may purchase and sell interests in corporate loans and corporate debt securities and other portfolio securities on a when-issued and delayed delivery basis, with payment and delivery scheduled for a future date. No income accrues to the Fund on such interests or securities in connection with such transactions prior to the date the Fund actually takes delivery of such interests or securities. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of acquiring such securities, they may sell such securities prior to the settlement date. |
K. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
L. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
M. | Futures Contracts — The Fund may enter into futures contracts to manage exposure to interest rate, equity and market price movements and/or currency risks. A futures contract is an agreement between Counterparties to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission |
Invesco V.I. High Yield Fund
merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund’s basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Statement of Operations. The primary risks associated with futures contracts are market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal Counterparty risk since the exchange’s clearinghouse, as Counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. |
N. | Swap Agreements — The Fund may enter into various swap transactions, including interest rate, total return, index, currency and credit default swap contracts (“CDS”) for investment purposes or to manage interest rate, currency or credit risk. Such transactions are agreements between Counterparties. A swap agreement may be negotiated bilaterally and traded over-the-counter (OTC) between two parties (‘uncleared/OTC”) or, in some instances, must be transacted through a future commission merchant (FCM) and cleared through a clearinghouse that serves as a central Counterparty (“centrally cleared swap”). These agreements may contain among other conditions, events of default and termination events, and various covenants and representations such as provisions that require the Fund to maintain a pre-determined level of net assets, and/or provide limits regarding the decline of the Fund’s NAV over specific periods of time. If the Fund were to trigger such provisions and have open derivative positions at that time, the Counterparty may be able to terminate such agreement and request immediate payment in an amount equal to the net liability positions, if any. |
Interest rate, total return, index, and currency swap agreements are two-party contracts entered into primarily to exchange the returns (or differentials in rates of returns) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or “swapped” between the parties are calculated with respect to a notional amount, i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate or return of an underlying asset, in a particular foreign currency, or in a “basket” of securities representing a particular index.
In a centrally cleared swap, the Fund’s ultimate Counterparty is a central clearinghouse. The Fund initially will enter into centrally cleared swaps through an executing broker. When a Fund enters into a centrally cleared swap, it must deliver to the central Counterparty (via the FCM) an amount referred to as “initial margin.” Initial margin requirements are determined by the central Counterparty, but an FCM may require additional initial margin above the amount required by the central Counterparty. Initial margin deposits required upon entering into centrally cleared swaps are satisfied by cash or securities as collateral at the FCM. Securities deposited as initial margin are designated on the Schedule of Investments and cash deposited is recorded on the Statement of Assets and Liabilities. During the term of a cleared swap agreement, a “variation margin” amount may be required to be paid by the Fund or may be received by the Fund, based on the daily change in price of the underlying reference instrument subject to the swap agreement and is recorded as a receivable or payable for variation margin in the Statement of Assets and Liabilities until the centrally cleared swap is terminated at which time a realized gain or loss is recorded.
A CDS is an agreement between Counterparties to exchange the credit risk of an issuer. A buyer of a CDS is said to buy protection by paying a fixed payment over the life of the agreement and in some situations an upfront payment to the seller of the CDS. If a defined credit event occurs (such as payment default or bankruptcy), the Fund as a protection buyer would cease paying its fixed payment, the Fund would deliver eligible bonds issued by the reference entity to the seller, and the seller would pay the full notional value, or the “par value”, of the referenced obligation to the Fund. A seller of a CDS is said to sell protection and thus would receive a fixed payment over the life of the agreement and an upfront payment, if applicable. If a credit event occurs, the Fund as a protection seller would cease to receive the fixed payment stream, the Fund would pay the buyer “par value” or the full notional value of the referenced obligation, and the Fund would receive the eligible bonds issued by the reference entity. In turn, these bonds may be sold in order to realize a recovery value. Alternatively, the seller of the CDS and its Counterparty may agree to net the notional amount and the market value of the bonds and make a cash payment equal to the difference to the buyer of protection. If no credit event occurs, the Fund receives the fixed payment over the life of the agreement. As the seller, the Fund would effectively add leverage to its portfolio because, in addition to its total net assets, the Fund would be subject to investment exposure on the notional amount of the CDS. In connection with these agreements, cash and securities may be identified as collateral in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default under the swap agreement or bankruptcy/insolvency of a party to the swap agreement. If a Counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, the Fund may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. The Fund may obtain only limited recovery or may obtain no recovery in such circumstances. The Fund’s maximum risk of loss from Counterparty risk, either as the protection seller or as the protection buyer, is the value of the contract. The risk may be mitigated by having a master netting arrangement between the Fund and the Counterparty and by the designation of collateral by the Counterparty to cover the Fund’s exposure to the Counterparty.
Implied credit spreads represent the current level at which protection could be bought or sold given the terms of the existing CDS contract and serve as an indicator of the current status of the payment/performance risk of the CDS. An implied spread that has widened or increased since entry into the initial contract may indicate a deteriorating credit profile and increased risk of default for the reference entity. A declining or narrowing spread may indicate an improving credit profile or decreased risk of default for the reference entity. Alternatively, credit spreads may increase or decrease reflecting the general tolerance for risk in the credit markets.
An interest rate swap is an agreement between Counterparties pursuant to which the parties exchange a floating rate payment for a fixed rate payment based on a specified notional amount.
Changes in the value of centrally cleared and OTC swap agreements are recognized as unrealized gains (losses) in the Statement of Operations by “marking to market” on a daily basis to reflect the value of the swap agreement at the end of each trading day. Payments received or paid at the beginning of the agreement are reflected as such on the Statement of Assets and Liabilities and may be referred to as upfront payments. The Fund accrues for the fixed payment stream and amortizes upfront payments, if any, on swap agreements on a daily basis with the net amount, recorded as a component of realized gain (loss) on the Statement of Operations. A liquidation payment received or made at the termination of a
Invesco V.I. High Yield Fund
swap agreement is recorded as realized gain (loss) on the Statement of Operations. The Fund segregates liquid securities having a value at least equal to the amount of the potential obligation of a Fund under any swap transaction. Entering into these agreements involves, to varying degrees, lack of liquidity and elements of credit, market, and Counterparty risk in excess of amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that a swap is difficult to sell or liquidate; the Counterparty does not honor its obligations under the agreement and unfavorable interest rates and market fluctuations. It is possible that developments in the swaps market, including potential government regulation, could adversely affect the Fund’s ability to terminate existing swap agreements or to realize amounts to be received under such agreements. A short position in a security poses more risk than holding the same security long. As there is no limit on how much the price of the security can increase, the Fund’s exposure is unlimited.
Notional amounts of each individual credit default swap agreement outstanding as of June 30, 2015 for which the Fund is the seller of protection are disclosed in the open swap agreements table. These potential amounts would be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into by the Fund for the same referenced entity or entities.
O. | Bank Loan Risk — Although the resale, or secondary market for floating rate loans has grown substantially over the past decade, both in overall size and number of market participants, there is no organized exchange or board of trade on which floating rate loans are traded. Instead, the secondary market for floating rate loans is a private, unregulated interdealer or interbank resale market. Such a market may therefore be subject to irregular trading activity, wide bid/ask spreads, and extended trade settlement periods. Similar to other asset classes, bank loan funds may be exposed to counterparty credit risk, or the risk than an entity with which the Fund has unsettled or open transactions may fail to or be unable to perform on its commitments. The Fund manages 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. |
P. | Leverage Risk — Leverage exists when a Fund can lose more than it originally invests because it purchases or sells an instrument or enters into a transaction without investing an amount equal to the full economic exposure of the instrument or transaction. |
Q. | Other Risks — The Fund invests in corporate loans from U.S. or non-U.S. companies (the “Borrowers”). The investment of the Fund in a corporate loan may take the form of participation interests or assignments. If the Fund purchases a participation interest from a syndicate of lenders (“Lenders”) or one of the participants in the syndicate (“Participant”), one or more of which administers the loan on behalf of all the Lenders (the “Agent Bank”), the Fund would be required to rely on the Lender that sold the participation interest not only for the enforcement of the Fund’s rights against the Borrower but also for the receipt and processing of payments due to the Fund under the corporate loans. As such, the Fund is subject to the credit risk of the Borrower and the Participant. Lenders and Participants interposed between the Fund and a Borrower, together with Agent Banks, are referred to as “Intermediate Participants”. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||||
First $200 million | 0 | .625% | ||||
Next $300 million | 0 | .55% | ||||
Next $500 million | 0 | .50% | ||||
Over $1 billion | 0 | .45% |
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.625%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2016, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 1.50% and Series II shares to 1.75% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2016. The fee waiver agreement cannot be terminated during its term. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $4,192.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $24,795 for accounting and fund administrative services and reimbursed $186,802 for services provided by insurance companies.
Invesco V.I. High Yield Fund
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 822,107 | $ | 115,540 | $ | — | $ | 937,647 | ||||||||
U.S. Treasury Bills | — | 515,000 | — | 515,000 | ||||||||||||
Corporate Debt Securities | — | 144,269,876 | 0 | 144,269,876 | ||||||||||||
Foreign Debt Securities | — | 8,387,978 | — | 8,387,978 | ||||||||||||
822,107 | 153,288,394 | 0 | 154,110,501 | |||||||||||||
Forward Foreign Currency Contracts* | — | (41,444 | ) | — | (41,444 | ) | ||||||||||
Futures Contracts* | 115,910 | — | — | 115,910 | ||||||||||||
Swap Agreements* | — | (10,362 | ) | — | (10,362 | ) | ||||||||||
Total Investments | $ | 938,017 | $ | 153,236,588 | $ | 0 | $ | 154,174,605 |
* | Unrealized appreciation (depreciation). |
NOTE 4—Derivative Investments
Value of Derivative Investments at Period-End
The table below summarizes the value of the Fund’s derivative investments, detailed by primary risk exposure, held as of June 30, 2015:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Credit risk: | ||||||||
Swap agreements(a) | $ | — | $ | (10,362 | ) | |||
Currency risk: | ||||||||
Forward foreign currency contracts(b) | 58,591 | (100,035 | ) | |||||
Interest rate risk: | ||||||||
Futures contracts(c) | 115,910 | — | ||||||
Total | $ | 174,501 | $ | (110,397 | ) |
(a) | Includes cumulative appreciation (depreciation) of centrally cleared swap agreements. Only current day’s variation margin receivable (payable) is reported within the Statement of Assets and Liabilities. |
(b) | Values are disclosed on the Statement of Assets and Liabilities under the captions Unrealized appreciation on forward foreign currency contracts outstanding and Unrealized depreciation on forward foreign currency contracts outstanding. |
(c) | Includes cumulative appreciation of futures contracts. Only current day’s variation margin receivable is reported within the Statement of Assets and Liabilities. |
Invesco V.I. High Yield Fund
Effect of Derivative Investments for the six months ended June 30, 2015
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations | ||||||||||||
Forward Foreign Currency Contracts | Futures Contracts | Swap Agreements | ||||||||||
Realized Gain (Loss): | ||||||||||||
Credit risk | $ | — | $ | — | $ | (33,818 | ) | |||||
Currency risk | 292,862 | — | — | |||||||||
Interest rate risk | — | (29,575 | ) | — | ||||||||
Change in Net Unrealized Appreciation (Depreciation): | ||||||||||||
Credit risk | — | — | 19,875 | |||||||||
Currency risk | (133,097 | ) | — | — | ||||||||
Interest rate risk | — | 115,910 | — | |||||||||
Total | $ | 159,765 | $ | 86,335 | $ | (13,943 | ) |
The table below summarizes the six month average notional value of forward foreign currency contracts and swap agreements and the two month average notional value of futures contracts during the period.
Forward Foreign Currency Contracts | Futures | Swap Agreements | ||||||||||
Average notional value | $ | 8,740,304 | $ | 12,058,320 | $ | 2,341,785 |
Open Forward Foreign Currency Contracts | ||||||||||||||||||||||||||
Settlement | Counterparty | Contract to | Notional Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||
Deliver | Receive | |||||||||||||||||||||||||
09/04/15 | Citigroup Global Markets Inc. | EUR | 190,000 | USD | 213,981 | $ | 212,039 | $ | 1,942 | |||||||||||||||||
09/04/15 | Deutsche Bank Securities Inc. | EUR | 3,725,803 | USD | 4,214,628 | 4,157,979 | 56,649 | |||||||||||||||||||
09/04/15 | Goldman Sachs International | GBP | 2,665,845 | USD | 4,091,539 | 4,186,949 | (95,410 | ) | ||||||||||||||||||
09/04/15 | Goldman Sachs International | USD | 413,085 | EUR | 366,006 | 408,460 | (4,625 | ) | ||||||||||||||||||
Total Forward Foreign Currency Contracts — Currency Risk | $ | (41,444 | ) |
Currency Abbreviations:
EUR | – Euro | |
GBP | – British Pound Sterling | |
USD | – U.S. Dollar |
Open Futures Contracts — Interest Rate Risk | ||||||||||||||||||||
Futures Contracts | Type of Contract | Number of Contracts | Expiration Month | Notional Value | Unrealized Appreciation | |||||||||||||||
U.S. Treasury 10 Year Notes | Short | 95 | September-2015 | $ | (11,986,328 | ) | $ | 115,910 |
Open Centrally Cleared Credit Default Swap Agreements | ||||||||||||||||||||||||||||||
Counterparty/ Clearinghouse | Reference Entity | Buy/Sell Protection | (Pay)/Receive Fixed Rate | Expiration Date | Implied Credit Spread(a) | Notional Value | Upfront Payments Paid/ (Received) | Unrealized Appreciation | ||||||||||||||||||||||
Credit Suisse Securities (USA) LLC/CME | Markit CDX North America High Yield Index, Series 24 | Sell | 5.00 | % | 06/20/20 | 3.56 | % | $ | 1,341,450 | $ | 88,241 | $ | (4,296 | ) | ||||||||||||||||
Credit Suisse Securities (USA) LLC/CME | Markit CDX North America High Yield Index, Series 23 | Sell | 5.00 | % | 12/20/19 | 3.09 | 1,829,420 | 147,820 | (6,066 | ) | ||||||||||||||||||||
Total Centrally Cleared Credit Default Swap Agreements — Credit Risk |
| $ | (10,362 | ) |
(a) | Implied credit spreads represent the current level as of June 30, 2015 at which protection could be bought or sold given the terms of the existing credit default swap contract and serve as an indicator of the current status of the payment/performance risk of the credit default swap contract. An implied credit spread that has widened or increased since entry into the initial contract may indicate a deteriorating credit profile and increased risk of default for the reference entity. A declining or narrowing spread may indicate an improving credit profile or decreased risk of default for the reference entity. Alternatively, credit spreads may increase or decrease reflecting the general tolerance for risk in the credit markets generally. |
Abbreviations:
CME | – Chicago Mercantile Exchange |
Invesco V.I. High Yield Fund
Offsetting Assets and Liabilities
Accounting Standards Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which was subsequently clarified in Financial Accounting Standards Board ASU 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” is intended to enhance disclosures about financial instruments and derivative instruments that are subject to offsetting arrangements on the Statement of Assets and Liabilities and to enable investors to better understand the effect of those arrangements on the Fund’s financial position. In order for an arrangement to be eligible for netting, the Fund must have a basis to conclude that such netting arrangements are legally enforceable. The Fund enters into netting agreements and collateral agreements in an attempt to reduce the Fund’s Counterparty credit risk by providing for a single net settlement with a Counterparty of all financial transactions covered by the agreement in an event of default as defined under such agreement.
There were no derivative instruments subject to a netting agreement for which the Fund is not currently netting. The following tables present derivative instruments that are either subject to an enforceable netting agreement or offset by collateral arrangements as of June 30, 2015.
Assets: | ||||||||||||||||||||||||
Gross amounts of Recognized Assets | Gross amounts offset in Statement of Assets & Liabilities | Net amounts of assets presented in Statement of Assets & Liabilities | Collateral Received | |||||||||||||||||||||
Counterparty | Financial Instruments | Cash | Net Amount | |||||||||||||||||||||
Citigroup Global Markets Inc.(a) | $ | 1,942 | $ | — | $ | 1,942 | $ | — | $ | — | $ | 1,942 | ||||||||||||
Credit Suisse Securities (USA) LLC(b) | 236,061 | (10,362 | ) | 225,699 | — | — | 225,699 | |||||||||||||||||
Deutsche Bank Securities Inc.(a) | 56,649 | — | 56,649 | — | — | 56,649 | ||||||||||||||||||
Total | $ | 294,652 | $ | (10,362 | ) | $ | 284,290 | $ | — | $ | — | $ | 284,290 | |||||||||||
Liabilities: | ||||||||||||||||||||||||
Gross amounts of Recognized Liabilities | Gross amounts offset in Statement of Assets & Liabilities | Net amounts of liabilities presented in Statement of Assets & Liabilities | Collateral Pledged | |||||||||||||||||||||
Counterparty | Financial Instruments | Cash | Net Amount | |||||||||||||||||||||
Credit Suisse Securities (USA) LLC(b) | $ | 10,362 | $ | (10,362 | ) | $ | — | $ | — | $ | — | $ | — | |||||||||||
Goldman Sachs International(a) | 100,035 | — | 100,035 | — | — | 100,035 | ||||||||||||||||||
Total | $ | 110,397 | $ | (10,362 | ) | $ | 100,035 | $ | — | $ | — | $ | 100,035 |
(a) | Forward foreign currency contracts Counterparty. |
(b) | Swap agreements — centrally cleared Counterparty. Includes upfront payments and cumulative appreciation (depreciation). Only current day’s variation margin receivable (payable) is reported within the Statement of Assets and Liabilities. |
NOTE 5—Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the six months ended June 30, 2015, the Fund engaged in securities sales of $1,224,225, which resulted in net realized gains of $5,226.
NOTE 6—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 7—Cash Balances
The Fund may borrow for leveraging in an amount up to 5% of the Fund’s total assets (excluding the amount borrowed) at the time the borrowing is made. In doing so, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate. A Fund may not purchase additional securities when any borrowings from banks exceeds 5% of the Fund’s total assets.
Invesco V.I. High Yield Fund
NOTE 8—Unfunded Loan Commitments
As of June 30, 2015, the Fund had unfunded loan commitments, which could be extended at the option of the borrower, pursuant to the following loan agreements with the following borrowers:
Borrower | Type | Principal Amount | Value | |||||||
SS&C Technologies Holdings, Inc. | Term Loan | $ | 405,000 | $ | 405,000 |
NOTE 9—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of December 31, 2014, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
December 31, 2016 | $ | 2,969,048 | $ | — | $ | 2,969,048 | ||||||
December 31, 2017 | 3,028,860 | — | 3,028,860 | |||||||||
Not subject to expiration | 533,294 | 280,648 | 813,942 | |||||||||
$ | 6,531,202 | $ | 280,648 | $ | 6,811,850 |
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code and may be further limited depending upon a variety of factors, including the realization of net unrealized gains or losses as of the date of any reorganization. |
NOTE 10—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $89,186,490 and $82,507,444, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 1,766,457 | ||
Aggregate unrealized (depreciation) of investment securities | (12,096,050 | ) | ||
Net unrealized appreciation (depreciation) of investment securities | $ | (10,329,593 | ) |
Cost of investments for tax purposes is $164,440,094.
Invesco V.I. High Yield Fund
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 4,441,994 | $ | 25,090,785 | 8,876,121 | $ | 51,313,881 | ||||||||||
Series II | 4,350,500 | 24,537,243 | 4,956,536 | 28,473,807 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 856,422 | 4,795,964 | ||||||||||||
Series II | — | — | 486,047 | 2,707,280 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (6,750,988 | ) | (38,316,345 | ) | (9,955,032 | ) | (57,055,989 | ) | ||||||||
Series II | (2,860,808 | ) | (16,277,624 | ) | (2,419,660 | ) | (13,604,816 | ) | ||||||||
Net increase (decrease) in share activity | (819,302 | ) | $ | (4,965,941 | ) | 2,800,434 | $ | 16,630,127 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 73% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 12—Senior Loan Participation Commitments
The Fund invests in participations, assignments, or acts as a party to the primary lending syndicate of a Senior Loan interest to corporations, partnerships, and other entities. When the Fund purchases a participation of a Senior Loan interest, the Fund typically enters into a contractual agreement with the lender or other third party selling the participation, but not with the borrower directly. As such, the Fund assumes the credit risk of the borrower, selling participant or other persons interpositioned between the Fund and the borrower.
At the six months ended June 30, 2015, the following sets forth the selling participants with respect to interest in Senior Loans purchased by the Fund on a participation basis.
Selling Participant | Principal Amount | Value | ||||||
Citibank, N.A. | $ | 1,051,103 | $ | 984,095 | ||||
Morgan Stanley Senior Funding, Inc. | 405,000 | 405,000 | ||||||
Total | $ | 1,456,103 | $ | 1,389,095 |
Invesco V.I. High Yield Fund
NOTE 13—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||
Series I | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 5.53 | $ | 0.14 | $ | (0.00 | ) | $ | 0.14 | $ | — | $ | 5.67 | 2.53 | % | $ | 83,664 | 1.04 | %(d) | 1.05 | %(d) | 5.09 | %(d) | 52 | % | |||||||||||||||||||||||
Year ended 12/31/14 | 5.70 | 0.29 | (0.19 | ) | 0.10 | (0.27 | ) | 5.53 | 1.73 | 94,345 | 0.92 | 0.98 | 5.11 | 103 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 5.61 | 0.33 | 0.05 | 0.38 | (0.29 | ) | 5.70 | 7.01 | 98,455 | 0.81 | 1.03 | 5.79 | 74 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 5.04 | 0.33 | 0.53 | 0.86 | (0.29 | ) | 5.61 | 17.17 | 93,529 | 0.79 | 1.04 | 6.10 | 58 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 5.35 | 0.35 | (0.29 | ) | 0.06 | (0.37 | ) | 5.04 | 0.96 | 106,557 | 0.83 | 1.06 | 6.84 | 71 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 5.22 | 0.43 | 0.26 | 0.69 | (0.56 | ) | 5.35 | 13.57 | 55,803 | 0.95 | 1.17 | 8.04 | 102 | |||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 5.50 | 0.14 | (0.01 | ) | 0.13 | — | 5.63 | 2.36 | 69,528 | 1.29 | (d) | 1.30 | (d) | 4.84 | (d) | 52 | ||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 5.67 | 0.28 | (0.19 | ) | 0.09 | (0.26 | ) | 5.50 | 1.59 | 59,683 | 1.17 | 1.23 | 4.86 | 103 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 5.59 | 0.32 | 0.05 | 0.37 | (0.29 | ) | 5.67 | 6.76 | 44,416 | 1.06 | 1.28 | 5.54 | 74 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 5.03 | 0.32 | 0.52 | 0.84 | (0.28 | ) | 5.59 | 16.96 | 21,004 | 1.04 | 1.29 | 5.85 | 58 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 5.35 | 0.33 | (0.29 | ) | 0.04 | (0.36 | ) | 5.03 | 0.61 | 5,363 | 1.08 | 1.31 | 6.59 | 71 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 5.22 | 0.42 | 0.26 | 0.68 | (0.55 | ) | 5.35 | 13.27 | 497 | 1.20 | 1.42 | 7.79 | 102 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the period ended December 31, 2013, the portfolio turnover calculation excludes the value of securities purchased of $32,385,318 and sold of $10,521,731 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco V.I. High Yield Securities Fund into the Fund. For the period ending December 31, 2011, the portfolio turnover calculation excludes the value of securities purchased of $30,901,742 and sold of $8,109,618 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco Van Kampen V.I. High Yield Fund into the Fund. |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $97,779 and $68,456 for Series I and Series II shares, respectively. |
Invesco V.I. High Yield Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,025.30 | $ | 5.22 | $ | 1,019.64 | $ | 5.21 | 1.04 | % | ||||||||||||
Series II | 1,000.00 | 1,023.60 | 6.47 | 1,018.40 | 6.46 | 1.29 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. High Yield Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. High Yield Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ investment process oversight, independent credit analysis
and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Annuity Underlying Funds High Yield Index. The Board noted that performance of Series I shares of the Fund was in the third quintile of its performance universe for the one year period, the second quintile for the three year period, and the fourth quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Series I shares of the Fund was
Invesco V.I. High Yield Fund
below the performance of the Index for the one year period and above the Index for the three and five year periods. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series I shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was above the rate of one such mutual fund. The Board also noted how the Fund’s rate compared to the effective sub-adviser fee rate of a mutual fund sub-advised by Invesco Advisers.
The Board also considered the fees charged by Invesco Advisers and the Affiliated Sub-Advisers to other client accounts with investment strategies comparable to those of the Fund. The Board noted that Invesco Advisers or the Affiliated Sub-Advisers may charge lower fees to large institutional clients. Invesco Advisers reviewed with the Board the significantly greater scope of services it provides to the Invesco Funds relative to certain other types of client accounts. These additional services include provision of administrative services, officers and office space, oversight of service providers, preparation of annual registration statement updates and financial information and regulatory compliance under the Investment Company Act of 1940, as amended.
Invesco Advisers also reviewed generally the higher frequency of shareholder purchases and redemptions in the Invesco Funds relative to the flow of assets for other client accounts. Invesco Advisers advised the Board that advance notice of redemptions is often provided to Invesco Advisers by institutional clients. The Board did note that sub-advisory fee rates charged by the
Affiliated Sub-Advisers to manage the Invesco Funds and to manage other client accounts tended to be more comparable, reflecting a similar scope of services. The information received by the Board demonstrated that the aggregate services provided to the Invesco Funds were sufficiently different from those provided to institutional clients to support the difference in fees.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the
organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. Invesco Advisers noted that the Fund does not execute brokerage transactions through “soft dollar” arrangements to any significant degree.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
Invesco V.I. High Yield Fund
| ||||
Semiannual Report to Shareholders
| June 30, 2015
| |||
Invesco V.I. International Growth Fund | ||||
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
Invesco Distributors, Inc. VIIGR-SAR-1
| ||||
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GURANTEE |
Fund Performance |
Performance summary
| ||
Fund vs. Indexes Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower.
| ||
Series I Shares | 3.36% | |
Series II Shares | 3.23 | |
MSCI All Country World ex-U.S. Indexq (Broad Market Index)* | 4.03 | |
MSCI EAFE Indexq (Former Broad Market Index)* | 5.52 | |
Custom International Growth Indexn (Style-Specific Index) | 5.40 | |
Lipper VUF International Large-Cap Growth Funds Index¿ (Peer Group Index) | 4.50 | |
Source(s): qFactSet Research Systems Inc.; nInvesco, FactSet Research Systems Inc.; ¿Lipper Inc. | ||
* The Fund has elected to use the MSCI All Country World ex-U.S. Index as its broad market index rather than the MSCI EAFE Index because the MSCI All Country World ex-U.S. Index more closely reflects the performance of the types of securities in which the Fund invests.
The MSCI All Country World ex-U.S. Index is an index considered representative of developed and emerging market stock markets, excluding the US. The index is computed using the net return, which withholds applicable taxes for non-resident investors. The MSCI EAFE® Index is an unmanaged index considered representative of stocks of Europe, Australasia and the Far East. The index is computed using the net return, which withholds applicable taxes for non-resident investors. The Custom International Growth Index is an index comprised of the MSCI EAFE Growth Index through February 28, 2013, and the MSCI All Country World ex-U.S. Growth Index thereafter. The Lipper VUF International Large-Cap Growth Funds Index is an unmanaged index considered representative of international large-cap growth variable insurance underlying funds tracked by Lipper. The MSCI EAFE® Growth Index is an unmanaged index considered representative of growth stocks of Europe, Australasia and the Far East. The index is computed using the net return, which withholds applicable taxes for non-resident investors. The MSCI All Country World ex-U.S. Growth Index is a market capitalization weighted index that includes growth companies in developed and emerging markets throughout the world, excluding the US. The index is computed using the net return, which withholds applicable taxes for non-resident investors. The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es). A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
|
The performance of the Fund’s Series I and Series II share classes will differ primarily due to different class expenses. The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return | and principal value will fluctuate so that you may have a gain or loss when you sell shares. The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 1.02% and 1.27%, respectively.1 The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 1.03% and 1.28%, respectively. The expense ratios presented above may vary from the expense |
Average Annual Total Returns | ||
As of 6/30/15 | ||
Series I Shares
| ||
Inception (5/5/93) | 7.56% | |
10 Years | 7.61 | |
5 Years | 10.39 | |
1 Year | -2.44 | |
Series II Shares
| ||
Inception (9/19/01) | 8.08% | |
10 Years | 7.33 | |
5 Years | 10.11 | |
1 Year | -2.65 |
ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. International Growth Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2017. See current prospectus for more information. |
Invesco V.I. International Growth Fund
Schedule of Investments
June 30, 2015
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–92.58% |
| |||||||
Australia–4.11% | ||||||||
Amcor Ltd. | 3,060,865 | $ | 32,335,194 | |||||
Aurizon Holdings Ltd. | 3,664,265 | 14,429,608 | ||||||
Brambles Ltd. | 2,287,252 | 18,599,873 | ||||||
CSL Ltd. | 200,150 | 13,283,057 | ||||||
78,647,732 | ||||||||
Belgium–1.20% | ||||||||
Anheuser-Busch InBev N.V. | 190,000 | 22,870,641 | ||||||
Brazil–3.99% | ||||||||
Banco Bradesco S.A.–ADR | 3,245,237 | 29,726,371 | ||||||
BM&FBOVESPA S.A. | 8,487,534 | 32,019,674 | ||||||
BRF S.A. | 684,448 | 14,458,092 | ||||||
76,204,137 | ||||||||
Canada–7.12% | ||||||||
Canadian National Railway Co. | 258,309 | 14,905,306 | ||||||
Cenovus Energy Inc. | 530,404 | 8,481,877 | ||||||
CGI Group Inc.–Class A(a) | 821,763 | 32,145,358 | ||||||
Encana Corp. | 1,625,151 | 17,919,866 | ||||||
Fairfax Financial Holdings Ltd. | 40,129 | 19,790,718 | ||||||
Great-West Lifeco Inc. | 473,490 | 13,786,112 | ||||||
Suncor Energy, Inc. | 1,055,172 | 29,066,237 | ||||||
136,095,474 | ||||||||
China–4.51% | ||||||||
Baidu, Inc.–ADR(a) | 164,010 | 32,651,111 | ||||||
CNOOC Ltd. | 5,526,000 | 7,841,938 | ||||||
Great Wall Motor Co. Ltd.–Class H | 4,692,500 | 23,004,232 | ||||||
Industrial & Commercial Bank of China Ltd.–Class H | 28,616,000 | 22,633,909 | ||||||
86,131,190 | ||||||||
Denmark–2.74% | ||||||||
Carlsberg AS–Class B | 339,689 | 30,843,893 | ||||||
Novo Nordisk AS–Class B | 392,622 | 21,537,712 | ||||||
52,381,605 | ||||||||
France–3.19% | ||||||||
Publicis Groupe S.A. | 506,391 | 37,404,204 | ||||||
Schneider Electric S.E. | 342,515 | 23,626,684 | ||||||
61,030,888 | ||||||||
Germany–7.29% | ||||||||
adidas AG | 164,299 | 12,576,226 | ||||||
Allianz S.E. | 148,719 | 23,165,289 | ||||||
Deutsche Boerse AG | 412,368 | 34,139,431 | ||||||
Deutsche Post AG | 451,156 | 13,182,136 | ||||||
ProSiebenSat.1 Media AG | 544,309 | 26,885,871 | ||||||
SAP S.E. | 422,796 | 29,464,436 | ||||||
139,413,389 |
Shares | Value | |||||||
Hong Kong–3.19% | ||||||||
CK Hutchison Holdings Ltd. | 2,758,768 | $ | 40,454,687 | |||||
Galaxy Entertainment Group Ltd. | 5,140,000 | 20,489,976 | ||||||
60,944,663 | ||||||||
Israel–2.41% | ||||||||
Teva Pharmaceutical Industries Ltd.–ADR | 778,008 | 45,980,273 | ||||||
Japan–6.91% | ||||||||
Denso Corp. | 188,400 | 9,383,059 | ||||||
FANUC Corp. | 40,300 | 8,226,071 | ||||||
Japan Tobacco, Inc. | 960,200 | 34,207,125 | ||||||
Keyence Corp. | 23,100 | 12,467,206 | ||||||
Komatsu Ltd. | 853,237 | 17,096,563 | ||||||
Toyota Motor Corp. | 418,700 | 27,999,731 | ||||||
Yahoo Japan Corp. | 5,633,300 | 22,735,704 | ||||||
132,115,459 | ||||||||
Mexico–2.18% | ||||||||
Fomento Economico Mexicano, S.A.B. de C.V.–ADR | 136,816 | 12,188,937 | ||||||
Grupo Televisa S.A.B.–ADR | 758,102 | 29,429,520 | ||||||
41,618,457 | ||||||||
Singapore–3.47% | ||||||||
Avago Technologies Ltd. | 264,541 | 35,165,435 | ||||||
United Overseas Bank Ltd. | 1,824,600 | 31,218,367 | ||||||
66,383,802 | ||||||||
South Korea–1.71% | ||||||||
Samsung Electronics Co., Ltd. | 28,750 | 32,680,705 | ||||||
Spain–1.03% | ||||||||
Amadeus IT Holding S.A.–Class A | 492,400 | 19,630,425 | ||||||
Sweden–3.31% | ||||||||
Getinge AB–Class B | 403,821 | 9,719,767 | ||||||
Investor AB–Class B | 777,831 | 28,948,507 | ||||||
Telefonaktiebolaget LM Ericsson–Class B | 2,379,329 | 24,658,788 | ||||||
63,327,062 | ||||||||
Switzerland–9.12% | ||||||||
ABB Ltd. | 1,184,873 | 24,815,289 | ||||||
Julius Baer Group Ltd. | 511,898 | 28,759,414 | ||||||
Novartis AG | 143,629 | 14,187,402 | ||||||
Roche Holding AG | 102,876 | 28,884,339 | ||||||
Swatch Group AG (The) | 33,468 | 13,053,205 | ||||||
Syngenta AG | 76,874 | 31,503,033 | ||||||
UBS Group AG | 1,558,933 | 33,066,254 | ||||||
174,268,936 | ||||||||
Taiwan–1.52% | ||||||||
Taiwan Semiconductor Manufacturing Co. Ltd.–ADR | 1,282,036 | 29,115,038 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. International Growth Fund
Shares | Value | |||||||
Thailand–1.61% | ||||||||
Kasikornbank PCL–NVDR | 5,514,900 | $ | 30,790,497 | |||||
Turkey–0.94% | ||||||||
Akbank T.A.S. | 6,294,831 | 18,057,781 | ||||||
United Kingdom–21.03% | ||||||||
Aberdeen Asset Management PLC | 3,177,672 | 20,151,815 | ||||||
British American Tobacco PLC | 755,453 | 40,601,700 | ||||||
Centrica PLC | 3,064,543 | 12,702,805 | ||||||
Compass Group PLC | 1,801,848 | 29,848,176 | ||||||
Informa PLC | 1,886,522 | 16,216,704 | ||||||
Kingfisher PLC | 5,128,536 | 27,939,679 | ||||||
Lloyds Banking Group PLC | 16,646,219 | 22,346,471 | ||||||
Next PLC | 162,930 | 19,072,887 | ||||||
Reed Elsevier PLC | 2,451,589 | 39,918,245 | ||||||
Royal Dutch Shell PLC–Class B | 864,873 | 24,596,484 | ||||||
Sky PLC | 3,855,230 | 62,818,586 | ||||||
Smith & Nephew PLC | 1,108,094 | 18,724,446 |
Shares | Value | |||||||
United Kingdom–(continued) | ||||||||
Unilever N.V. | 504,866 | $ | 21,103,492 | |||||
WPP PLC | 2,050,304 | 46,007,238 | ||||||
402,048,728 | ||||||||
Total Common Stocks & Other Equity Interests |
| 1,769,736,882 | ||||||
Money Market Funds–7.14% |
| |||||||
Liquid Assets Portfolio–Institutional Class(b) | 68,253,724 | 68,253,724 | ||||||
Premier Portfolio–Institutional Class(b) | 68,253,724 | 68,253,724 | ||||||
Total Money Market Funds | 136,507,448 | |||||||
TOTAL INVESTMENTS–99.72% | 1,906,244,330 | |||||||
OTHER ASSETS LESS LIABILITIES–0.28% |
| 5,292,532 | ||||||
NET ASSETS–100.00% | $ | 1,911,536,862 |
Investment Abbreviations:
ADR | – American Depositary Receipt | |
NVDR | – Non-Voting Depositary Receipt |
Notes to Schedule of Investments:
(a) | Non-income producing security. |
(b) | The money market fund and the Fund are affiliated by having the same investment adviser. |
Portfolio Composition
By sector, based on Net Assets
as of June 30, 2015
Consumer Discretionary | 23.1 | % | ||
Financials | 20.3 | |||
Information Technology | 14.2 | |||
Consumer Staples | 9.2 | |||
Health Care | 8.0 | |||
Industrials | 9.2 | |||
Energy | 4.6 | |||
Materials | 3.3 | |||
Utilities | 0.7 | |||
Money Market Funds Plus Other Assets Less Liabilities | 7.4 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. International Growth Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: | ||||
Investments, at value (Cost $1,371,410,200) | $ | 1,769,736,882 | ||
Investments in affiliated money market funds, at value and cost | 136,507,448 | |||
Total investments, at value (Cost $1,507,917,648) | 1,906,244,330 | |||
Foreign currencies, at value (Cost $5,824,271) | 5,824,889 | |||
Receivable for: | ||||
Fund shares sold | 1,732,753 | |||
Dividends | 6,174,849 | |||
Investment for trustee deferred compensation and retirement plans | 245,068 | |||
Other assets | 190 | |||
Total assets | 1,920,222,079 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 1,098,882 | |||
Accrued foreign taxes | 218,374 | |||
Fund shares reacquired | 4,833,957 | |||
Accrued fees to affiliates | 1,999,739 | |||
Accrued trustees’ and officers’ fees and benefits | 8,719 | |||
Accrued other operating expenses | 247,746 | |||
Trustee deferred compensation and retirement plans | 277,800 | |||
Total liabilities | 8,685,217 | |||
Net assets applicable to shares outstanding | $ | 1,911,536,862 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 1,488,868,302 | ||
Undistributed net investment income | 32,354,592 | |||
Undistributed net realized gain (loss) | (8,027,372 | ) | ||
Net unrealized appreciation | 398,341,340 | |||
$ | 1,911,536,862 | |||
Net Assets: | ||||
Series I | $ | 651,991,369 | ||
Series II | $ | 1,259,545,493 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 18,090,094 | |||
Series II | 35,449,699 | |||
Series I: | ||||
Net asset value per share | $ | 36.04 | ||
Series II: | ||||
Net asset value per share | $ | 35.53 |
Investment income: | ||||
Dividends (net of foreign withholding taxes of $2,665,271) | $ | 29,485,828 | ||
Dividends from affiliated money market funds | 44,451 | |||
Total investment income | 29,530,279 | |||
Expenses: | ||||
Advisory fees | 6,563,982 | |||
Administrative services fees | 2,455,599 | |||
Custodian fees | 317,563 | |||
Distribution fees — Series II | 1,496,689 | |||
Transfer agent fees | 47,583 | |||
Trustees’ and officers’ fees and benefits | 21,617 | |||
Other | 52,356 | |||
Total expenses | 10,955,389 | |||
Less: Fees waived | (105,805 | ) | ||
Net expenses | 10,849,584 | |||
Net investment income | 18,680,695 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from: | ||||
Investment securities | 64,075,857 | |||
Foreign currencies | 1,215,423 | |||
65,291,280 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities (net of foreign taxes on holdings of $524,233) | (30,873,431 | ) | ||
Foreign currencies | 277,767 | |||
(30,595,664 | ) | |||
Net realized and unrealized gain | 34,695,616 | |||
Net increase in net assets resulting from operations | $ | 53,376,311 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. International Growth Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: | ||||||||
Net investment income | $ | 18,680,695 | $ | 25,036,827 | ||||
Net realized gain | 65,291,280 | 110,044,435 | ||||||
Change in net unrealized appreciation (depreciation) | (30,595,664 | ) | (132,352,415 | ) | ||||
Net increase in net assets resulting from operations | 53,376,311 | 2,728,847 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Series I | — | (10,756,299 | ) | |||||
Series ll | — | (15,248,241 | ) | |||||
Total distributions from net investment income | — | (26,004,540 | ) | |||||
Share transactions–net: | ||||||||
Series l | (17,260,816 | ) | (30,328,366 | ) | ||||
Series ll | 148,403,873 | 31,387,888 | ||||||
Net increase in net assets resulting from share transactions | 131,143,057 | 1,059,522 | ||||||
Net increase (decrease) in net assets | 184,519,368 | (22,216,171 | ) | |||||
Net assets: | ||||||||
Beginning of period | 1,727,017,494 | 1,749,233,665 | ||||||
End of period (includes undistributed net investment income of $32,354,592 and $13,673,897, respectively) | $ | 1,911,536,862 | $ | 1,727,017,494 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. International Growth Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is long-term growth of capital.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual
Invesco V.I. International Growth Fund
trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
Invesco V.I. International Growth Fund
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $250 million | 0.75% | |||
Over $250 million | 0.70% |
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.71%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2016, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.25% and Series II shares to 2.50% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on
Invesco V.I. International Growth Fund
short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2016. The fee waiver agreement cannot be terminated during its term. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $105,805.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $197,614 for accounting and fund administrative services and reimbursed $2,257,985 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
During the six months ended June 30, 2015, there were transfers from Level 1 to Level 2 of $386,287,187 and from Level 2 to Level 1 of $172,057,305, due to foreign fair value adjustments. Additionally, there were transfers from Level 2 to Level 3 of $23,004,232, due to security low volume trading.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Australia | $ | — | $ | 78,647,732 | $ | — | $ | 78,647,732 | ||||||||
Belgium | — | 22,870,641 | — | 22,870,641 | ||||||||||||
Brazil | 76,204,137 | — | — | 76,204,137 | ||||||||||||
Canada | 136,095,474 | — | — | 136,095,474 | ||||||||||||
China | 40,493,049 | 22,633,909 | 23,004,232 | 86,131,190 | ||||||||||||
Denmark | 30,843,893 | 21,537,712 | — | 52,381,605 | ||||||||||||
France | — | 61,030,888 | — | 61,030,888 | ||||||||||||
Germany | 109,948,953 | 29,464,436 | — | 139,413,389 | ||||||||||||
Hong Kong | 20,489,976 | 40,454,687 | — | 60,944,663 | ||||||||||||
Israel | 45,980,273 | — | — | 45,980,273 | ||||||||||||
Japan | 78,793,094 | 53,322,365 | — | 132,115,459 | ||||||||||||
Mexico | 41,618,457 | — | — | 41,618,457 |
Invesco V.I. International Growth Fund
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Singapore | $ | 35,165,435 | $ | 31,218,367 | $ | — | $ | 66,383,802 | ||||||||
South Korea | 32,680,705 | — | — | 32,680,705 | ||||||||||||
Spain | 19,630,425 | — | — | 19,630,425 | ||||||||||||
Sweden | 34,378,555 | 28,948,507 | — | 63,327,062 | ||||||||||||
Switzerland | 57,881,543 | 116,387,393 | — | 174,268,936 | ||||||||||||
Taiwan | 29,115,038 | — | — | 29,115,038 | ||||||||||||
Thailand | — | 30,790,497 | — | 30,790,497 | ||||||||||||
Turkey | — | 18,057,781 | — | 18,057,781 | ||||||||||||
United Kingdom | 94,594,278 | 307,454,450 | — | 402,048,728 | ||||||||||||
United States | 136,507,448 | — | — | 136,507,448 | ||||||||||||
Total Investments | $ | 1,020,420,733 | $ | 862,819,365 | $ | 23,004,232 | $ | 1,906,244,330 |
NOTE 4—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 5—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 6—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of December 31, 2014, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
December 31, 2016 | $ | 5,717,826 | $ | — | $ | 5,717,826 | ||||||
December 31, 2017 | 14,504,919 | — | 14,504,919 | |||||||||
December 31, 2018 | 37,802,554 | — | 37,802,554 | |||||||||
$ | 58,025,299 | $ | — | $ | 58,025,299 |
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code and may be further limited depending upon a variety of factors, including the realization of net unrealized gains or losses as of the date of any reorganization. |
Invesco V.I. International Growth Fund
NOTE 7—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $329,910,156 and $200,198,467, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 428,645,979 | ||
Aggregate unrealized (depreciation) of investment securities | (55,332,249 | ) | ||
Net unrealized appreciation of investment securities | $ | 373,313,730 |
Cost of investments for tax purposes is $1,532,930,600.
