UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORMN-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number811-07452
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)
Sheri Morris
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: 12/31/18
Item 1. Report to Stockholders.
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Annual Report to Shareholders
| December 31, 2018 | |||
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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 FormN-Q (or any successor Form). The Fund’s FormN-Q (or any successor Form) filings are available on the SEC website, sec.gov. The SEC file numbers for the Fund are811-07452 and033-57340. The Fund’s most recent portfolio holdings, as filed on FormN-Q (or any successor Form), 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 recent12-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.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Invesco Distributors, Inc. | VK-VIAMFR-AR-1 | 02152019 1210 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. American Franchise Fund (the Fund) underperformed the Russell 1000 Growth Index, the Fund’s style-specific benchmark.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -3.62 | % | |||
Series II Shares | -3.89 | ||||
S&P 500 Index▼(Broad Market Index) | -4.38 | ||||
Russell 1000 Growth Index∎(Style-Specific Index) | -1.51 | ||||
Lipper VUFLarge-Cap Growth Funds Index◆(Peer Group Index) | -0.68 | ||||
Source(s):▼FactSet Research Systems Inc.;∎RIMES Technologies Corp.;◆Lipper Inc.
|
Market conditions and your Fund
Calendar year 2018 proved to be an increasingly volatile time for US equities. In January 2018, US equity markets steadily moved higher, as investors remained enthused about the passage of the Tax Cuts and Jobs Act signed into law in late December 2017. However, in February 2018, volatility returned to the US stock and bond markets. Worries about how rising interest rates might affect economic growth, concerns about a potential trade war and heightened geopolitical tensions caused the US stock markets to pull back and volatility to increase.
US equity markets generally recovered in the second quarter of 2018 as strong US retail sales and low unemployment buoyed markets. Throughout the summer, US equities moved higher as corporate profits surged. Several US equity indexes reached new highs despite potential headwinds including trade tensions, tariff announcements and contagion concerns over a Turkish currency crisis. After a relatively quiet summer, market volatility noticeably rose in October, as US equity markets suffered a sharpsell-off throughyear-end, amid rising
interest rates and concerns that higher inflation could mean a more restrictive monetary policy. In this environment, there was a flight to safety, as investors fled to defensive areas of the equities markets, like health care and utilities, and US Treasuries.
Given signs of a strong economy, the US Federal Reserve raised interest rates four times during the year: in March, June, September and December 2018. Following December’s Federal Reserve meeting, Chairman Jerome Powell raised interest rates for the fourth time in 2018 by 25 basis points to a targeted range of 2.25% to 2.50%, and lowered guidance from three to two rate hikes in 2019, signaling a slightly more dovish stance than expected.1 In contrast, the European Central Bank and central banks in several other countries maintained extraordinarily accommodative monetary policies.
During the year, the Fund produced a loss and underperformed the style-specific benchmark. Stock selection in the communication services and consumer staples sectors, as well as overweight exposures in the communication services and energy sectors, were key detractors from
relative performance. Key contributors to relative performance included stock selection and underweight exposures in the industrials and materials sectors, as well as stock selection in the information technology (IT) sector. Ancillary cash was also beneficial to relative returns given stock market volatility during the year.
Within communication services, entertainment industry holdingsNintendoand Activision Blizzard were key individual detractors from both absolute and relative returns for the year. Nintendo’s stock fell in the second quarter following a decline in its Switch console sales that resulted from a lack of momentum in Nintendo Labo, a series ofdo-it-yourself kits that work with the Switch console. Nintendo also saw a lack of Switch support for popular third-party titles, such as “Fortnite.” Activision Blizzard experienced weak third-quarter results and reduced its outlook after experiencing a lower-than-expected performance of the expansion pack for its key “Destiny” title and a lack of a major game release for 2019. In general, global video game stocks saw weakness in the fourth quarter as a result of China’s regulatory head-winds combined with a market rotation out of growth and toward defensive areas.
During the year, an overweight allocation inFacebook detracted from the Fund’s performance relative to the style-specific benchmark. The social media company faced a few tough periods in 2018, with the first being a majorsell-off in March following the announcement that Cambridge Analytica (not a Fund holding) had harvested personal data from profiles to use for targeted political ads. In July, Facebook’s management released guidance indicating slower-than-expected revenue growth in the second half of 2018 driven by the migration of
Portfolio Composition | |||
By sector | % of total net assets |
Information Technology | 22.4% | |
Consumer Discretionary | 22.1 | |
Communication Services | 20.4 | |
Health Care | 16.7 | |
Industrials | 7.5 | |
Consumer Staples | 2.5 | |
Energy | 2.5 | |
Financials | 2.3 | |
Materials | 2.3 | |
Money Market Funds | ||
Plus Other Assets Less Liabilities | 1.3 |
Top 10 Equity Holdings* | |||
% of total net assets | |||
1. Amazon.com, Inc. | 8.6% | ||
2. Alphabet Inc.-Class A | 7.0 | ||
3. Facebook, Inc.-Class A | 4.1 | ||
4. Microsoft Corp. | 4.1 | ||
5. UnitedHealth Group Inc. | 3.9 | ||
6. Alibaba Group Holding Ltd.-ADR | 3.7 | ||
7. Mastercard Inc.-Class A | 3.5 | ||
8. Visa Inc.-Class A | 3.2 | ||
9. salesforce.com, inc. | 3.1 | ||
10. Lowe’s Cos., Inc. | 3.1 |
Total Net Assets | $538.4 million | |
Total Number of Holdings* | 66 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
Data presented here are as of December 31, 2018.
Invesco V.I. American Franchise Fund
users from the application’s News Feed to its Stories section, along with higher-than-expected expense growth related to safety, security and privacy controls. We continued to hold the stock but decreased exposure throughout the year.
Within the energy sector,Noble Energy, Marathon Oiland Occidental Petroleum were among detractors from the Fund’s performance versus the style-specific benchmark for the year. In general, the energy sector was among the worst-performing sectors this year given volatility in oil prices. We used weakness in energy stocks to reallocate into companies with higher conviction that we believed were higher quality, such as Noble Energy. Shares of Noble Energy have underperformed other large exploration and production companies for the last several years given its exposure to Mediterranean gas markets, which are still ramping up and less understood by investors. We received shares of Marathon Oil following its takeover of Andeavor (not a Fund holding) and have maintained the shares. Occidental Petroleum was sold during the year as part of our original reason for owning the stock had deteriorated. Gaps between crude oil prices in the Permian Basin versus Brent Oil had been wide earlier in the year due to energy infrastructure constraints. The gap narrowed.
Within the consumer discretionary sector, retail ande-commerce giantAmazon.com was a key contributor to both absolute and relative returns for the year. Amazon reported strong revenue growth across all segments and strong profit margins in its retail and Amazon Web Services (AWS) segments. AWS provideson-demand cloud computing services enabling retailers to increase operational efficiency in order to have a global reach and gain scale quickly.
Within the IT sector,salesforce.com,Mastercardand Palo Alto Networks contributed to both absolute and relative returns. salesforce.com provides customer relationship management (CRM) software that is delivered via internet browsers and on mobile devices to help companies increase sales and promote customer satisfaction. Quarterly revenue results were strong during 2018, with double-digit growth over the previous year. Further, the company continued to increase future guidance on these strong results. Mastercard experienced strong results for much of the year given payment
volume growth due to its thoughtful approach toward investments within thebusiness-to-business payments arena, blockchain technology and fast ACH processing. Palo Alto Networks is a cybersecurity company that provides advanced firewall protection and helps businesses protect against cyber-attacks. Unlike its competitors, Palo Alto Network’s services run on the same hardware and threats are evaluated with its unique “single pass” technology. We believed this would help Palo Alto Networks continue to gain market share as security breaches increase worldwide.
At the end of the year, the Fund’s largest overweight positions relative to the Russell 1000 Growth Index were in the communication services, consumer discretionary, health care and energy sectors. The largest underweight exposures were in the IT, industrials, consumer staples, financials and real estate sectors. Our overweight exposures are primarily focused on companies that we believe will benefit from technology-driven market share shifts, demographics and changing consumer behaviors. While our underweight exposures are primarily driven by late economic cycle dynamics, such as excess inventory and slowing growth rates in combination with reduced, and in some cases reversed, fiscal stimulus or high geopolitical uncertainty.
Our view is that we are in a slowing, but not declining, growth environment as the benefits of US tax stimulus and deregulation are offset by higher interest rates, rising labor costs and trade pressures. In such an environment, true growth will likely remain scarce, and we believe the market will favor companies that can produce growth and compound earnings in spite of the economic cycle. We believe that change is the fuel for growth, thus we are seeking to identify “share-takers,” companies that can gain market share from technology-enabled advantages in their business models and from disruptive shifts in consumer behavior. Though we anticipate a possible economic slowing, we continue to prudently balance the Fund’s portfolio between dynamic growth opportunities and more durable growth opportunities.
Thank you for your commitment to the Invesco V.I. American Franchise Fund and for sharing our long-term investment horizon.
1 | Source: US Federal Reserve |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Erik Voss Chartered Financial Analyst, Portfolio Manager, is lead manager of Invesco V.I. American Franchise | ||
Fund. He joined Invesco in 2010. Mr. Voss earned a BS in mathematics and an MS in finance from the University of Wisconsin. | ||
Ido Cohen Portfolio Manager, is manager of Invesco V.I. American Franchise Fund. He joined Invesco in 2010. Mr. Cohen | ||
earned a BS in economics from The Wharton School of the University of Pennsylvania. |
Invesco V.I. American Franchise Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: RIMES Technologies Corp. |
2 | Source: Lipper Inc. |
3 | Source: FactSet Research Systems Inc. |
Past performance cannot guarantee
comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (7/3/95) | 8.88 | % | |||
10 Years | 15.58 | ||||
5 Years | 7.40 | ||||
1 Year | -3.62 | ||||
Series II Shares | |||||
Inception (9/18/00) | 1.52 | % | |||
10 Years | 15.29 | ||||
5 Years | 7.13 | ||||
1 Year | -3.89 |
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, prior to June 1, 2010, 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 recentmonth-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Performance figures in the table and chart do not reflect deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund Shares. 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 0.89% and 1.14%, 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 recentmonth-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recentmonth-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
Invesco V.I. American Franchise Fund’s investment objective is to seek capital growth.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
Growth investing risk.Growth stocks tend to be more expensive relative to the issuing company’s earnings or assets compared with other types of stock. As a result, they tend to be more sensitive to changes in, or investors’ expectations of, the issuing company’s earnings and can be more volatile.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of
certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
Mid-capitalization companies risk.Mid-capitalization companies tend to be more vulnerable to changing market conditions and may have more limited product lines and markets, less experienced management and fewer financial resources than larger companies. These companies’ securities may be more volatile and less liquid than those of more established companies, and their returns may vary, sometimes significantly, from the overall securities market.
Sector focus risk.The Fund may from time to time invest a significant amount of its assets (i.e. over 25%) in one market sector or group of related industries. In this event, the Fund’s performance will depend to a greater extent on the overall condition of the sector or group of industries and there is increased risk that the Fund will lose significant value if conditions adversely affect that sector or group of industries.
About indexes used in this report
TheS&P 500® Index is an unmanaged index considered representative of the US stock market.
TheRussell 1000® Growth Indexis an unmanaged index considered representative oflarge-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.
TheLipper VUFLarge-Cap Growth Funds Indexis an unmanaged index considered representative oflarge-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.
Other information
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Industry 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.
Invesco V.I. American Franchise Fund
Schedule of Investments(a)
December 31, 2018
Shares | Value | |||||||
Common Stocks & Other Equity Interests–98.67% |
| |||||||
Aerospace & Defense–2.39% |
| |||||||
Airbus S.E. (France) | 50,081 | $ | 4,789,793 | |||||
BAE Systems PLC (United Kingdom) | 469,424 | 2,739,803 | ||||||
Boeing Co. (The) | 10,354 | 3,339,165 | ||||||
Raytheon Co. | 12,862 | 1,972,388 | ||||||
12,841,149 | ||||||||
Agricultural & Farm Machinery–0.51% |
| |||||||
Deere & Co. | 18,235 | 2,720,115 | ||||||
Application Software–4.54% |
| |||||||
Adobe Inc.(b) | 33,466 | 7,571,348 | ||||||
salesforce.com, inc.(b) | 123,124 | 16,864,294 | ||||||
24,435,642 | ||||||||
Biotechnology–1.11% |
| |||||||
Alexion Pharmaceuticals, Inc.(b) | 24,785 | 2,413,068 | ||||||
BioMarin Pharmaceutical Inc.(b) | 9,774 | 832,256 | ||||||
Celgene Corp.(b) | 42,366 | 2,715,237 | ||||||
5,960,561 | ||||||||
Cable & Satellite–1.55% |
| |||||||
Charter Communications, Inc.–Class A(b) | 29,213 | 8,324,829 | ||||||
Commodity Chemicals–0.57% |
| |||||||
LyondellBasell Industries N.V.–Class A | 36,727 | 3,054,217 | ||||||
Consumer Electronics–2.44% |
| |||||||
Sony Corp. (Japan) | 273,300 | 13,161,279 | ||||||
Data Processing & Outsourced Services–8.49% |
| |||||||
Mastercard Inc.–Class A | 101,095 | 19,071,571 | ||||||
PayPal Holdings, Inc.(b) | 111,743 | 9,396,469 | ||||||
Visa Inc.–Class A | 130,852 | 17,264,613 | ||||||
45,732,653 | ||||||||
Diversified Support Services–1.02% |
| |||||||
Cintas Corp. | 32,542 | 5,466,731 | ||||||
Environmental & Facilities Services–1.62% |
| |||||||
Republic Services, Inc. | 61,582 | 4,439,446 | ||||||
Waste Management, Inc. | 48,056 | 4,276,504 | ||||||
8,715,950 | ||||||||
Financial Exchanges & Data–1.99% |
| |||||||
London Stock Exchange Group PLC (United Kingdom) | 83,026 | 4,284,560 | ||||||
S&P Global Inc. | 37,898 | 6,440,386 | ||||||
10,724,946 | ||||||||
Health Care Equipment–4.62% |
| |||||||
Abbott Laboratories | 66,472 | 4,807,920 | ||||||
Boston Scientific Corp.(b) | 157,402 | 5,562,587 | ||||||
Intuitive Surgical, Inc.(b) | 14,197 | 6,799,227 | ||||||
Stryker Corp. | 36,670 | 5,748,022 |
Shares | Value | |||||||
Health Care Equipment–(continued) |
| |||||||
Teleflex Inc. | 7,569 | $ | 1,956,435 | |||||
24,874,191 | ||||||||
Home Improvement Retail–3.71% |
| |||||||
Home Depot, Inc. (The) | 20,703 | 3,557,190 | ||||||
Lowe’s Cos., Inc. | 177,956 | 16,436,016 | ||||||
19,993,206 | ||||||||
Hotels, Resorts & Cruise Lines–2.69% |
| |||||||
Norwegian Cruise Line Holdings Ltd.(b) | 66,083 | 2,801,258 | ||||||
Royal Caribbean Cruises Ltd. | 119,306 | 11,666,934 | ||||||
14,468,192 | ||||||||
Industrial Gases–0.85% |
| |||||||
Air Products & Chemicals, Inc. | 28,575 | 4,573,429 | ||||||
Industrial Machinery–0.93% |
| |||||||
Stanley Black & Decker Inc. | 41,949 | 5,022,973 | ||||||
Interactive Home Entertainment–6.04% |
| |||||||
Activision Blizzard, Inc. | 232,064 | 10,807,221 | ||||||
Electronic Arts Inc.(b) | 55,585 | 4,386,212 | ||||||
Nintendo Co., Ltd. (Japan) | 44,400 | 11,730,959 | ||||||
Take-Two Interactive Software, Inc.(b) | 54,306 | 5,590,260 | ||||||
32,514,652 | ||||||||
Interactive Media & Services–11.12% |
| |||||||
Alphabet Inc.–Class A(b) | 36,063 | 37,684,393 | ||||||
Facebook, Inc.–Class A(b) | 169,256 | 22,187,769 | ||||||
59,872,162 | ||||||||
Internet & Direct Marketing Retail–13.21% |
| |||||||
Alibaba Group Holding Ltd.–ADR (China)(b) | 143,962 | 19,732,871 | ||||||
Amazon.com, Inc.(b) | 30,672 | 46,068,424 | ||||||
Booking Holdings Inc.(b) | 3,088 | 5,318,833 | ||||||
71,120,128 | ||||||||
Investment Banking & Brokerage–0.29% |
| |||||||
Morgan Stanley | 39,324 | 1,559,197 | ||||||
Life Sciences Tools & Services–4.57% |
| |||||||
Illumina, Inc.(b) | 38,459 | 11,535,008 | ||||||
IQVIA Holdings Inc.(b) | 50,862 | 5,908,639 | ||||||
Thermo Fisher Scientific, Inc. | 31,970 | 7,154,566 | ||||||
24,598,213 | ||||||||
Managed Health Care–4.60% |
| |||||||
Anthem, Inc. | 13,549 | 3,558,374 | ||||||
UnitedHealth Group Inc. | 85,198 | 21,224,526 | ||||||
24,782,900 | ||||||||
Movies & Entertainment–1.72% |
| |||||||
Netflix, Inc.(b) | 24,324 | 6,510,562 | ||||||
Vivendi S.A. (France) | 113,461 | 2,756,797 | ||||||
9,267,359 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. American Franchise Fund
Shares | Value | |||||||
Oil & Gas Exploration & Production–0.93% |
| |||||||
Diamondback Energy Inc. | 13,173 | $ | 1,221,137 | |||||
Noble Energy, Inc. | 202,081 | 3,791,040 | ||||||
5,012,177 | ||||||||
Oil & Gas Refining & Marketing–1.56% |
| |||||||
Marathon Petroleum Corp. | 142,449 | 8,405,915 | ||||||
Packaged Foods & Meats–0.95% |
| |||||||
Tyson Foods, Inc.–Class A | 96,104 | 5,131,954 | ||||||
Pharmaceuticals–1.80% |
| |||||||
Allergan PLC | 24,875 | 3,324,792 | ||||||
Zoetis Inc. | 74,242 | 6,350,661 | ||||||
9,675,453 | ||||||||
Railroads–1.01% |
| |||||||
Canadian Pacific Railway Ltd. (Canada) | 30,591 | 5,433,573 | ||||||
Semiconductor Equipment–0.57% |
| |||||||
Applied Materials, Inc. | 49,640 | 1,625,214 | ||||||
ASML Holding N.V.–New York Shares (Netherlands) | 9,404 | 1,463,450 | ||||||
3,088,664 | ||||||||
Semiconductors–1.38% |
| |||||||
Broadcom Inc. | 16,410 | 4,172,735 | ||||||
NVIDIA Corp. | 24,289 | 3,242,581 | ||||||
7,415,316 | ||||||||
Specialty Chemicals–0.90% |
| |||||||
Sherwin-Williams Co. (The) | 12,309 | 4,843,099 |
Shares | Value | |||||||
Systems Software–5.22% |
| |||||||
Microsoft Corp. | 215,631 | $ | 21,901,641 | |||||
Palo Alto Networks, Inc.(b) | 15,765 | 2,969,338 | ||||||
ServiceNow, Inc.(b) | 18,311 | 3,260,273 | ||||||
28,131,252 | ||||||||
Technology Hardware, Storage & Peripherals–2.23% |
| |||||||
Apple Inc. | 76,285 | 12,033,196 | ||||||
Tobacco–1.54% |
| |||||||
Philip Morris International Inc. | 124,136 | 8,287,319 | ||||||
Total Common Stocks & Other Equity Interests (Cost $337,101,278) | 531,242,592 | |||||||
Money Market Funds–1.26% |
| |||||||
Invesco Government & Agency Portfolio– Institutional Class, 2.30%(c) | 2,370,601 | 2,370,601 | ||||||
Invesco Liquid Assets Portfolio–Institutional Class, 2.48%(c) | 1,692,961 | 1,693,130 | ||||||
Invesco Treasury Portfolio–Institutional Class, 2.30%(c) | 2,709,258 | 2,709,258 | ||||||
Total Money Market Funds |
| 6,772,989 | ||||||
TOTAL INVESTMENTS IN SECURITIES–99.93% |
| 538,015,581 | ||||||
OTHER ASSETS LESS LIABILITIES–0.07% |
| 391,801 | ||||||
NET ASSETS–100.00% |
| $ | 538,407,382 |
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. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $337,101,278) | $ | 531,242,592 | ||
Investments in affiliated money market funds, at value (Cost $6,773,039) | 6,772,989 | |||
Foreign currencies, at value (Cost $6,378) | 6,435 | |||
Receivable for: | ||||
Fund shares sold | 919,017 | |||
Dividends | 356,332 | |||
Investment for trustee deferred compensation and retirement plans | 308,560 | |||
Total assets | 539,605,925 | |||
Liabilities: | ||||
Payable for: | ||||
Amount due to custodian | 326,286 | |||
Fund shares reacquired | 151,503 | |||
Accrued fees to affiliates | 323,307 | |||
Accrued trustees’ and officers’ fees and benefits | 5,630 | |||
Accrued other operating expenses | 58,434 | |||
Trustee deferred compensation and retirement plans | 333,383 | |||
Total liabilities | 1,198,543 | |||
Net assets applicable to shares outstanding | $ | 538,407,382 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 265,582,159 | ||
Distributable earnings | 272,825,223 | |||
$ | 538,407,382 | |||
Net Assets: | ||||
Series I | $ | 405,191,586 | ||
Series II | $ | 133,215,796 | ||
Shares outstanding, no par value, |
| |||
Series I | 7,090,515 | |||
Series II | 2,426,408 | |||
Series I: | ||||
Net asset value per share | $ | 57.15 | ||
Series II: | ||||
Net asset value per share | $ | 54.90 |
Investment income: | ||||
Dividends (net of foreign withholding taxes of $78,544) | $ | 5,671,729 | ||
Dividends from affiliated money market funds (includes securities lending income of $27,451) | 62,216 | |||
Total investment income | 5,733,945 | |||
Expenses: | ||||
Advisory fees | 4,389,714 | |||
Administrative services fees | 1,131,436 | |||
Custodian fees | 40,791 | |||
Distribution fees — Series II | 409,064 | |||
Transfer agent fees | 74,683 | |||
Trustees’ and officers’ fees and benefits | 29,771 | |||
Reports to shareholders | 9,607 | |||
Professional services fees | 56,948 | |||
Other | 12,733 | |||
Total expenses | 6,154,747 | |||
Less: Fees waived | (1,483 | ) | ||
Net expenses | 6,153,264 | |||
Net investment income (loss) | (419,319 | ) | ||
Realized and unrealized gain (loss): | ||||
Investment securities (includes net gains from securities sold to affiliates of $3,569) | 85,212,324 | |||
Foreign currencies | (46,249 | ) | ||
85,166,075 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (97,418,031 | ) | ||
Foreign currencies | (3,135 | ) | ||
(97,421,166 | ) | |||
Net realized and unrealized gain (loss) | (12,255,091 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (12,674,410 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income (loss) | $ | (419,319 | ) | $ | (832,957 | ) | ||
Net realized gain | 85,166,075 | 40,086,602 | ||||||
Change in net unrealized appreciation (depreciation) | (97,421,166 | ) | 111,505,076 | |||||
Net increase (decrease) in net assets resulting from operations | (12,674,410 | ) | 150,758,721 | |||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (29,906,066 | ) | (37,895,048 | ) | ||||
Series II | (10,129,348 | ) | (13,392,445 | ) | ||||
Total distributions from distributable earnings | (40,035,414 | ) | (51,287,493 | ) | ||||
Share transactions–net: | ||||||||
Series I | (46,845,225 | ) | (2,950,365 | ) | ||||
Series II | (24,264,904 | ) | (6,716,707 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (71,110,129 | ) | (9,667,072 | ) | ||||
Net increase (decrease) in net assets | (123,819,953 | ) | 89,804,156 | |||||
Net assets: | ||||||||
Beginning of year | 662,227,335 | 572,423,179 | ||||||
End of year | $ | 538,407,382 | $ | 662,227,335 |
(1) | For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income and distributions from net realized gains. The Securities and Exchange Commission eliminated the requirement to disclose the distribution components separately, except for tax return of capital. For the year ended December 31, 2017, distributions from net investment income were $384,589 and $0 and distributions from net realized gains were $37,510,459 and $13,392,445 for Series I and Series II, respectively. |
Notes to Financial Statements
December 31, 2018
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 anopen-end series management investment company. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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 theover-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 (“NAV”) 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 theend-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. American Franchise 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. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 investment 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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. American Franchise 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. | 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 inshort-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. The Fund bears the risk of loss with respect to the investment of collateral. 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. When loaning securities, the Fund retains certain benefits of owning the securities, including the economic equivalent of dividends or interest generated by the security. 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. The securities loaned are subject to termination at the option of the borrower or the Fund. Upon termination, the borrower will return to the Fund the securities loaned and the Fund will return the collateral. 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 and the securities may lose value during the delay which could result in potential losses to the Fund. Some of these losses may be indemnified by the lending agent. 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, are included inDividends from affiliated money market fundson 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 the 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 the dailymark-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 anagreed-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 accrues daily and pays monthly 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 year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.67%.
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2019, 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 (the “expense limits”). 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, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $1,483.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $154,846 for accounting and fund administrative services and was reimbursed $976,590 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution fees.
For the year ended December 31, 2018, the Fund incurred $4,274 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 December 31, 2018. 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 | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks & Other Equity Interests | $ | 491,779,401 | $ | 39,463,191 | $ | — | $ | 531,242,592 | ||||||||
Money Market Funds | 6,772,989 | — | — | 6,772,989 | ||||||||||||
Total Investments | $ | 498,552,390 | $ | 39,463,191 | $ | — | $ | 538,015,581 |
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 year ended December 31, 2018, the Fund engaged in securities purchases of $315,563 and securities sales of $376,802, which resulted in net realized gains of $3,569.
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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 3,547,796 | $ | 384,589 | ||||
Long-term capital gain | 36,487,618 | 50,902,904 | ||||||
Total distributions | $ | 40,035,414 | $ | 51,287,493 |
Invesco V.I. American Franchise Fund
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 1,304,602 | ||
Undistributedlong-term gain | 80,981,012 | |||
Net unrealized appreciation — investments | 190,854,679 | |||
Net unrealized appreciation (depreciation) — foreign currencies | (3,206 | ) | ||
Temporary book/tax differences | (311,864 | ) | ||
Shares of beneficial interest | 265,582,159 | |||
Total net assets | $ | 538,407,382 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation (depreciation) difference is attributable primarily to wash sales and straddles.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 does not have a capital loss carryforward as of December 31, 2018.
NOTE 8—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $272,241,197 and $388,896,809, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 206,928,224 | ||
Aggregate unrealized (depreciation) of investments | (16,073,545 | ) | ||
Net unrealized appreciation of investments | $ | 190,854,679 |
Cost of investments for tax purposes is $347,160,902.
NOTE 9—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of net operating losses, on December 31, 2018, undistributed net investment income (loss) was increased by $448,600 and undistributed net realized gain was decreased by $448,600. This reclassification had no effect on the net assets or the distributable earnings of the Fund.
Invesco V.I. American Franchise Fund
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 309,111 | $ | 20,899,475 | 632,683 | $ | 39,590,013 | ||||||||||
Series II | 172,561 | 11,056,980 | 193,178 | 11,491,194 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 428,393 | 29,906,066 | 623,684 | 37,895,048 | ||||||||||||
Series II | 150,914 | 10,129,348 | 228,151 | 13,392,445 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (1,448,513 | ) | (97,650,766 | ) | (1,308,965 | ) | (80,435,426 | ) | ||||||||
Series II | (709,185 | ) | (45,451,232 | ) | (527,169 | ) | (31,600,346 | ) | ||||||||
Net increase (decrease) in share activity | (1,096,719 | ) | $ | (71,110,129 | ) | (158,438 | ) | $ | (9,667,072 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 34% 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 (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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 62.97 | $ | (0.00 | ) | $ | (1.50 | ) | $ | (1.50 | ) | $ | — | $ | (4.32 | ) | $ | (4.32 | ) | $ | 57.15 | (3.62 | )% | $ | 405,192 | 0.88 | %(d) | 0.88 | %(d) | (0.00 | )%(d) | 42 | % | |||||||||||||||||||||||
Year ended 12/31/17 | 53.58 | (0.04 | ) | 14.50 | 14.46 | (0.05 | ) | (5.02 | ) | (5.07 | ) | 62.97 | 27.34 | 491,271 | 0.89 | 0.89 | (0.06 | ) | 45 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 57.30 | 0.07 | 1.33 | 1.40 | — | (5.12 | ) | (5.12 | ) | 53.58 | 2.27 | 420,824 | 0.93 | 0.93 | 0.12 | 59 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 54.88 | (0.03 | ) | 2.76 | 2.73 | — | (0.31 | ) | (0.31 | ) | 57.30 | 5.01 | 479,298 | 0.96 | 0.96 | (0.05 | ) | 68 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 50.63 | (0.09 | ) | 4.36 | 4.27 | (0.02 | ) | — | (0.02 | ) | 54.88 | 8.44 | 541,929 | 0.92 | 0.95 | (0.17 | ) | 64 | ||||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 60.79 | (0.16 | ) | (1.41 | ) | (1.57 | ) | — | (4.32 | ) | (4.32 | ) | 54.90 | (3.88 | ) | 133,216 | 1.13 | (d) | 1.13 | (d) | (0.25 | )(d) | 42 | |||||||||||||||||||||||||||||||||
Year ended 12/31/17 | 51.95 | (0.19 | ) | 14.05 | 13.86 | — | (5.02 | ) | (5.02 | ) | 60.79 | 27.03 | 170,956 | 1.14 | 1.14 | (0.31 | ) | 45 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 55.85 | (0.06 | ) | 1.28 | 1.22 | — | (5.12 | ) | (5.12 | ) | 51.95 | 2.00 | 151,599 | 1.18 | 1.18 | (0.13 | ) | 59 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 53.63 | (0.16 | ) | 2.69 | 2.53 | — | (0.31 | ) | (0.31 | ) | 55.85 | 4.75 | 175,919 | 1.21 | 1.21 | (0.30 | ) | 68 | ||||||||||||||||||||||||||||||||||||||
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 |
(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 based on average daily net assets (000’s omitted) of $487,880 and $163,626 for Series I and Series II shares, respectively. |
Invesco V.I. American Franchise Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. American Franchise Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. American Franchise Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and transfer agent. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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 | ACTUAL | HYPOTHETICAL expenses) | Annualized Ratio | ||||||||||||||||||||
Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 874.30 | $ | 4.16 | $ | 1,020.77 | $ | 4.48 | 0.88 | % | ||||||||||||
Series II | 1,000.00 | 873.20 | 5.34 | 1,019.51 | 5.75 | 1.13 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. American Franchise Fund
Tax Information
Form1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Long-Term Capital Gain Distributions | $ | 36,487,618 | ||
Corporate Dividends Received Deduction* | 100 | % | ||
U.S. Treasury Obligations* | 0 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. American Franchise Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. American Franchise Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. American Franchise Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor��— 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. American Franchise Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. American Franchise Fund
| ||||
Annual Report to Shareholders
| December 31, 2018 | |||
| ||||
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 FormN-Q (or any successor Form). The Fund’s FormN-Q (or any successor Form) filings are available on the SEC website, sec.gov. The SEC file numbers for the Fund are811-07452 and033-57340. The Fund’s most recent portfolio holdings, as filed on FormN-Q (or any successor Form), 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 recent12-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.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Invesco Distributors, Inc. VK-VIAMVA-AR-1 02152019 1210 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. American Value Fund (the Fund) underperformed the Russell Midcap Value Index, the Fund’s style-specific benchmark.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -12.65 | % | |||
Series II Shares | -12.87 | ||||
S&P 500 Index▼(Broad Market Index) | -4.38 | ||||
Russell Midcap Value Index∎(Style-Specific Index) | -12.29 | ||||
Lipper VUFMid-Cap Value Funds Index◆(Peer Group Index) | -13.38 | ||||
Source(s):▼FactSet Research Systems Inc.;∎RIMES Technologies Corp.;◆Lipper Inc.
|
Market conditions and your Fund
Calendar year 2018 proved to be an increasingly volatile time for US equities. In January 2018, US equity markets steadily moved higher, as investors remained enthused about the passage of the Tax Cuts and Jobs Act signed into law in late December 2017. However, in February 2018, volatility returned to the US stock and bond markets. Worries about how rising interest rates might affect economic growth, concerns about a potential trade war and heightened geopolitical tensions caused the US stock markets to pull back and volatility to increase.
US equity markets generally recovered in the second quarter of 2018 as strong US retail sales and low unemployment buoyed markets. Throughout the summer, US equities moved higher as corporate profits surged. Several US equity indexes reached new highs despite potential headwinds including trade tensions, tariff announcements and contagion concerns over a Turkish currency crisis. After a relatively quiet summer, market volatility noticeably rose in October, as US equity markets suffered a sharpsell-off throughyear-end, amid
rising interest rates and concerns that higher inflation could mean a more restrictive monetary policy. In this environment, there was a flight to safety, as investors fled to defensive areas of the equities markets, like health care and utilities, and US Treasuries.
Given signs of a strong economy, the US Federal Reserve raised interest rates four times during the year: in March, June, September and December 2018. Following December’s Federal Reserve meeting, Chairman Jerome Powell raised interest rates for the fourth time in 2018 by 25 basis points to a targeted range of 2.25% to 2.50%, and lowered guidance from three to two rate hikes in 2019, signaling a slightly more dovish stance than expected.1 In contrast, the European Central Bank and central banks in several other countries maintained extraordinarily accommodative monetary policies.
Within the Russell Midcap Value Index, just two sectors – communication services and utilities – had positive returns for the year. Energy was the worst-performing sector in the Russell Midcap Value Index for the year with a loss of approximately 27%.
Given energy’s steep declines during the year, an overweight allocation and stock selection in the energy sector was the largest detractor from the Fund’s performance relative to the style-specific benchmark during the year. Oil prices began the year at $60 per barrel, rising to a high of roughly $75 per barrel in early October, only to sharply decline to the mid $40s by late December.2 Energy stocks fell in tandem, and a number of the Fund’s largest detractors, such asNoble Energy, Devon EnergyandTechnip-FMC, came from this sector.
Security selection in the health care sector also detracted from the Fund’s performance relative to the style-specific benchmark during the year. Key detractors in this sector includedMylanand DaVita. Along with other generic and specialty pharmaceutical companies, Mylan faced negative headlines regarding potential drug pricing legislation and investigations into drug price collusion. A number of company-specific headwinds also impacted Mylan, including delays in approval for its generic asthma treatment and an FDA warning letter for one of its manufacturing facilities, resulting in remediation expenses and production delays. DaVita’s shares came under pressure due to weaker-than-anticipated organic growth. In addition, the company’s sale of its medical group business to United Healthcare (not a Fund holding), while positive in our view, was renegotiated lower in the fourth quarter and added to share price weakness. We continued to hold both Mylan and DaVita at year end.
The Fund’s lack of exposure to the communication services sector detracted from the Fund’s performance relative to the style-specific benchmark during the year as it was one of only two sectors to post a positive return for the year. The Fund’s material underweight allocation to other defensive areas, such as utilities
Portfolio Composition | |||
By sector | % of total net assets |
Financials | 26.7% | |
Industrials | 12.9 | |
Consumer Discretionary | 11.2 | |
Energy | 10.0 | |
Health Care | 9.3 | |
Information Technology | 8.0 | |
Materials | 6.9 | |
Real Estate | 6.5 | |
Utilities | 3.4 | |
Consumer Staples | 2.0 | |
Money Market Funds | ||
Plus Other Assets Less Liabilities
| 3.1 |
Top 10 Equity Holdings* | |||
% of total net assets | |||
1. FirstEnergy Corp. | 3.4% | ||
2. Royal Caribbean Cruises Ltd. | 3.4 | ||
3. Willis Towers Watson PLC | 3.2 | ||
4. Arthur J. Gallagher & Co. | 3.1 | ||
5. Keysight Technologies, Inc. | 3.0 | ||
6. W.R. Grace & Co. | 3.0 | ||
7. Teradata Corp. | 2.8 | ||
8. Zions Bancorp., N.A. | 2.7 | ||
9. Johnson Controls International PLC | 2.7 | ||
10. KeyCorp | 2.5 |
Total Net Assets | $246.5 million | |
Total Number of Holdings* | 44 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
Data presented here are as of December 31, 2018.
Invesco V.I. American Value Fund
and real estate, also detracted from the Fund’s relative returns.
Stock selection in the information technology (IT) sector was the largest contributor to the Fund’s performance relative to the style-specific benchmark during the year. Technology hardware and equipment companiesCiena,Key-sight Technologiesand ARRIS International were top contributors in this sector. Both Ciena and Keysight reported stronger-than-expected earnings throughout the year, which boosted shares. In November, CommScope (not a Fund holding) announced it was acquiring ARRIS for a premium to the company’s share price. We sold the stock following the announcement.
Stock selection in the consumer discretionary sector during the year was another contributor to the Fund’s performance relative to the style-specific benchmark during the year. A strong contributor within the sector wasAdvance Auto Partsas the company’s turnaround initiatives resulted in stronger-than-expected earnings for much of the year. We took profits based on positive performance and trimmed our position in the stock.
Security selection in the financials sector also contributed to the Fund’s performance relative to the style-specific benchmark. InsurerArthur J. Gallagher was a key contributor in this sector as the company benefited from strong organic revenue growth, which helped increase profit margins.
The Fund’s cash position and underweight allocation to the consumer staples sector during the year also contributed to the Fund’s performance relative to the style-specific benchmark.
During the year, we increased our exposure to the consumer staples and consumer discretionary sectors and decreased our exposure to the IT sector. At year end, the Fund’s largest overweight allocations relative to the style-specific benchmark were in the financials and energy sectors, while the largest relative underweight allocations were in the utilities and real estate sectors.
Market volatility increased significantly during the year, and we believe it may continue into 2019 given the potential for slowing economic growth, higher interest rates and uncertainty around US imposed tariffs on trade. We believe market volatility creates opportunities to invest in companies with attractive valuations and strong fundamentals. We believe that ultimately those valuations and fundamentals will be reflected in those companies’ stock prices.
As always, we are committed to working to achieve positive returns for the Fund’s shareholders through an entire market cycle. Thank you for your continued investment in Invesco V.I. American Value Fund.
1 | Source: US Federal Reserve |
2 | Source: Bloomberg |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Jeffrey Vancavage Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. American Value Fund. He joined | ||
Invesco in 2016. Mr. Vancavage earned a BS in aeronautical science from Embry-Riddle Aeronautical University and an MBA from the University of Florida. |
Invesco V.I. American Value Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: FactSet Research Systems Inc. |
2 | Source: RIMES Technologies Corp. |
3 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (1/2/97) | 8.74 | % | |||
10 Years | 11.59 | ||||
5 Years | 2.04 | ||||
1 Year | -12.65 | ||||
Series II Shares | |||||
Inception (5/5/03) | 8.91 | % | |||
10 Years | 11.38 | ||||
5 Years | 1.79 | ||||
1 Year | -12.87 |
Effective June 1, 2010, Class I and Class II shares of the predecessor fund, The Universal Institutional Funds, Inc. U.S. 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, prior to June 1, 2010, 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 recentmonth-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Performance figures in the table and chart do not reflect deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 0.94% and 1.19%, 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 recentmonth-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recentmonth-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 Value Fund
Invesco V.I. American Value 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.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Depositary receipts risk.Investing in depositary receipts involves the same risks as direct investments in foreign securities. In addition, the underlying issuers of certain depositary receipts are under no obligation to distribute shareholder communications or pass through any voting rights with respect to the deposited securities to the holders of such receipts. The Fund may therefore receive less timely information or have less control than if it invested directly in the foreign issuer.
Derivatives risk.The value of a derivative instrument depends largely on (and is derived from) the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include other, possibly greater, risks, including counterparty, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by holding a position in the derivative. As a result, an adverse change in the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative or the anticipated value of the underlying asset, which may make the Fund’s returns more volatile and increase the risk of loss. Derivative instruments may also be less liquid than more traditional investments and the Fund may be unable to sell or close out its derivative positions at a desirable time or price. This risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. Derivatives strategies may not always be successful. For example, derivatives used for hedging or to gain or limit exposure to a particular market segment may not provide the expected benefits, particularly during adverse market conditions.
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
REIT risk/real estate risk.Investments in real estate related instruments may be affected by economic, legal, cultural, environmental or technological factors that affect property values, rents or occupancies
of real estate related to the Fund’s holdings. Shares of real estate related companies, which tend to be small- andmid-cap companies, may be more volatile and less liquid.
Sector focus risk.The Fund may from time to time invest a significant amount of its assets (i.e. over 25%) in one market sector or group of related industries. In this event, the Fund’s performance will depend to a greater extent on the overall condition of the sector or group of industries and there is increased risk that the Fund will lose significant value if conditions adversely affect that sector or group of industries.
Small- andmid-capitalization companies risks.Small- andmid-capitalization companies tend to be more vulnerable to changing market conditions, may have little or no operating history or track record of success, and may have more limited product lines and markets, less experienced management and fewer financial resources than larger companies. These companies’ securities may be more volatile and less liquid than those of more established companies, and their returns may vary, sometimes significantly, from the overall securities market.
Value investing style risk.A value investing style subjects the Fund to the risk that the valuations never improve or that the returns on value equity securities are less than returns on other styles of investing or the overall stock market.
About indexes used in this report
TheS&P 500® Index is an unmanaged index considered representative of the US stock market.
TheRussell Midcap® Value Index is an unmanaged index considered representative ofmid-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.
TheLipper VUF Mid Cap Value Funds Index is an unmanaged index considered representative ofmid-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).
Invesco V.I. American Value Fund
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.
Other information
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Industry 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.
Invesco V.I. American Value Fund
Schedule of Investments(a)
December 31, 2018
Shares | Value | |||||||
Common Stocks & Other Equity Interests–96.93% |
| |||||||
Aerospace & Defense–1.98% |
| |||||||
Textron Inc. | 106,100 | $ | 4,879,539 | |||||
Apparel, Accessories & Luxury Goods–1.94% |
| |||||||
Tapestry, Inc. | 141,350 | 4,770,562 | ||||||
Automotive Retail–1.78% |
| |||||||
Advance Auto Parts, Inc. | 27,836 | 4,383,057 | ||||||
Biotechnology–1.00% |
| |||||||
Myriad Genetics, Inc.(b) | 85,066 | 2,472,869 | ||||||
Building Products–2.67% |
| |||||||
Johnson Controls International PLC | 222,030 | 6,583,189 | ||||||
Communications Equipment–2.26% |
| |||||||
Ciena Corp.(b) | 164,046 | 5,562,800 | ||||||
Consumer Finance–2.12% |
| |||||||
Santander Consumer USA Holdings Inc. | 297,232 | 5,228,311 | ||||||
Copper–1.77% |
| |||||||
Freeport-McMoRan Inc. | 422,007 | 4,350,892 | ||||||
Distributors–2.00% |
| |||||||
LKQ Corp.(b) | 207,850 | 4,932,280 | ||||||
Diversified Chemicals–2.14% |
| |||||||
Eastman Chemical Co. | 72,185 | 5,277,445 | ||||||
Diversified REITs–2.43% |
| |||||||
Liberty Property Trust | 142,777 | 5,979,501 | ||||||
Electric Utilities–3.44% |
| |||||||
FirstEnergy Corp. | 225,656 | 8,473,383 | ||||||
Electronic Equipment & Instruments–2.99% |
| |||||||
Keysight Technologies, Inc.(b) | 118,692 | 7,368,399 | ||||||
Food Distributors–0.80% |
| |||||||
Performance Food Group Co.(b) | 61,253 | 1,976,634 | ||||||
Food Retail–1.23% |
| |||||||
Kroger Co. (The) | 110,483 | 3,038,283 | ||||||
Health Care Distributors–1.81% |
| |||||||
AmerisourceBergen Corp. | 59,886 | 4,455,518 | ||||||
Health Care Facilities–1.95% |
| |||||||
Encompass Health Corp. | 78,018 | 4,813,711 | ||||||
Health Care Services–2.31% |
| |||||||
DaVita Inc.(b) | 110,648 | 5,693,946 | ||||||
Hotels, Resorts & Cruise Lines–5.48% |
| |||||||
Norwegian Cruise Line Holdings Ltd.(b) | 119,627 | 5,070,988 | ||||||
Royal Caribbean Cruises Ltd. | 86,230 | 8,432,432 | ||||||
13,503,420 |
Shares | Value | |||||||
Industrial Machinery–2.13% |
| |||||||
Kennametal Inc. | 157,918 | $ | 5,255,511 | |||||
Insurance Brokers–6.29% |
| |||||||
Arthur J. Gallagher & Co. | 103,126 | 7,600,386 | ||||||
Willis Towers Watson PLC | 52,125 | 7,915,703 | ||||||
15,516,089 | ||||||||
Investment Banking & Brokerage–2.29% |
| |||||||
Stifel Financial Corp. | 136,535 | 5,655,280 | ||||||
Life & Health Insurance–2.07% |
| |||||||
Athene Holding Ltd.–Class A(b) | 128,298 | 5,110,109 | ||||||
Marine–2.23% |
| |||||||
Kirby Corp.(b) | 81,661 | 5,500,685 | ||||||
Office REITs–2.26% |
| |||||||
Hudson Pacific Properties, Inc. | 191,697 | 5,570,715 | ||||||
Oil & Gas Equipment & Services–2.17% |
| |||||||
TechnipFMC PLC (United Kingdom) | 273,673 | 5,358,517 | ||||||
Oil & Gas Exploration & Production–7.84% |
| |||||||
Anadarko Petroleum Corp. | 121,481 | 5,325,727 | ||||||
Devon Energy Corp. | 189,739 | 4,276,717 | ||||||
Marathon Oil Corp. | 349,274 | 5,008,589 | ||||||
Noble Energy, Inc. | 251,898 | 4,725,607 | ||||||
19,336,640 | ||||||||
Other Diversified Financial Services–2.15% |
| |||||||
Voya Financial, Inc. | 132,301 | 5,310,562 | ||||||
Pharmaceuticals–2.26% |
| |||||||
Mylan N.V.(b) | 202,997 | 5,562,118 | ||||||
Regional Banks–11.73% |
| |||||||
Comerica Inc. | 83,962 | 5,767,350 | ||||||
First Horizon National Corp. | 408,013 | 5,369,451 | ||||||
KeyCorp | 413,058 | 6,104,997 | ||||||
Wintrust Financial Corp. | 76,394 | 5,079,437 | ||||||
Zions Bancorp., N.A. | 161,909 | 6,596,173 | ||||||
28,917,408 | ||||||||
Specialized REITs–1.83% |
| |||||||
Life Storage, Inc. | 48,603 | 4,519,593 | ||||||
Specialty Chemicals–2.98% |
| |||||||
W.R. Grace & Co. | 113,166 | 7,345,605 | ||||||
Systems Software–2.75% |
| |||||||
Teradata Corp.(b) | 176,683 | 6,777,560 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. American Value Fund
Shares | Value | |||||||
Trucking–3.85% |
| |||||||
Knight-Swift Transportation Holdings Inc. | 225,654 | $ | 5,657,146 | |||||
Ryder System, Inc. | 79,387 | 3,822,484 | ||||||
9,479,630 | ||||||||
Total Common Stocks & Other Equity Interests |
| 238,959,761 | ||||||
Money Market Funds–2.80% |
| |||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30%(c) | 2,412,823 | 2,412,823 | ||||||
Invesco Liquid Assets Portfolio–Institutional Class, 2.48%(c) | 1,723,129 | 1,723,301 | ||||||
Invesco Treasury Portfolio–Institutional Class, 2.30%(c) | 2,757,511 | 2,757,511 | ||||||
Total Money Market Funds |
| 6,893,635 | ||||||
TOTAL INVESTMENTS IN SECURITIES–99.73% |
| 245,853,396 | ||||||
OTHER ASSETS LESS LIABILITIES–0.27% |
| 672,719 | ||||||
NET ASSETS–100.00% |
| $ | 246,526,115 |
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 money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $235,497,310) | $ | 238,959,761 | ||
Investments in affiliated money market funds, at value (Cost $6,893,701) | 6,893,635 | |||
Receivable for: | ||||
Fund shares sold | 629,354 | |||
Dividends | 388,840 | |||
Investment for trustee deferred compensation and retirement plans | 51,625 | |||
Total assets | 246,923,215 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares reacquired | 61,234 | |||
Accrued fees to affiliates | 231,552 | |||
Accrued trustees’ and officers’ fees and benefits | 4,730 | |||
Accrued other operating expenses | 39,549 | |||
Trustee deferred compensation and retirement plans | 60,035 | |||
Total liabilities | 397,100 | |||
Net assets applicable to shares outstanding | $ | 246,526,115 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 224,227,289 | ||
Distributable earnings | 22,298,826 | |||
$ | 246,526,115 | |||
Net Assets: | ||||
Series I | $ | 77,490,519 | ||
Series II | $ | 169,035,596 | ||
Shares outstanding, no par value, |
| |||
Series I | 5,589,000 | |||
Series II | 12,325,813 | |||
Series I: | ||||
Net asset value per share | $ | 13.86 | ||
Series II: | ||||
Net asset value per share | $ | 13.71 |
Investment income: | ||||
Dividends | $ | 4,900,864 | ||
Dividends from affiliated money market funds | 142,920 | |||
Total investment income | 5,043,784 | |||
Expenses: | ||||
Advisory fees | 2,500,751 | |||
Administrative services fees | 605,163 | |||
Custodian fees | 13,643 | |||
Distribution fees — Series II | 620,640 | |||
Transfer agent fees | 25,668 | |||
Trustees’ and officers’ fees and benefits | 25,205 | |||
Reports to shareholders | 9,200 | |||
Professional services fees | 47,159 | |||
Other | 8,638 | |||
Total expenses | 3,856,067 | |||
Less: Fees waived | (9,219 | ) | ||
Net expenses | 3,846,848 | |||
Net investment income | 1,196,936 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from investment securities | 23,028,494 | |||
Change in net unrealized appreciation (depreciation) of investment securities | (59,304,127 | ) | ||
Net realized and unrealized gain (loss) | (36,275,633 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (35,078,697 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income | $ | 1,196,936 | $ | 1,181,060 | ||||
Net realized gain | 23,028,494 | 43,350,554 | ||||||
Change in net unrealized appreciation (depreciation) | (59,304,127 | ) | (9,438,439 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (35,078,697 | ) | 35,093,175 | |||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (13,858,867 | ) | (2,078,429 | ) | ||||
Series II | (33,748,480 | ) | (4,637,366 | ) | ||||
Total distributions from distributable earnings | (47,607,347 | ) | (6,715,795 | ) | ||||
Share transactions–net: | ||||||||
Series I | (2,498,966 | ) | (20,241,160 | ) | ||||
Series II | (67,396,523 | ) | (9,832,937 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (69,895,489 | ) | (30,074,097 | ) | ||||
Net increase (decrease) in net assets | (152,581,533 | ) | (1,696,717 | ) | ||||
Net assets: | ||||||||
Beginning of year | 399,107,648 | 400,804,365 | ||||||
End of year | $ | 246,526,115 | $ | 399,107,648 |
(1) | For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income and distributions from net realized gains. The Securities and Exchange Commission eliminated the requirement to disclose the distribution components separately, except for tax return of capital. For the year ended December 31, 2017, distributions from net investment income were $854,814 and $1,557,213 and distributions from net realized gains were $1,223,615 and $3,080,153 for Series I and Series II shares, respectively. |
Notes to Financial Statements
December 31, 2018
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. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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 theover-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 (“NAV”) 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 theend-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. American Value 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. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 investment 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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 of the cost of the related investment. These recharacterizations are reflected in the accompanying financial statements.
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.
Invesco V.I. American Value 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.
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 issuerderives 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. |
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 accrues daily and pays monthly 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 year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.72%.
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2019, 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 (the “expense limits”). 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, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $9,219.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $84,885 for accounting and fund administrative services and was reimbursed $520,278 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. American Value Fund
Plan, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Series II shares. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution fees.
For the year ended December 31, 2018, the Fund incurred $5,513 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 December 31, 2018, 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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 3,909,159 | $ | 2,412,027 | ||||
Long-term capital gain | 43,698,188 | 4,303,768 | ||||||
Total distributions | $ | 47,607,347 | $ | 6,715,795 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 2,353,120 | ||
Undistributedlong-term gain | 19,938,685 | |||
Net unrealized appreciation — investments | 63,222 | |||
Temporary book/tax differences | (56,201 | ) | ||
Shares of beneficial interest | 224,227,289 | |||
Total net assets | $ | 246,526,115 |
Invesco V.I. American Value Fund
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation (depreciation) difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 does not have a capital loss carryforward as of December 31, 2018.
NOTE 7—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $131,986,520 and $246,727,422, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 33,800,959 | ||
Aggregate unrealized (depreciation) of investments | (33,737,737 | ) | ||
Net unrealized appreciation of investments | $ | 63,222 |
Cost of investments for tax purposes is $245,790,174.
NOTE 8—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of REIT distributions, on December 31, 2018, undistributed net investment income was increased by $253,303, undistributed net realized gain was decreased by $206,121 and shares of beneficial interest was decreased by $47,182. This reclassification had no effect on the net assets of the Fund.
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 237,067 | $ | 3,989,332 | 303,660 | $ | 5,290,582 | ||||||||||
Series II | 1,290,855 | 23,139,466 | 3,186,094 | 54,783,210 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 796,944 | 13,858,867 | 122,260 | 2,078,429 | ||||||||||||
Series II | 1,959,842 | 33,748,480 | 275,215 | 4,637,366 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (1,132,589 | ) | (20,347,165 | ) | (1,582,312 | ) | (27,610,171 | ) | ||||||||
Series II | (7,116,736 | ) | (124,284,469 | ) | (4,078,148 | ) | (69,253,513 | ) | ||||||||
Net increase (decrease) in share activity | (3,964,617 | ) | $ | (69,895,489 | ) | (1,773,231 | ) | $ | (30,074,097 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 64% 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. American Value 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 18.38 | $ | 0.10 | $ | (1.87 | ) | $ | (1.77 | ) | $ | (0.09 | ) | $ | (2.66 | ) | $ | (2.75 | ) | $ | 13.86 | (12.65 | )% | $ | 77,491 | 0.93 | %(d) | 0.93 | %(d) | 0.52 | %(d) | 39 | % | |||||||||||||||||||||||
Year ended 12/31/17 | 17.06 | 0.08 | 1.59 | 1.67 | (0.14 | ) | (0.21 | ) | (0.35 | ) | 18.38 | 9.96 | 104,510 | 0.94 | 0.94 | 0.48 | 56 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 15.69 | 0.13 | 2.23 | 2.36 | (0.06 | ) | (0.93 | ) | (0.99 | ) | 17.06 | 15.49 | 116,762 | 0.97 | 0.97 | 0.84 | 50 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 19.92 | 0.06 | (1.82 | ) | (1.76 | ) | (0.06 | ) | (2.41 | ) | (2.47 | ) | 15.69 | (9.13 | ) | 125,686 | 0.99 | 0.99 | 0.33 | 26 | ||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 18.19 | 0.05 | (1.83 | ) | (1.78 | ) | (0.04 | ) | (2.66 | ) | (2.70 | ) | 13.71 | (12.82 | ) | 169,036 | 1.18 | (d) | 1.18 | (d) | 0.27 | (d) | 39 | |||||||||||||||||||||||||||||||||
Year ended 12/31/17 | 16.90 | 0.04 | 1.56 | 1.60 | (0.10 | ) | (0.21 | ) | (0.31 | ) | 18.19 | 9.62 | 294,598 | 1.19 | 1.19 | 0.23 | 56 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 15.55 | 0.09 | 2.21 | 2.30 | (0.02 | ) | (0.93 | ) | (0.95 | ) | 16.90 | 15.22 | 284,043 | 1.22 | 1.22 | 0.59 | 50 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 19.75 | 0.02 | (1.80 | ) | (1.78 | ) | (0.01 | ) | (2.41 | ) | (2.42 | ) | 15.55 | (9.36 | ) | 210,354 | 1.24 | 1.24 | 0.08 | 26 | ||||||||||||||||||||||||||||||||||||
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 |
(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 based on average daily net assets (000’s omitted) of $99,070 and $248,256 for Series I and Series II shares, respectively. |
Invesco V.I. American Value Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) and Shareholders of Invesco V.I. American Value Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. American Value Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and transfer agent. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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 (07/01/18) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 830.20 | $ | 4.34 | $ | 1,020.47 | $ | 4.79 | 0.94 | % | ||||||||||||
Series II | 1,000.00 | 829.00 | 5.49 | 1,019.21 | 6.06 | 1.19 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. American Value Fund
Tax Information
Form1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Long-Term Capital Gain Distributions | $ | 43,698,188 | ||
Corporate Dividends Received Deduction* | 90.50 | % | ||
U.S. Treasury Obligations* | 0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. American Value Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. American Value Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. American Value Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. American Value Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. American Value Fund
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Annual Report to Shareholders
| December 31, 2018 | |||
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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 FormN-Q (or any successor Form). The Fund’s FormN-Q (or any successor Form) filings are available on the SEC website, sec.gov. The SEC file numbers for the Fund are811-07452 and033-57340. The Fund’s most recent portfolio holdings, as filed on FormN-Q (or any successor Form), 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 recent12-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.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Invesco Distributors, Inc. VIIBRA-AR-1 02152019 1215 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. Balanced-Risk Allocation Fund (the Fund) underperformed the Custom Invesco V.I. Balanced-Risk Allocation Index, the Fund’s custom style-specific index.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -6.46 | % | |||
Series II Shares | -6.71 | ||||
MSCI World Index▼(Broad Market Index) | -8.71 | ||||
Custom Invesco V.I. Balanced-Risk Allocation Index∎(Style-Specific Index) | -5.10 | ||||
Lipper VUF Absolute Return Funds Classification Average◆(Peer Group) | -7.06 | ||||
Source(s):▼RIMES Technologies Corp.;∎Invesco, FactSet Research Systems Inc., RIMES Technologies Corp.;◆Lipper Inc. |
Market conditions and your Fund
For the year ended December 31, 2018, the Fund reported negative absolute performance as two of the three asset classes in which the Fund invests (stocks and commodities) detracted from Fund performance. The Fund invests in derivatives, such as swaps and futures, which are expected to correspond to the performance of US and international fixed income, equity and commodity markets. The strategic allocation portion of the investment process involves first selecting representative assets for each asset class from a universe of more than 50 assets. Next, we seek to construct the portfolio so that an approximately equal amount of risk comes from our equity, fixed income and commodity allocations. Tactical adjustments to the Fund’s portfolio are then made on a monthly basis to try and take advantage of short-term market dynamics.
The Fund’s strategic exposure to equities, obtained through the use of swaps and futures, detracted from results for the year as all six markets in which the Fund invests posted negative returns. Asian and European equities were the largest detractors. The Hong Kong market
languished as it tends to trade in sympathy with China, where markets fell in response to the ongoing trade conflict, as well as weakening economic data. Similarly, the Japanese market was also pressured by trade battles and fears of slowing global growth. Europe’s performance was affected by a sluggish economy, a stronger euro versus major trading partners’ currencies and the transition to a less accommodative monetary policy from the European Central Bank (ECB) due to cuts in bond purchases. The UK market was not immune to the volatility in global equities as it had to also deal with the ongoing challenge to leave the European Union (Brexit).
USlarge-cap equities were able to shrug off concerns about the global trade conflicts as tax cuts and stronger US economic growth supported earnings throughout the year, until a sharp pull-back in October erased the year’s gains. USsmall-cap equities also could not hold gains, despite benefiting from less direct export exposure, as global stock markets sold off late in the year. Tactical positioning in equities, obtained through the use of swaps and futures, detracted from Fund results during the year. Losses from overweight exposures versus the strategic
allocation in Europe, Hong Kong, Japan and the UK outweighed gains from positioning in US large- andsmall-cap equities.
The Fund’s strategic exposure to global government bonds, obtained through the use of swaps and futures, contributed to Fund performance for the year as five of the six markets in which the Fund invests posted positive performance. German government bonds were the top contributor to Fund performance for the year after having started the year off on weak footing as the ECB was signaling that it would begin to reduce asset purchases later in 2018. Prices then rose later in the year after Italy elected a new government – sparking fears of fracture across the European Union – and as the ECB reassured markets that policy would continue to be accommodative and data driven. Given Australia’s natural resource-based economy, Australian bonds benefited from escalating trade war concerns, which drove investors to safe-haven securities. Australian bonds also benefited from China’s slowing economic growth. Exposure to US bonds was the sole detractor within bonds during the year as the US Federal Reserve continued to raise interest rates as economic growth accelerated.
Tactical positioning to government bonds detracted from the Fund’s performance during the year as losses in Germany and the UK were not fully offset by gains in the US.
The Fund’s strategic exposure to commodities, obtained through the use of swaps, futures and commodity-linked notes, also detracted from Fund performance for the year as all strategic assets in which the strategy invests posted negative returns. Agriculture experienced the largest decline during the year due to the trade conflict and oversupplied markets. Within agriculture, soybeans and sugar were the top detractors from the
Target Risk Allocation and | ||||||||||
Notional Asset Weights as of 12/31/18 |
| |||||||||
By asset class
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Asset Class | | Target Risk Allocation* | | Notional Asset Weights** | ||||||
Equities | 27.94% | 31.01% | ||||||||
Fixed Income | 49.97 | 79.67 | ||||||||
Commodities | 22.09 | 28.51 | ||||||||
Total | 100.00 | 139.19 |
* | Reflects the risk that each asset class is expected to contribute to the overall risk of the Fund as measured by standard deviation and estimates of risk based on historical data. Standard deviation measures the annualized fluctuations (volatility) of monthly returns. |
** | Proprietary models determine the Notional Asset Weights necessary to achieve the Target Risk Allocations. Total Notional Asset Weight greater than 100% is achieved through derivatives and other instruments that create leverage. |
Total Net Assets | $1.0 billion |
Invesco V.I. Balanced-Risk Allocation Fund
Fund’s performance. Sugar suffered as bumper crops in India and Thailand continued to add to the global supply glut. Additionally, depreciating currencies in emerging markets, against a stronger US dollar, caused emerging market agriculture producers to lower prices in response to consumer demand. Soybeans also declined as they were caught in the crosshairs of the trade battle with China while the US harvest produced high crop yields.
Energy posted gains through the year, before collapsing in the fourth quarter and detracting from the Fund’s performance. Evidence of slowing manufacturing and economic activity, which resulted from the trade dispute between the US and China and the effects of central bank actions, tempered demand expectations. This bearish demand sentiment, along with concerns about robust production, led to sharp declines in energy prices during the year.
Industrial metals also detracted from the Fund’s performance during the year due to the strengthening US dollar and a softening Chinese economy. Precious metals declined as higher interest rates in the US provided support for the US dollar and decreased demand for gold and silver. Silver declined more than gold as it traded in sympathy with its crossover use as an industrial metal.
Tactical positioning in commodities contributed to the Fund’s performance during the year due to positioning in energy and underweight allocations to agriculture and precious metals.
Please note that our strategy is principally implemented with derivative instruments that include futures, commodity-linked notes and total return swaps. Therefore, all or most of the performance of the strategy, both positive and negative, can be attributed to these instruments. Derivatives can be a cost-effective way to gain exposure to asset classes. However, derivatives may amplify traditional investment risks through the creation of leverage and may be less liquid than traditional securities.
Thank you for your continued investment in Invesco V.I. Balanced-Risk Allocation Fund.
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Mark Ahnrud Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Balanced-Risk Allocation Fund. | ||
He joined Invesco in 2000. Mr. Ahnrud earned a BS in finance and investments from Babson College and an MBA from Duke University Fuqua School of Business. |
Chris Devine Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Balanced-Risk Allocation Fund. | ||
He joined Invesco in 1998. Mr. Devine earned a BA in economics from Wake Forest University and an MBA from the University of Georgia. |
Scott Hixon Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Balanced-Risk Allocation Fund. | ||
He joined Invesco in 1994. Mr. Hixon earned a BBA in finance from Georgia Southern University and an MBA in finance from Georgia State University. |
Christian Ulrich Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Balanced-Risk Allocation Fund. | ||
He joined Invesco in 2000. Mr. Ulrich earned the equivalent of a BBA from the KV Zurich Business School in Zurich, Switzerland. |
Scott Wolle Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Balanced-Risk Allocation Fund. | ||
He joined Invesco in 1999. Mr. Wolle earned a BS in finance from Virginia Polytechnic Institute and State University and an MBA from Duke University Fuqua School of Business. |
Assisted by Invesco’s Global Asset Allocation Team
Invesco V.I. Balanced-Risk Allocation Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es) since Inception
Fund and index data from 1/23/09
1 | Source: RIMES Technologies Corp. |
2 | Source(s): Invesco, FactSet Research Systems Inc., RIMES Technologies Corp. |
Past performance cannot guarantee comparable future results.
Due to changes within the Lipper VUF Absolute Returns Funds Classification Average, certain components do not have 10 years of historical data. As such, the benchmark has not been included within the chart above.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (1/23/09) | 7.52 | % | |||
5 Years | 3.16 | ||||
1 Year | -6.46 | ||||
Series II Shares | |||||
Inception (1/23/09) | 7.24 | % | |||
5 Years | 2.92 | ||||
1 Year | -6.71 |
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 recentmonth-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Performance figures in the table and chart do not reflect deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 1.26% and 1.51%, 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 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 recentmonth-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recentmonth-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 0.15%. |
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, 2020. See current prospectus for more information. |
3 | Total annual Fund operating expenses after any contractual fee waivers by the adviser in effect through at least June 30, 2020. See current prospectus for more information. |
Invesco V.I. Balanced-Risk Allocation Fund
Invesco V.I. Balanced-Risk Allocation Fund’s investment objective is total return with a low to moderate correlation to traditional financial market indices.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Active trading risk.Active trading of portfolio securities may result in added expenses, a lower return and increased tax liability.
Changing fixed income market conditions risk.The current low interest rate environment was created in part by the Federal Reserve Board (FRB) and certain foreign central banks keeping the federal funds and equivalent foreign rates near, at or below zero. Increases in the federal funds and equivalent foreign rates may expose fixed income markets to heightened volatility and reduced liquidity for certain fixed income investments, particularly those with longer maturities. In addition, decreases in fixed income dealer market-making capacity may also potentially lead to heightened volatility and reduced liquidity in the fixed income markets. As a result, the value of the Fund’s investments and share price may decline. Changes in central bank policies could also result in higher than normal shareholder redemptions, which could potentially increase portfolio turnover and the Fund’s transaction costs.
Commodities tax risk.The tax treatment of commodity-linked derivative instruments may be adversely affected by changes in legislation, regulations or other legally binding authority. If, as a result of any such adverse action, the income of the Fund from certain commodity-linked derivatives was treated asnon-qualifying income, the Fund might fail to qualify as a regulated investment company and be subject to federal income tax at the Fund level. As a result of a recent announcement by the Internal Revenue Service, the Fund intends to invest in commodity-linked notes: (a) directly, relying on an opinion of counsel confirming that income from such investments should be qualifying income because such commodity-linked notes constitute securities under section 2(a)(36) of the 1940 Act or (b) indirectly through the Subsidiary. Should the Internal Revenue Service issue further guidance, or Congress enact legislation, that adversely affects the tax treatment of the Fund’s use of commodity-linked notes or the Subsidiary (which guidance might be applied to the Fund retroactively), it could, among other consequences, limit the Fund’s ability to pursue its investment strategy.
Commodity-linked notes risk.In addition to risks associated with the underlying commodities, investments in commodity-linked notes may be subject to additional risks, such asnon-payment of interest and loss of principal, counterparty risk, lack of a secondary market and risk of greater volatility than traditional equity and debt securities. The value of the commodity-linked notes the Fund buys may fluctuate significantly because the values of the underlying investments to which they are linked are themselves volatile. Additionally, certain commodity-linked notes employ “economic” leverage by requiring payment by the issuer of an amount that is a multiple of the price increase or decrease of the underlying commodity, commodity index, or other economic variable. Such economic leverage will increase the volatility of the value of these commodity-linked notes and the Fund to the extent it invests in such notes.
Commodity risk.The Fund may have investment exposure to the commodities markets and/or a particular sector of the commodities markets, which may subject the Fund to greater volatility than investments in traditional securities, such as stocks and bonds. Volatility in the commodities markets may be caused by changes in overall market movements, domestic and foreign political and economic events and policies, war, acts of terrorism, changes in domestic or foreign interest rates and/or investor expectations concerning interest rates, domestic and foreign inflation rates, investment and trading activities of mutual funds, hedge funds and commodities funds, and factors such as drought, floods, weather, livestock disease, embargoes, tariffs and other regulatory developments or supply and demand disruptions. Because the Fund’s performance may be linked to the performance of volatile commodities, investors should be willing to assume the risks of potentially significant fluctuations in the value of the Fund’s shares.
Correlation risk.Because the Fund’s investment strategy seeks to balance risk across three asset classes and, within each asset class, across different countries and investments, to the extent either the asset classes or the selected countries and investments become correlated in a way not anticipated by the Adviser, the Fund’s risk allocation process
may result in magnified risks and loss instead of balancing (reducing) the risk of loss.
Debt securities risk.The prices of debt securities held by the Fund will be affected by changes in interest rates, the creditworthiness of the issuer and other factors. An increase in prevailing interest rates typically causes the value of existing debt securities to fall and often has a greater impact on longer-duration debt securities and higher quality debt securities. Falling interest rates will cause the Fund to reinvest the proceeds of debt securities that have been repaid by the issuer at lower interest rates. Falling interest rates may also reduce the Fund’s distributable income because interest payments on floating rate debt instruments held by the Fund will decline. The Fund could lose money on investments in debt securities if the issuer or borrower fails to meet its obligations to make interest payments and/or to repay principal in a timely manner. Changes in an issuer’s financial strength, the market’s perception of such strength or in the credit rating of the issuer or the security may affect the value of debt securities. The Adviser’s credit analysis may fail to anticipate such changes, which could result in buying a debt security at an inopportune time or failing to sell a debt security in advance of a price decline or other credit event.
Derivatives risk.The value of a derivative instrument depends largely on (and is derived from) the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include other, possibly greater, risks, including counterparty, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by holding a position in the derivative. As a result, an adverse change in the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative or the anticipated value of the underlying asset, which may
Invesco V.I. Balanced-Risk Allocation Fund
make the Fund’s returns more volatile and increase the risk of loss. Derivative instruments may also be less liquid than more traditional investments and the Fund may be unable to sell or close out its derivative positions at a desirable time or price. This risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. The SEC has proposed new regulations related to the use of derivatives and related instruments by registered investment companies. If adopted as proposed, these regulations would limit the Fund’s ability to engage in derivatives transactions and may result in increased costs or require the Fund to modify its investment strategies or to liquidate. Derivatives strategies may not always be successful. For example, derivatives used for hedging or to gain or limit exposure to a particular market segment may not provide the expected benefits, particularly during adverse market conditions. These risks are greater for the Fund than most other mutual funds because the Fund will implement its investment strategy primarily through derivative instruments rather than direct investments in stocks/bonds.
Exchange-traded funds risk.In addition to the risks associated with the underlying assets held by the exchange-traded fund, investments in exchange-traded funds are subject to the following additional risks: (1) an exchange-traded fund’s shares may trade above or below its net asset value; (2) an active trading market for the exchange-traded fund’s shares may not develop or be maintained; (3) trading an exchange-traded fund’s shares may be halted by the listing exchange; (4) a passively managed exchange-traded fund may not track the performance of the reference asset; and (5) a passively managed exchange-traded fund may hold troubled securities. Investment in exchange-traded funds may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the exchange-traded funds in which it invests. Further, certain exchange-traded funds in which the Fund may invest are leveraged, which may result in economic leverage, permitting the Fund to gain exposure that is greater than would be the case in an unlevered instrument and potentially resulting in greater volatility.
Exchange-traded notes risk.Exchange-traded notes are subject to credit risk, counterparty risk, and the risk that the value of the exchange-traded note may drop due to a downgrade in the issuer’s credit rating. The value of an exchange-traded note may also be influenced by time to maturity, level of supply and demand for the exchange-traded note, volatility and lack of liquidity in the underlying market, changes in the applicable interest rates, and economic, legal, political, or geographic events that affect the referenced underlying market or assets. The Fund will bear its proportionate share of any fees and expenses borne by an exchange-traded note in which it invests. For certain exchange-traded notes, there may be restrictions on the Fund’s right to redeem its investment, which is meant to be held until maturity.
Foreign government debt risk.Investments in foreign government debt securities (sometimes referred to as sovereign debt securities) involve certain risks in addition to those relating to foreign securities or debt securities generally. The issuer of the debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due in accordance with the terms of such debt, and the Fund may have limited recourse in the event of a default against the defaulting government. Without the approval of debt holders, some governmental debtors have in the past been able to reschedule or restructure their debt payments or declare moratoria on payments.
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Because the Fund’s investment process relies heavily on its asset allocation process, market movements that are counter to the portfolio managers’ expectations may have a significant adverse effect on the Fund’s net asset value. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
Short position risk.Because the Fund’s potential loss on a short position arises from increases in the value of the asset sold short, the Fund will incur a loss on a short position, which is theoretically unlimited, if the price of the asset sold short increases from the short sale price. The counterparty to a short position or other market factors may prevent the Fund from closing out a short position at a desirable time or price and may reduce or eliminate any gain or result in a loss. In a rising market, the Fund’s short positions will cause the Fund to underperform the overall market and its peers that do not engage in shorting. If the Fund holds both long and short positions, and both positions decline simultaneously, the short positions will not provide any buffer (hedge) from declines in value of the Fund’s long positions. Certain types of short positions involve leverage, which may exaggerate any losses, potentially more than the actual cost of the investment, and will increase the volatility of the Fund’s returns.
Invesco V.I. Balanced-Risk Allocation Fund
Subsidiary risk.By investing in the Subsidiary, the Fund is indirectly exposed to risks associated with the Subsidiary’s investments. The Subsidiary is not registered under the Investment Company Act of 1940, as amended (1940 Act), and, except as otherwise noted in the prospectus, is not subject to the investor protections of the 1940 Act. Changes in the laws of the United States and/or the Cayman Islands, under which the Fund and the Subsidiary, respectively, are organized, could result in the inability of the Fund and/or the Subsidiary to operate as described in the prospectus and the SAI, and could negatively affect the Fund and its shareholders.
US government obligations risk.Obligations of US government agencies and authorities receive varying levels of support and may not be backed by the full faith and credit of the US government, which could affect the Fund’s ability to recover should they default. No assurance can be given that the US government will provide financial support to its agencies and authorities if it is not obligated by law to do so.
Volatility risk.Although the Fund’s investment strategy targets a specific volatility level, certain of the Fund’s investments may appreciate or decrease significantly in value over short periods of time. This may cause the Fund’s net asset value per share to experience significant increases or declines in value over short periods of time.
About indexes used in this report
TheMSCI WorldSM Index is considered representative of stocks of developed countries. The index is computed using the net return, which withholds applicable taxes fornon-resident investors.
TheCustom Invesco V.I. Balanced-Risk Allocation Index is composed of the MSCI World Index and Bloomberg Barclays U.S. Aggregate Bond Index. Prior to May 2, 2011, the index comprised the MSCI World Index, JP Morgan GBI Global Index and FTSE US3-Month Treasury Bill Index.
TheLipper VUF Absolute Return Funds Classification Average represents an average of all variable insurance underlying funds in the Lipper Absolute Return Funds Classification.
TheBloomberg Barclays U.S. Aggregate Bond Index is considered representative of the US investment grade,fixed-rate bond market.
TheFTSE US3-Month Treasury Bill Index is considered representative of three-month US Treasury bills.
TheJP Morgan GBI Global Index tracks the performance offixed-rate issuances from high-income, developed market countries.
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.
Other information
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Invesco V.I. Balanced-Risk Allocation Fund
Consolidated Schedule of Investments
December 31, 2018
Interest Rate | Maturity Date | Principal Amount | Value | |||||||||||||
U.S. Treasury Bills–12.39%(a) |
| |||||||||||||||
U.S. Treasury Bills | 0.10 | % | 01/10/2019 | $ | 50,000,000 | $ | 49,973,919 | |||||||||
U.S. Treasury Bills(b) | 0.44 | % | 02/07/2019 | 14,300,000 | 14,268,004 | |||||||||||
U.S. Treasury Bills | 1.89 | % | 03/14/2019 | 13,000,000 | 12,937,870 | |||||||||||
U.S. Treasury Bills(b) | 2.13 | % | 06/06/2019 | 48,000,000 | 47,483,265 | |||||||||||
Total U.S. Treasury Bills (Cost $124,662,370) | 124,663,058 | |||||||||||||||
Expiration Date | ||||||||||||||||
Commodity-Linked Securities–1.95% | ||||||||||||||||
Canadian Imperial Bank of Commerce EMTN, U.S. Federal Funds Effective Rate minus 0.03% (linked to the Canadian Imperial Bank of Commerce Custom 7 Agriculture Commodity Index, multiplied by 2)(c)(*) | 08/23/2019 | 8,540,000 | 7,598,426 | |||||||||||||
Cargill, Inc., Commodity-Linked Notes, one mo. USD LIBOR minus 0.10% (linked to the Monthly Rebalance Commodity Excess Return Index, multiplied by 2)(c)(*) | 08/21/2019 | 13,450,000 | 12,048,925 | |||||||||||||
Total Commodity-Linked Securities (Cost $21,990,000) | 19,647,351 | |||||||||||||||
Shares | ||||||||||||||||
Money Market Funds–84.65%(d) | ||||||||||||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30% | 310,595,820 | 310,595,820 | ||||||||||||||
Invesco Government Money Market Fund–Cash Reserve Shares, 1.89% | 41,970,831 | 41,970,831 | ||||||||||||||
Invesco Premier U.S. Government Money Portfolio–Institutional Class, 2.30% | 86,563,159 | 86,563,159 | ||||||||||||||
Invesco Treasury Obligations Portfolio–Institutional Class, 2.21% | 171,324,067 | 171,324,067 | ||||||||||||||
Invesco Treasury Portfolio–Institutional Class, 2.30% | 176,995,281 | 176,995,281 | ||||||||||||||
Invesco V.I. Government Money Market Fund–Series I, 2.12% | 16,640,310 | 16,640,310 | ||||||||||||||
STIC (Global Series) PLC–U.S. Dollar Liquidity Portfolio–Institutional Class (Ireland), 2.47% | 47,247,984 | 47,247,984 | ||||||||||||||
Total Money Market Funds (Cost $851,337,452) | 851,337,452 | |||||||||||||||
TOTAL INVESTMENTS IN SECURITIES–98.99% (Cost $997,989,822) | 995,647,861 | |||||||||||||||
OTHER ASSETS LESS LIABILITIES–1.01% | 10,131,640 | |||||||||||||||
NET ASSETS–100.00% | $ | 1,005,779,501 |
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 | ||||||||||||||||||||
Long Futures Contracts | Number of Contracts | Expiration Month | Notional Value | Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
Brent Crude | 290 | April-2019 | $ | 15,825,300 | $ | (2,249,255 | ) | $ | (2,249,255 | ) | ||||||||||
Gasoline Reformulated Blendstock Oxygenate Blending | 378 | January-2019 | 20,672,140 | (2,278,064 | ) | (2,278,064 | ) | |||||||||||||
Natural Gas | 33 | November-2019 | 972,180 | (27,551 | ) | (27,551 | ) | |||||||||||||
New York Harbor Ultra-Low Sulfur Diesel | 30 | February-2019 | 2,104,074 | (926,127 | ) | (926,127 | ) | |||||||||||||
Silver | 162 | March-2019 | 12,587,400 | 948,072 | 948,072 | |||||||||||||||
WTI Crude | 151 | May-2019 | 7,086,430 | (1,088,940 | ) | (1,088,940 | ) | |||||||||||||
Subtotal — Commodity Risk |
| (5,621,865 | ) | (5,621,865 | ) | |||||||||||||||
E-Mini Russell 2000 Index | 595 | March-2019 | 40,132,750 | (2,644,176 | ) | (2,644,176 | ) | |||||||||||||
E-Mini S&P 500 Index | 296 | March-2019 | 37,076,960 | (2,075,548 | ) | (2,075,548 | ) | |||||||||||||
EURO STOXX 50 Index | 1,520 | March-2019 | 51,793,385 | (1,407,161 | ) | (1,407,161 | ) | |||||||||||||
FTSE 100 Index | 615 | March-2019 | 52,198,493 | (612,103 | ) | (612,103 | ) | |||||||||||||
Hang Seng Index | 370 | January-2019 | 61,081,540 | 262,216 | 262,216 | |||||||||||||||
Tokyo Stock Price Index | 438 | March-2019 | 59,682,770 | (3,418,385 | ) | (3,418,385 | ) | |||||||||||||
Subtotal — Equity Risk |
| (9,895,157 | ) | (9,895,157 | ) | |||||||||||||||
Australia 10 Year Bonds | 1,705 | March-2019 | 159,331,549 | 1,781,073 | 1,781,073 | |||||||||||||||
Canada 10 Year Bonds | 2,540 | March-2019 | 254,465,133 | 7,497,845 | 7,497,845 | |||||||||||||||
Euro Bund | 593 | March-2019 | 111,113,909 | 618,785 | 618,785 | |||||||||||||||
Japan 10 Year Government Bonds | 43 | March-2019 | 59,820,629 | 196,158 | 196,158 | |||||||||||||||
Long Gilt | 834 | March-2019 | 130,931,707 | 1,036,204 | 1,036,204 | |||||||||||||||
U.S. Treasury Long Bonds | 839 | March-2019 | 122,494,000 | 5,427,999 | 5,427,999 | |||||||||||||||
Subtotal — Interest Rate Risk |
| 16,558,064 | 16,558,064 | |||||||||||||||||
Total Futures Contracts |
| $ | 1,041,042 | $ | 1,041,042 |
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(e)(f) | ||||||||||||||||||||||||||||||||||||||
Counterparty | Pay/ Receive | Reference Entity(*) | Fixed Rate | Payment Frequency | Number of Contracts | Maturity Date | Notional Value | Upfront Payments Paid (Received) | Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||||||
Cargill, Inc. | Receive | Monthly Rebalance Commodity Excess Return Index | 0.47 | % | Monthly | 36,350 | July-2019 | $ | 25,892,447 | $ | — | $ | 0 | $ | 0 | |||||||||||||||||||||||
JPMorgan Chase Bank, N.A. | Receive | S&P GSCI Gold Index Excess Return | 0.09 | Monthly | 151,500 | October-2019 | 15,225,689 | — | 113,731 | 113,731 | ||||||||||||||||||||||||||||
Merrill Lynch International | Receive | Merrill Lynch Gold Excess Return Index | 0.14 | Monthly | 111,500 | June-2019 | 17,692,831 | — | 0 | 0 | ||||||||||||||||||||||||||||
Merrill Lynch International | Receive | MLCX Dynamic Enhanced Copper Excess Return Index | 0.25 | Monthly | 2,300 | September-2019 | 1,307,309 | — | 0 | 0 | ||||||||||||||||||||||||||||
Merrill Lynch International | Receive | MLCX Natural Gas Annual Excess Return Index | 0.25 | Monthly | 309,000 | November-2019 | 14,436,078 | — | 6 | 6 | ||||||||||||||||||||||||||||
Subtotal — Commodity Risk |
| — | 113,737 | 113,737 | ||||||||||||||||||||||||||||||||||
Goldman Sachs International | Receive | Hang Seng Index Futures | — | Monthly | 5 | January-2019 | 822,269 | — | 3,025 | 3,025 | ||||||||||||||||||||||||||||
Subtotal — Equity Risk |
| — | 3,025 | 3,025 | ||||||||||||||||||||||||||||||||||
Subtotal — Appreciation |
| — | 116,762 | 116,762 | ||||||||||||||||||||||||||||||||||
Barclays Bank PLC | Receive | Barclays Commodity Strategy 1452 Excess Return Index | 0.33 | Monthly | 41,800 | October-2019 | 20,581,981 | — | (527,829 | ) | (527,829 | ) | ||||||||||||||||||||||||||
Barclays Bank PLC | Receive | Barclays Commodity Strategy 1735 Excess Return Index | 0.45 | Monthly | 113,200 | July-2019 | 27,891,439 | — | (957,695 | ) | (957,695 | ) | ||||||||||||||||||||||||||
Canadian Imperial Bank of Commerce | Receive | Canadian Imperial Bank of Commerce Dynamic Roll LME Copper Excess Return Index 2 | 0.30 | Monthly | 268,500 | April-2019 | 20,708,063 | — | (667,867 | ) | (667,867 | ) | ||||||||||||||||||||||||||
Goldman Sachs International | Receive | Goldman Sachs Commodity Strategy 1072 | 0.40 | Monthly | 350,000 | July-2019 | 27,229,178 | — | (1,335,585 | ) | (1,335,585 | ) | ||||||||||||||||||||||||||
JPMorgan Chase Bank, N.A. | Receive | J.P. Morgan Contag Beta Gas Oil Excess Return Index | 0.25 | Monthly | 25,300 | April-2019 | 5,592,282 | — | (32,607 | ) | (32,607 | ) | ||||||||||||||||||||||||||
Morgan Stanley Capital Services LLC | Receive | S&P GSCI Aluminum Dynamic Roll Index Excess Return | 0.38 | Monthly | 145,500 | October-2019 | 14,072,670 | — | (630,064 | ) | (630,064 | ) | ||||||||||||||||||||||||||
Subtotal — Depreciation — Commodity Risk |
| — | (4,151,647 | ) | (4,151,647 | ) | ||||||||||||||||||||||||||||||||
Total — Over-The-Counter Total Return Swap Agreements |
| $ | — | $ | (4,034,885 | ) | $ | (4,034,885 | ) |
Investments Abbreviations:
EMTN | – European Medium-Term Notes | |
LIBOR | – London Interbank Offered Rate | |
USD | – U.S. Dollar |
See accompanying Notes to Consolidated Financial Statements which are an integral part of the financial statements.
Invesco V.I. Balanced-Risk Allocation Fund
Notes to Consolidated Schedule of Investments:
(a) | Securities 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. |
(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 December 31, 2018, was $19,647,351, which represented 1.95% of the Fund’s Net Assets. |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
(e) | The Fund receives or pays payments based on any positive or negative return on the Reference Entity, respectively. |
(f) | Open Over-The-Counter Total Return Swap Agreements are collateralized by cash held with the swap Counterparties in the amount of $14,434,596. |
(*) | The table below includes additional information regarding the underlying components of certain reference entities that are not publicly available. |
Reference Entity Components | ||||||
Reference Entity | Underlying Components | Percentage | ||||
Canadian Imperial Bank of Commerce Custom 7 Agriculture Commodity Index | ||||||
Long Futures Contracts | ||||||
Coffee ‘C’ | 4.39 | % | ||||
Corn | 5.04 | |||||
Cotton No. 2 | 20.55 | |||||
Lean Hogs | 0.51 | |||||
Live Cattle | 1.75 | |||||
Soybean Meal | 19.44 | |||||
Soybean Oil | 4.39 | |||||
Soybeans | 19.15 | |||||
Sugar No. 11 | 19.96 | |||||
Wheat | 4.82 | |||||
Total | 100.00 | % | ||||
Monthly Rebalance Commodity Excess Return Index | ||||||
Long Futures Contracts | ||||||
Coffee ‘C’ | 4.39 | % | ||||
Corn | 5.04 | |||||
Cotton No. 2 | 20.55 | |||||
Lean Hogs | 0.51 | |||||
Live Cattle | 1.75 | |||||
Soybean Meal | 19.44 | |||||
Soybean Oil | 4.39 | |||||
Soybeans | 19.15 | |||||
Sugar No. 11 | 19.96 | |||||
Wheat | 4.82 | |||||
Total | 100.00 | % | ||||
S&P GSCI Aluminum Dynamic Roll Index Excess Return | ||||||
Long Futures Contracts | ||||||
Aluminum | 100.00 | % | ||||
Merrill Lynch Gold Excess Return Index | ||||||
Long Futures Contracts | ||||||
Gold | 100.00 | % | ||||
MLCX Dynamic Enhanced Copper Excess Return Index | ||||||
Long Futures Contracts | ||||||
Copper | 100.00 | % | ||||
MLCX Natural Gas Annual Excess Return Index | ||||||
Long Futures Contracts | ||||||
Natural Gas | 100.00 | % |
See accompanying Notes to Consolidated Financial Statements which are an integral part of the financial statements.
Invesco V.I. Balanced-Risk Allocation Fund
Reference Entity Components—(continued) | ||||||
Reference Entity | Underlying Components | Percentage | ||||
Barclays Commodity Strategy 1452 Excess Return Index | ||||||
Long Futures Contracts | ||||||
Copper | 100.00 | % | ||||
Barclays Commodity Strategy 1735 Excess Return Index | ||||||
Long Futures Contracts | ||||||
Coffee ‘C’ | 4.39 | % | ||||
Corn | 5.04 | |||||
Cotton No. 2 | 20.55 | |||||
Lean Hogs | 0.51 | |||||
Live Cattle | 1.75 | |||||
Soybean Meal | 19.44 | |||||
Soybean Oil | 4.39 | |||||
Soybeans | 19.15 | |||||
Sugar No. 11 | 19.96 | |||||
Wheat | 4.82 | |||||
Total | 100.00 | % | ||||
Canadian Imperial Bank of Commerce Dynamic Roll LME Copper Excess Return Index 2 | ||||||
Long Futures Contracts | ||||||
Copper | 100.00 | % | ||||
Goldman Sachs Commodity Strategy 1072 | ||||||
Long Futures Contracts | ||||||
Coffee ‘C’ | 4.39 | % | ||||
Corn | 5.04 | |||||
Cotton No. 2 | 20.55 | |||||
Lean Hogs | 0.51 | |||||
Live Cattle | 1.75 | |||||
Soybean Meal | 19.44 | |||||
Soybean Oil | 4.39 | |||||
Soybeans | 19.15 | |||||
Sugar No. 11 | 19.96 | |||||
Wheat | 4.82 | |||||
Total | 100.00 | % | ||||
J.P. Morgan Contag Beta Gas Oil Excess Return Index | ||||||
Long Futures Contracts | ||||||
Gas Oil | 100.00 | % | ||||
S&P GSCI Gold Index Excess Return | ||||||
Long Futures Contracts | ||||||
Gold | 100.00 | % |
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
December 31, 2018
Consolidated Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $146,652,370) | $ | 144,310,409 | ||
Investments in affiliated money market funds, at value and cost | 851,337,452 | |||
Other investments: | ||||
Variation margin receivable — futures contracts | 2,126,644 | |||
Swaps receivable — OTC | 763,619 | |||
Unrealized appreciation on swap agreements — OTC | 116,762 | |||
Deposits with brokers: | ||||
Cash collateral — OTC derivatives | 14,434,596 | |||
Foreign currencies, at value (Cost $1,411) | 1,194 | |||
Receivable for: | ||||
Investments sold | 220 | |||
Fund shares sold | 502,073 | |||
Dividends and interest | 1,596,488 | |||
Investment for trustee deferred compensation and retirement plans | 92,142 | |||
Total assets | 1,015,281,599 | |||
Liabilities: | ||||
Other investments: | ||||
Swaps payable — OTC | 1,431,043 | |||
Unrealized depreciation on swap agreements — OTC | 4,151,647 | |||
Payable for: | ||||
Amount due to custodian | 406,356 | |||
Fund shares reacquired | 2,264,026 | |||
Accrued fees to affiliates | 1,064,977 | |||
Accrued trustees’ and officers’ fees and benefits | 6,706 | |||
Accrued other operating expenses | 72,068 | |||
Trustee deferred compensation and retirement plans | 105,275 | |||
Total liabilities | 9,502,098 | |||
Net assets applicable to shares outstanding | $ | 1,005,779,501 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 1,038,102,867 | ||
Distributable earnings | (32,323,366 | ) | ||
$ | 1,005,779,501 | |||
Net Assets: | ||||
Series I | $ | 37,450,084 | ||
Series II | $ | 968,329,417 | ||
Shares outstanding, no par value, |
| |||
Series I | 3,955,850 | |||
Series II | 103,708,360 | |||
Series I: | ||||
Net asset value per share and offering price per share | $ | 9.47 | ||
Series II: | ||||
Net asset value per share | $ | 9.34 |
Investment income: | ||||
Dividends from affiliated money market funds | $ | 16,375,349 | ||
Interest | 2,454,775 | |||
Total investment income | 18,830,124 | |||
Expenses: | ||||
Advisory fees | 10,267,998 | |||
Administrative services fees | 1,948,419 | |||
Custodian fees | 12,935 | |||
Distribution fees — Series II | 2,711,759 | |||
Transfer agent fees | 24,533 | |||
Trustees’ and officers’ fees and benefits | 35,657 | |||
Reports to shareholders | 11,761 | |||
Professional services fees | 90,062 | |||
Other | 14,463 | |||
Total expenses | 15,117,587 | |||
Less: Fees waived | (5,003,680 | ) | ||
Net expenses | 10,113,907 | |||
Net investment income | 8,716,217 | |||
Realized and unrealized gain (loss): | ||||
Net realized gain (loss) from: | ||||
Investment securities | (4,967,794 | ) | ||
Foreign currencies | 1,180,226 | |||
Futures contracts | (40,238,569 | ) | ||
Swap agreements | (18,874,989 | ) | ||
(62,901,126 | ) | |||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (2,355,176 | ) | ||
Foreign currencies | 55,920 | |||
Futures contracts | (6,787,546 | ) | ||
Swap agreements | (12,151,994 | ) | ||
(21,238,796 | ) | |||
Net realized and unrealized gain (loss) | (84,139,922 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (75,423,705 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 8,716,217 | $ | (1,675,961 | ) | |||
Net realized gain (loss) | (62,901,126 | ) | 101,494,421 | |||||
Change in net unrealized appreciation (depreciation) | (21,238,796 | ) | 10,795,576 | |||||
Net increase (decrease) in net assets resulting from operations | (75,423,705 | ) | 110,614,036 | |||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (3,802,380 | ) | (3,554,824 | ) | ||||
Series II | (107,564,085 | ) | (106,373,815 | ) | ||||
Total distributions from distributable earnings | (111,366,465 | ) | (109,928,639 | ) | ||||
Return of Capital: | ||||||||
Series I | (318,341 | ) | — | |||||
Series II | (2,637,420 | ) | — | |||||
Total Return of Capital | (2,955,761 | ) | — | |||||
Share transactions–net: | ||||||||
Series I | 4,812,203 | 4,606,109 | ||||||
Series II | (6,703,716 | ) | 43,872,788 | |||||
Net increase (decrease) in net assets resulting from share transactions | (1,891,513 | ) | 48,478,897 | |||||
Net increase (decrease) in net assets | (191,637,444 | ) | 49,164,294 | |||||
Net assets: | ||||||||
Beginning of year | 1,197,416,945 | 1,148,252,651 | ||||||
End of year | $ | 1,005,779,501 | $ | 1,197,416,945 |
(1) | For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income and distributions from net realized gains. The Securities and Exchange Commission eliminated the requirement to disclose the distribution components separately, except for tax return of capital. For the year ended December 31, 2017, distributions from net investment income were $1,508,787 and $43,695,120 and distributions from net realized gains were $2,046,037 and $62,678,695 for Series I and Series II, respectively. |
Notes to Consolidated Financial Statements
December 31, 2018
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 anopen-end series management investment company. Information presented in these consolidated financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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”), awholly-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 and other securities that may provide leveraged and non-leveraged exposure to commodities. 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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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. Balanced-Risk Allocation Fund
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 theover-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 (“NAV”) 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 theend-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 includeend-of-day net present values, spreads, ratings, industry, company performance and returns of referenced assets. Centrally cleared swap agreements are valued at the daily settlement price determined by the relevant exchange or clearinghouse.
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 investment 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. Bond premiums and discounts are amortized and/or accreted over the lives of the respective securities.Pay-in-kind interest income andnon-cash dividend income received in the form of securities in-lieu of cash are recorded at the fair value of the securities received. 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 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 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 the Consolidated Statement of Changes in Net Assets, or the net investment income per share and the 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 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 |
Invesco V.I. Balanced-Risk Allocation Fund
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 asother 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 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 the 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 the dailymark-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 anagreed-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
Invesco V.I. Balanced-Risk Allocation Fund
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 financialindicators (“reference instruments”). Most structured securities are fixed-income securities that have maturities of three years or less. Structuredsecurities 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. |
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 equitize the Fund’s cash holdings or to manage exposure to interest rate, equity, commodity 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, commodity 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.
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.
A total return swap is an agreement in which one party makes payments based on a set rate, either fixed or variable, while the other party makes payments based on the return of an underlying asset, which includes both the income generated and capital gains, if any. The unrealized appreciation (depreciation) on total return swaps includes dividends on the underlying securities and financing rate payable from the Counterparty. 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 cash or liquid securities having a value at least equal to the amount of the potential obligation of a Fund under any swap transaction. Cash held as collateral is recorded as deposits with brokers on the Consolidated Statement of Assets and Liabilities. 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
Invesco V.I. Balanced-Risk Allocation Fund
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.
N. | Leverage Risk— Leverage exists when the 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 incommodities, commodity-linked derivatives and other securities, such as exchange-traded and commodity-linked notes, that may provide leveraged and non-leveraged exposure to commodity markets. The Fund is indirectly exposed to the risks associated with the Subsidiary’s investments. |
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 accrues daily and pays monthly 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 year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.91%.
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 mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least April 30, 2020, 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 (including prior fiscal year-end Acquired Fund Fees and Expenses of 0.15% and excluding certain items discussed below) of Series I shares to 0.80% and Series II shares to 1.05% of average daily net assets (the “expense limits”). 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, 2020. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $5,003,680.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $263,402 for accounting and fund administrative services and was reimbursed $1,685,017 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Consolidated Statement of Operations asTransfer agent fees.
Invesco V.I. Balanced-Risk Allocation Fund
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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Consolidated Statement of Operations asDistribution 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 December 31, 2018. 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 | |||||||||||||
Investments in Securities | ||||||||||||||||
U.S. Treasury Securities | $ | — | $ | 124,663,058 | $ | — | $ | 124,663,058 | ||||||||
Commodity Linked Securities | — | 19,647,351 | — | 19,647,351 | ||||||||||||
Money Market Funds | 851,337,452 | — | — | 851,337,452 | ||||||||||||
Total Investments in Securities | 851,337,452 | 144,310,409 | — | 995,647,861 | ||||||||||||
Other Investments — Assets* | ||||||||||||||||
Futures Contracts | 17,768,352 | — | — | 17,768,352 | ||||||||||||
Swap Agreements | — | 116,762 | — | 116,762 | ||||||||||||
17,768,352 | 116,762 | — | 17,885,114 | |||||||||||||
Other Investments — Liabilities* | ||||||||||||||||
Futures Contracts | (16,727,310 | ) | — | — | (16,727,310 | ) | ||||||||||
Swap Agreements | — | (4,151,647 | ) | — | (4,151,647 | ) | ||||||||||
(16,727,310 | ) | (4,151,647 | ) | — | (20,878,957 | ) | ||||||||||
Total Other Investments | 1,041,042 | (4,034,885 | ) | — | (2,993,843 | ) | ||||||||||
Total Investments | $ | 852,378,494 | $ | 140,275,524 | $ | — | $ | 992,654,018 |
* | Unrealized appreciation (depreciation). |
NOTE 4—Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (“ISDA Master Agreement”) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Consolidated Statement of Assets and Liabilities.