NOTE 8—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 1,542,211 | $ | 56,199,541 | 3,030,640 | $ | 108,099,105 | ||||||||||
Series II | 6,764,385 | 244,039,441 | 6,960,184 | 245,055,431 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 304,681 | 10,743,048 | ||||||||||||
Series II | — | — | 437,790 | 15,248,241 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (2,023,409 | ) | (73,460,357 | ) | (4,195,088 | ) | (149,170,519 | ) | ||||||||
Series II | (2,680,928 | ) | (95,635,568 | ) | (6,504,328 | ) | (228,915,784 | ) | ||||||||
Net increase in share activity | 3,602,259 | $ | 131,143,057 | 33,879 | $ | 1,059,522 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 37% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 9—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||
Series I | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 34.87 | $ | 0.40 | $ | 0.77 | $ | 1.17 | $ | — | $ | 36.04 | 3.36 | % | $ | 651,991 | 1.01 | %(d) | 1.02 | %(d) | 2.17 | %(d) | 12 | % | ||||||||||||||||||||||||
Year ended 12/31/14 | 35.32 | 0.56 | (0.44 | ) | 0.12 | (0.57 | ) | 34.87 | 0.33 | 647,530 | 1.01 | 1.02 | 1.58 | 26 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 30.03 | 0.44 | 5.25 | 5.69 | (0.40 | ) | 35.32 | 19.01 | 686,305 | 1.01 | 1.02 | 1.37 | 24 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 26.37 | 0.35 | 3.73 | 4.08 | (0.42 | ) | 30.03 | 15.53 | 591,491 | 1.00 | 1.01 | 1.24 | 24 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 28.69 | 0.50 | (2.38 | ) | (1.88 | ) | (0.44 | ) | 26.37 | (6.74 | ) | 544,143 | 1.02 | 1.03 | 1.75 | 26 | ||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 26.01 | 0.38 | 2.92 | 3.30 | (0.62 | ) | 28.69 | 12.86 | 586,219 | 1.03 | 1.04 | 1.46 | 38 | |||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 34.42 | 0.34 | 0.77 | 1.11 | — | 35.53 | 3.23 | 1,259,545 | 1.26 | (d) | 1.27 | (d) | 1.92 | (d) | 12 | |||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 34.88 | 0.47 | (0.43 | ) | 0.04 | (0.50 | ) | 34.42 | 0.09 | 1,079,488 | 1.26 | 1.27 | 1.33 | 26 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 29.68 | 0.36 | 5.18 | 5.54 | (0.34 | ) | 34.88 | 18.72 | 1,062,929 | 1.26 | 1.27 | 1.12 | 24 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 26.08 | 0.28 | 3.69 | 3.97 | (0.37 | ) | 29.68 | 15.26 | 827,361 | 1.25 | 1.26 | 0.99 | 24 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 28.35 | 0.42 | (2.36 | ) | (1.94 | ) | (0.33 | ) | 26.08 | (6.99 | ) | 607,269 | 1.27 | 1.28 | 1.50 | 26 | ||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 25.63 | 0.31 | 2.89 | 3.20 | (0.48 | ) | 28.35 | 12.61 | 569,610 | 1.28 | 1.29 | 1.21 | 38 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the period ended December 31, 2011, the portfolio turnover calculation excludes the value of securities purchased of $23,376,285 and sold of $8,831,296 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco Van Kampen V.I. International Growth Equity Fund into the Fund. |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $665,834 and $1,207,274 for Series I and Series II shares, respectively. |
Invesco V.I. International Growth Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,033.60 | $ | 5.09 | $ | 1,019.79 | $ | 5.06 | 1.01 | % | ||||||||||||
Series II | 1,000.00 | 1,032.30 | 6.35 | 1,018.55 | 6.31 | 1.26 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. International Growth Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. International Growth Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ investment process oversight, independent credit analysis
and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Underlying Fund International Large-Cap Growth Index. The Board noted that performance of Series I shares of the Fund was in the first quintile of its performance universe for the one and five year periods and the third quintile for the three year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Series I shares of the Fund was above the performance
Invesco V.I. International Growth Fund
of the Index for the one and five year periods and below the performance of the Index for the three year period. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series I shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was below the rate of one such mutual fund. The Board also noted how the Fund’s rate compared to the effective sub-adviser fee rate of other mutual funds sub-advised by Invesco Advisers.
The Board also considered the fees charged by Invesco Advisers and the Affiliated Sub-Advisers to other client accounts with investment strategies comparable to those of the Fund. The Board noted that Invesco Advisers or the Affiliated Sub-Advisers may charge lower fees to large institutional clients. Invesco Advisers reviewed with the Board the significantly greater scope of services it provides to the Invesco Funds relative to certain other types of client accounts. These additional services include provision of administrative services, officers and office space, oversight of service providers, preparation of annual registration statement updates and financial information and regulatory compliance under the Investment Company Act of 1940, as amended.
Invesco Advisers also reviewed generally the higher frequency of shareholder purchases and redemptions in the Invesco Funds relative to the flow of assets for other client accounts. Invesco Advisers advised the Board that advance notice of redemptions is often provided to Invesco Advisers by institutional clients. The Board did note that sub-advisory fee rates charged by the
Affiliated Sub-Advisers to manage the Invesco Funds and to manage other client accounts tended to be more comparable, reflecting a similar scope of services. The information received by the Board demonstrated that the aggregate services provided to the Invesco Funds were sufficiently different from those provided to institutional clients to support the difference in fees.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the
organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered that it receives periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to, among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
Invesco V.I. International Growth Fund
| ||||
Semiannual Report to Shareholders
| June 30, 2015 | |||
Invesco V.I. Managed Volatility Fund | ||||
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
Invesco Distributors, Inc. I-VIMGV-SAR-1
| ||
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance | ||
Performance summary
Fund vs. Indexes
Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower.
Series I Shares | 0.95 | % | |||
Series II Shares | 0.85 | ||||
Russell 1000 Value Indexq (Broad Market Index) | -0.61 | ||||
Barclays U.S. Government/Credit Indexq (Style-Specific Index) | -0.30 | ||||
Lipper VUF Mixed-Asset Target Allocation Growth Indexn (Peer Group Index)* | 1.86 | ||||
Lipper VUF Equity Income Funds Indexn (Former Peer Group Index)* | -0.89 | ||||
Source(s): qFactSet Research Systems Inc.; nLipper Inc. |
* The Fund has elected to use the Lipper VUF Mixed-Asset Target Allocation Growth Index as its peer group index rather than the Lipper VUF Equity Income Funds Index because the Lipper VUF Mixed-Asset Target Allocation Growth Index more closely reflects the performance of the types of securities in which the Fund invests. |
The Russell 1000® Value Index is an unmanaged index considered representative of large-cap value stocks. The Russell 1000 Value Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
The Barclays U.S. Government/Credit Index includes treasuries and agencies that represent the government portion of the index, and includes publicly issued US corporate and foreign debentures and secured notes that meet specified maturity, liquidity and quality requirements.
The Lipper VUF Mixed-Asset Target Allocation Growth Index is an unmanaged index considered representative of mixed-asset target allocation growth variable insurance underlying funds tracked by Lipper.
The Lipper VUF Equity Income Funds Index is an unmanaged index considered representative of equity income variable insurance underlying funds tracked by Lipper.
The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es).
A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
Average Annual Total Returns
As of 6/30/15
Series I Shares | |||||
Inception (12/30/94) | 7.54 | % | |||
10 Years | 7.97 | ||||
5 Years | 13.44 | ||||
1 Year | 3.43 | ||||
Series II Shares | |||||
Inception (4/30/04) | 9.85 | % | |||
10 Years | 7.70 | ||||
5 Years | 13.18 | ||||
1 Year | 3.19 |
The performance of the Fund’s Series I and Series II share classes will differ primarily due to different class expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 1.10% and 1.35%, respectively.1 The total annual Fund operating
expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 1.11% and 1.36%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. Managed Volatility Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges,
expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2017. See current prospectus for more information. |
Invesco V.I. Managed Volatility Fund |
Schedule of Investments(a)
June 30, 2015
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–64.41% |
| |||||||
Aerospace & Defense–0.96% | ||||||||
General Dynamics Corp. | 4,490 | $ | 636,188 | |||||
Agricultural Products–0.75% | ||||||||
Archer-Daniels-Midland Co. | 10,372 | 500,138 | ||||||
Application Software–1.10% | ||||||||
Adobe Systems Inc.(b) | 4,609 | 373,375 | ||||||
Citrix Systems, Inc.(b) | 5,140 | 360,622 | ||||||
733,997 | ||||||||
Asset Management & Custody Banks–1.77% | ||||||||
Northern Trust Corp. | 6,533 | 499,513 | ||||||
State Street Corp. | 8,810 | 678,370 | ||||||
1,177,883 | ||||||||
Automobile Manufacturers–0.74% | ||||||||
General Motors Co. | 14,812 | 493,684 | ||||||
Biotechnology–0.50% | ||||||||
Amgen Inc. | 2,171 | 333,292 | ||||||
Broadcasting–0.17% | ||||||||
CBS Corp.–Class B | 2,059 | 114,274 | ||||||
Cable & Satellite–1.89% | ||||||||
Comcast Corp.–Class A | 12,556 | 755,118 | ||||||
Time Warner Cable Inc. | 2,816 | 501,727 | ||||||
1,256,845 | ||||||||
Communications Equipment–1.03% | ||||||||
Cisco Systems, Inc. | 24,878 | 683,150 | ||||||
Construction Machinery & Heavy Trucks–0.50% | ||||||||
Caterpillar Inc. | 3,943 | 334,445 | ||||||
Diversified Banks–8.63% | ||||||||
Bank of America Corp. | 64,981 | 1,105,977 | ||||||
Citigroup Inc. | 37,153 | 2,052,332 | ||||||
Comerica Inc. | 9,359 | 480,304 | ||||||
JPMorgan Chase & Co. | 31,023 | 2,102,118 | ||||||
5,740,731 | ||||||||
Diversified Chemicals–0.37% | ||||||||
Dow Chemical Co. (The) | 4,792 | 245,207 | ||||||
Electric Utilities–0.37% | ||||||||
FirstEnergy Corp. | 7,501 | 244,157 | ||||||
Electronic Components–0.60% | ||||||||
Corning Inc. | 20,159 | 397,737 | ||||||
Fertilizers & Agricultural Chemicals–0.37% | ||||||||
Mosaic Co. (The) | 5,278 | 247,274 |
Shares | Value | |||||||
General Merchandise Stores–1.30% | ||||||||
Target Corp. | 10,559 | $ | 861,931 | |||||
Health Care Equipment–1.51% | ||||||||
Baxter International Inc. | 5,894 | 412,168 | ||||||
Medtronic PLC | 7,943 | 588,576 | ||||||
1,000,744 | ||||||||
Health Care Services–0.56% | ||||||||
Express Scripts Holding Co.(b) | 4,152 | 369,279 | ||||||
Hotels, Resorts & Cruise Lines–1.15% | ||||||||
Carnival Corp. | 15,514 | 766,236 | ||||||
Household Products–0.73% | ||||||||
Procter & Gamble Co. (The) | 6,186 | 483,993 | ||||||
Hypermarkets & Super Centers–0.89% | ||||||||
Wal-Mart Stores, Inc. | 8,387 | 594,890 | ||||||
Industrial Conglomerates–2.05% | ||||||||
General Electric Co. | 51,305 | 1,363,174 | ||||||
Industrial Machinery–0.83% | ||||||||
Ingersoll-Rand PLC | 8,204 | 553,114 | ||||||
Insurance Brokers–2.05% | ||||||||
Aon PLC | 4,825 | 480,956 | ||||||
Marsh & McLennan Cos., Inc. | 8,380 | 475,146 | ||||||
Willis Group Holdings PLC | 8,715 | 408,733 | ||||||
1,364,835 | ||||||||
Integrated Oil & Gas–3.33% | ||||||||
Exxon Mobil Corp. | 4,789 | 398,445 | ||||||
Occidental Petroleum Corp. | 4,880 | 379,518 | ||||||
Royal Dutch Shell PLC–Class A (United Kingdom) | 33,066 | 929,653 | ||||||
TOTAL S.A. (France) | 10,484 | 510,193 | ||||||
2,217,809 | ||||||||
Integrated Telecommunication Services–1.09% | ||||||||
Koninklijke KPN N.V. (Netherlands) | 31,738 | 121,824 | ||||||
Orange S.A. (France) | 7,118 | 110,151 | ||||||
Telecom Italia S.p.A. (Italy)(b) | 66,489 | 84,366 | ||||||
Telefónica, S.A. (Spain) | 5,390 | 76,826 | ||||||
Verizon Communications Inc. | 7,139 | 332,749 | ||||||
725,916 | ||||||||
Internet Software & Services–1.16% | ||||||||
eBay Inc.(b) | 12,794 | 770,711 | ||||||
Investment Banking & Brokerage–3.22% | ||||||||
Charles Schwab Corp. (The) | 15,691 | 512,311 | ||||||
Goldman Sachs Group, Inc. (The) | 2,549 | 532,206 | ||||||
Morgan Stanley | 28,337 | 1,099,192 | ||||||
2,143,709 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
Shares | Value | |||||||
IT Consulting & Other Services–0.81% | ||||||||
Amdocs Ltd. | 9,818 | $ | 535,965 | |||||
Managed Health Care–1.22% | ||||||||
Anthem, Inc. | 2,761 | 453,190 | ||||||
UnitedHealth Group Inc. | 2,941 | 358,802 | ||||||
811,992 | ||||||||
Movies & Entertainment–0.87% | ||||||||
Time Warner Inc. | 3,357 | 293,435 | ||||||
Viacom Inc.–Class B | 4,426 | 286,097 | ||||||
579,532 | ||||||||
Multi-Utilities–0.41% | ||||||||
PG&E Corp. | 5,581 | 274,027 | ||||||
Oil & Gas Drilling–0.31% | ||||||||
Ensco PLC–Class A | 9,225 | 205,441 | ||||||
Oil & Gas Equipment & Services–0.73% | ||||||||
Baker Hughes Inc. | 7,820 | 482,494 | ||||||
Oil & Gas Exploration & Production–1.78% | ||||||||
Anadarko Petroleum Corp. | 3,827 | 298,736 | ||||||
Apache Corp. | 9,062 | 522,243 | ||||||
Canadian Natural Resources Ltd. (Canada) | 13,481 | 365,956 | ||||||
1,186,935 | ||||||||
Other Diversified Financial Services–0.99% | ||||||||
Voya Financial, Inc. | 14,211 | 660,385 | ||||||
Packaged Foods & Meats–0.80% | ||||||||
Mondelez International Inc.–Class A | 12,921 | 531,570 | ||||||
Pharmaceuticals–5.23% | ||||||||
Eli Lilly and Co. | 6,753 | 563,808 | ||||||
Merck & Co., Inc. | 13,398 | 762,748 | ||||||
Novartis AG (Switzerland) | 6,853 | 676,927 | ||||||
Pfizer Inc. | 13,812 | 463,116 | ||||||
Sanofi (France) | 4,845 | 478,059 | ||||||
Teva Pharmaceutical Industries Ltd.–ADR (Israel) | 9,039 | 534,205 | ||||||
3,478,863 | ||||||||
Publishing–0.50% | ||||||||
Thomson Reuters Corp. | 8,785 | 334,573 | ||||||
Railroads–0.69% | ||||||||
CSX Corp. | 13,988 | 456,708 | ||||||
Regional Banks–3.80% | ||||||||
BB&T Corp. | 9,893 | 398,787 | ||||||
Citizens Financial Group Inc. | 20,329 | 555,185 | ||||||
Fifth Third Bancorp | 21,262 | 442,675 | ||||||
First Horizon National Corp. | 19,213 | 301,067 | ||||||
PNC Financial Services Group, Inc. (The) | 8,674 | 829,668 | ||||||
2,527,382 | ||||||||
Security & Alarm Services–0.65% | ||||||||
Tyco International PLC | 11,270 | 433,557 |
Shares | Value | |||||||
Semiconductor Equipment–0.70% | ||||||||
Applied Materials, Inc. | 24,206 | $ | 465,239 | |||||
Semiconductors–1.29% | ||||||||
Broadcom Corp.–Class A | 6,836 | 351,986 | ||||||
Intel Corp. | 16,697 | 507,839 | ||||||
859,825 | ||||||||
Specialized Finance–0.43% | ||||||||
CME Group Inc.–Class A | 3,056 | 284,391 | ||||||
Systems Software–1.53% | ||||||||
Microsoft Corp. | 10,678 | 471,434 | ||||||
Symantec Corp. | 23,442 | 545,026 | ||||||
1,016,460 | ||||||||
Technology Hardware, Storage & Peripherals–0.51% | ||||||||
NetApp, Inc. | 10,826 | 341,669 | ||||||
Tobacco–0.84% | ||||||||
Philip Morris International Inc. | 6,970 | 558,785 | ||||||
Wireless Telecommunication Services–0.70% | ||||||||
Vodafone Group PLC–ADR (United Kingdom) | 12,762 | 465,175 | ||||||
Total Common Stocks & Other Equity Interests |
| 42,846,311 | ||||||
Principal Amount | ||||||||
Bonds and Notes–21.69% |
| |||||||
Aerospace & Defense–0.29% | ||||||||
Boeing Capital Corp., Sr. Unsec. Notes, | $ | 35,000 | 35,539 | |||||
L-3 Communications Corp., Sr. Unsec. Gtd. Global Notes, 3.95%, 05/28/24 | 150,000 | 145,845 | ||||||
Northrop Grumman Corp., Sr. Unsec. Global Notes, 3.85%, 04/15/45 | 10,000 | 8,833 | ||||||
190,217 | ||||||||
Agricultural Products–0.23% | ||||||||
Bunge Ltd Finance Corp., Sr. Unsec. Gtd. Global Notes, 5.10%, 07/15/15 | 150,000 | 150,160 | ||||||
Air Freight & Logistics–0.27% | ||||||||
UTi Worldwide Inc., Sr. Unsec. Conv. Bonds, 4.50%, 03/01/19 | 174,000 | 178,568 | ||||||
Airlines–0.11% | ||||||||
American Airlines Pass Through Trust, Series 2014-1, Class A, Sr. Sec. First Lien Pass Through Ctfs., 3.70%, 10/01/26 | 24,267 | 24,252 | ||||||
United Airlines Pass Through Trust, Series 2014-2, Class A, Sr. Sec. First Lien Pass Through Ctfs., 3.75%, 09/03/26 | 30,000 | 29,831 | ||||||
Virgin Australia Pass Through Trust (Australia), Series 2013-1, Class A, Sec. Gtd. Pass Through Ctfs., 5.00%, 10/23/23(c) | 16,452 | 17,049 | ||||||
71,132 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
Principal Amount | Value | |||||||
Apparel Retail–0.03% | ||||||||
Ross Stores, Inc., Sr. Unsec. Notes, 3.38%, 09/15/24 | $ | 19,000 | $ | 18,758 | ||||
Application Software–0.43% | ||||||||
Citrix Systems, Inc., Sr. Unsec. Conv. Bonds, 0.50%, 04/15/19 | 268,000 | 284,415 | ||||||
Asset Management & Custody Banks–0.41% | ||||||||
Apollo Management Holdings L.P., Sr. Unsec. Gtd. Notes, | 40,000 | 40,130 | ||||||
Blackstone Holdings Finance Co. LLC, Sr. Unsec. Gtd. Notes, | 150,000 | 149,313 | ||||||
KKR Group Finance Co III LLC, Sr. Unsec. Gtd. Bonds, 5.13%, 06/01/44(c) | 85,000 | 81,715 | ||||||
271,158 | ||||||||
Biotechnology–0.42% | ||||||||
BioMarin Pharmaceutical Inc., Sr. Unsec. Sub. Conv. Notes, 1.50%, 10/15/20 | 115,000 | 183,712 | ||||||
Celgene Corp., Sr. Unsec. Global Notes, | 100,000 | 95,473 | ||||||
279,185 | ||||||||
Broadcasting–0.75% | ||||||||
Grupo Televisa S.A.B. (Mexico), Sr. Unsec. Global Notes, 5.00%, 05/13/45 | 200,000 | 191,013 | ||||||
Liberty Media Corp., Sr. Unsec. Conv. Bonds, 1.38%, 10/15/23 | 324,000 | 309,420 | ||||||
500,433 | ||||||||
Cable & Satellite–0.80% | ||||||||
Comcast Corp., | 150,000 | 167,105 | ||||||
Sr. Unsec. Gtd. Notes, | ||||||||
4.40%, 08/15/35 | 35,000 | 34,724 | ||||||
Cox Communications, Inc., Sr. Unsec. Notes, 8.38%, 03/01/39(c) | 150,000 | 189,743 | ||||||
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc., Sr. Unsec. Gtd. Global Notes, | 150,000 | 141,884 | ||||||
533,456 | ||||||||
Catalog Retail–0.26% | ||||||||
Liberty Interactive LLC, Sr. Unsec. Conv. Global Deb., 0.75%, 03/30/23(d) | 81,000 | 129,347 | ||||||
QVC, Inc., Sr. Sec. Gtd. First Lien Global Notes, 5.45%, 08/15/34 | 50,000 | 45,415 | ||||||
174,762 | ||||||||
Communications Equipment–0.45% | ||||||||
Ciena Corp., Sr. Unsec. Conv. Notes, | 81,000 | 114,261 | ||||||
JDS Uniphase Corp., Sr. Unsec. Conv. Deb., 0.63%, 08/15/18(d) | 165,000 | 162,834 | ||||||
QUALCOMM Inc., Sr. Unsec. Global Notes, 3.00%, 05/20/22 | 24,000 | 23,855 | ||||||
300,950 |
Principal Amount | Value | |||||||
Consumer Finance–0.38% | ||||||||
American Express Co., Unsec. Sub. Global Notes, 3.63%, 12/05/24 | $ | 18,000 | $ | 17,623 | ||||
American Express Credit Corp., Sr. Unsec. Medium-Term Notes, 2.75%, 09/15/15 | 140,000 | 140,559 | ||||||
Capital One Financial Corp., Sr. Unsec. Global Notes, 1.00%, 11/06/15 | 95,000 | 94,972 | ||||||
253,154 | ||||||||
Data Processing & Outsourced Services–0.05% | ||||||||
Xerox Corp., Sr. Unsec. Global Notes, | 38,000 | 35,961 | ||||||
Diversified Banks–1.92% | ||||||||
Abbey National Treasury Services PLC (United Kingdom), Sr. Unsec. Gtd. Global Notes, 4.00%, 04/27/16 | 115,000 | 117,700 | ||||||
Banco Inbursa S.A. Institucion de Banca Multiple (Mexico), Sr. Unsec. Notes, | 150,000 | 144,959 | ||||||
BNP Paribas S.A. (France), Unsec. Sub. Notes, 4.25%, 10/15/24 | 200,000 | 198,054 | ||||||
Citigroup Inc., Unsec. Sub. Notes, | 60,000 | 59,198 | ||||||
HSBC Finance Corp., Sr. Unsec. Global Notes, 5.50%, 01/19/16 | 100,000 | 102,403 | ||||||
JPMorgan Chase & Co., | 150,000 | 147,188 | ||||||
Series X, Jr. Unsec. Sub. Global Notes, 6.10%(e) | 60,000 | 60,375 | ||||||
Series Z, Jr. Unsec. Sub. Global Notes, 5.30%(e) | 40,000 | 39,900 | ||||||
Santander Holdings USA Inc., Sr. Unsec. Global Notes, 3.00%, 09/24/15 | 150,000 | 150,421 | ||||||
Wells Fargo & Co., | 75,000 | 67,535 | ||||||
Unsec. Sub. Medium-Term Notes, 4.10%, 06/03/26 | 95,000 | 94,930 | ||||||
4.65%, 11/04/44 | 100,000 | 96,125 | ||||||
1,278,788 | ||||||||
Diversified Chemicals–0.06% | ||||||||
Eastman Chemical Co., Sr. Unsec. Global Notes, 2.70%, 01/15/20 | 43,000 | 42,873 | ||||||
Diversified Real Estate Activities–0.06% | ||||||||
Brookfield Asset Management Inc. (Canada), Sr. Unsec. Yankee Notes, | 40,000 | 39,538 | ||||||
Drug Retail–0.11% | ||||||||
CVS Health Corp., Sr. Unsec. Global Bonds, 3.38%, 08/12/24 | 20,000 | 19,656 | ||||||
Walgreens Boots Alliance Inc., Sr. Unsec. Gtd. Global Notes, | 32,000 | 31,811 | ||||||
4.50%, 11/18/34 | 24,000 | 22,606 | ||||||
74,073 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
Principal Amount | Value | |||||||
Electric Utilities–0.26% | ||||||||
Georgia Power Co., Sr. Unsec. Notes, | $ | 45,000 | $ | 45,778 | ||||
NextEra Energy Capital Holdings Inc., | 70,000 | 70,245 | ||||||
Southern Co. (The), Series A, Sr. Unsec. Notes, 2.38%, 09/15/15 | 55,000 | 55,195 | ||||||
171,218 | ||||||||
Environmental & Facilities Services–0.03% | ||||||||
Waste Management, Inc., Sr. Unsec. Gtd. Global Notes, 3.90%, 03/01/35 | 25,000 | 23,148 | ||||||
Fertilizers & Agricultural Chemicals–0.04% | ||||||||
Monsanto Co., Sr. Unsec. Global Notes, | 15,000 | 14,932 | ||||||
3.38%, 07/15/24 | 10,000 | 9,590 | ||||||
24,522 | ||||||||
Food Retail–0.08% | ||||||||
Kraft Heinz Co. (The), Sr. Unsec. Gtd. Notes, 1.60%, 06/30/17(c) | 56,000 | 56,051 | ||||||
General Merchandise Stores–0.19% | ||||||||
Dollar General Corp., Sr. Unsec. Global Notes, 3.25%, 04/15/23 | 20,000 | 19,059 | ||||||
Target Corp., Sr. Unsec. Notes, | 100,000 | 105,198 | ||||||
124,257 | ||||||||
Health Care Distributors–0.07% | ||||||||
AmerisourceBergen Corp., Sr. Unsec. Bonds, 3.40%, 05/15/24 | 50,000 | 49,703 | ||||||
Health Care Equipment–0.99% | ||||||||
Becton, Dickinson and Co., | 170,000 | 169,597 | ||||||
Sr. Unsec. Global Notes, | 165,000 | 165,818 | ||||||
Sr. Unsec. Notes, | 17,000 | 17,018 | ||||||
Medtronic Inc., Sr. Unsec. Gtd. Notes, | 58,000 | 58,179 | ||||||
4.38%, 03/15/35(c) | �� | 21,000 | 20,821 | |||||
NuVasive Inc., Sr. Unsec. Conv. Notes, | 94,000 | 119,850 | ||||||
Wright Medical Group, Inc., | 101,000 | 107,691 | ||||||
658,974 | ||||||||
Health Care Facilities–0.79% | ||||||||
Brookdale Senior Living Inc., Sr. Unsec. Conv. Notes, 2.75%, 06/15/18 | 174,000 | 227,614 | ||||||
HealthSouth Corp., Sr. Unsec. Sub. Conv. Notes, 2.00%, 12/01/20(d) | 235,000 | 300,065 | ||||||
527,679 |
Principal Amount | Value | |||||||
Health Care REIT’s–0.04% | ||||||||
HCP, Inc., Sr. Unsec. Global Notes, 3.88%, 08/15/24 | $ | 25,000 | $ | 24,486 | ||||
Health Care Services–0.34% | ||||||||
Express Scripts Holding Co., | 50,000 | 49,713 | ||||||
Sr. Unsec. Gtd. Notes, | 120,000 | 122,024 | ||||||
Laboratory Corp. of America Holdings, Sr. Unsec. Notes, | 33,000 | 32,560 | ||||||
4.70%, 02/01/45 | 22,000 | 20,161 | ||||||
224,458 | ||||||||
Industrial Conglomerates–0.14% | ||||||||
General Electric Co., Sr. Unsec. Global Notes, 0.85%, 10/09/15 | 90,000 | 90,137 | ||||||
Industrial Machinery–0.03% | ||||||||
Valmont Industries, Inc., Sr. Unsec. Gtd. Global Notes, 5.25%, 10/01/54 | 22,000 | 19,700 | ||||||
Integrated Oil & Gas–0.14% | ||||||||
Chevron Corp., Sr. Unsec. Global Notes, | 77,000 | 76,876 | ||||||
Suncor Energy Inc. (Canada), Sr. Unsec. Yankee Notes, 3.60%, 12/01/24 | 18,000 | 18,017 | ||||||
94,893 | ||||||||
Integrated Telecommunication Services–0.56% | ||||||||
AT&T Inc., Sr. Unsec. Global Notes, | 28,000 | 27,056 | ||||||
3.40%, 05/15/25 | 29,000 | 27,642 | ||||||
4.50%, 05/15/35 | 25,000 | 22,992 | ||||||
Telefonica Emisiones SAU (Spain), Sr. Unsec. Gtd. Global Notes, 7.05%, 06/20/36 | 150,000 | 185,463 | ||||||
Verizon Communications Inc., Sr. Unsec. Global Notes, 4.40%, 11/01/34 | 120,000 | 112,126 | ||||||
375,279 | ||||||||
Internet Retail–0.18% | ||||||||
Amazon.com, Inc., Sr. Unsec. Global Notes, 0.65%, 11/27/15 | 110,000 | 110,041 | ||||||
4.80%, 12/05/34 | 9,000 | 8,882 | ||||||
118,923 | ||||||||
Investment Banking & Brokerage–0.60% | ||||||||
Jefferies Group LLC, Sr. Unsec. Conv. Deb., 3.88%, 11/01/17(d) | 163,000 | 166,973 | ||||||
Lazard Group LLC, Sr. Unsec. Global Notes, 3.75%, 02/13/25 | 62,000 | 59,018 | ||||||
Morgan Stanley, Sr. Unsec. Global Medium-Term Notes, 2.38%, 07/23/19 | 175,000 | 173,942 | ||||||
399,933 | ||||||||
Life & Health Insurance–0.07% | ||||||||
Aegon N.V. (Netherlands), Sr. Unsec. Global Bonds, 4.63%, 12/01/15 | 45,000 | 45,625 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
Principal Amount | Value | |||||||
Managed Health Care–0.19% | ||||||||
Anthem, Inc., Sr. Unsec. Global Notes, 1.25%, 09/10/15 | $ | 125,000 | $ | 125,158 | ||||
Movies & Entertainment–0.13% | ||||||||
Live Nation Entertainment, Inc., Sr. Unsec. Conv. Bonds, 2.50%, 05/15/19 | 61,000 | 65,994 | ||||||
Viacom Inc., Sr. Unsec. Global Deb., | 19,000 | 17,600 | ||||||
83,594 | ||||||||
Multi-Line Insurance–0.54% | ||||||||
American Financial Group, Inc., Sr. Unsec. Notes, 9.88%, 06/15/19 | 150,000 | 187,633 | ||||||
American International Group, Inc., Sr. Unsec. Global Notes, 2.30%, 07/16/19 | 20,000 | 20,024 | ||||||
4.38%, 01/15/55 | 40,000 | 35,899 | ||||||
Farmers Exchange Capital III, Unsec. Sub. Notes, 5.45%, 10/15/54(c) | 70,000 | 68,395 | ||||||
Nationwide Financial Services Inc., Sr. Unsec. Notes, 5.30%, 11/18/44(c) | 50,000 | 49,120 | ||||||
361,071 | ||||||||
Multi-Utilities–0.29% | ||||||||
Enable Midstream Partners L.P., Sr. Unsec. Gtd. Notes, 2.40%, 05/15/19(c) | 200,000 | 192,907 | ||||||
Office REIT’s–0.22% | ||||||||
Highwoods Realty L.P., Sr. Unsec. Notes, 3.20%, 06/15/21 | 150,000 | 149,167 | ||||||
Oil & Gas Equipment & Services–0.12% | ||||||||
Helix Energy Solutions Group, Inc., Sr. Unsec. Conv. Notes, | 84,000 | 79,905 | ||||||
Oil & Gas Exploration & Production–0.74% | ||||||||
Cobalt International Energy Inc., Sr. Unsec. Conv. Notes, 2.63%, 12/01/19 | 129,000 | 95,379 | ||||||
ConocoPhillips Co., Sr. Unsec. Gtd. Global Notes, | 46,000 | 46,375 | ||||||
4.15%, 11/15/34 | 49,000 | 47,724 | ||||||
Devon Energy Corp., Sr. Unsec. Global Notes, | 25,000 | 25,081 | ||||||
3.25%, 05/15/22 | 6,000 | 5,931 | ||||||
Marathon Oil Corp., Sr. Unsec. Notes, | 110,000 | 109,979 | ||||||
Stone Energy Corp., Sr. Unsec. Gtd. Conv. Notes, 1.75%, 03/01/17 | 174,000 | 159,754 | ||||||
490,223 | ||||||||
Oil & Gas Storage & Transportation–0.47% | ||||||||
Energy Transfer Partners, L.P., Sr. Unsec. Notes, 4.90%, 03/15/35 | 19,000 | 17,151 |
Principal Amount | Value | |||||||
Oil & Gas Storage & Transportation–(continued) | ||||||||
Enterprise Products Operating LLC, Sr. Unsec. Gtd. Notes, | $ | 150,000 | $ | 151,891 | ||||
2.55%, 10/15/19 | 20,000 | 20,008 | ||||||
Kinder Morgan Inc., Sr. Unsec. Gtd. Notes, 5.30%, 12/01/34 | 28,000 | 25,890 | ||||||
Spectra Energy Partners, LP, Sr. Unsec. Notes, 2.95%, 06/15/16 | 55,000 | 55,769 | ||||||
Williams Partners L.P., Sr. Unsec. Global Notes, 5.10%, 09/15/45 | 48,000 | 42,611 | ||||||
313,320 | ||||||||
Other Diversified Financial Services–0.07% | ||||||||
ERAC USA Finance LLC, Sr. Unsec. Gtd. Notes, 2.35%, 10/15/19(c) | 50,000 | 49,641 | ||||||
Packaged Foods & Meats–0.56% | ||||||||
General Mills, Inc., Sr. Unsec. Global Notes, 0.88%, 01/29/16 | 45,000 | 45,049 | ||||||
2.20%,10/21/19 | 45,000 | 44,726 | ||||||
Grupo Bimbo S.A.B. de C.V. (Mexico), Sr. Unsec. Gtd. Notes, 3.88%, 06/27/24(c) | 200,000 | 197,644 | ||||||
Mondelez International, Inc., Sr. Unsec. Global Notes, 4.13%, 02/09/16 | 60,000 | 61,127 | ||||||
Tyson Foods, Inc., Sr. Unsec. Gtd. Global Bonds, | 11,000 | 11,116 | ||||||
5.15%, 08/15/44 | 12,000 | 12,405 | ||||||
372,067 | ||||||||
Pharmaceuticals–1.50% | ||||||||
AbbVie Inc., Sr. Unsec. Global Notes, | 125,000 | 125,161 | ||||||
4.50%, 05/14/35 | 38,000 | 37,312 | ||||||
Actavis Funding SCS, Sr. Unsec. Gtd. Global Notes, | 49,000 | 49,300 | ||||||
4.55%, 03/15/35 | 14,000 | 13,426 | ||||||
4.85%, 06/15/44 | 150,000 | 144,773 | ||||||
Allergan, Inc., Sr. Unsec. Gtd. Global Notes, 5.75%, 04/01/16 | 50,000 | 51,804 | ||||||
Bayer US Finance LLC (Germany), Sr. Unsec. Gtd. Notes, 3.00%, 10/08/21(c) | 200,000 | 201,305 | ||||||
Jazz Investments I Ltd., Sr. Unsec. Gtd. Conv. Notes, 1.88%, 08/15/21(c) | 76,000 | 88,777 | ||||||
Merck & Co., Inc., Sr. Unsec. Global Notes, 0.70%, 05/18/16 | 100,000 | 100,018 | ||||||
Sanofi (France), Sr. Unsec. Global Notes, | 85,000 | 86,335 | ||||||
Zoetis Inc., Sr. Unsec. Global Notes, | 100,000 | 100,032 | ||||||
998,243 | ||||||||
Property & Casualty Insurance–0.25% | ||||||||
Liberty Mutual Group Inc., Sr. Unsec. Gtd. Bonds, 4.85%, 08/01/44(c) | 100,000 | 97,788 | ||||||
Old Republic International Corp., Sr. Unsec. Conv. Notes, 3.75%, 03/15/18 | 57,000 | 67,581 | ||||||
165,369 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
Principal Amount | Value | |||||||
Railroads–0.04% | ||||||||
Union Pacific Corp., Sr. Unsec. Notes, | $ | 25,000 | $ | 23,932 | ||||
Regional Banks–0.27% | ||||||||
BB&T Corp., Series A, Sr. Unsec. Medium-Term Notes, 3.20%, 03/15/16 | 40,000 | 40,590 | ||||||
Fifth Third Bancorp, Sr. Unsec. Notes, | 140,000 | 141,924 | ||||||
182,514 | ||||||||
Renewable Electricity–0.22% | ||||||||
Oglethorpe Power Corp., Sr. Sec. First Mortgage Bonds, 4.55%, 06/01/44 | 150,000 | 147,857 | ||||||
Research & Consulting Services–0.04% | ||||||||
Verisk Analytics, Inc., Sr. Unsec. Global Notes, 5.50%, 06/15/45 | 25,000 | 24,635 | ||||||
Retail REIT’s–0.23% | ||||||||
Realty Income Corp., Sr. Unsec. Notes, | 150,000 | 150,998 | ||||||
Semiconductor Equipment–0.48% | ||||||||
Lam Research Corp., | 35,000 | 34,116 | ||||||
Series B, Sr. Unsec. Conv. Notes, | 198,000 | 281,779 | ||||||
315,895 | ||||||||
Semiconductors–1.07% | ||||||||
Microchip Technology Inc., Sr. Unsec. Sub. Conv. Notes, 1.63%, 02/15/25(c) | 94,000 | 95,292 | ||||||
Micron Technology, Inc., Series G, Sr. Unsec. Conv. Global Bonds, 3.00%, 11/15/28(d) | 219,000 | 198,879 | ||||||
NVIDIA Corp., Sr. Unsec. Conv. Bonds, | 297,000 | 341,736 | ||||||
ON Semiconductor Corp., Sr. Unsec. Gtd. Conv. Notes, 1.00%, 12/01/20(c) | 76,000 | 75,573 | ||||||
711,480 | ||||||||
Soft Drinks–0.24% | ||||||||
Coca-Cola Co. (The), Sr. Unsec. Global Notes, 1.80%, 09/01/16 | 30,000 | 30,375 | ||||||
PepsiCo, Inc., Sr. Unsec. Notes, | 130,000 | 132,062 | ||||||
162,437 | ||||||||
Specialized Finance–0.24% | ||||||||
Moody’s Corp., Sr. Unsec. Global Notes, 4.88%, 02/15/24 | 150,000 | 161,419 | ||||||
Systems Software–0.42% | ||||||||
FireEye, Inc., | 22,000 | 23,595 | ||||||
Series B, Sr. Unsec. Conv. Notes, | 19,000 | 20,354 | ||||||
Microsoft Corp., Sr. Unsec. Global Notes, 3.50%, 02/12/35 | 37,000 | 33,841 |
Principal Amount | Value | |||||||
Systems Software–(continued) | ||||||||
NetSuite Inc., Sr. Unsec. Conv. Notes, | $ | 162,000 | $ | 169,492 | ||||
Oracle Corp., Sr. Unsec. Global Notes, | 30,000 | 29,445 | ||||||
276,727 | ||||||||
Technology Hardware, Storage & Peripherals–0.72% | ||||||||
Apple Inc., Sr. Unsec. Global Notes, | 39,000 | 37,238 | ||||||
SanDisk Corp., Sr. Unsec. Conv. Bonds, 0.50%, 10/15/20 | 348,000 | 339,082 | ||||||
Seagate HDD Cayman, | 65,000 | 64,919 | ||||||
Sr. Unsec. Gtd. Notes, 5.75%, 12/01/34(c) | 37,000 | 36,353 | ||||||
477,592 | ||||||||
Thrifts & Mortgage Finance–0.67% | ||||||||
MGIC Investment Corp., Sr. Unsec. Conv. Notes, | 170,000 | 196,032 | ||||||
2.00%, 04/01/20 | 46,000 | 76,820 | ||||||
Radian Group Inc., Sr. Unsec. Conv. Notes, 3.00%, 11/15/17 | 72,000 | 119,970 | ||||||
2.25%, 03/01/19 | 30,000 | 53,381 | ||||||
446,203 | ||||||||
Tobacco–0.09% | ||||||||
Altria Group, Inc., Sr. Unsec. Gtd. Global Notes, 4.13%, 09/11/15 | 25,000 | 25,151 | ||||||
B.A.T. International Finance PLC (United Kingdom), Sr. Unsec. Gtd. Bonds, 3.95%, 06/15/25(c) | 37,000 | 37,005 | ||||||
62,156 | ||||||||
Trading Companies & Distributors–0.05% | ||||||||
Air Lease Corp., Sr. Unsec. Global Notes, 4.25%, 09/15/24 | 35,000 | 34,956 | ||||||
Wireless Telecommunication Services–0.25% | ||||||||
Crown Castle Towers LLC, Sr. Sec. Gtd. First Lien Notes, 4.88%, 08/15/20(c) | 150,000 | 163,996 | ||||||
Total Bonds and Notes |
| 14,430,029 | ||||||
U.S. Treasury Securities–8.70% |
| |||||||
U.S. Treasury Notes–8.65% | ||||||||
0.63%, 06/30/17 | 3,000,000 | 2,998,817 | ||||||
1.63%, 06/30/20 | 2,244,300 | 2,242,464 | ||||||
2.13%, 05/15/25 | 523,800 | 513,437 | ||||||
5,754,718 | ||||||||
U.S. Treasury Bonds–0.05% | ||||||||
2.50%, 02/15/45 | 34,800 | 30,501 | ||||||
Total U.S. Treasury Securities |
| 5,785,219 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
Shares | Value | |||||||
Preferred Stocks–0.17% |
| |||||||
Asset Management & Custody Banks–0.17% | ||||||||
AMG Capital Trust II, $2.58 Jr. Unsec. Gtd. Sub. Conv. Pfd. (Cost $118,794) | 1,900 | $ | 114,831 | |||||
Money Market Funds–5.23% |
| |||||||
Liquid Assets Portfolio–Institutional Class(f) | 1,738,945 | 1,738,945 | ||||||
Premier Portfolio–Institutional Class(f) | 1,738,946 | 1,738,946 | ||||||
Total Money Market Funds |
| 3,477,891 | ||||||
TOTAL INVESTMENTS–100.20% |
| 66,654,281 | ||||||
OTHER ASSETS LESS LIABILITIES–(0.20)% |
| (134,781 | ) | |||||
NET ASSETS–100.00% |
| $ | 66,519,500 |
Investment Abbreviations:
ADR | – American Depositary Receipt | |
Conv. | – Convertible | |
Ctfs. | – Certificates | |
Deb. | – Debentures | |
Gtd. | – Guaranteed | |
Jr. | – Junior | |
Pfd. | – Preferred | |
REIT | – Real Estate Investment Trust | |
Sec. | – Secured | |
Sr. | – Senior | |
Sub. | – Subordinated | |
Unsec. | – Unsecured |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Non-income producing security. |
(c) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at June 30, 2015 was $2,442,576, which represented 3.67% of the Fund’s Net Assets. |
(d) | Security has an irrevocable call by the issuer or mandatory put by the holder. Maturity date reflects such call or put. |