Invesco V.I. Balanced-Risk Allocation Fund
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 December 31, 2018:
Value | ||||||||||||||||
Derivative Assets | Commodity Risk | Equity Risk | Interest Rate Risk | Total | ||||||||||||
Unrealized appreciation on futures contracts — Exchange-Traded(a) | $ | 948,072 | $ | 262,216 | $ | 16,558,064 | $ | 17,768,352 | ||||||||
Unrealized appreciation on swap agreements — OTC | 113,737 | 3,025 | — | 116,762 | ||||||||||||
Total Derivative Assets | 1,061,809 | 265,241 | 16,558,064 | 17,885,114 | ||||||||||||
Derivatives not subject to master netting agreements | (948,072 | ) | (262,216 | ) | (16,558,064 | ) | (17,768,352 | ) | ||||||||
Total Derivative Assets subject to master netting agreements | $ | 113,737 | $ | 3,025 | $ | — | $ | 116,762 | ||||||||
Value | ||||||||||||||||
Derivative Liabilities | Commodity Risk | Equity Risk | Interest Rate Risk | Total | ||||||||||||
Unrealized depreciation on futures contracts — Exchange-Traded(a) | $ | (6,569,937 | ) | $ | (10,157,373 | ) | $ | — | $ | (16,727,310 | ) | |||||
Unrealized depreciation on swap agreements — OTC | (4,151,647 | ) | — | — | (4,151,647 | ) | ||||||||||
Total Derivative Liabilities | (10,721,584 | ) | (10,157,373 | ) | — | (20,878,957 | ) | |||||||||
Derivatives not subject to master netting agreements | 6,569,937 | 10,157,373 | — | 16,727,310 | ||||||||||||
Total Derivative Liabilities subject to master netting agreements | $ | (4,151,647 | ) | $ | — | $ | — | $ | (4,151,647 | ) |
(a) | The daily variation margin receivable at period-end is recorded in the Consolidated Statement of Assets and Liabilities. |
Offsetting Assets and Liabilities
The table below reflects the Fund’s exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of December 31, 2018.
Financial Derivative Assets | Financial Derivative Liabilities | Net Value of Derivatives | Collateral (Received)/Pledged | Net Amount(b) | ||||||||||||||||||||
Counterparty | Swap Agreements | Swap Agreements | Non-Cash | Cash | ||||||||||||||||||||
Fund | ||||||||||||||||||||||||
Goldman Sachs International | $ | 3,025 | $ | (7,251 | ) | $ | (4,226 | ) | $ | — | $ | — | $ | (4,226 | ) | |||||||||
Subtotal — Fund | 3,025 | (7,251 | ) | (4,226 | ) | — | — | (4,226 | ) | |||||||||||||||
Subsidiary | ||||||||||||||||||||||||
Barclays Bank PLC | — | (1,493,324 | ) | (1,493,324 | ) | — | 1,493,324 | — | ||||||||||||||||
Canadian Imperial Bank of Commerce | — | (671,374 | ) | (671,374 | ) | — | 671,374 | — | ||||||||||||||||
Cargill, Inc. | 0 | (1,060,854 | ) | (1,060,854 | ) | — | 820,000 | (240,854 | ) | |||||||||||||||
Goldman Sachs International | — | (1,343,149 | ) | (1,343,149 | ) | — | 1,343,149 | — | ||||||||||||||||
JPMorgan Chase Bank, N.A. | 113,731 | (34,017 | ) | 79,714 | — | — | 79,714 | |||||||||||||||||
Merrill Lynch International | 763,625 | (336,020 | ) | 427,605 | — | — | 427,605 | |||||||||||||||||
Morgan Stanley Capital Services LLC | — | (636,701 | ) | (636,701 | ) | — | 600,000 | (36,701 | ) | |||||||||||||||
Subtotal — Subsidiary | 877,356 | (5,575,439 | ) | (4,698,083 | ) | — | 4,927,847 | 229,764 | ||||||||||||||||
Total | $ | 880,381 | $ | (5,582,690 | ) | $ | (4,702,309 | ) | $ | — | $ | 4,927,847 | $ | 225,538 |
(b) | The Fund and the Subsidiary are recognized as separate legal entities and as such are subject to separate netting arrangements with the Counterparty. |
Effect of Derivative Investments for the year ended December 31, 2018
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 | ||||||||||||||||
Commodity Risk | Equity Risk | Interest Rate Risk | Total | |||||||||||||
Realized Gain (Loss): | ||||||||||||||||
Futures contracts | $ | (1,478,047 | ) | $ | (30,439,615 | ) | $ | (8,320,907 | ) | $ | (40,238,569 | ) | ||||
Swap agreements | (18,073,975 | ) | (675,791 | ) | (125,223 | ) | (18,874,989 | ) | ||||||||
Change in Net Unrealized Appreciation (Depreciation): | ||||||||||||||||
Futures contracts | (11,494,797 | ) | (16,282,170 | ) | 20,989,421 | (6,787,546 | ) | |||||||||
Swap agreements | (11,895,387 | ) | (330,691 | ) | 74,084 | (12,151,994 | ) | |||||||||
Total | $ | (42,942,206 | ) | $ | (47,728,267 | ) | $ | 12,617,375 | $ | (78,053,098 | ) |
Invesco V.I. Balanced-Risk Allocation Fund
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 | $ | 1,340,734,471 | $ | 233,286,501 |
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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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—Distributions to Shareholders and Tax Components of Net Assets-
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 84,502,400 | $ | 72,920,240 | ||||
Return of capital | 2,955,761 | — | ||||||
Long-term capital gain | 26,864,065 | 37,008,399 | ||||||
Total distributions | $ | 114,322,226 | $ | 109,928,639 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Net unrealized appreciation — investments | $ | 3,980,008 | ||
Net unrealized appreciation — foreign currencies | 55,968 | |||
Temporary book/tax differences | (99,042 | ) | ||
Capital loss carryforward | (36,260,300 | ) | ||
Shares of beneficial interest | 1,038,102,867 | |||
Total net assets | $ | 1,005,779,501 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to futures contracts and swap agreements.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 has a capital loss carryforward as of December 31, 2018, as follows:
Capital Loss Carryforward | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
Not subject to expiration | $ | 24,253,552 | $ | 12,006,748 | $ | 36,260,300 |
Invesco V.I. Balanced-Risk Allocation Fund
NOTE 8—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $46,410,000 and $44,819,778, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 17,886,403 | ||
Aggregate unrealized (depreciation) of investments | (13,906,395 | ) | ||
Net unrealized appreciation of investments | $ | 3,980,008 |
Cost of investments for tax purposes is $988,674,010.
NOTE 9—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of capital loss carryforward, net operating loss and foreign currencies, on December 31, 2018, undistributed net investment income was increased by $3,034,608, undistributed net realized gain (loss) was increased by $45,102,244 and shares of beneficial interest was decreased by $48,136,852. This reclassification had no effect on the net assets of the Fund.
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 438,450 | $ | 4,686,758 | 353,444 | $ | 4,089,594 | ||||||||||
Series II | 7,359,729 | 79,190,918 | 11,147,285 | 127,157,678 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 415,814 | 4,120,721 | 330,067 | 3,554,824 | ||||||||||||
Series II | 11,268,048 | 110,201,505 | 9,988,152 | 106,373,815 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (376,740 | ) | (3,995,276 | ) | (264,404 | ) | (3,038,309 | ) | ||||||||
Series II | (18,613,654 | ) | (196,096,139 | ) | (16,688,062 | ) | (189,658,705 | ) | ||||||||
Net increase (decrease) in share activity | 491,647 | $ | (1,891,513 | ) | 4,866,482 | $ | 48,478,897 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 83% 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. Balanced-Risk Allocation 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 (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 | Return of capital | 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 11.31 | $ | 0.11 | $ | (0.79 | ) | $ | (0.68 | ) | $ | (0.14 | ) | $ | (0.99 | ) | $ | (0.03 | ) | $ | (1.16 | ) | $ | 9.47 | (6.46 | )% | $ | 37,450 | 0.65 | %(d)(e) | 1.10 | %(d) | 1.03 | %(d) | 199 | % | ||||||||||||||||||||||||
Year ended 12/31/17 | 11.35 | 0.01 | 1.08 | 1.09 | (0.48 | ) | (0.65 | ) | — | (1.13 | ) | 11.31 | 10.06 | 39,340 | 0.68 | (e) | 1.11 | 0.10 | 52 | |||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 10.20 | (0.04 | ) | 1.24 | 1.20 | (0.05 | ) | — | — | (0.05 | ) | 11.35 | 11.74 | 34,714 | 0.67 | (e) | 1.12 | (0.33 | ) | 120 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 12.30 | (0.07 | ) | (0.44 | ) | (0.51 | ) | (0.52 | ) | (1.07 | ) | — | (1.59 | ) | 10.20 | (4.10 | ) | 26,854 | 0.69 | 1.15 | (0.61 | ) | 44 | |||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 11.17 | 0.08 | (0.78 | ) | (0.70 | ) | (0.11 | ) | (0.99 | ) | (0.03 | ) | (1.13 | ) | 9.34 | (6.71 | ) | 968,329 | 0.90 | (d)(e) | 1.35 | (d) | 0.78 | (d) | 199 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/17 | 11.22 | (0.02 | ) | 1.07 | 1.05 | (0.45 | ) | (0.65 | ) | — | (1.10 | ) | 11.17 | 9.83 | 1,158,077 | 0.93 | (e) | 1.36 | (0.15 | ) | 52 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 10.08 | (0.06 | ) | 1.22 | 1.16 | (0.02 | ) | — | — | (0.02 | ) | 11.22 | 11.51 | 1,113,539 | 0.92 | (e) | 1.37 | (0.58 | ) | 120 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 12.17 | (0.10 | ) | (0.44 | ) | (0.54 | ) | (0.48 | ) | (1.07 | ) | — | (1.55 | ) | 10.08 | (4.40 | ) | 939,354 | 0.94 | 1.40 | (0.86 | ) | 44 | |||||||||||||||||||||||||||||||||||||
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 |
(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 based on average daily net assets (000’s omitted) of $38,782 and $1,084,704 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 your Fund. They are expenses that are incurred directly by the underlying funds and are deducted from the value of the funds your Fund invests in. The effect of the estimated underlying fund expenses that you bear indirectly is included in your Fund’s total return. Estimated acquired fund fees from underlying funds were 0.16%, 0.15%, 0.12% and 0.09% for the year ended December 31, 2018, 2017, 2016 and 2014, respectively. |
Invesco V.I. Balanced-Risk Allocation Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Balanced-Risk Allocation Fund:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statement of assets and liabilities, including the consolidated schedule of investments, of Invesco V.I. Balanced-Risk Allocation Fund and its subsidiary (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related consolidated statement of operations for the year ended December 31, 2018, the consolidated statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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 (07/01/18) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Ratio | ||||||||||||||||||||
Ending Account Value (12/31/18)1 | Expenses Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 937.90 | $ | 3.18 | $ | 1,021.92 | $ | 3.32 | 0.65 | % | ||||||||||||
Series II | 1,000.00 | 937.10 | 4.40 | 1,020.66 | 4.59 | 0.90 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Balanced-Risk Allocation Fund
Tax Information
Form1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Long-Term Capital Gain Distributions | $ | 26,864,065 | ||
Corporate Dividends Received Deduction* | 0.00 | % | ||
U.S. Treasury Obligations* | 13.15 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. Balanced-Risk Allocation Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Balanced-Risk Allocation Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. Balanced-Risk Allocation Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. Balanced-Risk Allocation Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Balanced-Risk Allocation Fund
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Annual Report to Shareholders
| December 31, 2018 | |||
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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 FormN-Q (or any successor Form). The Fund’s FormN-Q (or any successor Form) filings are available on the SEC website, sec.gov. The SEC file numbers for the Fund are811-07452 and033-57340. The Fund’s most recent portfolio holdings, as filed on FormN-Q (or any successor Form), 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 recent12-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.
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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.
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NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Invesco Distributors, Inc. | VK-VICOM-AR-1 | 02152019 1211 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. Comstock Fund (the Fund) underperformed the Russell 1000 Value Index, the Fund’s style-specific benchmark.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -12.16 | % | |||
Series II Shares | -12.37 | ||||
S&P 500 Index▼(Broad Market Index) | -4.38 | ||||
Russell 1000 Value Index∎(Style-Specific Index) | -8.27 | ||||
Lipper VUFLarge-Cap Value Funds Index¨(Peer Group Index) | -9.47 | ||||
Source(s):▼FactSet Research Systems Inc.;∎RIMES Technologies Corp.;¨Lipper Inc. |
Market conditions and your Fund
Calendar year 2018 proved to be an increasingly volatile time for US equities. In January 2018, US equity markets steadily moved higher, as investors remained enthused about the passage of the Tax Cuts and Jobs Act signed into law in late December 2017. However, in February 2018, volatility returned to the US stock and bond markets. Worries about how rising interest rates might affect economic growth, concerns about a potential trade war and heightened geopolitical tensions, caused the US stock markets to pull back and volatility to increase.
US equity markets generally recovered in the second quarter of 2018 as strong US retail sales and low unemployment buoyed markets. Throughout the summer, US equities moved higher as corporate profits surged. Several US equity indexes reached new highs despite potential headwinds including trade tensions, tariff announcements and contagion concerns over a Turkish currency crisis. After a relatively quiet summer, market volatility noticeably rose in October, as US equity markets suffered a sharpsell-off throughyear-end, amid rising interest rates and
concerns that higher inflation could mean a more restrictive monetary policy. In this environment, there was a flight to safety, as investors fled to defensive areas of the equities markets, like health care and utilities, and US Treasuries.
Given signs of a strong economy, the US Federal Reserve raised interest rates four times during the year: in March, June, September and December 2018. Following December’s Federal Reserve meeting, Chairman Jerome Powell raised interest rates for the fourth time in 2018 by 25 basis points to a targeted range of 2.25% to 2.50%, and lowered guidance from three to two rate hikes in 2019, signaling a slightly more dovish stance than expected.1 In contrast, the European Central Bank and central banks in several other countries maintained extraordinarily accommodative monetary policies.
During the year, nine of the 11 sectors posted negative returns within the Russell 1000 Value Index. The industrials and energy sectors were the weakest-performing sectors, posting double-digit losses, while health care and utilities were the only sectors with positive returns.
On the positive side, stock selection within the information technology sector
was the largest driver of the Fund’s performance relative to the style-specific benchmark for the year. Most notably,Microsoft, Cisco Systemsand NetApp were top performers within the sector. NetApp’s stock performed well after reporting sales and profits exceeding expectations due to strong product adoption, expanding their customer base and expanding new cloud partnerships. Microsoft also contributed to the Fund’s relative performance after the company reported earnings in April and July that beat expectations and provided strong guidance on optimism around sales of its Azure and Office 365 products.
The Fund’s allocation to cash, averaging less than 5% for the year, contributed to relative performance in a negative market environment.
An underweight allocation to the consumer staples sector also aided the Fund’s performance versus thestyle-specific benchmark for the year. Lack of exposure to Philip Morris International was a top contributor to the Fund’s relative performance.Kimberly-Clark, the maker of Huggies diapers and Kleenex tissues, also boosted the Fund’s relative and absolute returns. The company benefited from managing expenses and discretionary spending, while returning capital back to shareholders by increasing dividends andre-purchasing stock. In addition, investors favored the new chief executive officer, effective January 1, 2019, upon the speculation of brand divestments, mergers or a boost to current dividend increases and stock buybacks.
On the negative side, stock selection in the financials sector was a large detractor from the Fund’s performance relative to the style-specific index for the year. Within banks, insurance and diversified financials,Citigroup, American International Group (AIG), Allstate, State Streetand Morgan Stanley were the
Portfolio Composition | |||
By sector | % of total net assets |
Financials | 28.4% | |
Energy | 16.4 | |
Health Care | 15.3 | |
Consumer Discretionary | 9.0 | |
Information Technology | 8.6 | |
Industrials | 5.9 | |
Consumer Staples | 4.6 | |
Communication Services | 2.8 | |
Materials | 2.2 | |
Money Market Funds | ||
Plus Other Assets Less Liabilities | 6.8 |
Top 10 Equity Holdings* | |||
% of total net assets |
1. Citigroup Inc. | 4.4% | |
2. Bank of America Corp. | 4.3 | |
3. JPMorgan Chase & Co. | 3.6 | |
4. Cisco Systems, Inc. | 2.5 | |
5. Royal Dutch Shell PLC-Class A-ADR | 2.3 | |
6. American International Group, Inc. | 2.1 | |
7. Suncor Energy, Inc. | 2.0 | |
8. Intel Corp. | 2.0 | |
9. Chevron Corp. | 2.0 | |
10. BPPLC-ADR | 1.9 |
Total Net Assets | $1.3 billion | |
Total Number of Holdings* | 75 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
Data presented here are as of December 31, 2018.
Invesco V.I. Comstock Fund
largest relative detractors. During the year, many of the large banks and interest rate-sensitive financial stocks were down due to concerns over a flattening yield curve, possibly signaling a recession. In our view, financials have not performed as expected, given a normalizing rate environment and posting positive earnings and guidance. At the close of the year, we believed that financials were still attractively valued, with valuations at historically low levels.
Another detractor from the Fund’s performance relative to the style-specific benchmark was stock selection in and overweight exposure to the energy sector.Devon Energyand Halliburton were two of the largest detractors on a relative and absolute basis. Since the third quarter, oil prices have deteriorated amid weaker inventory data and concerns over global demand destruction caused by a potential trade war. Oil prices dropped from roughly $75 per barrel in early October to the mid $40s per barrel during the fourth quarter.3 Absent a meaningful decrease in demand, at the end of the year we still believe energy equities represent compelling value and are poised for recovery.
Stock selection in the health care sector also hurt the Fund’s performance versus the style-specific benchmark for the year.Mylan, Cardinal HealthandMcKesson were the largest detractors within the sector. In May, Cardinal Health’s stock hit a three-year low after reporting a more than 30% drop in earnings from the prior year due to a higher-than-expected tax rate on its medical devices division, with most business derived from outside the US. In our long-term view, valuations and fundamentals still remain attractive.
We used currency forward contracts during the year for the purpose of hedging currency exposure ofnon-US-based companies held in the Fund. Derivatives were used solely for the purpose of hedging and not for speculative purposes or leverage. The use of currency forward contracts had a positive impact on the Fund’s performance relative to the Russell 1000 Value Index for the year.
At the close of the year, the Fund held overweight exposure relative to the style-specific benchmark in the financials sector, as we have a favorable view of large banks within financials. We also maintained a constructive view on the long–term prospects for our energy holdings, as we believe supply and demand for oil should balance over time. The Fund’s exposure to each sector has a higher beta2
than the style-specific benchmark. Therefore, the portfolio should be more sensitive to broad moves within these sectors for the foreseeable future.
Thank you for your investment in Invesco V.I. Comstock Fund and for sharing our long-term investment horizon.
1 | Source: US Federal Reserve |
2 | Beta is a measure of risk representing how a security is expected to respond to general market movements. |
3 | Source: Bloomberg |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Kevin Holt Chartered Financial Analyst, Portfolio Manager and Chief Investment Officer for Invesco US Value | ||
Equities, is lead manager of Invesco V.I. Comstock Fund. He joined Invesco in 2010. Mr. Holt earned a bachelor’s degree from the University of Iowa and an MBA from the University of Chicago Graduate School of Business. |
Devin Armstrong Chartered Financial Analyst, Portfolio Manager, is lead manager of Invesco V.I. Comstock Fund. He | ||
joined Invesco in 2010. Mr. Armstrong earned a BS in psychology and finance from the University of Illinois and an MBA from Columbia University. |
Charles DyReyes Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Comstock Fund. He joined Invesco | ||
in 2015. Mr. DyReyes earned a BS in finance from Lehigh University. |
James (Jay) Warwick Portfolio Manager, is manager of Invesco V.I. Comstock Fund. He joined Invesco in 2010. Mr. Warwick earned a | ||
BBA from Stephen F. Austin State University and an MBA from the University of Houston. |
Invesco V.I. Comstock Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: FactSet Research Systems Inc. |
2 | Source: RIMES Technologies Corp. |
3 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (4/30/99) | 6.39 | % | |||
10 Years | 11.49 | ||||
5 Years | 4.54 | ||||
1 Year | -12.16 | ||||
Series II Shares | |||||
Inception (9/18/00) | 6.36 | % | |||
10 Years | 11.21 | ||||
5 Years | 4.29 | ||||
1 Year | -12.37 |
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, prior to June 1, 2010, 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 recentmonth-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Performance figures in the table and chart do not reflect deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund Shares. 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 0.76% and 1.01%, 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 recentmonth-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recentmonth-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. Comstock Fund
Invesco V.I. Comstock 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.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Depositary receipts risk.Investing in depositary receipts involves the same risks as direct investments in foreign securities. In addition, the underlying issuers of certain depositary receipts are under no obligation to distribute shareholder communications or pass through any voting rights with respect to the deposited securities to the holders of such receipts. The Fund may therefore receive less timely information or have less control than if it invested directly in the foreign issuer.
Derivatives risk.The value of a derivative instrument depends largely on (and is derived from) the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include other, possibly greater, risks, including counterparty, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by holding a position in the derivative. As a result, an adverse change in the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative or the anticipated value of the underlying asset, which may make the Fund’s returns more volatile and increase the risk of loss. Derivative instruments may also be less liquid than more traditional investments and the Fund may be unable to sell or close out its derivative positions at a desirable time or price. This risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. Derivatives strategies may not always be successful. For example, derivatives used for hedging or to gain or limit
exposure to a particular market segment may not provide the expected benefits, particularly during adverse market conditions.
Emerging markets securities risk. Emerging markets (also referred to as developing markets) are generally subject to greater market volatility, political, social and economic instability, uncertain trading markets and more governmental limitations on foreign investment than more developed markets. In addition, companies operating in emerging markets may be subject to lower trading volume and greater price fluctuations than companies in more developed markets. Securities law and the enforcement of systems of taxation in many emerging market countries may change quickly and unpredictably. In addition, investments in emerging markets securities may also be subject to additional transaction costs, delays in settlement procedures, and lack of timely information.
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to
be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
REIT risk/real estate risk.Investments in real estate related instruments may be affected by economic, legal, cultural, environmental or technological factors that affect property values, rents or occupancies of real estate related to the Fund’s holdings. Shares of real estate related companies, which tend to be small- andmid-cap companies, may be more volatile and less liquid.
Sector focus risk.The Fund may from time to time invest a significant amount of its assets (i.e. over 25%) in one market sector or group of related industries. In this event, the Fund’s performance will depend to a greater extent on the overall condition of the sector or group of industries and there is increased risk that the Fund will lose significant value if conditions adversely affect that sector or group of industries.
Small- andmid-capitalization companies risks.Small- andmid-capitalization companies tend to be more vulnerable to changing market conditions, may have little or no operating history or track record of success, and may have more limited product lines and markets, less experienced management and fewer financial resources than larger companies. These companies’ securities may be more volatile and less liquid than those of more established companies, and their returns may vary, sometimes significantly, from the overall securities market.
Invesco V.I. Comstock Fund
Value investing style risk.A value investing style subjects the Fund to the risk that the valuations never improve or that the returns on value equity securities are less than returns on other styles of investing or the overall stock market.
About indexes used in this report
TheS&P 500® Index is an unmanaged index considered representative of the US stock market.
TheRussell 1000® Value Index is an unmanaged index considered representative oflarge-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.
TheLipper VUFLarge-Cap Value Funds Index is an unmanaged index considered representative oflarge-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.
Other information
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Industry 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.
Invesco V.I. Comstock Fund
Schedule of Investments(a)
December 31, 2018
Shares | Value | |||||||
Common Stocks & Other Equity Interests–93.18% |
| |||||||
Aerospace & Defense–1.17% |
| |||||||
Arconic Inc. | 361,933 | $ | 6,102,190 | |||||
Textron Inc. | 202,000 | 9,289,980 | ||||||
15,392,170 | ||||||||
Agricultural Products–1.15% |
| |||||||
Archer-Daniels-Midland Co. | 247,273 | 10,130,775 | ||||||
Bunge Ltd. | 93,479 | 4,995,518 | ||||||
15,126,293 | ||||||||
Apparel Retail–0.68% |
| |||||||
Gap, Inc. (The) | 346,739 | 8,931,997 | ||||||
Asset Management & Custody Banks–2.49% |
| |||||||
Bank of New York Mellon Corp. (The) | 351,164 | 16,529,289 | ||||||
State Street Corp. | 256,827 | 16,198,079 | ||||||
32,727,368 | ||||||||
Automobile Manufacturers–1.92% |
| |||||||
General Motors Co. | 754,140 | 25,225,983 | ||||||
Automotive Retail–0.76% |
| |||||||
Advance Auto Parts, Inc. | 63,233 | 9,956,668 | ||||||
Biotechnology–1.23% |
| |||||||
Gilead Sciences, Inc. | 257,631 | 16,114,819 | ||||||
Broadcasting–0.68% |
| |||||||
CBS Corp.–Class B | 205,587 | 8,988,264 | ||||||
Building Products–1.60% |
| |||||||
Johnson Controls International PLC | 708,404 | 21,004,179 | ||||||
Cable & Satellite–1.89% |
| |||||||
Charter Communications, Inc.–Class A(b) | 42,918 | 12,230,342 | ||||||
Comcast Corp.–Class A | 368,793 | 12,557,402 | ||||||
24,787,744 | ||||||||
Communications Equipment–2.45% |
| |||||||
Cisco Systems, Inc. | 743,751 | 32,226,731 | ||||||
Construction Machinery & Heavy Trucks–0.41% |
| |||||||
Caterpillar Inc. | 41,891 | 5,323,089 | ||||||
Consumer Finance–0.82% |
| |||||||
Ally Financial Inc. | 476,946 | 10,807,596 | ||||||
Diversified Banks–13.73% |
| |||||||
Bank of America Corp. | 2,302,985 | 56,745,550 | ||||||
Citigroup Inc. | 1,108,065 | 57,685,864 | ||||||
JPMorgan Chase & Co. | 477,632 | 46,626,436 | ||||||
Wells Fargo & Co. | 414,890 | 19,118,131 | ||||||
180,175,981 |
Shares | Value | |||||||
Electrical Components & Equipment–1.77% |
| |||||||
Eaton Corp. PLC | 231,015 | $ | 15,861,490 | |||||
Emerson Electric Co. | 124,158 | 7,418,440 | ||||||
23,279,930 | ||||||||
Fertilizers & Agricultural Chemicals–0.75% |
| |||||||
CF Industries Holdings, Inc. | 226,289 | 9,845,834 | ||||||
Health Care Distributors–1.50% |
| |||||||
Cardinal Health, Inc. | 227,245 | 10,135,127 | ||||||
McKesson Corp. | 86,655 | 9,572,778 | ||||||
19,707,905 | ||||||||
Health Care Equipment–1.10% |
| |||||||
Medtronic PLC | 159,027 | 14,465,096 | ||||||
Health Care Services–1.01% |
| |||||||
CVS Health Corp. | 202,187 | 13,247,292 | ||||||
Hotels, Resorts & Cruise Lines–1.92% |
| |||||||
Carnival Corp. | 512,305 | 25,256,637 | ||||||
Household Products–2.27% |
| |||||||
Kimberly-Clark Corp. | 178,296 | 20,315,046 | ||||||
Reckitt Benckiser Group PLC (United Kingdom) | 123,882 | 9,460,374 | ||||||
29,775,420 | ||||||||
Industrial Conglomerates–0.31% |
| |||||||
General Electric Co. | 536,572 | 4,061,850 | ||||||
Industrial Machinery–0.64% |
| |||||||
Ingersoll-Rand PLC | 91,943 | 8,387,960 | ||||||
Integrated Oil & Gas–9.29% |
| |||||||
BP PLC–ADR (United Kingdom) | 672,343 | 25,495,247 | ||||||
Chevron Corp. | 236,821 | 25,763,757 | ||||||
Exxon Mobil Corp. | 47,228 | 3,220,477 | ||||||
Occidental Petroleum Corp. | 187,523 | 11,510,162 | ||||||
Royal Dutch Shell PLC–Class A–ADR (United Kingdom) | 511,657 | 29,814,253 | ||||||
Suncor Energy, Inc. (Canada) | 935,597 | 26,168,648 | ||||||
121,972,544 | ||||||||
Integrated Telecommunication Services–1.20% |
| |||||||
Verizon Communications Inc. | 279,770 | 15,728,669 | ||||||
Internet & Direct Marketing Retail–2.04% |
| |||||||
Altaba Inc.(b) | 94,980 | 5,503,141 | ||||||
eBay Inc.(b) | 756,418 | 21,232,654 | ||||||
26,735,795 | ||||||||
Investment Banking & Brokerage–2.56% |
| |||||||
Goldman Sachs Group, Inc. (The) | 68,247 | 11,400,662 | ||||||
Morgan Stanley | 559,265 | 22,174,857 | ||||||
33,575,519 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Comstock Fund
Shares | Value | |||||||
IT Consulting & Other Services–0.85% |
| |||||||
Cognizant Technology Solutions Corp.–Class A | 176,370 | $ | 11,195,968 | |||||
Life & Health Insurance–1.51% |
| |||||||
MetLife, Inc. | 483,912 | 19,869,427 | ||||||
Managed Health Care–1.90% |
| |||||||
Anthem, Inc. | 95,016 | 24,954,052 | ||||||
Multi-Line Insurance–2.13% |
| |||||||
American International Group, Inc. | 707,874 | 27,897,314 | ||||||
Oil & Gas Equipment & Services–0.60% |
| |||||||
Halliburton Co. | 295,772 | 7,861,620 | ||||||
Oil & Gas Exploration & Production–6.46% |
| |||||||
Anadarko Petroleum Corp. | 177,692 | 7,790,017 | ||||||
Canadian Natural Resources Ltd. (Canada) | 476,143 | 11,488,537 | ||||||
Devon Energy Corp. | 692,703 | 15,613,526 | ||||||
Encana Corp. (Canada) | 734,881 | 4,247,612 | ||||||
Hess Corp. | 360,646 | 14,606,163 | ||||||
Marathon Oil Corp. | 1,542,916 | 22,125,415 | ||||||
Noble Energy, Inc. | 476,562 | 8,940,303 | ||||||
84,811,573 | ||||||||
Packaged Foods & Meats–1.22% |
| |||||||
Danone S.A. (France) | 227,804 | 16,054,501 | ||||||
Paper Packaging–1.48% |
| |||||||
International Paper Co. | 481,625 | 19,438,385 | ||||||
Pharmaceuticals–8.59% |
| |||||||
Allergan PLC | 152,168 | 20,338,775 | ||||||
Bristol-Myers Squibb Co. | 132,174 | 6,870,405 | ||||||
Merck & Co., Inc. | 246,376 | 18,825,590 | ||||||
Mylan N.V.(b) | 437,406 | 11,984,924 | ||||||
Novartis AG (Switzerland) | 146,589 | 12,555,110 | ||||||
Pfizer Inc. | 511,557 | 22,329,463 | ||||||
Sanofi–ADR (France) | 456,811 | 19,830,166 | ||||||
112,734,433 | ||||||||
Property & Casualty Insurance–0.98% |
| |||||||
Allstate Corp. (The) | 155,199 | 12,824,093 |
Shares | Value | |||||||
Regional Banks–4.15% |
| |||||||
Citizens Financial Group, Inc. | 463,801 | $ | 13,788,804 | |||||
Fifth Third Bancorp | 799,680 | 18,816,470 | ||||||
KeyCorp | 297,811 | 4,401,647 | ||||||
PNC Financial Services Group, Inc. (The) | 149,379 | 17,463,899 | ||||||
54,470,820 | ||||||||
Semiconductors–3.57% |
| |||||||
Intel Corp. | 551,114 | 25,863,780 | ||||||
QUALCOMM Inc. | 369,130 | 21,007,188 | ||||||
46,870,968 | ||||||||
Systems Software–1.48% |
| |||||||
Microsoft Corp. | 190,991 | 19,398,956 | ||||||
Technology Hardware, Storage & Peripherals–0.29% |
| |||||||
NetApp, Inc. | 64,139 | 3,827,174 | ||||||
Wireless Telecommunication Services–0.63% |
| |||||||
Vodafone Group PLC (United Kingdom) | 4,232,690 | 8,224,661 | ||||||
Total Common Stocks & Other Equity Interests |
| 1,223,263,278 | ||||||
Money Market Funds–5.08% |
| |||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30%(c) | 23,340,411 | 23,340,411 | ||||||
Invesco Liquid Assets Portfolio–Institutional Class, 2.48%(c) | 16,669,569 | 16,671,236 | ||||||
Invesco Treasury Portfolio–Institutional Class, 2.30%(c) | 26,674,756 | 26,674,756 | ||||||
Total Money Market Funds |
| 66,686,403 | ||||||
TOTAL INVESTMENTS IN SECURITIES–98.26% |
| 1,289,949,681 | ||||||
OTHER ASSETS LESS LIABILITIES–1.74% |
| 22,800,575 | ||||||
NET ASSETS–100.00% |
| $ | 1,312,750,256 |
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. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Comstock Fund
Open Forward Foreign Currency Contracts | ||||||||||||||||||||||
Settlement
| Counterparty
| Contract to | Unrealized
| |||||||||||||||||||
Deliver | Receive | |||||||||||||||||||||
01/18/2019 | Canadian Imperial Bank of Commerce | CAD | 13,342,628 | USD | 9,967,711 | $ | 190,233 | |||||||||||||||
01/18/2019 | Royal Bank of Canada | CAD | 13,342,731 | USD | 9,965,881 | 188,329 | ||||||||||||||||
Subtotal — Appreciation | 378,562 | |||||||||||||||||||||
01/18/2019 | Goldman Sachs International | EUR | 14,677,286 | USD | 16,684,111 | (153,327 | ) | |||||||||||||||
01/18/2019 | Goldman Sachs International | GBP | 8,800,877 | USD | 11,114,231 | (111,683 | ) | |||||||||||||||
01/18/2019 | Royal Bank of Canada | CHF | 6,378,087 | USD | 6,440,334 | (57,236 | ) | |||||||||||||||
01/18/2019 | Royal Bank of Canada | EUR | 14,677,189 | USD | 16,679,921 | (157,407 | ) | |||||||||||||||
01/18/2019 | Royal Bank of Canada | GBP | 8,800,799 | USD | 11,110,709 | (115,105 | ) | |||||||||||||||
Subtotal — Depreciation | (594,758 | ) | ||||||||||||||||||||
Total Forward Foreign Currency Contracts — Currency Risk |
| $ | (216,196 | ) |
Abbreviations:
CAD | – Canadian Dollar | |
CHF | – Swiss Franc | |
EUR | – Euro | |
GBP | – British Pound Sterling | |
USD | – U.S. Dollar |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $1,211,108,593) | $ | 1,223,263,278 | ||
Investments in affiliated money market funds, at value (Cost $66,687,872) | 66,686,403 | |||
Other investments: | ||||
Unrealized appreciation on forward foreign currency contracts outstanding | 378,562 | |||
Foreign currencies, at value (Cost $124,370) | 124,497 | |||
Receivable for: | ||||
Fund shares sold | 23,131,117 | |||
Dividends | 2,050,787 | |||
Investment for trustee deferred compensation and retirement plans | 184,204 | |||
Total assets | 1,315,818,848 | |||
Liabilities: | ||||
Other investments: | ||||
Unrealized depreciation on forward foreign currency contracts outstanding | 594,758 | |||
Payable for: | ||||
Amount due to custodian | 776,683 | |||
Fund shares reacquired | 132,581 | |||
Accrued fees to affiliates | 1,290,493 | |||
Accrued trustees’ and officers’ fees and benefits | 7,881 | |||
Accrued other operating expenses | 57,220 | |||
Trustee deferred compensation and retirement plans | 208,976 | |||
Total liabilities | 3,068,592 | |||
Net assets applicable to shares outstanding | $ | 1,312,750,256 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 1,112,484,889 | ||
Distributable earnings | 200,265,367 | |||
$ | 1,312,750,256 | |||
Net Assets: | ||||
Series I | $ | 214,084,452 | ||
Series II | $ | 1,098,665,804 | ||
Shares outstanding, no par value, |
| |||
Series I | 13,278,786 | |||
Series II | 68,428,956 | |||
Series I: | ||||
Net asset value per share | $ | 16.12 | ||
Series II: | ||||
Net asset value per share | $ | 16.06 |
Investment income: | ||||
Dividends (net of foreign withholding taxes of $891,564) | $ | 38,303,099 | ||
Dividends from affiliated money market funds | 1,255,331 | |||
Total investment income | 39,558,430 | |||
Expenses: | ||||
Advisory fees | 9,403,039 | |||
Administrative services fees | 2,802,642 | |||
Custodian fees | 65,792 | |||
Distribution fees — Series II | 3,521,709 | |||
Transfer agent fees | 39,029 | |||
Trustees’ and officers’ fees and benefits | 43,807 | |||
Reports to shareholders | 10,271 | |||
Professional services fees | 65,334 | |||
Other | 26,339 | |||
Total expenses | 15,977,962 | |||
Less: Fees waived | (80,376 | ) | ||
Net expenses | 15,897,586 | |||
Net investment income | 23,660,844 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from: | ||||
Investment securities | 168,440,520 | |||
Foreign currencies | 124,870 | |||
Forward foreign currency contracts | 1,010,561 | |||
169,575,951 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (381,445,364 | ) | ||
Foreign currencies | (15,389 | ) | ||
Forward foreign currency contracts | 2,912,890 | |||
(378,547,863 | ) | |||
Net realized and unrealized gain (loss) | (208,971,912 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (185,311,068 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income | $ | 23,660,844 | $ | 23,545,726 | ||||
Net realized gain | 169,575,951 | 156,183,437 | ||||||
Change in net unrealized appreciation (depreciation) | (378,547,863 | ) | 123,678,223 | |||||
Net increase (decrease) in net assets resulting from operations | (185,311,068 | ) | 303,407,386 | |||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (29,013,356 | ) | (16,364,250 | ) | ||||
Series II | (151,533,451 | ) | (99,337,584 | ) | ||||
Total distributions from distributable earnings | (180,546,807 | ) | (115,701,834 | ) | ||||
Share transactions–net: | ||||||||
Series I | 1,540,438 | (11,573,352 | ) | |||||
Series II | (236,864,144 | ) | (198,048,701 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (235,323,706 | ) | (209,622,053 | ) | ||||
Net increase (decrease) in net assets | (601,181,581 | ) | (21,916,501 | ) | ||||
Net assets: | ||||||||
Beginning of year | 1,913,931,837 | 1,935,848,338 | ||||||
End of year | $ | 1,312,750,256 | $ | 1,913,931,837 |
(1) | For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income and distributions from net realized gains. The Securities and Exchange Commission eliminated the requirement to disclose the distribution components separately, except for tax return of capital. For the year ended December 31, 2017, distributions from net investment income were $5,551,772 and $31,132,801 for Series I and Series II shares, respectively, and distributions from net realized gains were $10,812,478 and $68,204,783 for Series I and Series II shares, respectively. |
Notes to Financial Statements
December 31, 2018
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. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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 theover-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 (“NAV”) 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 theend-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. Comstock 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. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 investment 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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. Comstock 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 the 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 the dailymark-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 anagreed-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 accrues daily and pays monthly 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 year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.57%.
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the
Invesco V.I. Comstock Fund
fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least April 30, 2020, 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 (the “expense limits”). 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; (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, 2020. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $80,376.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $371,345 for accounting and fund administrative services and was reimbursed $2,431,297 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution fees.
For the year ended December 31, 2018, the Fund incurred $9,599 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. |
Invesco V.I. Comstock Fund
The following is a summary of the tiered valuation input levels, as of December 31, 2018. 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 | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stock & Other Equity Interests | $ | 1,193,023,133 | $ | 30,240,145 | $ | — | $ | 1,223,263,278 | ||||||||
Money Market Funds | 66,686,403 | — | — | 66,686,403 | ||||||||||||
Total Investments in Securities | 1,259,709,536 | 30,240,145 | — | 1,289,949,681 | ||||||||||||
Other Investments — Assets* | ||||||||||||||||
Forward Foreign Currency Contracts | — | 378,562 | — | 378,562 | ||||||||||||
Other Investments — Liabilities* | ||||||||||||||||
Forward Foreign Currency Contracts | — | (594,758 | ) | — | (594,758 | ) | ||||||||||
Total Other Investments | — | (216,196 | ) | — | (216,196 | ) | ||||||||||
Total Investments | $ | 1,259,709,536 | $ | 30,023,949 | $ | — | $ | 1,289,733,485 |
* | Unrealized appreciation (depreciation). |
NOTE 4—Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (“ISDA Master Agreement”) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
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 December 31, 2018:
Value | ||||
Derivative Assets | Currency Risk | |||
Unrealized appreciation on forward foreign currency contracts outstanding | $ | 378,562 | ||
Derivatives not subject to master netting agreements | — | |||
Total Derivative Assets subject to master netting agreements | $ | 378,562 |
Value | ||||
Derivative Liabilities | Currency Risk | |||
Unrealized depreciation on forward foreign currency contracts outstanding | $ | (594,758 | ) | |
Derivatives not subject to master netting agreements | — | |||
Total Derivative Liabilities subject to master netting agreements | $ | (594,758 | ) |
Offsetting Assets and Liabilities
The table below reflects the Fund’s exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of December 31, 2018.
Financial Derivative Assets | Financial Derivative Liabilities | Collateral (Received)/Pledged | ||||||||||||||||||||||
Counterparty | Forward Foreign Currency Contracts | Forward Foreign Currency Contracts | Net Value of Derivatives | Non-Cash | Cash | Net Amount | ||||||||||||||||||
Canadian Imperial Bank of Commerce | $ | 190,233 | $ | — | $ | 190,233 | $ | — | $ | — | $ | 190,233 | ||||||||||||
Goldman Sachs International | — | (265,010 | ) | (265,010 | ) | — | — | (265,010 | ) | |||||||||||||||
Royal Bank of Canada | 188,329 | (329,748 | ) | (141,419 | ) | — | — | (141,419 | ) | |||||||||||||||
Total | $ | 378,562 | $ | (594,758 | ) | $ | (216,196 | ) | $ | — | $ | — | $ | (216,196 | ) |
Invesco V.I. Comstock Fund
Effect of Derivative Investments for the year ended December 31, 2018
The table below summarizes the gains on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain on Statement of Operations | ||||
Currency Risk | ||||
Realized Gain: | ||||
Forward foreign currency contracts | $ | 1,010,561 | ||
Change in Net Unrealized Appreciation: | ||||
Forward foreign currency contracts | 2,912,890 | |||
Total | $ | 3,923,451 |
The table below summarizes the average notional value of forward foreign currency contracts outstanding during the period.
Forward Foreign Currency Contracts | ||||
Average notional value | $ | 126,933,492 |
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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 23,575,887 | $ | 47,708,517 | ||||
Long-term capital gain | 156,970,920 | 67,993,317 | ||||||
Total distributions | $ | 180,546,807 | $ | 115,701,834 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 35,237,643 | ||
Undistributedlong-term gain | 157,771,551 | |||
Net unrealized appreciation — investments | 7,456,961 | |||
Net unrealized appreciation (depreciation) — foreign currencies | (2,827 | ) | ||
Temporary book/tax differences | (197,961 | ) | ||
Shares of beneficial interest | 1,112,484,889 | |||
Total net assets | $ | 1,312,750,256 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to wash sales and forward foreign currency contracts.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Invesco V.I. Comstock Fund
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 eithershort-term orlong-term capital losses instead of asshort-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 does not have a capital loss carryforward as of December 31, 2018.
NOTE 8—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $308,951,768 and $706,542,588, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 175,502,051 | ||
Aggregate unrealized (depreciation) of investments | (168,045,090 | ) | ||
Net unrealized appreciation of investments | $ | 7,456,961 |
Cost of investments for tax purposes is $1,282,276,524.
NOTE 9—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of foreign currency transactions, on December 31, 2018, undistributed net investment income was increased by $174,085 and undistributed net realized gain was decreased by $174,085. This reclassification had no effect on the net assets or the distributable earnings of the Fund.
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 899,651 | $ | 17,343,797 | 618,922 | $ | 11,976,966 | ||||||||||
Series II | 3,163,658 | 57,343,771 | 2,755,173 | 52,626,539 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 1,479,518 | 29,013,356 | 863,093 | 16,364,250 | ||||||||||||
Series II | 7,755,038 | 151,533,451 | 5,255,957 | 99,337,584 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (2,224,115 | ) | (44,816,715 | ) | (2,062,592 | ) | (39,914,568 | ) | ||||||||
Series II | (22,497,477 | ) | (445,741,366 | ) | (18,238,937 | ) | (350,012,824 | ) | ||||||||
Net increase (decrease) in share activity | (11,423,727 | ) | $ | (235,323,706 | ) | (10,808,384 | ) | $ | (209,622,053 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 62% 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. Comstock 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 20.62 | $ | 0.33 | $ | (2.41 | ) | $ | (2.08 | ) | $ | (0.36 | ) | $ | (2.06 | ) | $ | (2.42 | ) | $ | 16.12 | (12.16 | )% | $ | 214,084 | 0.75 | %(d) | 0.75 | %(d) | 1.63 | %(d) | 19 | % | |||||||||||||||||||||||
Year ended 12/31/17 | 18.69 | 0.28 | 2.94 | 3.22 | (0.44 | ) | (0.85 | ) | (1.29 | ) | 20.62 | 17.85 | 270,651 | 0.75 | 0.75 | 1.47 | 13 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 17.57 | 0.38 | 2.47 | 2.85 | (0.29 | ) | (1.44 | ) | (1.73 | ) | 18.69 | 17.30 | 256,080 | 0.77 | 0.78 | 2.20 | 21 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 19.16 | 0.28 | (1.45 | ) | (1.17 | ) | (0.37 | ) | (0.05 | ) | (0.42 | ) | 17.57 | (5.98 | ) | 332,411 | 0.78 | 0.83 | 1.52 | 16 | ||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 20.54 | 0.28 | (2.40 | ) | (2.12 | ) | (0.30 | ) | (2.06 | ) | (2.36 | ) | 16.06 | (12.37 | ) | 1,098,666 | 1.00 | (d) | 1.00 | (d) | 1.38 | (d) | 19 | |||||||||||||||||||||||||||||||||
Year ended 12/31/17 | 18.62 | 0.23 | 2.93 | 3.16 | (0.39 | ) | (0.85 | ) | (1.24 | ) | 20.54 | 17.58 | 1,643,281 | 1.00 | 1.00 | 1.22 | 13 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 17.51 | 0.34 | 2.45 | 2.79 | (0.24 | ) | (1.44 | ) | (1.68 | ) | 18.62 | 16.99 | 1,679,769 | 1.02 | 1.03 | 1.95 | 21 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 19.08 | 0.24 | (1.44 | ) | (1.20 | ) | (0.32 | ) | (0.05 | ) | (0.37 | ) | 17.51 | (6.19 | ) | 1,549,679 | 1.03 | 1.08 | 1.27 | 16 | ||||||||||||||||||||||||||||||||||||
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 |
(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 based on average daily net assets (000’s omitted) of $255,505 and $1,408,684 for Series I and Series II shares, respectively. |
Invesco V.I. Comstock Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Comstock Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Comstock Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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.
ACTUAL | HYPOTHETICAL (5% annual return before | |||||||||||||||||||||||
Class | Beginning Account Value (07/01/18) | Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | Annualized Ratio | ||||||||||||||||||
Series I | $ | 1,000.00 | $ | 877.50 | $ | 3.55 | $ | 1,021.42 | $ | 3.82 | 0.75 | % | ||||||||||||
Series II | 1,000.00 | 1,000.00 | 4.73 | 1,020.16 | 5.09 | 1.00 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Comstock Fund
Tax Information
Form1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Long-Term Capital Gain Distributions | $ | 156,970,920 | ||
Corporate Dividends Received Deduction* | 99.99 | % | ||
U.S. Treasury Obligations* | 0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. Comstock Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Comstock Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. Comstock Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. Comstock Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Comstock Fund
| ||||
Annual Report to Shareholders
| December 31, 2018 | |||
| ||||
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 FormN-Q (or any successor Form). The Fund’s FormN-Q (or any successor Form) filings are available on the SEC website, sec.gov. The SEC file numbers for the Fund are811-07452 and033-57340. The Fund’s most recent portfolio holdings, as filed on FormN-Q (or any successor Form), 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 recent12-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.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Invesco Distributors, Inc. | VICEQ-AR-1 | 02152019 1151 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. Core Equity Fund (the Fund) underperformed the Russell 1000 Index, the Fund’s style-specific benchmark.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -9.40 | % | |||
Series II Shares | -9.61 | ||||
S&P 500 Index▼ (Broad Market Index) | -4.38 | ||||
Russell 1000 Index∎ (Style-Specific Index) | -4.78 | ||||
Lipper VUFLarge-Cap Core Funds Index¨ (Peer Group Index) | -5.26 | ||||
Source(s):▼FactSet Research Systems Inc.;∎RIMES Technologies Corp.;¨Lipper Inc. |
Market conditions and your Fund
Calendar year 2018 proved to be an increasingly volatile time for US equities. In January 2018, US equity markets steadily moved higher, as investors remained enthused about the passage of the Tax Cuts and Jobs Act signed into law in late December 2017. However, in February 2018, volatility returned to the US stock and bond markets. Worries about how rising interest rates might affect economic growth, concerns about a potential trade war and heightened geopolitical tensions, caused the US stock markets to pull back and volatility to increase.
US equity markets generally recovered in the second quarter of 2018 as strong US retail sales and low unemployment buoyed markets. Throughout the summer, US equities moved higher as corporate profits surged. Several US equity indexes reached new highs despite potential headwinds including trade tensions, tariff announcements and contagion concerns over a Turkish currency crisis. After a relatively quiet summer, market volatility noticeably rose in October, as US equity markets suffered a sharpsell-off throughyear-end, amid
rising interest rates and concerns that higher inflation could mean a more restrictive monetary policy. In this environment, there was a flight to safety, as investors fled to defensive areas of the equities markets, like health care and utilities, and US Treasuries.