(e) | Perpetual bond with no specified maturity date. |
(f) | The money market fund and the Fund are affiliated by having the same investment adviser. |
Portfolio Composition
By sector, based on Net
Assets as of June 30, 2015
Financials | 27.1 | % | ||
Health Care | 13.3 | |||
Information Technology | 12.3 | |||
Consumer Discretionary | 9.0 | |||
U.S. Treasury Securities | 8.7 | |||
Energy | 7.6 | |||
Industrials | 6.7 | |||
Consumer Staples | 5.3 | |||
Telecommunication Services | 2.6 | |||
Utilities | 1.6 | |||
Materials | 0.8 | |||
Money Market Funds Plus Other Assets Less Liabilities | 5.0 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $60,466,385) | $ | 63,176,390 | ||
Investments in affiliated money market funds, at value and cost | 3,477,891 | |||
Total investments, at value (Cost $63,944,276) | 66,654,281 | |||
Foreign currencies, at value (Cost $22,618) | 22,382 | |||
Receivable for: | ||||
Investments sold | 38,156 | |||
Fund shares sold | 5,810 | |||
Dividends and interest | 206,503 | |||
Investment for trustee deferred compensation and retirement plans | 70,512 | |||
Unrealized appreciation on forward foreign currency contracts outstanding | 6,122 | |||
Other assets | 2,564 | |||
Total assets | 67,006,330 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 225,115 | |||
Fund shares reacquired | 101,417 | |||
Accrued fees to affiliates | 47,904 | |||
Accrued trustees’ and officers’ fees and benefits | 4,411 | |||
Accrued other operating expenses | 33,342 | |||
Trustee deferred compensation and retirement plans | 74,641 | |||
Total liabilities | 486,830 | |||
Net assets applicable to shares outstanding | $ | 66,519,500 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 39,250,493 | ||
Undistributed net investment income | 1,106,582 | |||
Undistributed net realized gain | 23,450,018 | |||
Net unrealized appreciation | 2,712,407 | |||
$ | 66,519,500 | |||
Net Assets: |
| |||
Series I | $ | 64,883,710 | ||
Series II | $ | 1,635,790 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 3,378,818 | |||
Series II | 85,908 | |||
Series I: | ||||
Net asset value per share | $ | 19.20 | ||
Series II: | ||||
Net asset value per share | $ | 19.04 |
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $17,522) | $ | 532,103 | ||
Dividends from affiliated money market funds | 1,257 | |||
Interest | 219,164 | |||
Total investment income | 752,524 | |||
Expenses: | ||||
Advisory fees | 208,222 | |||
Administrative services fees | 105,711 | |||
Custodian fees | 7,901 | |||
Distribution fees — Series II | 2,134 | |||
Transfer agent fees | 10,374 | |||
Trustees’ and officers’ fees and benefits | 11,110 | |||
Professional services fees | 20,806 | |||
Other | 7,099 | |||
Total expenses | 373,357 | |||
Less: Fees waived | (10,347 | ) | ||
Net expenses | 363,010 | |||
Net investment income | 389,514 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 996,427 | |||
Foreign currencies | (86 | ) | ||
Forward foreign currency contracts | 170,954 | |||
Futures contracts | (167,333 | ) | ||
999,962 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (618,976 | ) | ||
Foreign currencies | (765 | ) | ||
Forward foreign currency contracts | (75,127 | ) | ||
(694,868 | ) | |||
Net realized and unrealized gain | 305,094 | |||
Net increase in net assets resulting from operations | $ | 694,608 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: |
| |||||||
Net investment income | $ | 389,514 | $ | 882,573 | ||||
Net realized gain | 999,962 | 22,977,439 | ||||||
Change in net unrealized appreciation (depreciation) | (694,868 | ) | (11,008,043 | ) | ||||
Net increase in net assets resulting from operations | 694,608 | 12,851,969 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Series I | — | (1,956,705 | ) | |||||
Series ll | — | (44,780 | ) | |||||
Total distributions from net investment income | — | (2,001,485 | ) | |||||
Distributions to shareholders from net realized gains: | ||||||||
Series l | — | (3,200,299 | ) | |||||
Series ll | — | (80,119 | ) | |||||
Total distributions from net realized gains | — | (3,280,418 | ) | |||||
Share transactions–net: | ||||||||
Series l | (6,512,949 | ) | 1,534,064 | |||||
Series ll | (172,960 | ) | (63,252 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (6,685,909 | ) | 1,470,812 | |||||
Net increase (decrease) in net assets | (5,991,301 | ) | 9,040,878 | |||||
Net assets: | ||||||||
Beginning of period | 72,510,801 | 63,469,923 | ||||||
End of period (includes undistributed net investment income of $1,106,582 and $717,068, respectively) | $ | 66,519,500 | $ | 72,510,801 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. Managed Volatility Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is both capital appreciation and current income while managing portfolio volatility.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Invesco V.I. Managed Volatility Fund
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
Invesco V.I. Managed Volatility Fund
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
K. | Futures Contracts — The Fund may enter into futures contracts to manage exposure to interest rate, equity and market price movements and/or currency risks. A futures contract is an agreement between two parties (“Counterparties”) to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund’s basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Statement of Operations. The primary risks associated with futures contracts are market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal Counterparty risk since the exchange’s |
Invesco V.I. Managed Volatility Fund
clearinghouse, as Counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. |
L. | Other Risks — The Fund’s investments are concentrated in a comparatively narrow segment of the economy, which may make the Fund more volatile. |
The Fund may invest a large percentage of its assets in a limited number of securities or other instruments, which could negatively affect the value of the Fund.
The following factors may affect the Fund’s investments in the utilities sector: governmental regulation, economic factors, ability of the issuer to obtain financing, prices of natural resources and risks associated with nuclear power.
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of 0.60% of the Fund’s average daily net assets.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
Effective May 1, 2015, the Adviser has contractually agreed, through at least June 30, 2016, to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets. Prior to May 1, 2015, the Adviser had contractually agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 1.03% and Series II shares to 1.28% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2016. The fee waiver agreement cannot be terminated during its term. To the extent that the annualized expense ratio does not exceed the expense limitation, the Adviser will retain its ability to be reimbursed for such fee waivers or reimbursements prior to the end of each fiscal year.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $10,347.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $24,795 for accounting and fund administrative services and reimbursed $80,916 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the six months ended June 30, 2015, the Fund incurred $88 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
Invesco V.I. Managed Volatility Fund
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 43,420,569 | $ | 3,018,464 | $ | — | $ | 46,439,033 | ||||||||
U.S. Treasury Securities | — | 5,785,219 | — | 5,785,219 | ||||||||||||
Corporate Debt Securities | — | 14,430,029 | — | 14,430,029 | ||||||||||||
43,420,569 | 23,233,712 | — | 66,654,281 | |||||||||||||
Forward Foreign Currency Contracts* | — | 6,122 | — | 6,122 | ||||||||||||
Total Investments | $ | 43,420,569 | $ | 23,239,834 | $ | — | $ | 66,660,403 |
* | Unrealized appreciation. |
NOTE 4—Derivative Investments
Value of Derivative Investments at Period-End
The table below summarizes the value of the Fund’s derivative investments, detailed by primary risk exposure, held as of June 30, 2015:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Currency risk: | ||||||||
Forward foreign currency contracts(a) | $ | 17,483 | $ | (11,361 | ) |
(a) | Values are disclosed on the Statement of Assets and Liabilities under the caption Unrealized appreciation on forward foreign currency contracts outstanding. |
Effect of Derivative Investments for the six months ended June 30, 2015
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations | ||||||||
Forward Foreign Currency Contracts | Futures Contracts | |||||||
Realized Gain (Loss): | ||||||||
Currency risk | $ | 170,954 | $ | — | ||||
Market risk | — | (167,333 | ) | |||||
Change in Net Unrealized Appreciation (Depreciation): | ||||||||
Currency risk | (75,127 | ) | — | |||||
Total | $ | 95,827 | $ | (167,333 | ) |
The table below summarizes the six month average notional value of forward foreign currency contracts and the two month average notional value of futures contracts outstanding during the period.
Forward Foreign Currency Contracts | Futures Contracts | |||||||
Average notional value | $ | 4,097,035 | $ | 4,714,370 |
Invesco V.I. Managed Volatility Fund
Open Forward Foreign Currency Contracts | ||||||||||||||||||||||||||
Settlement Date | Counterparty | Contract to | Notional Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||
Deliver | Receive | |||||||||||||||||||||||||
7/24/15 | Bank of New York Mellon (The) | CAD | 333,810 | USD | 270,895 | $ | 267,205 | $ | 3,690 | |||||||||||||||||
7/24/15 | State Street Bank and Trust Co. | CAD | 334,437 | USD | 271,350 | 267,706 | 3,644 | |||||||||||||||||||
7/24/15 | Bank of New York Mellon (The) | CHF | 239,075 | USD | 256,766 | 255,955 | 811 | |||||||||||||||||||
7/24/15 | State Street Bank and Trust Co. | CHF | 239,846 | USD | 257,596 | 256,781 | 815 | |||||||||||||||||||
7/24/15 | Bank of New York Mellon (The) | EUR | 460,138 | USD | 517,462 | 513,205 | 4,257 | |||||||||||||||||||
7/24/15 | State Street Bank and Trust Co. | EUR | 460,842 | USD | 518,256 | 513,990 | 4,266 | |||||||||||||||||||
7/24/15 | Bank of New York Mellon (The) | GBP | 339,321 | USD | 530,818 | 533,097 | (2,279 | ) | ||||||||||||||||||
7/24/15 | State Street Bank and Trust Co. | GBP | 339,783 | USD | 531,558 | 533,823 | (2,265 | ) | ||||||||||||||||||
7/24/15 | Bank of New York Mellon (The) | ILS | 729,985 | USD | 190,026 | 193,397 | (3,371 | ) | ||||||||||||||||||
7/24/15 | State Street Bank and Trust Co. | ILS | 729,986 | USD | 189,951 | 193,397 | (3,446 | ) | ||||||||||||||||||
Total Open Forward Foreign Currency Contracts — Currency Risk | $ | 6,122 |
Currency Abbreviations:
CAD | – Canadian Dollar | |
CHF | – Swiss Franc | |
EUR | – Euro |
GBP | – British Pound Sterling | |
ILS | – Israeli Shekel | |
USD | – U.S. Dollar |
Offsetting Assets and Liabilities
Accounting Standards Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which was subsequently clarified in Financial Accounting Standards Board ASU 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” is intended to enhance disclosures about financial instruments and derivative instruments that are subject to offsetting arrangements on the Statement of Assets and Liabilities and to enable investors to better understand the effect of those arrangements on the Fund’s financial position. In order for an arrangement to be eligible for netting, the Fund must have a basis to conclude that such netting arrangements are legally enforceable. The Fund enters into netting agreements and collateral agreements in an attempt to reduce the Fund’s Counterparty credit risk by providing for a single net settlement with a Counterparty of all financial transactions covered by the agreement in an event of default as defined under such agreement.
There were no derivative instruments subject to a netting agreement for which the Fund is not currently netting. The following tables present derivative instruments that are either subject to an enforceable netting agreement or offset by collateral arrangements as of June 30, 2015.
Assets: | ||||||||||||||||||||||||
Gross amounts of Recognized Assets | Gross amounts offset in Statement of Assets & Liabilities | Net amounts of assets presented in Statement of Assets & Liabilities | Collateral Received | |||||||||||||||||||||
Counterparty | Financial Instruments | Cash | Net Amount | |||||||||||||||||||||
Bank of New York Mellon (The) | $ | 8,758 | $ | (5,650 | ) | $ | 3,108 | $ | — | $ | — | $ | 3,108 | |||||||||||
State Street Bank and Trust Co. | 8,725 | (5,711 | ) | 3,014 | — | — | 3,014 | |||||||||||||||||
Total | $ | 17,483 | $ | (11,361 | ) | $ | 6,122 | $ | — | $ | — | $ | 6,122 | |||||||||||
Liabilities: | ||||||||||||||||||||||||
Gross amounts of Recognized Liabilities | Gross amounts offset in Statement of Assets & Liabilities | Net amounts of liabilities presented in Statement of Assets & Liabilities | Collateral Pledged | |||||||||||||||||||||
Counterparty | Financial Instruments | Cash | Net Amount | |||||||||||||||||||||
Bank of New York Mellon (The) | $ | 5,650 | $ | (5,650 | ) | $ | — | $ | — | $ | — | $ | — | |||||||||||
State Street Bank and Trust Co. | 5,711 | (5,711 | ) | — | — | — | — | |||||||||||||||||
Total | $ | 11,361 | $ | (11,361 | ) | $ | — | $ | — | $ | — | $ | — |
NOTE 5—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
Invesco V.I. Managed Volatility Fund
NOTE 6—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund did not have a capital loss carryforward as of December 31, 2014.
NOTE 8—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $7,971,214 and $13,159,664, respectively. During the same period, purchases and sales of U.S. Treasury obligations were $32,732,100 and $32,413,293, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 5,012,465 | ||
Aggregate unrealized (depreciation) of investment securities | (2,377,225 | ) | ||
Net unrealized appreciation of investment securities | $ | 2,635,240 |
Cost of investments for tax purposes is $64,019,041.
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 186,625 | $ | 3,545,306 | 717,540 | $ | 13,584,291 | ||||||||||
Series II | 2,614 | 49,560 | 16,173 | 299,184 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 276,664 | 5,157,004 | ||||||||||||
Series II | — | — | 6,744 | 124,899 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (525,506 | ) | (10,058,255 | ) | (906,605 | ) | (17,207,231 | ) | ||||||||
Series II | (11,704 | ) | (222,520 | ) | (26,293 | ) | (487,335 | ) | ||||||||
Net increase (decrease) in share activity | (347,971 | ) | $ | (6,685,909 | ) | 84,223 | $ | 1,470,812 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 57% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
Invesco V.I. Managed Volatility Fund
NOTE 10—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income(a) | Net gains on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Distributions from net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Series I |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 19.02 | $ | 0.11 | $ | 0.07 | $ | 0.18 | $ | — | $ | — | $ | — | $ | 19.20 | 0.95 | % | $ | 64,884 | 1.04 | %(d) | 1.07 | %(d) | 1.13 | %(d) | 62 | % | ||||||||||||||||||||||||||||
Year ended 12/31/14 | 17.03 | 0.24 | 3.23 | 3.47 | (0.56 | ) | (0.92 | ) | (1.48 | ) | 19.02 | 20.57 | 70,717 | 1.03 | 1.10 | 1.26 | 201 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 16.20 | 0.47 | 1.25 | 1.72 | (0.52 | ) | (0.37 | ) | (0.89 | ) | 17.03 | 10.76 | 61,806 | 1.07 | 1.08 | 2.73 | 15 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 16.74 | 0.52 | 0.10 | 0.62 | (0.54 | ) | (0.62 | ) | (1.16 | ) | 16.20 | 3.61 | 64,158 | 0.99 | 1.03 | 3.10 | 3 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 14.87 | 0.51 | 1.90 | 2.41 | (0.54 | ) | — | (0.54 | ) | 16.74 | 16.45 | 70,956 | 0.92 | 1.04 | 3.23 | 14 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 14.51 | 0.47 | 0.43 | 0.90 | (0.54 | ) | — | (0.54 | ) | 14.87 | 6.30 | 63,945 | 0.92 | 1.04 | 3.25 | 13 | ||||||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 18.88 | 0.08 | 0.08 | 0.16 | — | — | — | 19.04 | 0.85 | 1,636 | 1.29 | (d) | 1.32 | (d) | 0.88 | (d) | 62 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 16.91 | 0.19 | 3.21 | 3.40 | (0.51 | ) | (0.92 | ) | (1.43 | ) | 18.88 | 20.30 | 1,794 | 1.28 | 1.35 | 1.01 | 201 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 16.09 | 0.43 | 1.23 | 1.66 | (0.47 | ) | (0.37 | ) | (0.84 | ) | 16.91 | 10.45 | 1,664 | 1.32 | 1.33 | 2.48 | 15 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 16.63 | 0.47 | 0.10 | 0.57 | (0.49 | ) | (0.62 | ) | (1.11 | ) | 16.09 | 3.34 | 1,637 | 1.24 | 1.28 | 2.85 | 3 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 14.78 | 0.47 | 1.88 | 2.35 | (0.50 | ) | — | (0.50 | ) | 16.63 | 16.15 | 1,878 | 1.17 | 1.29 | 2.98 | 14 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 14.43 | 0.43 | 0.42 | 0.85 | (0.50 | ) | — | (0.50 | ) | 14.78 | 6.01 | 1,706 | 1.17 | 1.29 | 3.00 | 13 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $68,261 and $1,721 for Series I and Series II shares, respectively. |
Invesco V.I. Managed Volatility Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before | Annualized Expense Ratio2 | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2,3 | Ending Account Value (06/30/15) | Expenses Paid During Period2,4 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,009.50 | $ | 5.18 | $ | 1,019.64 | $ | 5.21 | 1.04 | % | ||||||||||||
Series II | 1,000.00 | 1,008.50 | 6.42 | 1,018.40 | 6.46 | 1.29 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. Effective May 1, 2015, the Fund’s adviser has contractually agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual fund operating expense of Series I and Series II shares to 2.00% and 2.25% of average daily net assets, respectively. The annualized expense ratios restated as if these agreements had been in effect throughout the entire most recent fiscal half year are 1.06% and 1.31% for Series I and Series II shares, respectively. |
3 | The actual expenses paid restated as if the changes discussed above had been in effect throughout the entire most recent fiscal half year are $5.28 and $6.52 for Series I and Series II shares, respectively. |
4 | The hypothetical expenses paid restated as if the changes discussed above had been in effect throughout the entire most recent fiscal half year are $5.31 and $6.56 for Series I and Series II shares, respectively. |
Invesco V.I. Managed Volatility Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. Managed Volatility Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports form the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s
consideration of Invesco Advisers’ investment process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Underlying Funds Mixed-Asset Target Allocation Growth Index. The Board noted that performance of Series I shares of the Fund was in the first quintile of the Lipper performance universe for the one year period, the fifth quintile for the three year period and the second quintile for the five year period (the first quintile being the best performing funds and the
Invesco V.I. Managed Volatility Fund
fifth quintile being the worst performing funds). The Board noted that performance of Series I shares of the Fund was above the performance of the Index for the one and five year periods and below the performance of the Index for the three year period. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series I shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other funds or client accounts with investment strategies comparable to those of the Fund.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisors to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board noted that the Fund does not benefit from economies of scale through contractual breakpoints, but does share directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services . The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to
operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered that it receives periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the
affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
Invesco V.I. Managed Volatility Fund
| ||||
Semiannual Report to Shareholders |
June 30, 2015 | |||
| ||||
Invesco V.I. Mid Cap Core Equity Fund | ||||
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. | ||
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. | ||
Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. | ||
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd. | ||
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing. | ||
Invesco Distributors, Inc. VIMCCE-SAR-1 | ||
| ||
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance |
Performance summary
Fund vs. Indexes
Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower.
Series I Shares | 3.70 | % | |||
Series II Shares | 3.54 | ||||
S&P 500 Indexq (Broad Market Index) | 1.23 | ||||
Russell Midcap Indexq (Style-Specific Index) | 2.35 | ||||
Lipper VUF Mid-Cap Core Funds Indexn (Peer Group Index) | 3.12 | ||||
Source(s): qFactSet Research Systems Inc.; nLipper Inc. |
The S&P 500® Index is an unmanaged index considered representative of the US stock market.
The Russell Midcap® Index is an unmanaged index considered representative of mid-cap stocks. The Russell Midcap Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
The Lipper VUF Mid-Cap Core Funds Index is an unmanaged index considered representative of mid-cap core variable insurance underlying funds tracked by Lipper.
The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es).
A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
Average Annual Total Returns
As of 6/30/15
Series I Shares | |||||
Inception (9/10/01) | 7.72 | % | |||
10 Years | 7.08 | ||||
5 Years | 11.60 | ||||
1 Year | 0.65 | ||||
Series II Shares | |||||
Inception (9/10/01) | 7.46 | % | |||
10 Years | 6.81 | ||||
5 Years | 11.30 | ||||
1 Year | 0.34 |
The performance of the Fund’s Series I and Series II share classes will differ primarily due to different class expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 1.04% and 1.29%, respectively.1 The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 1.07% and 1.32%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of
this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. Mid Cap Core Equity Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses
currently or in the past, returns would have been lower. See current prospectus for more information.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2017. See current prospectus for more information. |
Invesco V.I. Mid Cap Core Equity Fund
Schedule of Investments(a)
June 30, 2015
(Unaudited)
Shares | Value | |||||||
Common Stocks–84.74% |
| |||||||
Apparel, Accessories & Luxury Goods–1.57% | ||||||||
PVH Corp. | 50,481 | $ | 5,815,411 | |||||
Asset Management & Custody Banks–2.18% | ||||||||
Northern Trust Corp. | 105,897 | 8,096,885 | ||||||
Auto Parts & Equipment–1.67% | ||||||||
Dana Holding Corp. | 301,728 | 6,209,562 | ||||||
Brewers–1.41% | ||||||||
Molson Coors Brewing Co.–Class B | 74,613 | 5,208,734 | ||||||
Communications Equipment–2.92% | ||||||||
F5 Networks, Inc.(b) | 50,974 | 6,134,721 | ||||||
Juniper Networks, Inc. | 181,069 | 4,702,362 | ||||||
10,837,083 | ||||||||
Computer & Electronics Retail–1.13% | ||||||||
GameStop Corp.–Class A | 97,761 | 4,199,813 | ||||||
Data Processing & Outsourced Services–1.30% | ||||||||
Jack Henry & Associates, Inc. | 74,325 | 4,808,827 | ||||||
Department Stores–0.65% | ||||||||
Macy’s, Inc. | 35,833 | 2,417,652 | ||||||
Drug Retail–1.33% | ||||||||
Rite Aid Corp.(b) | 591,494 | 4,938,975 | ||||||
Electronic Components–2.74% | ||||||||
Amphenol Corp.–Class A | 175,111 | 10,151,185 | ||||||
Environmental & Facilities Services–1.19% | ||||||||
Republic Services, Inc. | 112,300 | 4,398,791 | ||||||
Health Care Distributors–1.15% | ||||||||
Cardinal Health, Inc. | 50,835 | 4,252,348 | ||||||
Health Care Equipment–2.16% | ||||||||
ResMed Inc. | 74,034 | 4,173,296 | ||||||
Wright Medical Group, Inc.(b) | 146,510 | 3,847,353 | ||||||
8,020,649 | ||||||||
Health Care Facilities–2.66% | ||||||||
Community Health Systems Inc.(b) | 92,674 | 5,835,682 | ||||||
Tenet Healthcare Corp.(b) | 69,661 | 4,031,978 | ||||||
9,867,660 | ||||||||
Homebuilding–1.32% | ||||||||
D.R. Horton, Inc. | 178,392 | 4,880,805 | ||||||
Homefurnishing Retail–1.25% | ||||||||
Aaron’s, Inc. | 128,088 | 4,638,066 | ||||||
Hotels, Resorts & Cruise Lines–1.77% | ||||||||
Norwegian Cruise Line Holdings Ltd.(b) | 117,253 | 6,570,858 |
Shares | Value | |||||||
Human Resource & Employment Services–0.91% | ||||||||
ManpowerGroup Inc. | 37,891 | $ | 3,386,698 | |||||
Industrial Machinery–7.44% | ||||||||
Kennametal Inc. | 183,660 | 6,266,479 | ||||||
Lincoln Electric Holdings, Inc. | 52,806 | 3,215,357 | ||||||
Stanley Black & Decker Inc. | 88,379 | 9,301,006 | ||||||
Timken Co. (The) | 116,913 | 4,275,509 | ||||||
Xylem, Inc. | 122,002 | 4,522,614 | ||||||
27,580,965 | ||||||||
Insurance Brokers–2.19% | ||||||||
Brown & Brown, Inc. | 247,235 | 8,124,142 | ||||||
Life & Health Insurance–3.88% | ||||||||
St. James’s Place PLC (United Kingdom) | 501,157 | 7,134,460 | ||||||
Torchmark Corp. | 124,804 | 7,266,089 | ||||||
14,400,549 | ||||||||
Life Sciences Tools & Services–1.21% | ||||||||
Agilent Technologies, Inc. | 116,560 | 4,496,885 | ||||||
Marine–0.78% | ||||||||
Kirby Corp.(b) | 37,465 | 2,872,067 | ||||||
Multi-Utilities–1.59% | ||||||||
CMS Energy Corp. | 185,370 | 5,902,181 | ||||||
Oil & Gas Equipment & Services–1.29% | ||||||||
Dril-Quip, Inc.(b) | 63,726 | 4,795,381 | ||||||
Oil & Gas Exploration & Production–3.58% | ||||||||
Cabot Oil & Gas Corp. | 136,237 | 4,296,915 | ||||||
Concho Resources Inc.(b) | 41,565 | 4,732,591 | ||||||
Vermilion Energy, Inc. (Canada) | 98,308 | 4,247,050 | ||||||
13,276,556 | ||||||||
Packaged Foods & Meats–2.05% | ||||||||
Hain Celestial Group, Inc. (The)(b) | 47,693 | 3,141,061 | ||||||
JM Smucker Co. (The) | 41,281 | 4,475,273 | ||||||
7,616,334 | ||||||||
Paper Packaging–0.62% | ||||||||
Packaging Corp. of America | 36,944 | 2,308,631 | ||||||
Pharmaceuticals–1.69% | ||||||||
Endo International PLC(b) | 78,440 | 6,247,746 | ||||||
Property & Casualty Insurance–5.47% | ||||||||
Arch Capital Group Ltd.(b) | 139,220 | 9,322,171 | ||||||
Progressive Corp. (The) | 394,088 | 10,967,469 | ||||||
20,289,640 | ||||||||
Regional Banks–3.08% | ||||||||
First Republic Bank | 181,387 | 11,432,823 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Mid Cap Core Equity Fund
Shares | Value | |||||||
Semiconductor Equipment–4.04% | ||||||||
Lam Research Corp. | 84,667 | $ | 6,887,660 | |||||
Teradyne, Inc. | 419,151 | 8,085,423 | ||||||
14,973,083 | ||||||||
Semiconductors–3.67% | ||||||||
Linear Technology Corp. | 187,469 | 8,291,754 | ||||||
Xilinx, Inc. | 119,939 | 5,296,506 | ||||||
13,588,260 | ||||||||
Specialized Finance–2.48% | ||||||||
Moody’s Corp. | 85,062 | 9,183,294 | ||||||
Specialty Chemicals–5.15% | ||||||||
Albemarle Corp. | 81,432 | 4,500,747 | ||||||
Cytec Industries Inc. | 83,360 | 5,045,781 | ||||||
International Flavors & Fragrances Inc. | 51,197 | 5,595,320 | ||||||
Koninklijke DSM N.V. (Netherlands) | 68,006 | 3,953,965 | ||||||
19,095,813 | ||||||||
Specialty Stores–1.34% | ||||||||
Dick’s Sporting Goods, Inc. | 95,598 | 4,949,108 |
Shares | Value | |||||||
Technology Hardware, Storage & Peripherals–1.37% | ||||||||
NetApp, Inc. | 160,800 | $ | 5,074,848 | |||||
Trading Companies & Distributors–1.27% | ||||||||
WESCO International, Inc.(b) | 68,329 | 4,690,103 | ||||||
Trucking–1.24% | ||||||||
Hertz Global Holdings, Inc.(b) | 253,255 | 4,588,981 | ||||||
Total Common Stocks |
| 314,187,392 | ||||||
Money Market Funds–15.25% |
| |||||||
Liquid Assets Portfolio–Institutional Class(c) | 28,266,708 | 28,266,708 | ||||||
Premier Portfolio–Institutional Class(c) | 28,266,709 | 28,266,709 | ||||||
Total Money Market Funds |
| 56,533,417 | ||||||
TOTAL INVESTMENTS–99.99% |
| 370,720,809 | ||||||
OTHER ASSETS LESS LIABILITIES–0.01% |
| 17,026 | ||||||
NET ASSETS–100.00% |
| $ | 370,737,835 |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Non-income producing security. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. |
Portfolio Composition
By sector, based on Net Assets
as of June 30, 2015
Financials | 19.3 | % | ||
Information Technology | 16.0 | |||
Industrials | 12.8 | |||
Consumer Discretionary | 10.7 | |||
Health Care | 8.8 | |||
Materials | 5.8 | |||
Energy | 4.9 | |||
Consumer Staples | 4.8 | |||
Utilities | 1.6 | |||
Money Market Funds Plus Other Assets Less Liabilities | 15.3 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Mid Cap Core Equity Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $234,152,598) | $ | 314,187,392 | ||
Investments in affiliated money market funds, at value and cost | 56,533,417 | |||
Total investments, at value (Cost $290,686,015) | 370,720,809 | |||
Foreign currencies, at value (Cost $15,717) | 15,508 | |||
Receivable for: | ||||
Fund shares sold | 248,096 | |||
Dividends | 286,557 | |||
Investment for trustee deferred compensation and retirement plans | 111,911 | |||
Total assets | 371,382,881 | |||
Liabilities: |
| |||
Payable for: | ||||
Fund shares reacquired | 164,723 | |||
Accrued fees to affiliates | 318,911 | |||
Accrued trustees’ and officers’ fees and benefits | 4,987 | |||
Accrued other operating expenses | 29,319 | |||
Trustee deferred compensation and retirement plans | 127,106 | |||
Total liabilities | 645,046 | |||
Net assets applicable to shares outstanding | $ | 370,737,835 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 245,745,052 | ||
Undistributed net investment income | 741,945 | |||
Undistributed net realized gain | 44,216,551 | |||
Net unrealized appreciation | 80,034,287 | |||
$ | 370,737,835 | |||
Net Assets: |
| |||
Series I | $ | 240,633,875 | ||
Series II | $ | 130,103,960 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 16,508,544 | |||
Series II | 9,077,620 | |||
Series I: | ||||
Net asset value per share | $ | 14.58 | ||
Series II: | ||||
Net asset value per share | $ | 14.33 |
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $27,215) | $ | 2,071,942 | ||
Dividends from affiliated money market funds | 19,431 | |||
Total investment income | 2,091,373 | |||
Expenses: | ||||
Advisory fees | 1,359,487 | |||
Administrative services fees | 512,346 | |||
Custodian fees | 12,476 | |||
Distribution fees — Series II | 160,796 | |||
Transfer agent fees | 21,911 | |||
Trustees’ and officers’ fees and benefits | 12,835 | |||
Other | 27,250 | |||
Total expenses | 2,107,101 | |||
Less: Fees waived | (49,456 | ) | ||
Net expenses | 2,057,645 | |||
Net investment income | 33,728 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 11,692,529 | |||
Foreign currencies | (19,670 | ) | ||
11,672,859 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | 1,895,976 | |||
Foreign currencies | (466 | ) | ||
1,895,510 | ||||
Net realized and unrealized gain | 13,568,369 | |||
Net increase in net assets resulting from operations | $ | 13,602,097 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Mid Cap Core Equity Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: |
| |||||||
Net investment income | $ | 33,728 | $ | 845,635 | ||||
Net realized gain | 11,672,859 | 32,956,386 | ||||||
Change in net unrealized appreciation (depreciation) | 1,895,510 | (16,651,461 | ) | |||||
Net increase in net assets resulting from operations | 13,602,097 | 17,150,560 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Distributions to shareholders from net investment income — Series I | — | �� | (103,075 | ) | ||||
Distributions to shareholders from net realized gains: | ||||||||
Series l | — | (29,565,808 | ) | |||||
Series ll | — | (14,396,190 | ) | |||||
Total distributions from net realized gains | — | (43,961,998 | ) | |||||
Share transactions–net: | ||||||||
Series l | (22,982,164 | ) | (18,688,127 | ) | ||||
Series ll | (2,740,185 | ) | 20,690,882 | |||||
Net increase (decrease) in net assets resulting from share transactions | (25,722,349 | ) | 2,002,755 | |||||
Net increase (decrease) in net assets | (12,120,252 | ) | (24,911,758 | ) | ||||
Net assets: | ||||||||
Beginning of period | 382,858,087 | 407,769,845 | ||||||
End of period (includes undistributed net investment income of $741,945 and $708,217, respectively) | $ | 370,737,835 | $ | 382,858,087 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. Mid Cap Core Equity Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is long-term growth of capital.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. Security Valuations — Securities, including restricted securities, are valued according to the following policy.
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect
Invesco V.I. Mid Cap Core Equity Fund
appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
Invesco V.I. Mid Cap Core Equity Fund
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||||
First $500 million | 0 | .725% | ||||
Next $500 million | 0 | .70% | ||||
Next $500 million | 0 | .675% | ||||
Over $1.5 billion | 0 | .65% |
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.73%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
Invesco V.I. Mid Cap Core Equity Fund
The Adviser has contractually agreed, through at least June 30, 2016, to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2016. The fee waiver agreement cannot be terminated during its term. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $49,456.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $45,608 for accounting and fund administrative services and reimbursed $466,738 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the six months ended June 30, 2015, the Fund incurred $25 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 366,766,844 | $ | 3,953,965 | $ | — | $ | 370,720,809 |
NOTE 4—Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the six months ended June 30, 2015, the Fund engaged in securities purchases of $906,764.
Invesco V.I. Mid Cap Core Equity Fund
NOTE 5—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund did not have a capital loss carryforward as of December 31, 2014.
NOTE 8—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $78,741,425 and $93,296,150, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 85,610,524 | ||
Aggregate unrealized (depreciation) of investment securities | (5,727,821 | ) | ||
Net unrealized appreciation of investment securities | $ | 79,882,703 |
Cost of investments for tax purposes is $290,838,106.
Invesco V.I. Mid Cap Core Equity Fund
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 209,310 | $ | 3,015,647 | 728,130 | $ | 11,027,954 | ||||||||||
Series II | 1,057,933 | 14,983,073 | 2,443,423 | 36,548,302 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 2,092,304 | 29,668,883 | ||||||||||||
Series II | — | — | 1,030,508 | 14,396,190 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (1,810,187 | ) | (25,997,811 | ) | (3,914,889 | ) | (59,384,964 | ) | ||||||||
Series II | (1,252,107 | ) | (17,723,258 | ) | (2,042,206 | ) | (30,253,610 | ) | ||||||||
Net increase (decrease) in share activity | (1,795,051 | ) | $ | (25,722,349 | ) | 337,270 | $ | 2,002,755 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 60% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 10—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income (loss)(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Distributions from net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of net assets | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income (loss) to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Series I |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 14.06 | $ | 0.01 | $ | 0.51 | $ | 0.52 | $ | — | $ | — | $ | — | $ | 14.58 | 3.70 | % | $ | 240,634 | 1.01 | %(d) | 1.04 | %(d) | 0.10 | %(d) | 25 | % | ||||||||||||||||||||||||||||
Year ended 12/31/14 | 15.13 | 0.05 | 0.64 | 0.69 | (0.01 | ) | (1.75 | ) | (1.76 | ) | 14.06 | 4.43 | 254,553 | 1.01 | 1.04 | 0.29 | 38 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 12.71 | 0.01 | 3.59 | 3.60 | (0.11 | ) | (1.07 | ) | (1.18 | ) | 15.13 | 28.81 | 290,550 | 1.01 | 1.04 | 0.09 | 34 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 11.56 | 0.09 | 1.18 | 1.27 | (0.01 | ) | (0.11 | ) | (0.12 | ) | 12.71 | 10.96 | 286,607 | 1.02 | 1.05 | 0.69 | 59 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 12.39 | 0.01 | (0.80 | ) | (0.79 | ) | (0.04 | ) | — | (0.04 | ) | 11.56 | (6.38 | ) | 322,102 | 1.01 | 1.03 | 0.08 | 57 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 10.92 | 0.03 | 1.50 | 1.53 | (0.06 | ) | — | (0.06 | ) | 12.39 | 14.11 | 411,812 | 1.01 | 1.03 | 0.27 | 61 | ||||||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 13.84 | (0.01 | ) | 0.50 | 0.49 | — | — | — | 14.33 | 3.54 | 130,104 | 1.26 | (d) | 1.29 | (d) | (0.15 | )(d) | 25 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 14.95 | 0.01 | 0.63 | 0.64 | — | (1.75 | ) | (1.75 | ) | 13.84 | 4.17 | 128,305 | 1.26 | 1.29 | 0.04 | 38 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 12.58 | (0.02 | ) | 3.54 | 3.52 | (0.08 | ) | (1.07 | ) | (1.15 | ) | 14.95 | 28.46 | 117,219 | 1.26 | 1.29 | (0.16 | ) | 34 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 11.47 | 0.06 | 1.16 | 1.22 | — | (0.11 | ) | (0.11 | ) | 12.58 | 10.62 | 90,648 | 1.27 | 1.30 | 0.44 | 59 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 12.28 | (0.02 | ) | (0.78 | ) | (0.80 | ) | (0.01 | ) | — | (0.01 | ) | 11.47 | (6.50 | ) | 65,196 | 1.26 | 1.28 | (0.17 | ) | 57 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 10.83 | (0.00 | ) | 1.49 | 1.49 | (0.04 | ) | — | (0.04 | ) | 12.28 | 13.78 | 61,587 | 1.26 | 1.28 | 0.02 | 61 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $248,436 and $129,703 for Series I and Series II shares, respectively. |
Invesco V.I. Mid Cap Core Equity Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,037.00 | $ | 5.10 | $ | 1,019.79 | $ | 5.06 | 1.01 | % | ||||||||||||
Series II | 1,000.00 | 1,035.40 | 6.36 | 1,018.55 | 6.31 | 1.26 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. Mid Cap Core Equity Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. Mid Cap Core Equity Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports form the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s
consideration of Invesco Advisers’ investment process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Underlying Funds Mid-Cap Core Index. The Board noted that performance of Series I shares of the Fund was in the fifth quintile of its performance universe for the one, three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Series I shares of the
Invesco V.I. Mid Cap Core Equity Fund
Fund was below the performance of the Index for the one, three and five year periods. Invesco Advisers noted that fund performance was consistent with the Fund’s investment process and market environment, which includes being defensively biased with high cash. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series I shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was above the rate of one such mutual fund.
The Board also considered the fees charged by Invesco Advisers and the Affiliated Sub-Advisers to other client accounts with investment strategies comparable to those of the Fund. The Board noted that Invesco Advisers or the Affiliated Sub-Advisers may charge lower fees to large institutional clients. Invesco Advisers reviewed with the Board the significantly greater scope of services it provides to the Invesco Funds relative to certain other types of client accounts. These additional services include provision of administrative services, officers and office space, oversight of service providers, preparation of annual registration statement updates and financial information and regulatory compliance under the Investment Company Act of 1940, as amended.
Invesco Advisers also reviewed generally the higher frequency of shareholder purchases and redemptions in the Invesco Funds relative to the flow of assets for other client accounts. Invesco Advisers advised the Board that advance notice of redemptions is often provided to Invesco Advisers by institutional clients. The Board did
note that sub-advisory fee rates charged by the Affiliated Sub-Advisers to manage the Invesco Funds and to manage other client accounts tended to be more comparable, reflecting a similar scope of services. The information received by the Board demonstrated that the aggregate services provided to the Invesco Funds were sufficiently different from those provided to institutional clients to support the difference in fees.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its
affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered that it receives periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
Invesco V.I. Mid Cap Core Equity Fund
| ||||
Semiannual Report to Shareholders
| June 30, 2015 | |||
Invesco V.I. Mid Cap Growth Fund | ||||
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
Invesco Distributors, Inc. VK-VIMCG-SAR-1
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance |
Performance summary
Fund vs. Indexes
Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower.
Series I Shares | 8.13 | % | |||
Series II Shares | 8.01 | ||||
S&P 500 Indexq (Broad Market Index) | 1.23 | ||||
Russell Midcap Growth Indexq (Style-Specific Index) | 4.18 | ||||
Lipper VUF Mid-Cap Growth Funds Indexn (Peer Group Index) | 6.06 | ||||
Source(s): qFactSet Research Systems Inc.; nLipper Inc. |
The S&P 500® Index is an unmanaged index considered representative of the US stock market.
The Russell Midcap® Growth Index is an unmanaged index considered representative of mid-cap growth stocks. The Russell Midcap Growth Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
The Lipper VUF Mid-Cap Growth Funds Index is an unmanaged index considered representative of mid-cap growth variable insurance underlying funds tracked by Lipper.
The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es).
A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
Average Annual Total Returns |
| ||||
As of 6/30/15 |
| ||||
Series I Shares | |||||
10 Years | 8.83 | % | |||
5 Years | 15.99 | ||||
1 Year | 10.42 | ||||
Series II Shares | |||||
Inception (9/25/00) | 0.98 | % | |||
10 Years | 8.73 | ||||
5 Years | 15.69 | ||||
1 Year | 10.12 |
Effective June 1, 2010, Class II shares of the predecessor fund, Van Kampen Life Investment Trust Mid Cap Growth Portfolio, advised by Van Kampen Asset Management were reorganized into Series II shares of Invesco Van Kampen V.I. Mid Cap Growth Fund (renamed Invesco V.I. Mid Cap Growth Fund on April 29, 2013). Returns shown above for Series II shares are blended returns of the predecessor fund and Invesco V.I. Mid Cap Growth Fund. Share class returns will differ from the predecessor fund because of different expenses.
Series I shares incepted on June 1, 2010. Series I share performance shown prior to that date is that of the predecessor fund’s Class II shares and includes the 12b-1 fees applicable to the predecessor fund’s Class II shares.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses,
reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 1.07% and 1.32%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. Mid Cap Growth Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined
by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
Invesco V.I. Mid Cap Growth Fund
Schedule of Investments(a)
June 30, 2015
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–97.31% |
| |||||||
Aerospace & Defense–1.65% | ||||||||
B/E Aerospace, Inc. | 37,770 | $ | 2,073,573 | |||||
DigitalGlobe Inc.(b) | 99,840 | 2,774,554 | ||||||
4,848,127 | ||||||||
Airlines–1.51% | ||||||||
Delta Air Lines, Inc. | 41,703 | 1,713,159 | ||||||
United Continental Holdings Inc.(b) | 50,909 | 2,698,686 | ||||||
4,411,845 | ||||||||
Apparel Retail–1.21% | ||||||||
L Brands, Inc. | 41,331 | 3,543,307 | ||||||
Apparel, Accessories & Luxury Goods–1.49% | ||||||||
Under Armour, Inc.–Class A(b) | 52,189 | 4,354,650 | ||||||
Application Software–3.76% | ||||||||
Cadence Design Systems, Inc.(b) | 213,581 | 4,199,003 | ||||||
Mobileye N.V.(b) | 82,479 | 4,385,408 | ||||||
SolarWinds, Inc.(b) | 52,847 | 2,437,832 | ||||||
11,022,243 | ||||||||
Asset Management & Custody Banks–1.66% | ||||||||
Ameriprise Financial, Inc. | 38,902 | 4,860,027 | ||||||
Auto Parts & Equipment–1.80% | ||||||||
Delphi Automotive PLC (United Kingdom) | 17,002 | 1,446,700 | ||||||
Gentherm Inc.(b) | 69,991 | 3,843,206 | ||||||
5,289,906 | ||||||||
Automobile Manufacturers–1.08% | ||||||||
Tesla Motors, Inc.(b) | 11,810 | 3,168,151 | ||||||
Automotive Retail–1.97% | ||||||||
Advance Auto Parts, Inc. | 16,604 | 2,644,851 | ||||||
O’Reilly Automotive, Inc.(b) | 13,844 | 3,128,467 | ||||||
5,773,318 | ||||||||
Biotechnology–4.59% | ||||||||
Alexion Pharmaceuticals, Inc.(b) | 28,256 | 5,107,837 | ||||||
BioMarin Pharmaceutical Inc.(b) | 30,088 | 4,115,437 | ||||||
Medivation Inc.(b) | 37,065 | 4,232,823 | ||||||
13,456,097 | ||||||||
Building Products–3.42% | ||||||||
A.O. Smith Corp. | 64,326 | 4,630,186 | ||||||
Lennox International Inc. | 33,229 | 3,578,431 | ||||||
Owens Corning Inc. | 44,073 | 1,818,011 | ||||||
10,026,628 | ||||||||
Communications Equipment–2.64% | ||||||||
Palo Alto Networks, Inc.(b) | 44,322 | 7,743,053 | ||||||
Construction Machinery & Heavy Trucks–1.36% | ||||||||
WABCO Holdings Inc.(b) | 20,266 | 2,507,310 |
Shares | Value | |||||||
Construction Machinery & Heavy Trucks–(continued) | ||||||||
Wabtec Corp. | 15,735 | $ | 1,482,866 | |||||
3,990,176 | ||||||||
Consumer Electronics–1.74% | ||||||||
Harman International Industries, Inc. | 42,888 | 5,101,099 | ||||||
Data Processing & Outsourced Services–0.93% | ||||||||
Alliance Data Systems Corp.(b) | 9,382 | 2,738,981 | ||||||
Distillers & Vintners–1.94% | ||||||||
Constellation Brands, Inc.–Class A | 49,020 | 5,687,300 | ||||||
Diversified REIT’s–1.00% | ||||||||
NorthStar Realty Finance Corp. | 185,000 | 2,941,500 | ||||||
Diversified Support Services–1.08% | ||||||||
KAR Auction Services Inc. | 84,284 | 3,152,222 | ||||||
Electronic Components–1.56% | ||||||||
Amphenol Corp.–Class A | 78,915 | 4,574,703 | ||||||
Electronic Equipment & Instruments–0.52% | ||||||||
Cognex Corp. | 31,383 | 1,509,522 | ||||||
Electronic Equipment Manufacturers–0.23% | ||||||||
Fitbit Inc A(b)(c) | 17,469 | 667,840 | ||||||
Food Retail–1.02% | ||||||||
Kroger Co. (The) | 41,030 | 2,975,085 | ||||||
General Merchandise Stores–1.38% | ||||||||
Burlington Stores, Inc.(b) | 78,752 | 4,032,102 | ||||||
Health Care Equipment–2.29% | ||||||||
Boston Scientific Corp.(b) | 202,526 | 3,584,710 | ||||||
Hologic, Inc.(b) | 82,185 | 3,127,961 | ||||||
6,712,671 | ||||||||
Health Care Facilities–1.39% | ||||||||
Universal Health Services, Inc.–Class B | 28,729 | 4,082,391 | ||||||
Health Care Services–1.23% | ||||||||
Team Health Holdings, Inc.(b) | 55,218 | 3,607,392 | ||||||
Home Entertainment Software–0.28% | ||||||||
Activision Blizzard, Inc. | 34,423 | 833,381 | ||||||
Hotels, Resorts & Cruise Lines–1.19% | ||||||||
Royal Caribbean Cruises Ltd. | 44,510 | 3,502,492 | ||||||
Household Appliances–0.78% | ||||||||
Whirlpool Corp. | 13,270 | 2,296,373 | ||||||
Housewares & Specialties–1.33% | ||||||||
Jarden Corp.(b) | 75,255 | 3,894,446 | ||||||
Industrial Conglomerates–1.44% | ||||||||
Carlisle Cos. Inc. | 42,214 | 4,226,466 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Mid Cap Growth Fund
Shares | Value | |||||||
Industrial Machinery–1.28% | ||||||||
Stanley Black & Decker Inc. | 35,667 | $ | 3,753,595 | |||||
Internet Retail–0.92% | ||||||||
Netflix Inc.(b) | 4,089 | 2,686,228 | ||||||
Internet Software & Services–0.99% | ||||||||
LinkedIn Corp.–Class A(b) | 14,109 | 2,915,343 | ||||||
Investment Banking & Brokerage–1.26% | ||||||||
Lazard Ltd.–Class A | 65,672 | 3,693,393 | ||||||
IT Consulting & Other Services–0.72% | ||||||||
Gartner, Inc.(b) | 24,530 | 2,104,183 | ||||||
Leisure Products–1.68% | ||||||||
Brunswick Corp. | 96,606 | 4,913,381 | ||||||
Life Sciences Tools & Services–2.96% | ||||||||
Illumina, Inc.(b) | 22,048 | 4,814,401 | ||||||
VWR Corp.(b) | 144,534 | 3,863,394 | ||||||
8,677,795 | ||||||||
Metal & Glass Containers–0.83% | ||||||||
Berry Plastics Group Inc.(b) | 74,880 | 2,426,112 | ||||||
Movies & Entertainment–1.46% | ||||||||
Cinemark Holdings, Inc. | 106,164 | 4,264,608 | ||||||
Oil & Gas Exploration & Production–4.16% | ||||||||
Concho Resources Inc.(b) | 41,215 | 4,692,740 | ||||||
Diamondback Energy Inc.(b) | 28,839 | 2,173,884 | ||||||
EQT Corp. | 28,620 | 2,327,951 | ||||||
Whiting Petroleum Corp.(b) | 89,140 | 2,995,104 | ||||||
12,189,679 | ||||||||
Packaged Foods & Meats–0.56% | ||||||||
Mead Johnson Nutrition Co. | 18,111 | 1,633,974 | ||||||
Pharmaceuticals–5.25% | ||||||||
Allergan PLC(b) | 13,581 | 4,121,290 | ||||||
Mylan N.V.(b) | 80,401 | 5,456,012 | ||||||
Pacira Pharmaceuticals, Inc.(b) | 61,397 | 4,341,996 | ||||||
Perrigo Co. PLC | 7,970 | 1,473,095 | ||||||
15,392,393 | ||||||||
Real Estate Services–1.59% | ||||||||
Realogy Holdings Corp.(b) | 99,920 | 4,668,262 | ||||||
Regional Banks–1.23% | ||||||||
SVB Financial Group(b) | 25,034 | 3,604,395 | ||||||
Research & Consulting Services–1.01% | ||||||||
IHS Inc.–Class A(b) | 23,042 | 2,963,892 | ||||||
Semiconductor Equipment–1.70% | ||||||||
Applied Materials, Inc. | 258,889 | 4,975,847 | ||||||
Semiconductors–5.10% | ||||||||
Cavium Inc.(b) | 65,418 | 4,501,413 | ||||||
NXP Semiconductors N.V. (Netherlands)(b) | 68,037 | 6,681,233 |
Shares | Value | |||||||
Semiconductors–(continued) | ||||||||
Qorvo, Inc.(b) | 47,048 | $ | 3,776,543 | |||||
14,959,189 | ||||||||
Soft Drinks–1.18% | ||||||||
Monster Beverage Corp.(b) | 25,770 | 3,453,695 | ||||||
Specialized Finance–1.04% | ||||||||
Intercontinental Exchange, Inc. | 13,569 | 3,034,164 | ||||||
Specialized REIT’s–0.73% | ||||||||
Equinix, Inc. | 8,400 | 2,133,600 | ||||||
Specialty Chemicals–2.07% | ||||||||
PPG Industries, Inc. | 40,200 | 4,611,744 | ||||||
Valspar Corp. (The) | 17,908 | 1,465,233 | ||||||
6,076,977 | ||||||||
Specialty Stores–3.50% | ||||||||
Signet Jewelers Ltd. | 42,606 | 5,463,793 | ||||||
Tractor Supply Co. | 53,359 | 4,799,109 | ||||||
10,262,902 | ||||||||
Systems Software–1.62% | ||||||||
ServiceNow, Inc.(b) | 63,719 | 4,734,959 | ||||||
Technology Hardware, Storage & Peripherals–0.78% | ||||||||
Western Digital Corp. | 29,148 | 2,285,786 | ||||||
Thrifts & Mortgage Finance–1.08% | ||||||||
MGIC Investment Corp.(b) | 277,341 | 3,156,141 | ||||||
Trading Companies & Distributors–0.84% | ||||||||
United Rentals, Inc.(b) | 28,221 | 2,472,724 | ||||||
Trucking–0.67% | ||||||||
Old Dominion Freight Line, Inc.(b) | 28,694 | 1,968,552 | ||||||
Wireless Telecommunication Services–1.63% | ||||||||
SBA Communications Corp.–Class A(b) | 41,678 | 4,791,720 | ||||||
Total Common Stocks & Other Equity Interests |
| 285,216,983 | ||||||
Money Market Funds–3.24% |
| |||||||
Liquid Assets Portfolio–Institutional Class(d) | 4,752,653 | 4,752,653 | ||||||
Premier Portfolio–Institutional Class(d) | 4,752,652 | 4,752,652 | ||||||
Total Money Market Funds |
| 9,505,305 | ||||||
TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–100.55% |
| 294,722,288 | ||||||
Investments Purchased with Cash Collateral from Securities on Loan |
| |||||||
Money Market Funds–0.15% |
| |||||||
Liquid Assets Portfolio–Institutional Class | 445,400 | 445,400 | ||||||
TOTAL INVESTMENTS–100.70% | 295,167,688 | |||||||
OTHER ASSETS LESS LIABILITIES–(0.70)% |
| (2,048,789 | ) | |||||
NET ASSETS–100.00% | $ | 293,118,899 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Mid Cap Growth Fund
Investment Abbreviations:
REIT | – Real Estate Investment Trust |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Non-income producing security. |
(c) | All or a portion of this security was out on loan at June 30, 2015. |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. |
(e) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrower’s return of the securities loaned. See Note 1I. The following table presents the Fund’s gross and net amount of assets available for offset by the Fund as of June 30, 2015. |
Counterparty | Gross Amount of Securities on Loan at Value | Cash Collateral Received for Securities Loaned | Net Amount | |||||||||
Brown Brothers Harriman | $ | 500,813 | $ | (445,400 | ) | $ | 55,413 |
Portfolio Composition
By sector, based on Net Assets
as of June 30, 2015
Consumer Discretionary | 21.5 | % | ||
Information Technology | 20.8 | |||
Health Care | 17.7 | |||
Industrials | 14.3 | |||
Financials | 9.6 | |||
Consumer Staples | 4.7 | |||
Energy | 4.2 | |||
Materials | 2.9 | |||
Telecommunication Services | 1.6 | |||
Money Market Funds Plus Other Assets Less Liabilities | 2.7 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Mid Cap Growth Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $210,776,754)* | $ | 285,216,983 | ||
Investments in affiliated money market funds, at value and cost | 9,950,705 | |||
Total investments, at value (Cost $220,727,459) | 295,167,688 | |||
Receivable for: | ||||
Investments sold | 2,180,452 | |||
Fund shares sold | 386,349 | |||
Dividends | 80,571 | |||
Investment for trustee deferred compensation and retirement plans | 118,433 | |||
Other assets | 34,661 | |||
Total assets | 297,968,154 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 3,646,944 | |||
Fund shares reacquired | 301,535 | |||
Collateral upon return of securities loaned | 445,400 | |||
Accrued fees to affiliates | 292,570 | |||
Accrued trustees’ and officers’ fees and benefits | 5,629 | |||
Accrued other operating expenses | 27,679 | |||
Trustee deferred compensation and retirement plans | 129,498 | |||
Total liabilities | 4,849,255 | |||
Net assets applicable to shares outstanding | $ | 293,118,899 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 179,185,413 | ||
Undistributed net investment income (loss) | (813,295 | ) | ||
Undistributed net realized gain | 40,306,552 | |||
Net unrealized appreciation | 74,440,229 | |||
$ | 293,118,899 | |||
Net Assets: |
| |||
Series I | $ | 117,158,367 | ||
Series II | $ | 175,960,532 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 18,742,247 | |||
Series II | 28,361,664 | |||
Series I: | ||||
Net asset value per share | $ | 6.25 | ||
Series II: | ||||
Net asset value per share | $ | 6.20 |
* | At June 30, 2015, securities with an aggregate value of $500,813 were on loan to brokers. |
Investment income: |
| |||
Dividends | $ | 1,023,008 | ||
Dividends from affiliated money market funds (includes securities lending income of $7,348) | 9,643 | |||
Total investment income | 1,032,651 | |||
Expenses: | ||||
Advisory fees | 1,062,108 | |||
Administrative services fees | 375,400 | |||
Custodian fees | 7,909 | |||
Distribution fees — Series II | 212,592 | |||
Transfer agent fees | 30,680 | |||
Trustees’ and officers’ fees and benefits | 13,060 | |||
Other | 27,367 | |||
Total expenses | 1,729,116 | |||
Less: Fees waived | (4,772 | ) | ||
Net expenses | 1,724,344 | |||
Net investment income (loss) | (691,693 | ) | ||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from investment securities | 22,518,291 | |||
Change in net unrealized appreciation (depreciation) of investment securities | (417,197 | ) | ||
Net realized and unrealized gain | 22,101,094 | |||
Net increase in net assets resulting from operations | $ | 21,409,401 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Mid Cap Growth Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: | ||||||||
Net investment income (loss) | $ | (691,693 | ) | $ | (1,399,535 | ) | ||
Net realized gain | 22,518,291 | 36,941,281 | ||||||
Change in net unrealized appreciation (depreciation) | (417,197 | ) | (15,377,922 | ) | ||||
Net increase in net assets resulting from operations | 21,409,401 | 20,163,824 | ||||||
Share transactions–net: | ||||||||
Series l | 2,131,895 | (17,038,304 | ) | |||||
Series ll | 888,125 | (22,232,293 | ) | |||||
Net increase (decrease) in net assets resulting from share transactions | 3,020,020 | (39,270,597 | ) | |||||
Net increase (decrease) in net assets | 24,429,421 | (19,106,773 | ) | |||||
Net assets: | ||||||||
Beginning of period | 268,689,478 | 287,796,251 | ||||||
End of period (includes undistributed net investment income (loss) of $(813,295) and $(121,602), respectively) | $ | 293,118,899 | $ | 268,689,478 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. Mid Cap Growth Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is to seek capital growth.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events
Invesco V.I. Mid Cap Growth Fund
occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund |
Invesco V.I. Mid Cap Growth Fund
monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Securities Lending — The Fund may lend portfolio securities having a market value up to one-third of the Fund’s total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. It is the Fund’s policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if, and to the extent that, the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower failed to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliated money market funds on the Statement of Operations. The aggregate value of securities out on loan, if any, is shown as a footnote on the Statement of Assets and Liabilities. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||||
First $500 million | 0 | .75% | ||||
Next $500 million | 0 | .70% | ||||
Over $1 billion | 0 | .65% |
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.75%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2016, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2016. The fee waiver agreement cannot be terminated during its term. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash (excluding investments of cash collateral from securities lending) in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $4,772.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $35,051 for accounting and fund administrative services and reimbursed $340,349 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the
Invesco V.I. Mid Cap Growth Fund
Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the six months ended June 30, 2015, the Fund incurred $888 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1— | Prices are determined using quoted prices in an active market for identical assets. |
Level 2— | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3— | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
As of June 30, 2015, all of the securities in this Fund were valued based on Level 1 inputs (see the Schedule of Investments for security categories). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
NOTE 4—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 5—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 6—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
Invesco V.I. Mid Cap Growth Fund
The Fund had a capital loss carryforward as of December 31, 2014, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
December 31, 2015 | $ | 3,091,956 | $ | — | $ | 3,091,956 |
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code and may be further limited depending upon a variety of factors, including the realization of net unrealized gains or losses as of the date of any reorganization. |
NOTE 7—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $89,724,984 and $90,485,427, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 78,579,784 | ||
Aggregate unrealized (depreciation) of investment securities | (4,513,400 | ) | ||
Net unrealized appreciation of investment securities | $ | 74,066,384 |
Cost of investments for tax purposes is $221,101,304.
NOTE 8—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 2,030,053 | $ | 12,504,196 | 2,719,313 | $ | 15,046,775 | ||||||||||
Series II | 3,138,354 | 19,249,900 | 3,222,420 | 17,657,513 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (1,691,880 | ) | (10,372,301 | ) | (5,866,476 | ) | (32,085,079 | ) | ||||||||
Series II | (3,029,418 | ) | (18,361,775 | ) | (7,324,414 | ) | (39,889,806 | ) | ||||||||
Net increase (decrease) in share activity | 447,109 | $ | 3,020,020 | (7,249,157 | ) | $ | (39,270,597 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 55% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
Invesco V.I. Mid Cap Growth Fund
NOTE 9—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income (loss)(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Distributions from net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income (loss) to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Series I |
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Six months ended 06/30/15 | $ | 5.78 | $ | (0.01 | ) | $ | 0.48 | $ | 0.47 | $ | — | $ | — | $ | — | $ | 6.25 | 8.13 | % | $ | 117,158 | 1.07 | %(d) | 1.07 | %(d) | (0.34 | )%(d) | 32 | % | |||||||||||||||||||||||||||
Year ended 12/31/14 | 5.35 | (0.02 | ) | 0.45 | 0.43 | — | — | — | 5.78 | 8.04 | 106,390 | 1.07 | 1.07 | (0.36 | ) | 71 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 3.92 | (0.02 | ) | 1.47 | 1.45 | (0.02 | ) | — | (0.02 | ) | 5.35 | 37.01 | 115,319 | 1.08 | 1.08 | (0.41 | ) | 76 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 3.69 | 0.02 | (e) | 0.41 | 0.43 | — | (0.20 | ) | (0.20 | ) | 3.92 | 11.60 | 88,091 | 1.06 | 1.12 | 0.54 | (e) | 92 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 4.05 | (0.01 | ) | (0.35 | ) | (0.36 | ) | — | — | — | 3.69 | (8.89 | ) | 11 | 1.00 | 1.14 | (0.36 | ) | 137 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/10(f) | 3.30 | (0.00 | )(g) | 0.75 | 0.75 | — | — | — | 4.05 | 22.73 | 12 | 1.01 | (h) | 1.12 | (h) | (0.18 | )(h) | 105 | ||||||||||||||||||||||||||||||||||||||
Series II |
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Six months ended 06/30/15 | 5.74 | (0.02 | ) | 0.48 | 0.46 | — | — | — | 6.20 | 8.01 | 175,961 | 1.32 | (d) | 1.32 | (d) | (0.59 | )(d) | 32 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 5.33 | (0.03 | ) | 0.44 | 0.41 | — | — | — | 5.74 | 7.69 | 162,299 | 1.32 | 1.32 | (0.61 | ) | 71 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 3.91 | (0.03 | ) | 1.46 | 1.43 | (0.01 | ) | — | (0.01 | ) | 5.33 | 36.60 | 172,478 | 1.33 | 1.33 | (0.66 | ) | 76 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 3.68 | 0.01 | (e) | 0.42 | 0.43 | — | (0.20 | ) | (0.20 | ) | 3.91 | 11.63 | 143,588 | 1.31 | 1.37 | 0.29 | (e) | 92 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 4.06 | (0.02 | ) | (0.36 | ) | (0.38 | ) | — | — | — | 3.68 | (9.36 | ) | 65,080 | 1.25 | 1.39 | (0.61 | ) | 137 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 3.19 | (0.02 | ) | 0.89 | 0.87 | — | — | — | 4.06 | 27.27 | 79,461 | 1.26 | 1.37 | (0.53 | ) | 105 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the year ended December 31, 2012, the portfolio turnover calculation excludes the value of securities purchased of $158,450,343 and sold of $99,449,268 in the effort to realign the Fund’s portfolio holdings after the reorganization of Invesco V.I. Capital Development Fund into the Fund. |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $114,093 and $171,483 for Series I and Series II shares, respectively. |
(e) | Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets includes significant dividends received of $3.92 per share owned of Aveta Inc. on August 16, 2012. Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets excluding the significant dividends are $0.01 and 0.28% and $0.00 and 0.03% for Series I and Series II shares, respectively. |
(f) | Commencement date of June 1, 2010. |
(g) | Amount is less than $0.01 per share. |
(h) | Annualized. |
Invesco V.I. Mid Cap Growth Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,081.30 | $ | 5.52 | $ | 1,019.49 | $ | 5.36 | 1.07 | % | ||||||||||||
Series II | 1,000.00 | 1,080.10 | 6.81 | 1,018.25 | 6.61 | 1.32 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. Mid Cap Growth Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. Mid Cap Growth Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ investment
process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Underlying Fund Mid-Cap Growth Index. The Board noted that performance of Series II shares of the Fund was in the third quintile of its performance universe for the one year period and the fourth quintile for the three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Series II shares of the Fund was
Invesco V.I. Mid Cap Growth Fund
above the performance of the Index for the one year period and below the performance of the Index for the three and five year periods. Invesco Advisers noted that abrupt market changes over the past three years created a challenging environment for the trend driven process employed by the portfolio management team. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series II shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was above the rate of one such mutual fund.