Given signs of a strong economy, the US Federal Reserve raised interest rates four times during the year: in March, June, September and December 2018. Following December’s Federal Reserve meeting, Chairman Jerome Powell raised interest rates for the fourth time in 2018 by 25 basis points to a targeted range of 2.25% to 2.50%, and lowered guidance from three to two rate hikes in 2019, signaling a slightly more dovish stance than expected.1 In contrast, the European Central Bank and central banks in several other countries maintained extraordinarily accommodative monetary policies.
During the year, stock selection in the financials and consumer staples sectors contributed to the Fund’s performance versus the style-specific index. In addition, underweight exposure to the consumer staples and materials sectors benefited the Fund’s relative performance. The largest detractors from the Fund’s
relative performance included stock selection in the health care, communication services, consumer discretionary, industrials and information technology (IT) sectors. Underweight exposure to the IT sector and overweight exposure to the industrials sector was a drag on relative performance, as well
Several health care stocks were strong performers for the year. The top contributor to the Fund’s performance relative to the style-specific index wasHCA Healthcare, which reported good results and a favorable outlook for the year. The stock responded well as the market had been skeptical that it could meet, much less beat, management’s initial guidance for the year. Investors also appeared to be more confident in the company’s outlook for 2019.
During the year,Thermo Fisher Scientific performed well due to several solid quarters of organic growth that were well above expectations. Estimates during the year appeared very conservative given fundamentals and the stock’s current valuation.
Nike was a leading contributor to the Fund’s performance relative to its style-specific index for the year. The company reported solid numbers with material upside in sales and gross profit margin. Nike also benefited from growing online sales and quality of earnings.
The leading detractor from the Fund’s performance versus the style-specific index wasFedEx. During the year, the company missed earnings expectations as European volume was lower than expected. This earnings flop, coupled with the generalsell-off in industrial stocks, pushed shares of the company lower.
Social media giantFacebook was a top detractor from the Fund’s performance versus the style-specific index for the year, as management’s earnings guidance for third-quarter evenue was weaker
Portfolio Composition | |||
By sector | % of total net assets |
Financials | 18.0% | |
Health Care | 17.5 | |
Information Technology | 13.7 | |
Consumer Discretionary | 12.7 | |
Industrials | 12.7 | |
Communication Services | 12.0 | |
Energy | 5.3 | |
Consumer Staples | 3.5 | |
Utilities | 2.1 | |
Money Market Funds | ||
Plus Other Assets Less Liabilities | 2.5 |
Top 10 Equity Holdings* | |||
% of total net assets | |||
1. Alphabet Inc.-Class C | 5.1% | ||
2. Microsoft Corp. | 4.1 | ||
3. Comcast Corp.-Class A | 3.0 | ||
4. Thermo Fisher Scientific, Inc. | 3.0 | ||
5. American Express Co. | 2.9 | ||
6. Mastercard Inc.-Class A | 2.6 | ||
7. UnitedHealth Group Inc. | 2.6 | ||
8. PepsiCo, Inc. | 2.4 | ||
9. U.S. Bancorp | 2.3 | ||
10. NIKE, Inc.-Class B | 2.2 |
Total Net Assets | $879 million | |
Total Number of Holdings* | 55 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
Data presented here are as of December 31, 2018.
Invesco V.I. Core Equity Fund
than expected. The stock price rose significantly in the second quarter, setting up the decline when expectations were not met. We exited our position in Facebook before the close of the year.
Concho Resources was another detractor from the Fund’s performance relative to the style-specific index during the year. The company sold off along with the energy sector as a whole, as oil prices fell during the year. In our view, company-specific issues were not the catalyst for the stock’s downturn.
Dental equipment makerDentsply Sirona performed poorly during the year after the company delivered lower-than-expected synergies in several key segments and experienced a series of leadership changes. We exited our position in the holding before the close of the year.
During the year, the Fund’s cash levels were brought down to under 5%. The cash was both deployed to new and existing holdings within the Fund.
At the close of the year, the Fund’s largest overweight positions relative to the Russell 1000 Index were in the consumer discretionary, health care and industrials sectors. The Fund’s largest underweight positions were in the consumer staples and IT sectors.
As always, the Fund focuses on companies that provide an attractive return on invested capital, trade at attractive valuations and have high-quality management teams with a long-term perspective. In short, we seek to take advantage of the market’s volatile behavior and short-term focus. We believe our conservative approach should position the Fund to navigate the evolving economic backdrop.
We thank you for your continued investment in Invesco V.I. Core Equity Fund.
1 | Source: US Federal Reserve |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Ronald Sloan Chartered Financial Analyst, Portfolio Manager andCo-Chief Investment Officer of Invesco’s Global Core Equity Team, is lead | ||
manager of Invesco V.I. Core Equity Fund. He joined Invesco in 1998. Mr. Sloan earned a BS in business administration and an MBA from the University of Missouri. |
Assisted by Invesco’s Global Core Equity Team
Invesco V.I. Core Equity Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: RIMES Technologies Corp. |
2 | Source: FactSet Research Systems Inc. |
3 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (5/2/94) | 7.37 | % | |||
10 Years | 9.07 | ||||
5 Years | 2.87 | ||||
1 Year | -9.40 | ||||
Series II Shares | |||||
Inception (10/24/01) | 5.68 | % | |||
10 Years | 8.80 | ||||
5 Years | 2.62 | ||||
1 Year | -9.61 |
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 recentmonth-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Performance figures in the table and chart do not reflect deduction of taxes a shareholder would
pay on Fund distributions or the redemption of Fund shares. 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 0.81% and 1.06%, 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 0.82% and 1.07%, 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 recentmonth-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recentmonth-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, 2020. See current prospectus for more information. |
Invesco V.I. Core Equity Fund
Invesco V.I. Core Equity Fund’s investment objective is long-term growth of capital.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Cash/cash equivalents risk.In rising markets, holding cash or cash equivalents will negatively affect the Fund’s performance relative to its benchmark.
Debt securities risk.The prices of debt securities held by the Fund will be affected by changes in interest rates, the creditworthiness of the issuer and other factors. An increase in prevailing interest rates typically causes the value of existing debt securities to fall and often has a greater impact on longer-duration debt securities and higher quality debt securities. Falling interest rates will cause the Fund to reinvest the proceeds of debt securities that have been repaid by the issuer at lower interest rates. Falling interest rates may also reduce the Fund’s distributable income because interest payments on floating rate debt instruments held by the Fund will decline. The Fund could lose money on investments in debt securities if the issuer or borrower fails to meet its obligations to make interest payments and/or to repay principal in a timely manner. Changes in an issuer’s financial strength, the market’s perception of such strength or in the credit rating of the issuer or the security may affect the value of debt securities. The Adviser’s credit analysis may fail to anticipate such changes, which could result in buying a debt security at an inopportune time or failing to sell a debt security in advance of a price decline or other credit event.
Derivatives risk.The value of a derivative instrument depends largely on (and is derived from) the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include other, possibly greater, risks, including counterparty, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by holding a position in the derivative. As a result, an adverse change in
the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative or the anticipated value of the underlying asset, which may make the Fund’s returns more volatile and increase the risk of loss. Derivative instruments may also be less liquid than more traditional investments and the Fund may be unable to sell or close out its derivative positions at a desirable time or price. This risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. Derivatives strategies may not always be successful. For example, derivatives used for hedging or to gain or limit exposure to a particular market segment may not provide the expected benefits, particularly during adverse market conditions.
Foreign government debt risk.Investments in foreign government debt securities (sometimes referred to as sovereign debt securities) involve certain risks in addition to those relating to foreign securities or debt securities generally. The issuer of the debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due in accordance with the terms of such debt, and the Fund may have limited recourse in the event of a default against the defaulting government. Without the approval of debt holders, some governmental debtors have in the past been able to reschedule or restructure their debt payments or declare moratoria on payments.
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange
controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
Small- andmid-capitalization companies risks.Small- andmid-capitalization companies tend to be more vulnerable to changing market conditions, may have little or no operating history or track record of success, and may have more limited product lines and markets, less experienced management and fewer financial resources than larger companies. These companies’ securities may be more volatile and less liquid than those of more established companies, and their returns may vary, sometimes significantly, from the overall securities market.
Invesco V.I. Core Equity Fund
About indexes used in this report
TheS&P 500® Index is an unmanaged index considered representative of the US stock market.
TheRussell 1000® Index is an unmanaged index considered representative oflarge-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.
TheLipper VUFLarge-Cap Core Funds Index is an unmanaged index considered representative oflarge-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.
Other information
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Industry 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.
Invesco V.I. Core Equity Fund
Schedule of Investments(a)
December 31, 2018
Shares | Value | |||||||
Common Stocks & Other Equity Interests–97.54% |
| |||||||
Aerospace & Defense–2.66% |
| |||||||
General Dynamics Corp. | 54,687 | $ | 8,597,343 | |||||
United Technologies Corp. | 138,741 | 14,773,142 | ||||||
23,370,485 | ||||||||
Air Freight & Logistics–1.36% |
| |||||||
FedEx Corp. | 73,974 | 11,934,225 | ||||||
Airlines–1.25% |
| |||||||
Delta Air Lines, Inc. | 220,513 | 11,003,599 | ||||||
Asset Management & Custody Banks–1.34% |
| |||||||
BlackRock, Inc. | 29,989 | 11,780,279 | ||||||
Auto Parts & Equipment–0.84% |
| |||||||
Aptiv PLC | 120,251 | 7,403,854 | ||||||
Biotechnology–4.76% |
| |||||||
Biogen Inc.(b) | 57,291 | 17,240,008 | ||||||
BioMarin Pharmaceutical Inc.(b) | 83,913 | 7,145,192 | ||||||
Celgene Corp.(b) | 138,147 | 8,853,841 | ||||||
Vertex Pharmaceuticals Inc.(b) | 51,771 | 8,578,972 | ||||||
41,818,013 | ||||||||
Cable & Satellite–2.99% |
| |||||||
Comcast Corp.–Class A | 772,497 | 26,303,523 | ||||||
Casinos & Gaming–1.12% |
| |||||||
Wynn Resorts Ltd. | 99,513 | 9,842,831 | ||||||
Consumer Finance–2.86% |
| |||||||
American Express Co. | 263,977 | 25,162,288 | ||||||
Data Processing & Outsourced Services–2.61% |
| |||||||
Mastercard Inc.–Class A | 121,742 | 22,966,628 | ||||||
Distillers & Vintners–1.17% |
| |||||||
Diageo PLC (United Kingdom) | 289,240 | 10,280,607 | ||||||
Diversified Banks–3.59% |
| |||||||
Toronto-Dominion Bank (The) (Canada) | 234,987 | 11,680,499 | ||||||
U.S. Bancorp | 434,854 | 19,872,828 | ||||||
31,553,327 | ||||||||
Financial Exchanges & Data–1.02% |
| |||||||
Moody’s Corp. | 63,781 | 8,931,891 | ||||||
Footwear–2.20% |
| |||||||
NIKE, Inc.–Class B | 260,938 | 19,345,943 | ||||||
General Merchandise Stores–1.99% |
| |||||||
Dollar General Corp. | 162,123 | 17,522,254 | ||||||
Health Care Equipment–2.89% |
| |||||||
Medtronic PLC | 165,651 | 15,067,615 | ||||||
Zimmer Biomet Holdings, Inc. | 99,483 | 10,318,377 | ||||||
25,385,992 |
Shares | Value | |||||||
Health Care Facilities–1.92% |
| |||||||
HCA Healthcare, Inc. | 135,245 | $ | 16,831,240 | |||||
Home Improvement Retail–1.43% |
| |||||||
Home Depot, Inc. (The) | 73,314 | 12,596,812 | ||||||
Hotels, Resorts & Cruise Lines–1.93% |
| |||||||
Carnival Corp. | 344,832 | 17,000,218 | ||||||
Industrial Conglomerates–2.96% |
| |||||||
Honeywell International Inc. | 105,198 | 13,898,760 | ||||||
Siemens AG (Germany) | 108,570 | 12,113,492 | ||||||
26,012,252 | ||||||||
Industrial Machinery–3.43% |
| |||||||
Parker-Hannifin Corp. | 106,798 | 15,927,854 | ||||||
Stanley Black & Decker Inc. | 118,871 | 14,233,613 | ||||||
30,161,467 | ||||||||
Insurance Brokers–2.15% |
| |||||||
Marsh & McLennan Cos., Inc. | 237,446 | 18,936,319 | ||||||
Integrated Oil & Gas–3.82% |
| |||||||
Chevron Corp. | 166,814 | 18,147,695 | ||||||
Suncor Energy, Inc. (Canada) | 551,989 | 15,439,132 | ||||||
33,586,827 | ||||||||
Integrated Telecommunication Services–2.16% |
| |||||||
Verizon Communications Inc. | 337,254 | 18,960,420 | ||||||
Interactive Home Entertainment–1.77% |
| |||||||
Activision Blizzard, Inc. | 333,712 | 15,540,968 | ||||||
Interactive Media & Services–5.09% |
| |||||||
Alphabet Inc.–Class C(b) | 43,243 | 44,782,883 | ||||||
Internet & Direct Marketing Retail–3.21% |
| |||||||
Alibaba Group Holding Ltd.–ADR (China)(b) | 66,317 | 9,090,071 | ||||||
Booking Holdings Inc.(b) | 11,093 | 19,106,805 | ||||||
28,196,876 | ||||||||
IT Consulting & Other Services–3.20% |
| |||||||
Cognizant Technology Solutions Corp.–Class A | 202,854 | 12,877,172 | ||||||
EPAM Systems, Inc.(b) | 131,556 | 15,261,812 | ||||||
28,138,984 | ||||||||
Life Sciences Tools & Services–2.99% |
| |||||||
Thermo Fisher Scientific, Inc. | 117,532 | 26,302,486 | ||||||
Managed Health Care–2.55% |
| |||||||
UnitedHealth Group Inc. | 90,053 | 22,434,003 | ||||||
Multi-Utilities–2.15% |
| |||||||
WEC Energy Group, Inc. | 272,490 | 18,872,657 | ||||||
Oil & Gas Exploration & Production–1.46% |
| |||||||
Concho Resources Inc.(b) | 124,798 | 12,827,986 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Equity Fund
Shares | Value | |||||||
Pharmaceuticals–2.37% |
| |||||||
Allergan PLC | 85,305 | $ | 11,401,866 | |||||
Novo Nordisk A/S–Class B (Denmark) | 205,727 | 9,456,799 | ||||||
20,858,665 | ||||||||
Property & Casualty Insurance–3.54% |
| |||||||
Chubb Ltd. | 100,411 | 12,971,093 | ||||||
Progressive Corp. (The) | 300,404 | 18,123,373 | ||||||
31,094,466 | ||||||||
Railroads–1.03% |
| |||||||
Norfolk Southern Corp. | 60,374 | 9,028,328 | ||||||
Regional Banks–3.45% |
| |||||||
First Republic Bank | 178,688 | 15,527,987 | ||||||
PNC Financial Services Group, Inc. (The) | 126,374 | 14,774,385 | ||||||
30,302,372 | ||||||||
Semiconductors–2.83% |
| |||||||
Analog Devices, Inc. | 213,044 | 18,285,566 | ||||||
QUALCOMM Inc. | 115,002 | 6,544,764 | ||||||
24,830,330 | ||||||||
Soft Drinks–2.37% |
| |||||||
PepsiCo, Inc. | 188,266 | 20,799,628 |
Shares | Value | |||||||
Systems Software–5.08% |
| |||||||
Microsoft Corp. | 352,238 | $ | 35,776,814 | |||||
Oracle Corp. | 197,220 | 8,904,483 | ||||||
44,681,297 | ||||||||
Total Common Stocks & Other Equity Interests |
| 857,383,223 | ||||||
Money Market Funds–2.43% |
| |||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30%(c) | 7,477,437 | 7,477,437 | ||||||
Invesco Liquid Assets Portfolio–Institutional Class, 2.48%(c) | 5,336,150 | 5,336,684 | ||||||
Invesco Treasury Portfolio–Institutional Class, 2.30%(c) | 8,545,642 | 8,545,642 | ||||||
Total Money Market Funds |
| 21,359,763 | ||||||
TOTAL INVESTMENTS IN SECURITIES–99.97% |
| 878,742,986 | ||||||
OTHER ASSETS LESS LIABILITIES–0.03% |
| 287,800 | ||||||
NET ASSETS–100.00% |
| $ | 879,030,786 |
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. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $749,610,687) | $ | 857,383,223 | ||
Investments in affiliated money market funds, at value (Cost $21,359,784) | 21,359,763 | |||
Cash | 65,221 | |||
Foreign currencies, at value (Cost $1,301) | 1,350 | |||
Receivable for: | ||||
Fund shares sold | 355,191 | |||
Dividends | 915,787 | |||
Investment for trustee deferred compensation and retirement plans | 383,155 | |||
Other assets | 191 | |||
Total assets | 880,463,881 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares reacquired | 587,445 | |||
Accrued fees to affiliates | 348,169 | |||
Accrued trustees’ and officers’ fees and benefits | 6,505 | |||
Accrued other operating expenses | 65,948 | |||
Trustee deferred compensation and retirement plans | 425,028 | |||
Total liabilities | 1,433,095 | |||
Net assets applicable to shares outstanding | $ | 879,030,786 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 674,186,373 | ||
Distributable earnings | 204,844,413 | |||
$ | 879,030,786 | |||
Net Assets: | ||||
Series I | $ | 858,827,939 | ||
Series II | $ | 20,202,847 | ||
Shares outstanding, no par value, |
| |||
Series I | 27,759,107 | |||
Series II | 658,920 | |||
Series I: | ||||
Net asset value per share | $ | 30.94 | ||
Series II: | ||||
Net asset value per share | $ | 30.66 |
Investment income: | ||||
Dividends (net of foreign withholding taxes of $199,072) | $ | 14,683,310 | ||
Dividends from affiliated money market funds | 1,209,807 | |||
Total investment income | 15,893,117 | |||
Expenses: | ||||
Advisory fees | 6,532,746 | |||
Administrative services fees | 1,704,013 | |||
Custodian fees | 70,933 | |||
Distribution fees — Series II | 169,290 | |||
Transfer agent fees | 73,543 | |||
Trustees’ and officers’ fees and benefits | 35,488 | |||
Reports to shareholders | 10,330 | |||
Professional services fees | 102,710 | |||
Other | 21,327 | |||
Total expenses | 8,720,380 | |||
Less: Fees waived | (99,125 | ) | ||
Net expenses | 8,621,255 | |||
Net investment income | 7,271,862 | |||
Realized and unrealized gain (loss): | ||||
Net realized gain from: | ||||
Investment securities | 95,783,721 | |||
Foreign currencies | 596,575 | |||
96,380,296 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (196,608,141 | ) | ||
Foreign currencies | (942,187 | ) | ||
(197,550,328 | ) | |||
Net realized and unrealized gain (loss) | (101,170,032 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (93,898,170 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income | $ | 7,271,862 | $ | 8,746,855 | ||||
Net realized gain | 96,380,296 | 63,198,866 | ||||||
Change in net unrealized appreciation (depreciation) | (197,550,328 | ) | 80,767,444 | |||||
Net increase (decrease) in net assets resulting from operations | (93,898,170 | ) | 152,713,165 | |||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (72,928,447 | ) | (65,021,597 | ) | ||||
Series II | (1,504,788 | ) | (11,137,579 | ) | ||||
Total distributions from distributable earnings | (74,433,235 | ) | (76,159,176 | ) | ||||
Share transactions–net: | ||||||||
Series I | (35,235,681 | ) | (44,176,644 | ) | ||||
Series II | (162,186,906 | ) | (888,493 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (197,422,587 | ) | (45,065,137 | ) | ||||
Net increase (decrease) in net assets | (365,753,992 | ) | 31,488,852 | |||||
Net assets: | ||||||||
Beginning of year | 1,244,784,778 | 1,213,295,926 | ||||||
End of year | $ | 879,030,786 | $ | 1,244,784,778 |
(1) | For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income and distributions from net realized gains. The Securities and Exchange Commission eliminated the requirement to disclose distribution components separately, except for tax return of capital. For the year ended December 31, 2017, distributions from net investment income were $10,820,715 and $1,482,765 and distributions from net realized gains were $54,200,882 and $9,654,814 for Series I and Series II shares, respectively. |
Notes to Financial Statements
December 31, 2018
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. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 islong-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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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 theover-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 (“NAV”) 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 theend-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. 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. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 investment 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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 the 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 the dailymark-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 anagreed-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 accrues daily and pays monthly 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 year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.61%.
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
Invesco V.I. Core Equity Fund
The Adviser has contractually agreed, through at least June 30, 2019, 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 (the “expense limits”). 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, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $99,125.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $250,630 for accounting and fund administrative services and was reimbursed $1,453,383 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution fees.
For the year ended December 31, 2018, the Fund incurred $2,128 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 December 31, 2018. 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 | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks & Other Equity Interests | $ | 837,645,817 | $ | 19,737,406 | $ | — | $ | 857,383,223 | ||||||||
Money Market Funds | 21,359,763 | — | — | 21,359,763 | ||||||||||||
Total Investments | $ | 859,005,580 | $ | 19,737,406 | $ | — | $ | 878,742,986 |
Invesco V.I. Core Equity Fund
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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 8,935,012 | $ | 13,761,073 | ||||
Long-term capital gain | 65,498,223 | 62,398,103 | ||||||
Total distributions | $ | 74,433,235 | $ | 76,159,176 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 7,833,861 | ||
Undistributedlong-term gain | 92,661,295 | |||
Net unrealized appreciation — investments | 104,758,020 | |||
Net unrealized appreciation (depreciation) — foreign currencies | (6,454 | ) | ||
Temporary book/tax differences | (402,309 | ) | ||
Shares of beneficial interest | 674,186,373 | |||
Total net assets | $ | 879,030,786 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 does not have a capital loss carryforward as of December 31, 2018.
NOTE 7—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $454,739,294 and $576,794,895, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 167,990,750 | ||
Aggregate unrealized (depreciation) of investments | (63,232,730 | ) | ||
Net unrealized appreciation of investments | $ | 104,758,020 |
Cost of investments for tax purposes is $773,984,966.
Invesco V.I. Core Equity Fund
NOTE 8—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of foreign currency transactions, on December 31, 2018, undistributed net investment income (loss) was increased by $596,574 and undistributed net realized gain (loss) was decreased by $596,574. This reclassification had no effect on the net assets or the distributable earnings of the Fund.
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 1,686,758 | $ | 61,083,116 | 1,051,421 | $ | 37,861,752 | ||||||||||
Series II | 96,316 | 3,437,247 | 212,324 | 7,514,897 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 2,005,181 | 72,928,448 | 1,829,018 | 65,021,597 | ||||||||||||
Series II | 41,719 | 1,504,788 | 317,853 | 11,137,579 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (4,659,767 | ) | (169,247,245 | ) | (4,043,650 | ) | (147,059,993 | ) | ||||||||
Series II | (4,730,829 | ) | (167,128,941 | ) | (544,318 | ) | (19,540,969 | ) | ||||||||
Net increase (decrease) in share activity | (5,560,622 | ) | $ | (197,422,587 | ) | (1,177,352 | ) | $ | (45,065,137 | ) |
(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. |
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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 36.72 | $ | 0.25 | $ | (3.29 | ) | $ | (3.04 | ) | $ | (0.34 | ) | $ | (2.40 | ) | $ | (2.74 | ) | $ | 30.94 | (9.40 | )% | $ | 858,828 | 0.79 | %(d) | 0.80 | %(d) | 0.70 | %(d) | 46 | % | |||||||||||||||||||||||
Year ended 12/31/17 | 34.58 | 0.27 | 4.21 | 4.48 | (0.39 | ) | (1.95 | ) | (2.34 | ) | 36.72 | 13.17 | 1,054,802 | 0.79 | 0.80 | 0.74 | 30 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 33.84 | 0.39 | 3.07 | 3.46 | (0.28 | ) | (2.44 | ) | (2.72 | ) | 34.58 | 10.26 | 1,033,700 | 0.84 | 0.85 | 1.11 | 38 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 41.00 | 0.32 | (2.79 | ) | (2.47 | ) | (0.46 | ) | (4.23 | ) | (4.69 | ) | 33.84 | (5.75 | ) | 921,516 | 0.89 | 0.90 | 0.81 | 45 | ||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 36.18 | 0.16 | (3.28 | ) | (3.12 | ) | — | (2.40 | ) | (2.40 | ) | 30.66 | (9.61 | ) | 20,203 | 1.04 | (d) | 1.05 | (d) | 0.45 | (d) | 46 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/17 | 34.11 | 0.18 | 4.14 | 4.32 | (0.30 | ) | (1.95 | ) | (2.25 | ) | 36.18 | 12.87 | 189,982 | 1.04 | 1.05 | 0.49 | 30 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 33.40 | 0.30 | 3.03 | 3.33 | (0.18 | ) | (2.44 | ) | (2.62 | ) | 34.11 | 10.02 | 179,596 | 1.09 | 1.10 | 0.86 | 38 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 40.53 | 0.22 | (2.75 | ) | (2.53 | ) | (0.37 | ) | (4.23 | ) | (4.60 | ) | 33.40 | (5.98 | ) | 178,126 | 1.14 | 1.15 | 0.56 | 45 | ||||||||||||||||||||||||||||||||||||
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 |
(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 based on average daily net assets (000’s omitted) of $1,000,242 and $67,716 for Series I and Series II shares, respectively. |
Invesco V.I. Core Equity Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Core Equity Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Core Equity Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and transfer agent. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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.
ACTUAL | HYPOTHETICAL (5% annual return before | |||||||||||||||||||||||
Class | Beginning Account Value (07/01/18) | Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | Annualized Expense Ratio | ||||||||||||||||||
Series I | $ | 1,000.00 | $ | 909.30 | $ | 3.80 | $ | 1,021.22 | $ | 4.02 | 0.79 | % | ||||||||||||
Series II | 1,000.00 | 908.20 | 5.00 | 1,019.96 | 5.30 | 1.04 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Core Equity Fund
Tax Information
Form1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Long-Term Capital Gain Distributions | $ | 65,498,223 | ||
Corporate Dividends Received Deduction* | 100.00 | % | ||
U.S. Treasury Obligations* | 0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. Core Equity Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Core Equity Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. Core Equity Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. Core Equity Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Core Equity Fund
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Annual Report to Shareholders
| December 31, 2018 | |||
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Invesco V.I. Core Plus Bond Fund
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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 (or any successor Form). The Fund’s Form N-Q (or any successor Form) filings are available on the SEC website, 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 (or any successor Form), 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.
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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.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Invesco Distributors, Inc. | VICPB-AR-1 | 02152019 1151 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. Core Plus Bond Fund (the Fund), underperformed the Fund’s broad market/style-specific index, the Bloomberg Barclays U.S. Aggregate Bond Index.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -2.37 | % | |||
Series II Shares | -2.64 | ||||
Bloomberg Barclays U.S. Aggregate Bond Index▼ (Broad Market/Style-Specific Index) | 0.01 | ||||
Lipper VUF Core Plus Bond Funds Index∎ (Peer Group Index) | -0.74 | ||||
Source(s):▼FactSet Research Systems Inc.;∎Lipper Inc. |
Market conditions and your Fund
For the year ended December 31, 2018, US bond returns were mixed across fixed income indexes, primarily driven by heightened market volatility, a widening of fixed income credit spreads, and a decline in overall demand for debt securities. The US Federal Reserve (the Fed) raised the fed funds rate to a range of 2.25% to 2.50% in December 2018, highlighting the ongoing positive health of the US economy, with low unemployment and moderate economic growth.1 This was the Fed’s fourth 0.25% rate hike in 2018, and further hikes are expected in 2019.1 A benign inflation outlook dampened long-term interest rates as the yield curve flattened, benefiting investors invested in shorter maturity securities. In addition, the benign inflation environment may allow the Fed to remain less aggressive with rate hikes in the future. As proxies for interest rate movements, the two-year US Treasury yield rose from 1.89% to 2.48% during the year.2 In contrast, the 10-year US Treasury yield increased from 2.40% to 2.69%, and the 30-year US Treasury yield rose from 2.74% to 3.02% during the year.2
The US corporate credit sector was a primary detractor from the Fund’s
performance for the year, with lower-rated investment grade securities generally underperforming higher-rated credits and comparable-maturity Treasuries. Corporate debt issuance was roughly $1.325 trillion3 for the year, yet spread premiums moved wider in the face of lower net supply as overseas buyer demand softened while credit spreads steadily widened over the course of the year. Issuance related to large scale mergers and acquisitions transactions continued to be strong throughout the year. The high yield sector also benefited from strong demand during the first nine months of the year but succumbed to weakening credit technicals due to heavy risk-off sentiment observed in the fourth quarter. Within structured securities, asset-backed securities performed well in the midst of higher short-term interest rates. Agency mortgage-backed securities underperformed comparable maturity Treasuries on a relative basis for the year as the Fed continued to systematically de-lever its mortgage-backed securities (MBS) and Treasury holdings.
The US investment grade bond market, as represented by the Bloomberg Barclays U.S. Aggregate Bond Index, returned 0.01% for the year. This was
largely attributed to income (bond coupon payments) of underlying debt offset by the underperformance of credit-related fixed income sectors relative to Treasuries. The treasury, government-related and securitized sectors posted positive returns for the year while corporate credit lagged. The Fund’s out-of-index exposure, such as high yield and emerging market (EM) debt, detracted from the Fund’s performance for the year. High yield sector total returns were negative in 2018 as a result of deteriorating credit fundamentals and a lack of buyer demand in the fourth quarter. Growth and interest rate differentials favored the US relative to EM in 2018. As a result, EM saw capital outflows and downward pressure on EM asset prices.
The Fund generated negative returns for the year and underperformed its broad market/style-specific benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index. The Fund’s overweight allocation to corporate credit negatively impacted the Fund’s performance relative to the broad market/style-specific index. In addition, the Fund’s overweight exposure to lower-rated investment grade securities and its allocation to high yield securities also dampened relative results. The Fund’s security selection within the securitized sector positively contributed to relative returns. The Fund’s slight overweight duration posture was a detractor for the year, with an increase in interest rates along the intermediate and long maturity spectrums.
The Fund benefited from incremental income earned from transactions in the highly liquid to-be-announced market for agency MBS for the year. Such transactions involve the Fund selling an agency MBS to a financial institution, with an agreement to repurchase a substantially similar security at an agreed upon price and date. Cash received by the Fund as a result of these repurchase transactions
Portfolio Composition | |||
By security type | % of total investments |
Bonds & Notes | 51.9% | |
U.S. Government Sponsored Agency Mortgage-Backed Securities | 16.6 | |
Asset-Backed Securities | 9.9 | |
U.S. Treasury Securities | 5.6 | |
Preferred Stocks | 1.4 | |
Security Types Each Less Than 1% of Portfolio | 0.4 | |
Money Market Funds | 14.2 |
Top Five Debt Issuers* | |||
% of total net assets | |||
1. Federal National Mortgage Association | 12.5% | ||
2. U.S. Treasury Securities | 6.6 | ||
3. Federal Home Loan Mortgage Corp. | 3.7 | ||
4. Government National Mortgage Association | 3.3 | ||
5. Sprint Spectrum Co. LLC/Sprint | |||
Spectrum Co. II LLC/Sprint Spectrum Co. III LLC | 2.3 |
Total Net Assets | $17.1 million | |
Total Number of Holdings* | 477 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
Data presented here are as of December 31, 2018.
Invesco V.I. Core Plus Bond Fund
may be invested in short-term instruments, and the income from these investments, together with any additional fee income received from this activity, may generate income for the Fund.
The Fund also may use active duration and yield curve positioning for risk management and for generating excess return versus its broad market/style-specific benchmark. Duration measures a portfolio’s price sensitivity to interest rate changes. Yield curve positioning refers to actively emphasizing particular points (maturities) along the yield curve with favorable risk-return expectations. Duration of the portfolio was maintained close to that of the Fund’s broad market/style-specific benchmark, on average, and the timing of changes and the degree of variance from the benchmark during the year detracted modestly from relative returns. Buying and selling US Treasury futures and interest rate swaptions were important tools used during the year for the management of interest rate risk and to maintain the Fund’s targeted portfolio duration.
Part of the Fund’s strategy to manage credit and currency risk in the portfolio during the reporting period entailed purchasing and selling credit and currency derivatives. We managed credit market risk by purchasing and selling protection through credit default swaps at various points throughout the year. Currency management was carried out via currency forwards and options on an as-needed basis.
We wish to remind you that the Fund is subject to interest rate risk, meaning when interest rates rise, the value of fixed income securities tends to fall. The risk may be greater in the current market environment because interest rates are near historic lows. The degree to which the value of fixed income securities may decline due to rising interest rates may vary depending on the speed and magnitude of the increase in interest rates, as well as individual security characteristics such as price, maturity, duration and coupon and market forces such as supply and demand for similar securities. We are monitoring interest rates, and the market, economic and geopolitical factors that may impact the direction, speed and magnitude of changes to interest rates across the maturity spectrum, including the potential impact of monetary policy changes by the Fed and certain foreign central banks. If interest rates rise, markets may experience increased volatility, which may affect the value and/ or liquidity of certain of the Fund’s investments.
Thank you for investing in Invesco V.I. Core Plus Bond Fund and for sharing our long-term investment horizon.
1 Source: US Federal Reserve
2 Source: US Department of the Treasury
3 Source: Bloomberg
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Matt Brill Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Core Plus Bond Fund. He joined | ||
Invesco in 2013. Mr. Brill earned a BA in economics from Washington and Lee University. |
Chuck Burge Portfolio Manager, is manager of Invesco V.I. Core Plus Bond Fund. He joined Invesco in 2002. Mr. Burge earned a BS in | ||
economics from Texas A&M University and an MBA in finance and accounting from Rice University. |
Michael Hyman Portfolio Manager, is manager of Invesco V.I. Core Plus Bond Fund. He joined Invesco in 2013. Mr. Hyman earned a BSE | ||
in finance from Pennsylvania State University and an MBA from the Stern School of Business at New York University. |
Joseph Portera Portfolio Manager, is manager of Invesco V.I. Core Plus Bond Fund. He joined Invesco in 2012. Mr. Portera earned BA | ||
and MA degrees in Soviet studies and an MA in international political economy and development from Fordham University. |
Rashique Rahman Portfolio Manager, is manager of Invesco V.I. Core Plus Bond Fund. Mr. Rahman is the Head of Emerging Markets for | ||
Invesco Fixed Income. He joined Invesco in 2014. Mr. Rahman did undergraduate work at the University of California, Los Angeles, and earned an MA and an MBA from Columbia University. |
Scott Roberts Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Core Plus Bond Fund. He joined | ||
Invesco in 2000. Mr. Roberts earned a BBA in finance from the University of Houston. |
Robert Waldner Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Core Plus Bond Fund. He joined | ||
Invesco in 2013. Mr. Waldner earned a BSE degree in civil engineering from Princeton University. |
Invesco V.I. Core Plus Bond Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 Source: FactSet Research Systems Inc.
Past performance cannot guarantee comparable future results.
The Lipper VUF Core Plus Bond Fund Index is not shown on the chart as the index does not have 10 years of performance history.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (5/5/93) | 4.18 | % | |||
10 Years | 5.62 | ||||
5 Years | 3.57 | ||||
1 Year | -2.37 | ||||
Series II Shares | |||||
Inception (3/14/02) | 3.63 | % | |||
10 Years | 5.34 | ||||
5 Years | 3.31 | ||||
1 Year | -2.64 |
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. Performance figures in the table and chart do not reflect deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 0.62% and 0.87%, respectively.1,2 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 1.60% and 1.85%, 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. 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, 2020. See current prospectus for more information. |
2 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2020. See current prospectus for more information. |
Invesco V.I. Core Plus Bond Fund
Invesco V.I. Core Plus Bond Fund’s investment objective is total return, comprised of current income and capital appreciation.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Active trading risk.Active trading of portfolio securities may result in added expenses and a lower return.
Changing fixed income market conditions risk.The current low interest rate environment was created in part by the Federal Reserve Board (FRB) and certain foreign central banks keeping the federal funds and equivalent foreign rates near, at or below zero. Increases in the federal funds and equivalent foreign rates may expose fixed income markets to heightened volatility and reduced liquidity for certain fixed income investments, particularly those with longer maturities. In addition, decreases in fixed income dealer market-making capacity may also potentially lead to heightened volatility and reduced liquidity in the fixed income markets. As a result, the value of the Fund’s investments and share price may decline. Changes in central bank policies could also result in higher than normal shareholder redemptions, which could potentially increase portfolio turnover and the Fund’s transaction costs.
Collateralized loan obligations risk. CLOs are subject to the risks of substantial losses due to actual defaults by underlying borrowers, which will be greater during periods of economic or financial stress. CLOs may also lose value due to collateral defaults and disappearance of subordinate tranches, market anticipation of defaults, and investor aversion to CLO securities as a class. The risks of CLOs will be greater if the Fund invests in CLOs that hold loans of uncreditworthy borrowers or if the Fund holds subordinate tranches of the CLO that absorbs losses from the defaults before senior tranches. In addition, CLOs are subject to interest rate risk and credit risk.
Debt securities risk.The prices of debt securities held by the Fund will be affected by changes in interest rates, the creditworthiness of the issuer and other factors. An increase in prevailing interest rates typically causes the value of existing debt securities to fall and often has a greater impact on longer-duration debt securities and higher quality debt securities. Falling interest rates will cause the Fund to reinvest the proceeds of debt securities that have been repaid by the issuer at lower interest rates. Falling interest
rates may also reduce the Fund’s distributable income because interest payments on floating rate debt instruments held by the Fund will decline. The Fund could lose money on investments in debt securities if the issuer or borrower fails to meet its obligations to make interest payments and/or to repay principal in a timely manner. Changes in an issuer’s financial strength, the market’s perception of such strength or in the credit rating of the issuer or the security may affect the value of debt securities. The Adviser’s credit analysis may fail to anticipate such changes, which could result in buying a debt security at an inopportune time or failing to sell a debt security in advance of a price decline or other credit event.
Derivatives risk.The value of a derivative instrument depends largely on (and is derived from) the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include other, possibly greater, risks, including counterparty, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by holding a position in the derivative. As a result, an adverse change in the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative or the anticipated value of the underlying asset, which may make the Fund’s returns more volatile and increase the risk of loss. Derivative instruments may also be less liquid than more traditional investments and the Fund may be unable to sell or close out its derivative positions at a desirable time or price. This risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. Derivatives strategies may not always be successful. For example,
derivatives used for hedging or to gain or limit exposure to a particular market segment may not provide the expected benefits, particularly during adverse market conditions.
Emerging markets securities risk.Emerging markets (also referred to as developing markets) are generally subject to greater market volatility, political, social and economic instability, uncertain trading markets and more governmental limitations on foreign investment than more developed markets. In addition, companies operating in emerging markets may be subject to lower trading volume and greater price fluctuations than companies in more developed markets. Securities law and the enforcement of systems of taxation in many emerging market countries may change quickly and unpredictably. In addition, investments in emerging markets securities may also be subject to additional transaction costs, delays in settlement procedures, and lack of timely information.
Foreign government debt risk.Investments in foreign government debt securities (sometimes referred to as sovereign debt securities) involve certain risks in addition to those relating to foreign securities or debt securities generally. The issuer of the debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due in accordance with the terms of such debt, and the Fund may have limited recourse in the event of a default against the defaulting government. Without the approval of debt holders, some governmental debtors have in the past been able to reschedule or restructure their debt payments or declare moratoria on payments.
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign
Invesco V.I. Core Plus Bond Fund
currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
High yield debt securities (junk bond) risk.Investments in high yield debt securities (“junk bonds”) and other lower-rated securities will subject the Fund to substantial risk of loss. These securities are considered to be speculative with respect to the issuer’s ability to pay interest and principal when due, are more susceptible to default or decline in market value and are less liquid than investment grade debt securities. Prices of high yield debt securities tend to be very volatile.
Liquidity risk.The Fund may be unable to sell illiquid investments at the time or price it desires and, as a result, could lose its entire investment in such investments. Liquid securities can become illiquid during periods of market stress. If a significant amount of the Fund’s securities become illiquid, the Fund may not be able to timely pay redemption proceeds and may need to sell securities at significantly reduced prices.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
Mortgage- and asset-backed securities risk.Mortgage- and asset-backed securities,
including collateralized debt obligations and collateralized mortgage obligations, are subject to prepayment or call risk, which is the risk that a borrower’s payments may be received earlier or later than expected due to changes in prepayment rates on underlying loans. This could result in the Fund reinvesting these early payments at lower interest rates, thereby reducing the Fund’s income. Mortgage- and asset-backed securities also are subject to extension risk, which is the risk that an unexpected rise in interest rates could reduce the rate of prepayments, causing the price of the mortgage- and asset-backed securities and the Fund’s share price to fall. An unexpectedly high rate of defaults on the mortgages held by a mortgage pool may adversely affect the value of mortgage-backed securities and could result in losses to the Fund. The Fund may invest in mortgage pools that include subprime mortgages, which are loans made to borrowers with weakened credit histories or with lower capacity to make timely payments on their mortgages. Privately issued mortgage-related securities are not subject to the same underwriting requirements as those with government or government-sponsored entity guarantees and, therefore, mortgage loans underlying privately issued mortgage-related securities may have less favorable collateral, credit risk or other underwriting characteristics, and wider variances in interest rate, term, size, purpose and borrower characteristics.
Municipal securities risk.The risk of a municipal obligation generally depends on the financial and credit status of the issuer. Constitutional amendments, legislative enactments, executive orders, administrative regulations, voter initiatives, and the issuer’s regional economic conditions may affect the municipal security’s value, interest payments, repayment of principal and the Fund’s ability to sell the security. Failure of a municipal security issuer to comply with applicable tax requirements may make income paid thereon taxable, resulting in a decline in the security’s value. In addition, there could be changes in applicable tax laws or tax treatments that reduce or eliminate the current federal income tax exemption on municipal securities or otherwise adversely affect the current federal or state tax status of municipal securities.
TBA transactions risk.TBA transactions involve the risk of loss if the securities received are less favorable than what was anticipated by the Fund when entering
into the TBA transaction, or if the counterparty fails to deliver the securities. When the Fund enters into a short sale of a TBA mortgage it does not own, the Fund may have to purchase deliverable mortgages to settle the short sale at a higher price than anticipated, thereby causing a loss. As there is no limit on how much the price of mortgage securities can increase, the Fund’s exposure is unlimited. The Fund may not always be able to purchase mortgage securities to close out the short position at a particular time or at an acceptable price. In addition, taking short positions results in a form of leverage, which could increase the volatility of the Fund’s share price.
US government obligations risk.Obligations of U.S. Government agencies and authorities receive varying levels of support and may not be backed by the full faith and credit of the U.S. Government, which could affect the Fund’s ability to recover should they default. No assurance can be given that the U.S. Government will provide financial support to its agencies and authorities if it is not obligated by law to do so.
When-issued, delayed delivery and forward commitment risks.When-issued and delayed delivery transactions subject the Fund to market risk because the value or yield of a security at delivery may be more or less than the purchase price or yield generally available when delivery occurs, and counterparty risk because the Fund relies on the buyer or seller, as the case may be, to consummate the transaction. These transactions also have a leveraging effect on the Fund because the Fund commits to purchase securities that it does not have to pay for until a later date, which increases the Fund’s overall investment exposure and, as a result, its volatility.
Zero Coupon or pay-in-kind securities risk.The value, interest rates, and liquidity of non-cash paying instruments, such as zero coupon and pay-in-kind securities, are subject to greater fluctuation than other types of securities. The higher yields and interest rates on pay-in-kind securities reflect the payment deferral and increased credit risk associated with such instruments and that such investments may represent a higher credit risk than loans that periodically pay interest.
Invesco V.I. Core Plus Bond Fund
About indexes used in this report
TheBloomberg Barclays U.S. Aggregate Bond Index is an unmanaged index considered representative of the US investment grade, fixed-rate bond market.
TheLipper VUF Core Plus Bond Funds Index is an unmanaged index considered representative of core plus bond 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.