The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other client accounts with investment strategies comparable to those of the Fund.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco
Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered that it receives periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by
Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to, among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
Invesco V.I. Mid Cap Growth Fund
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Semiannual Report to Shareholders
| June 30, 2015 | |||
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Invesco V.I. Money Market Fund | ||||
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
Invesco Distributors, Inc. VIMKT-SAR-1
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NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
About your Fund |
Invesco V.I. Money Market Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return. The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser. Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information. |
An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, you may lose money by investing in the Fund. | |||||
Invesco V.I. Money Market Fund
Schedule of Investments
June 30, 2015
(Unaudited)
Interest Rate | Maturity Date | Principal Amount (000) | Value | |||||||||||||
Commercial Paper–47.17%(a) |
| |||||||||||||||
Asset-Backed Securities–Consumer Receivables–2.71% | ||||||||||||||||
Barton Capital LLC(b)(c) | 0.24 | % | 11/02/15 | $ | 1,400 | $ | 1,400,000 | |||||||||
Old Line Funding, LLC(b) | 0.24 | % | 08/06/15 | 1,800 | 1,799,568 | |||||||||||
Old Line Funding, LLC(b) | 0.24 | % | 08/14/15 | 3,400 | 3,399,003 | |||||||||||
Old Line Funding, LLC(b) | 0.24 | % | 09/25/15 | 1,800 | 1,798,968 | |||||||||||
Old Line Funding, LLC(b) | 0.24 | % | 10/01/15 | 5,000 | 4,996,933 | |||||||||||
Thunder Bay Funding, LLC(b) | 0.24 | % | 08/07/15 | 1,400 | 1,399,655 | |||||||||||
Thunder Bay Funding, LLC(b) | 0.24 | % | 10/01/15 | 1,700 | 1,698,957 | |||||||||||
Thunder Bay Funding, LLC(b) | 0.28 | % | 10/13/15 | 1,800 | 1,798,544 | |||||||||||
18,291,628 | ||||||||||||||||
Asset-Backed Securities–Fully Supported–0.80% | ||||||||||||||||
Kells Funding LLC (CEP-FMS Wertmanagement)(b)(d) | 0.21 | % | 09/09/15 | 1,400 | 1,399,428 | |||||||||||
Kells Funding LLC (CEP-FMS Wertmanagement)(b)(d) | 0.24 | % | 10/19/15 | 4,000 | 3,997,067 | |||||||||||
5,396,495 | ||||||||||||||||
Asset-Backed Securities—Fully Supported Bank–9.44% | ||||||||||||||||
Atlantic Asset Securitization LLC (CEP-Credit Agricole)(b)(d) | 0.10 | % | 07/01/15 | 10,000 | 10,000,000 | |||||||||||
Cancara Asset Securitisation LLC (CEP-Lloyds Bank LLC)(b)(d) | 0.14 | % | 07/02/15 | 5,000 | 4,999,981 | |||||||||||
Cancara Asset Securitisation LLC (CEP-Lloyds Bank LLC)(b)(d) | 0.18 | % | 07/27/15 | 7,500 | 7,499,025 | |||||||||||
Collateralized Commercial Paper Co., LLC (CEP-JPMorgan Securities LLC) | 0.30 | % | 08/10/15 | 2,000 | 1,999,333 | |||||||||||
Collateralized Commercial Paper Co., LLC (CEP-JPMorgan Securities LLC)(c) | 0.36 | % | 12/14/15 | 12,800 | 12,800,000 | |||||||||||
Collateralized Commercial Paper II Co., LLC (CEP-JPMorgan Securities LLC)(b)(c) | 0.36 | % | 12/11/15 | 2,000 | 2,000,000 | |||||||||||
Collateralized Commercial Paper II Co., LLC (CEP-JPMorgan Securities LLC)(b)(c) | 0.36 | % | 12/14/15 | 3,000 | 3,000,000 | |||||||||||
Gotham Funding Corp. (CEP-Bank of Tokyo-Mitsubishi UFJ, Ltd. (The))(b)(d) | 0.20 | % | 07/17/15 | 1,400 | 1,399,876 | |||||||||||
Gotham Funding Corp. (CEP-Bank of Tokyo-Mitsubishi UFJ, Ltd. (The))(b)(d) | 0.20 | % | 08/20/15 | 5,000 | 4,998,611 | |||||||||||
Lexington Parker Capital Co., LLC (Multi-CEP’s)(b)(d) | 0.20 | % | 07/06/15 | 10,000 | 9,999,722 | |||||||||||
Victory Receivables Corp. (CEP-Bank of Tokyo-Mitsubishi UFJ Ltd.)(b)(d) | 0.17 | % | 07/09/15 | 5,000 | 4,999,811 | |||||||||||
63,696,359 | ||||||||||||||||
Asset-Backed Securities–Multi-Purpose–9.90% | ||||||||||||||||
CAFCO, LLC(b) | 0.20 | % | 09/10/15 | 10,000 | 9,996,055 | |||||||||||
Chariot Funding, LLC(b) | 0.30 | % | 10/07/15 | 1,400 | 1,398,857 | |||||||||||
Chariot Funding, LLC(b) | 0.30 | % | 10/15/15 | 2,500 | 2,497,792 | |||||||||||
CHARTA, LLC(b) | 0.20 | % | 09/10/15 | 1,600 | 1,599,369 | |||||||||||
CRC Funding, LLC(b) | 0.20 | % | 09/10/15 | 11,300 | 11,295,543 | |||||||||||
Jupiter Securitization Co. LLC(b) | 0.30 | % | 10/20/15 | 5,000 | 4,995,375 | |||||||||||
Nieuw Amsterdam Receivables Corp.(b)(d) | 0.19 | % | 08/13/15 | 10,000 | 9,997,730 | |||||||||||
Nieuw Amsterdam Receivables Corp.(b)(d) | 0.19 | % | 08/17/15 | 5,000 | 4,998,760 | |||||||||||
Nieuw Amsterdam Receivables Corp.(b)(d) | 0.20 | % | 09/02/15 | 5,000 | 4,998,250 | |||||||||||
Regency Markets No. 1 LLC(b)(d) | 0.17 | % | 07/15/15 | 15,000 | 14,999,008 | |||||||||||
66,776,739 | ||||||||||||||||
Consumer Finance–0.19% | ||||||||||||||||
Toyota Motor Credit Corp.(d) | 0.23 | % | 08/14/15 | 1,300 | 1,299,635 | |||||||||||
Diversified Banks–14.86% | ||||||||||||||||
BNP Paribas S.A.(d) | 0.23 | % | 08/18/15 | 1,500 | 1,499,540 | |||||||||||
BNP Paribas S.A.(d) | 0.25 | % | 09/14/15 | 5,000 | 4,997,396 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Money Market Fund
Interest Rate | Maturity Date | Principal Amount (000) | Value | |||||||||||||
Diversified Banks–(continued) | ||||||||||||||||
China Construction Bank Corp.(b)(d) | 0.20 | % | 07/06/15 | $ | 1,600 | $ | 1,599,956 | |||||||||
China Construction Bank Corp.(b)(d) | 0.20 | % | 07/09/15 | 2,300 | 2,299,898 | |||||||||||
Commonwealth Bank of Australia(b)(d) | 0.21 | % | 09/28/15 | 1,400 | 1,399,273 | |||||||||||
Commonwealth Bank of Australia(b)(c)(d) | 0.32 | % | 05/13/16 | 5,000 | 4,999,505 | |||||||||||
DBS Bank Ltd.(b)(d) | 0.19 | % | 07/20/15 | 15,000 | 14,998,496 | |||||||||||
DBS Bank Ltd.(b)(d) | 0.20 | % | 08/06/15 | 1,400 | 1,399,720 | |||||||||||
DBS Bank Ltd.(b)(d) | 0.20 | % | 09/02/15 | 1,600 | 1,599,440 | |||||||||||
DBS Bank Ltd.(b)(d) | 0.21 | % | 09/21/15 | 1,500 | 1,499,282 | |||||||||||
DBS Bank Ltd.(b)(d) | 0.22 | % | 09/24/15 | 1,500 | 1,499,221 | |||||||||||
ING (US) Funding LLC(d) | 0.27 | % | 08/19/15 | 2,500 | 2,499,081 | |||||||||||
ING (US) Funding LLC(d) | 0.27 | % | 09/18/15 | 2,200 | 2,198,696 | |||||||||||
J.P. Morgan Securities LLC | 0.27 | % | 09/08/15 | 6,000 | 5,996,895 | |||||||||||
Nordea Bank Finland PLC(b)(d) | 0.20 | % | 08/17/15 | 2,600 | 2,599,338 | |||||||||||
Oversea-Chinese Banking Corp. Ltd.(d) | 0.21 | % | 09/09/15 | 2,100 | 2,099,142 | |||||||||||
Societe Generale(b)(d) | 0.20 | % | 08/04/15 | 5,000 | 4,999,056 | |||||||||||
Standard Chartered Bank(b)(d) | 0.24 | % | 07/15/15 | 1,500 | 1,499,860 | |||||||||||
Standard Chartered Bank(b)(d) | 0.25 | % | 08/17/15 | 5,000 | 4,998,368 | |||||||||||
Standard Chartered Bank(b)(d) | 0.25 | % | 08/21/15 | 1,700 | 1,699,398 | |||||||||||
Sumitomo Mitsui Banking Corp.(b)(d) | 0.27 | % | 07/02/15 | 10,000 | 9,999,925 | |||||||||||
Sumitomo Mitsui Trust Bank Ltd.(b)(d) | 0.24 | % | 07/06/15 | 1,500 | 1,499,950 | |||||||||||
Sumitomo Mitsui Trust Bank Ltd.(b)(d) | 0.24 | % | 08/10/15 | 10,000 | 9,997,333 | |||||||||||
Sumitomo Mitsui Trust Bank Ltd.(b)(d) | 0.24 | % | 08/13/15 | 1,800 | 1,799,484 | |||||||||||
Toronto-Dominion Holdings (USA) Inc.(b)(d) | 0.20 | % | 07/17/15 | 2,700 | 2,699,760 | |||||||||||
Toronto-Dominion Holdings (USA) Inc.(b)(d) | 0.20 | % | 09/28/15 | 1,500 | 1,499,258 | |||||||||||
Toronto-Dominion Holdings (USA) Inc.(b)(d) | 0.22 | % | 09/17/15 | 2,000 | 1,999,047 | |||||||||||
Toronto-Dominion Holdings (USA) Inc.(b)(d) | 0.30 | % | 10/16/15 | 1,700 | 1,698,484 | |||||||||||
Toronto-Dominion Holdings (USA) Inc.(b)(d) | 0.30 | % | 10/22/15 | 1,200 | 1,198,870 | |||||||||||
United Overseas Bank Ltd.(b)(d) | 0.32 | % | 11/17/15 | 1,500 | 1,498,147 | |||||||||||
100,271,819 | ||||||||||||||||
Multi-Utilities–3.78% | ||||||||||||||||
Engie S.A.(b)(d) | 0.16 | % | 07/02/15 | 4,000 | 3,999,982 | |||||||||||
Engie S.A.(b)(d) | 0.16 | % | 07/13/15 | 17,000 | 16,999,094 | |||||||||||
Engie S.A.(b)(d) | 0.17 | % | 07/08/15 | 4,500 | 4,499,851 | |||||||||||
25,498,927 | ||||||||||||||||
Other Diversified Financial Services–1.70% | ||||||||||||||||
Credit Suisse New York(d) | 0.23 | % | 07/01/15 | 1,500 | 1,500,000 | |||||||||||
General Electric Capital Corp.(c) | 0.23 | % | 07/31/15 | 5,000 | 5,000,000 | |||||||||||
General Electric Capital Corp. | 0.26 | % | 08/26/15 | 5,000 | 4,997,978 | |||||||||||
11,497,978 | ||||||||||||||||
Packaged Foods & Meats–0.89% | ||||||||||||||||
Nestle Capital Corp.(b)(d) | 0.07 | % | 09/02/15 | 6,000 | 5,999,265 | |||||||||||
Regional Banks–1.08% | ||||||||||||||||
Banque et Caisse d’Epargne de l’Etat(d) | 0.25 | % | 07/09/15 | 1,200 | 1,199,935 | |||||||||||
BNZ International Funding Ltd.(b)(d) | 0.26 | % | 09/16/15 | 1,400 | 1,399,222 | |||||||||||
BNZ International Funding Ltd.(b)(d) | 0.26 | % | 09/21/15 | 1,200 | 1,199,289 | |||||||||||
BNZ International Funding Ltd.(b)(d) | 0.27 | % | 09/08/15 | 1,500 | 1,499,238 | |||||||||||
Landesbank Hessen-Thueringen Girozentrale(b)(d) | 0.18 | % | 07/20/15 | 2,000 | 1,999,810 | |||||||||||
7,297,494 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Money Market Fund
Interest Rate | Maturity Date | Principal Amount (000) | Value | |||||||||||||
Specialized Finance–1.82% | ||||||||||||||||
CDP Financial Inc.(b)(d) | 0.19 | % | 08/05/15 | $ | 2,300 | $ | 2,299,575 | |||||||||
CDP Financial Inc.(b)(d) | 0.20 | % | 09/15/15 | 5,000 | 4,997,889 | |||||||||||
Nederlandse Waterschapsbank N.V.(b)(d) | 0.24 | % | 09/04/15 | 5,000 | 4,997,833 | |||||||||||
12,295,297 | ||||||||||||||||
Total Commercial Paper (Cost $318,321,636) | 318,321,636 | |||||||||||||||
Certificates of Deposit–35.11% |
| |||||||||||||||
Australia & New Zealand Banking Group, Ltd.(c)(d) | 0.21 | % | 08/03/15 | 1,600 | 1,600,000 | |||||||||||
Bank of China Ltd.(d) | 0.20 | % | 07/16/15 | 10,000 | 10,000,000 | |||||||||||
Bank of China Ltd.(d) | 0.20 | % | 07/20/15 | 3,500 | 3,500,000 | |||||||||||
Bank of Montreal(d) | 0.21 | % | 09/10/15 | 1,700 | 1,700,000 | |||||||||||
Bank of Montreal(d) | 0.22 | % | 09/15/15 | 1,800 | 1,800,000 | |||||||||||
Bank of Montreal(c)(d) | 0.24 | % | 09/03/15 | 4,000 | 4,000,000 | |||||||||||
Bank of Montreal(c)(d) | 0.29 | % | 12/11/15 | 1,700 | 1,700,000 | |||||||||||
Bank of Nova Scotia(c)(d) | 0.32 | % | 03/09/16 | 1,600 | 1,600,000 | |||||||||||
Bank of Nova Scotia(c)(d) | 0.41 | % | 07/29/16 | 700 | 700,000 | |||||||||||
Bank of Tokyo-Mitsubishi UFJ, Ltd. (The)(c)(d) | 0.32 | % | 09/14/15 | 5,000 | 5,000,000 | |||||||||||
Canadian Imperial Bank of Commerce(d) | 0.10 | % | 07/01/15 | 10,000 | 10,000,000 | |||||||||||
China Construction Bank Corp.(d) | 0.17 | % | 07/01/15 | 3,100 | 3,100,000 | |||||||||||
China Construction Bank Corp.(d) | 0.25 | % | 08/11/15 | 2,700 | 2,700,000 | |||||||||||
Cooperatieve Centrale Raiffeisen-Boerenleenbank BA(d) | 0.21 | % | 08/14/15 | 5,000 | 5,000,000 | |||||||||||
Cooperatieve Centrale Raiffeisen-Boerenleenbank BA(d) | 0.24 | % | 09/17/15 | 2,000 | 2,000,000 | |||||||||||
DZ Bank AG Deutsche Zentral-Genossenschafts Bank(d) | 0.26 | % | 08/10/15 | 1,400 | 1,400,000 | |||||||||||
DZ Bank AG Deutsche Zentral-Genossenschafts Bank(d) | 0.31 | % | 10/06/15 | 5,000 | 5,000,000 | |||||||||||
HSBC Bank USA N.A.(c)(d) | 0.33 | % | 12/11/15 | 2,000 | 2,000,000 | |||||||||||
Mitsubishi UFJ Trust & Banking Corp.(d) | 0.25 | % | 08/05/15 | 5,000 | 5,000,000 | |||||||||||
Mizuho Bank Ltd.(d) | 0.25 | % | 08/21/15 | 10,000 | 10,000,000 | |||||||||||
Nordea Bank Finland PLC(d) | 0.19 | % | 08/05/15 | 1,500 | 1,500,000 | |||||||||||
Nordea Bank Finland PLC(d) | 0.19 | % | 08/06/15 | 1,500 | 1,500,000 | |||||||||||
Nordea Bank Finland PLC(d) | 0.19 | % | 08/11/15 | 10,000 | 10,000,000 | |||||||||||
Nordea Bank Finland PLC(d) | 0.19 | % | 08/12/15 | 1,600 | 1,600,000 | |||||||||||
Nordea Bank Finland PLC(d) | 0.20 | % | 08/26/15 | 3,400 | 3,400,000 | |||||||||||
Norinchukin Bank (The)(d) | 0.26 | % | 09/14/15 | 2,000 | 2,000,000 | |||||||||||
Oversea-Chinese Banking Corp. Ltd.(d) | 0.21 | % | 09/08/15 | 5,000 | 5,000,000 | |||||||||||
Oversea-Chinese Banking Corp. Ltd.(d) | 0.24 | % | 09/18/15 | 5,000 | 5,000,000 | |||||||||||
Royal Bank of Canada(c)(d) | 0.39 | % | 07/01/16 | 2,000 | 2,000,000 | |||||||||||
Skandinaviska Enskilda Banken AB(d) | 0.04 | % | 07/01/15 | 31,000 | 31,000,000 | |||||||||||
Standard Chartered Bank(d) | 0.05 | % | 07/01/15 | 5,000 | 5,000,000 | |||||||||||
Standard Chartered Bank(d) | 0.10 | % | 07/01/15 | 10,000 | 10,000,000 | |||||||||||
Standard Chartered Bank(c)(d) | 0.36 | % | 12/17/15 | 5,300 | 5,300,000 | |||||||||||
Sumitomo Mitsui Banking Corp.(d) | 0.13 | % | 07/01/15 | 6,200 | 6,200,000 | |||||||||||
Sumitomo Mitsui Banking Corp.(d) | 0.19 | % | 07/14/15 | 5,000 | 5,000,000 | |||||||||||
Sumitomo Mitsui Banking Corp.(d) | 0.26 | % | 09/08/15 | 3,200 | 3,200,000 | |||||||||||
Sumitomo Mitsui Trust Bank Ltd.(d) | 0.24 | % | 07/13/15 | 1,100 | 1,100,000 | |||||||||||
Svenska Handelsbanken AB(d) | 0.04 | % | 07/01/15 | 31,000 | 31,000,000 | |||||||||||
Swedbank AB(d) | 0.10 | % | 07/01/15 | 2,400 | 2,400,000 | |||||||||||
Swedbank AB(d) | 0.11 | % | 07/01/15 | 7,900 | 7,900,000 | |||||||||||
Wells Fargo Bank, N.A.(c) | 0.27 | % | 08/18/15 | 16,000 | 16,000,450 | |||||||||||
Westpac Banking Corp.(d) | 0.20 | % | 09/09/15 | 3,000 | 3,000,000 | |||||||||||
Total Certificates of Deposit (Cost $236,900,450) | 236,900,450 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Money Market Fund
Interest Rate | Maturity Date | Principal Amount (000) | Value | |||||||||||||
Variable Rate Demand Notes–3.85%(e) |
| |||||||||||||||
Credit Enhanced–3.85% | ||||||||||||||||
Atlanticare Health Services, Inc.; Series 2003, VRD Taxable Bonds (LOC-Wells Fargo Bank, N.A.)(f) | 0.18 | % | 10/01/33 | $ | 4,500 | $ | 4,500,000 | |||||||||
Benjamin Rose Institute (The) (Kethley House); Series 2005, VRD Taxable Notes (LOC-JPMorgan Chase Bank, N.A.)(f) | 0.20 | % | 12/01/28 | 3,360 | 3,360,000 | |||||||||||
Collier (County of), Florida Industrial Development Authority (Allete, Inc.); Series 2006, Ref. VRD IDR (LOC-Wells Fargo Bank, N.A.)(f) | 0.11 | % | 10/01/25 | 1,000 | 1,000,000 | |||||||||||
Gary Chicago International Airport Authority (Gary Jet Center) Series 2011, Multi-Modal Special Purpose Facility, VRD RB (LOC-BMO Harris Bank NA)(f) | 0.16 | % | 05/01/36 | 7,145 | 7,145,000 | |||||||||||
Hamilton (County of), Ohio (Children’s Hospital Medical Center); Series 1997 A, VRD Hospital Facilities RB (LOC-PNC Bank, N.A.)(f) | 0.06 | % | 05/15/17 | 400 | 400,000 | |||||||||||
Keep Memory Alive; Series 2013, VRD Taxable Bonds (LOC-PNC Bank, N.A.)(f) | 0.14 | % | 05/01/37 | 3,620 | 3,620,000 | |||||||||||
M3 Realty, LLC; Series 2007, VRD RN (LOC-General Electric Capital Corp.)(b)(f) | 0.25 | % | 01/01/33 | 2,085 | 2,085,000 | |||||||||||
Massachusetts (State of) Development Finance Agency (Milton Academy); (Canada) Series 2009 B, VRD Taxable RB (LOC-TD Bank, N.A.)(f) | 0.19 | % | 03/01/39 | 1,500 | 1,500,000 | |||||||||||
Ogden (City of), Utah Redevelopment Agency; Series 2009 B-1, Ref. VRD Taxable RB (LOC-Wells Fargo Bank, N.A.)(f) | 0.18 | % | 12/01/27 | 2,125 | 2,125,000 | |||||||||||
Rock Island (County of), Illinois Metropolitan Airport Authority (Quad City International Airport Air Freight); Series 1998 A, VRD Priority RB (LOC-U.S. Bank, N.A.)(f) | 0.18 | % | 12/01/18 | 230 | 230,000 | |||||||||||
Total Variable Rate Demand Notes (Cost $25,965,000) | 25,965,000 | |||||||||||||||
U.S. Government Sponsored Agency Securities–0.74% |
| |||||||||||||||
Overseas Private Investment Corp. (OPIC)–0.74% | ||||||||||||||||
Unsec. Gtd. VRD Bonds(e) (Cost $5,000,000) | 0.11 | % | 09/15/20 | 5,000 | 5,000,000 | |||||||||||
Notes–0.44% |
| |||||||||||||||
Wells Fargo Bank, N.A., Unsec. Floating Rate Medium-Term Notes(c) (Cost $3,000,000) | 0.40 | % | 07/19/16 | 3,000 | 3,000,000 | |||||||||||
TOTAL INVESTMENTS (excluding Repurchase Agreements)–87.31% (Cost $589,187,086) | 589,187,086 | |||||||||||||||
Repurchase Amount | ||||||||||||||||
Repurchase Agreements–7.97%(g) | ||||||||||||||||
Citigroup Global Markets Inc., Joint agreement dated 06/30/15, aggregate maturing value of $400,001,111 (collateralized by U.S. Treasury obligations valued at $408,000,000; 0%, 08/15/17-05/15/42) | 0.10 | % | 07/01/15 | 38,798,097 | 38,797,989 | |||||||||||
Merrill Lynch Pierce Fenner & Smith, Inc., Term agreement dated 06/29/15, maturing value of $10,007,500 (collateralized by non-agency asset-backed security valued at $11,000,000; 0%, 09/10/46)(c)(h) | 0.45 | % | 08/28/15 | 10,007,500 | 10,000,000 | |||||||||||
RBC Capital Markets Corp., Term agreement dated 06/29/15, maturing value of $5,003,394 (collateralized by corporate obligations valued at $5,250,000; 0%-7.95%, | 0.26 | % | 10/01/15 | 5,003,394 | 5,000,000 | |||||||||||
Total Repurchase Agreements (Cost $53,797,989) | 53,797,989 | |||||||||||||||
TOTAL INVESTMENTS(i)(j)–95.28% (Cost $642,985,075) | 642,985,075 | |||||||||||||||
OTHER ASSETS LESS LIABILITIES–4.72% | 31,816,928 | |||||||||||||||
NET ASSETS–100.00% | $ | 674,802,003 |
Investment Abbreviations:
CEP | – Credit Enhancement Provider | |
Gtd. | – Guaranteed | |
IDR | – Industrial Development Revenue Bonds | |
LOC | – Letter of Credit | |
RB | – Revenue Bonds | |
Ref. | – Refunding | |
RN | – Revenue Notes | |
Unsec. | – Unsecured | |
VRD | – Variable Rate Demand |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Money Market Fund
Notes to Schedule of Investments:
(a) | Security may be traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. |
(b) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at June 30, 2015 was $272,319,005, which represented 40.36% of the Fund’s Net Assets. |
(c) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on June 30, 2015. |
(d) | The security is credit guaranteed, enhanced or has credit risk by a foreign entity. The foreign credit exposure to countries other than the United States of America (as a percentage of net assets) is summarized as follows: Sweden: 13.8%; Japan: 10.9%; United Kingdom: 8.6%; France: 7.0%; Canada: 6.7%; Netherlands: 5.4%; Singapore: 5.1%; other countries less than 5% each: 10.5%. |
(e) | Demand security payable upon demand by the Fund at specified time intervals no greater than thirteen months. Interest rate is redetermined periodically. Rate shown is the rate in effect on June 30, 2015. |
(f) | Principal and interest payments are fully enhanced by a letter of credit from the bank listed or a predecessor bank, branch or subsidiary. |
(g) | Principal amount equals value at period end. See Note 1I. |
(h) | The Fund may demand payment of the term repurchase agreement upon one to seven business days’ notice depending on the timing of the demand. |
(i) | Also represents cost for federal income tax purposes. |
(j) | Entities may either issue, guarantee, back or otherwise enhance the credit quality of a security. The entities are not primarily responsible for the issuer’s obligation but may be called upon to satisfy issuers obligations. No concentration of any single entity was greater than 5% each. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Money Market Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, excluding repurchase agreements, at value and cost | $ | 589,187,086 | ||
Repurchase agreements, at value and cost | 53,797,989 | |||
Total investments, at value and cost | 642,985,075 | |||
Receivable for: | ||||
Investments sold | 115,000 | |||
Fund shares sold | 32,608,368 | |||
Interest | 39,063 | |||
Fund expenses absorbed | 44,423 | |||
Investment for trustee deferred compensation and retirement plans | 58,005 | |||
Total assets | 675,849,934 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares reacquired | 792,253 | |||
Dividends | 135 | |||
Accrued fees to affiliates | 148,999 | |||
Accrued trustees’ and officers’ fees and benefits | 6,845 | |||
Accrued other operating expenses | 36,147 | |||
Trustee deferred compensation and retirement plans | 63,552 | |||
Total liabilities | 1,047,931 | |||
Net assets applicable to shares outstanding | $ | 674,802,003 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 674,807,192 | ||
Undistributed net investment income | (9,539 | ) | ||
Undistributed net realized gain | 4,350 | |||
$ | 674,802,003 | |||
Net Assets: |
| |||
Series I | $ | 655,557,591 | ||
Series II | $ | 19,244,412 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 655,551,987 | |||
Series II | 19,244,240 | |||
Series I: | ||||
Net asset value per share | $ | 1.00 | ||
Series II: | ||||
Net asset value per share | $ | 1.00 |
Investment income: |
| |||
Interest | $ | 520,908 | ||
Expenses: | ||||
Advisory fees | 1,013,307 | |||
Administrative services fees | 336,129 | |||
Custodian fees | 10,963 | |||
Distribution fees — Series II | 21,392 | |||
Transfer agent fees | 10,669 | |||
Trustees’ and officers’ fees and benefits | 15,235 | |||
Other | 60,693 | |||
Total expenses | 1,468,388 | |||
Less: Fees waived and expenses reimbursed | (974,264 | ) | ||
Net expenses | 494,124 | |||
Net investment income | 26,784 | |||
Net realized gain from investment securities | 4,059 | |||
Net increase in net assets resulting from operations | $ | 30,843 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Money Market Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: |
| |||||||
Net investment income | $ | 26,784 | $ | 69,709 | ||||
Net realized gain | 4,059 | 1,738 | ||||||
Net increase in net assets resulting from operations | 30,843 | 71,447 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Series I | (25,941 | ) | (67,296 | ) | ||||
Series ll | (843 | ) | (2,413 | ) | ||||
Total distributions from net investment income | (26,784 | ) | (69,709 | ) | ||||
Share transactions–net: | ||||||||
Series l | 49,000,819 | 184,059,944 | ||||||
Series ll | 1,748,245 | 1,613,097 | ||||||
Net increase in net assets resulting from share transactions | 50,749,064 | 185,673,041 | ||||||
Net increase in net assets | 50,753,123 | 185,674,779 | ||||||
Net assets: | ||||||||
Beginning of period | 624,048,880 | 438,374,101 | ||||||
End of period (includes undistributed net investment income of ($9,539) and $(9,539), respectively) | $ | 674,802,003 | $ | 624,048,880 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. Money Market Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is to provide current income consistent with preservation of capital and liquidity.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — The Fund’s securities are recorded on the basis of amortized cost which approximates value as permitted by Rule 2a-7 under the 1940 Act. This method values a security at its cost on the date of purchase and, thereafter, assumes a constant amortization to maturity of any premiums or accretion of any discounts. |
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any), adjusted for amortization of premiums and accretion of discounts on investments, is recorded on the accrual basis from settlement date. Paydown gains and losses on mortgage and asset-backed securities are recorded as adjustments to interest income. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized gains
Invesco V.I. Money Market Fund
(losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates realized and unrealized capital gains and losses to a class based on the relative net assets of each class. The Fund allocates income to a class based on the relative value of the settled shares of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income, if any, are declared daily and paid monthly to separate accounts of participating insurance companies. Distributions from net realized gain, if any, are generally declared and paid annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Repurchase Agreements — The Fund may enter into repurchase agreements. Collateral on repurchase agreements, including the Fund’s pro-rata interest in joint repurchase agreements, is taken into possession by the Fund upon entering into the repurchase agreement. Collateral consisting of U.S. Government Securities and U.S. Government Sponsored Agency Securities is marked to market daily to ensure its market value is at least 102% of the sales price of the repurchase agreement. Collateral consisting of nongovernment securities is marked to market daily to ensure its market value is at least 105% of the sales price of the repurchase agreement. The investments in some repurchase agreements, pursuant to procedures approved by the Board of Trustees, are through participation with other mutual funds, private accounts and certain non-registered investment companies managed by the investment advisor or its affiliates (“Joint repurchase agreements”). The principal amount of the repurchase agreement is equal to the value at period-end. If the seller of a repurchase agreement fails to repurchase the security in accordance with the terms of the agreement, the Fund might incur expenses in enforcing its rights, and could experience losses, including a decline in the value of the collateral and loss of income. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $250 million | 0.40% | |||
Over $250 million | 0.35% |
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.37%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
Invesco V.I. Money Market Fund
The Adviser has contractually agreed, through at least June 30, 2016, to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual operating expenses after fee waivers and/or expense reimbursements (excluding certain items discussed below) of Series I shares to 1.50% and Series II shares to 1.75% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual operating expenses after fee waivers and/or expense reimbursements to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2016. The fee waiver agreement cannot be terminated during its term. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
The Adviser and/or Invesco Distributors, Inc., (“IDI”) voluntarily agreed to waive fees and/or reimburse expenses in order to increase the Fund’s yield. Voluntary fee waivers and/or reimbursements may be modified at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended June 30, 2015, Invesco voluntarily waived advisory fees of $952,872 and reimbursed class level expenses of $21,392 for Series II shares in order to increase the Fund’s yield.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $64,995 for accounting and fund administrative services and reimbursed $271,134 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with IDI to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
As of June 30, 2015, all of the securities in this Fund were valued based on Level 2 inputs (see the Schedule of Investments for security categories). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
NOTE 4—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
Invesco V.I. Money Market Fund
NOTE 5—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The Bank of New York Mellon, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 6—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund did not have a capital loss carryforward as of December 31, 2014.
NOTE 7—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 566,689,077 | $ | 566,689,077 | 1,289,451,981 | $ | 1,289,451,981 | ||||||||||
Series II | 13,393,969 | 13,393,969 | 40,068,335 | 40,068,335 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 25,253 | 25,253 | 64,806 | 64,806 | ||||||||||||
Series II | 843 | 843 | 2,413 | 2,413 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (517,713,511 | ) | (517,713,511 | ) | (1,105,456,843 | ) | (1,105,456,843 | ) | ||||||||
Series II | (11,646,567 | ) | (11,646,567 | ) | (38,457,651 | ) | (38,457,651 | ) | ||||||||
Net increase in share activity | 50,749,064 | $ | 50,749,064 | 185,673,041 | $ | 185,673,041 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 90% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
Invesco V.I. Money Market Fund
NOTE 8—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset beginning | Net investment income(a) | Net realized (both | Total from investment operations | Dividends from net investment income | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of net assets with fee waivers | Ratio of assets without | Ratio of net to average | ||||||||||||||||||||||||||||||||||
Series I | ||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 1.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | (0.00 | ) | $ | 1.00 | 0.01 | % | $ | 655,558 | 0.18 | %(c) | 0.53 | %(c) | 0.01 | %(c) | |||||||||||||||||||||
Year ended 12/31/14 | 1.00 | 0.00 | 0.00 | 0.00 | (0.00 | ) | 1.00 | 0.01 | 606,553 | 0.16 | 0.50 | 0.01 | ||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 1.00 | 0.00 | (0.00 | ) | 0.00 | (0.00 | ) | 1.00 | 0.03 | 422,491 | 0.16 | 0.70 | 0.03 | |||||||||||||||||||||||||||||||
Year ended 12/31/12 | 1.00 | 0.00 | 0.00 | 0.00 | (0.00 | ) | 1.00 | 0.03 | 156,931 | 0.23 | 0.54 | 0.03 | ||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 1.00 | 0.00 | — | 0.00 | (0.00 | ) | 1.00 | 0.05 | 198,533 | 0.17 | 0.57 | 0.05 | ||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 1.00 | 0.00 | (0.00 | ) | 0.00 | (0.00 | ) | 1.00 | 0.18 | 25,578 | 0.16 | 1.01 | 0.18 | |||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 1.00 | 0.00 | 0.00 | 0.00 | (0.00 | ) | 1.00 | 0.01 | 19,244 | 0.18 | (c) | 0.78 | (c) | 0.01 | (c) | |||||||||||||||||||||||||||||
Year ended 12/31/14 | 1.00 | 0.00 | 0.00 | 0.00 | (0.00 | ) | 1.00 | 0.01 | 17,496 | 0.16 | 0.75 | 0.01 | ||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 1.00 | 0.00 | (0.00 | ) | 0.00 | (0.00 | ) | 1.00 | 0.03 | 15,883 | 0.16 | 0.95 | 0.03 | |||||||||||||||||||||||||||||||
Year ended 12/31/12 | 1.00 | 0.00 | 0.00 | 0.00 | (0.00 | ) | 1.00 | 0.03 | 746 | 0.23 | 0.79 | 0.03 | ||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 1.00 | 0.00 | — | 0.00 | (0.00 | ) | 1.00 | 0.05 | 1,022 | 0.17 | 0.82 | 0.05 | ||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 1.00 | 0.00 | (0.00 | ) | 0.00 | (0.00 | ) | 1.00 | 0.18 | 1,024 | 0.16 | 1.26 | 0.18 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America. Total returns are not annualized for periods less than one year, if applicable and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Ratios are annualized and based on average daily net assets (000’s omitted) of $530,862 and $17,255 for Series I and Series II shares, respectively. |
Invesco V.I. Money Market Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period 2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,000.00 | $ | 0.89 | $ | 1,023.90 | $ | 0.90 | 0.18 | % | ||||||||||||
Series II | 1,000.00 | 1,000.00 | 0.89 | 1,023.90 | 0.90 | 0.18 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. Money Market Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. Money Market Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ investment
process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Annuity Underlying Funds Money Market Index. The Board noted that performance of Series I shares of the Fund was in the first quintile of its performance universe for the one, three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Series I shares of the Fund was above the performance of the Index for the one, three and five year periods. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s
Invesco V.I. Money Market Fund
Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series I shares of the Fund was the same as the contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was below the rate of one such mutual fund.
The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other client accounts with investment strategies comparable to those of the Fund.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco
Advisers and its affiliates provide to the Invesco Funds. The Board noted that in the current low yield environment Invesco Advisers and its subsidiaries did not make a profit from managing the Fund. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. Invesco Advisers noted that the Fund does not execute brokerage transactions through “soft dollar” arrangements.
Invesco V.I. Money Market Fund
| ||||
Semiannual Report to Shareholders
| June 30, 2015
| |||
Invesco V.I. S&P 500 Index Fund | ||||
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
Invesco Distributors, Inc. MS-VISPI-SAR-1
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance |
Performance summary
| ||
Fund vs. Indexes | ||
Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower. | ||
Series I Shares | 1.08% | |
Series II Shares | 1.03 | |
S&P 500 Indexq (Broad Market/Style-Specific Index) | 1.23 | |
Lipper VUF S&P 500 Funds Indexn (Peer Group Index) | 1.05 | |
Source(s): qFactSet Research Systems Inc.; nLipper Inc. | ||
The S&P 500® Index is an unmanaged index considered representative of the US stock market. The Lipper VUF S&P 500 Funds Index is an unmanaged index considered representative of S&P 500 variable insurance underlying funds tracked by Lipper. A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
|
Average Annual Total Returns | ||
As of 6/30/15 | ||
Series I Shares | ||
Inception (5/18/98) | 5.33% | |
10 Years | 7.64 | |
5 Years | 17.00 | |
1 Year | 7.09 | |
Series II Shares | ||
Inception (6/5/00) | 3.71% | |
10 Years | 7.38 | |
5 Years | 16.73 | |
1 Year | 6.84 |
Effective June 1, 2010, Class X and Class Y shares of the predecessor fund, Morgan Stanley Variable Investment S&P 500 Index Portfolio advised by Morgan Stanley Investment Advisors Inc. were reorganized into Series I and Series II shares, respectively, of Invesco V.I. S&P 500 Index Fund. Returns shown above for Series I and Series II shares are blended returns of the predecessor fund and Invesco V.I. S&P 500 Index Fund. Share class returns will differ from the predecessor fund because of different expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 0.41% and 0.66%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. S&P 500 Index Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
Invesco V.I. S&P 500 Index Fund
Schedule of Investments(a)
June 30, 2015
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–100.95% |
| |||||||
Advertising–0.14% | ||||||||
Interpublic Group of Cos., Inc. (The) | 2,161 | $ | 41,642 | |||||
Omnicom Group Inc. | 1,299 | 90,268 | ||||||
131,910 | ||||||||
Aerospace & Defense–2.64% | ||||||||
Boeing Co. (The) | 3,421 | 474,561 | ||||||
General Dynamics Corp. | 1,668 | 236,339 | ||||||
Honeywell International Inc. | 4,150 | 423,175 | ||||||
L-3 Communications Holdings, Inc. | 437 | 49,547 | ||||||
Lockheed Martin Corp. | 1,423 | 264,536 | ||||||
Northrop Grumman Corp. | 1,030 | 163,389 | ||||||
Precision Castparts Corp. | 735 | 146,904 | ||||||
Raytheon Co. | 1,623 | 155,289 | ||||||
Rockwell Collins, Inc. | 704 | 65,014 | ||||||
Textron Inc. | 1,462 | 65,249 | ||||||
United Technologies Corp. | 4,405 | 488,647 | ||||||
2,532,650 | ||||||||
Agricultural & Farm Machinery–0.18% | ||||||||
Deere & Co. | 1,775 | 172,264 | ||||||
Agricultural Products–0.17% | ||||||||
Archer-Daniels-Midland Co. | 3,300 | 159,126 | ||||||
Air Freight & Logistics–0.72% | ||||||||
C.H. Robinson Worldwide, Inc. | 774 | 48,290 | ||||||
Expeditors International of Washington, Inc. | 1,022 | 47,119 | ||||||
FedEx Corp. | 1,402 | 238,901 | ||||||
United Parcel Service, Inc.–Class B | 3,695 | 358,082 | ||||||
692,392 | ||||||||
Airlines–0.46% | ||||||||
American Airlines Group Inc. | 3,686 | 147,200 | ||||||
Delta Air Lines, Inc. | 4,372 | 179,602 | ||||||
Southwest Airlines Co. | 3,555 | 117,635 | ||||||
444,437 | ||||||||
Alternative Carriers–0.09% | ||||||||
Level 3 Communications, Inc.(b) | 1,564 | 82,376 | ||||||
Aluminum–0.08% | ||||||||
Alcoa Inc. | 6,483 | 72,285 | ||||||
Apparel Retail–0.55% | ||||||||
Gap, Inc. (The) | 1,414 | 53,972 | ||||||
L Brands, Inc. | 1,302 | 111,621 | ||||||
Ross Stores, Inc. | 2,194 | 106,650 | ||||||
TJX Cos., Inc. (The) | 3,620 | 239,536 | ||||||
Urban Outfitters, Inc.(b) | 544 | 19,040 | ||||||
530,819 |
Shares | Value | |||||||
Apparel, Accessories & Luxury Goods–0.50% | ||||||||
Coach, Inc. | 1,460 | $ | 50,531 | |||||
Fossil Group, Inc.(b) | 228 | 15,814 | ||||||
Hanesbrands, Inc. | 2,125 | 70,805 | ||||||
Michael Kors Holdings Ltd.(b) | 1,064 | 44,784 | ||||||
PVH Corp. | 435 | 50,112 | ||||||
Ralph Lauren Corp. | 326 | 43,149 | ||||||
Under Armour, Inc.–Class A(b) | 894 | 74,595 | ||||||
VF Corp. | 1,815 | 126,578 | ||||||
476,368 | ||||||||
Application Software–0.73% | ||||||||
Adobe Systems Inc.(b) | 2,528 | 204,793 | ||||||
Autodesk, Inc.(b) | 1,205 | 60,341 | ||||||
Citrix Systems, Inc.(b) | 852 | 59,776 | ||||||
Intuit Inc. | 1,467 | 147,830 | ||||||
salesforce.com, inc.(b) | 3,243 | 225,810 | ||||||
698,550 | ||||||||
Asset Management & Custody Banks–1.30% | ||||||||
Affiliated Managers Group, Inc.(b) | 293 | 64,050 | ||||||
Ameriprise Financial, Inc. | 967 | 120,807 | ||||||
Bank of New York Mellon Corp. (The) | 5,967 | 250,435 | ||||||
BlackRock, Inc. | 674 | 233,190 | ||||||
Franklin Resources, Inc. | 2,078 | 101,884 | ||||||
Invesco Ltd.(c) | 2,283 | 85,590 | ||||||
Legg Mason, Inc. | 518 | 26,693 | ||||||
Northern Trust Corp. | 1,172 | 89,611 | ||||||
State Street Corp. | 2,186 | 168,322 | ||||||
T. Rowe Price Group Inc. | 1,397 | 108,589 | ||||||
1,249,171 | ||||||||
Auto Parts & Equipment–0.39% | ||||||||
BorgWarner, Inc. | 1,204 | 68,435 | ||||||
Delphi Automotive PLC (United Kingdom) | 1,539 | 130,953 | ||||||
Johnson Controls, Inc. | 3,486 | 172,662 | ||||||
372,050 | ||||||||
Automobile Manufacturers–0.58% | ||||||||
Ford Motor Co. | 21,155 | 317,537 | ||||||
General Motors Co. | 7,155 | 238,476 | ||||||
556,013 | ||||||||
Automotive Retail–0.35% | ||||||||
AutoNation, Inc.(b) | 405 | 25,507 | ||||||
AutoZone, Inc.(b) | 168 | 112,039 | ||||||
CarMax, Inc.(b) | 1,113 | 73,692 | ||||||
O’Reilly Automotive, Inc.(b) | 536 | 121,125 | ||||||
332,363 | ||||||||
Biotechnology–3.24% | ||||||||
Alexion Pharmaceuticals, Inc.(b) | 1,190 | 215,116 | ||||||
Amgen Inc. | 4,045 | 620,988 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. S&P 500 Index Fund
Shares | Value | |||||||
Biotechnology–(continued) | ||||||||
Biogen Inc.(b) | 1,251 | $ | 505,329 | |||||
Celgene Corp.(b) | 4,220 | 488,402 | ||||||
Gilead Sciences, Inc. | 7,820 | 915,566 | ||||||
Regeneron Pharmaceuticals, Inc.(b) | 401 | 204,562 | ||||||
Vertex Pharmaceuticals Inc.(b) | 1,296 | 160,030 | ||||||
3,109,993 | ||||||||
Brewers–0.06% | ||||||||
Molson Coors Brewing Co.–Class B | 844 | 58,920 | ||||||
Broadcasting–0.29% | ||||||||
CBS Corp.–Class B | 2,426 | 134,643 | ||||||
Discovery Communications, Inc.–Class A(b) | 786 | 26,142 | ||||||
Discovery Communications, Inc.–Class C(b) | 1,388 | 43,139 | ||||||
Scripps Networks Interactive Inc.–Class A | 516 | 33,731 | ||||||
TEGNA Inc. | 1,220 | 39,126 | ||||||
276,781 | ||||||||
Building Products–0.08% | ||||||||
Allegion PLC | 506 | 30,431 | ||||||
Masco Corp.(b) | 1,826 | 44,152 | ||||||
74,583 | ||||||||
Cable & Satellite–1.40% | ||||||||
Cablevision Systems Corp.–Class A | 1,172 | 28,058 | ||||||
Comcast Corp.–Class A | 13,375 | 804,372 | ||||||
DIRECTV(b) | 2,675 | 248,213 | ||||||
Time Warner Cable Inc. | 1,503 | 267,790 | ||||||
1,348,433 | ||||||||
Casinos & Gaming–0.04% | ||||||||
Wynn Resorts Ltd. | 437 | 43,119 | ||||||
Coal & Consumable Fuels–0.03% | ||||||||
CONSOL Energy Inc. | 1,219 | 26,501 | ||||||
Commodity Chemicals–0.23% | ||||||||
LyondellBasell Industries N.V.–Class A | 2,090 | 216,357 | ||||||
Communications Equipment–1.55% | ||||||||
Cisco Systems, Inc. | 27,065 | 743,205 | ||||||
F5 Networks, Inc.(b) | 390 | 46,936 | ||||||
Harris Corp. | 655 | 50,376 | ||||||
Juniper Networks, Inc. | 1,869 | 48,538 | ||||||
Motorola Solutions, Inc. | 987 | 56,595 | ||||||
QUALCOMM, Inc. | 8,671 | 543,065 | ||||||
1,488,715 | ||||||||
Computer & Electronics Retail–0.08% | ||||||||
Best Buy Co., Inc. | 1,542 | 50,285 | ||||||
GameStop Corp.–Class A | 590 | 25,346 | ||||||
75,631 | ||||||||
Construction & Engineering–0.11% | ||||||||
Fluor Corp. | 782 | 41,454 | ||||||
Jacobs Engineering Group, Inc.(b) | 691 | 28,068 |
Shares | Value | |||||||
Construction & Engineering–(continued) | ||||||||
Quanta Services, Inc.(b) | 1,153 | $ | 33,229 | |||||
TopBuild Corp.(b) | 1 | 26 | ||||||
102,777 | ||||||||
Construction Machinery & Heavy Trucks–0.55% | ||||||||
Caterpillar Inc. | 3,209 | 272,187 | ||||||
Cummins Inc. | 899 | 117,940 | ||||||
Joy Global Inc. | 538 | 19,476 | ||||||
PACCAR Inc. | 1,876 | 119,707 | ||||||
529,310 | ||||||||
Construction Materials–0.11% | ||||||||
Martin Marietta Materials, Inc. | 335 | 47,406 | ||||||
Vulcan Materials Co. | 697 | 58,499 | ||||||
105,905 | ||||||||
Consumer Electronics–0.08% | ||||||||
Garmin Ltd. | 650 | 28,555 | ||||||
Harman International Industries, Inc. | 378 | 44,959 | ||||||
73,514 | ||||||||
Consumer Finance–0.82% | ||||||||
American Express Co. | 4,649 | 361,320 | ||||||
Capital One Financial Corp. | 2,907 | 255,729 | ||||||
Discover Financial Services | 2,371 | 136,617 | ||||||
Navient Corp. | 2,118 | 38,569 | ||||||
792,235 | ||||||||
Data Processing & Outsourced Services–2.03% | ||||||||
Alliance Data Systems Corp.(b) | 333 | 97,216 | ||||||
Automatic Data Processing, Inc. | 2,498 | 200,415 | ||||||
Computer Sciences Corp. | 744 | 48,836 | ||||||
Fidelity National Information Services, Inc. | 1,503 | 92,885 | ||||||
Fiserv, Inc.(b) | 1,265 | 104,780 | ||||||
MasterCard, Inc.–Class A | 5,157 | 482,076 | ||||||
Paychex, Inc. | 1,730 | 81,102 | ||||||
Total System Services, Inc. | 876 | 36,591 | ||||||
Visa Inc.–Class A | 10,290 | 690,974 | ||||||
Western Union Co. (The) | 2,756 | 56,029 | ||||||
Xerox Corp. | 5,545 | 58,999 | ||||||
1,949,903 | ||||||||
Department Stores–0.25% | ||||||||
Kohl’s Corp. | 1,052 | 65,866 | ||||||
Macy’s, Inc. | 1,789 | 120,704 | ||||||
Nordstrom, Inc. | 745 | 55,502 | ||||||
242,072 | ||||||||
Distillers & Vintners–0.19% | ||||||||
Brown-Forman Corp.–Class B | 828 | 82,949 | ||||||
Constellation Brands, Inc.–Class A | 901 | 104,534 | ||||||
187,483 | ||||||||
Distributors–0.08% | ||||||||
Genuine Parts Co. | 809 | 72,430 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. S&P 500 Index Fund
Shares | Value | |||||||
Diversified Banks–5.25% | ||||||||
Bank of America Corp. | 55,894 | $ | 951,316 | |||||
Citigroup Inc. | 16,146 | 891,905 | ||||||
Comerica Inc. | 951 | 48,805 | ||||||
JPMorgan Chase & Co. | 19,748 | 1,338,125 | ||||||
U.S. Bancorp | 9,448 | 410,043 | ||||||
Wells Fargo & Co. | 24,936 | 1,402,401 | ||||||
5,042,595 | ||||||||
Diversified Chemicals–0.72% | ||||||||
Dow Chemical Co. (The) | 5,772 | 295,359 | ||||||
E. I. du Pont de Nemours and Co.(b) | 4,817 | 296,245 | ||||||
Eastman Chemical Co. | 786 | 64,311 | ||||||
FMC Corp. | 705 | 37,048 | ||||||
692,963 | ||||||||
Diversified Metals & Mining–0.11% | ||||||||
Freeport-McMoRan Inc. | 5,509 | 102,578 | ||||||
Diversified Support Services–0.05% | ||||||||
Cintas Corp. | 513 | 43,395 | ||||||
Drug Retail–1.06% | ||||||||
CVS Health Corp. | 6,003 | 629,595 | ||||||
Walgreens Boots Alliance, Inc. | 4,643 | 392,055 | ||||||
1,021,650 | ||||||||
Electric Utilities–1.61% | ||||||||
American Electric Power Co., Inc. | 2,593 | 137,351 | ||||||
Duke Energy Corp. | 3,679 | 259,811 | ||||||
Edison International | 1,726 | 95,931 | ||||||
Entergy Corp. | 956 | 67,398 | ||||||
Eversource Energy | 1,678 | 76,198 | ||||||
Exelon Corp. | 4,583 | 143,998 | ||||||
FirstEnergy Corp. | 2,230 | 72,587 | ||||||
NextEra Energy, Inc. | 2,363 | 231,645 | ||||||
Pepco Holdings, Inc. | 1,334 | 35,938 | ||||||
Pinnacle West Capital Corp. | 584 | 33,224 | ||||||
PPL Corp. | 3,537 | 104,235 | ||||||
Southern Co. (The) | 4,826 | 202,209 | ||||||
Xcel Energy, Inc. | 2,680 | 86,242 | ||||||
1,546,767 | ||||||||
Electrical Components & Equipment–0.55% | ||||||||
AMETEK, Inc. | 1,278 | 70,009 | ||||||
Eaton Corp. PLC | 2,485 | 167,713 | ||||||
Emerson Electric Co. | 3,555 | 197,054 | ||||||
Rockwell Automation, Inc. | 718 | 89,491 | ||||||
524,267 | ||||||||
Electronic Components–0.24% | ||||||||
Amphenol Corp.–Class A | 1,640 | 95,071 | ||||||
Corning Inc. | 6,743 | 133,039 | ||||||
228,110 | ||||||||
Electronic Equipment & Instruments–0.02% | ||||||||
FLIR Systems, Inc. | 746 | 22,992 |
Shares | Value | |||||||
Electronic Manufacturing Services–0.14% | ||||||||
TE Connectivity Ltd. (Switzerland) | 2,155 | $ | 138,566 | |||||
Environmental & Facilities Services–0.23% | ||||||||
Republic Services, Inc. | 1,337 | 52,370 | ||||||
Stericycle, Inc.(b) | 449 | 60,126 | ||||||
Waste Management, Inc. | 2,257 | 104,612 | ||||||
217,108 | ||||||||
Fertilizers & Agricultural Chemicals–0.45% | ||||||||
CF Industries Holdings, Inc. | 1,251 | 80,414 | ||||||
Monsanto Co. | 2,533 | 269,992 | ||||||
Mosaic Co. (The) | 1,649 | 77,256 | ||||||
427,662 | ||||||||
Food Distributors–0.12% | ||||||||
Sysco Corp. | 3,159 | 114,040 | ||||||
Food Retail–0.27% | ||||||||
Kroger Co. (The) | 2,603 | 188,743 | ||||||
Whole Foods Market, Inc. | 1,906 | 75,173 | ||||||
263,916 | ||||||||
Footwear–0.42% | ||||||||
NIKE, Inc.–Class B | 3,711 | 400,862 | ||||||
Gas Utilities–0.03% | ||||||||
AGL Resources Inc. | 650 | 30,264 | ||||||
General Merchandise Stores–0.55% | ||||||||
Dollar General Corp. | 1,580 | 122,829 | ||||||
Dollar Tree, Inc.(b) | 1,089 | 86,020 | ||||||
Family Dollar Stores, Inc. | 508 | 40,036 | ||||||
Target Corp. | 3,397 | 277,297 | ||||||
526,182 | ||||||||
Gold–0.07% | ||||||||
Newmont Mining Corp. | 2,814 | 65,735 | ||||||
Health Care Distributors–0.65% | ||||||||
AmerisourceBergen Corp. | 1,110 | 118,037 | ||||||
Cardinal Health, Inc. | 1,754 | 146,722 | ||||||
Henry Schein, Inc.(b) | 446 | 63,385 | ||||||
McKesson Corp. | 1,234 | 277,416 | ||||||
Patterson Cos. Inc. | 466 | 22,671 | ||||||
628,231 | ||||||||
Health Care Equipment–2.17% | ||||||||
Abbott Laboratories | 7,921 | 388,763 | ||||||
Baxalta Inc.(b) | 2,895 | 92,466 | ||||||
Baxter International Inc.(b) | 2,895 | 110,010 | ||||||
Becton, Dickinson and Co. | 1,107 | 156,807 | ||||||
Boston Scientific Corp.(b) | 7,136 | 126,307 | ||||||
C.R. Bard, Inc. | 396 | 67,597 | ||||||
Edwards Lifesciences Corp.(b) | 566 | 80,615 | ||||||
Intuitive Surgical, Inc.(b) | 194 | 93,993 | ||||||
Medtronic PLC | 7,583 | 561,900 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. S&P 500 Index Fund
Shares | Value | |||||||
Health Care Equipment–(continued) | ||||||||
St. Jude Medical, Inc. | 1,491 | $ | 108,947 | |||||
Stryker Corp. | 1,583 | 151,287 | ||||||
Varian Medical Systems, Inc.(b) | 529 | 44,611 | ||||||
Zimmer Biomet Holdings, Inc. | 906 | 98,963 | ||||||
2,082,266 | ||||||||
Health Care Facilities–0.25% | ||||||||
HCA Holdings, Inc.(b) | 1,542 | 139,890 | ||||||
Tenet Healthcare Corp.(b) | 520 | 30,098 | ||||||
Universal Health Services, Inc.–Class B | 491 | 69,771 | ||||||
239,759 | ||||||||
Health Care REIT’s–0.33% | ||||||||
HCP, Inc. | 2,434 | 88,768 | ||||||
Health Care REIT, Inc. | 1,853 | 121,612 | ||||||
Ventas, Inc. | 1,754 | 108,906 | ||||||
319,286 | ||||||||
Health Care Services–0.56% | ||||||||
DaVita HealthCare Partners Inc.(b) | 910 | 72,318 | ||||||
Express Scripts Holding Co.(b) | 3,880 | 345,087 | ||||||
Laboratory Corp. of America Holdings(b) | 527 | 63,883 | ||||||
Quest Diagnostics Inc. | 765 | 55,478 | ||||||
536,766 | ||||||||
Health Care Supplies–0.04% | ||||||||
DENTSPLY International Inc. | 749 | 38,611 | ||||||
Health Care Technology–0.12% | ||||||||
Cerner Corp.(b) | 1,628 | 112,430 | ||||||
Home Entertainment Software–0.11% | ||||||||
Electronic Arts Inc.(b) | 1,647 | 109,525 | ||||||
Home Furnishings–0.10% | ||||||||
Leggett & Platt, Inc. | 752 | 36,607 | ||||||
Mohawk Industries, Inc.(b) | 334 | 63,761 | ||||||
100,368 | ||||||||
Home Improvement Retail–1.15% | ||||||||
Home Depot, Inc. (The) | 6,912 | 768,131 | ||||||
Lowe’s Cos., Inc. | 4,963 | 332,372 | ||||||
1,100,503 | ||||||||
Homebuilding–0.14% | ||||||||
D.R. Horton, Inc. | 1,758 | 48,099 | ||||||
Lennar Corp.–Class A | 945 | 48,233 | ||||||
PulteGroup Inc. | 1,793 | 36,129 | ||||||
132,461 | ||||||||
Homefurnishing Retail–0.07% | ||||||||
Bed Bath & Beyond Inc.(b) | 911 | 62,841 | ||||||
Hotel and Resort REIT’s–0.08% | ||||||||
Host Hotels & Resorts Inc. | 3,994 | 79,201 |
Shares | Value | |||||||
Hotels, Resorts & Cruise Lines–0.41% | ||||||||
Carnival Corp. | 2,387 | $ | 117,894 | |||||
Marriott International Inc.–Class A | 1,100 | 81,829 | ||||||
Royal Caribbean Cruises Ltd. | 884 | 69,562 | ||||||
Starwood Hotels & Resorts Worldwide, Inc. | 910 | 73,792 | ||||||
Wyndham Worldwide Corp. | 639 | 52,340 | ||||||
395,417 | ||||||||
Household Appliances–0.08% | ||||||||
Whirlpool Corp. | 418 | 72,335 | ||||||
Household Products–1.77% | ||||||||
Clorox Co. (The) | 695 | 72,294 | ||||||
Colgate-Palmolive Co. | 4,532 | 296,438 | ||||||
Kimberly-Clark Corp. | 1,938 | 205,370 | ||||||
Procter & Gamble Co. (The) | 14,436 | 1,129,472 | ||||||
1,703,574 | ||||||||
Housewares & Specialties–0.06% | ||||||||
Newell Rubbermaid Inc. | 1,436 | 59,034 | ||||||
Human Resource & Employment Services–0.04% | ||||||||
Robert Half International, Inc. | 716 | 39,738 | ||||||
Hypermarkets & Super Centers–0.95% | ||||||||
Costco Wholesale Corp. | 2,333 | 315,095 | ||||||
Wal-Mart Stores, Inc. | 8,397 | 595,599 | ||||||
910,694 | ||||||||
Independent Power Producers & Energy Traders–0.09% | ||||||||
AES Corp. (The) | 3,631 | 48,147 | ||||||
NRG Energy, Inc. | 1,751 | 40,063 | ||||||
88,210 | ||||||||
Industrial Conglomerates–2.41% | ||||||||
3M Co. | 3,375 | 520,762 | ||||||
Danaher Corp. | 3,276 | 280,393 | ||||||
General Electric Co.(d) | 53,620 | 1,424,683 | ||||||
Roper Technologies, Inc. | 530 | 91,404 | ||||||
2,317,242 | ||||||||
Industrial Gases–0.38% | ||||||||
Air Products and Chemicals, Inc. | 1,028 | 140,661 | ||||||
Airgas, Inc. | 355 | 37,552 | ||||||
Praxair, Inc. | 1,531 | 183,031 | ||||||
361,244 | ||||||||
Industrial Machinery–0.78% | ||||||||
Dover Corp. | 853 | 59,864 | ||||||
Flowserve Corp. | 721 | 37,968 | ||||||
Illinois Tool Works Inc. | 1,799 | 165,130 | ||||||
Ingersoll-Rand PLC | 1,406 | 94,793 | ||||||
Pall Corp. | 563 | 70,065 | ||||||
Parker Hannifin Corp. | 737 | 85,735 | ||||||
Pentair PLC (United Kingdom) | 967 | 66,481 | ||||||
Snap-on Inc. | 313 | 49,845 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. S&P 500 Index Fund
Shares | Value | |||||||
Industrial Machinery–(continued) | ||||||||
Stanley Black & Decker Inc. | 817 | $ | 85,981 | |||||
Xylem, Inc. | 982 | 36,403 | ||||||
752,265 | ||||||||
Industrial REIT’s–0.11% | ||||||||
Prologis, Inc. | 2,788 | 103,435 | ||||||
Insurance Brokers–0.32% | ||||||||
Aon PLC | 1,498 | 149,321 | ||||||
Marsh & McLennan Cos., Inc. | 2,867 | 162,559 | ||||||
311,880 | ||||||||
Integrated Oil & Gas–3.26% | ||||||||
Chevron Corp. | 10,006 | 965,279 | ||||||
Exxon Mobil Corp. | 22,252 | 1,851,366 | ||||||
Occidental Petroleum Corp. | 4,087 | 317,846 | ||||||
3,134,491 | ||||||||
Integrated Telecommunication Services–2.20% | ||||||||
AT&T Inc. | 27,635 | 981,595 | ||||||
CenturyLink Inc. | 3,025 | 88,875 | ||||||
Frontier Communications Corp. | 6,136 | 30,373 | ||||||
Verizon Communications Inc. | 21,704 | 1,011,623 | ||||||
2,112,466 | ||||||||
Internet Retail–1.58% | ||||||||
Amazon.com, Inc.(b) | 2,031 | 881,637 | ||||||
Expedia, Inc. | 532 | 58,174 | ||||||
Netflix Inc.(b) | 322 | 211,535 | ||||||
Priceline Group Inc. (The)(b) | 276 | 317,778 | ||||||
TripAdvisor Inc.(b) | 590 | 51,412 | ||||||
1,520,536 | ||||||||
Internet Software & Services–3.42% | ||||||||
Akamai Technologies, Inc.(b) | 942 | 65,771 | ||||||
eBay Inc.(b) | 5,882 | 354,332 | ||||||
Equinix, Inc. | 299 | 75,946 | ||||||
Facebook Inc.–Class A(b) | 11,208 | 961,254 | ||||||
Google Inc.–Class A(b) | 1,522 | 821,941 | ||||||
Google Inc.–Class C(b) | 1,526 | 794,298 | ||||||
VeriSign, Inc.(b) | 557 | 34,378 | ||||||
Yahoo! Inc.(b) | 4,618 | 181,441 | ||||||
3,289,361 | ||||||||
Investment Banking & Brokerage–1.05% | ||||||||
Charles Schwab Corp. (The) | 6,150 | 200,797 | ||||||
E*TRADE Financial Corp.(b) | 1,530 | 45,824 | ||||||
Goldman Sachs Group, Inc. (The) | 2,138 | 446,393 | ||||||
Morgan Stanley | 8,197 | 317,962 | ||||||
1,010,976 | ||||||||
IT Consulting & Other Services–1.40% | ||||||||
Accenture PLC–Class A | 3,326 | 321,890 | ||||||
Cognizant Technology Solutions Corp.–Class A(b) | 3,248 | 198,421 |
Shares | Value | |||||||
IT Consulting & Other Services–(continued) | ||||||||
International Business Machines Corp. | 4,879 | $ | 793,618 | |||||
Teradata Corp.(b) | 769 | 28,453 | ||||||
1,342,382 | ||||||||
Leisure Products–0.09% | ||||||||
Hasbro, Inc. | 593 | 44,351 | ||||||
Mattel, Inc. | 1,831 | 47,038 | ||||||
91,389 | ||||||||
Life & Health Insurance–0.96% | ||||||||
Aflac, Inc. | 2,308 | 143,557 | ||||||
Lincoln National Corp. | 1,345 | 79,651 | ||||||
MetLife, Inc. | 5,923 | 331,629 | ||||||
Principal Financial Group, Inc. | 1,447 | 74,217 | ||||||
Prudential Financial, Inc. | 2,407 | 210,661 | ||||||
Torchmark Corp. | 674 | 39,240 | ||||||
Unum Group | 1,335 | 47,726 | ||||||
926,681 | ||||||||
Life Sciences Tools & Services–0.45% | ||||||||
Agilent Technologies, Inc. | 1,767 | 68,171 | ||||||
PerkinElmer, Inc. | 598 | 31,479 | ||||||
Thermo Fisher Scientific, Inc. | 2,118 | 274,831 | ||||||
Waters Corp.(b) | 440 | 56,487 | ||||||
430,968 | ||||||||
Managed Health Care–1.52% | ||||||||
Aetna Inc. | 1,864 | 237,585 | ||||||
Anthem, Inc. | 1,407 | 230,945 | ||||||
Cigna Corp. | 1,370 | 221,940 | ||||||
Humana Inc. | 793 | 151,685 | ||||||
UnitedHealth Group Inc. | 5,059 | 617,198 | ||||||
1,459,353 | ||||||||
Metal & Glass Containers–0.07% | ||||||||
Ball Corp. | 725 | 50,859 | ||||||
Owens-Illinois, Inc.(b) | 891 | 20,439 | ||||||
71,298 | ||||||||
Motorcycle Manufacturers–0.06% | ||||||||
Harley-Davidson, Inc. | 1,111 | 62,605 | ||||||
Movies & Entertainment–1.83% | ||||||||
Time Warner Inc. | 4,388 | 383,555 | ||||||
Twenty-First Century Fox, Inc.–Class A | 9,415 | 306,411 | ||||||
Viacom Inc.–Class B | 1,900 | 122,816 | ||||||
Walt Disney Co. (The) | 8,307 | 948,161 | ||||||
1,760,943 | ||||||||
Multi-Line Insurance–0.66% | ||||||||
American International Group, Inc. | 7,095 | 438,613 | ||||||
Assurant, Inc. | 361 | 24,187 | ||||||
Genworth Financial Inc.–Class A(b) | 2,625 | 19,871 | ||||||
Hartford Financial Services Group, Inc. (The) | 2,232 | 92,784 | ||||||
Loews Corp. | 1,586 | 61,077 | ||||||
636,532 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. S&P 500 Index Fund
Shares | Value | |||||||
Multi-Sector Holdings–1.42% | ||||||||
Berkshire Hathaway Inc.–Class B(b) | 9,704 | $ | 1,320,812 | |||||
Leucadia National Corp. | 1,680 | 40,790 | ||||||
1,361,602 | ||||||||
Multi-Utilities–1.12% | ||||||||
Ameren Corp. | 1,285 | 48,419 | ||||||
CenterPoint Energy, Inc. | 2,324 | 44,226 | ||||||
CMS Energy Corp. | 1,457 | 46,391 | ||||||
Consolidated Edison, Inc. | 1,552 | 89,830 | ||||||
Dominion Resources, Inc. | 3,157 | 211,108 | ||||||
DTE Energy Co. | 953 | 71,132 | ||||||
NiSource Inc. | 1,673 | 76,272 | ||||||
PG&E Corp. | 2,554 | 125,401 | ||||||
Public Service Enterprise Group Inc. | 2,682 | 105,349 | ||||||
SCANA Corp. | 754 | 38,190 | ||||||
Sempra Energy | 1,237 | 122,389 | ||||||
TECO Energy, Inc. | 1,210 | 21,369 | ||||||
WEC Energy Group, Inc. | 1,671 | 75,151 | ||||||
1,075,227 | ||||||||
Office REIT’s–0.25% | ||||||||
Boston Properties, Inc. | 810 | 98,042 | ||||||
SL Green Realty Corp. | 523 | 57,473 | ||||||
Vornado Realty Trust | 924 | 87,715 | ||||||
243,230 | ||||||||
Office Services & Supplies–0.02% | ||||||||
Pitney Bowes Inc. | 1,069 | 22,246 | ||||||
Oil & Gas Drilling–0.13% | ||||||||
Diamond Offshore Drilling, Inc. | 390 | 10,066 | ||||||
Ensco PLC–Class A | 1,241 | 27,637 | ||||||
Helmerich & Payne, Inc. | 573 | 40,351 | ||||||
Noble Corp. PLC | 1,328 | 20,438 | ||||||
Transocean Ltd. | 1,784 | 28,758 | ||||||
127,250 | ||||||||
Oil & Gas Equipment & Services–1.17% | ||||||||
Baker Hughes Inc. | 2,313 | 142,712 | ||||||
Cameron International Corp.(b) | 1,018 | 53,313 | ||||||
FMC Technologies, Inc.(b) | 1,227 | 50,908 | ||||||
Halliburton Co. | 4,527 | 194,978 | ||||||
National Oilwell Varco Inc. | 2,063 | 99,602 | ||||||
Schlumberger Ltd. | 6,764 | 582,989 | ||||||
1,124,502 | ||||||||
Oil & Gas Exploration & Production–1.94% | ||||||||
Anadarko Petroleum Corp. | 2,702 | 210,918 | ||||||
Apache Corp. | 1,995 | 114,972 | ||||||
Cabot Oil & Gas Corp. | 2,189 | 69,041 | ||||||
Chesapeake Energy Corp. | 2,802 | 31,298 | ||||||
Cimarex Energy Co. | 498 | 54,934 | ||||||
ConocoPhillips | 6,561 | 402,911 | ||||||
Devon Energy Corp. | 2,055 | 122,252 |
Shares | Value | |||||||
Oil & Gas Exploration & Production–(continued) | ||||||||
EOG Resources, Inc. | 2,920 | $ | 255,646 | |||||
EQT Corp. | 802 | 65,235 | ||||||
Hess Corp. | 1,288 | 86,141 | ||||||
Marathon Oil Corp. | 3,591 | 95,305 | ||||||
Murphy Oil Corp. | 883 | 36,706 | ||||||
Newfield Exploration Co.(b) | 854 | 30,847 | ||||||
Noble Energy, Inc. | 2,051 | 87,537 | ||||||
Pioneer Natural Resources Co. | 788 | 109,288 | ||||||
Range Resources Corp. | 893 | 44,096 | ||||||
Southwestern Energy Co.(b) | 2,050 | 46,597 | ||||||
1,863,724 | ||||||||
Oil & Gas Refining & Marketing–0.63% | ||||||||
Marathon Petroleum Corp. | 2,896 | 151,490 | ||||||
Phillips 66 | 2,882 | 232,174 | ||||||
Tesoro Corp. | 668 | 56,386 | ||||||
Valero Energy Corp. | 2,706 | 169,395 | ||||||
609,445 | ||||||||
Oil & Gas Storage & Transportation–0.75% | ||||||||
Kinder Morgan Inc. | 9,230 | 354,340 | ||||||
ONEOK, Inc. | 1,125 | 44,415 | ||||||
Spectra Energy Corp. | 3,557 | 115,958 | ||||||
Williams Cos., Inc. (The) | 3,566 | 204,653 | ||||||
719,366 | ||||||||
Packaged Foods & Meats–1.52% | ||||||||
Campbell Soup Co. | 949 | 45,220 | ||||||
ConAgra Foods, Inc. | 2,251 | 98,414 | ||||||
General Mills, Inc. | 3,171 | 176,688 | ||||||
Hershey Co. (The) | 783 | 69,554 | ||||||
Hormel Foods Corp. | 711 | 40,079 | ||||||
JM Smucker Co. (The) | 515 | 55,831 | ||||||
Kellogg Co. | 1,335 | 83,704 | ||||||
Keurig Green Mountain Inc. | 614 | 47,051 | ||||||
Kraft Foods Group, Inc. | 3,151 | 268,276 | ||||||
McCormick & Co., Inc. | 680 | 55,046 | ||||||
Mead Johnson Nutrition Co. | 1,070 | 96,535 | ||||||
Mondelez International Inc.–Class A | 8,650 | 355,861 | ||||||
Tyson Foods, Inc.–Class A | 1,552 | 66,162 | ||||||
1,458,421 | ||||||||
Paper Packaging–0.18% | ||||||||
Avery Dennison Corp. | 479 | 29,190 | ||||||
MeadWestvaco Corp. | 1,793 | 84,612 | ||||||
Sealed Air Corp. | 1,114 | 57,237 | ||||||
171,039 | ||||||||
Paper Products–0.11% | ||||||||
International Paper Co. | 2,245 | 106,840 | ||||||
Personal Products–0.11% | ||||||||
Estee Lauder Cos. Inc. (The)–Class A | 1,186 | 102,779 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. S&P 500 Index Fund
Shares | Value | |||||||
Pharmaceuticals–6.58% | ||||||||
AbbVie Inc. | 9,150 | $ | 614,788 | |||||
Allergan PLC(b) | 2,091 | 634,535 | ||||||
Bristol-Myers Squibb Co. | 8,870 | 590,210 | ||||||
Eli Lilly and Co. | 5,194 | 433,647 | ||||||
Endo International PLC(b) | 1,068 | 85,066 | ||||||
Hospira, Inc.(b) | 909 | 80,637 | ||||||
Johnson & Johnson | 14,742 | 1,436,755 | ||||||
Mallinckrodt PLC(b) | 615 | 72,398 | ||||||
Merck & Co., Inc. | 15,034 | 855,886 | ||||||
Mylan N.V.(b) | 2,190 | 148,613 | ||||||
Perrigo Co. PLC | 777 | 143,613 | ||||||
Pfizer Inc. | 32,768 | 1,098,711 | ||||||
Zoetis Inc. | 2,657 | 128,121 | ||||||
6,322,980 | ||||||||
Property & Casualty Insurance–0.81% | ||||||||
ACE Ltd. | 1,736 | 176,517 | ||||||
Allstate Corp. (The) | 2,176 | 141,157 | ||||||
Chubb Corp. (The) | 1,224 | 116,451 | ||||||
Cincinnati Financial Corp. | 779 | 39,090 | ||||||
Progressive Corp. (The) | 2,835 | 78,898 | ||||||
Travelers Cos., Inc. (The) | 1,704 | 164,709 | ||||||
XL Group PLC | 1,631 | 60,673 | ||||||
777,495 | ||||||||
Publishing–0.04% | ||||||||
News Corp.–Class A(b) | 2,649 | 38,649 | ||||||
Railroads–0.84% | ||||||||
CSX Corp. | 5,277 | 172,294 | ||||||
Kansas City Southern | 584 | 53,261 | ||||||
Norfolk Southern Corp. | 1,621 | 141,610 | ||||||
Union Pacific Corp. | 4,659 | 444,329 | ||||||
811,494 | ||||||||
Real Estate Services–0.06% | ||||||||
CBRE Group, Inc.–Class A(b) | 1,481 | 54,797 | ||||||
Regional Banks–1.01% | ||||||||
BB&T Corp. | 3,889 | 156,766 | ||||||
Fifth Third Bancorp | 4,355 | 90,671 | ||||||
Huntington Bancshares Inc. | 4,303 | 48,667 | ||||||
KeyCorp | 4,484 | 67,350 | ||||||
M&T Bank Corp. | 707 | 88,325 | ||||||
People’s United Financial Inc. | 1,686 | 27,330 | ||||||
PNC Financial Services Group, Inc. (The) | 2,761 | 264,090 | ||||||
Regions Financial Corp. | 7,123 | 73,794 | ||||||
SunTrust Banks, Inc. | 2,764 | 118,907 | ||||||
Zions Bancorp. | 1,104 | 35,035 | ||||||
970,935 | ||||||||
Research & Consulting Services–0.18% | ||||||||
Dun & Bradstreet Corp. (The) | 189 | 23,058 | ||||||
Equifax Inc. | 638 | 61,944 | ||||||
Nielsen N.V. | 1,968 | 88,107 | ||||||
173,109 |
Shares | Value | |||||||
Residential REIT’s–0.37% | ||||||||
Apartment Investment & Management Co.–Class A | 817 | $ | 30,172 | |||||
AvalonBay Communities, Inc. | 699 | 111,749 | ||||||
Equity Residential | 1,936 | 135,849 | ||||||
Essex Property Trust, Inc. | 345 | 73,313 | ||||||
351,083 | ||||||||
Restaurants–1.32% | ||||||||
Chipotle Mexican Grill, Inc.(b) | 165 | 99,823 | ||||||
Darden Restaurants, Inc. | 670 | 47,624 | ||||||
McDonald’s Corp. | 5,098 | 484,667 | ||||||
Starbucks Corp. | 7,984 | 428,062 | ||||||
Yum! Brands, Inc. | 2,297 | 206,914 | ||||||
1,267,090 | ||||||||
Retail REIT’s–0.55% | ||||||||
General Growth Properties, Inc. | 3,326 | 85,345 | ||||||
Kimco Realty Corp. | 2,189 | 49,340 | ||||||
Macerich Co. (The) | 744 | 55,503 | ||||||
Realty Income Corp. | 1,236 | 54,866 | ||||||
Simon Property Group, Inc. | 1,655 | 286,348 | ||||||
531,402 | ||||||||
Security & Alarm Services–0.12% | ||||||||
ADT Corp. (The) | 924 | 31,019 | ||||||
Tyco International PLC | 2,218 | 85,326 | ||||||
116,345 | ||||||||
Semiconductor Equipment–0.25% | ||||||||
Applied Materials, Inc. | 6,560 | 126,083 | ||||||
KLA-Tencor Corp. | 862 | 48,453 | ||||||
Lam Research Corp. | 841 | 68,416 | ||||||
242,952 | ||||||||
Semiconductors–2.18% | ||||||||
Altera Corp. | 1,615 | 82,688 | ||||||
Analog Devices, Inc. | 1,667 | 106,996 | ||||||
Avago Technologies Ltd. (Singapore) | 1,360 | 180,785 | ||||||
Broadcom Corp.–Class A | 2,890 | 148,806 | ||||||
First Solar, Inc.(b) | 415 | 19,497 | ||||||
Intel Corp. | 25,246 | 767,857 | ||||||
Linear Technology Corp. | 1,263 | 55,862 | ||||||
Microchip Technology Inc. | 1,064 | 50,460 | ||||||
Micron Technology, Inc.(b) | 5,691 | 107,218 | ||||||
NVIDIA Corp. | 2,753 | 55,363 | ||||||
Qorvo, Inc.(b) | 787 | 63,173 | ||||||
Skyworks Solutions, Inc. | 1,010 | 105,141 | ||||||
Texas Instruments Inc. | 5,554 | 286,087 | ||||||
Xilinx, Inc. | 1,375 | 60,720 | ||||||
2,090,653 | ||||||||
Soft Drinks–1.85% | ||||||||
Coca-Cola Co. (The) | 20,846 | 817,789 | ||||||
Coca-Cola Enterprises, Inc. | 1,150 | 49,956 | ||||||
Dr Pepper Snapple Group, Inc. | 1,029 | 75,014 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. S&P 500 Index Fund
Shares | Value | |||||||
Soft Drinks–(continued) | ||||||||
Monster Beverage Corp.(b) | 775 | $ | 103,866 | |||||
PepsiCo, Inc. | 7,863 | 733,932 | ||||||
1,780,557 | ||||||||
Specialized Consumer Services–0.05% | ||||||||
H&R Block, Inc. | 1,487 | 44,090 | ||||||
Specialized Finance–0.59% | ||||||||
CME Group Inc.–Class A | 1,678 | 156,155 | ||||||
Intercontinental Exchange, Inc. | 596 | 133,272 | ||||||
McGraw Hill Financial, Inc. | 1,450 | 145,652 | ||||||
Moody’s Corp. | 943 | 101,806 | ||||||
NASDAQ OMX Group, Inc. (The) | 621 | 30,311 | ||||||
567,196 | ||||||||
Specialized REIT’s–0.68% | ||||||||
American Tower Corp. | 2,241 | 209,063 | ||||||
Crown Castle International Corp. | 1,795 | 144,138 | ||||||
Iron Mountain Inc. | 1,007 | 31,217 | ||||||
Plum Creek Timber Co., Inc. | 931 | 37,771 | ||||||
Public Storage | 768 | 141,596 | ||||||
Weyerhaeuser Co. | 2,779 | 87,539 | ||||||
651,324 | ||||||||
Specialty Chemicals–0.60% | ||||||||
Ecolab Inc. | 1,431 | 161,803 | ||||||
International Flavors & Fragrances Inc. | 428 | 46,776 | ||||||
PPG Industries, Inc. | 1,452 | 166,574 | ||||||
Sherwin-Williams Co. (The) | 421 | 115,783 | ||||||
Sigma-Aldrich Corp. | 630 | 87,791 | ||||||
578,727 | ||||||||
Specialty Stores–0.18% | ||||||||
Staples, Inc. | 3,359 | 51,426 | ||||||
Tiffany & Co. | 607 | 55,723 | ||||||
Tractor Supply Co. | 719 | 64,667 | ||||||
171,816 | ||||||||
Steel–0.10% | ||||||||
Allegheny Technologies, Inc. | 575 | 17,365 | ||||||
Nucor Corp. | 1,690 | 74,478 | ||||||
91,843 | ||||||||
Systems Software–2.91% | ||||||||
CA, Inc. | 1,697 | 49,705 | ||||||
Microsoft Corp. | 43,049 | 1,900,613 | ||||||
Oracle Corp. | 16,965 | 683,690 | ||||||
Red Hat, Inc.(b) | 972 | 73,804 | ||||||
Symantec Corp. | 3,631 | 84,421 | ||||||
2,792,233 |
Shares | Value | |||||||
Technology Hardware, Storage & Peripherals–4.89% | ||||||||
Apple Inc. | 30,657 | $ | 3,845,154 | |||||
EMC Corp. | 10,335 | 272,741 | ||||||
Hewlett-Packard Co. | 9,641 | 289,326 | ||||||
NetApp, Inc. | 1,651 | 52,106 | ||||||
SanDisk Corp. | 1,105 | 64,333 | ||||||
Seagate Technology PLC | 1,688 | 80,180 | ||||||
Western Digital Corp. | 1,156 | 90,653 | ||||||
4,694,493 | ||||||||
Thrifts & Mortgage Finance–0.03% | ||||||||
Hudson City Bancorp, Inc. | 2,601 | 25,698 | ||||||
Tires & Rubber–0.05% | ||||||||
Goodyear Tire & Rubber Co. (The) | 1,454 | 43,838 | ||||||
Tobacco–1.39% | ||||||||
Altria Group, Inc. | 10,446 | 510,914 | ||||||
Philip Morris International Inc. | 8,243 | 660,841 | ||||||
Reynolds American Inc. | 2,212 | 165,148 | ||||||
1,336,903 | ||||||||
Trading Companies & Distributors–0.19% | ||||||||
Fastenal Co. | 1,445 | 60,950 | ||||||
United Rentals, Inc.(b) | 511 | 44,774 | ||||||
W.W. Grainger, Inc. | 320 | 75,728 | ||||||
181,452 | ||||||||
Trucking–0.07% | ||||||||
J.B. Hunt Transport Services, Inc. | 490 | 40,224 | ||||||
Ryder System, Inc. | 280 | 24,464 | ||||||
64,688 | ||||||||
Total Common Stocks & Other Equity Interests |
| 96,953,898 | ||||||
Money Market Funds–2.21% | ||||||||
Liquid Assets Portfolio–Institutional Class(e) | 1,062,343 | 1,062,343 | ||||||
Premier Portfolio–Institutional Class(e) | 1,062,344 | 1,062,344 | ||||||
Total Money Market Funds | 2,124,687 | |||||||
TOTAL INVESTMENTS–103.16% |
| 99,078,585 | ||||||
OTHER ASSETS LESS LIABILITIES–(3.16)% |
| (3,036,515 | ) | |||||
NET ASSETS–100.00% |
| $ | 96,042,070 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. S&P 500 Index Fund
Investment Abbreviations:
REIT | – Real Estate Investment Trust |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Non-income producing security. |
(c) | The Fund’s Adviser is a subsidiary of Invesco Ltd. and therefore, Invesco Ltd. is considered to be affiliated with the Fund. See Note 5. |
(d) | All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 1I and Note 4. |
(e) | The money market fund and the Fund are affiliated by having the same investment adviser. |
Portfolio Composition
By sector, based on Net Assets
as of June 30, 2015
Information Technology | 19.8 | % | ||
Financials | 16.7 | |||
Health Care | 15.6 | |||
Consumer Discretionary | 12.9 | |||
Industrials | 10.2 | |||
Consumer Staples | 9.5 | |||
Energy | 7.9 | |||
Materials | 3.2 | |||
Utilities | 2.9 | |||
Telecommunication Services | 2.3 | |||
Money Market Funds Plus Other Assets Less Liabilities | (1.0 | ) |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. S&P 500 Index Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $37,728,623) | $ | 96,868,308 | ||
Investments in affiliates, at value (Cost $2,180,595) | 2,210,277 | |||
Total investments, at value (Cost $39,909,218) | 99,078,585 | |||
Receivable for: | ||||
Investments sold | 93,547 | |||
Variation margin — futures | 4,095 | |||
Fund shares sold | 597 | |||
Dividends | 111,599 | |||
Investment for trustee deferred compensation and retirement plans | 28,486 | |||
Other assets | 17,007 | |||
Total assets | 99,333,916 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 82,357 | |||
Fund shares reacquired | 3,064,323 | |||
Accrued fees to affiliates | 67,886 | |||
Accrued trustees’ and officers’ fees and benefits | 4,496 | |||
Accrued other operating expenses | 37,085 | |||
Trustee deferred compensation and retirement plans | 35,699 | |||
Total liabilities | 3,291,846 | |||
Net assets applicable to shares outstanding | $ | 96,042,070 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 26,965,362 | ||
Undistributed net investment income | 2,046,328 | |||
Undistributed net realized gain | 7,892,765 | |||
Net unrealized appreciation | 59,137,615 | |||
$ | 96,042,070 | |||
Net Assets: | ||||
Series I | $ | 37,272,577 | ||
Series II | $ | 58,769,493 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 1,990,727 | |||
Series II | 3,158,584 | |||
Series I: | ||||
Net asset value per share | $ | 18.72 | ||
Series II: | ||||
Net asset value per share | $ | 18.61 |
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $443) | $ | 1,018,070 | ||
Dividends from affiliates | 1,973 | |||
Total investment income | 1,020,043 | |||
Expenses: | ||||
Advisory fees | 60,320 | |||
Administrative services fees | 80,192 | |||
Custodian fees | 12,377 | |||
Distribution fees — Series II | 79,333 | |||
Transfer agent fees | 2,115 | |||
Trustees’ and officers’ fees and benefits | 11,286 | |||
Professional services fees | 16,198 | |||
Other | 15,727 | |||
Total expenses | 277,548 | |||
Less: Fees waived | (1,612 | ) | ||
Net expenses | 275,936 | |||
Net investment income | 744,107 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from: | ||||
Investment securities | 3,289,555 | |||
Futures contracts | 138,799 | |||
3,428,354 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (3,157,639 | ) | ||
Futures contracts | (24,313 | ) | ||
(3,181,952 | ) | |||
Net realized and unrealized gain | 246,402 | |||
Net increase in net assets resulting from operations | $ | 990,509 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. S&P 500 Index Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: | ||||||||
Net investment income | $ | 744,107 | $ | 1,465,688 | ||||
Net realized gain | 3,428,354 | 9,118,184 | ||||||
Change in net unrealized appreciation (depreciation) | (3,181,952 | ) | 1,654,178 | |||||
Net increase in net assets resulting from operations | 990,509 | 12,238,050 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Series I | — | (686,694 | ) | |||||
Series ll | — | (1,015,390 | ) | |||||
Total distributions from net investment income | — | (1,702,084 | ) | |||||
Share transactions–net: | ||||||||
Series l | (815,225 | ) | (3,051,108 | ) | ||||
Series ll | (5,485,110 | ) | (10,779,798 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (6,300,335 | ) | (13,830,906 | ) | ||||
Net increase (decrease) in net assets | (5,309,826 | ) | (3,294,940 | ) | ||||
Net assets: | ||||||||
Beginning of period | 101,351,896 | 104,646,836 | ||||||
End of period (includes undistributed net investment income of $2,046,328 and $1,302,221, respectively) | $ | 96,042,070 | $ | 101,351,896 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. S&P 500 Index Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is to provide investment results that, before expenses, correspond to the total return (i.e., the combination of capital changes and income) of the Standard & Poor’s 500® Composite Stock Price Index.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual
Invesco V.I. S&P 500 Index Fund
trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
Invesco V.I. S&P 500 Index Fund
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Futures Contracts — The Fund may enter into futures contracts to manage exposure to interest rate, equity and market price movements and/or currency risks. A futures contract is an agreement between two parties (“Counterparties”) to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund’s basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Statement of Operations. The primary risks associated with futures contracts are market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal Counterparty risk since the exchange’s clearinghouse, as Counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. |
J. | Collateral — To the extent the Fund has designated or segregated a security as collateral and that security is subsequently sold, it is the Fund’s practice to replace such collateral no later than the next business day. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $2 billion | 0.12% | |||
Over $2 billion | 0.10% |
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.12%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2016, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2016. The fee waiver agreement cannot be terminated during its term. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $1,612.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of
Invesco V.I. S&P 500 Index Fund
the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $24,794 for accounting and fund administrative services and reimbursed $55,398 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 99,078,585 | $ | — | $ | — | $ | 99,078,585 | ||||||||
Futures Contracts* | (31,752 | ) | — | — | (31,752 | ) | ||||||||||
Total Investments | $ | 99,046,833 | $ | — | $ | — | $ | 99,046,833 |
* | Unrealized appreciation (depreciation). |
NOTE 4—Derivative Investments
Value of Derivative Investments at Period-End
The table below summarizes the value of the Fund’s derivative investments, detailed by primary risk exposure, held as of June 30, 2015:
Value | ||||||||
Risk Exposure/Derivative Type | Assets | Liabilities | ||||||
Equity risk: | ||||||||
Futures contracts(a) | $ | — | $ | (31,752 | ) |
(a) | Includes cumulative appreciation (depreciation) of futures contracts. Only current day’s variation margin receivable is reported within the Statement of Assets and Liabilities. |
Effect of Derivative Investments for the six months ended June 30, 2015
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations | ||||
Futures Contracts | ||||
Realized Gain: | ||||
Equity risk | $ | 138,799 | ||
Change in Net Unrealized Appreciation (Depreciation): | ||||
Equity risk | (24,313 | ) | ||
Total | $ | 114,486 |
Invesco V.I. S&P 500 Index Fund
The table below summarizes the average notional value of futures contracts outstanding during the period.