Other information
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Invesco V.I. Core Plus Bond Fund
Schedule of Investments(a)
December 31, 2018
Principal Amount | Value | |||||||
Bonds & Notes–61.49% |
| |||||||
Aerospace & Defense–0.05% |
| |||||||
BBA U.S. Holdings, Inc., Sr. Unsec. Notes, 5.38%, 05/01/2026(b) | $ | 2,000 | $ | 1,900 | ||||
Moog Inc., Sr. Unsec. Gtd. Notes, 5.25%, 12/01/2022(b) | 2,000 | 1,990 | ||||||
TransDigm Inc., Sr. Unsec. Gtd. Sub. Global Notes, 6.50%, 07/15/2024 | 2,000 | 1,952 | ||||||
Triumph Group, Inc., Sr. Unsec. Gtd. Global Notes, 7.75%, 08/15/2025 | 2,000 | 1,770 | ||||||
7,612 | ||||||||
Agricultural & Farm Machinery–0.03% |
| |||||||
Titan International, Inc., Sr. Sec. Gtd. First Lien Global Notes, 6.50%, 11/30/2023 | 5,000 | 4,500 | ||||||
Air Freight & Logistics–0.01% |
| |||||||
XPO Logistics, Inc., Sr. Unsec. Gtd. Notes, 6.50%, 06/15/2022(b) | 2,000 | 1,990 | ||||||
Airlines–4.05% |
| |||||||
Air Canada Pass Through Trust (Canada), | ||||||||
Series 2017-1, Class A, | ||||||||
Sec. Pass Through Ctfs., 3.55%, 07/15/2031(b) | 37,000 | 35,426 | ||||||
Series 2017-1, Class B, | ||||||||
Sec. Pass Through Ctfs., 3.70%, 07/15/2027(b) | 39,000 | 37,071 | ||||||
Series 2017-1, Class AA, | 38,000 | 36,417 | ||||||
American Airlines Pass Through Trust, | ||||||||
Series 2016-1, Class AA, Sr. Sec. First Lien Pass Through Ctfs., 3.58%, 07/15/2029 | 28,940 | 28,506 | ||||||
Series 2016-3, Class B, Sec. Third Lien Pass Through Ctfs., 3.75%, 04/15/2027 | 31,907 | 30,657 | ||||||
Series 2017-1, Class B, Sec. Third Lien Pass Through Ctfs., 4.95%, 08/15/2026 | 31,590 | 31,723 | ||||||
Series 2017-1, Class AA, Sr. Sec. First Lien Pass Through Ctfs., 3.65%, 02/15/2029 | 38,798 | 38,309 | ||||||
Series 2017-2, Class A, Sec. Second Lien Pass Through Ctfs., 3.60%, 04/15/2031 | 44,755 | 42,566 | ||||||
Series 2017-2, Class B, Sec. Third Lien Pass Through Ctfs., 3.70%, 04/15/2027 | 34,180 | 33,093 | ||||||
Delta Air Lines, Inc., Sr. Unsec. Global Notes, | ||||||||
2.88%, 03/13/2020 | 27,000 | 26,825 | ||||||
3.63%, 03/15/2022 | 45,000 | 44,067 | ||||||
3.80%, 04/19/2023 | 24,000 | 23,638 | ||||||
4.38%, 04/19/2028 | 38,000 | 36,505 |
Principal Amount | Value | |||||||
Airlines–(continued) | ||||||||
LATAM Airlines Group S.A. Pass Through Trust (Chile),Series 2015-1, Class A, Sr. Sec. First Lien Global Pass Through Ctfs., 4.20%, 08/15/2029 | $ | 98,445 | $ | 95,246 | ||||
United Airlines Pass Through Trust, | ||||||||
Series 2014-2, Class B, Sec. Second Lien Pass Through Ctfs., 4.63%, 03/03/2024 | 35,930 | 35,784 | ||||||
Series 2018-1, Class A, Sec. Second Lien Pass Through Ctfs., 3.70%, 09/01/2031 | 62,000 | 60,603 | ||||||
Series 2018-1, Class AA, Sr. Sec. First Lien Pass Through Ctfs., 3.50%, 09/01/2031 | 58,000 | 57,062 | ||||||
US Airways Pass Through Trust,Series 2012-1, Class B, Sec. Second Lien Pass Through Ctfs., 8.00%, 04/01/2021 | 656 | 677 | ||||||
694,175 | ||||||||
Alternative Carriers–0.06% |
| |||||||
CenturyLink, Inc., | ||||||||
Series S, Sr. Unsec. Notes, 6.45%, 06/15/2021 | 2,000 | 2,002 | ||||||
Series Y, Sr. Unsec. Global Notes, 7.50%, 04/01/2024 | 1,000 | 968 | ||||||
Level 3 Financing, Inc., Sr. Unsec. Gtd. Global Notes, | ||||||||
5.25%, 03/15/2026 | 2,000 | 1,835 | ||||||
5.38%, 05/01/2025 | 5,000 | 4,700 | ||||||
9,505 | ||||||||
Aluminum–0.02% |
| |||||||
Novelis Corp., Sr. Unsec. Gtd. Notes, | ||||||||
5.88%, 09/30/2026(b) | 2,000 | 1,775 | ||||||
6.25%, 08/15/2024(b) | 2,000 | 1,885 | ||||||
3,660 | ||||||||
Apparel Retail–0.24% |
| |||||||
L Brands, Inc., Sr. Unsec. Gtd. Global Notes, | ||||||||
5.63%, 02/15/2022 | 39,000 | 39,000 | ||||||
6.88%, 11/01/2035 | 2,000 | 1,680 | ||||||
40,680 | ||||||||
Apparel, Accessories & Luxury Goods–0.02% |
| |||||||
Hanesbrands Inc., Sr. Unsec. Gtd. Notes, 4.88%, 05/15/2026(b) | 3,000 | 2,719 | ||||||
Asset Management & Custody Banks–0.77% |
| |||||||
Carlyle Finance LLC, Sr. Unsec. Gtd. Notes, 5.65%, 09/15/2048(b) | 52,000 | 51,844 | ||||||
Carlyle Holdings II Finance LLC, Sr. Unsec. Gtd. Notes, 5.63%, 03/30/2043(b) | 75,000 | 74,548 |
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 | |||||||
Asset Management & Custody Banks–(continued) |
| |||||||
Prime Security Services Borrower, LLC/Prime Finance, Inc., Sec. Gtd. Second Lien Notes, 9.25%, 05/15/2023(b) | $ | 5,000 | $ | 5,169 | ||||
131,561 | ||||||||
Auto Parts & Equipment–0.06% |
| |||||||
Dana Inc., Sr. Unsec. Notes, 5.50%, 12/15/2024 | 5,000 | 4,675 | ||||||
Delphi Technologies PLC, Sr. Unsec. Gtd. Notes, 5.00%, 10/01/2025(b) | 1,000 | 844 | ||||||
Flexi-Van Leasing, Inc., Sec. Second Lien Notes, 10.00%, 02/15/2023(b) | 4,000 | 3,260 | ||||||
Hertz Corp. (The), Sec. Gtd. Second Lien Notes, 7.63%, 06/01/2022(b) | 2,000 | 1,890 | ||||||
10,669 | ||||||||
Automobile Manufacturers–0.86% |
| |||||||
General Motors Financial Co., Inc., | ||||||||
Sr. Unsec. Gtd. Notes, 3.15%, 01/15/2020 | 39,000 | 38,772 | ||||||
Series B, Jr. Unsec. Sub. Global Notes, 6.50%(c) | 124,000 | 105,090 | ||||||
J.B. Poindexter & Co., Inc., Sr. Unsec. Bonds, 7.13%, 04/15/2026(b) | 4,000 | 3,760 | ||||||
147,622 | ||||||||
Automotive Retail–0.12% |
| |||||||
Advance Auto Parts, Inc., Sr. Unsec. Gtd. Notes, 5.75%, 05/01/2020 | 12,000 | 12,293 | ||||||
Lithia Motors, Inc., Sr. Unsec. Gtd. Notes, 5.25%, 08/01/2025(b) | 2,000 | 1,847 | ||||||
Murphy Oil USA, Inc., Sr. Unsec. Gtd. Global Notes, 5.63%, 05/01/2027 | 2,000 | 1,930 | ||||||
Penske Automotive Group Inc., Sr. Unsec. Sub. Gtd. Notes, 5.50%, 05/15/2026 | 4,000 | 3,735 | ||||||
19,805 | ||||||||
Biotechnology–0.13% |
| |||||||
AbbVie Inc., Sr. Unsec. Global Notes, 3.75%, 11/14/2023 | 22,000 | 21,911 | ||||||
Brewers–0.45% |
| |||||||
Anheuser-Busch Cos. LLC/ Anheuser-Busch InBev Worldwide Inc (Belgium), Sr. Unsec. Gtd. Notes, 3.65%, 02/01/2026(b) | 55,000 | 52,036 | ||||||
Anheuser-Busch InBev Worldwide Inc. (Belgium), Sr. Unsec. Gtd. Global Notes, 4.38%, 04/15/2038 | 28,000 | 25,088 | ||||||
77,124 | ||||||||
Broadcasting–0.10% |
| |||||||
Clear Channel Worldwide Holdings, Inc., Series B, Sr. Unsec. Gtd. Sub. Global Notes, 7.63%, 03/15/2020 | 6,000 | 5,872 | ||||||
Netflix, Inc., | ||||||||
Sr. Unsec. Global Notes, 5.75%, 03/01/2024 | 3,000 | 3,053 | ||||||
Sr. Unsec. Notes, 5.88%, 11/15/2028(b) | 2,000 | 1,954 |
Principal Amount | Value | |||||||
Broadcasting–(continued) |
| |||||||
Nexstar Broadcasting, Inc., Sr. Unsec. Gtd. Notes, 5.63%, 08/01/2024(b) | $ | 4,000 | $ | 3,750 | ||||
Tribune Media Co., Sr. Unsec. Gtd. Global Notes, 5.88%, 07/15/2022 | 3,000 | 3,030 | ||||||
17,659 | ||||||||
Building Products–0.47% |
| |||||||
Gibraltar Industries Inc., Sr. Unsec. Gtd. Sub. Global Notes, 6.25%, 02/01/2021 | 2,000 | 2,005 | ||||||
Standard Industries Inc., Sr. Unsec. Notes, | ||||||||
4.75%, 01/15/2028(b) | 38,000 | 32,062 | ||||||
5.00%, 02/15/2027(b) | 3,000 | 2,632 | ||||||
6.00%, 10/15/2025(b) | 3,000 | 2,889 | ||||||
Toll Brothers Finance Corp., Sr. Unsec. Gtd. Notes, 4.35%, 02/15/2028 | 48,000 | 41,280 | ||||||
80,868 | ||||||||
Cable & Satellite–1.23% |
| |||||||
CCO Holdings LLC/CCO Holdings Capital Corp., | ||||||||
Sr. Unsec. Global Notes, 5.75%, 09/01/2023 | 2,000 | 1,995 | ||||||
Sr. Unsec. Notes, 5.75%, 02/15/2026(b) | 11,000 | 10,807 | ||||||
Charter Communications Operating, LLC/Charter Communications Operating Capital Corp., Sr. Sec. Gtd. First Lien Global Notes, | ||||||||
5.38%, 04/01/2038 | 25,000 | 23,367 | ||||||
5.75%, 04/01/2048 | 30,000 | 28,222 | ||||||
Comcast Corp., Sr. Unsec. Gtd. Global Notes, | ||||||||
3.95%, 10/15/2025 | 20,000 | 20,263 | ||||||
4.60%, 10/15/2038 | 30,000 | 30,386 | ||||||
4.70%, 10/15/2048 | 17,000 | 17,339 | ||||||
4.95%, 10/15/2058 | 31,000 | 31,647 | ||||||
CSC Holdings LLC, Sr. Unsec. Global Notes, 6.75%, 11/15/2021 | 7,000 | 7,193 | ||||||
Discovery Communications LLC, Sr. Unsec. Gtd. Global Notes, 5.20%, 09/20/2047 | 15,000 | 13,918 | ||||||
DISH DBS Corp., Sr. Unsec. Gtd. Global Notes, 5.88%, 11/15/2024 | 8,000 | 6,470 | ||||||
Gray Escrow, Inc., Sr. Unsec. Notes, 7.00%, 05/15/2027(b) | 2,000 | 1,955 | ||||||
Hughes Satellite Systems Corp., | ||||||||
Sr. Sec. Gtd. First Lien Global Notes, 5.25%, 08/01/2026 | 2,000 | 1,840 | ||||||
Sr. Unsec. Gtd. Global Notes, 7.63%, 06/15/2021 | 5,000 | 5,200 | ||||||
Intelsat Jackson Holdings S.A. (Luxembourg), | ||||||||
Sr. Unsec. Gtd. Global Bonds, 5.50%, 08/01/2023 | 6,000 | 5,250 | ||||||
Sr. Unsec. Gtd. Notes, 8.50%, 10/15/2024(b) | 2,000 | 1,950 | ||||||
Sirius XM Radio Inc., Sr. Unsec. Gtd. Notes, 6.00%, 07/15/2024(b) | 2,000 | 2,013 | ||||||
209,815 |
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 | |||||||
Casinos & Gaming–0.10% |
| |||||||
Boyd Gaming Corp., Sr. Unsec. Gtd. Global Notes, | ||||||||
6.00%, 08/15/2026 | $ | 2,000 | $ | 1,878 | ||||
6.88%, 05/15/2023 | 3,000 | 3,041 | ||||||
MGM Resorts International, Sr. Unsec. Gtd. Notes, 7.75%, 03/15/2022 | 5,000 | 5,331 | ||||||
Scientific Games International Inc., Sr. Unsec. Gtd. Global Notes, 10.00%, 12/01/2022 | 2,000 | 2,032 | ||||||
Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., Sr. Unsec. Gtd. Notes, 5.50%, 03/01/2025(b) | 5,000 | 4,675 | ||||||
16,957 | ||||||||
Coal & Consumable Fuels–0.02% |
| |||||||
SunCoke Energy Partners, L.P./ SunCoke Energy Partners Finance Corp., Sr. Unsec. Gtd. Notes, 7.50%, 06/15/2025(b) | 4,000 | 3,800 | ||||||
Commodity Chemicals–0.03% |
| |||||||
Nufarm Australia Ltd./Nufarm Americas Inc. (Australia), Sr. Unsec. Gtd. Notes, 5.75%, 04/30/2026(b) | 2,000 | 1,833 | ||||||
Valvoline Inc., Sr. Unsec. Gtd. Global Notes, 5.50%, 07/15/2024 | 4,000 | 3,920 | ||||||
5,753 | ||||||||
Construction & Engineering–0.01% |
| |||||||
William Lyon Homes, Inc., Sr. Unsec. Gtd. Global Notes, 6.00%, 09/01/2023 | 2,000 | 1,810 | ||||||
Construction Machinery & Heavy Trucks–0.61% |
| |||||||
Meritor Inc., Sr. Unsec. Gtd. Notes, 6.25%, 02/15/2024 | 3,000 | 2,880 | ||||||
Terex Corp., Sr. Unsec. Gtd. Notes, 5.63%, 02/01/2025(b) | 6,000 | 5,595 | ||||||
Wabtec Corp., Sr. Unsec. Gtd. Global Notes, | ||||||||
4.15%, 03/15/2024 | 25,000 | 24,185 | ||||||
4.70%, 09/15/2028 | 77,000 | 72,396 | ||||||
105,056 | ||||||||
Consumer Finance–0.07% |
| |||||||
Ally Financial Inc., | ||||||||
Sr. Unsec. Global Notes, | ||||||||
4.63%, 03/30/2025 | 2,000 | 1,945 | ||||||
5.13%, 09/30/2024 | 3,000 | 2,985 | ||||||
Sr. Unsec. Gtd. Global Notes, 8.00%, 03/15/2020 | 2,000 | 2,075 | ||||||
Discover Financial Services, Inc., Series C, Jr. Unsec. Sub. Global Notes, 5.50%(c) | 2,000 | 1,664 | ||||||
Navient Corp., Sr. Unsec.Medium-Term Notes, | ||||||||
7.25%, 01/25/2022 | 2,000 | 1,938 | ||||||
8.00%, 03/25/2020 | 2,000 | 2,037 | ||||||
12,644 |
Principal Amount | Value | |||||||
Containers & Glass Products–0.24% |
| |||||||
Reynolds Group Issuer Inc./LLC, | ||||||||
Sr. Sec. Gtd. First Lien Global Notes, 5.75%, 10/15/2020 | $ | 35,857 | $ | 35,812 | ||||
Sr. Unsec. Gtd. Notes, | 6,000 | 5,726 | ||||||
41,538 | ||||||||
Copper–0.19% |
| |||||||
First Quantum Minerals Ltd. (Zambia), Sr. Unsec. Gtd. Notes, | 7,000 | 6,733 | ||||||
Freeport-McMoRan Inc., Sr. Unsec. Gtd. Global Notes, 5.40%, 11/14/2034 | 9,000 | 7,132 | ||||||
Southern Copper Corp. (Peru), Sr. Unsec. Global Notes, 5.88%, 04/23/2045 | 18,000 | 18,474 | ||||||
Taseko Mines Ltd. (Canada), Sr. Sec. Gtd. First Lien Notes, 8.75%, 06/15/2022(b) | 1,000 | 903 | ||||||
33,242 | ||||||||
Data Processing & Outsourced Services–0.10% |
| |||||||
First Data Corp., Sec. Gtd. Second Lien Notes, 5.75%, 01/15/2024(b) | 6,000 | 5,882 | ||||||
Fiserv, Inc., Sr. Unsec. Global Notes, 4.20%, 10/01/2028 | 11,000 | 11,007 | ||||||
16,889 | ||||||||
Distillers & Vintners–0.13% |
| |||||||
Constellation Brands, Inc., Sr. Unsec. Gtd. Global Floating Rate Notes, 3.21% (3 mo. USD LIBOR + 0.70%), 11/15/2021(d) | 22,000 | 21,745 | ||||||
Distributors–0.09% |
| |||||||
HD Supply, Inc., Sr. Unsec. Gtd. Notes, 5.38%, 10/15/2026(b) | 15,000 | 14,604 | ||||||
Diversified Banks–7.52% |
| |||||||
Bank of America Corp., | ||||||||
Sr. Unsec. Medium-Term Global Notes, 3.59%, 07/21/2028 | 50,000 | 47,494 | ||||||
Series Z, Jr. Unsec. Sub. Notes, 6.50%(c) | 85,000 | 86,169 | ||||||
Series DD, Jr. Unsec. Sub. Notes, 6.30%(c) | 30,000 | 30,544 | ||||||
Series FF, Jr. Unsec. Sub. Notes, 5.88%(c) | 20,000 | 18,233 | ||||||
BBVA Bancomer S.A. (Mexico), Unsec. Sub. Notes, 6.75%, 09/30/2022(b) | 150,000 | 158,439 | ||||||
BNP Paribas S.A. (France), Unsec. Sub. Notes, 4.38%, 03/01/2033(b) | 58,000 | 54,398 | ||||||
Citigroup Inc., | ||||||||
Sr. Unsec. Global Notes, | ||||||||
2.88%, 07/24/2023 | 20,000 | 19,365 | ||||||
3.67%, 07/24/2028 | 75,000 | 70,968 | ||||||
Sr. Unsec. Notes, 4.65%, 07/23/2048 | 21,000 | 20,634 | ||||||
Series Q, Jr. Unsec. Sub. Global Notes, 5.95%(c) | 25,000 | 24,172 | ||||||
Series T, Jr. Unsec. Sub. Global Notes, 6.25%(c) | 30,000 | 28,769 |
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 | |||||||
Diversified Banks–(continued) |
| |||||||
Corp. Andina de Fomento (Supranational), Sr. Unsec. Global Notes, 4.38%, 06/15/2022 | $ | 50,000 | $ | 51,872 | ||||
HSBC Holdings PLC (United Kingdom), | ||||||||
Jr. Unsec. Sub. Global Bonds, 6.00%(c) | 200,000 | 180,596 | ||||||
Sr. Unsec. Global Notes, 4.00%, 03/30/2022 | 45,000 | 45,605 | ||||||
JPMorgan Chase & Co., | ||||||||
Sr. Unsec. Global Floating Rate Notes, 3.37% (3 mo. USD LIBOR + 0.89%), 07/23/2024(d) | 65,000 | 63,554 | ||||||
Sr. Unsec. Global Notes, | ||||||||
3.54%, 05/01/2028 | 17,000 | 16,236 | ||||||
3.78%, 02/01/2028 | 35,000 | 34,029 | ||||||
Sr. Unsec. Medium-Term Global Notes, 2.30%, 08/15/2021 | 65,000 | 63,438 | ||||||
Unsec. Sub. Global Notes, 3.63%, 12/01/2027 | 35,000 | 32,650 | ||||||
Series I, Jr. Unsec. Sub. Global Variable Rate Notes, 5.99% (3 mo. USD LIBOR + 3.47%)(c)(d) | 50,000 | 49,500 | ||||||
Series V, Jr. Unsec. Sub. Global Notes, 5.00%(c) | 40,000 | 38,650 | ||||||
Series W, Jr. Unsec. Sub. Global Floating Rate Notes, 3.62% (3 mo. USD LIBOR + 1.00%), 05/15/2077(d) | 65,000 | 47,612 | ||||||
Series CC, Jr. Unsec. Sub. Global Notes, 4.63%(c) | 50,000 | 42,495 | ||||||
Royal Bank of Scotland Group PLC (United Kingdom), Unsec. Sub. Global Notes, 6.00%, 12/19/2023 | 5,000 | 5,066 | ||||||
Wells Fargo & Co., Unsec. Sub. Medium-Term Notes, 4.75%, 12/07/2046 | 25,000 | 24,158 | ||||||
Westpac Banking Corp. (Australia), Jr. Unsec. Sub. Global Bonds, 5.00%(c) | 40,000 | 33,273 | ||||||
1,287,919 | ||||||||
Diversified Chemicals–0.20% |
| |||||||
Chemours Co. (The), Sr. Unsec. Gtd. Global Notes, | ||||||||
6.63%, 05/15/2023 | 5,000 | 5,069 | ||||||
7.00%, 05/15/2025 | 2,000 | 2,025 | ||||||
Dow Chemical Co. (The), Sr. Unsec. Notes, 4.80%, 11/30/2028(b) | 25,000 | 25,501 | ||||||
Trinseo Materials Operating S.C.A./Trinseo Materials Finance, Inc., Sr. Unsec. Gtd. Notes, 5.38%, 09/01/2025(b) | 2,000 | 1,758 | ||||||
34,353 | ||||||||
Diversified Metals & Mining–0.05% |
| |||||||
HudBay Minerals, Inc. (Canada), Sr. Unsec. Gtd. Notes, 7.63%, 01/15/2025(b) | 4,000 | 3,930 | ||||||
Teck Resources Ltd. (Canada), Sr. Unsec. Notes, 6.13%, 10/01/2035 | 4,000 | 3,840 | ||||||
7,770 |
Principal Amount | Value | |||||||
Diversified REITs–1.13% |
| |||||||
CyrusOne L.P./CyrusOne Finance Corp., Sr. Unsec. Gtd. Global Notes, 5.00%, 03/15/2024 | $ | 2,000 | $ | 1,965 | ||||
Trust F/1401 (Mexico), Sr. Unsec. Notes, 5.25%, 01/30/2026(b) | 200,000 | 191,250 | ||||||
193,215 | ||||||||
Drug Retail–0.83% |
| |||||||
CVS Pass Through Trust, Sr. Sec. First Lien Mortgage Pass Through Ctfs., 5.77%, 01/10/2033(b) | 135,151 | 142,246 | ||||||
Electric Utilities–0.18% |
| |||||||
Southern Co. (The), Series B, Jr. Unsec. Sub. Global Notes, 5.50%, 03/15/2057 | 32,000 | 30,840 | ||||||
Electronic Equipment & Instruments–0.03% |
| |||||||
Itron, Inc., Sr. Unsec. Gtd. Notes, 5.00%, 01/15/2026(b) | 6,000 | 5,505 | ||||||
Electronic Manufacturing Services–0.08% |
| |||||||
Jabil, Inc., Sr. Unsec. Global Notes, 3.95%, 01/12/2028 | 15,000 | 13,399 | ||||||
Environmental & Facilities Services–0.08% |
| |||||||
Advanced Disposal Services, Inc., Sr. Unsec. Gtd. Notes, 5.63%, 11/15/2024(b) | 4,000 | 3,930 | ||||||
Core & Main LP, Sr. Unsec. Notes, 6.13%, 08/15/2025(b) | 5,000 | 4,463 | ||||||
Hulk Finance Corp. (Canada), Sr. Unsec. Notes, 7.00%, 06/01/2026(b) | 4,000 | 3,500 | ||||||
Waste Pro USA, Inc., Sr. Unsec. Notes, 5.50%, 02/15/2026(b) | 2,000 | 1,850 | ||||||
13,743 | ||||||||
Financial Exchanges & Data–2.02% |
| |||||||
Moody’s Corp., | ||||||||
Sr. Unsec. Global Bonds, 5.50%, 09/01/2020 | 110,000 | 114,100 | ||||||
Sr. Unsec. Global Notes, | ||||||||
2.75%, 07/15/2019 | 45,000 | 45,013 | ||||||
4.88%, 02/15/2024 | 138,000 | 145,354 | ||||||
5.25%, 07/15/2044 | 35,000 | 37,915 | ||||||
MSCI Inc., Sr. Unsec. Gtd. Notes, 5.75%, 08/15/2025(b) | 3,000 | 3,037 | ||||||
345,419 | ||||||||
Food Distributors–0.02% |
| |||||||
US Foods, Inc., Sr. Unsec. Gtd. Notes, 5.88%, 06/15/2024(b) | 4,000 | 3,905 | ||||||
Food Retail–0.03% |
| |||||||
Albertsons Cos. LLC/ Safeway Inc./New Albertson’s L.P./Albertson’s LLC, Sr. Unsec. Gtd. Global Notes, 6.63%, 06/15/2024 | 6,000 | 5,595 |
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 | |||||||
Gas Utilities–0.06% |
| |||||||
AmeriGas Partners, L.P./AmeriGas Finance Corp., Sr. Unsec. Global Notes, | ||||||||
5.63%, 05/20/2024 | $ | 4,000 | $ | 3,800 | ||||
5.88%, 08/20/2026 | 2,000 | 1,835 | ||||||
Ferrellgas L.P./Ferrellgas Finance Corp., | ||||||||
Sr. Unsec. Global Notes, 6.50%, 05/01/2021 | 2,000 | 1,650 | ||||||
Sr. Unsec. Gtd. Global Notes, 6.75%, 06/15/2023 | 2,000 | 1,620 | ||||||
Suburban Propane Partners, L.P./Suburban Energy Finance Corp., Sr. Unsec. Global Notes, 5.50%, 06/01/2024 | 2,000 | 1,870 | ||||||
10,775 | ||||||||
Health Care Distributors–0.08% |
| |||||||
AmerisourceBergen Corp., Sr. Unsec. Global Notes, 4.30%, 12/15/2047 | 16,000 | 13,759 | ||||||
Health Care Equipment–0.32% |
| |||||||
Hill-Rom Holdings, Inc., Sr. Unsec. Gtd. Notes, 5.00%, 02/15/2025(b) | 2,000 | 1,910 | ||||||
Teleflex Inc., Sr. Unsec. Gtd. Global Notes, 4.63%, 11/15/2027 | 17,000 | 15,831 | ||||||
Zimmer Biomet Holdings, Inc., Sr. Unsec. Global Floating Rate Notes, 3.55% (3 mo. USD LIBOR + 0.75%), 03/19/2021(d) | 38,000 | 37,656 | ||||||
55,397 | ||||||||
Health Care Facilities–1.70% |
| |||||||
Acadia Healthcare Co., Inc., Sr. Unsec. Gtd. Global Notes, 6.50%, 03/01/2024 | 2,000 | 1,940 | ||||||
Credit Suisse Group AG (Switzerland), Jr. Unsec. Sub. Notes, 7.25%(b)(c) | 200,000 | 189,170 | ||||||
Encompass Health Corp., Sr. Unsec. Gtd. Global Notes, 5.75%, 09/15/2025 | 2,000 | 1,960 | ||||||
HCA, Inc., | ||||||||
Sr. Sec. Gtd. First Lien Global Notes, 6.50%, 02/15/2020 | 19,000 | 19,522 | ||||||
Sr. Sec. Gtd. First Lien Notes, | ||||||||
5.25%, 04/15/2025 | 2,000 | 1,995 | ||||||
5.50%, 06/15/2047 | 62,000 | 58,900 | ||||||
Sr. Unsec. Gtd. Notes, | ||||||||
5.38%, 09/01/2026 | 2,000 | 1,950 | ||||||
5.88%, 02/15/2026 | 10,000 | 9,975 | ||||||
Tenet Healthcare Corp., | ||||||||
Sec. Gtd. Second Lien Notes, 7.50%, 01/01/2022(b) | 2,000 | 2,033 | ||||||
Sr. Unsec. Global Notes, | ||||||||
6.75%, 06/15/2023 | 2,000 | 1,885 | ||||||
8.13%, 04/01/2022 | 2,000 | 2,013 | ||||||
291,343 | ||||||||
Health Care REITs–0.79% |
| |||||||
HCP, Inc., Sr. Unsec. Global Notes, 4.00%, 12/01/2022 | 71,000 | 70,956 | ||||||
MPT Operating Partnership L.P./MPT Finance Corp., Sr. Unsec. Gtd. Global Notes, 5.00%, 10/15/2027 | 4,000 | 3,667 |
Principal Amount | Value | |||||||
Health Care REITs–(continued) |
| |||||||
Physicians Realty L.P., Sr. Unsec. Gtd. Global Notes, 4.30%, 03/15/2027 | $ | 20,000 | $ | 19,465 | ||||
Senior Housing Properties Trust, Sr. Unsec. Notes, 6.75%, 12/15/2021 | 40,000 | 41,936 | ||||||
136,024 | ||||||||
Health Care Services–1.28% |
| |||||||
AMN Healthcare, Inc., Sr. Unsec. Gtd. Notes, 5.13%, 10/01/2024(b) | 2,000 | 1,920 | ||||||
Cigna Corp., | ||||||||
Sr. Unsec. Gtd. Floating Rate Notes, 3.33% (3 mo. USD LIBOR + 0.89%), | 62,000 | 61,093 | ||||||
Sr. Unsec. Gtd. Notes, | ||||||||
3.40%, 09/17/2021(b) | 36,000 | 35,940 | ||||||
3.75%, 07/15/2023(b) | 60,000 | 59,858 | ||||||
4.50%, 03/15/2021 | 45,000 | 46,000 | ||||||
DaVita Inc., Sr. Unsec. Gtd. Global Notes, 5.00%, 05/01/2025 | 2,000 | 1,823 | ||||||
Eagle Holding Co. II, LLC, Sr. Unsec. PIK Notes, 8.38% PIK Rate, 7.63% Cash Rate, 05/15/2022(b)(e) | 2,000 | 1,915 | ||||||
Heartland Dental, LLC, Sr. Unsec. Notes, 8.50%, 05/01/2026(b) | 6,000 | 5,415 | ||||||
MEDNAX, Inc., Sr. Unsec. Gtd. Notes, 6.25%, 01/15/2027(b) | 3,000 | 2,902 | ||||||
Surgery Center Holdings, Inc., Sr. Unsec. Gtd. Notes, | ||||||||
6.75%, 07/01/2025(b) | 2,000 | 1,710 | ||||||
8.88%, 04/15/2021(b) | 1,000 | 1,003 | ||||||
219,579 | ||||||||
Homebuilding–0.95% |
| |||||||
Ashton Woods USA LLC/Ashton Woods Finance Co., Sr. Unsec. Notes, 6.88%, 02/15/2021(b) | 2,000 | 1,930 | ||||||
Beazer Homes USA, Inc., Sr. Unsec. Gtd. Global Notes, | ||||||||
6.75%, 03/15/2025 | 3,000 | 2,591 | ||||||
8.75%, 03/15/2022 | 3,000 | 3,008 | ||||||
KB Home, Sr. Unsec. Gtd. Notes, | ||||||||
7.50%, 09/15/2022 | 3,000 | 3,097 | ||||||
8.00%, 03/15/2020 | 2,000 | 2,070 | ||||||
Lennar Corp., Sr. Unsec. Gtd. Global Notes, | ||||||||
5.25%, 06/01/2026 | 5,000 | 4,731 | ||||||
8.38%, 01/15/2021 | 2,000 | 2,135 | ||||||
MDC Holdings, Inc., Sr. Unsec. Gtd. Notes, 6.00%, 01/15/2043 | 174,000 | 136,590 | ||||||
Meritage Homes Corp., Sr. Unsec. Gtd. Global Notes, 7.15%, 04/15/2020 | 2,000 | 2,048 | ||||||
SRS Distribution Inc., Sr. Unsec. Gtd. Notes, 8.25%, 07/01/2026(b) | 2,000 | 1,840 | ||||||
Taylor Morrison Communities Inc./ Taylor Morrison Holdings II, Inc., Sr. Unsec. Gtd. Notes, 5.88%, 04/15/2023(b) | 3,000 | 2,910 | ||||||
162,950 |
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 | |||||||
Hotels, Resorts & Cruise Lines–0.31% |
| |||||||
Royal Caribbean Cruises Ltd., Sr. Unsec. Global Notes, 3.70%, 03/15/2028 | $ | 57,000 | $ | 52,554 | ||||
Household Products–0.01% |
| |||||||
Spectrum Brands, Inc., Sr. Unsec. Gtd. Global Notes, 5.75%, 07/15/2025 | 2,000 | 1,909 | ||||||
Independent Power Producers & Energy Traders–0.05% |
| |||||||
AES Corp. (The), Sr. Unsec. Notes, 5.50%, 04/15/2025 | 5,000 | 4,987 | ||||||
NRG Energy, Inc., Sr. Unsec. Gtd. Global Notes, 6.25%, 05/01/2024 | 2,000 | 2,038 | ||||||
Vistra Energy Corp., Sr. Unsec. Gtd. Global Notes, 7.38%, 11/01/2022 | 2,000 | 2,070 | ||||||
9,095 | ||||||||
Industrial Machinery–0.09% |
| |||||||
Cleaver-Brooks, Inc., Sr. Sec. Notes, 7.88%, 03/01/2023(b) | 8,000 | 7,740 | ||||||
EnPro Industries, Inc., Sr. Unsec. Notes, 5.75%, 10/15/2026(b) | 2,000 | 1,935 | ||||||
Mueller Industries, Inc., Unsec. Sub. Deb., 6.00%, 03/01/2027 | 2,000 | 1,870 | ||||||
Mueller Water Products, Inc., Sr. Unsec. Gtd. Notes, 5.50%, 06/15/2026(b) | 2,000 | 1,945 | ||||||
Stevens Holding Co., Inc., Sr. Unsec. Gtd. Notes, 6.13%, 10/01/2026(b) | 2,000 | 1,980 | ||||||
15,470 | ||||||||
Integrated Oil & Gas–0.57% |
| |||||||
Parsley Energy, LLC/Finance Corp., Sr. Unsec. Gtd. Notes, 5.63%, 10/15/2027(b) | 2,000 | 1,828 | ||||||
Petrobras Global Finance B.V. (Brazil), Sr. Unsec. Gtd. Global Notes, 5.75%, 02/01/2029 | 4,000 | 3,710 | ||||||
Petróleos Mexicanos (Mexico), | ||||||||
Sr. Unsec. Gtd. Global Bonds, 6.63%, 06/15/2035 | 23,000 | 20,194 | ||||||
Sr. Unsec. Gtd. Global Notes, | ||||||||
6.35%, 02/12/2048 | 29,000 | 23,244 | ||||||
6.50%, 03/13/2027 | 23,000 | 21,677 | ||||||
6.50%, 01/23/2029 | 28,000 | 26,159 | ||||||
96,812 | ||||||||
Integrated Telecommunication Services–1.34% |
| |||||||
AT&T Inc., | ||||||||
Sr. Unsec. Global Notes, | ||||||||
5.15%, 02/15/2050 | 141,000 | 131,282 | ||||||
5.70%, 03/01/2057 | 35,000 | 34,620 | ||||||
Sr. Unsec. Notes, | 30,000 | 30,530 | ||||||
Cincinnati Bell Inc., Sr. Unsec. Gtd. Notes, 7.00%, 07/15/2024(b) | 2,000 | 1,660 | ||||||
Telecom Italia Capital S.A. (Italy), Sr. Unsec. Gtd. Global Notes, 7.20%, 07/18/2036 | 5,000 | 4,800 | ||||||
Verizon Communications Inc., Sr. Unsec. Global Notes, 4.81%, 03/15/2039 | 27,000 | 26,646 | ||||||
229,538 |
Principal Amount | Value | |||||||
Internet & Direct Marketing Retail–0.31% |
| |||||||
QVC, Inc., Sr. Sec. Gtd. First Lien Global Notes, 5.45%, 08/15/2034 | $ | 61,000 | $ | 53,465 | ||||
Investment Banking & Brokerage–1.80% |
| |||||||
Cantor Fitzgerald, L.P., Unsec. Notes, 6.50%, 06/17/2022(b) | 34,000 | 36,076 | ||||||
E*TRADE Financial Corp., Series B, Jr. Unsec. Sub. Global Notes, 5.30%(c) | 30,000 | 24,903 | ||||||
Goldman Sachs Group, Inc. (The), | ||||||||
Sr. Unsec. Notes, 3.27%, 09/29/2025 | 50,000 | 46,901 | ||||||
Series L, Jr. Unsec. Sub. Notes, 5.70%(c) | 55,000 | 53,699 | ||||||
Series P, Jr. Unsec. Sub. Notes, 5.00%(c) | 40,000 | 33,825 | ||||||
Jefferies Group LLC/Jefferies Group Capital Finance Inc., Sr. Unsec. Global Notes, 4.15%, 01/23/2030 | 49,000 | 42,136 | ||||||
Morgan Stanley, Sr. Unsec. Global Notes, 3.59%, 07/22/2028 | 75,000 | 70,963 | ||||||
308,503 | ||||||||
Leisure Facilities–0.01% |
| |||||||
Six Flags Entertainment Corp., Sr. Unsec. Gtd. Notes, 4.88%, 07/31/2024(b) | 2,000 | 1,890 | ||||||
Life & Health Insurance–4.22% |
| |||||||
American Equity Investment Life Holding Co., Sr. Unsec. Global Notes, 5.00%, 06/15/2027 | 40,000 | 38,979 | ||||||
Athene Holding Ltd., Sr. Unsec. Notes, 4.13%, 01/12/2028 | 90,000 | 81,950 | ||||||
Dai-ichi Life Insurance Co., Ltd. (The) (Japan), Jr. Unsec. Sub. Notes, 4.00%(b)(c) | 200,000 | 185,300 | ||||||
MetLife, Inc., | ||||||||
Series C, Jr. Unsec. Sub. Global Notes, 5.25%(c) | 65,000 | 62,562 | ||||||
Series D, Jr. Unsec. Sub. Global Notes, 5.88%(c) | 49,000 | 47,101 | ||||||
Nationwide Financial Services, Inc., Sr. Unsec. Notes, 5.38%, 03/25/2021(b) | 165,000 | 171,054 | ||||||
Nationwide Mutual Insurance Co., Unsec. Sub. Notes, 4.95%, 04/22/2044(b) | 100,000 | 101,145 | ||||||
Pacific Life Insurance Co., Unsec. Sub. Notes, 4.30%, 10/24/2067(b) | 40,000 | 35,242 | ||||||
723,333 | ||||||||
Life Sciences Tools & Services–0.01% |
| |||||||
Charles River Laboratories International, Inc., Sr. Unsec. Gtd. Notes, | 2,000 | 1,975 | ||||||
Managed Health Care–0.54% |
| |||||||
Centene Corp., Sr. Unsec. Notes, 5.38%, 06/01/2026(b) | 4,000 | 3,900 | ||||||
Molina Healthcare, Inc., Sr. Unsec. Gtd. Notes, 4.88%, 06/15/2025(b) | 1,000 | 916 |
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 | |||||||
Managed Health Care–(continued) |
| |||||||
UnitedHealth Group Inc., Sr. Unsec. Global Notes, | ||||||||
3.50%, 02/15/2024 | $ | 18,000 | $ | 18,127 | ||||
3.75%, 07/15/2025 | 35,000 | 35,476 | ||||||
3.88%, 12/15/2028 | 26,000 | 26,386 | ||||||
WellCare Health Plans Inc., Sr. Unsec. Notes, | ||||||||
5.25%, 04/01/2025 | 5,000 | 4,831 | ||||||
5.38%, 08/15/2026(b) | 2,000 | 1,935 | ||||||
91,571 | ||||||||
Metal & Glass Containers–0.06% |
| |||||||
Ball Corp., Sr. Unsec. Gtd. Global Notes, 5.25%, 07/01/2025 | 3,000 | 3,000 | ||||||
Berry Global, Inc., Sec. Gtd. Second Lien Global Notes, 6.00%, 10/15/2022 | 2,000 | 2,025 | ||||||
Flex Acquisition Co., Inc., Sr. Unsec. Notes, 7.88%, 07/15/2026(b) | 4,000 | 3,610 | ||||||
OI European Group B.V., Sr. Unsec. Gtd. Notes, 4.00%, 03/15/2023(b) | 2,000 | 1,875 | ||||||
10,510 | ||||||||
Movies & Entertainment–0.02% |
| |||||||
AMC Entertainment Holdings, Inc., Sr. Unsec. Gtd. Sub. Global Notes, 5.75%, 06/15/2025 | 3,000 | 2,651 | ||||||
Multi-Line Insurance–0.64% |
| |||||||
AIG Global Funding, Sr. Sec. First Lien Notes, 2.70%, 12/15/2021(b) | 42,000 | 41,021 | ||||||
American Financial Group, Inc., Sr. Unsec. Notes, 3.50%, 08/15/2026 | 20,000 | 18,908 | ||||||
Fairfax Financial Holdings Ltd. (Canada), Sr. Unsec. Notes, 4.85%, 04/17/2028(b) | 35,000 | 33,712 | ||||||
Massachusetts Mutual Life Insurance Co., Unsec. Sub. Notes, 4.90%, 04/01/2077(b) | 15,000 | 15,027 | ||||||
108,668 | ||||||||
Multi-Utilities–0.56% |
| |||||||
CenterPoint Energy, Inc., Series A, Jr. Unsec. Sub. Notes, 6.13%(c) | 99,000 | 96,649 | ||||||
Office REITs–0.37% |
| |||||||
Alexandria Real Estate Equities, Inc., Sr. Unsec. Gtd. Global Notes, 3.95%, 01/15/2027 | 40,000 | 38,900 | ||||||
Hudson Pacific Properties, LP, Sr. Unsec. Gtd. Notes, 3.95%, 11/01/2027 | 27,000 | 25,157 | ||||||
64,057 | ||||||||
Office Services & Supplies–0.51% |
| |||||||
Pitney Bowes Inc., Sr. Unsec. Global Notes, | ||||||||
3.88%, 10/01/2021 | 55,000 | 51,769 | ||||||
4.95%, 04/01/2023 | 39,000 | 34,612 | ||||||
86,381 |
Principal Amount | Value | |||||||
Oil & Gas Drilling–0.07% |
| |||||||
Ensco PLC, Sr. Unsec. Global Notes, 7.75%, 02/01/2026 | $ | 6,000 | $ | 4,470 | ||||
Noble Holding International Ltd., Sr. Unsec. Gtd. Global Notes, 7.75%, 01/15/2024 | 4,000 | 3,045 | ||||||
Precision Drilling Corp. (Canada), Sr. Unsec. Gtd. Global Notes, | ||||||||
5.25%, 11/15/2024 | 2,000 | 1,670 | ||||||
6.50%, 12/15/2021 | 1,353 | 1,265 | ||||||
Transocean Inc., Sr. Unsec. Gtd. Global Notes, 7.50%, 04/15/2031 | 2,000 | 1,525 | ||||||
11,975 | ||||||||
Oil & Gas Equipment & Services–0.03% |
| |||||||
Archrock Partners, L.P./Archrock Partners Finance Corp., Sr. Unsec. Gtd. Global Notes, 6.00%, 10/01/2022 | 2,000 | 1,890 | ||||||
SESI, L.L.C., Sr. Unsec. Gtd. Global Notes, 7.13%, 12/15/2021 | 2,000 | 1,710 | ||||||
Sunoco LP/ Sunoco Finance Corp., Sr. Unsec. Gtd. Global Notes, 4.88%, 01/15/2023 | 2,000 | 1,955 | ||||||
5,555 | ||||||||
Oil & Gas Exploration & Production–1.07% |
| |||||||
Ascent Resources Utica Holdings, LLC /ARU Finance Corp., Sr. Unsec. Notes, 10.00%, 04/01/2022(b) | 4,000 | 4,111 | ||||||
Callon Petroleum Co., Sr. Unsec. Gtd. Global Notes, 6.13%, 10/01/2024 | 2,000 | 1,870 | ||||||
Concho Resources Inc., Sr. Unsec. Gtd. Global Notes, 4.38%, 01/15/2025 | 52,000 | 51,449 | ||||||
Continental Resources Inc., Sr. Unsec. Gtd. Global Notes, 5.00%, 09/15/2022 | 56,000 | 55,665 | ||||||
EP Energy LLC/Everest Acquisition Finance Inc., Sr. Sec. Gtd. First Lien Notes, 8.00%, 11/29/2024(b) | 2,000 | 1,500 | ||||||
Gulfport Energy Corp., Sr. Unsec. Gtd. Global Notes, 6.00%, 10/15/2024 | 4,000 | 3,560 | ||||||
Jagged Peak Energy LLC, Sr. Unsec. Gtd. Notes, 5.88%, 05/01/2026(b) | 6,000 | 5,610 | ||||||
Newfield Exploration Co., Sr. Unsec. Global Notes, 5.63%, 07/01/2024 | 3,000 | 3,045 | ||||||
NGPL PipeCo. LLC, | ||||||||
Sr. Unsec. Bonds, 4.88%, 08/15/2027(b) | 21,000 | 19,871 | ||||||
Sr. Unsec. Notes, 4.38%, 08/15/2022(b) | 13,000 | 12,805 | ||||||
Oasis Petroleum Inc., Sr. Unsec. Gtd. Global Notes, 6.88%, 01/15/2023 | 2,000 | 1,852 | ||||||
QEP Resources, Inc., | ||||||||
Sr. Unsec. Global Notes, | ||||||||
5.25%, 05/01/2023 | 2,000 | 1,780 | ||||||
5.63%, 03/01/2026 | 2,000 | 1,668 | ||||||
Sr. Unsec. Notes, 6.88%, 03/01/2021 | 2,000 | 2,025 | ||||||
Range Resources Corp., Sr. Unsec. Gtd. Global Notes, 5.88%, 07/01/2022 | 2,000 | 1,860 | ||||||
SM Energy Co., Sr. Unsec. Global Notes, 6.13%, 11/15/2022 | 4,000 | 3,800 |
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 Exploration & Production–(continued) |
| |||||||
Southwestern Energy Co., Sr. Unsec. Gtd. Global Notes, | ||||||||
7.50%, 04/01/2026 | $ | 2,000 | $ | 1,900 | ||||
7.75%, 10/01/2027 | 3,000 | 2,865 | ||||||
Whiting Petroleum Corp., Sr. Unsec. Gtd. Global Notes, 6.25%, 04/01/2023 | 2,000 | 1,830 | ||||||
WildHorse Resource Development Corp., Sr. Unsec. Gtd. Global Notes, 6.88%, 02/01/2025 | 3,000 | 2,850 | ||||||
WPX Energy Inc., Sr. Unsec. Notes, 5.25%, 09/15/2024 | 2,000 | 1,820 | ||||||
183,736 | ||||||||
Oil & Gas Refining & Marketing–0.01% |
| |||||||
Parkland Fuel Corp. (Canada), Sr. Unsec. Notes, 6.00%, 04/01/2026(b) | 2,000 | 1,885 | ||||||
Oil & Gas Storage & Transportation–4.70% |
| |||||||
Abu Dhabi Crude Oil Pipeline LLC (United Arab Emirates), Sr. Sec. Notes, 3.65%, 11/02/2029(b) | 200,000 | 190,200 | ||||||
Antero Midstream Partners LP/Antero Midstream Finance Corp., Sr. Unsec. Gtd. Global Notes, 5.38%, 09/15/2024 | 2,000 | 1,875 | ||||||
Buckeye Partners, L.P., Sr. Unsec. Global Notes, 5.60%, 10/15/2044 | 51,000 | 45,638 | ||||||
Energy Transfer Equity, L.P., Sr. Sec. First Lien Notes, 5.88%, 01/15/2024 | 2,000 | 2,047 | ||||||
Energy Transfer Partners, L.P., | ||||||||
Series A, Jr. Unsec. Sub. Global Notes, 6.25%(c) | 2,000 | 1,678 | ||||||
Series B, Jr. Unsec. Sub. Global Notes, 6.63%(c) | 79,000 | 65,323 | ||||||
Enterprise Products Operating LLC, | ||||||||
Sr. Unsec. Gtd. Notes, | ||||||||
4.15%, 10/16/2028 | 69,000 | 68,832 | ||||||
4.80%, 02/01/2049 | 6,000 | 5,860 | ||||||
Series D, Jr. Unsec. Gtd. Sub. Deb., 4.88%, 08/16/2077 | 42,000 | 34,920 | ||||||
Holly Energy Partners L.P./Holly Energy Finance Corp., Sr. Unsec. Gtd. Notes, 6.00%, 08/01/2024(b) | 2,000 | 1,970 | ||||||
MPLX L.P., Sr. Unsec. Global Notes, | ||||||||
4.80%, 02/15/2029 | 28,000 | 28,004 | ||||||
5.50%, 02/15/2049 | 58,000 | 56,694 | ||||||
Plains All American Pipeline, L.P., Series B, Jr. Unsec. Sub. Notes, 6.13%(c) | 181,000 | 152,492 | ||||||
SemGroup Corp./ Rose Rock Finance Corp., Sr. Unsec. Gtd. Global Notes, 5.63%, 11/15/2023 | 2,000 | 1,830 | ||||||
Targa Resources Partners L.P./Targa Resources Partners Finance Corp., | ||||||||
Sr. Unsec. Gtd. Global Bonds, | ||||||||
5.13%, 02/01/2025 | 2,000 | 1,885 | ||||||
5.25%, 05/01/2023 | 57,000 | 56,003 | ||||||
Sr. Unsec. Gtd. Notes, | 2,000 | 1,955 |
Principal Amount | Value | |||||||
Oil & Gas Storage & Transportation–(continued) |
| |||||||
Williams Cos., Inc. (The), | $ | 4,000 | $ | 4,043 | ||||
Sr. Unsec. Notes, | 83,000 | 83,677 | ||||||
804,926 | ||||||||
Other Diversified Financial Services–0.44% |
| |||||||
Football Trust V, Sec. Pass Through Ctfs., 5.35%, 10/05/2020(b) | 65,868 | 68,183 | ||||||
Lions Gate Capital Holdings LLC, Sr. Unsec. Gtd. Notes, 5.88%, 11/01/2024(b) | 2,000 | 1,985 | ||||||
LPL Holdings Inc., Sr. Unsec. Gtd. Notes, 5.75%, 09/15/2025(b) | 2,000 | 1,880 | ||||||
Tempo Acquisition, LLC/Finance Corp., Sr. Unsec. Notes, 6.75%, 06/01/2025(b) | 2,000 | 1,860 | ||||||
VFH Parent LLC/Orchestra Co-Issuer Inc., Sec. Gtd. Second Lien Notes, | 2,000 | 1,946 | ||||||
75,854 | ||||||||
Packaged Foods & Meats–0.42% |
| |||||||
B&G Foods, Inc., Sr. Unsec. Gtd. Notes, 5.25%, 04/01/2025 | 2,000 | 1,868 | ||||||
Conagra Brands, Inc., Sr. Unsec. Global Notes, | ||||||||
4.60%, 11/01/2025 | 14,000 | 14,071 | ||||||
5.30%, 11/01/2038 | 33,000 | 31,309 | ||||||
5.40%, 11/01/2048 | 20,000 | 18,508 | ||||||
JBS USA Lux S.A./JBS USA Finance Inc., Sr. Unsec. Gtd. Notes, 5.75%, 06/15/2025(b) | 2,000 | 1,917 | ||||||
Lamb Weston Holdings, Inc., Sr. Unsec. Gtd. Notes, 4.63%, 11/01/2024(b) | 4,000 | 3,900 | ||||||
71,573 | ||||||||
Paper Packaging–0.01% |
| |||||||
Plastipak Holdings Inc., Sr. Unsec. Notes, 6.25%, 10/15/2025(b) | 2,000 | 1,780 | ||||||
Paper Products–0.03% |
| |||||||
Mercer International Inc. (Canada), Sr. Unsec. Global Notes, 6.50%, 02/01/2024 | 4,000 | 3,930 | ||||||
Schweitzer-Mauduit International, Inc., Sr. Unsec. Gtd. Notes, 6.88%, 10/01/2026(b) | 2,000 | 1,885 | ||||||
5,815 | ||||||||
Pharmaceuticals–0.23% |
| |||||||
Bausch Health Cos. Inc., Sr. Sec. Gtd. First Lien Notes, 5.50%, 11/01/2025(b) | 4,000 | 3,745 | ||||||
Elanco Animal Health Inc., Sr. Unsec. Notes, 3.91%, 08/27/2021(b) | 31,000 | 31,211 | ||||||
HLF Financing S.a.r.l., LLC/ Herbalife International, Inc., Sr. Unsec. Gtd. Notes, 7.25%, 08/15/2026(b) | 2,000 | 1,973 |
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 | |||||||
Pharmaceuticals–(continued) |
| |||||||
Teva Pharmaceutical Finance IV, B.V. (Israel), Sr. Unsec. Gtd. Global Notes, 3.65%, 11/10/2021 | $ | 2,000 | $ | 1,896 | ||||
38,825 | ||||||||
Property & Casualty Insurance–0.64% |
| |||||||
Allstate Corp. (The), Sr. Unsec. Notes, 4.20%, 12/15/2046 | 20,000 | 19,529 | ||||||
Liberty Mutual Group Inc., Jr. Unsec. Gtd. Sub. Bonds, 7.80%, 03/07/2087(b) | 45,000 | 49,162 | ||||||
W.R. Berkley Corp., Sr. Unsec. Notes, 7.38%, 09/15/2019 | 40,000 | 41,175 | ||||||
109,866 | ||||||||
Publishing–0.04% |
| |||||||
Meredith Corp., Sr. Unsec. Gtd. Notes, 6.88%, 02/01/2026(b) | 6,000 | 5,880 | ||||||
Railroads–0.01% |
| |||||||
Kenan Advantage Group Inc. (The), Sr. Unsec. Notes, 7.88%, 07/31/2023(b) | 2,000 | 1,925 | ||||||
Regional Banks–0.90% |
| |||||||
CIT Group Inc., Sr. Unsec. Global Notes, 5.00%, 08/01/2023 | 2,000 | 1,965 | ||||||
Fifth Third Bancorp, Unsec. Sub. Notes, 4.30%, 01/16/2024 | 55,000 | 55,683 | ||||||
First Niagara Financial Group Inc., Unsec. Sub. Notes, 7.25%, 12/15/2021 | 35,000 | 38,291 | ||||||
Huntington Bancshares, Inc., Series E, Jr. Unsec. Sub. Global Notes, 5.70%(c) | 31,000 | 27,571 | ||||||
Synovus Financial Corp., Sr. Unsec. Global Notes, 3.13%, 11/01/2022 | 33,000 | 31,185 | ||||||
154,695 | ||||||||
Reinsurance–0.18% |
| |||||||
Reinsurance Group of America, Inc., Sr. Unsec. Medium-Term Notes, 4.70%, 09/15/2023 | 30,000 | 31,336 | ||||||
Residential REITs–0.67% |
| |||||||
Essex Portfolio L.P., Sr. Unsec. Gtd. Global Notes, 3.63%, 08/15/2022 | 115,000 | 114,977 | ||||||
Restaurants–0.50% |
| |||||||
1011778 BC ULC/ New Red Finance, Inc. (Canada), | 6,000 | 5,535 | ||||||
Sr. Sec. Gtd. First Lien Notes, 4.63%, 01/15/2022(b) | 32,000 | 31,040 | ||||||
Aramark Services, Inc., Sr. Unsec. Gtd. Notes, 5.00%, 04/01/2025(b) | 2,000 | 1,960 | ||||||
Carrols Restaurant Group, Inc., Sec. Gtd. Second Lien Global Notes, 8.00%, 05/01/2022 | 2,000 | 2,008 | ||||||
IRB Holding Corp., Sr. Unsec. Gtd. Notes, 6.75%, 02/15/2026(b) | 50,000 | 43,875 |
Principal Amount | Value | |||||||
Restaurants–(continued) |
| |||||||
KFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC, Sr. Unsec. Gtd. Notes, 4.75%, 06/01/2027(b) | $ | 2,000 | $ | 1,865 | ||||
86,283 | ||||||||
Security & Alarm Services–0.01% |
| |||||||
Brink’s Co. (The), Sr. Unsec. Gtd. Notes, 4.63%, 10/15/2027(b) | 2,000 | 1,830 | ||||||
Semiconductors–0.18% |
| |||||||
Analog Devices, Inc., Sr. Unsec. Global Notes, 3.13%, 12/05/2023 | 30,000 | 29,171 | ||||||
Micron Technology, Inc., Sr. Unsec. Global Notes, 5.50%, 02/01/2025 | 2,000 | 1,968 | ||||||
31,139 | ||||||||
Soft Drinks–0.33% |
| |||||||
Keurig Dr Pepper Inc., Sr. Unsec. Gtd. Notes, | ||||||||
3.55%, 05/25/2021(b) | 39,000 | 38,962 | ||||||
4.06%, 05/25/2023(b) | 18,000 | 17,943 | ||||||
56,905 | ||||||||
Sovereign Debt–1.67% |
| |||||||
Argentine Republic Government International Bond (Argentina), Sr. Unsec. Global Notes, | ||||||||
4.63%, 01/11/2023 | 9,000 | 7,138 | ||||||
7.13%, 06/28/2117 | 1,000 | 719 | ||||||
Hungary Government International Bond (Hungary), Sr. Unsec. Global Notes, 5.38%, 03/25/2024 | 28,000 | 30,034 | ||||||
Mexico Government International Bond (Mexico), Sr. Unsec. Global Notes, 4.00%, 10/02/2023 | 14,000 | 13,952 | ||||||
Peruvian Government International Bond (Peru), Sr. Unsec. Global Bonds, 4.13%, 08/25/2027 | 8,000 | 8,280 | ||||||
Turkey Government International Bond (Turkey), Sr. Unsec. Global Notes, 7.25%, 12/23/2023 | 200,000 | 205,891 | ||||||
Uruguay Government International Bond (Uruguay), Sr. Unsec. Global Notes, 4.38%, 10/27/2027 | 20,000 | 20,071 | ||||||
286,085 | ||||||||
Specialized Consumer Services–0.03% |
| |||||||
ServiceMaster Co., LLC (The), | ||||||||
Sr. Unsec. Gtd. Notes, | 2,000 | 1,895 | ||||||
Sr. Unsec. Notes, 7.45%, 08/15/2027 | 3,000 | 3,075 | ||||||
4,970 | ||||||||
Specialized Finance–2.86% |
| |||||||
AerCap Global Aviation Trust (Ireland), Jr. Unsec. Gtd. Sub. Notes, | 235,000 | 229,125 | ||||||
Air Lease Corp., Sr. Unsec. Global Notes, | ||||||||
3.00%, 09/15/2023 | 64,000 | 60,158 | ||||||
3.38%, 06/01/2021 | 60,000 | 59,459 | ||||||
3.88%, 04/01/2021 | 85,000 | 85,149 |
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 | |||||||
Specialized Finance–(continued) |
| |||||||
Aircastle Ltd., Sr. Unsec. Notes, | ||||||||
5.00%, 04/01/2023 | $ | 2,000 | $ | 2,010 | ||||
5.50%, 02/15/2022 | 2,000 | 2,048 | ||||||
Aviation Capital Group LLC, | 22,000 | 21,837 | ||||||
Sr. Unsec. Notes, 4.13%, 08/01/2025(b) | 31,000 | 30,139 | ||||||
489,925 | ||||||||
Specialized REITs–0.55% |
| |||||||
Crown Castle International Corp., Sr. Unsec. Global Bonds, 3.80%, 02/15/2028 | 57,000 | 53,595 | ||||||
Equinix Inc., Sr. Unsec. Notes, 5.88%, 01/15/2026 | 5,000 | 5,050 | ||||||
GLP Capital LP/GLP Financing II Inc., Sr. Unsec. Gtd. Notes, 5.38%, 04/15/2026 | 2,000 | 1,983 | ||||||
Iron Mountain Inc., Sr. Unsec. Gtd. Notes, 6.00%, 08/15/2023 | 2,000 | 2,030 | ||||||
Iron Mountain US Holdings, Inc., Sr. Unsec. Gtd. Notes, 5.38%, 06/01/2026(b) | 2,000 | 1,830 | ||||||
Rayonier A.M. Products Inc., Sr. Unsec. Gtd. Notes, 5.50%, 06/01/2024(b) | 4,000 | 3,540 | ||||||
Regency Centers, L.P., Sr. Unsec. Gtd. Notes, 4.13%, 03/15/2028 | 25,000 | 24,745 | ||||||
SBA Communications Corp., Sr. Unsec. Global Notes, 4.88%, 09/01/2024 | 2,000 | 1,888 | ||||||
94,661 | ||||||||
Specialty Chemicals–2.38% |
| |||||||
Ashland LLC, Sr. Unsec. Gtd. Global Notes, 4.75%, 08/15/2022 | 2,000 | 1,977 | ||||||
GCP Applied Technologies Inc., Sr. Unsec. Gtd. Notes, 5.50%, 04/15/2026(b) | 4,000 | 3,910 | ||||||
Platform Specialty Products Corp., Sr. Unsec. Gtd. Notes, 5.88%, 12/01/2025(b) | 2,000 | 1,880 | ||||||
Sasol Financing USA LLC (South Africa), Sr. Unsec. Gtd. Global Notes, | ||||||||
5.88%, 03/27/2024 | 200,000 | 199,787 | ||||||
6.50%, 09/27/2028 | 200,000 | 200,500 | ||||||
408,054 | ||||||||
Steel–0.16% |
| |||||||
ArcelorMittal (Luxembourg), Sr. Unsec. Global Notes, 7.00%, 10/15/2039 | 2,000 | 2,113 | ||||||
Cleveland-Cliffs Inc., Sr. Unsec. Gtd. Global Notes, 5.75%, 03/01/2025 | 4,000 | 3,610 | ||||||
Steel Dynamics, Inc., Sr. Unsec. Gtd. Global Notes, 5.13%, 10/01/2021 | 15,000 | 15,000 | ||||||
United States Steel Corp., Sr. Unsec. Global Notes, 6.88%, 08/15/2025 | 8,000 | 7,360 | ||||||
28,083 | ||||||||
Systems Software–0.44% |
| |||||||
CommScope Technologies LLC, Sr. Unsec. Gtd. Notes, 6.00%, 06/15/2025(b) | 6,000 | 5,490 |
Principal Amount | Value | |||||||