Futures Contracts | ||||
Average notional value | $ | 2,043,940 |
Open Futures Contracts — Equity Risk | ||||||||||||||||||||
Futures Contracts | Type of Contract | Number of Contracts | Expiration Month | Notional Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
E-Mini S&P 500 Index | Long | 21 | September-2015 | $ | 2,157,120 | $ | (31,752 | ) |
NOTE 5—Investments in Affiliates
The Fund’s Adviser is a subsidiary of Invesco Ltd. and therefore, Invesco Ltd. is considered to be affiliated with the Fund. The following is a summary of the transactions in, and earnings from, investments in Invesco Ltd. for the six months ended June 30, 2015.
Value 12/31/14 | Purchases at Cost | Proceeds from Sales | Change in Unrealized Appreciation (Depreciation) | Realized Gain | Value 06/30/15 | Dividend Income | ||||||||||||||||||||||
Invesco Ltd. | $ | 94,729 | $ | 1,938 | $ | (6,312 | ) | $ | (6,205 | ) | $ | 1,440 | $ | 85,590 | $ | 1,199 |
NOTE 6—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 7—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 8—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized.
Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund did not have a capital loss carryforward as of December 31, 2014.
NOTE 9—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $4,437,483 and $8,241,135, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 56,124,425 | ||
Aggregate unrealized (depreciation) of investment securities | (789,470 | ) | ||
Net unrealized appreciation of investment securities | $ | 55,334,955 |
Cost of investments for tax purposes is $43,743,630.
Invesco V.I. S&P 500 Index Fund
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 118,740 | $ | 2,244,373 | 94,973 | $ | 1,667,562 | ||||||||||
Series II | 442,926 | 8,222,162 | 336,901 | 5,906,132 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 39,005 | 686,494 | ||||||||||||
Series II | — | — | 57,956 | 1,015,390 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (162,910 | ) | (3,059,598 | ) | (310,830 | ) | (5,405,164 | ) | ||||||||
Series II | (739,440 | ) | (13,707,272 | ) | (1,029,367 | ) | (17,701,320 | ) | ||||||||
Net increase (decrease) in share activity | (340,684 | ) | $ | (6,300,335 | ) | (811,362 | ) | $ | (13,830,906 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 95% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 11—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||
Series I | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 18.52 | $ | 0.15 | $ | 0.05 | $ | 0.20 | $ | — | $ | 18.72 | 1.08 | % | $ | 37,273 | 0.39 | %(d) | 0.39 | %(d) | 1.64 | %(d) | 4 | % | ||||||||||||||||||||||||
Year ended 12/31/14 | 16.66 | 0.28 | 1.92 | 2.20 | (0.34 | ) | 18.52 | 13.32 | 37,685 | 0.41 | 0.41 | 1.62 | 3 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 12.89 | 0.24 | 3.84 | 4.08 | (0.31 | ) | 16.66 | 31.91 | 36,853 | 0.41 | 0.41 | 1.63 | 4 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 11.36 | 0.25 | 1.54 | 1.79 | (0.26 | ) | 12.89 | 15.77 | 32,634 | 0.33 | 0.39 | 1.97 | 4 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 11.42 | 0.21 | (0.04 | ) | 0.17 | (0.23 | ) | 11.36 | 1.76 | 32,889 | 0.28 | 0.31 | 1.81 | 4 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 10.14 | 0.19 | 1.29 | 1.48 | (0.20 | ) | 11.42 | 14.87 | 37,651 | 0.28 | 0.42 | 1.79 | 6 | |||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 18.43 | 0.13 | 0.05 | 0.18 | — | 18.61 | 0.98 | 58,769 | 0.64 | (d) | 0.64 | (d) | 1.39 | (d) | 4 | |||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 16.58 | 0.24 | 1.90 | 2.14 | (0.29 | ) | 18.43 | 13.02 | 63,667 | 0.66 | 0.66 | 1.37 | 3 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 12.83 | 0.20 | 3.82 | 4.02 | (0.27 | ) | 16.58 | 31.55 | 67,793 | 0.66 | 0.66 | 1.38 | 4 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 11.30 | 0.22 | 1.54 | 1.76 | (0.23 | ) | 12.83 | 15.52 | 64,657 | 0.58 | 0.64 | 1.72 | 4 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 11.35 | 0.18 | (0.03 | ) | 0.15 | (0.20 | ) | 11.30 | 1.53 | 67,378 | 0.53 | 0.56 | 1.56 | 4 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 10.08 | 0.16 | 1.28 | 1.44 | (0.17 | ) | 11.35 | 14.58 | 88,407 | 0.53 | 0.67 | 1.54 | 6 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $37,374 and $63,993 for Series I and Series II shares, respectively. |
Invesco V.I. S&P 500 Index Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,010.80 | $ | 1.94 | $ | 1,022.86 | $ | 1.96 | 0.39 | % | ||||||||||||
Series II | 1,000.00 | 1,010.30 | 3.19 | 1,021.62 | 3.21 | 0.64 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. S&P 500 Index Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. S&P 500 Index Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ investment
process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Underlying Fund S&P 500 Index. The Board noted that performance of Series I shares of the Fund was in the second quintile of its performance universe for the one, three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Series I shares of the Fund was above the performance of the Index
Invesco V.I. S&P 500 Index Fund
for the one, three and five year periods. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series I shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was the same as the rate of one such mutual fund.
The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other client accounts with investment strategies comparable to those of the Fund.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its
affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds. The Board noted that although Invesco Advisers received a minimal amount of revenues from advising the Fund, Invesco Advisers and its subsidiaries did not make a profit from managing the Fund. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered that it receives periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to
waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to, among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
Invesco V.I. S&P 500 Index Fund
| ||||
Semiannual Report to Shareholders
| June 30, 2015 | |||
Invesco V.I. Small Cap Equity Fund | ||||
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
Invesco Distributors, Inc. VISCE-SAR-1
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance |
Performance summary
Fund vs. Indexes
Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower.
Series I Shares | 5.71 | % | |||
Series II Shares | 5.62 | ||||
S&P 500 Indexq (Broad Market Index) | 1.23 | ||||
Russell 2000 Indexq (Style-Specific Index) | 4.75 | ||||
Lipper VUF Small-Cap Core Funds Indexn (Peer Group Index) | 3.97 | ||||
Source(s): qFactSet Research Systems Inc.; nLipper Inc. |
The S&P 500® Index is an unmanaged index considered representative of the US stock market.
The Russell 2000® Index is an unmanaged index considered representative of small-cap stocks. The Russell 2000 Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
The Lipper VUF Small-Cap Core Funds Index is an unmanaged index considered representative of small-cap core variable insurance underlying funds tracked by Lipper.
The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es).
A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
Average Annual Total Returns
As of 6/30/15
Series I Shares | |||||
Inception (8/29/03) | 9.72 | % | |||
10 Years | 9.14 | ||||
5 Years | 16.85 | ||||
1 Year | 8.16 | ||||
Series II Shares | |||||
Inception (8/29/03) | 9.46 | % | |||
10 Years | 8.87 | ||||
5 Years | 16.57 | ||||
1 Year | 7.91 |
The performance of the Fund’s Series I and Series II share classes will differ primarily due to different class expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 1.05% and 1.30%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. Small Cap Equity Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
Invesco V.I. Small Cap Equity Fund
Schedule of Investments(a)
June 30, 2015
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–97.99% |
| |||||||
Air Freight & Logistics–0.95% | ||||||||
Forward Air Corp. | 64,321 | $ | 3,361,415 | |||||
Alternative Carriers–0.94% | ||||||||
Iridium Communications Inc.(b) | 365,749 | 3,324,658 | ||||||
Apparel, Accessories & Luxury Goods–1.12% | ||||||||
Columbia Sportswear Co. | 65,418 | 3,955,172 | ||||||
Application Software–5.02% | ||||||||
Blackbaud, Inc. | 69,988 | 3,985,817 | ||||||
Bottomline Technologies (de), Inc.(b) | 96,288 | 2,677,769 | ||||||
MicroStrategy Inc.–Class A(b) | 24,038 | 4,088,383 | ||||||
SS&C Technologies Holdings, Inc. | 56,049 | 3,503,062 | ||||||
Verint Systems Inc.(b) | 57,947 | 3,519,991 | ||||||
17,775,022 | ||||||||
Asset Management & Custody Banks–1.20% | ||||||||
Janus Capital Group Inc. | 247,698 | 4,240,590 | ||||||
Automotive Retail–0.98% | ||||||||
Penske Automotive Group, Inc. | 66,673 | 3,474,330 | ||||||
Biotechnology–1.41% | ||||||||
AMAG Pharmaceuticals, Inc.(b) | 72,264 | 4,990,552 | ||||||
Broadcasting–0.94% | ||||||||
Nexstar Broadcasting Group, Inc.–Class A | 59,728 | 3,344,768 | ||||||
Building Products–2.43% | ||||||||
Apogee Enterprises, Inc. | 92,100 | 4,848,144 | ||||||
Trex Co., Inc.(b) | 75,972 | 3,755,296 | ||||||
8,603,440 | ||||||||
Communications Equipment–1.59% | ||||||||
ARRIS Group Inc.(b) | 113,261 | 3,465,786 | ||||||
Finisar Corp.(b) | 120,378 | 2,151,155 | ||||||
5,616,941 | ||||||||
Construction & Engineering–2.08% | ||||||||
Dycom Industries, Inc.(b) | 86,568 | 5,094,527 | ||||||
Primoris Services Corp. | 114,762 | 2,272,287 | ||||||
7,366,814 | ||||||||
Construction Materials–0.85% | ||||||||
Eagle Materials Inc. | 39,308 | 3,000,380 | ||||||
Data Processing & Outsourced Services–2.05% | ||||||||
DST Systems, Inc. | 32,112 | 4,045,470 | ||||||
Jack Henry & Associates, Inc. | 49,797 | 3,221,866 | ||||||
7,267,336 | ||||||||
Diversified REIT’s–0.95% | ||||||||
Cousins Properties, Inc. | 324,900 | 3,372,462 |
Shares | Value | |||||||
Diversified Support Services–1.02% | ||||||||
Mobile Mini, Inc. | 85,547 | $ | 3,596,396 | |||||
Electrical Components & Equipment–1.22% | ||||||||
EnerSys | 61,715 | 4,337,947 | ||||||
Electronic Components–0.96% | ||||||||
Belden Inc. | 41,715 | 3,388,509 | ||||||
Environmental & Facilities Services–1.81% | ||||||||
Team, Inc.(b) | 73,150 | 2,944,288 | ||||||
Waste Connections, Inc. | 73,395 | 3,458,372 | ||||||
6,402,660 | ||||||||
Gas Utilities–0.51% | ||||||||
UGI Corp. | 52,617 | 1,812,656 | ||||||
Health Care Equipment–3.75% | ||||||||
Analogic Corp. | 40,684 | 3,209,967 | ||||||
Globus Medical, Inc.–Class A(b) | 135,819 | 3,486,474 | ||||||
Hill-Rom Holdings, Inc. | 72,663 | 3,947,781 | ||||||
Wright Medical Group, Inc.(b) | 100,392 | 2,636,294 | ||||||
13,280,516 | ||||||||
Health Care Facilities–2.13% | ||||||||
Community Health Systems Inc.(b) | 54,816 | 3,451,764 | ||||||
LifePoint Health, Inc.(b) | 47,031 | 4,089,345 | ||||||
7,541,109 | ||||||||
Health Care Services–1.05% | ||||||||
Team Health Holdings, Inc.(b) | 56,910 | 3,717,930 | ||||||
Health Care Supplies–1.64% | ||||||||
Alere, Inc.(b) | 93,963 | 4,956,548 | ||||||
Haemonetics Corp.(b) | 20,407 | 844,034 | ||||||
5,800,582 | ||||||||
Health Care Technology–0.72% | ||||||||
HMS Holdings Corp.(b) | 148,989 | 2,558,141 | ||||||
Home Furnishings–0.84% | ||||||||
La-Z-Boy Inc. | 112,481 | 2,962,750 | ||||||
Homebuilding–0.88% | ||||||||
Beazer Homes USA, Inc.(b) | 156,002 | 3,112,240 | ||||||
Homefurnishing Retail–0.40% | ||||||||
Pier 1 Imports, Inc. | 113,098 | 1,428,428 | ||||||
Hotel and Resort REIT’s–0.82% | ||||||||
LaSalle Hotel Properties | 81,488 | 2,889,564 | ||||||
Household Appliances–1.11% | ||||||||
Helen of Troy Ltd.(b) | 40,215 | 3,920,560 | ||||||
Industrial Machinery–2.59% | ||||||||
Albany International Corp.–Class A | 91,232 | 3,631,034 | ||||||
Rexnord Corp.(b) | 109,999 | 2,630,076 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Small Cap Equity Fund
Shares | Value | |||||||
Industrial Machinery–(continued) | ||||||||
Watts Water Technologies, Inc.–Class A | 55,800 | $ | 2,893,230 | |||||
9,154,340 | ||||||||
Internet Software & Services–0.32% | ||||||||
SciQuest, Inc.(b) | 75,776 | 1,122,243 | ||||||
Investment Banking & Brokerage–2.27% | ||||||||
E*TRADE Financial Corp.(b) | 163,197 | 4,887,750 | ||||||
Evercore Partners Inc.–Class A | 58,657 | 3,165,132 | ||||||
8,052,882 | ||||||||
IT Consulting & Other Services–1.96% | ||||||||
CACI International Inc.–Class A(b) | 40,456 | 3,272,486 | ||||||
Luxoft Holding, Inc.(b) | 65,110 | 3,681,970 | ||||||
6,954,456 | ||||||||
Leisure Facilities–0.56% | ||||||||
Vail Resorts, Inc. | 18,181 | 1,985,365 | ||||||
Life & Health Insurance–1.02% | ||||||||
StanCorp Financial Group, Inc. | 47,593 | 3,598,507 | ||||||
Life Sciences Tools & Services–3.02% | ||||||||
Affymetrix, Inc.(b) | 370,551 | 4,046,417 | ||||||
Bio-Techne Corp. | 35,522 | 3,497,852 | ||||||
Charles River Laboratories International, Inc.(b) | 44,851 | 3,154,819 | ||||||
10,699,088 | ||||||||
Multi-Line Insurance–1.01% | ||||||||
American Financial Group, Inc. | 55,165 | 3,587,932 | ||||||
Office Services & Supplies–0.81% | ||||||||
Pitney Bowes Inc. | 138,268 | 2,877,357 | ||||||
Oil & Gas Drilling–0.73% | ||||||||
Precision Drilling Corp. (Canada) | 382,198 | 2,568,371 | ||||||
Oil & Gas Equipment & Services–1.35% | ||||||||
Forum Energy Technologies Inc.(b) | 161,662 | 3,278,505 | ||||||
Helix Energy Solutions Group Inc.(b) | 119,817 | 1,513,289 | ||||||
4,791,794 | ||||||||
Oil & Gas Exploration & Production–0.48% | ||||||||
Ultra Petroleum Corp.(b)(c) | 134,813 | 1,687,859 | ||||||
Oil & Gas Storage & Transportation–1.97% | ||||||||
Scorpio Tankers Inc. (Monaco) | 348,587 | 3,517,243 | ||||||
SemGroup Corp.–Class A | 43,697 | 3,473,037 | ||||||
6,990,280 | ||||||||
Packaged Foods & Meats–1.88% | ||||||||
Pinnacle Foods Inc. | 90,384 | 4,116,087 | ||||||
TreeHouse Foods, Inc.(b) | 31,456 | 2,548,880 | ||||||
6,664,967 | ||||||||
Paper Packaging–1.43% | ||||||||
Graphic Packaging Holding Co. | 362,434 | 5,048,706 |
Shares | Value | |||||||
Pharmaceuticals–1.87% | ||||||||
Impax Laboratories, Inc.(b) | 94,498 | $ | 4,339,348 | |||||
Phibro Animal Health Corp.–Class A | 58,564 | 2,280,482 | ||||||
6,619,830 | ||||||||
Real Estate Services–2.14% | ||||||||
Jones Lang LaSalle Inc. | 25,810 | 4,413,510 | ||||||
Kennedy-Wilson Holdings Inc. | 128,044 | 3,148,602 | ||||||
7,562,112 | ||||||||
Regional Banks–9.60% | ||||||||
Bank of the Ozarks, Inc. | 85,924 | 3,931,023 | ||||||
BankUnited, Inc. | 100,923 | 3,626,163 | ||||||
East West Bancorp, Inc. | 91,508 | 4,101,389 | ||||||
Glacier Bancorp, Inc. | 123,342 | 3,628,722 | ||||||
IBERIABANK Corp. | 49,056 | 3,347,091 | ||||||
PacWest Bancorp | 70,717 | 3,306,727 | ||||||
PrivateBancorp, Inc. | 96,273 | 3,833,591 | ||||||
Synovus Financial Corp. | 119,632 | 3,687,058 | ||||||
Western Alliance Bancorp(b) | 134,245 | 4,532,111 | ||||||
33,993,875 | ||||||||
Restaurants–5.20% | ||||||||
Brinker International, Inc. | 60,079 | 3,463,554 | ||||||
Cracker Barrel Old Country Store, Inc.(c) | 24,526 | 3,658,298 | ||||||
Papa John’s International, Inc. | 52,093 | 3,938,752 | ||||||
Red Robin Gourmet Burgers Inc.(b) | 44,118 | 3,786,207 | ||||||
Sonic Corp. | 123,794 | 3,565,267 | ||||||
18,412,078 | ||||||||
Semiconductor Equipment–1.01% | ||||||||
Entegris Inc.(b) | 244,394 | 3,560,821 | ||||||
Semiconductors–3.26% | ||||||||
Fairchild Semiconductor International, Inc.(b) | 165,478 | 2,876,007 | ||||||
Intersil Corp.–Class A | 222,953 | 2,789,142 | ||||||
Microsemi Corp.(b) | 99,141 | 3,464,978 | ||||||
Power Integrations, Inc. | 53,593 | 2,421,332 | ||||||
11,551,459 | ||||||||
Specialized REIT’s–0.76% | ||||||||
Geo Group Inc. (The) | 78,885 | 2,694,712 | ||||||
Specialty Chemicals–3.16% | ||||||||
Minerals Technologies Inc. | 56,640 | 3,858,883 | ||||||
PolyOne Corp. | 88,725 | 3,475,358 | ||||||
Sensient Technologies Corp. | 56,509 | 3,861,825 | ||||||
11,196,066 | ||||||||
Specialty Stores–1.82% | ||||||||
GNC Holdings, Inc.–Class A | 56,933 | 2,532,380 | ||||||
Michaels Cos., Inc. (The)(b) | 145,332 | 3,910,884 | ||||||
6,443,264 | ||||||||
Steel–0.90% | ||||||||
Haynes International, Inc. | 64,660 | 3,189,031 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Small Cap Equity Fund
Shares | Value | |||||||
Technology Distributors–0.86% | ||||||||
Tech Data Corp.(b) | 53,102 | $ | 3,056,551 | |||||
Technology Hardware, Storage & Peripherals–1.03% | ||||||||
Cray, Inc.(b) | 123,528 | 3,645,311 | ||||||
Trucking–3.61% | ||||||||
Celadon Group, Inc. | 134,801 | 2,787,685 | ||||||
Heartland Express, Inc. | 138,614 | 2,804,161 | ||||||
Landstar System, Inc. | 49,362 | 3,300,837 | ||||||
Old Dominion Freight Line, Inc.(b) | 56,529 | 3,878,172 | ||||||
12,770,855 | ||||||||
Total Common Stocks & Other Equity Interests |
| 346,923,980 | ||||||
Money Market Funds–2.66% |
| |||||||
Liquid Assets Portfolio–Institutional Class(d) | 4,712,625 | 4,712,625 | ||||||
Premier Portfolio–Institutional Class(d) | 4,712,625 | 4,712,625 | ||||||
Total Money Market Funds |
| 9,425,250 | ||||||
TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–100.65% |
| 356,349,230 |
Shares | Value | |||||||
Investments Purchased with Cash Collateral from Securities on Loan |
| |||||||
Money Market Funds–1.15% | ||||||||
Liquid Assets Portfolio–Institutional Class | 4,058,790 | $ | 4,058,790 | |||||
TOTAL INVESTMENTS–101.80% |
| 360,408,020 | ||||||
OTHER ASSETS LESS LIABILITIES–(1.80)% |
| (6,357,170 | ) | |||||
NET ASSETS–100.00% |
| $ | 354,050,850 |
Investment Abbreviations:
REIT | – Real Estate Investment Trust |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Non-income producing security. |
(c) | All or a portion of this security was out on loan at June 30, 2015. |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. |
(e) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrower’s return of the securities loaned. See Note 1I. The following table presents the Fund’s gross and net amount of assets available for offset by the Fund as of June 30, 2015. |
Counterparty | Gross Value | Cash Received for Securities Loaned* | Net Amount | |||||||||
Brown Brothers Harriman | $ | 3,995,400 | $ | (3,995,400 | ) | $ | — |
* | Amount does not include excess collateral received. |
Portfolio Composition
By sector, based on Net Assets
as of June 30, 2015
Financials | 19.8 | % | ||
Industrials | 17.5 | |||
Information Technology | 17.1 | |||
Health Care | 15.6 | |||
Consumer Discretionary | 13.9 | |||
Materials | 6.3 | |||
Energy | 4.5 | |||
Consumer Staples | 1.9 | |||
Telecommunication Services | 0.9 | |||
Utilities | 0.5 | |||
Money Market Funds Plus Other Assets Less Liabilities | 2.0 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Small Cap Equity Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $271,939,807)* | $ | 346,923,980 | ||
Investments in affiliated money market funds, at value and cost | 13,484,040 | |||
Total investments, at value (Cost $285,423,847) | 360,408,020 | |||
Receivable for: | ||||
Investments sold | 844,512 | |||
Fund shares sold | 56,084 | |||
Dividends | 193,384 | |||
Investment for trustee deferred compensation and retirement plans | 72,414 | |||
Total assets | 361,574,414 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 2,624,493 | |||
Fund shares reacquired | 413,319 | |||
Collateral upon return of securities loaned | 4,058,790 | |||
Accrued fees to affiliates | 312,146 | |||
Accrued trustees’ and officers’ fees and benefits | 5,033 | |||
Accrued other operating expenses | 29,352 | |||
Trustee deferred compensation and retirement plans | 80,431 | |||
Total liabilities | 7,523,564 | |||
Net assets applicable to shares outstanding | $ | 354,050,850 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 195,489,735 | ||
Undistributed net investment income (loss) | (428,535 | ) | ||
Undistributed net realized gain | 84,005,477 | |||
Net unrealized appreciation | 74,984,173 | |||
$ | 354,050,850 | |||
Net Assets: |
| |||
Series I | $ | 197,594,819 | ||
Series II | $ | 156,456,031 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 7,906,690 | |||
Series II | 6,449,771 | |||
Series I: | ||||
Net asset value per share | $ | 24.99 | ||
Series II: | ||||
Net asset value per share | $ | 24.26 |
* | At June 30, 2015, securities with an aggregate value of $3,995,400 were on loan to brokers. |
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $2,221) | $ | 1,499,127 | ||
Dividends from affiliated money market funds (includes securities lending income of $125,455) | 127,037 | |||
Total investment income | 1,626,164 | |||
Expenses: | ||||
Advisory fees | 1,285,513 | |||
Administrative services fees | 462,682 | |||
Custodian fees | 6,871 | |||
Distribution fees — Series II | 186,379 | |||
Transfer agent fees | 14,158 | |||
Trustees’ and officers’ fees and benefits | 10,704 | |||
Other | 16,453 | |||
Total expenses | 1,982,760 | |||
Less: Fees waived | (3,564 | ) | ||
Net expenses | 1,979,196 | |||
Net investment income (loss) | (353,032 | ) | ||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from investment securities (includes net gains from securities sold to affiliates of $1,199,299) | 19,955,009 | |||
Change in net unrealized appreciation (depreciation) of investment securities | (598,044 | ) | ||
Net realized and unrealized gain | 19,356,965 | |||
Net increase in net assets resulting from operations | $ | 19,003,933 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Small Cap Equity Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: | ||||||||
Net investment income (loss) | $ | (353,032 | ) | $ | (956,866 | ) | ||
Net realized gain | 19,955,009 | 64,529,783 | ||||||
Change in net unrealized appreciation (depreciation) | (598,044 | ) | (57,506,374 | ) | ||||
Net increase in net assets resulting from operations | 19,003,933 | 6,066,543 | ||||||
Distributions to shareholders from net realized gains: | ||||||||
Series l | — | (18,790,735 | ) | |||||
Series ll | — | (12,734,891 | ) | |||||
Total distributions from net realized gains | — | (31,525,626 | ) | |||||
Share transactions–net: | ||||||||
Series l | (17,334,752 | ) | (42,863,057 | ) | ||||
Series ll | 2,913,159 | 21,003,451 | ||||||
Net increase (decrease) in net assets resulting from share transactions | (14,421,593 | ) | (21,859,606 | ) | ||||
Net increase (decrease) in net assets | 4,582,340 | (47,318,689 | ) | |||||
Net assets: | ||||||||
Beginning of period | 349,468,510 | 396,787,199 | ||||||
End of period (includes undistributed net investment income (loss) of $(428,535) and $(75,503), respectively) | $ | 354,050,850 | $ | 349,468,510 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. Small Cap Equity Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is long-term growth of capital.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual
Invesco V.I. Small Cap Equity Fund
trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
Invesco V.I. Small Cap Equity Fund
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Securities Lending — The Fund may lend portfolio securities having a market value up to one-third of the Fund’s total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. It is the Fund’s policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if, and to the extent that, the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower failed to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliated money market funds on the Statement of Operations. The aggregate value of securities out on loan, if any, is shown as a footnote on the Statement of Assets and Liabilities. |
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||||
First $250 million | 0 | .745% | ||||
Next $250 million | 0 | .73% | ||||
Next $500 million | 0 | .715% | ||||
Next $1.5 billion | 0 | .70% | ||||
Next $2.5 billion | 0 | .685% | ||||
Next $2.5 billion | 0 | .67% | ||||
Next $2.5 billion | 0 | .655% | ||||
Over $10 billion | 0 | .64% |
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.74 %.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2016, to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2016. The fee waiver agreement cannot be terminated during its term. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash (excluding investments of cash collateral from securities lending) in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $3,564.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees
Invesco V.I. Small Cap Equity Fund
paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $42,396 for accounting and fund administrative services and reimbursed $420,286 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
As of June 30, 2015, all of the securities in this Fund were valued based on Level 1 inputs (see the Schedule of Investments for security categories). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
NOTE 4—Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the six months ended June 30, 2015, the Fund engaged in securities purchases of $747,536 and securities sales of $6,546,229, which resulted in net realized gains of $1,199,299.
NOTE 5—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
Invesco V.I. Small Cap Equity Fund
NOTE 7—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund did not have a capital loss carryforward as of December 31, 2014.
NOTE 8—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $61,976,173 and $79,792,237, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 88,559,432 | ||
Aggregate unrealized (depreciation) of investment securities | (13,929,900 | ) | ||
Net unrealized appreciation of investment securities | $ | 74,629,532 |
Cost of investments for tax purposes is $285,778,488.
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 502,859 | $ | 12,333,128 | 1,165,408 | $ | 28,150,006 | ||||||||||
Series II | 609,901 | 14,502,995 | 1,811,699 | 42,473,210 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 855,680 | 18,790,735 | ||||||||||||
Series II | — | — | 596,203 | 12,734,891 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (1,225,143 | ) | (29,667,880 | ) | (3,700,234 | ) | (89,803,798 | ) | ||||||||
Series II | (494,138 | ) | (11,589,836 | ) | (1,486,845 | ) | (34,204,650 | ) | ||||||||
Net increase (decrease) in share activity | (606,521 | ) | $ | (14,421,593 | ) | (758,089 | ) | $ | (21,859,606 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 61% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
Invesco V.I. Small Cap Equity Fund
NOTE 10—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income (loss)(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Distributions from net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income (loss) to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Series I |
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Six months ended 06/30/15 | $ | 23.64 | $ | (0.01 | ) | $ | 1.36 | $ | 1.35 | �� | $ | — | $ | — | $ | — | $ | 24.99 | 5.71 | % | $ | 197,595 | 1.04 | %(d) | 1.04 | %(d) | (0.10 | )%(d) | 18 | % | ||||||||||||||||||||||||||
Year ended 12/31/14 | 25.44 | (0.04 | ) | 0.47 | 0.43 | — | (2.23 | ) | (2.23 | ) | 23.64 | 2.36 | 203,963 | 1.05 | 1.05 | (0.17 | ) | 45 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 18.69 | (0.04 | ) | 7.02 | 6.98 | (0.00 | ) | (0.23 | ) | (0.23 | ) | 25.44 | 37.47 | 262,261 | 1.05 | 1.05 | (0.17 | ) | 35 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 16.41 | 0.01 | 2.27 | 2.28 | — | — | — | 18.69 | 13.89 | 205,566 | 1.06 | 1.06 | 0.05 | 36 | ||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 16.53 | (0.05 | ) | (0.07 | ) | (0.12 | ) | — | — | — | 16.41 | (0.73 | ) | 217,287 | 1.06 | 1.06 | (0.27 | ) | 61 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 12.86 | (0.02 | ) | 3.69 | 3.67 | — | — | — | 16.53 | 28.54 | 220,925 | 1.07 | 1.07 | (0.11 | ) | 46 | ||||||||||||||||||||||||||||||||||||||||
Series II |
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Six months ended 06/30/15 | 22.97 | (0.04 | ) | 1.33 | 1.29 | — | — | — | 24.26 | 5.62 | 156,456 | 1.29 | (d) | 1.29 | (d) | (0.35 | )(d) | 18 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 24.85 | (0.10 | ) | 0.45 | 0.35 | — | (2.23 | ) | (2.23 | ) | 22.97 | 2.08 | 145,505 | 1.30 | 1.30 | (0.42 | ) | 45 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 18.31 | (0.09 | ) | 6.86 | 6.77 | — | (0.23 | ) | (0.23 | ) | 24.85 | 37.08 | 134,526 | 1.30 | 1.30 | (0.42 | ) | 35 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 16.11 | (0.03 | ) | 2.23 | 2.20 | — | — | — | 18.31 | 13.66 | 83,096 | 1.31 | 1.31 | (0.20 | ) | 36 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 16.27 | (0.09 | ) | (0.07 | ) | (0.16 | ) | — | — | — | 16.11 | (0.98 | ) | 54,691 | 1.31 | 1.31 | (0.52 | ) | 61 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 12.69 | (0.05 | ) | 3.63 | 3.58 | — | — | — | 16.27 | 28.21 | 33,670 | 1.32 | 1.32 | (0.36 | ) | 46 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $199,639 and $150,339 for Series I and Series II shares, respectively. |
Invesco V.I. Small Cap Equity Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,057.10 | $ | 5.30 | $ | 1,019.64 | $ | 5.21 | 1.04 | % | ||||||||||||
Series II | 1,000.00 | 1,056.20 | 6.58 | 1,018.40 | 6.46 | 1.29 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. Small Cap Equity Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. Small Cap Equity Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ investment
process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Underlying Fund Small-Cap Core Index. The Board noted that performance of Series I shares of the Fund was in the fifth quintile of its performance universe for the one and three year periods and the third quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Series I shares of the Fund was
Invesco V.I. Small Cap Equity Fund
below the performance of the Index for the one and three year periods and above the performance of the Index for the five year period. Invesco Advisers noted that the larger capitalization and quality orientation of the Fund had performed as expected in the volatile, low quality market environment in 2009 and subsequent periods. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series I shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was above the rate of one such mutual fund. The Board also noted how the Fund’s rate compared to the effective sub-adviser fee rate of three mutual funds sub-advised by Invesco Advisers.
The Board also considered the fees charged by Invesco Advisers and the Affiliated Sub-Advisers to other client accounts with investment strategies comparable to those of the Fund. The Board noted that Invesco Advisers or the Affiliated Sub-Advisers may charge lower fees to large institutional clients. Invesco Advisers reviewed with the Board the significantly greater scope of services it provides to the Invesco Funds relative to certain other types of client accounts. These additional services include provision of administrative services, officers and office space, oversight of service providers, preparation of annual registration statement updates and financial information and regulatory compliance under the Investment Company Act of 1940, as amended.
Invesco Advisers also reviewed generally the higher frequency of shareholder purchases and redemptions in the Invesco Funds relative to the
flow of assets for other client accounts. Invesco Advisers advised the Board that advance notice of redemptions is often provided to Invesco Advisers by institutional clients. The Board did note that sub-advisory fee rates charged by the Affiliated Sub-Advisers to manage the Invesco Funds and to manage other client accounts tended to be more comparable, reflecting a similar scope of services. The information received by the Board demonstrated that the aggregate services provided to the Invesco Funds were sufficiently different from those provided to institutional clients to support the difference in fees.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding
fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered that it receives periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to, among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
Invesco V.I. Small Cap Equity Fund
| ||||
Semiannual Report to Shareholders
| June 30, 2015
| |||
| ||||
Invesco V.I. Technology Fund | ||||
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
Invesco Distributors, Inc. I-VITEC-SAR-1
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance |
Performance summary
Fund vs. Indexes
Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower.
Series I Shares | 3.70 | % | |||
Series II Shares | 3.50 | ||||
S&P 500 Indexq (Broad Market Index) | 1.23 | ||||
Bank of America Merrill Lynch 100 Technology Index (price only)n (Style-Specific Index) | 2.53 | ||||
Lipper VUF Science & Technology Funds Classification Average¿ (Peer Group) | 4.74 | ||||
Source(s): qFactSet Research Systems Inc.; nBloomberg LP; ¿Lipper Inc. |
|
The S&P 500® Index is an unmanaged index considered representative of the US stock market.
The Bank of America Merrill Lynch 100 Technology Index (price only) is an unmanaged, price-only equal-dollar-weighted index of 100 stocks designed to measure the performance of a cross section of large, actively traded technology stocks and American Depositary Receipts.
The Lipper VUF Science & Technology Funds Classification Average represents an average of all variable insurance underlying funds in the Lipper Science & Technology Funds classification.
The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es).