Systems Software–(continued) |
| |||||||
Microsoft Corp., Sr. Unsec. Global Notes, 4.25%, 02/06/2047 | $ | 24,000 | $ | 25,294 | ||||
VMware, Inc., Sr. Unsec. Global Notes, 2.30%, 08/21/2020 | 45,000 | 44,085 | ||||||
74,869 | ||||||||
Technology Distributors–0.20% |
| |||||||
Avnet, Inc., Sr. Unsec. Global Notes, 4.63%, 04/15/2026 | 35,000 | 34,264 | ||||||
Technology Hardware, Storage & Peripherals–0.92% |
| |||||||
Apple Inc., Sr. Unsec. Global Notes, 4.25%, 02/09/2047 | 20,000 | 20,008 | ||||||
Dell International LLC/ EMC Corp., | ||||||||
6.02%, 06/15/2026(b) | 62,000 | 62,398 | ||||||
8.35%, 07/15/2046(b) | 61,000 | 66,302 | ||||||
Sr. Unsec. Gtd. Notes, 7.13%, 06/15/2024(b) | 8,000 | 8,146 | ||||||
156,854 | ||||||||
Trading Companies & Distributors–0.10% |
| |||||||
BMC East, LLC, Sr. Sec. Gtd. First Lien Notes, 5.50%, 10/01/2024(b) | 4,000 | 3,745 | ||||||
H&E Equipment Services, Inc., Sr. Unsec. Gtd. Global Notes, 5.63%, 09/01/2025 | 4,000 | 3,685 | ||||||
Herc Rentals Inc., Sec. Gtd. Second Lien Notes, 7.75%, 06/01/2024(b) | 2,000 | 2,095 | ||||||
United Rentals North America Inc., Sr. Unsec. Gtd. Global Notes, 6.50%, 12/15/2026 | 6,000 | 5,925 | ||||||
Sr. Unsec. Gtd. Notes, 5.50%, 05/15/2027 | 2,000 | 1,860 | ||||||
17,310 | ||||||||
Trucking–0.17% |
| |||||||
Avis Budget Car Rental LLC/Avis Budget Finance Inc., Sr. Unsec. Gtd. Notes, 5.25%, 03/15/2025(b) | 2,000 | 1,738 | ||||||
DAE Funding LLC (United Arab Emirates), Sr. Unsec. Gtd. Notes, | ||||||||
4.00%, 08/01/2020(b) | 12,000 | 11,730 | ||||||
4.50%, 08/01/2022(b) | 17,000 | 16,362 | ||||||
29,830 | ||||||||
Wireless Telecommunication Services–2.51% |
| |||||||
Sprint Communications Inc., Sr. Unsec. Gtd. Notes, 7.00%, 03/01/2020(b) | 8,000 | 8,220 | ||||||
Sprint Corp., Sr. Unsec. Gtd. Global Notes, 7.25%, 09/15/2021 | 3,000 | 3,078 | ||||||
Sprint Spectrum Co. LLC/Sprint Spectrum Co. II LLC/Sprint Spectrum Co. III LLC, Sr. Sec. Gtd. First Lien Notes, | ||||||||
4.74%, 09/20/2029(b) | 200,000 | 196,750 | ||||||
5.15%, 09/20/2029(b) | 209,000 | 205,865 |
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) |
| |||||||
T-Mobile USA, Inc., | ||||||||
Sr. Unsec. Gtd. Global Bonds, 6.50%, 01/15/2026 | $ | 10,000 | $ | 10,225 | ||||
Sr. Unsec. Gtd. Global Notes, 6.38%, 03/01/2025 | 6,000 | 6,090 | ||||||
430,228 | ||||||||
Total Bonds & Notes |
| 10,536,573 | ||||||
U.S. Government Sponsored Agency Mortgage-Backed Securities–19.63% |
| |||||||
Collateralized Mortgage Obligations–0.16% |
| |||||||
Freddie Mac Whole Loan Securities Trust, 3.50%, 05/25/2047 | 27,653 | 27,604 | ||||||
Federal Home Loan Mortgage Corp. (FHLMC)–3.69% |
| |||||||
Pass Through Ctfs., 6.50%, 07/01/2031 to 08/01/2032 | 1,404 | 1,525 | ||||||
Pass Through Ctfs., TBA, | ||||||||
3.50%, 03/15/2048(f) | 488,000 | 487,885 | ||||||
4.00%, 06/15/2048(f) | 140,000 | 142,731 | ||||||
632,141 | ||||||||
Federal National Mortgage Association (FNMA)–12.49% |
| |||||||
Pass Through Ctfs., | ||||||||
7.50%, 04/01/2029 | 1,019 | 1,088 | ||||||
3.50%, 12/01/2030 | 45,624 | 46,280 | ||||||
6.50%, 09/01/2031 | 767 | 865 | ||||||
7.00%, 09/01/2032 | 4,986 | 5,219 | ||||||
Pass Through Ctfs., TBA, | ||||||||
2.50%, 05/25/2032(f) | 291,000 | 284,223 | ||||||
3.00%, 03/25/2033 to 05/25/2047(f) | 829,000 | 817,257 | ||||||
3.50%, 04/25/2033 to 02/25/2048(f) | 657,000 | 659,072 | ||||||
4.00%, 05/25/2048(f) | 320,000 | 326,331 | ||||||
2,140,335 | ||||||||
Government National Mortgage Association (GNMA)–3.29% |
| |||||||
Pass Through Ctfs., | ||||||||
7.50%, 06/15/2023 | 1,483 | 1,546 | ||||||
8.50%, 11/15/2024 | 862 | 864 | ||||||
7.00%, 07/15/2031 to 08/15/2031 | 965 | 1,080 | ||||||
6.50%, 11/15/2031 to 03/15/2032 | 2,154 | 2,320 | ||||||
6.00%, 11/15/2032 | 1,154 | 1,261 | ||||||
Pass Through Ctfs., TBA, | ||||||||
3.00%, 05/20/2047(f) | 345,000 | 339,475 | ||||||
4.00%, 05/20/2048(f) | 212,000 | 217,119 | ||||||
563,665 | ||||||||
Total U.S. Government Sponsored Agency Mortgage-Backed Securities |
| 3,363,745 | ||||||
Asset-Backed Securities–11.76% |
| |||||||
Adjustable Rate Mortgage Trust,Series 2004-2, Class 6A1, Variable Rate Pass Through Ctfs., 4.48%, 02/25/2035(g) | 13,989 | 14,043 |
Principal Amount | Value | |||||||
Angel Oak Mortgage Trust LLC,Series 2017-3, Class A1, Variable Rate Pass Through Ctfs., 2.71%, 11/25/2047(b)(g) | $ | 27,101 | $ | 26,950 | ||||
Banc of America Commercial Mortgage Trust,Series 2015-UBS7, Class AS, Variable Rate Pass Through Ctfs., 3.99%, 09/15/2048(g) | 70,000 | 71,208 | ||||||
CGDBB Commercial Mortgage Trust, | ||||||||
Series 2017-BIOC, Class A, Floating Rate Pass Through Ctfs., 3.25% (1 mo. USD LIBOR + 0.79%), 07/15/2032(b)(d) | 100,000 | 99,149 | ||||||
Series 2017-BIOC, Class C, Floating Rate Pass Through Ctfs., 3.51% (1 mo. USD LIBOR + 1.05%), 07/15/2032(b)(d) | 100,000 | 98,159 | ||||||
Series 2017-BIOC, Class D, Floating Rate Pass Through Ctfs., 4.06% (1 mo. USD LIBOR + 1.60%), 07/15/2032(b)(d) | 100,000 | 98,485 | ||||||
Chase Mortgage Trust, | ||||||||
Series 2016-1, Class M3, Variable Rate Pass Through Ctfs., 3.75%, 04/25/2045(b)(g) | 65,309 | 64,913 | ||||||
Series 2016-2, Class M3, Variable Rate Pass Through Ctfs., 3.75%, 12/25/2045(b)(g) | 72,636 | 71,727 | ||||||
Commercial Mortgage Trust,Series 2015-CR23, Class CMB, Variable Rate Pass Through Ctfs., 3.68%, 05/10/2048(b)(g) | 150,000 | 150,273 | ||||||
Series 2015-CR25, Class B, Variable Rate Pass Through Ctfs., 4.54%, 08/10/2048(g) | 72,000 | 74,247 | ||||||
Series 2016-GCT, Class B, Pass Through Ctfs., 3.09%, 08/10/2029(b) | 100,000 | 98,325 | ||||||
Credit Suisse First Boston Mortgage Securities Corp.,Series 2004-AR5, Class 3A1, Variable Rate Pass Through Ctfs., 4.14%, 06/25/2034(g) | 24,245 | 24,378 | ||||||
CSWF,Series 2018-TOP, Class B, Floating Rate Pass Through Ctfs., 3.76% (1 mo. USD LIBOR + 1.30%), 08/15/2035(b)(d) | 100,000 | 100,781 | ||||||
DB Master Finance LLC,Series 2015-1A, Class A2II, Pass Through Ctfs., 3.98%, 02/20/2045(b) | 66,413 | 67,414 | ||||||
GMACM Mortgage Loan Trust,Series 2006-AR1, Class 1A1, Variable Rate Pass Through Ctfs., 3.83%, 04/19/2036(g) | 68,325 | 60,866 | ||||||
HMH Trust,Series 2017-NSS, Class A, Pass Through Ctfs., 3.06%, 07/05/2031(b) | 100,000 | 97,990 | ||||||
Invitation Homes Trust,Series 2017-SFR2, Class C, Floating Rate Pass Through Ctfs., 3.91% (1 mo. USD LIBOR + 1.45%), 12/17/2036(b)(d) | 100,000 | 99,738 | ||||||
Merrill Lynch Mortgage Investors Trust,Series 2005-3, Class 3A, Variable Rate Pass Through Ctfs., 4.23%, 11/25/2035(g) | 16,691 | 16,777 | ||||||
Morgan Stanley Capital I Trust, | ||||||||
Series 2006-HQ10, Class AJ, Variable Rate Pass Through Ctfs., 5.39%, 11/12/2041(g) | 499 | 498 |
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 | |||||||
Series 2017-CLS, Class A, Floating Rate Pass Through Ctfs., 3.16% (1 mo. USD LIBOR + 0.70%), 11/15/2034(b)(d) | $ | 99,000 | $ | 97,571 | ||||
Series 2017-CLS, Class B, Floating Rate Pass Through Ctfs., 3.31% (1 mo. USD LIBOR + 0.85%), 11/15/2034(b)(d) | 49,000 | 48,261 | ||||||
Series 2017-CLS, Class C, Floating Rate Pass Through Ctfs., 3.46% (1 mo. USD LIBOR + 1.00%), 11/15/2034(b)(d) | 33,000 | 32,540 | ||||||
Starwood Waypoint Homes Trust,Series 2017-1, Class D, Floating Rate Pass Through Ctfs., 4.41% (1 mo. USD LIBOR + 1.95%), 01/17/2035(b)(d) | 100,000 | 99,381 | ||||||
Structured Adjustable Rate Mortgage Loan Trust,Series 2004-12, Class 3A2, Variable Rate Pass Through Ctfs., 4.33%, 09/25/2034(g) | 17,521 | 17,310 | ||||||
Structured Asset Securities Corp.,Series 2003-34A, Class 5A5, Variable Rate Pass Through Ctfs., 4.39%, 11/25/2033(g) | 72,509 | 72,792 | ||||||
Thornburg Mortgage Securities Trust, | ||||||||
Series 2005-1, Class A3, Variable Rate Pass Through Ctfs., 3.72%, 04/25/2045(g) | 59,326 | 59,773 | ||||||
Series 2005-2, Class A1, Variable Rate Pass Through Ctfs., 3.79%, 07/25/2045(g) | 28,456 | 27,941 | ||||||
Towd Point Mortgage Trust,Series 2017-2, Class A1, Variable Rate Pass Through Ctfs., 2.75%, 04/25/2057(b)(g) | 67,201 | 65,800 | ||||||
Wells Fargo Mortgage Backed Securities Trust,Series 2004-Z, Class 2A1, Variable Rate Pass Through Ctfs., 4.97%, 12/25/2034(g) | 19,612 | 20,005 | ||||||
Wendys Funding LLC,Series 2018-1A, Class A2II, Pass Through Ctfs., 3.88%, 03/15/2048(b) | 59,400 | 56,044 | ||||||
WFRBS Commercial Mortgage Trust,Series 2012-C6, Class B, Pass Through Ctfs., 4.70%, 04/15/2045 | 80,000 | 81,949 | ||||||
Total Asset-Backed Securities |
| 2,015,288 | ||||||
U.S. Treasury Securities–6.63% |
| |||||||
U.S. Treasury Bills–0.15% | ||||||||
0.98%, 01/24/2019(h)(i) | 25,000 | 24,966 | ||||||
U.S. Treasury Notes–4.45% | ||||||||
2.63%, 12/15/2021 | 10,400 | 10,448 | ||||||
2.63%, 12/31/2023 | 47,000 | 47,247 | ||||||
2.63%, 12/31/2025 | 253,500 | 254,250 | ||||||
3.13%, 11/15/2028 | 434,400 | 450,964 | ||||||
762,909 | ||||||||
U.S. Treasury Bonds–2.03% |
| |||||||
3.00%, 08/15/2048 | 348,500 | 347,555 | ||||||
Total U.S. Treasury Securities |
| 1,135,430 |
Shares | Value | |||||||
Preferred Stocks–1.63% |
| |||||||
Diversified Banks–0.84% | ||||||||
Wells Fargo & Co., Class A, Series L, $75.00 Conv. Pfd. | 114 | $ | 143,865 | |||||
Investment Banking & Brokerage–0.75% |
| |||||||
Morgan Stanley, Series F, 6.88% Pfd. | 5,000 | 129,500 | ||||||
Regional Banks–0.04% |
| |||||||
SunTrust Banks, Inc., Series G, 5.05% Pfd. | 7,000 | 6,160 | ||||||
Total Preferred Stocks |
| 279,525 | ||||||
Principal Amount | ||||||||
Variable Rate Senior Loan Interests–0.42%(j) |
| |||||||
Technology Distributors–0.42% | ||||||||
Refinitiv US Holdings, Inc., Term Loan B, 6.56% (3 mo. USD LIBOR + 3.75%), 10/01/2025 (Cost $75,810) | $ | 76,000 | 72,675 | |||||
Shares | ||||||||
Common Stocks & Other Equity Interests–0.00% |
| |||||||
Broadcasting–0.00% | ||||||||
Adelphia RecoveryTrust–Series ACC-1(k) | 87,412 | 9 | ||||||
Diversified Support Services–0.00% |
| |||||||
ACC Claims Holdings, LLC(l)(m) | 73,980 | 591 | ||||||
Total Common Stocks & Other Equity Interests |
| 600 | ||||||
Money Market Funds–16.85% |
| |||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30%(n) | 1,008,708 | 1,008,708 | ||||||
Invesco Liquid Assets Portfolio–Institutional Class, 2.48%(n) | 725,113 | 725,185 | ||||||
Invesco Treasury Portfolio–Institutional Class, 2.30%(n) | 1,152,810 | 1,152,810 | ||||||
Total Money Market Funds |
| 2,886,703 | ||||||
TOTAL INVESTMENTS IN SECURITIES–118.41% |
| 20,290,539 | ||||||
OTHER ASSETS LESS LIABILITIES–(18.41)% |
| (3,154,341 | ) | |||||
NET ASSETS–100.00% |
| $ | 17,136,198 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
Investment Abbreviations:
Conv. | – Convertible | |
Ctfs. | – Certificates | |
Deb. | – Debentures | |
Gtd. | – Guaranteed | |
Jr. | – Junior | |
LIBOR | - London Interbank Offered Rate | |
Pfd. | – Preferred | |
PIK | – Pay-in-Kind |
REIT | – Real Estate Investment Trust | |
Sec. | – Secured | |
Sr. | – Senior | |
Sub. | – Subordinated | |
TBA | – To Be Announced | |
Unsec. | – Unsecured | |
USD | – U.S. Dollar |
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 December 31, 2018 was $4,971,808, which represented 29.01% of the Fund’s Net Assets. |
(c) | Perpetual bond with no specified maturity date. |
(d) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on December 31, 2018. |
(e) | All or a portion of this security is Pay-in-Kind. Pay-in-Kind securities pay interest income in the form of securities. |
(f) | Security purchased on a forward commitment basis. This security is subject to dollar roll transactions. See Note 1M. |
(g) | Interest rate is redetermined periodically based on the cash flows generated by the pool of assets backing the security, less any applicable fees. The rate shown is the rate in effect on December 31, 2018. |
(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 1L. |
(j) | 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 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. |
(k) | Non-income producing security acquired as part of the Adelphia Communications bankruptcy reorganization. |
(l) | Non-income producing security. |
(m) | Security valued using significant unobservable inputs (Level 3). See Note 3. |
(n) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
Open Futures Contracts | ||||||||||||||||||||
Number of Contracts | Expiration Month | Notional Value | Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||
Long Futures Contracts | ||||||||||||||||||||
U.S. Treasury 2 Year Notes | 4 | March-2019 | $ | 849,250 | $ | 5,590 | $ | 5,590 | ||||||||||||
U.S. Treasury 5 Year Notes | 5 | March-2019 | 573,437 | 9,043 | 9,043 | |||||||||||||||
U.S. Treasury 10 Year Notes | 2 | March-2019 | 244,031 | (36 | ) | (36 | ) | |||||||||||||
U.S. Treasury Long Bonds | 3 | March-2019 | 438,000 | 20,477 | 20,477 | |||||||||||||||
U.S. Treasury Ultra Bonds | 3 | March-2019 | 481,969 | 25,479 | 25,479 | |||||||||||||||
Subtotal — Long Futures Contracts | 60,553 | 60,553 | ||||||||||||||||||
Short Futures Contracts | ||||||||||||||||||||
U.S. Treasury 10 Year Ultra Bonds | 9 | March-2019 | (1,170,703 | ) | (37,251 | ) | (37,251 | ) | ||||||||||||
Total Futures Contracts — Interest Rate Risk | $ | 23,302 | $ | 23,302 |
Open Forward Foreign Currency Contracts — Currency Risk | ||||||||||||||||||||||
Settlement Date | Contract to | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||
Counterparty | Deliver | Receive | ||||||||||||||||||||
02/28/2019 | Goldman Sachs International | EUR | 101,288 | USD | 115,752 | $ | (843 | ) |
Abbreviations:
EUR | – Euro | |
USD | – U.S. Dollar |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $17,784,813) | $ | 17,403,836 | ||
Investments in affiliated money market funds, at value | 2,886,703 | |||
Other investments: | ||||
Variation margin receivable — futures contracts | 729 | |||
Foreign currencies, at value (Cost $65,977) | 66,371 | |||
Receivable for: | ||||
Investments sold | 18,193 | |||
Dividends and interest | 159,835 | |||
Fund expenses absorbed | 1,531 | |||
Investment for trustee deferred compensation and retirement plans | 50,907 | |||
Other assets | 369 | |||
Total assets | 20,588,474 | |||
Liabilities: | ||||
Other investments: | ||||
Unrealized depreciation on forward foreign currency contracts outstanding | 843 | |||
Payable for: | ||||
Investments purchased | 3,319,089 | |||
Amount due to custodian | 4,909 | |||
Fund shares reacquired | 17,059 | |||
Accrued fees to affiliates | 875 | |||
Accrued trustees’ and officers’ fees and benefits | 3,985 | |||
Accrued other operating expenses | 52,495 | |||
Trustee deferred compensation and retirement plans | 53,021 | |||
Total liabilities | 3,452,276 | |||
Net assets applicable to shares outstanding | $ | 17,136,198 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 17,268,313 | ||
Distributable earnings | (132,115 | ) | ||
$ | 17,136,198 | |||
Net Assets: | ||||
Series I | $ | 17,019,017 | ||
Series II | $ | 117,181 | ||
Shares outstanding, no par value, | ||||
Series I | 2,836,435 | |||
Series II | 19,615 | |||
Series I: | ||||
Net asset value and offering per share | $ | 6.00 | ||
Series II: | ||||
Net asset value per share | $ | 5.97 |
Investment income: | ||||
Interest | $ | 684,085 | ||
Dividends | 11,371 | |||
Dividends from affiliated money market funds | 51,432 | |||
Total investment income | 746,888 | |||
Expenses: | ||||
Advisory fees | 80,792 | |||
Administrative services fees | 76,891 | |||
Custodian fees | 10,747 | |||
Distribution fees — Series II | 297 | |||
Transfer agent fees | 9,316 | |||
Trustees’ and officers’ fees and benefits | 20,313 | |||
Reports to shareholders | 10,897 | |||
Professional services fees | 56,518 | |||
Other | 53,988 | |||
Total expenses | 319,759 | |||
Less: Fees waived and expenses reimbursed | (213,325 | ) | ||
Net expenses | 106,434 | |||
Net investment income | 640,454 | |||
Realized and unrealized gain (loss): | ||||
Net realized gain (loss) from: | ||||
Investment securities | (225,222 | ) | ||
Foreign currencies | (3,427 | ) | ||
Forward foreign currency contracts | 7,341 | |||
Futures contracts | (116,219 | ) | ||
(337,527 | ) | |||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (784,056 | ) | ||
Foreign currencies | (660 | ) | ||
Forward foreign currency contracts | 1,479 | |||
Futures contracts | 27,112 | |||
(756,125 | ) | |||
Net realized and unrealized gain (loss) | (1,093,652 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (453,198 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income | $ | 640,454 | $ | 609,394 | ||||
Net realized gain (loss) | (337,527 | ) | 195,564 | |||||
Change in net unrealized appreciation (depreciation) | (756,125 | ) | 201,684 | |||||
Net increase (decrease) in net assets resulting from operations | (453,198 | ) | 1,006,642 | |||||
Distributions to shareholders from distributable earnings:(1) | ||||||||
Series I | (636,171 | ) | (647,374 | ) | ||||
Series II | (4,086 | ) | (3,900 | ) | ||||
Total distributions from distributable earnings | (640,257 | ) | (651,274 | ) | ||||
Share transactions–net: | ||||||||
Series I | (2,220,996 | ) | 4,488,700 | |||||
Series II | 1,722 | (6,224 | ) | |||||
Net increase (decrease) in net assets resulting from share transactions | (2,219,274 | ) | 4,482,476 | |||||
Net increase (decrease) in net assets | (3,312,729 | ) | 4,837,844 | |||||
Net assets: | ||||||||
Beginning of year | 20,448,927 | 15,611,083 | ||||||
End of year | $ | 17,136,198 | $ | 20,448,927 |
(1) | The Securities and Exchange Commission eliminated the requirement to disclose distribution components separately, except for tax return of capital. For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income. |
Notes to Financial Statements
December 31, 2018
NOTE 1—Significant Accounting Policies
Invesco V.I. Core Plus Bond 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. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 theover-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 (“NAV”) 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 theend-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 includeend-of-day net present values, spreads, ratings, industry, company performance and returns of referenced assets. Centrally cleared swap agreements are valued at the daily settlement price determined by the relevant exchange or clearinghouse.
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 investment 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. Bond premiums and discounts are amortized and/or accreted over the lives of the respective securities.Pay-in-kind interest income andnon-cash dividend income received in the form of securities in-lieu of cash are recorded at the fair value of the securities received. 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. |
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 the Statement of Changes in Net Assets, or the net investment income per share and the 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. Core Plus Bond Fund
taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including netrealized 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. | 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. | 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 the 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 the dailymark-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 anagreed-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. | 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 andLiabilities. 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) |
Invesco V.I. Core Plus Bond Fund
on futures contracts held during the period is included on the Statement of Operations. The primary risks associated with futures contracts aremarket 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. |
M. | 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 theto 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 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 roll 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. Dollar roll transactions covered in this manner are not treated as senior securities for purposes of a Fund’s fundamental investment limitation on senior securities and borrowings.
N. | Leverage Risk— Leverage exists when the 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. | 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 accrues daily and pays monthly 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% |
For the year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.45%.
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least April 30, 2020, 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 (the “expense limits”). 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, 2020. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $80,792 and reimbursed Fund expenses of $132,533.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $50,000 for accounting and fund administrative services and was reimbursed $26,891 for fees paid to 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
Invesco V.I. Core Plus Bond Fund
course of providing such services. For the year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution 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 December 31, 2018. 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 | |||||||||||||
Investments in Securities | ||||||||||||||||
Bonds & Notes | $ | — | $ | 10,536,573 | $ | — | $ | 10,536,573 | ||||||||
U.S. Government Sponsored Agency Mortgage-Backed Securities | — | 3,363,745 | — | 3,363,745 | ||||||||||||
Asset-Backed Securities | — | 2,015,288 | — | 2,015,288 | ||||||||||||
U.S. Treasury Securities | — | 1,135,430 | — | 1,135,430 | ||||||||||||
Preferred Stocks | 273,365 | 6,160 | — | 279,525 | ||||||||||||
Variable Rate Senior Loan Interests | — | 72,675 | — | 72,675 | ||||||||||||
Common Stocks & Other Equity Interests | — | 9 | 591 | 600 | ||||||||||||
Money Market Funds | 2,886,703 | — | — | 2,886,703 | ||||||||||||
Total Investments in Securities | 3,160,068 | 17,129,880 | 591 | 20,290,539 | ||||||||||||
Other Investments — Assets* | ||||||||||||||||
Futures Contracts | 60,589 | — | — | 60,589 | ||||||||||||
Other Investments — Liabilities* | ||||||||||||||||
Forward Foreign Currency Contracts | — | (843 | ) | — | (843 | ) | ||||||||||
Futures Contracts | (37,287 | ) | — | — | (37,287 | ) | ||||||||||
(37,287 | ) | (843 | ) | — | (38,130 | ) | ||||||||||
Total Other Investments | 23,302 | (843 | ) | — | 22,459 | |||||||||||
Total Investments | $ | 3,183,370 | $ | 17,129,037 | $ | 591 | $ | 20,312,998 |
* | Unrealized appreciation (depreciation). |
NOTE 4—Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (“ISDA Master Agreement”) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
Invesco V.I. Core Plus Bond Fund
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 December 31, 2018:
Value | ||||||||||||
Derivative Assets | Currency Risk | Interest Rate Risk | Total | |||||||||
Unrealized appreciation on futures contracts — Exchange-Traded(a) | $ | — | $ | 60,589 | $ | 60,589 | ||||||
Derivatives not subject to master netting agreements | — | (60,589 | ) | (60,589 | ) | |||||||
Total Derivative Assets subject to master netting agreements | $ | — | $ | — | $ | — | ||||||
Value | ||||||||||||
Derivative Liabilities | Currency Risk | Interest Rate Risk | Total | |||||||||
Unrealized depreciation on futures contracts — Exchange-Traded(a) | $ | — | $ | (37,287 | ) | $ | (37,287 | ) | ||||
Unrealized depreciation on forward foreign currency contracts outstanding | (843 | ) | — | (843 | ) | |||||||
Total Derivative Liabilities | (843 | ) | (37,287 | ) | (38,130 | ) | ||||||
Derivatives not subject to master netting agreements | — | 37,287 | 37,287 | |||||||||
Total Derivative Liabilities subject to master netting agreements | $ | (843 | ) | $ | — | $ | (843 | ) |
(a) | The daily variation margin receivable at period-end is recorded in the Statement of Assets and Liabilities. |
Offsetting Assets and Liabilities
The table below reflects the Fund’s exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of December 31, 2018.
Financial Derivative Assets | Financial Derivative Liabilities | Collateral (Received)/Pledged | Net | |||||||||||||||||||||
Counterparty | Forward Foreign Currency Contracts | Forward Foreign Currency Contracts | Net Value of | Non-Cash | Cash | |||||||||||||||||||
Goldman Sachs International | $ | — | $ | (843 | ) | $ | (843 | ) | $ | — | $ | — | $ | (843 | ) |
Effect of Derivative Investments for the year ended December 31, 2018
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 | ||||||||||||
Currency Risk | Interest Rate Risk | Total | ||||||||||
Realized Gain (Loss): | ||||||||||||
Forward foreign currency contracts | $ | 7,341 | $ | — | $ | 7,341 | ||||||
Futures contracts | — | (116,219 | ) | (116,219 | ) | |||||||
Change in Net Unrealized Appreciation: | ||||||||||||
Forward foreign currency contracts | 1,479 | — | 1,479 | |||||||||
Futures contracts | — | 27,112 | 27,112 | |||||||||
Total | $ | 8,820 | $ | (89,107 | ) | $ | (80,287 | ) |
The table below summarizes the average notional value of forward foreign currency contracts and futures contracts outstanding during the year.
Forward Foreign Currency Contracts | Futures Contracts | |||||||
Average notional value | $ | 139,624 | $ | 3,600,419 |
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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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. The Fund may not purchase additional securities when any borrowings from banks exceed 5% of the Fund’s total assets.
NOTE 7—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 640,257 | $ | 651,274 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 661,848 | ||
Net unrealized appreciation (depreciation) — investments | (381,561 | ) | ||
Net unrealized appreciation — foreign currencies | 395 | |||
Temporary book/tax differences | (48,246 | ) | ||
Capital loss carryforward | (364,551 | ) | ||
Shares of beneficial interest | 17,268,313 | |||
Total net assets | $ | 17,136,198 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation (depreciation) difference is attributable primarily to futures contracts.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 has a capital loss carryforward as of December 31, 2018, as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
Not subject to expiration | $ | 303,213 | $ | 61,338 | $ | 364,551 |
* | 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 Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $61,038,291 and $61,727,959, respectively. During the same period, purchases and sales of U.S. Treasury obligations were $12,300,332 and $12,358,586, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 222,081 | ||
Aggregate unrealized (depreciation) of investments | (603,642 | ) | ||
Net unrealized appreciation (depreciation) of investments | $ | (381,561 | ) |
Cost of investments for tax purposes is $20,694,559.
Invesco V.I. Core Plus Bond Fund
NOTE 9—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of dollar rolls and forward foreign currency contracts, on December 31, 2018, undistributed net investment income was increased by $51,718, undistributed net realized gain (loss) was decreased by $51,304 and shares of beneficial interest was decreased by $414. This reclassification had no effect on the net assets or the distributable earnings of the Fund.
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 395,009 | $ | 2,447,919 | 1,139,378 | $ | 7,342,799 | ||||||||||
Series II | 3 | 19 | 2 | 14 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 105,501 | 636,171 | 101,948 | 647,374 | ||||||||||||
Series II | 625 | 3,758 | 568 | 3,588 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (851,917 | ) | (5,305,086 | ) | (545,804 | ) | (3,501,473 | ) | ||||||||
Series II | (335 | ) | (2,055 | ) | (1,551 | ) | (9,826 | ) | ||||||||
Net increase (decrease) in share activity | (351,114 | ) | $ | (2,219,274 | ) | 694,541 | $ | 4,482,476 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 83% 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 | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 6.38 | $ | 0.22 | $ | (0.37 | ) | $ | (0.15 | ) | $ | (0.23 | ) | 6.00 | (2.37 | )% | $ | 17,019 | 0.59 | %(d) | 1.78 | %(d) | 3.57 | %(d) | 339 | |||||||||||||||||||||||
Year ended 12/31/17 | 6.21 | 0.22 | 0.17 | 0.39 | (0.22 | ) | 6.38 | 6.34 | 20,326 | 0.60 | 1.58 | 3.46 | 407 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 6.07 | 0.23 | 0.18 | 0.41 | (0.27 | ) | 6.21 | 6.66 | 15,485 | 0.55 | 1.68 | 3.71 | 474 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 6.39 | 0.24 | (0.26 | ) | (0.02 | ) | (0.30 | ) | 6.07 | (0.37 | ) | 15,587 | 0.65 | 1.73 | 3.81 | 416 | ||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 6.35 | 0.20 | (0.37 | ) | (0.17 | ) | (0.21 | ) | 5.97 | (2.64 | ) | 117 | 0.84 | (d) | 2.03 | (d) | 3.32 | (d) | 339 | |||||||||||||||||||||||||||||
Year ended 12/31/17 | 6.19 | 0.20 | 0.16 | 0.36 | (0.20 | ) | 6.35 | 5.89 | 123 | 0.85 | 1.83 | 3.21 | 407 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 6.04 | 0.22 | 0.18 | 0.40 | (0.25 | ) | 6.19 | 6.52 | 126 | 0.80 | 1.93 | 3.46 | 474 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 6.36 | 0.22 | (0.26 | ) | (0.04 | ) | (0.28 | ) | 6.04 | (0.64 | ) | 156 | 0.90 | 1.98 | 3.56 | 416 | ||||||||||||||||||||||||||||||||
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 |
(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 based on average daily net assets (000’s omitted) of $17,835 and $119 for Series I and Series II shares, respectively. |
Invesco V.I. Core Plus Bond Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) and Shareholders of Invesco V.I. Core Plus Bond Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Core Plus Bond Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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 (07/01/18) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,001.50 | $ | 2.98 | $ | 1,022.23 | $ | 3.01 | 0.59 | % | ||||||||||||
Series II | 1,000.00 | 1,000.40 | 4.24 | 1,020.97 | 4.28 | 0.84 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Core Plus Bond Fund
Tax Information
Form1099-DIV, Form 1042-S and other year–end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Corporate Dividends Received Deduction* | 1.32 | % | ||
U.S. Treasury Obligations* | 3.40 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. Core Plus Bond Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Core Plus Bond Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. Core Plus Bond Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. Core Plus Bond Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Core Plus Bond Fund
| ||||
Annual Report to Shareholders
| December 31, 2018 | |||
| ||||
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 FormN-Q (or any successor Form). The Fund’s FormN-Q (or any successor Form) filings are available on the SEC website, sec.gov. The SEC file numbers for the Fund are811-07452 and033-57340. The Fund’s most recent portfolio holdings, as filed on FormN-Q (or any successor Form), 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 recent12-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.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||
Invesco Distributors, Inc. VIDDI-AR-1 02152019 1152 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. Diversified Dividend Fund (the Fund) outperformed the Russell 1000 Value Index, the Fund’s style-specific benchmark.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -7.57 | % | |||
Series II Shares | -7.82 | ||||
S&P 500 Index▼(Broad Market Index) | -4.38 | ||||
Russell 1000 Value Index∎(Style-Specific Index) | -8.27 | ||||
Lipper VUFLarge-Cap Value Funds Index¨(Peer Group Index) | -9.47 | ||||
Source(s):▼FactSet Research Systems Inc.;∎RIMES Technologies Corp.;¨Lipper Inc. |
Market conditions and your Fund
Calendar year 2018 proved to be an increasingly volatile time for US equities. In January 2018, US equity markets steadily moved higher, as investors remained enthused about the passage of the Tax Cuts and Jobs Act signed into law in late December 2017. However, in February 2018, volatility returned to the US stock and bond markets. Worries about how rising interest rates might affect economic growth, concerns about a potential trade war and heightened geopolitical tensions caused the US stock markets to pull back and volatility to increase.
US equity markets generally recovered in the second quarter of 2018 as strong US retail sales and low unemployment buoyed markets. Throughout the summer, US equities moved higher as corporate profits surged. Several US equity indexes reached new highs despite potential headwinds including trade tensions, tariff announcements and contagion concerns over a Turkish currency crisis. After a relatively quiet summer, market volatility noticeably rose in October, as US equity markets suffered a
sharpsell-off throughyear-end, amid rising interest rates and concerns that higher inflation could mean a more restrictive monetary policy.
Within the S&P 500 Index, health care, utilities and consumer discretionary were the best-performing sectors for the year while energy, materials and industrials were the worst-performing sectors. It is important to view the market’s performance within the context of a full market cycle. This cycle, which began in March 2009, is one of the longest expansions on record with one of the largest bull markets, despite a historically low recovery in revenue versus previous cycle troughs.1
During the year, our management discipline remained unchanged. Our total return approach emphasizes long-term capital appreciation, current income and capital preservation. We believe the Fund may serve as an equity foundation within a well-diversified asset allocation strategy, complementing more aggressive and cyclical investments. We look for dividend-paying companies with strong profitability, solid balance sheets and capital allocation policies that support sustained
or increasing dividends and share repurchases. We perform extensive fundamental research, incorporating both financial statement analysis and an assessment of the potential upside relative to the downside risk, to determine a fair valuation over ourtwo- to three-year investment horizon for each stock. We believe this process may provide a valuable combination of dividend income, price appreciation and capital preservation. We also maintain a rigorous sell discipline and consider selling or reducing shares in stocks that no longer meet our investment criteria.
Within the Fund’s style-specific benchmark, health care and utilities were the best-performing sectors, while industrials, energy and materials were the worst-performing sectors during the year. The Fund’s overweight position in the utilities sector contributed the most to its performance versus the style-specific index. Stock selection in the energy and consumer discretionary sectors and an underweight position in the financials sector also made positive contributions to relative performance. The Fund’s underweight position in the health care sector detracted the most from relative performance during the year. Stock selection in communication services, real estate and consumer staples also hurt relative performance.
Holdings in the health care and utilities sectors were the largest contributors to the Fund’s performance relative to its style-specific benchmark for the year. Pharmaceutical companiesEli Lilly andMerck performed well within the sector during the year. Eli Lilly saw continued success in its diabetes platform. The company also spun out its animal health division, Elanco. Merck benefited from many positive trials within its immuno-oncology portfolio, strengthening its position in
Portfolio Composition |
By sector | % of total net assets |
Consumer Staples | 22.4% | |
Utilities | 18.0 | |
Financials | 13.0 | |
Industrials | 8.7 | |
Health Care | 8.4 | |
Energy | 6.4 | |
Communication Services | 6.1 | |
Consumer Discretionary | 4.7 | |
Materials | 3.2 | |
Information Technology | 1.2 | |
Real Estate | 1.1 | |
Money Market Funds | ||
Plus Other Assets Less Liabilities | 6.8 |
Top 10 Equity Holdings* | |||
% of total net assets | |||
1. Coca-Cola Co. (The) | 3.2% | ||
2. AT&T Inc. | 3.2 | ||
3. Exelon Corp. | 2.8 | ||
4. General Mills, Inc. | 2.7 | ||
5. Entergy Corp. | 2.7 | ||
6. Hartford Financial Services | |||
Group, Inc. (The) | 2.7 | ||
7. Procter & Gamble Co. (The) | 2.6 | ||
8. Dominion Energy, Inc. | 2.4 | ||
9. PPL Corp. | 2.3 | ||
10. Eli Lilly and Co. | 2.1 |
Total Net Assets | $542.3 million | |
Total Number of Holdings* | 70 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
Data presented here are as of December 31, 2018.
Invesco V.I. Diversified Dividend Fund
this growing market. Utility companyExelon also performed well during the year. The company benefited from regulatory changes that supported their merchant nuclear plants as well as their transmission and distribution businesses.
Within the sector, consumer staples holdingsGeneral Mills andKraft Heinz were among the largest detractors from the Fund’s performance versus the style-specific benchmark for the year. General Mills underperformed following the acquisition of Blue Buffalo (not a Fund holding), a premium pet food brand. Kraft Heinz saw a decline in profitability despite improved sales growth as customer service and transportation costs increased.
Within the communications services sector,AT&T performed poorly during the year and detracted from the Fund’s performance relative to the style-specific benchmark. The company’s acquisition of Time Warner (not a Fund holding) was poorly received by investors and its entertainment services (DirecTV andU-verse) have been challenged by lower cost- streaming options.
The Fund used currency forward contracts for the purpose of hedging currency exposure of somenon-US-based companies held in the portfolio and not for speculative purposes or leverage. The use of currency forward contracts had a very small positive impact on the Fund’s relative performance during the year.
The Fund has successfully navigated multiple market cycles with a consistent long-term mandate to emphasize capital appreciation, current income and capital preservation over a full market cycle.
It has been our privilege to oversee Invesco V.I. Diversified Dividend Fund and we thank you for your continued investment.
1 | Sources: National Bureau of Economic Research, Ned Davis Research and FactSet Research Systems Inc. |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Meggan Walsh Chartered Financial Analyst, Portfolio Manager and Head of Invesco’s Dividend Value Team, is lead manager of | ||
Invesco V.I. Diversified Dividend Fund. She joined Invesco in 1991. Ms. Walsh earned a BS in finance from the University of Maryland and an MBA from Loyola University Maryland. |
Robert Botard Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Diversified Dividend Fund. He joined | ||
Invesco in 1993. Mr. Botard earned a BBA in finance and a BBA in international business from The University of Texas at Austin. He also earned a Master of International Management degree from the Thunderbird School of Global Management. |
Kristina Bradshaw Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Diversified Dividend Fund. She | ||
joined Invesco in 2006. Ms. Bradshaw earned a BBA with honors from The University of Texas at Austin and an MBA from Stanford University’s Graduate School of Business. |
Chris McMeans Chartered Financial Analyst, Portfolio Manager is manager of Invesco V.I. Diversified Dividend Fund. He | ||
joined Invesco in 2008. Mr. McMeans earned a BA in economics from The University of Texas at Austin and an MBA with honors from the University of Houston. |
Invesco V.I. Diversified Dividend Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: FactSet Research Systems Inc. |
2 | Source: RIMES Technologies Corp. |
3 | Source: Lipper Inc. |
Past performance cannot guarantee comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (3/1/90) | 7.65 | % | |||
10 Years | 11.00 | ||||
5 Years | 5.82 | ||||
1 Year | -7.57 | ||||
Series II Shares | |||||
Inception (6/5/00) | 4.95 | % | |||
10 Years | 10.72 | ||||
5 Years | 5.56 | ||||
1 Year | -7.82 |
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, prior to June 1, 2010, for Series I and Series II shares are blended returns of the predecessor fund and Invesco V.I. Dividend Growth 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 recentmonth-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Performance figures in the table and chart do not reflect deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund Shares. 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 0.66% and 0.91%, 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 0.67% and 0.92%, 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 recentmonth-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recentmonth-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, 2020. See current prospectus for more information. |
Invesco V.I. Diversified Dividend Fund
Invesco V.I. Diversified Dividend Fund’s investment objective is to provide reasonable current income and long-term growth of income and capital.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
Value investing style risk.A value investing style subjects the Fund to the risk that the valuations never improve or that the returns on value equity securities are less than returns on other styles of investing or the overall stock market.
About indexes used in this report
TheS&P 500® Index is an unmanaged index considered representative of the US stock market.