A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
Average Annual Total Returns
As of 6/30/15
Series I Shares | |||||
Inception (5/20/97) | 5.09 | % | |||
10 Years | 7.67 | ||||
5 Years | 15.02 | ||||
1 Year | 8.35 | ||||
Series II Shares | |||||
Inception (4/30/04) | 7.01 | % | |||
10 Years | 7.38 | ||||
5 Years | 14.73 | ||||
1 Year | 8.02 |
The performance of the Fund’s Series I and Series II share classes will differ primarily due to different class expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 1.16% and 1.41%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. Technology Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
Invesco V.I. Technology Fund
Schedule of Investments(a)
June 30, 2015
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–98.36% |
| |||||||
Application Software–4.85% | ||||||||
Autodesk, Inc.(b) | 9,221 | $ | 461,742 | |||||
Monitise PLC (United Kingdom)(b)(c) | 2,906,771 | 490,996 | ||||||
salesforce.com, inc.(b) | 63,832 | 4,444,622 | ||||||
5,397,360 | ||||||||
Biotechnology–15.96% | ||||||||
Alexion Pharmaceuticals, Inc.(b) | 6,075 | 1,098,178 | ||||||
Alkermes PLC(b) | 62,904 | 4,047,243 | ||||||
Amgen Inc. | 11,398 | 1,749,821 | ||||||
Biogen Inc.(b) | 5,127 | 2,071,001 | ||||||
Celgene Corp.(b) | 40,102 | 4,641,205 | ||||||
Gilead Sciences, Inc. | 27,699 | 3,242,999 | ||||||
Vertex Pharmaceuticals Inc.(b) | 7,490 | 924,865 | ||||||
17,775,312 | ||||||||
Broadcasting–0.92% | ||||||||
CBS Corp.–Class B | 18,377 | 1,019,923 | ||||||
Cable & Satellite–3.41% | ||||||||
DISH Network Corp.–Class A(b) | 47,655 | 3,226,720 | ||||||
Time Warner Cable Inc. | 3,197 | 569,610 | ||||||
3,796,330 | ||||||||
Communications Equipment–4.10% | ||||||||
Cisco Systems, Inc. | 119,455 | 3,280,234 | ||||||
Palo Alto Networks, Inc.(b) | 7,334 | 1,281,250 | ||||||
4,561,484 | ||||||||
Consumer Electronics–4.11% | ||||||||
Harman International Industries, Inc. | 27,078 | 3,220,657 | ||||||
Sony Corp. (Japan) | 47,700 | 1,353,431 | ||||||
4,574,088 | ||||||||
Data Processing & Outsourced Services–5.51% | ||||||||
MasterCard, Inc.–Class A | 39,834 | 3,723,682 | ||||||
Visa Inc.–Class A | 36,004 | 2,417,669 | ||||||
6,141,351 | ||||||||
Fertilizers & Agricultural Chemicals–0.43% | ||||||||
Monsanto Co. | 4,450 | 474,326 | ||||||
Health Care Equipment–1.49% | ||||||||
Medtronic PLC | 22,441 | 1,662,878 | ||||||
Internet Retail–6.55% | ||||||||
Amazon.com, Inc.(b) | 8,918 | 3,871,215 | ||||||
Netflix Inc.(b) | 2,288 | 1,503,079 | ||||||
Priceline Group Inc. (The)(b) | 1,671 | 1,923,939 | ||||||
7,298,233 |
Shares | Value | |||||||
Internet Software & Services–14.38% | ||||||||
Alibaba Group Holding Ltd.–ADR (China)(b) | 26,172 | $ | 2,153,170 | |||||
Facebook Inc.–Class A(b) | 61,134 | 5,243,158 | ||||||
Google Inc.–Class A(b) | 8,618 | 4,654,065 | ||||||
Google Inc.–Class C(b) | 3,183 | 1,656,783 | ||||||
LinkedIn Corp.–Class A(b) | 8,363 | 1,728,047 | ||||||
Twitter, Inc.(b) | 16,045 | 581,150 | ||||||
16,016,373 | ||||||||
Investment Banking & Brokerage–1.24% | ||||||||
Charles Schwab Corp. (The) | 42,302 | 1,381,160 | ||||||
Life Sciences Tools & Services–1.29% | ||||||||
Thermo Fisher Scientific, Inc. | 11,091 | 1,439,168 | ||||||
Pharmaceuticals–5.55% | ||||||||
Allergan PLC(b) | 14,156 | 4,295,780 | ||||||
Bristol-Myers Squibb Co. | 28,423 | 1,891,266 | ||||||
6,187,046 | ||||||||
Semiconductor Equipment–1.01% | ||||||||
Lam Research Corp. | 13,844 | 1,126,209 | ||||||
Semiconductors–10.20% | ||||||||
Avago Technologies Ltd. (Singapore) | 23,239 | 3,089,160 | ||||||
NXP Semiconductors N.V. (Netherlands)(b) | 39,522 | 3,881,061 | ||||||
ON Semiconductor Corp.(b) | 135,267 | 1,581,271 | ||||||
Skyworks Solutions, Inc. | 27,022 | 2,812,990 | ||||||
11,364,482 | ||||||||
Systems Software–6.54% | ||||||||
Check Point Software Technologies Ltd. (Israel)(b) | 35,281 | 2,806,604 | ||||||
Oracle Corp. | 27,807 | 1,120,622 | ||||||
ServiceNow, Inc.(b) | 45,255 | 3,362,899 | ||||||
7,290,125 | ||||||||
Technology Hardware, Storage & Peripherals–9.50% | ||||||||
Apple Inc. | 84,335 | 10,577,717 | ||||||
Wireless Telecommunication Services–1.32% | ||||||||
Sprint Corp.(b) | 322,157 | 1,469,036 | ||||||
Total Common Stocks & Other Equity Interests |
| 109,552,601 | ||||||
Money Market Funds–1.84% |
| |||||||
Liquid Assets Portfolio–Institutional Class(d) | 1,023,119 | 1,023,119 | ||||||
Premier Portfolio–Institutional Class(d) | 1,023,119 | 1,023,119 | ||||||
Total Money Market Funds |
| 2,046,238 | ||||||
TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–100.20% |
| 111,598,839 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Technology Fund
Shares | Value | |||||||
Investments Purchased with Cash Collateral from Securities on Loan |
| |||||||
Money Market Funds–0.39% |
| |||||||
Liquid Assets Portfolio–Institutional Class | 436,016 | $ | 436,016 | |||||
TOTAL INVESTMENTS–100.59% |
| 112,034,855 | ||||||
OTHER ASSETS LESS LIABILITIES–(0.59)% |
| (653,630 | ) | |||||
NET ASSETS–100.00% |
| $ | 111,381,225 |
Investment Abbreviations:
ADR | – American Depositary Receipt |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Non-income producing security. |
(c) | All or a portion of this security was out on loan at June 30, 2015. |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. |
(e) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrower’s return of the securities loaned. See Note 1I. The following table presents the Fund’s gross and net amount of assets available for offset by the Fund as of June 30, 2015. |
Counterparty | Gross Amount of Securities on Loan at Value | Cash Collateral Received for Securities Loaned* | Net Amount | |||||||||
State Street Bank and Trust Co. | $ | 368,740 | $ | (368,740 | ) | $ | — |
* | Amount does not include excess collateral received. |
Portfolio Composition
By sector, based on Net Assets
as of June 30, 2015
Information Technology | 56.1 | % | ||
Health Care | 24.3 | |||
Consumer Discretionary | 15.0 | |||
Telecommunication Services | 1.3 | |||
Financials | 1.2 | |||
Materials | 0.4 | |||
Money Market Funds Plus Other Assets Less Liabilities | 1.7 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Technology Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $79,490,903)* | $ | 109,552,601 | ||
Investments in affiliated money market funds, at value and cost | 2,482,254 | |||
Total investments, at value (Cost $81,973,157) | 112,034,855 | |||
Foreign currencies, at value (Cost $1,428) | 1,486 | |||
Receivable for: | ||||
Fund shares sold | 8,193 | |||
Dividends | 17,626 | |||
Investment for trustee deferred compensation and retirement plans | 64,957 | |||
Total assets | 112,127,117 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares reacquired | 128,197 | |||
Collateral upon return of securities loaned | 436,016 | |||
Accrued fees to affiliates | 76,245 | |||
Accrued trustees’ and officers’ fees and benefits | 5,599 | |||
Accrued other operating expenses | 29,310 | |||
Trustee deferred compensation and retirement plans | 70,525 | |||
Total liabilities | 745,892 | |||
Net assets applicable to shares outstanding | $ | 111,381,225 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 64,494,815 | ||
Undistributed net investment income (loss) | (398,094 | ) | ||
Undistributed net realized gain | 17,222,748 | |||
Net unrealized appreciation | 30,061,756 | |||
$ | 111,381,225 | |||
Net Assets: |
| |||
Series I | $ | 104,255,762 | ||
Series II | $ | 7,125,463 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 5,091,727 | |||
Series II | 359,800 | |||
Series I: | ||||
Net asset value per share | $ | 20.48 | ||
Series II: | ||||
Net asset value per share | $ | 19.80 |
* | At June 30, 2015, securities with an aggregate value of $368,740 were on loan to brokers. |
Investment income: |
| |||
Dividends | $ | 296,529 | ||
Dividends from affiliated money market funds (includes securities lending income of $16,156) | 17,012 | |||
Total investment income | 313,541 | |||
Expenses: | ||||
Advisory fees | 419,466 | |||
Administrative services fees | 162,227 | |||
Custodian fees | 5,392 | |||
Distribution fees — Series II | 7,456 | |||
Transfer agent fees | 13,591 | |||
Trustees’ and officers’ fees and benefits | 12,310 | |||
Other | 28,089 | |||
Total expenses | 648,531 | |||
Less: Fees waived | (2,305 | ) | ||
Net expenses | 646,226 | |||
Net investment income (loss) | (332,685 | ) | ||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from: | ||||
Investment securities | 6,157,308 | |||
Foreign currencies | 335 | |||
6,157,643 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (1,848,302 | ) | ||
Foreign currencies | 79 | |||
(1,848,223 | ) | |||
Net realized and unrealized gain | 4,309,420 | |||
Net increase in net assets resulting from operations | $ | 3,976,735 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Technology Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: |
| |||||||
Net investment income (loss) | $ | (332,685 | ) | $ | (704,068 | ) | ||
Net realized gain | 6,157,643 | 9,611,503 | ||||||
Change in net unrealized appreciation (depreciation) | (1,848,223 | ) | 2,192,830 | |||||
Net increase in net assets resulting from operations | 3,976,735 | 11,100,265 | ||||||
Distributions to shareholders from net realized gains: | ||||||||
Series l | — | (8,529,977 | ) | |||||
Series ll | — | (353,110 | ) | |||||
Total distributions from net realized gains | — | (8,883,087 | ) | |||||
Share transactions–net: | ||||||||
Series l | (4,112,524 | ) | (755,417 | ) | ||||
Series ll | 2,185,806 | 1,518,646 | ||||||
Net increase (decrease) in net assets resulting from share transactions | (1,926,718 | ) | 763,229 | |||||
Net increase in net assets | 2,050,017 | 2,980,407 | ||||||
Net assets: | ||||||||
Beginning of period | 109,331,208 | 106,350,801 | ||||||
End of period (includes undistributed net investment income (loss) of $(398,094) and $(65,409), respectively) | $ | 111,381,225 | $ | 109,331,208 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. Technology Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is long-term growth of capital.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual
Invesco V.I. Technology Fund
trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
Invesco V.I. Technology Fund
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Securities Lending — The Fund may lend portfolio securities having a market value up to one-third of the Fund’s total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. It is the Fund’s policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if, and to the extent that, the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower failed to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliated money market funds on the Statement of Operations. The aggregate value of securities out on loan, if any, is shown as a footnote on the Statement of Assets and Liabilities. |
J. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
K. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
L. | Other Risks — The Fund’s investments are concentrated in a comparatively narrow segment of the economy, which may make the Fund more volatile. |
Many products and services offered in technology-related industries are subject to rapid obsolescence, which may lower the value of the issuers in this sector.
Invesco V.I. Technology Fund
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $250 million | 0.75% | |||
Next $250 million | 0.74% | |||
Next $500 million | 0.73% | |||
Next $1.5 billion | 0.72% | |||
Next $2.5 billion | 0.71% | |||
Next $2.5 billion | 0.70% | |||
Next $2.5 billion | 0.69% | |||
Over $10 billion | 0.68% |
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.75%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2016, to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2016. The fee waiver agreement cannot be terminated during its term. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $2,305.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $24,795 for accounting and fund administrative services and reimbursed $137,432 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the six months ended June 30, 2015, the Fund incurred $1,542 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
Invesco V.I. Technology Fund
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 110,681,424 | $ | 1,353,431 | $ | — | $ | 112,034,855 |
NOTE 4—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 5—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 6—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund did not have a capital loss carryforward as of December 31, 2014.
Invesco V.I. Technology Fund
NOTE 7—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $41,685,216 and $43,814,729, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 34,302,483 | ||
Aggregate unrealized (depreciation) of investment securities | (4,408,222 | ) | ||
Net unrealized appreciation of investment securities | $ | 29,894,261 |
Cost of investments for tax purposes is $82,140,594.
NOTE 8—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 408,701 | $ | 8,427,010 | 661,326 | $ | 13,151,750 | ||||||||||
Series II | 113,464 | 2,250,948 | 100,308 | 1,917,074 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 450,844 | 8,529,977 | ||||||||||||
Series II | — | — | 19,264 | 353,110 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (610,751 | ) | (12,539,534 | ) | (1,131,140 | ) | (22,437,144 | ) | ||||||||
Series II | (3,314 | ) | (65,142 | ) | (39,211 | ) | (751,538 | ) | ||||||||
Net increase (decrease) in share activity | (91,900 | ) | $ | (1,926,718 | ) | 61,391 | $ | 763,229 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 65% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 9—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income(a) | Net gains on securities (both | Total from investment operations | Dividends from net investment income | Distributions from net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of expenses to average net assets with fee waivers and/or expenses absorbed | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income (loss) to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Series I |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 19.75 | $ | (0.06 | ) | $ | 0.79 | $ | 0.73 | $ | — | $ | — | $ | — | $ | 20.48 | 3.70 | % | $ | 104,256 | 1.15 | %(d) | 1.15 | %(d) | (0.58 | )%(d) | 38 | % | |||||||||||||||||||||||||||
Year ended 12/31/14 | 19.42 | (0.13 | ) | 2.20 | 2.07 | — | (1.74 | ) | (1.74 | ) | 19.75 | 11.05 | 104,556 | 1.16 | 1.16 | (0.65 | ) | 77 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 16.87 | (0.07 | ) | 4.19 | 4.12 | — | (1.57 | ) | (1.57 | ) | 19.42 | 25.14 | 103,151 | 1.17 | 1.17 | (0.40 | ) | 45 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 15.16 | (0.07 | ) | 1.78 | 1.71 | — | — | — | 16.87 | 11.28 | 95,371 | 1.16 | 1.16 | (0.42 | ) | 42 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 16.00 | (0.10 | ) | (0.71 | ) | (0.81 | ) | (0.03 | ) | — | (0.03 | ) | 15.16 | (5.05 | ) | 100,579 | 1.12 | 1.12 | (0.62 | ) | 41 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 13.19 | 0.02 | 2.79 | 2.81 | — | — | — | 16.00 | 21.30 | 128,304 | 1.14 | 1.14 | 0.18 | 43 | ||||||||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 19.13 | (0.08 | ) | 0.75 | 0.67 | — | — | — | 19.80 | 3.50 | 7,125 | 1.40 | (d) | 1.40 | (d) | (0.83 | )(d) | 38 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 18.90 | (0.17 | ) | 2.14 | 1.97 | — | (1.74 | ) | (1.74 | ) | 19.13 | 10.82 | 4,775 | 1.41 | 1.41 | (0.90 | ) | 77 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 16.50 | (0.12 | ) | 4.09 | 3.97 | — | (1.57 | ) | (1.57 | ) | 18.90 | 24.79 | 3,200 | 1.42 | 1.42 | (0.65 | ) | 45 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 14.86 | (0.11 | ) | 1.75 | 1.64 | — | — | — | 16.50 | 11.04 | 2,118 | 1.41 | 1.41 | (0.67 | ) | 42 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 15.71 | (0.14 | ) | (0.70 | ) | (0.84 | ) | (0.01 | ) | — | (0.01 | ) | 14.86 | (5.32 | ) | 1,613 | 1.37 | 1.37 | (0.87 | ) | 41 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 12.98 | (0.01 | ) | 2.74 | 2.73 | — | — | — | 15.71 | 21.03 | 1,198 | 1.39 | 1.39 | (0.07 | ) | 43 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are annualized based on average daily net assets (000’s omitted) of $106,770 and $6,015 for Series I and Series II shares, respectively. |
Invesco V.I. Technology Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,037.00 | $ | 5.81 | $ | 1,019.09 | $ | 5.76 | 1.15 | % | ||||||||||||
Series II | 1,000.00 | 1,035.00 | 7.06 | 1,017.85 | 7.00 | 1.40 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. Technology Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. Technology Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s consideration of Invesco Advisers’ investment
process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Underlying Fund Science & Technology Index. The Board noted that performance of Series I shares of the Fund was in the third quintile of its performance universe for the one year period and the fifth quintile for the three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Series I shares of the
Invesco V.I. Technology Fund
Fund was above the performance of the Index for the one year period and below the performance of the Index for the three and five year periods. Invesco Advisers advised the Board that the portfolio management team had recently changed and that the revised portfolio will be more concentrated with a focus on new growth areas in the health care and technology sectors. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series I shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was above the rates of two such mutual funds. The Board also noted how the Fund’s rate compared to the effective sub-adviser fee rate of one mutual fund sub-advised by Invesco Advisers.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco
Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered that it receives periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by
Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to, among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
Invesco V.I. Technology Fund
| ||||
Semiannual Report to Shareholders
| June 30, 2015 | |||
Invesco V.I. Value Opportunities Fund | ||||
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund’s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund’s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund’s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (“variable products”) that invest in the Fund. | ||
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. | ||
Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. | ||
Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd. | ||
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing. | ||
Invesco Distributors, Inc. VK-VIVOPP-SAR-1
| ||
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance |
Performance summary
Fund vs. Indexes
Cumulative total returns, 12/31/14 to 6/30/15, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower.
Series I Shares | 1.12 | % | |||
Series II Shares | 0.92 | ||||
S&P 500 Indexq (Broad Market Index) | 1.23 | ||||
S&P 1500 Value Indexq (Style-Specific Index)* | -0.25 | ||||
Russell 3000 Value Indexq (Former Style-Specific Index)* | -0.51 | ||||
Lipper VUF Multi-Cap Value Funds Indexn (Peer Group Index) | 1.13 |
Source(s): qFactSet Research Systems Inc.; nLipper Inc.
* | The Fund has elected to use the S&P 1500 Value Index as its style-specific index rather than the Russell 3000 Value Index because the S&P 1500 Value Index more closely reflects the performance of the types of securities in which the Fund invests. |
The S&P 500® Index is an unmanaged index considered representative of the US stock market.
The S&P 1500 Value Index combines the value stocks of the S&P 500 Index, S&P MidCap 400 Index and the S&P Small Cap 600 Index.
The Russell 3000® Value Index is an unmanaged index considered representative of US value stocks. The Russell 3000 Value Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
The Lipper VUF Multi-Cap Value Funds Index is an unmanaged index considered representative of multi-cap value variable insurance underlying funds tracked by Lipper.
The S&P MidCap 400® Index is an unmanaged index considered representative of mid-sized US companies.
The S&P Small Cap 600® Index is a market-value weighted index considered representative of small-cap US stocks.
The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es).
A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.
Average Annual Total Returns |
| ||||
As of 6/30/15 | |||||
Series I Shares | |||||
Inception (9/10/01) | 4.42 | % | |||
10 Years | 4.38 | ||||
5 Years | 14.66 | ||||
1 Year | 2.45 | ||||
Series II Shares | |||||
Inception (9/10/01) | 4.16 | % | |||
10 Years | 4.11 | ||||
5 Years | 14.36 | ||||
1 Year | 2.10 |
The performance of the Fund’s Series I and Series II share classes will differ primarily due to different class expenses.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 1.04% and 1.29%, respectively.1 The total annual Fund operating expense
ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 1.05% and 1.30%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Invesco V.I. Value Opportunities Fund, a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined
by the variable product issuers, will vary and will lower the total return.
The most recent month-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2017. See current prospectus for more information. |
Invesco V.I. Value Opportunities Fund |
Schedule of Investments(a)
June 30, 2015
(Unaudited)
Shares | Value | |||||||
Common Stocks–96.67% |
| |||||||
Advertising–2.06% | ||||||||
Omnicom Group Inc. | 50,815 | $ | 3,531,134 | |||||
Agricultural & Farm Machinery–1.32% | ||||||||
AGCO Corp. | 39,836 | 2,261,888 | ||||||
Asset Management & Custody Banks–1.62% | ||||||||
Affiliated Managers Group, Inc.(b) | 12,700 | 2,776,220 | ||||||
Auto Parts & Equipment–4.34% | ||||||||
Dana Holding Corp. | 166,500 | 3,426,570 | ||||||
Gentex Corp. | 243,700 | 4,001,554 | ||||||
7,428,124 | ||||||||
Building Products–2.09% | ||||||||
Owens Corning Inc. | 86,588 | 3,571,755 | ||||||
Construction & Engineering–4.54% | ||||||||
AECOM(b) | 234,704 | 7,764,008 | ||||||
Consumer Finance–2.81% | ||||||||
Synchrony Financial(b) | 145,832 | 4,802,248 | ||||||
Diversified Banks–12.41% | ||||||||
Bank of America Corp. | 279,302 | 4,753,720 | ||||||
Citigroup Inc. | 98,272 | 5,428,545 | ||||||
JPMorgan Chase & Co. | 96,760 | 6,556,458 | ||||||
Wells Fargo & Co. | 79,985 | 4,498,356 | ||||||
21,237,079 | ||||||||
Electronic Components–3.87% | ||||||||
Belden Inc. | 81,555 | 6,624,713 | ||||||
Electronic Equipment & Instruments–1.98% | ||||||||
FLIR Systems, Inc. | 109,800 | 3,384,036 | ||||||
Electronic Manufacturing Services–2.21% | ||||||||
Flextronics International Ltd.(b) | 334,000 | 3,777,540 | ||||||
Health Care Supplies–4.22% | ||||||||
Alere, Inc.(b) | 136,700 | 7,210,925 | ||||||
Hotels, Resorts & Cruise Lines–2.93% | ||||||||
Carnival Corp. | 101,500 | 5,013,085 | ||||||
Human Resource & Employment Services–2.09% | ||||||||
ManpowerGroup Inc. | 40,000 | 3,575,200 | ||||||
Industrial Conglomerates–0.58% | ||||||||
General Electric Co. | 37,427 | 994,435 | ||||||
Internet Software & Services–1.34% | ||||||||
Google Inc.–Class C(b) | 4,392 | 2,286,080 | ||||||
Investment Banking & Brokerage–10.23% | ||||||||
E*TRADE Financial Corp.(b) | 124,400 | 3,725,780 | ||||||
LPL Financial Holdings, Inc. | 183,500 | 8,530,915 | ||||||
TD Ameritrade Holding Corp. | 142,500 | 5,246,850 | ||||||
17,503,545 |
Shares | Value | |||||||
Life & Health Insurance–6.77% | ||||||||
Aflac, Inc. | 43,334 | $ | 2,695,375 | |||||
MetLife, Inc. | 70,417 | 3,942,648 | ||||||
Unum Group | 138,112 | 4,937,504 | ||||||
11,575,527 | ||||||||
Oil & Gas Equipment & Services–2.31% | ||||||||
Baker Hughes Inc. | 28,300 | 1,746,110 | ||||||
Weatherford International PLC(b) | 179,100 | 2,197,557 | ||||||
3,943,667 | ||||||||
Personal Products–3.73% | ||||||||
Nu Skin Enterprises, Inc.–Class A | 135,500 | 6,386,115 | ||||||
Pharmaceuticals–3.67% | ||||||||
Novartis AG (Switzerland) | 37,652 | 3,719,194 | ||||||
Pfizer Inc. | 76,476 | 2,564,240 | ||||||
6,283,434 | ||||||||
Property & Casualty Insurance–3.61% | ||||||||
AmTrust Financial Services, Inc. | 94,200 | 6,171,042 | ||||||
Regional Banks–5.75% | ||||||||
First Horizon National Corp. | 243,200 | 3,810,944 | ||||||
Zions Bancorp. | 190,039 | 6,030,888 | ||||||
9,841,832 | ||||||||
Semiconductor Equipment–1.98% | ||||||||
Lam Research Corp. | 41,600 | 3,384,160 | ||||||
Semiconductors–2.45% | ||||||||
ON Semiconductor Corp.(b) | 357,800 | 4,182,682 | ||||||
Steel–1.86% | ||||||||
Allegheny Technologies, Inc. | 105,600 | 3,189,120 | ||||||
Systems Software–2.12% | ||||||||
Oracle Corp. | 89,995 | 3,626,799 | ||||||
Technology Distributors–1.78% | ||||||||
CDW Corp. | 89,041 | 3,052,325 | ||||||
Total Common Stocks |
| 165,378,718 | ||||||
Money Market Funds–3.39% |
| |||||||
Liquid Assets Portfolio–Institutional Class(c) | 2,902,910 | 2,902,910 | ||||||
Premier Portfolio–Institutional Class(c) | 2,902,910 | 2,902,910 | ||||||
Total Money Market Funds | 5,805,820 | |||||||
TOTAL INVESTMENTS–100.06% | 171,184,538 | |||||||
OTHER ASSETS LESS LIABILITIES–(0.06)% |
| (104,988 | ) | |||||
NET ASSETS–100.00% | $ | 171,079,550 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Value Opportunities Fund
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Non-income producing security. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. |
Portfolio Composition
By sector, based on Net Assets
as of June 30, 2015
Financials | 43.2 | % | ||
Industrials | 14.5 | |||
Information Technology | 13.9 | |||
Consumer Discretionary | 9.3 | |||
Health Care | 7.9 | |||
Consumer Staples | 3.7 | |||
Energy | 2.3 | |||
Materials | 1.9 | |||
Money Market Funds Plus Other Assets Less Liabilities | 3.3 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Value Opportunities Fund
Statement of Assets and Liabilities
June 30, 2015
(Unaudited)
Statement of Operations
For the six months ended June 30, 2015
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $141,372,439) | $ | 165,378,718 | ||
Investments in affiliated money market funds, at value and cost | 5,805,820 | |||
Total investments, at value (Cost $147,178,259) | 171,184,538 | |||
Foreign currencies, at value (Cost $37,384) | 37,425 | |||
Receivable for: | ||||
Fund shares sold | 8,093 | |||
Dividends | 266,337 | |||
Investment for trustee deferred compensation and retirement plans | 105,969 | |||
Total assets | 171,602,362 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares reacquired | 218,535 | |||
Accrued fees to affiliates | 154,093 | |||
Accrued trustees’ and officers’ fees and benefits | 4,703 | |||
Accrued other operating expenses | 25,435 | |||
Trustee deferred compensation and retirement plans | 120,046 | |||
Total liabilities | 522,812 | |||
Net assets applicable to shares outstanding | $ | 171,079,550 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 100,034,863 | ||
Undistributed net investment income | 4,177,905 | |||
Undistributed net realized gain | 42,862,980 | |||
Net unrealized appreciation | 24,003,802 | |||
$ | 171,079,550 | |||
Net Assets: |
| |||
Series I | $ | 102,368,547 | ||
Series II | $ | 68,711,003 | ||
Shares outstanding, $0.001 par value per share, |
| |||
Series I | 10,292,419 | |||
Series II | 6,951,813 | |||
Series I: | ||||
Net asset value per share | $ | 9.95 | ||
Series II: | ||||
Net asset value per share | $ | 9.88 |
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $62,705) | $ | 1,625,094 | ||
Dividends from affiliated money market funds (includes securities lending income of $11,636) | 13,258 | |||
Total investment income | 1,638,352 | |||
Expenses: | ||||
Advisory fees | 619,877 | |||
Administrative services fees | 244,722 | |||
Custodian fees | 6,176 | |||
Distribution fees — Series II | 91,657 | |||
Transfer agent fees | 14,991 | |||
Trustees’ and officers’ fees and benefits | 11,671 | |||
Other | 25,967 | |||
Total expenses | 1,015,061 | |||
Less: Fees waived | (4,306 | ) | ||
Net expenses | 1,010,755 | |||
Net investment income | 627,597 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 32,890,124 | |||
Foreign currencies | (334 | ) | ||
32,889,790 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (31,679,534 | ) | ||
Foreign currencies | 1,305 | |||
(31,678,229 | ) | |||
Net realized and unrealized gain | 1,211,561 | |||
Net increase in net assets resulting from operations | $ | 1,839,158 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Value Opportunities Fund
Statement of Changes in Net Assets
For the six months ended June 30, 2015 and the year ended December 31, 2014
(Unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Operations: | ||||||||
Net investment income | $ | 627,597 | $ | 3,826,854 | ||||
Net realized gain | 32,889,790 | 26,891,264 | ||||||
Change in net unrealized appreciation (depreciation) | (31,678,229 | ) | (17,253,839 | ) | ||||
Net increase in net assets resulting from operations | 1,839,158 | 13,464,279 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Series I | — | (1,634,027 | ) | |||||
Series ll | — | (1,170,784 | ) | |||||
Total distributions from net investment income | — | (2,804,811 | ) | |||||
Share transactions–net: | ||||||||
Series l | (9,606,487 | ) | (25,128,840 | ) | ||||
Series ll | (12,235,485 | ) | (28,394,119 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (21,841,972 | ) | (53,522,959 | ) | ||||
Net increase (decrease) in net assets | (20,002,814 | ) | (42,863,491 | ) | ||||
Net assets: | ||||||||
Beginning of period | 191,082,364 | 233,945,855 | ||||||
End of period (includes undistributed net investment income of $4,177,905 and $3,550,308, respectively) | $ | 171,079,550 | $ | 191,082,364 |
Notes to Financial Statements
June 30, 2015
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco V.I. Value Opportunities Fund (the “Fund”) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a “Fund”). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (“SEC”) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund’s investment objective is long-term growth of capital.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (“variable products”).
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations — Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Invesco V.I. Value Opportunities Fund
Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income — Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions — Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
Invesco V.I. Value Opportunities Fund
G. | Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications — Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Securities Lending — The Fund may lend portfolio securities having a market value up to one-third of the Fund’s total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. It is the Fund’s policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if, and to the extent that, the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower failed to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliated money market funds on the Statement of Operations. The aggregate value of securities out on loan, if any, is shown as a footnote on the Statement of Assets and Liabilities. |
J. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
K. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
Invesco V.I. Value Opportunities Fund
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of the Fund’s average daily net assets as follows:
Average Daily Net Assets | Rate | |||||
First $250 million | 0 | .695% | ||||
Next $250 million | 0 | .67% | ||||
Next $500 million | 0 | .645% | ||||
Next $1.5 billion | 0 | .62% | ||||
Next $2.5 billion | 0 | .595% | ||||
Next $2.5 billion | 0 | .57% | ||||
Next $2.5 billion | 0 | .545% | ||||
Over $10 billion | 0 | .52% |
For the six months ended June 30, 2015, the effective advisory fees incurred by the Fund was 0.695%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2016, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets. In determining the Adviser’s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2016. The fee waiver agreement cannot be terminated during its term. The Adviser did not waive fees and/or reimburse expenses during the period under this expense limitation.
Further, the Adviser has contractually agreed, through at least June 30, 2017, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash (excluding investments of cash collateral from securities lending) in such affiliated money market funds.
For the six months ended June 30, 2015, the Adviser waived advisory fees of $4,306.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for administrative services fees paid to insurance companies that have agreed to provide services to the participants of separate accounts. These administrative services provided by the insurance companies may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing participants; the maintenance of master accounts; the facilitation of purchases and redemptions requested by the participants; and the servicing of participants’ accounts. Pursuant to such agreement, for the six months ended June 30, 2015, Invesco was paid $24,794 for accounting and fund administrative services and reimbursed $219,928 for services provided by insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (“IIS”) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the six months ended June 30, 2015, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Series II shares (the “Plan”). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the six months ended June 30, 2015, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the six months ended June 30, 2015, the Fund incurred $1,920 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
Invesco V.I. Value Opportunities Fund
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of June 30, 2015. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity Securities | $ | 167,465,344 | $ | 3,719,194 | $ | — | $ | 171,184,538 |
NOTE 4—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees’ and Officers’ Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 5—Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 6—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund’s fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund did not have a capital loss carryforward as of December 31, 2014.
Invesco V.I. Value Opportunities Fund
NOTE 7—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended June 30, 2015 was $110,235,185 and $131,181,291, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 25,751,781 | ||
Aggregate unrealized (depreciation) of investment securities | (3,694,753 | ) | ||
Net unrealized appreciation of investment securities | $ | 22,057,028 |
Cost of investments for tax purposes is $149,127,510.
NOTE 8—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended June 30, 2015(a) | Year ended December 31, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 109,919 | $ | 1,093,124 | 424,414 | $ | 4,064,543 | ||||||||||
Series II | 146,811 | 1,457,262 | 1,022,954 | 9,705,160 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | — | — | 168,630 | 1,634,027 | ||||||||||||
Series II | — | — | 121,325 | 1,170,784 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (1,086,619 | ) | (10,699,611 | ) | (3,227,074 | ) | (30,827,410 | ) | ||||||||
Series II | (1,389,941 | ) | (13,692,747 | ) | (4,093,539 | ) | (39,270,063 | ) | ||||||||
Net increase (decrease) in share activity | (2,219,830 | ) | $ | (21,841,972 | ) | (5,583,290 | ) | $ | (53,522,959 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 63% of the outstanding shares of the Fund. The Fund and the Fund’s principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 9—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period | Net investment income(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends from net investment income | Net asset value, end of period | Total return(b) | Net assets, end of period (000’s omitted) | Ratio of with fee waivers | Ratio of expenses to average net assets without fee waivers and/or expenses absorbed | Ratio of net investment income to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||
Series I | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | $ | 9.84 | $ | 0.04 | $ | 0.07 | $ | 0.11 | $ | — | $ | 9.95 | 1.12 | % | $ | 102,369 | 1.04 | %(e) | 1.04 | %(e) | 0.81 | %(e) | 64 | % | ||||||||||||||||||||||||
Year ended 12/31/14 | 9.36 | 0.18 | (d) | 0.44 | 0.62 | (0.14 | ) | 9.84 | 6.62 | 110,865 | 1.03 | 1.04 | 1.87 | (d) | 15 | |||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 7.10 | 0.10 | 2.28 | 2.38 | (0.12 | ) | 9.36 | 33.75 | 130,146 | 1.01 | 1.02 | 1.24 | 17 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 6.12 | 0.09 | 0.99 | 1.08 | (0.10 | ) | 7.10 | 17.70 | 130,383 | 1.01 | 1.02 | 1.37 | 9 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 6.38 | 0.08 | (0.28 | ) | (0.20 | ) | (0.06 | ) | 6.12 | (3.05 | ) | 135,644 | 1.00 | 1.00 | 1.28 | 15 | ||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 5.98 | 0.04 | 0.40 | 0.44 | (0.04 | ) | 6.38 | 7.35 | 181,515 | 1.00 | 1.00 | 0.65 | 86 | |||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 06/30/15 | 9.79 | 0.03 | 0.06 | 0.09 | — | 9.88 | 0.92 | 68,711 | 1.29 | (e) | 1.29 | (e) | 0.56 | (e) | 64 | |||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 9.31 | 0.15 | (d) | 0.44 | 0.59 | (0.11 | ) | 9.79 | 6.39 | 80,217 | 1.28 | 1.29 | 1.62 | (d) | 15 | |||||||||||||||||||||||||||||||||
Year ended 12/31/13 | 7.07 | 0.08 | 2.26 | 2.34 | (0.10 | ) | 9.31 | 33.27 | 103,800 | 1.26 | 1.27 | 0.99 | 17 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/12 | 6.08 | 0.07 | 1.00 | 1.07 | (0.08 | ) | 7.07 | 17.66 | 98,014 | 1.26 | 1.27 | 1.12 | 9 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/11 | 6.34 | 0.06 | (0.28 | ) | (0.22 | ) | (0.04 | ) | 6.08 | (3.39 | ) | 103,538 | 1.25 | 1.25 | 1.03 | 15 | ||||||||||||||||||||||||||||||||
Year ended 12/31/10 | 5.95 | 0.02 | 0.39 | 0.41 | (0.02 | ) | 6.34 | 6.94 | 132,298 | 1.25 | 1.25 | 0.40 | 86 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Net Investment income per share and the ratio of net investment income to average net assets include significant dividends received during the period. Net Investment income per share and the ratio of net investment income to average net assets excluding the significant dividends are $0.12 and 1.23% and $0.09 and 0.98% for Series I and Series II, respectively. |
(e) | Ratios are annualized and based on average daily net assets (000’s omitted) of $105,927 and $73,933 or Series I and Series II shares, respectively. |
Invesco V.I. Value Opportunities Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2015 through June 30, 2015.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% 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. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (01/01/15) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (06/30/15)1 | Expenses Paid During Period2 | Ending Account Value (06/30/15) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,011.20 | $ | 5.19 | $ | 1,019.64 | $ | 5.21 | 1.04 | % | ||||||||||||
Series II | 1,000.00 | 1,009.20 | 6.43 | 1,018.40 | 6.46 | 1.29 |
1 | The actual ending account value is based on the actual total return of the Fund for the period January 1, 2015 through June 30, 2015, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect the most recent fiscal half year. |
Invesco V.I. Value Opportunities Fund
Approval of Investment Advisory and Sub-Advisory Contracts
The Board of Trustees (the Board) of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco V.I. Value Opportunities Fund’s (the Fund) investment advisory agreements. During contract renewal meetings held on June 9-10, 2015, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2015.
In evaluating the fairness and reasonableness of compensation under the Fund’s investment advisory agreement and sub-advisory contracts, the Board considered, among other things, the factors discussed below. The Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts are in the best interest of the Fund and its shareholders and that the compensation payable to Invesco Advisers and the Affiliated Sub-Advisers under the agreements is fair and reasonable.
The Board’s Fund Evaluation Process
The Board’s Investments Committee has established three Sub-Committees, each of which is primarily responsible for overseeing the performance and investment management services provided by Invesco Advisers and the Affiliated Sub-Advisers to a number of the funds advised by Invesco Advisers (the Invesco Funds). The Sub-Committees meet throughout the year to review the performance of their assigned Invesco Funds, including reviewing materials prepared under the direction of the independent Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. Over the course of each year, the Sub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review the performance, investment objective(s), policies, strategies, limitations and investment risks of these funds. The Board had the benefit of reports form the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Lipper Inc. (Lipper), an independent provider of investment company data. The Board also receives a report and this independent written evaluation from the Senior Officer. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel, the independent Trustees also discuss the continuance of the investment advisory agreement and sub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these same arrangements throughout the year and in prior years. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement and sub-advisory contracts. Unless otherwise stated, this information is current as of June 10, 2015, and does not reflect consideration of factors that became known to the Board after that date.
Factors and Conclusions and Summary of Independent Written Fee Evaluation
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers and the Affiliated Sub-Advisers |
The Board reviewed the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, the performance of Invesco Advisers in providing these services, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager or managers. The Board’s review of the qualifications of Invesco Advisers to provide advisory services included the Board’s
consideration of Invesco Advisers’ investment process oversight, independent credit analysis and investment risk management. The Board also considered non-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, equity and fixed income trading operations, internal audit, distribution, valuation and legal and compliance.
In determining whether to continue the Fund’s investment advisory agreement, the Board considered the benefits of reapproving an existing relationship and the greater uncertainty that may be associated with entering into a new relationship. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s investment advisory agreement.
The Board reviewed the services that may be provided by the Affiliated Sub-Advisers under the sub-advisory contracts and the credentials and experience of the officers and employees of the Affiliated Sub-Advisers who provide these services. The Board noted that the Affiliated Sub-Advisers have offices and personnel that are located in financial centers around the world. As a result, the Affiliated Sub-Advisers can provide research and investment analysis on the markets and economies of various countries in which the Fund may invest, make recommendations regarding securities and assist with security trades. The Board concluded that the sub-advisory contracts benefit the Fund and its shareholders by permitting Invesco Advisers to use the resources and talents of the Affiliated Sub-Advisers in managing the Fund. The Board concluded that the nature, extent and quality of the services that may be provided by the Affiliated Sub-Advisers are appropriate and satisfactory and consistent with the terms of the Fund’s sub-advisory contracts.
B. | Fund Performance |
The Board considered Fund performance as a relevant factor in considering whether to approve the investment advisory agreement. The Board did not view Fund performance as a relevant factor in considering whether to approve the sub-advisory contracts for the Fund, as no Affiliated Sub-Adviser currently manages assets of the Fund.
The Board compared the Fund’s performance during the past one, three and five calendar years to the performance of funds in the Lipper performance universe and against the Lipper Variable Underlying Funds Multi-Cap Value Funds Index. The Board noted that performance of Series I shares of the Fund was in the fifth quintile of its performance universe for the one and five year periods and the fourth quintile for the three year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board
Invesco V.I. Value Opportunities Fund
noted that performance of Series I shares of the Fund was below the performance of the Index for the one, three and five year periods. The Board noted that performance of Class A shares of the Fund was below the performance of the Index for the one, three and five year periods. Invesco Advisers noted that allocation to energy and the large cap bias of the Fund were the largest contributors to the Fund’s underperformance. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
C. | Advisory and Sub-Advisory Fees |
The Board compared the Fund’s contractual management fee rate to the contractual management fee rates of funds in the Fund’s Lipper expense group at a common asset level. The Board noted that the contractual management fee rate for Series I shares of the Fund was at the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” may include both advisory and certain administrative services fees, but that Lipper does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not charge the Invesco Funds for the administrative services included in the term as defined by Lipper. The Board also reviewed the methodology used by Lipper in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent prospectus or statement of additional information for each fund in the expense group.
The Board also compared the Fund’s effective advisory fee rate (the advisory fee rate after advisory fee waivers and before other expense limitations/waivers) to the effective advisory fee rates of other mutual funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund. The Board noted that the Fund’s rate was above the rate of one mutual fund advised by Invesco Advisers using a similar investment process. The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other client accounts with investment strategies comparable to those of the Fund.
The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable by Invesco Advisers to the Affiliated Sub-Advisers.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares
directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, quality and extent of the services provided. The Board received and accepted information from Invesco Advisers demonstrating that Invesco Advisers and each Affiliated Sub-Adviser are financially sound and have the resources necessary to perform their obligations under the investment advisory agreement and sub-advisory contracts.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund, including the fees received for providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Lipper and other independent sources. The Board considered the performance of Invesco Advisers and its affiliates in providing these services and the organizational structure employed to provide these services. The Board also considered that these services are provided to the Fund pursuant to written contracts that are reviewed and approved on an annual basis by the Board; and that the services are required for the operation of the Fund.
The Board considered the benefits realized by Invesco Advisers and the Affiliated Sub-Advisers as a result of portfolio brokerage transactions executed through “soft dollar” arrangements. The Board noted that soft dollar arrangements shift the payment obligation for research services from Invesco Advisers and the Affiliated Sub-Advisers to the Invesco Funds and that the research received may be used with other clients of Invesco Advisers and may reduce Invesco Advisers’ and the Affiliated Sub-Advisers’ expenses. The Board also considered that it receives periodic reports from the Chief Compliance Officer of the Invesco Funds demonstrating that these arrangements are consistent with regulatory requirements. The Board did not deem the soft dollar arrangements to be inappropriate.
The Board considered that the Fund’s uninvested cash and cash collateral from any securities lending arrangements may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash, but not cash collateral. The Board concluded that the amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
Invesco V.I. Value Opportunities Fund
ITEM 2. | CODE OF ETHICS. |
There were no amendments to the Code of Ethics (the “Code”) that applies to the Registrant’s Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”) during the period covered by the report. The Registrant did not grant any waivers, including implicit waivers, from any provisions of the Code to the PEO or PFO during the period covered by this report.
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
Not applicable.
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
Not applicable.
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable.
ITEM 6. | SCHEDULE OF INVESTMENTS. |
Investments in securities of unaffiliated issuers is included as part of the reports to stockholders filed under Item 1 of this Form.
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 COMPANY AND AFFILIATED PURCHASERS. |
Not applicable.
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
None.
ITEM 11. | CONTROLS AND PROCEDURES. |
(a) | As of August 13, 2015, an evaluation was performed under the supervision and with the participation of the officers of the Registrant, including the Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”), to assess the effectiveness of the Registrant’s disclosure controls and procedures, as that term is defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”), as amended. Based on that evaluation, the Registrant’s officers, including the PEO and PFO, concluded that, as of August 13, 2015, the Registrant’s disclosure controls and procedures were reasonably designed to ensure: (1) that information required to be disclosed by the Registrant on Form N-CSR is |
recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission; and (2) that material information relating to the Registrant is made known to the PEO and PFO as appropriate to allow timely decisions regarding required disclosure. |
(b) | There have been no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by the report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
ITEM 12. | EXHIBITS. |
12(a) (1) | Not applicable. |
12(a) (2) | Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. |
12(a) (3) | Not applicable. |
12(b) | Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940. |
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.
Registrant: AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
By: | /s/ Philip A. Taylor | |||
Philip A. Taylor | ||||
Principal Executive Officer | ||||
Date: | August 25, 2015 |
Pursuant to the requirements of the Securities and 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/ Philip A. Taylor | |||
Philip A. Taylor | ||||
Principal Executive Officer | ||||
Date: | August 25, 2015 |
By: | /s/ Sheri Morris | |||
Sheri Morris | ||||
Principal Financial Officer | ||||
Date: | August 25, 2015 |
EXHIBIT INDEX
12(a) (1) | Not applicable. | |
12(a) (2) | Certifications of principal executive officer and Principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. | |
12(a) (3) | Not applicable. | |
12(b) | Certifications of principal executive officer and Principal financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940. |