TheRussell 1000® Value Index is an unmanaged index considered representative oflarge-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.
TheLipper VUFLarge-Cap Value Funds Index is an unmanaged index considered representative oflarge-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.
Other information
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Industry 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.
Invesco V.I. Diversified Dividend Fund
Schedule of Investments(a)
December 31, 2018
Shares | Value | |||||||
Common Stocks & Other Equity Interests–93.20% |
| |||||||
Aerospace & Defense–1.47% |
| |||||||
General Dynamics Corp. | 36,964 | $ | 5,811,110 | |||||
Raytheon Co. | 14,099 | 2,162,082 | ||||||
7,973,192 | ||||||||
Air Freight & Logistics–1.10% |
| |||||||
United Parcel Service, Inc.–Class B | 61,466 | 5,994,779 | ||||||
Apparel Retail–1.19% |
| |||||||
TJX Cos., Inc. (The) | 144,470 | 6,463,588 | ||||||
Apparel, Accessories & Luxury Goods–0.55% |
| |||||||
Columbia Sportswear Co. | 35,507 | 2,985,784 | ||||||
Asset Management & Custody Banks–0.61% |
| |||||||
Federated Investors, Inc.–Class B | 124,680 | 3,310,254 | ||||||
Brewers–2.16% |
| |||||||
Anheuser-Busch InBev S.A./N.V. (Belgium) | 38,029 | 2,514,088 | ||||||
Heineken N.V. (Netherlands) | 104,375 | 9,199,335 | ||||||
11,713,423 | ||||||||
Construction Machinery & Heavy Trucks–0.79% |
| |||||||
Cummins Inc. | 32,024 | 4,279,687 | ||||||
Consumer Finance–1.61% |
| |||||||
American Express Co. | 91,496 | 8,721,399 | ||||||
Data Processing & Outsourced Services–1.17% |
| |||||||
Automatic Data Processing, Inc. | 48,267 | 6,328,769 | ||||||
Diversified Chemicals–0.25% |
| |||||||
BASF SE (Germany) | 19,780 | 1,368,841 | ||||||
Electric Utilities–12.16% |
| |||||||
American Electric Power Co., Inc. | 124,600 | 9,312,604 | ||||||
Duke Energy Corp. | 101,291 | 8,741,413 | ||||||
Entergy Corp. | 168,837 | 14,531,801 | ||||||
Exelon Corp. | 330,942 | 14,925,484 | ||||||
PPL Corp. | 436,339 | 12,361,484 | ||||||
SSE PLC (United Kingdom) | 443,438 | 6,096,932 | ||||||
65,969,718 | ||||||||
Electrical Components & Equipment–2.18% |
| |||||||
ABB Ltd. (Switzerland) | 312,145 | 5,951,222 | ||||||
Emerson Electric Co. | 84,813 | 5,067,577 | ||||||
nVent Electric PLC (United Kingdom) | 36,152 | 811,974 | ||||||
11,830,773 | ||||||||
Fertilizers & Agricultural Chemicals–0.75% |
| |||||||
Nutrien Ltd. (Canada) | 86,131 | 4,045,356 | ||||||
Food Distributors–1.28% |
| |||||||
Sysco Corp. | 110,420 | 6,918,917 | ||||||
General Merchandise Stores–1.28% |
| |||||||
Target Corp. | 105,314 | 6,960,202 |
Shares | Value | |||||||
Health Care Equipment–0.51% |
| |||||||
Stryker Corp. | 17,485 | $ | 2,740,774 | |||||
Household Products–4.43% |
| |||||||
Kimberly-Clark Corp. | 89,559 | 10,204,352 | ||||||
Procter & Gamble Co. (The) | 150,148 | 13,801,604 | ||||||
24,005,956 | ||||||||
Industrial Conglomerates–1.05% |
| |||||||
Siemens AG (Germany) | 51,006 | 5,690,898 | ||||||
Industrial Machinery–2.14% |
| |||||||
Flowserve Corp. | 236,038 | 8,974,165 | ||||||
Pentair PLC (United Kingdom) | 69,521 | 2,626,503 | ||||||
11,600,668 | ||||||||
Integrated Oil & Gas–3.95% |
| |||||||
Royal Dutch Shell PLC–Class B (Netherlands) | 102,643 | 3,054,324 | ||||||
Suncor Energy, Inc. (Canada) | 271,857 | 7,592,959 | ||||||
TOTAL S.A. (France) | 203,933 | 10,773,376 | ||||||
21,420,659 | ||||||||
Integrated Telecommunication Services–6.12% |
| |||||||
AT&T Inc. | 599,242 | 17,102,367 | ||||||
BT Group PLC (United Kingdom) | 2,530,078 | 7,658,616 | ||||||
Deutsche Telekom AG (Germany) | 497,608 | 8,449,389 | ||||||
33,210,372 | ||||||||
Motorcycle Manufacturers–1.11% |
| |||||||
Harley-Davidson, Inc. | 176,720 | 6,029,686 | ||||||
Multi-Line Insurance–2.66% |
| |||||||
Hartford Financial Services Group, Inc. (The) | 324,098 | 14,406,156 | ||||||
Multi-Utilities–5.89% |
| |||||||
Consolidated Edison, Inc. | 125,244 | 9,576,156 | ||||||
Dominion Energy, Inc. | 179,586 | 12,833,216 | ||||||
Sempra Energy | 88,170 | 9,539,112 | ||||||
31,948,484 | ||||||||
Oil & Gas Equipment & Services–0.72% |
| |||||||
Baker Hughes, a GE Co. | 182,446 | 3,922,589 | ||||||
Oil & Gas Exploration & Production–1.69% |
| |||||||
ConocoPhillips | 146,719 | 9,147,930 | ||||||
Packaged Foods & Meats–8.50% |
| |||||||
Campbell Soup Co. | 238,038 | 7,852,874 | ||||||
Danone S.A. (France) | 63,783 | 4,495,111 | ||||||
General Mills, Inc. | 377,290 | 14,691,672 | ||||||
Kraft Heinz Co. (The) | 116,249 | 5,003,357 | ||||||
Mondelez International, Inc.–Class A | 207,147 | 8,292,094 | ||||||
Nestle S.A. (Switzerland) | 70,784 | 5,754,799 | ||||||
46,089,907 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Diversified Dividend Fund
Shares | Value | |||||||
Paper Packaging–2.23% |
| |||||||
Avery Dennison Corp. | 27,399 | $ | 2,461,252 | |||||
International Paper Co. | 136,278 | 5,500,180 | ||||||
Sonoco Products Co. | 78,344 | 4,162,417 | ||||||
12,123,849 | ||||||||
Personal Products–1.36% |
| |||||||
L’Oreal S.A. (France) | 32,164 | 7,383,311 | ||||||
Pharmaceuticals–7.93% |
| |||||||
Bayer AG (Germany) | 87,157 | 6,047,528 | ||||||
Bristol-Myers Squibb Co. | 186,167 | 9,676,961 | ||||||
Eli Lilly and Co. | 99,690 | 11,536,127 | ||||||
Johnson & Johnson | 45,566 | 5,880,292 | ||||||
Merck & Co., Inc. | 128,865 | 9,846,574 | ||||||
42,987,482 | ||||||||
Property & Casualty Insurance–1.54% |
| |||||||
Travelers Cos., Inc. (The) | 69,629 | 8,338,073 | ||||||
Regional Banks–6.58% |
| |||||||
Cullen/Frost Bankers, Inc. | 38,015 | 3,343,039 | ||||||
Fifth Third Bancorp | 185,567 | 4,366,392 | ||||||
KeyCorp | 224,492 | 3,317,992 | ||||||
M&T Bank Corp. | 71,932 | 10,295,627 | ||||||
PNC Financial Services Group, Inc. (The) | 54,022 | 6,315,712 | ||||||
Zions Bancorp., N.A. | 196,957 | 8,024,028 | ||||||
35,662,790 |
Shares | Value | |||||||
Restaurants–0.52% |
| |||||||
Darden Restaurants, Inc. | 28,302 | $ | 2,826,238 | |||||
Soft Drinks–3.21% |
| |||||||
Coca-Cola Co. (The) | 367,882 | 17,419,213 | ||||||
Specialized REITs–1.06% |
| |||||||
Weyerhaeuser Co. | 263,553 | 5,761,268 | ||||||
Tobacco–1.45% |
| |||||||
Altria Group, Inc. | 76,122 | 3,759,666 | ||||||
Philip Morris International Inc. | 61,582 | 4,111,214 | ||||||
7,870,880 | ||||||||
Total Common Stocks & Other Equity Interests |
| 505,451,865 | ||||||
Money Market Funds–6.91% |
| |||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30%(b) | 14,251,288 | 14,251,288 | ||||||
Invesco Liquid Assets Portfolio–Institutional Class, 2.48%(b) | 10,233,528 | 10,234,552 | ||||||
Invesco Treasury Portfolio–Institutional Class, 2.30%(b) | 13,011,121 | 13,011,121 | ||||||
Total Money Market Funds |
| 37,496,961 | ||||||
TOTAL INVESTMENTS IN SECURITIES–100.11% |
| 542,948,826 | ||||||
OTHER ASSETS LESS LIABILITIES–(0.11)% |
| (599,204 | ) | |||||
NET ASSETS–100.00% |
| $ | 542,349,622 |
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. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
Open Forward Foreign Currency Contracts | ||||||||||||||||||||||
Contract to | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||
Settlement Date | Counterparty | Deliver | Receive | |||||||||||||||||||
02/08/2019 | Barclays Bank PLC | USD | 729,645 | EUR | 637,833 | $ | 3,348 | |||||||||||||||
Subtotal — Appreciation | 3,348 | |||||||||||||||||||||
02/08/2019 | Citibank N.A. | EUR | 7,411,216 | USD | 8,432,555 | (84,363 | ) | |||||||||||||||
02/08/2019 | Goldman Sachs International | EUR | 9,177,744 | USD | 8,067,043 | (92,849 | ) | |||||||||||||||
02/08/2019 | JP Morgan Chase Bank N.A | EUR | 7,411,215 | USD | 8,435,446 | (81,473 | ) | |||||||||||||||
Subtotal — Depreciation | (258,685 | ) | ||||||||||||||||||||
Total Forward Foreign Currency Contracts — Currency Risk | $ | (255,337 | ) |
Abbreviations:
EUR | – Euro | |
USD | – U.S. Dollar |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $438,920,295) | $ | 505,451,865 | ||
Investments in affiliated money market funds, at value (Cost $37,497,442) | 37,496,961 | |||
Other investments: | ||||
Unrealized appreciation on forward foreign currency contracts outstanding | 3,348 | |||
Foreign currencies, at value (Cost $149,813) | 149,864 | |||
Receivable for: | ||||
Fund shares sold | 158,065 | |||
Dividends and interest | 1,331,278 | |||
Investment for trustee deferred compensation and retirement plans | 77,685 | |||
Total assets | 544,669,066 | |||
Liabilities: | ||||
Other investments: | ||||
Unrealized depreciation on forward foreign currency contracts outstanding | 258,685 | |||
Payable for: | ||||
Investments purchased | 865,072 | |||
Amount due to custodian | 167,088 | |||
Fund shares reacquired | 559,145 | |||
Accrued fees to affiliates | 317,819 | |||
Accrued trustees’ and officers’ fees and benefits | 5,488 | |||
Accrued other operating expenses | 32,330 | |||
Trustee deferred compensation and retirement plans | 113,817 | |||
Total liabilities | 2,319,444 | |||
Net assets applicable to shares outstanding | $ | 542,349,622 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 438,205,398 | ||
Distributable earnings | 104,144,224 | |||
$ | 542,349,622 | |||
Net Assets: | ||||
Series I | $ | 337,460,810 | ||
Series II | $ | 204,888,812 | ||
Shares outstanding, no par value, |
| |||
Series I | 14,235,964 | |||
Series II | 8,704,333 | |||
Series I: | ||||
Net asset value per share | $ | 23.70 | ||
Series II: | ||||
Net asset value per share | $ | 23.54 |
Investment income: | ||||
Dividends (net of foreign withholding taxes of $354,671) | $ | 17,815,222 | ||
Dividends from affiliated money market funds | 933,461 | |||
Total investment income | 18,748,683 | |||
Expenses: | ||||
Advisory fees | 2,918,704 | |||
Administrative services fees | 926,261 | |||
Custodian fees | 36,532 | |||
Distribution fees — Series II | 575,583 | |||
Transfer agent fees | 24,978 | |||
Trustees’ and officers’ fees and benefits | 29,156 | |||
Reports to shareholders | 8,909 | |||
Professional services fees | 49,867 | |||
Other | 11,189 | |||
Total expenses | 4,581,179 | |||
Less: Fees waived | (63,163 | ) | ||
Net expenses | 4,518,016 | |||
Net investment income | 14,230,667 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 24,024,604 | |||
Foreign currencies | (6,019 | ) | ||
Forward foreign currency contracts | 1,465,953 | |||
25,484,538 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (86,060,784 | ) | ||
Foreign currencies | (2,437 | ) | ||
Forward foreign currency contracts | 246,661 | |||
(85,816,560 | ) | |||
Net realized and unrealized gain (loss) | (60,332,022 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (46,101,355 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income | $ | 14,230,667 | $ | 13,317,506 | ||||
Net realized gain | 25,484,538 | 23,965,217 | ||||||
Change in net unrealized appreciation (depreciation) | (85,816,560 | ) | 17,403,668 | |||||
Net increase (decrease) in net assets resulting from operations | (46,101,355 | ) | 54,686,391 | |||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (22,064,854 | ) | (22,172,434 | ) | ||||
Series II | (12,822,377 | ) | (11,625,406 | ) | ||||
Total distributions from distributable earnings | (34,887,231 | ) | (33,797,840 | ) | ||||
Share transactions–net: | ||||||||
Series I | (48,998,234 | ) | (16,772,830 | ) | ||||
Series II | (7,380,757 | ) | 20,130,628 | |||||
Net increase (decrease) in net assets resulting from share transactions | (56,378,991 | ) | 3,357,798 | |||||
Net increase (decrease) in net assets | (137,367,577 | ) | 24,246,349 | |||||
Net assets: | ||||||||
Beginning of year | 679,717,199 | 655,470,850 | ||||||
End of year | $ | 542,349,622 | $ | 679,717,199 |
(1) | For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income and distributions from net realized gains. The Securities and Exchange Commission eliminated the requirement to disclose the distribution components separately, except for tax return of capital. For the year ended December 31, 2017, distributions from net investment income were $7,270,269 and $3,521,736 and distributions from net realized gains were $14,902,165 and $8,103,670 for Series I and Series II, respectively. |
Notes to Financial Statements
December 31, 2018
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. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 andlong-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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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 theover-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 (“NAV”) 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 theend-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
Invesco V.I. Diversified Dividend Fund
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. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 investment 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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. Diversified Dividend 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 the 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 the dailymark-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 anagreed-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 accrues daily and pays monthly 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 year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.47%.
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the
Invesco V.I. Diversified Dividend Fund
fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2019, 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 (the “expense limits”). 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, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $63,163.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $147,721 for accounting and fund administrative services and was reimbursed $778,540 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution 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. Diversified Dividend Fund
The following is a summary of the tiered valuation input levels, as of December 31, 2018. 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 | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks & Other Equity Interests | $ | 449,579,950 | $ | 55,871,915 | $ | — | $ | 505,451,865 | ||||||||
Money Market Funds | 37,496,961 | — | — | 37,496,961 | ||||||||||||
Total Investments in Securities | 487,076,911 | 55,871,915 | — | 542,948,826 | ||||||||||||
Other Investments — Assets* | ||||||||||||||||
Forward Foreign Currency Contracts | — | 3,348 | — | 3,348 | ||||||||||||
Other Investments — Liabilities* | ||||||||||||||||
Forward Foreign Currency Contracts | — | (258,685 | ) | — | (258,685 | ) | ||||||||||
Total Other Investments | — | (255,337 | ) | — | (255,337 | ) | ||||||||||
Total Investments | $ | 487,076,911 | $ | 55,616,578 | $ | — | $ | 542,693,489 |
* | Unrealized appreciation (depreciation). |
NOTE 4—Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (“ISDA Master Agreement”) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
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 December 31, 2018:
Value | ||||
Derivative Assets | Currency Risk | |||
Unrealized appreciation on forward foreign currency contracts outstanding | $ | 3,348 | ||
Derivatives not subject to master netting agreements | — | |||
Total Derivative Assets subject to master netting agreements | $ | 3,348 | ||
Value | ||||
Derivative Liabilities | Currency Risk | |||
Unrealized depreciation on forward foreign currency contracts outstanding | $ | (258,685 | ) | |
Derivatives not subject to master netting agreements | — | |||
Total Derivative Liabilities subject to master netting agreements | $ | (258,685 | ) |
Offsetting Assets and Liabilities
The table below reflects the Fund’s exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of December 31, 2018.
Financial Derivative Assets | Financial Derivative Liabilities | Collateral (Received)/Pledged | ||||||||||||||||||||||
Counterparty | Forward Foreign Currency Contracts | Forward Foreign Currency Contracts | Net Value of Derivatives | Non-Cash | Cash | Net Amount | ||||||||||||||||||
Barclays Bank PLC | $ | 3,348 | $ | — | $ | 3,348 | $ | — | $ | — | $ | 3,348 | ||||||||||||
Citibank N.A. | — | (84,363 | ) | (84,363 | ) | — | — | (84,363 | ) | |||||||||||||||
Goldman Sachs International | — | (92,849 | ) | (92,849 | ) | — | — | (92,849 | ) | |||||||||||||||
JP Morgan Chase Bank N.A. | — | (81,473 | ) | (81,473 | ) | — | — | (81,473 | ) | |||||||||||||||
Total | $ | 3,348 | $ | (258,685 | ) | $ | (255,337 | ) | $ | — | $ | — | $ | (255,337 | ) |
Invesco V.I. Diversified Dividend Fund
Effect of Derivative Investments for the year ended December 31, 2018
The table below summarizes the gains on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain on Statement of Operations | ||||
Currency Risk | ||||
Realized Gain: | ||||
Forward foreign currency contracts | $ | 1,465,953 | ||
Change in Net Unrealized Appreciation: | ||||
Forward foreign currency contracts | 246,661 | |||
Total | $ | 1,712,614 |
The table below summarizes the average notional value of forward foreign currency contracts outstanding during the period.
Forward Foreign Currency Contracts | ||||
Average notional value | $ | 26,158,008 |
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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 13,981,690 | $ | 10,792,005 | ||||
Long-term capital gain | 20,905,541 | 23,005,835 | ||||||
Total distributions | $ | 34,887,231 | $ | 33,797,840 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 14,390,448 | ||
Undistributedlong-term gain | 24,130,336 | |||
Net unrealized appreciation — investments | 65,731,446 | |||
Net unrealized appreciation (depreciation) — foreign currencies | (37 | ) | ||
Temporary book/tax differences | (107,969 | ) | ||
Shares of beneficial interest | 438,205,398 | |||
Total net assets | $ | 542,349,622 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to wash sales and forward foreign currency contracts.
Invesco V.I. Diversified Dividend Fund
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 does not have a capital loss carryforward as of December 31, 2018.
NOTE 8—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $58,946,746 and $104,471,757, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 96,692,926 | ||
Aggregate unrealized (depreciation) of investments | (30,961,480 | ) | ||
Net unrealized appreciation of investments | $ | 65,731,446 |
Cost of investments for tax purposes is $476,962,043.
NOTE 9—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of foreign currency transactions, on December 31, 2018, undistributed net investment income was decreased by $5,104 and undistributed net realized gain was increased by $5,104. This reclassification had no effect on the net assets or the distributable earnings of the Fund.
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 1,113,850 | $ | 29,225,680 | 1,525,555 | $ | 41,126,302 | ||||||||||
Series II | 628,883 | 16,528,837 | 1,317,421 | 35,352,684 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 836,424 | 22,064,855 | 845,631 | 22,172,434 | ||||||||||||
Series II | 489,217 | 12,822,377 | 446,102 | 11,625,406 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (3,794,255 | ) | (100,288,769 | ) | (2,963,737 | ) | (80,071,566 | ) | ||||||||
Series II | (1,398,007 | ) | (36,731,971 | ) | (998,279 | ) | (26,847,462 | ) | ||||||||
Net increase (decrease) in share activity | (2,123,888 | ) | $ | (56,378,991 | ) | 172,693 | $ | 3,357,798 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 68% 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. Diversified Dividend 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 27.18 | $ | 0.63 | $ | (2.53 | ) | $ | (1.90 | ) | $ | (0.65 | ) | $ | (0.93 | ) | $ | (1.58 | ) | $ | 23.70 | (7.57 | )% | $ | 337,461 | 0.64 | %(d) | 0.65 | %(d) | 2.38 | %(d) | 10 | % | |||||||||||||||||||||||
Year ended 12/31/17 | 26.38 | 0.56 | 1.65 | 2.21 | (0.46 | ) | (0.95 | ) | (1.41 | ) | 27.18 | 8.58 | 437,104 | 0.64 | 0.65 | 2.06 | 16 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 23.27 | 0.50 | 2.93 | 3.43 | (0.32 | ) | — | (0.32 | ) | 26.38 | 14.81 | 439,857 | 0.66 | 0.68 | 2.02 | 14 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 23.21 | 0.43 | 0.04 | 0.47 | (0.41 | ) | — | (0.41 | ) | 23.27 | 2.07 | 333,573 | 0.70 | 0.71 | 1.84 | 15 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 20.93 | 0.40 | 2.26 | 2.66 | (0.38 | ) | — | (0.38 | ) | 23.21 | 12.83 | 330,370 | 0.72 | 0.73 | 1.80 | 6 | ||||||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 27.00 | 0.56 | (2.51 | ) | (1.95 | ) | (0.58 | ) | (0.93 | ) | (1.51 | ) | 23.54 | (7.78 | ) | 204,889 | 0.89 | (d) | 0.90 | (d) | 2.13 | (d) | 10 | |||||||||||||||||||||||||||||||||
Year ended 12/31/17 | 26.23 | 0.49 | 1.64 | 2.13 | (0.41 | ) | (0.95 | ) | (1.36 | ) | 27.00 | 8.31 | 242,614 | 0.89 | 0.90 | 1.81 | 16 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 23.16 | 0.43 | 2.92 | 3.35 | (0.28 | ) | — | (0.28 | ) | 26.23 | 14.54 | 215,614 | 0.91 | 0.93 | 1.77 | 14 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 23.11 | 0.37 | 0.04 | 0.41 | (0.36 | ) | — | (0.36 | ) | 23.16 | 1.82 | 132,477 | 0.95 | 0.96 | 1.59 | 15 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 20.85 | 0.34 | 2.25 | 2.59 | (0.33 | ) | — | (0.33 | ) | 23.11 | 12.54 | 105,813 | 0.97 | 0.98 | 1.55 | 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 based on average daily net assets (000’s omitted) of $390,292 and $230,233 for Series I and Series II shares, respectively. |
Invesco V.I. Diversified Dividend Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Diversified Dividend Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Diversified Dividend Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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 | ACTUAL | HYPOTHETICAL expenses) | Annualized Ratio | ||||||||||||||||||||
Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 944.40 | $ | 3.09 | $ | 1,022.03 | $ | 3.21 | 0.63 | % | ||||||||||||
Series II | 1,000.00 | 943.50 | 4.31 | 1,020.77 | 4.48 | 0.88 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Diversified Dividend Fund
Tax Information
Form1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Long-Term Capital Gain Distributions | $ | 20,905,541 | ||
Corporate Dividends Received Deduction* | 99.70 | % | ||
U.S. Treasury Obligations* | 0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. Diversified Dividend Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Diversified Dividend Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. Diversified Dividend Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. Diversified Dividend Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Diversified Dividend Fund
| ||||
Annual Report to Shareholders
| December 31, 2018 | |||
| ||||
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 FormN-Q (or any successor Form). The Fund’s FormN-Q (or any successor Form) filings are available on the SEC website, sec.gov. The SEC file numbers for the Fund are811-07452 and033-57340. The Fund’s most recent portfolio holdings, as filed on FormN-Q (or any successor Form), 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 recent12-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.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Invesco Distributors, Inc. MS-VIEWSP-AR-1 02152019 1149 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. Equally-Weighted S&P 500 Fund (the Fund) underperformed the S&P 500 Index.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -7.87 | % | |||
Series II Shares | -8.11 | ||||
S&P 500 Index▼(Broad Market Index) | -4.38 | ||||
S&P 500 Equal Weight Index▼(Style-Specific Index) | -7.64 | ||||
Lipper VUFMulti-Cap Core Funds Index∎(Peer Group Index) | -7.63 | ||||
Source(s):▼FactSet Research Systems Inc.;∎Lipper Inc. |
Market conditions and your Fund
Calendar year 2018 proved to be an increasingly volatile time for US equities. In January 2018, US equity markets steadily moved higher, as investors remained enthused about the passage of the Tax Cuts and Jobs Act signed into law in late December 2017. However, in February 2018, volatility returned to the US stock and bond markets. Worries about how rising interest rates might affect economic growth, concerns about a potential trade war and heightened geopolitical tensions caused the US stock markets to pull back and volatility to increase.
US equity markets generally recovered in the second quarter of 2018 as strong US retail sales and low unemployment buoyed markets. Throughout the summer, US equities moved higher as corporate profits surged. Several US equity indexes reached new highs despite potential headwinds including trade tensions, tariff announcements and contagion concerns over a Turkish currency crisis. After a relatively quiet
summer, market volatility noticeably rose in October, as US equity markets suffered a sharpsell-off throughyear-end, amid rising interest rates and concerns that higher inflation could mean a more restrictive monetary policy. In this environment, there was a flight to safety, as investors fled to defensive areas of the equities markets, like health care and utilities, and US Treasuries.
Given signs of a strong economy, the US Federal Reserve raised interest rates four times during the year: in March, June, September and December 2018. Following December’s Federal Reserve meeting, Chairman Jerome Powell raised interest rates for the fourth time in 2018 by 25 basis points to a targeted range of 2.25% to 2.50%, and lowered guidance from three to two rate hikes in 2019, signaling a slightly more dovish stance than expected.1 In contrast, the European Central Bank and central banks in several other countries maintained extraordinarily accommodative monetary policies.
Invesco V.I. Equally-Weighted S&P 500 Fund seeks total return through growth of
capital and current income. The Fund invests in a diversified portfolio of common stocks represented in the S&P 500 Index. The Fund generally invests in each common stock included in the S&P 500 Index in approximately equal proportions, which differs from the S&P 500 Index because stocks in the S&P 500 Index are represented in proportion to their market value or market capitalization. Due to the equally-weighted nature of the Fund and the capitalization-weighted nature of the S&P 500 Index, the Fund will lag when mega- andlarge-cap stocks outperformmid-cap stocks.
During the year, the sectors that contributed the most to the Fund’s absolute performance were information technology (IT) and real estate. Relative to the S&P 500 Index, underweight allocation to the communication services sector and overweight allocations to the real estate and utilities sectors contributed to the Fund’s results.
The energy, financials and industrials sectors were the top detractors from the Fund’s absolute performance for the year. Overweight allocation to the consumer discretionary sector and underweight allocation to the health care sector detracted from the Fund’s results. In general, the Fund’s underweight exposure tomega-cap stocks and overweight exposure tomid-cap stocks were key detractors.
The most significant contributor to the Fund’s absolute and relative results for the year wasAdvanced Micro Devices. This holding generated a nearly 70% return during the year.
During the year, the largest detractors from the Fund’s performance versus the S&P 500 Index includedCoty, Nektar Therapeuticsand Mohawk Industries.
Portfolio Composition |
| ||||
By sector % of total net assets |
| ||||
Financials | 13.7% | ||||
Industrials | 13.6 | ||||
Information Technology | 13.2 | ||||
Consumer Discretionary | 12.9 | ||||
Health Care | 12.0 | ||||
Consumer Staples | 6.3 | ||||
Real Estate | 6.1 | ||||
Energy | 5.7 | ||||
Utilities | 5.4 | ||||
Materials | 5.0 | ||||
Communication Services | 4.2 | ||||
Money Market Funds Plus Other Assets Less Liabilities | 1.9 |
Top 10 Equity Holdings* | |||
% of total net assets | |||
1. Kohl’s Corp. | 0.2% | ||
2. Foot Locker, Inc. | 0.2 | ||
3. Hartford Financial Services Group, Inc. (The) | 0.2 | ||
4. AbbVie Inc. | 0.2 | ||
5. General Electric Co. | 0.2 | ||
6. MetLife, Inc. | 0.2 | ||
7. Dollar Tree, Inc. | 0.2 | ||
8. American International Group, Inc. | 0.2 | ||
9. Ross Stores, Inc. | 0.2 | ||
10. FleetCor Technologies Inc. | 0.2 |
Total Net Assets | $259.3 million | |
Total Number of Holdings* | 505 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
Data presented here are as of December 31, 2018.
Invesco V.I. Equally-Weighted S&P 500 Fund
Please note, the Fund’s strategy is principally implemented through equity investments, but the Fund may also use S&P 500 futures contracts, which are derivative instruments used to gain exposure to the equity market. During the year, the Fund invested in S&P 500 futures contracts, which generated a negative return and detracted from absolute performance. Derivatives can be a cost-effective way to gain exposure to asset classes. However, derivatives may amplify traditional investment risks through the creation of leverage and may be less liquid than traditional securities.
We welcome new investors who joined the Fund during the year and thank you for your investment in Invesco V.I. Equally-Weighted S&P 500 Fund.
1 | Source: US Federal Reserve |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Anthony Munchak Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Equally-Weighted | ||||
S&P 500 Fund. He joined Invesco in 2000. Mr. Munchak earned a BS and an MS in finance from Boston College and an MBA from Bentley College. | ||||
Glen Murphy Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Equally-Weighted | ||||
S&P 500 Fund. He joined Invesco in 1995. Mr. Murphy earned a BA from the University of Massachusetts at Amherst and an MS in finance from Boston College. | ||||
Francis Orlando Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Equally-Weighted | ||||
S&P 500 Fund. He joined Invesco in 1987. Mr. Orlando earned a BA in business administration from Merrimack College and an MBA from Boston University. | ||||
Daniel Tsai Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Equally-Weighted | ||||
S&P 500 Fund. He joined Invesco in 2000. Mr. Tsai earned a BS in mechanical engineering from National Taiwan University, an MS in mechanical engineering from the University of Michigan and an MS in computer science from Wayne State University. | ||||
Anne Unflat Portfolio Manager, is manager of Invesco V.I. Equally-Weighted S&P 500 Fund. She joined Invesco | ||||
in 1988. Ms. Unflat earned a BA in economics from Queens College and an MBA in finance from St. John’s University. |
Invesco V.I. Equally-Weighted S&P 500 Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (11/9/94) | 10.09 | % | |||
10 Years | 14.44 | ||||
5 Years | 6.70 | ||||
1 Year | -7.87 | ||||
Series II Shares | |||||
Inception (7/24/00) | 7.93 | % | |||
10 Years | 14.16 | ||||
5 Years | 6.44 | ||||
1 Year | -8.11 |
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, prior to June 1, 2010, 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 recentmonth-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Performance figures in the table and chart do not reflect deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 0.32% and 0.57%, 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 recentmonth-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recentmonth-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
Invesco V.I. Equally-Weighted S&P 500 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.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Depositary receipts risk.Investing in depositary receipts involves the same risks as direct investments in foreign securities. In addition, the underlying issuers of certain depositary receipts are under no obligation to distribute shareholder communications or pass through any voting rights with respect to the deposited securities to the holders of such receipts. The Fund may therefore receive less timely information or have less control than if it invested directly in the foreign issuer.
Derivatives risk.The value of a derivative instrument depends largely on (and is derived from) the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include other, possibly greater, risks, including counterparty, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by holding a position in the derivative. As a result, an adverse change in the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative or the anticipated value of the underlying asset, which may make the Fund’s returns more volatile and increase the risk of loss. Derivative instruments may also be less liquid than more traditional investments and the Fund may be unable to sell or close out its derivative positions at a desirable time or price. This risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. Derivatives strategies may not always be successful. For example, derivatives used for hedging or to gain or limit exposure to a particular market segment may not provide the expected benefits, particularly during adverse market conditions.
Emerging markets securities risk. Emerging markets (also referred to as
developing markets) are generally subject to greater market volatility, political, social and economic instability, uncertain trading markets and more governmental limitations on foreign investment than more developed markets. In addition, companies operating in emerging markets may be subject to lower trading volume and greater price fluctuations than companies in more developed markets. Securities law and the enforcement of systems of taxation in many emerging market countries may change quickly and unpredictably. In addition, investments in emerging markets securities may also be subject to additional transaction costs, delays in settlement procedures, and lack of timely information.
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
Indexing risk.The Fund is operated as a passively managed index fund and, therefore, the adverse performance of a particular security necessarily will not result in the elimination of the security from the Fund’s portfolio. Ordinarily, the Adviser will not sell the Fund’s portfolio securities except to reflect additions or deletions of the securities that comprise the Index, or as may be necessary to raise cash to pay Fund shareholders who sell Fund shares. As such, the Fund will be negatively affected by declines in the securities represented by the Index. Also, there is no guarantee that the Adviser will be able to correlate the Fund’s performance with that of the Index.
Market risk.The market values of the
Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
About indexes used in this report
TheS&P 500® Index is an unmanaged index considered representative of the US stock market.
TheS&P 500® Equal Weight Index is the equally weighted version of the S&P 500 Index.
TheLipper VUFMulti-Cap Core Funds Index is an unmanaged index considered representative of multicap 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.
Other information
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Industry 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.
Invesco V.I. Equally-Weighted S&P 500 Fund
Schedule of Investments(a)
December 31, 2018
Shares | Value | |||||||
Common Stocks & Other Equity Interests–98.12% |
| |||||||
Advertising–0.39% |
| |||||||
Interpublic Group of Cos., Inc. (The) | 23,899 | $ | 493,036 | |||||
Omnicom Group Inc. | 7,004 | 512,973 | ||||||
1,006,009 | ||||||||
Aerospace & Defense–2.27% |
| |||||||
Arconic Inc. | 26,889 | 453,349 | ||||||
Boeing Co. (The) | 1,658 | 534,705 | ||||||
General Dynamics Corp. | 3,140 | 493,639 | ||||||
Harris Corp. | 3,573 | 481,104 | ||||||
Huntington Ingalls Industries, Inc. | 2,676 | 509,270 | ||||||
L3 Technologies, Inc. | 2,761 | 479,475 | ||||||
Lockheed Martin Corp. | 1,844 | 482,833 | ||||||
Northrop Grumman Corp. | 2,020 | 494,698 | ||||||
Raytheon Co. | 3,124 | 479,065 | ||||||
Textron Inc. | 10,729 | 493,427 | ||||||
TransDigm Group, Inc.(b) | 1,530 | 520,292 | ||||||
United Technologies Corp. | 4,467 | 475,646 | ||||||
5,897,503 | ||||||||
Agricultural & Farm Machinery–0.20% |
| |||||||
Deere & Co. | 3,561 | 531,194 | ||||||
Agricultural Products–0.19% |
| |||||||
Archer-Daniels-Midland Co. | 11,930 | 488,772 | ||||||
Air Freight & Logistics–0.78% |
| |||||||
C.H. Robinson Worldwide, Inc. | 6,270 | 527,244 | ||||||
Expeditors International of Washington, Inc. | 7,530 | 512,718 | ||||||
FedEx Corp. | 2,882 | 464,953 | ||||||
United Parcel Service, Inc.–Class B | 5,380 | 524,711 | ||||||
2,029,626 | ||||||||
Airlines–0.98% |
| |||||||
Alaska Air Group, Inc. | 8,519 | 518,381 | ||||||
American Airlines Group Inc. | 16,377 | 525,866 | ||||||
Delta Air Lines, Inc. | 9,919 | 494,958 | ||||||
Southwest Airlines Co. | 10,596 | 492,502 | ||||||
United Continental Holdings Inc.(b) | 6,049 | 506,483 | ||||||
2,538,190 | ||||||||
Alternative Carriers–0.18% |
| |||||||
CenturyLink Inc. | 31,223 | 473,028 | ||||||
Apparel Retail–1.01% |
| |||||||
Foot Locker, Inc. | 10,775 | 573,230 | ||||||
Gap, Inc. (The) | 19,947 | 513,835 | ||||||
L Brands, Inc. | 17,216 | 441,935 | ||||||
Ross Stores, Inc. | 6,700 | 557,440 | ||||||
TJX Cos., Inc. (The) | 11,737 | 525,113 | ||||||
2,611,553 |
Shares | Value | |||||||
Apparel, Accessories & Luxury Goods–1.39% |
| |||||||
Hanesbrands, Inc. | 39,115 | $ | 490,111 | |||||
Michael Kors Holdings Ltd.(b) | 13,990 | 530,501 | ||||||
PVH Corp. | 5,694 | 529,257 | ||||||
Ralph Lauren Corp. | 5,229 | 540,993 | ||||||
Tapestry, Inc. | 15,340 | 517,725 | ||||||
Under Armour, Inc.–Class A(b)(c) | 14,281 | 252,345 | ||||||
Under Armour, Inc.–Class C(b) | 14,641 | 236,745 | ||||||
VF Corp. | 7,062 | 503,803 | ||||||
3,601,480 | ||||||||
Application Software–1.60% |
| |||||||
Adobe Inc.(b) | 2,307 | 521,936 | ||||||
ANSYS, Inc.(b) | 3,544 | 506,579 | ||||||
Autodesk, Inc.(b) | 4,035 | 518,941 | ||||||
Cadence Design Systems, Inc.(b) | 12,280 | 533,935 | ||||||
Citrix Systems, Inc. | 4,863 | 498,263 | ||||||
Intuit Inc. | 2,641 | 519,881 | ||||||
salesforce.com, inc.(b) | 3,890 | 532,813 | ||||||
Synopsys, Inc.(b) | 6,055 | 510,073 | ||||||
4,142,421 | ||||||||
Asset Management & Custody Banks–1.81% |
| |||||||
Affiliated Managers Group, Inc. | 5,557 | 541,474 | ||||||
Ameriprise Financial, Inc. | 4,817 | 502,750 | ||||||
Bank of New York Mellon Corp. (The) | 10,905 | 513,298 | ||||||
BlackRock, Inc. | 1,388 | 545,234 | ||||||
Franklin Resources, Inc. | 16,920 | 501,847 | ||||||
Invesco Ltd.(d) | 31,315 | 524,213 | ||||||
Northern Trust Corp. | 6,145 | 513,661 | ||||||
State Street Corp. | 8,354 | 526,887 | ||||||
T. Rowe Price Group Inc. | 5,771 | 532,779 | ||||||
4,702,143 | ||||||||
Auto Parts & Equipment–0.40% |
| |||||||
Aptiv PLC | 8,047 | 495,454 | ||||||
BorgWarner, Inc. | 15,327 | 532,460 | ||||||
1,027,914 | ||||||||
Automobile Manufacturers–0.38% |
| |||||||
Ford Motor Co. | 62,301 | 476,603 | ||||||
General Motors Co. | 15,122 | 505,831 | ||||||
982,434 | ||||||||
Automotive Retail–0.81% |
| |||||||
Advance Auto Parts, Inc. | 3,240 | 510,170 | ||||||
AutoZone, Inc.(b) | 609 | 510,549 | ||||||
CarMax, Inc.(b) | 8,671 | 543,932 | ||||||
O’Reilly Automotive, Inc.(b) | 1,524 | 524,759 | ||||||
2,089,410 |
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 | |||||||
Biotechnology–1.79% |
| |||||||
AbbVie Inc. | 6,199 | $ | 571,486 | |||||
Alexion Pharmaceuticals, Inc.(b) | 4,850 | 472,196 | ||||||
Amgen Inc. | 2,763 | 537,873 | ||||||
Biogen Inc.(b) | 1,687 | 507,652 | ||||||
Celgene Corp.(b) | 7,782 | 498,748 | ||||||
Gilead Sciences, Inc. | 8,094 | 506,280 | ||||||
Incyte Corp.(b) | 8,011 | 509,420 | ||||||
Regeneron Pharmaceuticals, Inc.(b) | 1,392 | 519,912 | ||||||
Vertex Pharmaceuticals Inc.(b) | 3,120 | 517,015 | ||||||
4,640,582 | ||||||||
Brewers–0.18% |
| |||||||
Molson Coors Brewing Co.–Class B | 8,560 | 480,730 | ||||||
Broadcasting–0.37% |
| |||||||
CBS Corp.–Class B | 11,046 | 482,931 | ||||||
Discovery, Inc.–Class A(b)(c) | 6,040 | 149,430 | ||||||
Discovery, Inc.–Class C(b) | 13,905 | 320,927 | ||||||
953,288 | ||||||||
Building Products–0.98% |
| |||||||
A.O. Smith Corp. | 12,817 | 547,286 | ||||||
Allegion PLC | 6,146 | 489,898 | ||||||
Fortune Brands Home & Security, Inc. | 13,131 | 498,847 | ||||||
Johnson Controls International PLC | 16,602 | 492,249 | ||||||
Masco Corp. | 17,968 | 525,384 | ||||||
2,553,664 | ||||||||
Cable & Satellite–0.55% |
| |||||||
Charter Communications, Inc.–Class A(b) | 1,715 | 488,724 | ||||||
Comcast Corp.–Class A | 14,606 | 497,334 | ||||||
DISH Network Corp.–Class A(b) | 17,317 | 432,405 | ||||||
1,418,463 | ||||||||
Casinos & Gaming–0.38% |
| |||||||
MGM Resorts International | 20,060 | 486,656 | ||||||
Wynn Resorts Ltd. | 4,974 | 491,978 | ||||||
978,634 | ||||||||
Commodity Chemicals–0.21% |
| |||||||
LyondellBasell Industries N.V.–Class A | 6,446 | 536,049 | ||||||
Communications Equipment–0.97% |
| |||||||
Arista Networks Inc.(b) | 2,407 | 507,155 | ||||||
Cisco Systems, Inc. | 11,584 | 501,935 | ||||||
F5 Networks, Inc.(b) | 3,207 | 519,630 | ||||||
Juniper Networks, Inc. | 19,114 | 514,358 | ||||||
Motorola Solutions, Inc. | 4,190 | 482,017 | ||||||
2,525,095 | ||||||||
Computer & Electronics Retail–0.20% |
| |||||||
Best Buy Co., Inc. | 9,586 | 507,675 | ||||||
Construction & Engineering–0.61% |
| |||||||
Fluor Corp. | 16,133 | 519,483 | ||||||
Jacobs Engineering Group Inc. | 9,041 | 528,537 |
Shares | Value | |||||||
Construction & Engineering–(continued) |
| |||||||
Quanta Services, Inc. | 17,535 | $ | 527,803 | |||||
1,575,823 | ||||||||
Construction Machinery & Heavy Trucks–0.62% |
| |||||||
Caterpillar Inc. | 4,186 | 531,915 | ||||||
Cummins Inc. | 3,965 | 529,882 | ||||||
PACCAR Inc. | 9,383 | 536,145 | ||||||
1,597,942 | ||||||||
Construction Materials–0.40% |
| |||||||
Martin Marietta Materials, Inc. | 3,026 | 520,079 | ||||||
Vulcan Materials Co. | 5,327 | 526,307 | ||||||
1,046,386 | ||||||||
Consumer Electronics–0.20% |
| |||||||
Garmin Ltd. | 8,147 | 515,868 | ||||||
Consumer Finance–0.78% |
| |||||||
American Express Co. | 5,021 | 478,602 | ||||||
Capital One Financial Corp. | 6,741 | 509,552 | ||||||
Discover Financial Services | 8,585 | 506,343 | ||||||
Synchrony Financial | 22,024 | 516,683 | ||||||
2,011,180 | ||||||||
Copper–0.20% |
| |||||||
Freeport-McMoRan Inc. | 50,217 | 517,737 | ||||||
Data Processing & Outsourced Services–2.79% |
| |||||||
Alliance Data Systems Corp. | 3,064 | 459,845 | ||||||
Automatic Data Processing, Inc. | 3,936 | 516,088 | ||||||
Broadridge Financial Solutions, Inc. | 5,493 | 528,701 | ||||||
Fidelity National Information Services, Inc. | 5,075 | 520,441 | ||||||
Fiserv, Inc.(b) | 6,958 | 511,344 | ||||||
FleetCor Technologies Inc.(b) | 2,999 | 556,974 | ||||||
Global Payments Inc. | 5,224 | 538,751 | ||||||
Jack Henry & Associates, Inc. | 4,039 | 511,014 | ||||||
Mastercard Inc.–Class A | 2,716 | 512,374 | ||||||
Paychex, Inc. | 8,026 | 522,894 | ||||||
PayPal Holdings, Inc.(b) | 6,177 | 519,424 | ||||||
Total System Services, Inc. | 6,271 | 509,770 | ||||||
Visa Inc.–Class A | 3,928 | 518,260 | ||||||
Western Union Co. (The) | 29,197 | 498,101 | ||||||
7,223,981 | ||||||||
Department Stores–0.62% |
| |||||||
Kohl’s Corp. | 8,666 | 574,902 | ||||||
Macy’s, Inc. | 17,340 | 516,385 | ||||||
Nordstrom, Inc. | 10,919 | 508,935 | ||||||
1,600,222 | ||||||||
Distillers & Vintners–0.39% |
| |||||||
Brown-Forman Corp.–Class B | 11,278 | 536,607 | ||||||
Constellation Brands, Inc.–Class A | 2,927 | 470,720 | ||||||
1,007,327 |
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 | |||||||
Distributors–0.40% |
| |||||||
Genuine Parts Co. | 5,366 | $ | 515,243 | |||||
LKQ Corp.(b) | 21,576 | 511,999 | ||||||
1,027,242 | ||||||||
Diversified Banks–0.99% |
| |||||||
Bank of America Corp. | 21,682 | 534,244 | ||||||
Citigroup Inc. | 9,647 | 502,223 | ||||||
JPMorgan Chase & Co. | 5,292 | 516,605 | ||||||
U.S. Bancorp | 10,888 | 497,582 | ||||||
Wells Fargo & Co. | 11,404 | 525,496 | ||||||
2,576,150 | ||||||||
Diversified Chemicals–0.42% |
| |||||||
DowDuPont Inc. | 10,056 | 537,795 | ||||||
Eastman Chemical Co. | 7,423 | 542,695 | ||||||
1,080,490 | ||||||||
Diversified Support Services–0.41% |
| |||||||
Cintas Corp. | 3,126 | 525,137 | ||||||
Copart, Inc.(b) | 11,048 | 527,873 | ||||||
1,053,010 | ||||||||
Drug Retail–0.18% |
| |||||||
Walgreens Boots Alliance, Inc. | 6,740 | 460,544 | ||||||
Electric Utilities–2.89% |
| |||||||
Alliant Energy Corp. | 11,711 | 494,790 | ||||||
American Electric Power Co., Inc. | 6,633 | 495,750 | ||||||
Duke Energy Corp. | 5,848 | 504,682 | ||||||
Edison International | 8,899 | 505,196 | ||||||
Entergy Corp. | 5,912 | 508,846 | ||||||
Evergy, Inc. | 8,767 | 497,703 | ||||||
Eversource Energy | 7,607 | 494,759 | ||||||
Exelon Corp. | 11,278 | 508,638 | ||||||
FirstEnergy Corp. | 13,567 | 509,441 | ||||||
NextEra Energy, Inc. | 2,928 | 508,945 | ||||||
PG&E Corp.(b) | 20,407 | 484,666 | ||||||
Pinnacle West Capital Corp. | 5,804 | 494,501 | ||||||
PPL Corp. | 17,351 | 491,554 | ||||||
Southern Co. (The) | 11,214 | 492,519 | ||||||
Xcel Energy, Inc. | 9,988 | 492,109 | ||||||
7,484,099 | ||||||||
Electrical Components & Equipment–0.79% |
| |||||||
AMETEK, Inc. | 7,540 | 510,458 | ||||||
Eaton Corp. PLC | 7,520 | 516,323 | ||||||
Emerson Electric Co. | 8,781 | 524,665 | ||||||
Rockwell Automation, Inc. | 3,385 | 509,375 | ||||||
2,060,821 | ||||||||
Electronic Components–0.40% |
| |||||||
Amphenol Corp.–Class A | 6,376 | 516,584 | ||||||
Corning Inc. | 16,925 | 511,304 | ||||||
1,027,888 |
Shares | Value | |||||||
Electronic Equipment & Instruments–0.41% |
| |||||||
FLIR Systems, Inc. | 12,309 | $ | 535,934 | |||||
Keysight Technologies, Inc.(b) | 8,631 | 535,812 | ||||||
1,071,746 | ||||||||
Electronic Manufacturing Services–0.41% |
| |||||||
IPG Photonics Corp.(b) | 4,497 | 509,465 | ||||||
TE Connectivity Ltd. | 7,270 | 549,830 | ||||||
1,059,295 | ||||||||
Environmental & Facilities Services–0.60% |
| |||||||
Republic Services, Inc. | 7,132 | 514,146 | ||||||
Rollins, Inc. | 14,510 | 523,811 | ||||||
Waste Management, Inc. | 5,823 | 518,189 | ||||||
1,556,146 | ||||||||
Fertilizers & Agricultural Chemicals–0.60% |
| |||||||
CF Industries Holdings, Inc. | 12,619 | 549,053 | ||||||
FMC Corp. | 6,873 | 508,327 | ||||||
Mosaic Co. (The) | 17,160 | 501,243 | ||||||
1,558,623 | ||||||||
Financial Exchanges & Data–1.40% |
| |||||||
Cboe Global Markets, Inc. | 5,261 | 514,684 | ||||||
CME Group Inc.–Class A | 2,828 | 532,003 | ||||||
Intercontinental Exchange, Inc. | 6,884 | 518,572 | ||||||
Moody’s Corp. | 3,646 | 510,586 | ||||||
MSCI Inc. | 3,527 | 519,985 | ||||||
Nasdaq, Inc. | 6,133 | 500,269 | ||||||
S&P Global Inc. | 3,185 | 541,259 | ||||||
3,637,358 | ||||||||
Food Distributors–0.20% |
| |||||||
Sysco Corp. | 8,117 | 508,611 | ||||||
Food Retail–0.19% |
| |||||||
Kroger Co. (The) | 17,962 | 493,955 | ||||||
Footwear–0.21% |
| |||||||
NIKE, Inc.–Class B | 7,317 | 542,482 | ||||||
General Merchandise Stores–0.63% |
| |||||||
Dollar General Corp. | 5,056 | 546,452 | ||||||
Dollar Tree, Inc.(b) | 6,181 | 558,268 | ||||||
Target Corp. | 7,901 | 522,177 | ||||||
1,626,897 | ||||||||
Gold–0.21% |
| |||||||
Newmont Mining Corp. | 15,934 | 552,113 | ||||||
Health Care Distributors–0.77% |
| |||||||
AmerisourceBergen Corp. | 6,721 | 500,043 | ||||||
Cardinal Health, Inc. | 10,603 | 472,894 | ||||||
Henry Schein, Inc.(b) | 6,591 | 517,525 | ||||||
McKesson Corp. | 4,543 | 501,865 | ||||||
1,992,327 |
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 Equipment–3.02% |
| |||||||
Abbott Laboratories | 7,500 | $ | 542,475 | |||||
ABIOMED, Inc.(b) | 1,678 | 545,417 | ||||||
Baxter International Inc. | 8,078 | 531,694 | ||||||
Becton, Dickinson and Co. | 2,290 | 515,983 | ||||||
Boston Scientific Corp.(b) | 14,826 | 523,951 | ||||||
Danaher Corp. | 5,286 | 545,092 | ||||||
Edwards Lifesciences Corp.(b) | 3,314 | 507,605 | ||||||
Hologic, Inc.(b) | 12,655 | 520,121 | ||||||
IDEXX Laboratories, Inc.(b) | 2,789 | 518,810 | ||||||
Intuitive Surgical, Inc.(b) | 1,079 | 516,755 | ||||||
Medtronic PLC | 5,663 | 515,106 | ||||||
ResMed Inc. | 4,700 | 535,189 | ||||||
Stryker Corp. | 3,186 | 499,406 | ||||||
Varian Medical Systems, Inc.(b) | 4,455 | 504,796 | ||||||
Zimmer Biomet Holdings, Inc. | 4,870 | 505,116 | ||||||
7,827,516 | ||||||||
Health Care Facilities–0.40% |
| |||||||
HCA Healthcare, Inc. | 4,187 | 521,072 | ||||||
Universal Health Services, Inc.–Class B | 4,380 | 510,533 | ||||||
1,031,605 | ||||||||
Health Care REITs–0.59% |
| |||||||
HCP, Inc. | 18,334 | 512,069 | ||||||
Ventas, Inc. | 8,483 | 497,019 | ||||||
Welltower Inc. | 7,337 | 509,261 | ||||||
1,518,349 | ||||||||
Health Care Services–0.94% |
| |||||||
Cigna Corp. | 2,584 | 490,818 | ||||||
CVS Health Corp. | 7,384 | 483,800 | ||||||
DaVita Inc.(b) | 9,147 | 470,705 | ||||||
Laboratory Corp. of America Holdings(b) | 3,862 | 488,002 | ||||||
Quest Diagnostics Inc. | 6,209 | 517,023 | ||||||
2,450,348 | ||||||||
Health Care Supplies–0.61% |
| |||||||
Align Technology, Inc.(b) | 2,461 | 515,407 | ||||||
Cooper Cos., Inc. (The) | 2,123 | 540,304 | ||||||
DENTSPLY SIRONA Inc. | 14,357 | 534,224 | ||||||
1,589,935 | ||||||||
Health Care Technology–0.19% |
| |||||||
Cerner Corp.(b) | 9,493 | 497,813 | ||||||
Home Furnishings–0.41% |
| |||||||
Leggett & Platt, Inc. | 14,679 | 526,095 | ||||||
Mohawk Industries, Inc.(b) | 4,536 | 530,531 | ||||||
1,056,626 | ||||||||
Home Improvement Retail–0.41% |
| |||||||
Home Depot, Inc. (The) | 3,080 | 529,205 | ||||||
Lowe’s Cos., Inc. | 5,685 | 525,067 | ||||||
1,054,272 |
Shares | Value | |||||||
Homebuilding–0.61% |
| |||||||
D.R. Horton, Inc. | 14,952 | $ | 518,236 | |||||
Lennar Corp.–Class A | 13,200 | 516,780 | ||||||
PulteGroup Inc. | 20,726 | 538,669 | ||||||
1,573,685 | ||||||||
Hotel & Resort REITs–0.19% |
| |||||||
Host Hotels & Resorts Inc. | 29,853 | 497,650 | ||||||
Hotels, Resorts & Cruise Lines–0.96% |
| |||||||
Carnival Corp. | 9,436 | 465,195 | ||||||
Hilton Worldwide Holdings Inc. | 7,356 | 528,161 | ||||||
Marriott International Inc.–Class A | 4,930 | 535,201 | ||||||
Norwegian Cruise Line Holdings Ltd.(b) | 11,146 | 472,479 | ||||||
Royal Caribbean Cruises Ltd. | 4,956 | 484,647 | ||||||
2,485,683 | ||||||||
Household Appliances–0.19% |
| |||||||
Whirlpool Corp. | 4,689 | 501,113 | ||||||
Household Products–0.97% |
| |||||||
Church & Dwight Co., Inc. | 7,722 | 507,799 | ||||||
Clorox Co. (The) | 3,225 | 497,101 | ||||||
Colgate-Palmolive Co. | 8,144 | 484,731 | ||||||
Kimberly-Clark Corp. | 4,519 | 514,895 | ||||||
Procter & Gamble Co. (The) | 5,492 | 504,825 | ||||||
2,509,351 | ||||||||
Housewares & Specialties–0.17% |
| |||||||
Newell Brands, Inc. | 24,040 | 446,904 | ||||||
Human Resource & Employment Services–0.20% |
| |||||||
Robert Half International, Inc. | 9,188 | 525,554 | ||||||
Hypermarkets & Super Centers–0.41% |
| |||||||
Costco Wholesale Corp. | 2,562 | 521,905 | ||||||
Walmart Inc. | 5,778 | 538,221 | ||||||
1,060,126 | ||||||||
Independent Power Producers & Energy Traders–0.38% |
| |||||||
AES Corp. (The) | 33,279 | 481,215 | ||||||
NRG Energy, Inc. | 12,542 | 496,663 | ||||||
977,878 | ||||||||
Industrial Conglomerates–0.81% |
| |||||||
3M Co. | 2,706 | 515,601 | ||||||
General Electric Co. | 74,761 | 565,941 | ||||||
Honeywell International Inc. | 3,889 | 513,814 | ||||||
Roper Technologies, Inc. | 1,940 | 517,049 | ||||||
2,112,405 | ||||||||
Industrial Gases–0.41% |
| |||||||
Air Products & Chemicals, Inc. | 3,414 | 546,411 | ||||||
Linde PLC (United Kingdom) | 3,381 | 527,571 | ||||||
1,073,982 | ||||||||
Industrial Machinery–1.99% |
| |||||||
Dover Corp. | 6,954 | 493,386 |
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 | |||||||
Industrial Machinery–(continued) |
| |||||||
Flowserve Corp. | 12,707 | $ | 483,120 | |||||
Fortive Corp. | 7,707 | 521,456 | ||||||
Illinois Tool Works Inc. | 4,049 | 512,968 | ||||||
Ingersoll-Rand PLC | 5,530 | 504,502 | ||||||
Parker-Hannifin Corp. | 3,514 | 524,078 | ||||||
Pentair PLC (United Kingdom) | 13,546 | 511,768 | ||||||
Snap-on Inc. | 3,602 | 523,335 | ||||||
Stanley Black & Decker Inc. | 4,483 | 536,794 | ||||||
Xylem, Inc. | 8,110 | 541,099 | ||||||
5,152,506 | ||||||||
Industrial REITs–0.37% |
| |||||||
Duke Realty Corp. | 18,916 | 489,924 | ||||||
Prologis, Inc. | 8,189 | 480,858 | ||||||
970,782 | ||||||||
Insurance Brokers–0.79% |
| |||||||
Aon PLC | 3,449 | 501,347 | ||||||
Arthur J. Gallagher & Co. | 7,155 | 527,323 | ||||||
Marsh & McLennan Cos., Inc. | 6,394 | 509,922 | ||||||
Willis Towers Watson PLC | 3,451 | 524,069 | ||||||
2,062,661 | ||||||||
Integrated Oil & Gas–0.57% |
| |||||||
Chevron Corp. | 4,663 | 507,288 | ||||||
Exxon Mobil Corp. | 7,022 | 478,830 | ||||||
Occidental Petroleum Corp. | 8,152 | 500,370 | ||||||
1,486,488 | ||||||||
Integrated Telecommunication Services–0.39% |
| |||||||
AT&T Inc. | 17,564 | 501,277 | ||||||
Verizon Communications Inc. | 9,298 | 522,733 | ||||||
1,024,010 | ||||||||
Interactive Home Entertainment–0.60% |
| |||||||
Activision Blizzard, Inc. | 11,116 | 517,672 | ||||||
Electronic Arts Inc.(b) | 6,621 | 522,463 | ||||||
Take-Two Interactive Software, Inc.(b) | 5,130 | 528,082 | ||||||
1,568,217 | ||||||||
Interactive Media & Services–0.73% |
| |||||||
Alphabet Inc.–Class A(b) | 251 | 262,285 | ||||||
Alphabet Inc.–Class C(b) | 256 | 265,116 | ||||||
Facebook, Inc.–Class A(b) | 3,677 | 482,018 | ||||||
TripAdvisor, Inc.(b) | 8,743 | 471,597 | ||||||
Twitter, Inc.(b) | 14,797 | 425,266 | ||||||
1,906,282 | ||||||||
Internet & Direct Marketing Retail–0.78% |
| |||||||
Amazon.com, Inc.(b)(e) | 333 | 500,156 | ||||||
Booking Holdings Inc.(b) | 293 | 504,669 | ||||||
eBay Inc.(b) | 18,359 | 515,337 | ||||||
Expedia Group, Inc. | 4,483 | 505,010 | ||||||
2,025,172 |
Shares | Value | |||||||
Internet Services & Infrastructure–0.39% |
| |||||||
Akamai Technologies, Inc.(b) | 8,152 | $ | 497,924 | |||||
VeriSign, Inc.(b) | 3,476 | 515,456 | ||||||
1,013,380 | ||||||||
Investment Banking & Brokerage–1.02% |
| |||||||
Charles Schwab Corp. (The) | 12,886 | 535,156 | ||||||
E*TRADE Financial Corp. | 12,187 | 534,766 | ||||||
Goldman Sachs Group, Inc. (The) | 3,071 | 513,010 | ||||||
Morgan Stanley | 13,389 | 530,874 | ||||||
Raymond James Financial, Inc. | 7,139 | 531,213 | ||||||
2,645,019 | ||||||||
IT Consulting & Other Services–0.95% |
| |||||||
Accenture PLC–Class A | 3,412 | 481,126 | ||||||
Cognizant Technology Solutions Corp.–Class A | 7,826 | 496,794 | ||||||
DXC Technology Co. | 9,351 | 497,193 | ||||||
Gartner, Inc.(b) | 3,820 | 488,349 | ||||||
International Business Machines Corp. | 4,426 | 503,103 | ||||||
2,466,565 | ||||||||
Leisure Products–0.37% |
| |||||||
Hasbro, Inc. | 6,314 | 513,012 | ||||||
Mattel, Inc.(b)(c) | 45,021 | 449,760 | ||||||
962,772 | ||||||||
Life & Health Insurance–1.63% |
| |||||||
Aflac, Inc. | 11,898 | 542,073 | ||||||
Brighthouse Financial, Inc.(b) | 16,623 | 506,669 | ||||||
Lincoln National Corp. | 9,915 | 508,739 | ||||||
MetLife, Inc. | 13,648 | 560,387 | ||||||
Principal Financial Group, Inc. | 12,168 | 537,460 | ||||||
Prudential Financial, Inc. | 6,443 | 525,427 | ||||||
Torchmark Corp. | 6,874 | 512,319 | ||||||
Unum Group | 17,877 | 525,226 | ||||||
4,218,300 | ||||||||
Life Sciences Tools & Services–1.38% |
| |||||||
Agilent Technologies, Inc. | 7,652 | 516,204 | ||||||
Illumina, Inc.(b) | 1,625 | 487,386 | ||||||
IQVIA Holdings Inc.(b) | 4,496 | 522,300 | ||||||
Mettler-Toledo International Inc.(b) | 903 | 510,719 | ||||||
PerkinElmer, Inc. | 6,339 | 497,929 | ||||||
Thermo Fisher Scientific, Inc. | 2,266 | 507,108 | ||||||
Waters Corp.(b) | 2,808 | 529,729 | ||||||
3,571,375 | ||||||||
Managed Health Care–0.97% |
| |||||||
Anthem, Inc. | 1,925 | 505,563 | ||||||
Centene Corp.(b) | 4,161 | 479,763 | ||||||
Humana Inc. | 1,769 | 506,783 | ||||||
UnitedHealth Group Inc. | 2,002 | 498,738 | ||||||
WellCare Health Plans, Inc.(b) | 2,238 | 528,370 | ||||||
2,519,217 |
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 | |||||||
Metal & Glass Containers–0.20% |
| |||||||
Ball Corp. | 11,055 | $ | 508,309 | |||||
Motorcycle Manufacturers–0.20% |
| |||||||
Harley-Davidson, Inc. | 15,287 | 521,592 | ||||||
Movies & Entertainment–0.79% |
| |||||||
Netflix, Inc.(b) | 1,988 | 532,108 | ||||||
Twenty-First Century Fox, Inc.–Class A | 7,411 | 356,617 | ||||||
Twenty-First Century Fox, Inc.–Class B | 3,424 | 163,599 | ||||||
Viacom Inc.–Class B | 18,578 | 477,455 | ||||||
Walt Disney Co. (The) | 4,730 | 518,644 | ||||||
2,048,423 | ||||||||
Multi-Line Insurance–0.85% |
| |||||||
American International Group, Inc. | 14,158 | 557,967 | ||||||
Assurant, Inc. | 5,880 | 525,907 | ||||||
Hartford Financial Services Group, Inc. (The) | 12,861 | 571,672 | ||||||
Loews Corp. | 11,812 | 537,682 | ||||||
2,193,228 | ||||||||
Multi-Sector Holdings–0.41% |
| |||||||
Berkshire Hathaway Inc.–Class B(b) | 2,653 | 541,690 | ||||||
Jefferies Financial Group Inc. | 30,090 | 522,362 | ||||||
1,064,052 | ||||||||
Multi-Utilities–1.91% |
| |||||||
Ameren Corp. | 7,602 | 495,878 | ||||||
CenterPoint Energy, Inc. | 18,115 | 511,386 | ||||||
CMS Energy Corp. | 10,035 | 498,238 | ||||||
Consolidated Edison, Inc. | 6,331 | 484,068 | ||||||
Dominion Energy, Inc. | 6,900 | 493,074 | ||||||
DTE Energy Co. | 4,489 | 495,137 | ||||||
NiSource Inc. | 19,308 | 489,458 | ||||||
Public Service Enterprise Group Inc. | 9,531 | 496,088 | ||||||
Sempra Energy | 4,478 | 484,475 | ||||||
WEC Energy Group, Inc. | 7,137 | 494,309 | ||||||
4,942,111 | ||||||||
Office REITs–0.74% |
| |||||||
Alexandria Real Estate Equities, Inc. | 4,332 | 499,220 | ||||||
Boston Properties, Inc. | 4,220 | 474,961 | ||||||
SL Green Realty Corp. | 5,956 | 471,000 | ||||||
Vornado Realty Trust | 7,764 | 481,601 | ||||||
1,926,782 | ||||||||
Oil & Gas Drilling–0.17% |
| |||||||
Helmerich & Payne, Inc. | 9,040 | 433,378 | ||||||
Oil & Gas Equipment & Services–0.98% |
| |||||||
Baker Hughes, a GE Co. | 24,745 | 532,017 | ||||||
Halliburton Co. | 18,302 | 486,467 | ||||||
National Oilwell Varco Inc. | 19,895 | 511,302 | ||||||
Schlumberger Ltd. | 13,574 | 489,750 | ||||||
TechnipFMC PLC (United Kingdom) | 26,355 | 516,031 | ||||||
2,535,567 |
Shares | Value | |||||||
Oil & Gas Exploration & Production–2.61% |
| |||||||
Anadarko Petroleum Corp. | 10,417 | $ | 456,681 | |||||
Apache Corp. | 17,552 | 460,740 | ||||||
Cabot Oil & Gas Corp. | 22,770 | 508,910 | ||||||
Cimarex Energy Co. | 7,743 | 477,356 | ||||||
Concho Resources Inc.(b) | 4,613 | 474,170 | ||||||
ConocoPhillips | 8,223 | 512,704 | ||||||
Devon Energy Corp. | 20,541 | 462,994 | ||||||
Diamondback Energy Inc. | 5,725 | 530,708 | ||||||
EOG Resources, Inc. | 5,303 | 462,475 | ||||||
Hess Corp. | 10,428 | 422,334 | ||||||
Marathon Oil Corp. | 35,292 | 506,087 | ||||||
Newfield Exploration Co.(b) | 36,108 | 529,343 | ||||||
Noble Energy, Inc. | 24,359 | 456,975 | ||||||
Pioneer Natural Resources Co. | 3,869 | 508,851 | ||||||
6,770,328 | ||||||||
Oil & Gas Refining & Marketing–0.81% |
| |||||||
HollyFrontier Corp. | 9,815 | 501,743 | ||||||
Marathon Petroleum Corp. | 8,865 | 523,123 | ||||||
Phillips 66 | 6,112 | 526,549 | ||||||
Valero Energy Corp. | 7,241 | 542,858 | ||||||
2,094,273 | ||||||||
Oil & Gas Storage & Transportation–0.57% |
| |||||||
Kinder Morgan, Inc. | 32,826 | 504,864 | ||||||
ONEOK, Inc. | 8,817 | 475,677 | ||||||
Williams Cos., Inc. (The) | 22,634 | 499,080 | ||||||
1,479,621 | ||||||||
Packaged Foods & Meats–2.27% |
| |||||||
Campbell Soup Co.(c) | 13,553 | 447,114 | ||||||
Conagra Brands, Inc. | 17,757 | 379,290 | ||||||
General Mills, Inc. | 14,200 | 552,948 | ||||||
Hershey Co. (The) | 4,920 | 527,326 | ||||||
Hormel Foods Corp. | 11,908 | 508,233 | ||||||
JM Smucker Co. (The) | 5,208 | 486,896 | ||||||
Kellogg Co. | 8,793 | 501,289 | ||||||
Kraft Heinz Co. (The) | 11,183 | 481,316 | ||||||
Lamb Weston Holdings, Inc. | 6,999 | 514,846 | ||||||
McCormick & Co., Inc. | 3,501 | 487,479 | ||||||
Mondelez International, Inc.–Class A | 12,187 | 487,846 | ||||||
Tyson Foods, Inc.–Class A | 9,598 | 512,533 | ||||||
5,887,116 | ||||||||
Paper Packaging–0.96% |
| |||||||
Avery Dennison Corp. | 5,820 | 522,811 | ||||||
International Paper Co. | 12,218 | 493,118 | ||||||
Packaging Corp. of America | 5,680 | 474,053 | ||||||
Sealed Air Corp. | 15,639 | 544,863 | ||||||
WestRock Co. | 11,962 | 451,685 | ||||||
2,486,530 | ||||||||
Personal Products–0.38% |
| |||||||
Coty Inc.–Class A(b) | 72,613 | 476,341 |
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 | |||||||
Personal Products–(continued) |
| |||||||
Estee Lauder Cos. Inc. (The)–Class A | 3,925 | $ | 510,643 | |||||
986,984 | ||||||||
Pharmaceuticals–1.92% |
| |||||||
Allergan PLC | 3,580 | 478,503 | ||||||
Bristol-Myers Squibb Co. | 10,184 | 529,364 | ||||||
Eli Lilly and Co. | 4,742 | 548,744 | ||||||
Johnson & Johnson | 3,990 | 514,910 | ||||||
Merck & Co., Inc. | 6,939 | 530,209 | ||||||
Mylan N.V.(b) | 18,271 | 500,625 | ||||||
Nektar Therapeutics(b) | 14,538 | 477,864 | ||||||
Perrigo Co. PLC | 9,313 | 360,879 | ||||||
Pfizer Inc. | 12,118 | 528,951 | ||||||
Zoetis Inc. | 6,000 | 513,240 | ||||||
4,983,289 | ||||||||
Property & Casualty Insurance–1.02% |
| |||||||
Allstate Corp. (The)(e) | 6,693 | 553,043 | ||||||
Chubb Ltd. | 4,142 | 535,063 | ||||||
Cincinnati Financial Corp. | 6,683 | 517,398 | ||||||
Progressive Corp. (The) | 8,560 | 516,425 | ||||||
Travelers Cos., Inc. (The) | 4,402 | 527,139 | ||||||
2,649,068 | ||||||||
Publishing–0.19% |
| |||||||
News Corp.–Class A | 32,619 | 370,226 | ||||||
News Corp.–Class B | 10,530 | 121,621 | ||||||
491,847 | ||||||||
Railroads–0.79% |
| |||||||
CSX Corp. | 8,024 | 498,531 | ||||||
Kansas City Southern | 5,490 | 524,021 | ||||||
Norfolk Southern Corp. | 3,517 | 525,932 | ||||||
Union Pacific Corp. | 3,722 | 514,492 | ||||||
2,062,976 | ||||||||
Real Estate Services–0.20% |
| |||||||
CBRE Group, Inc.–Class A(b) | 12,933 | 517,837 | ||||||
Regional Banks–2.79% |
| |||||||
BB&T Corp. | 11,624 | 503,552 | ||||||
Citizens Financial Group, Inc. | 17,540 | 521,464 | ||||||
Comerica Inc. | 7,694 | 528,501 | ||||||
Fifth Third Bancorp | 22,415 | 527,425 | ||||||
First Republic Bank | 5,788 | 502,977 | ||||||
Huntington Bancshares Inc. | 43,615 | 519,891 | ||||||
KeyCorp | 35,082 | 518,512 | ||||||
M&T Bank Corp. | 3,590 | 513,837 | ||||||
People’s United Financial, Inc. | 34,806 | 502,250 | ||||||
PNC Financial Services Group, Inc. (The) | 4,478 | 523,523 | ||||||
Regions Financial Corp. | 39,406 | 527,252 | ||||||
SunTrust Banks, Inc. | 10,172 | 513,076 | ||||||
SVB Financial Group(b) | 2,768 | 525,698 | ||||||
Zions Bancorp., N.A. | 12,777 | 520,535 | ||||||
7,248,493 |
Shares | Value | |||||||
Reinsurance–0.21% |
| |||||||
Everest Re Group, Ltd. | 2,464 | $ | 536,561 | |||||
Research & Consulting Services–0.78% |
| |||||||
Equifax Inc. | 5,461 | 508,583 | ||||||
IHS Markit Ltd.(b) | 10,826 | 519,323 | ||||||
Nielsen Holdings PLC | 20,637 | 481,461 | ||||||
Verisk Analytics, Inc.–Class A(b) | 4,663 | 508,454 | ||||||
2,017,821 | ||||||||
Residential REITs–1.15% |
| |||||||
Apartment Investment & Management Co.–Class A | 11,252 | 493,737 | ||||||
AvalonBay Communities, Inc. | 2,839 | 494,128 | ||||||
Equity Residential | 7,588 | 500,884 | ||||||
Essex Property Trust, Inc. | 2,023 | 496,060 | ||||||
Mid-America Apartment Communities, Inc. | 5,234 | 500,894 | ||||||
UDR, Inc. | 12,634 | 500,559 | ||||||
2,986,262 | ||||||||
Restaurants–1.00% |
| |||||||
Chipotle Mexican Grill, Inc.(b) | 1,159 | 500,445 | ||||||
Darden Restaurants, Inc. | 5,143 | 513,580 | ||||||
McDonald’s Corp. | 2,895 | 514,065 | ||||||
Starbucks Corp. | 8,123 | 523,121 | ||||||
Yum! Brands, Inc. | 5,788 | 532,033 | ||||||
2,583,244 | ||||||||
Retail REITs–1.13% |
| |||||||
Federal Realty Investment Trust | 4,053 | 478,416 | ||||||
Kimco Realty Corp. | 32,267 | 472,712 | ||||||
Macerich Co. (The) | 11,111 | 480,884 | ||||||
Realty Income Corp. | 8,000 | 504,320 | ||||||
Regency Centers Corp. | 8,630 | 506,408 | ||||||
Simon Property Group, Inc. | 2,905 | 488,011 | ||||||
2,930,751 | ||||||||
Semiconductor Equipment–0.62% |
| |||||||
Applied Materials, Inc. | 16,257 | 532,254 | ||||||
KLA-Tencor Corp. | 5,929 | 530,586 | ||||||
Lam Research Corp. | 3,939 | 536,374 | ||||||
1,599,214 | ||||||||
Semiconductors–2.58% |
| |||||||
Advanced Micro Devices, Inc.(b) | 26,673 | 492,384 | ||||||
Analog Devices, Inc. | 6,082 | 522,018 | ||||||
Broadcom Inc. | 2,082 | 529,411 | ||||||
Intel Corp. | 11,090 | 520,454 | ||||||
Maxim Integrated Products, Inc. | 10,056 | 511,348 | ||||||
Microchip Technology Inc.(c) | 7,408 | 532,783 | ||||||
Micron Technology, Inc.(b) | 15,520 | 492,450 | ||||||
NVIDIA Corp. | 3,623 | 483,670 | ||||||
Qorvo, Inc.(b) | 8,769 | 532,541 | ||||||
QUALCOMM Inc. | 9,211 | 524,198 | ||||||
Skyworks Solutions, Inc. | 7,726 | 517,797 |
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 | |||||||
Semiconductors–(continued) |
| |||||||
Texas Instruments Inc. | 5,631 | $ | 532,129 | |||||
Xilinx, Inc. | 5,975 | 508,891 | ||||||
6,700,074 | ||||||||
Soft Drinks–0.58% |
| |||||||
Coca-Cola Co. (The) | 10,757 | 509,344 | ||||||
Monster Beverage Corp.(b) | 10,027 | 493,529 | ||||||
PepsiCo, Inc. | 4,658 | 514,616 | ||||||
1,517,489 | ||||||||
Specialized Consumer Services–0.19% |
| |||||||
H&R Block, Inc. | 19,673 | 499,104 | ||||||
Specialized REITs–1.73% |
| |||||||
American Tower Corp.–Class A | 3,185 | 503,835 | ||||||
Crown Castle International Corp. | 4,632 | 503,174 | ||||||
Digital Realty Trust, Inc. | 4,642 | 494,605 | ||||||
Equinix, Inc. | 1,371 | 483,360 | ||||||
Extra Space Storage Inc. | 5,454 | 493,478 | ||||||
Iron Mountain Inc. | 15,157 | 491,238 | ||||||
Public Storage | 2,608 | 527,885 | ||||||
SBA Communications Corp.–Class A(b) | 3,076 | 497,974 | ||||||
Weyerhaeuser Co. | 22,088 | 482,844 | ||||||
4,478,393 | ||||||||
Specialty Chemicals–1.21% |
| |||||||
Albemarle Corp. | 6,246 | 481,379 | ||||||
Celanese Corp. | 6,122 | 550,797 | ||||||
Ecolab Inc. | 3,435 | 506,147 | ||||||
International Flavors & Fragrances Inc. | 3,916 | 525,801 | ||||||
PPG Industries, Inc. | 5,321 | 543,966 | ||||||
Sherwin-Williams Co. (The) | 1,374 | 540,614 | ||||||
3,148,704 | ||||||||
Specialty Stores–0.59% |
| |||||||
Tiffany & Co. | 6,421 | 516,955 | ||||||
Tractor Supply Co. | 5,951 | 496,551 | ||||||
Ulta Beauty, Inc.(b) | 2,149 | 526,161 | ||||||
1,539,667 | ||||||||
Steel–0.19% |
| |||||||
Nucor Corp. | 9,413 | 487,688 | ||||||
Systems Software–0.97% |
| |||||||
Fortinet, Inc.(b) | 7,279 | 512,660 | ||||||
Microsoft Corp. | 5,006 | 508,459 | ||||||
Oracle Corp. | 11,390 | 514,259 | ||||||
Red Hat, Inc.(b) | 3,006 | 527,974 | ||||||
Symantec Corp. | 24,608 | 464,968 | ||||||
2,528,320 | ||||||||
Technology Hardware, Storage & Peripherals–1.34% |
| |||||||
Apple Inc. | 3,206 | 505,715 | ||||||
Hewlett Packard Enterprise Co. | 37,328 | 493,103 | ||||||
HP Inc. | 24,116 | 493,413 |
Shares | Value | |||||||
Technology Hardware, Storage & Peripherals–(continued) |
| |||||||
NetApp, Inc. | 8,640 | $ | 515,549 | |||||
Seagate Technology PLC | 13,768 | 531,307 | ||||||
Western Digital Corp. | 13,686 | 505,971 | ||||||
Xerox Corp. | 21,709 | 428,970 | ||||||
3,474,028 | ||||||||
Tires & Rubber–0.20% |
| |||||||
Goodyear Tire & Rubber Co. (The) | 25,543 | 521,333 | ||||||
Tobacco–0.36% |
| |||||||
Altria Group, Inc. | 10,066 | 497,160 | ||||||
Philip Morris International Inc. | 6,433 | 429,467 | ||||||
926,627 | ||||||||
Trading Companies & Distributors–0.60% |
| |||||||
Fastenal Co. | 9,853 | 515,213 | ||||||
United Rentals, Inc.(b) | 5,017 | 514,393 | ||||||
W.W. Grainger, Inc. | 1,865 | 526,602 | ||||||
1,556,208 | ||||||||
Trucking–0.20% |
| |||||||
J.B. Hunt Transport Services, Inc. | 5,726 | 532,747 | ||||||
Water Utilities–0.19% |
| |||||||
American Water Works Co., Inc. | 5,464 | 495,967 | ||||||
Total Common Stocks & Other Equity Interests |
| 254,457,667 | ||||||
Money Market Funds–1.58% |
| |||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30%(f) | 1,732,285 | 1,732,285 | ||||||
Invesco Liquid Assets Portfolio–Institutional Class, 2.48%(f) | 1,303,156 | 1,303,286 | ||||||
Invesco Treasury Portfolio–Institutional Class, 2.30%(f) | 1,070,156 | 1,070,156 | ||||||
Total Money Market Funds |
| 4,105,727 | ||||||
TOTAL INVESTMENTS IN SECURITIES (excluding investments purchased with cash collateral from securities on loan)–99.70% (Cost $217,252,528) |
| 258,563,394 | ||||||
Investments Purchased with Cash |
| |||||||
Money Market Funds–0.47% | ||||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30% | 1,216,213 | 1,216,213 | ||||||
TOTAL INVESTMENTS IN SECURITIES–100.17% |
| 259,779,607 | ||||||
OTHER ASSETS LESS LIABILITIES–(0.17)% |
| (453,095 | ) | |||||
NET ASSETS–100.00% |
| $ | 259,326,512 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equally-Weighted S&P 500 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 December 31, 2018. |
(d) | The Fund’s Adviser is a subsidiary of Invesco Ltd. and therefore, Invesco Ltd. is considered to be affiliated with the Fund. The value of this security as of December 31, 2018 represented less than 1% of the Fund’s Net Assets. See Note 5. |
(e) | All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 1J. |
(f) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the7-day SEC standardized yield as of December 31, 2018. |
(g) | 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. |
Open Futures Contracts — Equity Risk | ||||||||||||||||||||
Long Futures Contracts | Number of Contracts | Expiration Month | Notional Value | Value | Unrealized Appreciation | |||||||||||||||
E-Mini S&P 500 Index | 37 | March–2019 | $ | 4,634,620 | $ | 4,582 | $ | 4,582 |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $212,413,937)* | $ | 253,933,454 | ||
Investments in affiliates, at value (Cost $6,054,804) | 5,846,153 | |||
Other investments: | ||||
Variation margin receivable — futures contracts | 33,974 | |||
Cash | 229,881 | |||
Receivable for: | ||||
Investments sold | 497,431 | |||
Fund shares sold | 404,185 | |||
Dividends | 394,812 | |||
Investment for trustee deferred compensation and retirement plans | 32,108 | |||
Total assets | 261,371,998 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 502,977 | |||
Fund shares reacquired | 78,826 | |||
Collateral upon return of securities loaned | 1,216,213 | |||
Accrued fees to affiliates | 162,035 | |||
Accrued trustees’ and officers’ fees and benefits | 4,654 | |||
Accrued other operating expenses | 46,009 | |||
Trustee deferred compensation and retirement plans | 34,772 | |||
Total liabilities | 2,045,486 | |||
Net assets applicable to shares outstanding | $ | 259,326,512 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 211,850,740 | ||
Distributable earnings | 47,475,772 | |||
$ | 259,326,512 | |||
Net Assets: | ||||
Series I | $ | 109,413,912 | ||
Series II | $ | 149,912,600 | ||
Shares outstanding, no par value, |
| |||
Series I | 6,147,635 | |||
Series II | 8,672,104 | |||
Series I: | ||||
Net asset value per share | $ | 17.80 | ||
Series II: | ||||
Net asset value per share | $ | 17.29 |
* | At December 31, 2018, securities with an aggregate value of $1,184,882 were on loan to brokers. |
Investment income: | ||||
Dividends | $ | 4,937,292 | ||
Dividends from affiliates (includes securities lending income of $9,626) | 102,959 | |||
Total investment income | 5,040,251 | |||
Expenses: | ||||
Advisory fees | 315,675 | |||
Administrative services fees | 315,556 | |||
Custodian fees | 22,111 | |||
Distribution fees — Series II | 348,665 | |||
Transfer agent fees | 5,273 | |||
Trustees’ and officers’ fees and benefits | 23,818 | |||
Licensing fees | 45,095 | |||
Reports to shareholders | 10,707 | |||
Professional services fees | 52,513 | |||
Other | 36,255 | |||
Total expenses | 1,175,668 | |||
Less: Fees waived | (3,992 | ) | ||
Net expenses | 1,171,676 | |||
Net investment income | 3,868,575 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 4,621,993 | |||
Futures contracts | (589,276 | ) | ||
4,032,717 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (31,130,533 | ) | ||
Futures contracts | 13,185 | |||
(31,117,348 | ) | |||
Net realized and unrealized gain (loss) | (27,084,631 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (23,216,056 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income | $ | 3,868,575 | $ | 2,917,967 | ||||
Net realized gain | 4,032,717 | 4,516,918 | ||||||
Change in net unrealized appreciation (depreciation) | (31,117,348 | ) | 26,902,954 | |||||
Net increase (decrease) in net assets resulting from operations | (23,216,056 | ) | 34,337,839 | |||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (3,643,484 | ) | (3,280,890 | ) | ||||
Series II | (4,379,437 | ) | (2,595,830 | ) | ||||
Total distributions from distributable earnings | (8,022,921 | ) | (5,876,720 | ) | ||||
Share transactions–net: | ||||||||
Series I | (5,211,678 | ) | (3,857,449 | ) | ||||
Series II | 50,915,126 | 57,119,964 | ||||||
Net increase in net assets resulting from share transactions | 45,703,448 | 53,262,515 | ||||||
Net increase in net assets | 14,464,471 | 81,723,634 | ||||||
Net assets: | ||||||||
Beginning of year | 244,862,041 | 163,138,407 | ||||||
End of year | $ | 259,326,512 | $ | 244,862,041 |
(1) | For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income and distributions from net realized gains. The Securities and Exchange Commission eliminated the requirement to disclose the distribution components separately, except for tax return of capital. For the year ended December 31, 2017, distributions from net investment income were $959,664 and $684,524 and distributions from net realized gains were $2,321,226 and $1,911,306 for Series I and Series II shares, respectively. |
Notes to Financial Statements
December 31, 2018
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 anopen-end series management investment company. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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 theover-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 (“NAV”) 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 theend-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. Equally-Weighted S&P 500 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. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 investment 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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 of the cost of the related investment. 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. |
Invesco V.I. Equally-Weighted S&P 500 Fund
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. | 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 inshort-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. The Fund bears the risk of loss with respect to the investment of collateral. 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. When loaning securities, the Fund retains certain benefits of owning the securities, including the economic equivalent of dividends or interest generated by the security. 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. The securities loaned are subject to termination at the option of the borrower or the Fund. Upon termination, the borrower will return to the Fund the securities loaned and the Fund will return the collateral. 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 and the securities may lose value during the delay which could result in potential losses to the Fund. Some of these losses may be indemnified by the lending agent. 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, are included inDividends from affiliateson 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. | 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. |
K. | Collateral— To the extent the Fund has pledged 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. This practice does not apply to securities pledged as collateral for securities lending transactions. |
Invesco V.I. Equally-Weighted S&P 500 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 accrues daily and pays monthly 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 year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.12%.
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2019, 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 (the “expense limits”). 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, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
The Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $3,992.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $65,504 for accounting and fund administrative services and was reimbursed $250,052 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution 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. Equally-Weighted S&P 500 Fund
The following is a summary of the tiered valuation input levels, as of December 31, 2018. 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 | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks & Other Equity Interests | $ | 254,457,667 | $ | — | $ | — | $ | 254,457,667 | ||||||||
Money Market Funds | 5,321,940 | — | — | 5,321,940 | ||||||||||||
Total Investments in Securities | 259,779,607 | — | — | 259,779,607 | ||||||||||||
Other Investments — Assets* | ||||||||||||||||
Futures Contracts | 4,582 | — | — | 4,582 | ||||||||||||
Total Investments | $ | 259,784,189 | $ | — | $ | — | $ | 259,784,189 |
* | Unrealized appreciation. |
NOTE 4—Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (“ISDA Master Agreement”) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
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 December 31, 2018:
Value | ||||
Derivative Assets | Equity Risk | |||
Unrealized appreciation on futures contracts — Exchange-Traded(a) | $ | 4,582 | ||
Derivatives not subject to master netting agreements | (4,582 | ) | ||
Total Derivative Assets subject to master netting agreements | $ | — |
(a) | The daily variation margin receivable at period-end is recorded in the Statement of Assets and Liabilities. |
Effect of Derivative Investments for the year ended December 31, 2018
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 | ||||
Equity Risk | ||||
Realized Gain (Loss): | ||||
Futures contracts | $ | (589,276 | ) | |
Change in Net Unrealized Appreciation: | ||||
Futures contracts | 13,185 | |||
Total | $ | (576,091 | ) |
The table below summarizes the average notional value of futures contracts outstanding during the period.
Futures Contracts | ||||
Average notional value | $ | 3,694,784 |
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 year ended December 31, 2018.
Value 12/31/17 | Purchases at Cost | Proceeds from Sales | Change in Unrealized Appreciation (Depreciation) | Realized Gain (Loss) | Value 12/31/18 | Dividend Income | ||||||||||||||||||||||
Invesco Ltd. | $ | 467,675 | $ | 422,638 | $ | — | $ | (366,100 | ) | $ | — | $ | 524,213 | $ | 21,162 |
Invesco V.I. Equally-Weighted S&P 500 Fund
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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 5,428,590 | $ | 3,672,562 | ||||
Long-term capital gain | 2,594,331 | 2,204,158 | ||||||
Total distributions | $ | 8,022,921 | $ | 5,876,720 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 5,216,221 | ||
Undistributedlong-term gain | 3,001,735 | |||
Net unrealized appreciation — investments | 39,289,640 | |||
Temporary book/tax differences | (31,824 | ) | ||
Shares of beneficial interest | 211,850,740 | |||
Total net assets | $ | 259,326,512 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 does not have a capital loss carryforward as of December 31, 2018.
NOTE 9—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $101,171,417 and $61,815,772, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 53,852,913 | ||
Aggregate unrealized (depreciation) of investments | (14,563,273 | ) | ||
Net unrealized appreciation of investments | $ | 39,289,640 |
Cost of investments for tax purposes is $220,494,549.
Invesco V.I. Equally-Weighted S&P 500 Fund
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 424,677 | $ | 8,542,209 | 441,919 | $ | 8,277,046 | ||||||||||
Series II | 3,056,048 | 59,434,939 | 3,562,087 | 64,459,112 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 174,246 | 3,643,484 | 177,345 | 3,280,890 | ||||||||||||
Series II | 215,418 | 4,379,437 | 144,133 | 2,595,830 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (863,544 | ) | (17,397,371 | ) | (830,573 | ) | (15,415,385 | ) | ||||||||
Series II | (667,704 | ) | (12,899,250 | ) | (547,921 | ) | (9,934,978 | ) | ||||||||
Net increase in share activity | 2,339,141 | $ | 45,703,448 | 2,946,990 | $ | 53,262,515 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 91% 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 | 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 19.88 | $ | 0.32 | $ | (1.80 | ) | $ | (1.48 | ) | $ | (0.23 | ) | $ | (0.37 | ) | $ | (0.60 | ) | $ | 17.80 | (7.87 | )% | $ | 109,414 | 0.31 | %(d) | 0.31 | %(d) | 1.61 | %(d) | 24 | % | |||||||||||||||||||||||
Year ended 12/31/17 | 17.24 | 0.29 | 2.87 | 3.16 | (0.15 | ) | (0.37 | ) | (0.52 | ) | 19.88 | 18.58 | 127,462 | 0.32 | 0.32 | 1.55 | 22 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 15.81 | 0.26 | 1.96 | 2.22 | (0.10 | ) | (0.69 | ) | (0.79 | ) | 17.24 | 14.24 | 114,202 | 0.39 | 0.39 | 1.56 | 22 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 19.98 | 0.26 | (0.94 | ) | (0.68 | ) | (0.28 | ) | (3.21 | ) | (3.49 | ) | 15.81 | (2.68 | ) | 27,974 | 0.55 | 0.55 | 1.38 | 25 | ||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 19.35 | 0.26 | (1.74 | ) | (1.48 | ) | (0.21 | ) | (0.37 | ) | (0.58 | ) | 17.29 | (8.11 | ) | 149,913 | 0.56 | (d) | 0.56 | (d) | 1.36 | (d) | 24 | |||||||||||||||||||||||||||||||||
Year ended 12/31/17 | 16.82 | 0.24 | 2.79 | 3.03 | (0.13 | ) | (0.37 | ) | (0.50 | ) | 19.35 | 18.26 | 117,400 | 0.57 | 0.57 | 1.30 | 22 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 15.44 | 0.21 | 1.93 | 2.14 | (0.07 | ) | (0.69 | ) | (0.76 | ) | 16.82 | 14.01 | 48,936 | 0.64 | 0.64 | 1.31 | 22 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 19.60 | 0.21 | (0.92 | ) | (0.71 | ) | (0.24 | ) | (3.21 | ) | (3.45 | ) | 15.44 | (2.92 | ) | 38,643 | 0.80 | 0.80 | 1.13 | 25 | ||||||||||||||||||||||||||||||||||||
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 |
(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 based on average daily net assets (000’s omitted) of $123,596 and $139,466 for Series I and Series II shares, respectively. |
Invesco V.I. Equally-Weighted S&P 500 Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Equally-Weighted S&P 500 Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Equally-Weighted S&P 500 Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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.
Beginning Account Value (07/01/18) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | ||||||||||||||||||||||
Class | Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | Annualized Expense Ratio | |||||||||||||||||||
Series I | $ | 1,000.00 | $ | 906.70 | $ | 1.49 | $ | 1,023.64 | $ | 1.58 | 0.31 | % | ||||||||||||
Series II | 1,000.00 | 905.80 | 2.69 | 1,022.38 | 2.85 | 0.56 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Equally-Weighted S&P 500 Fund
Tax Information
Form1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Long-Term Capital Gain Distributions | $ | 2,594,331 | ||
Corporate Dividends Received Deduction* | 55.98 | % | ||
U.S. Treasury Obligations* | 0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. Equally-Weighted S&P 500 Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Equally-Weighted S&P 500 Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. Equally-Weighted S&P 500 Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. Equally-Weighted S&P 500 Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Equally-Weighted S&P 500 Fund
| ||||
Annual Report to Shareholders
| December 31, 2018 | |||
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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 semi-annual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on FormN-Q (or any successor Form). The Fund’s FormN-Q (or any successor Form) filings are available on the SEC website, sec.gov. The SEC file numbers for the Fund are811-07452 and033-57340. The Fund’s most recent portfolio holdings, as filed on FormN-Q (or any successor Form), 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 recent12-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.
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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.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Invesco Distributors, Inc. | VK-VIEQI-AR-1 | 02152019 1212 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. Equity and Income Fund (the Fund) underperformed the Russell 1000 Value Index.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -9.50% | ||||
Series II Shares | -9.73 | ||||
Russell 1000 Value Index▼(Broad Market Index) | -8.27 | ||||
Bloomberg Barclays U.S. Government/Credit Index∎(Style-Specific Index) | -0.42 | ||||
Lipper VUF Mixed-Asset Target Allocation Growth Funds Index¨ (Peer Group Index) | -6.39 | ||||
Source(s):▼RIMES Technologies Corp.;∎FactSet Research Systems Inc.;¨Lipper Inc. |
Market conditions and your Fund
Calendar year 2018 proved to be an increasingly volatile time for US equities. In January 2018, US equity markets steadily moved higher, as investors remained enthused about the passage of the Tax Cuts and Jobs Act signed into law in late December 2017. However, in February 2018, volatility returned to the US stock and bond markets. Worries about how rising interest rates might affect economic growth, concerns about a potential trade war and heightened geopolitical tensions, caused the US stock markets to pull back and volatility to increase.
US equity markets generally recovered in the second quarter of 2018 as strong US retail sales and low unemployment buoyed markets. Throughout the summer, US equities moved higher as corporate profits surged. Several US equity indexes reached new highs despite potential headwinds including trade tensions, tariff announcements and contagion concerns over a Turkish currency crisis. After a relatively quiet summer, market volatility noticeably rose in October, as US equity markets suffered a sharpsell-off throughyear-end, amid rising interest rates and concerns that higher inflation could mean a more restrictive
monetary policy. In this environment, there was a flight to safety, as investors fled to defensive areas of the equities markets, like health care and utilities, and US Treasuries.
Given signs of a strong economy, the US Federal Reserve raised interest rates four times during the year: in March, June, September and December 2018. Following December’s Federal Reserve meeting, Chairman Jerome Powell raised interest rates for the fourth time in 2018 by 25 basis points to a targeted range of 2.25% to 2.50%, and lowered guidance from three to two rate hikes in 2019, signaling a slightly more dovish stance than expected.1 In contrast, the European Central Bank and central banks in several other countries maintained extraordinarily accommodative monetary policies.
During the year, nine of the 11 sectors within the Russell 1000 Value Index posted negative returns. The industrials and energy sectors were the weakest-performing sectors, posting double-digit losses, while health care and utilities were the only sectors with positive returns.
Stock selection in the industrials sector was a large contributor to the Fund’s performance relative to its style-specific benchmark for the year.CSX, a rail-based transportation services firm, was
one of the top contributors within the sector. The company reported strong earnings and revenues in July 2018 as it benefited from improved profit margins and a lower tax rate. Having no exposure toGeneral Electric was also a large contributor to the Fund’s relative performance, as the stock performed poorly for the year.
Stock selection in the materials sector also contributed to the Fund’s performance relative to its style-specific benchmark for the year. Notably,The Mosaic Company, a potash and phosphate supplier was a contributor to relative performance. An upbeat earnings outlook, healthy prospects from the Vale Fertilizantes (not a Fund holding) buyout, along with strong demand and pricing fundamentals for crop nutrients contributed to the company’s strong performance.
Stock selection in information technology (IT) also boosted the Fund’s performance versus the style-specific benchmark. Within IT,QUALCOMM andOracle were key contributors. During the third quarter, QUALCOMM reported better-than-expected earnings and announced a share repurchase plan totaling $30 billion after the company terminated its plan to purchase NXP Semiconductors (not a Fund holding).
During the year, a large driver of underperformance relative to the style-specific benchmark was stock selection within the financials sector – notably within banks and capital markets. Financials were negatively impacted by the flattening yield curve and subsequent concerns over a recession due to a slowing economy. Within the sector,Citigroup, Morgan Stanley and StateStreet were key detractors. At the close of the year, we still believed that large banks and capital markets were attractively valued, had strong balance sheets and the potential for future growth as
Portfolio Composition | |||
By security type | % of total net assets |
Common Stocks & Other Equity | ||
Interests | 61.6% | |
Bonds & Notes | 20.3 | |
U.S. Treasury Securities | 12.8 | |
Security Types Less Than 1% of Portfolio | 0.6 | |
Money Market Funds | ||
Plus Other Assets Less Liabilities | 4.7 |
Top 10 Equity Holdings* | |||
% of total net assets | |||
1. Citigroup Inc. | 2.6% | ||
2. Bank of America Corp. | 2.4 | ||
3. Johnson & Johnson | 2.0 | ||
4. JPMorgan Chase & Co. | 2.0 | ||
5. American International Group, Inc. | 1.6 | ||
6. General Motors Co. | 1.6 | ||
7. CVS Health Corp. | 1.6 | ||
8. Morgan Stanley | 1.5 | ||
9. Carnival Corp. | 1.4 | ||
10. Mondelez International, Inc.-Class A | 1.2 |
Total Net Assets | $1.2 billion | |
Total Number of Holdings* | 368 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
Data presented here are as of December 31, 2018.
Invesco V.I. Equity and Income Fund
they continued to return high levels of capital to shareholders in the form of stock buybacks and dividends.
Stock selection in and overweight exposure to the energy sector also dampened the Fund’s performance relative to its style-specific benchmark for the year. Oil prices declined sharply during the fourth quarter, falling from roughly $75 per barrel in early October to the mid $40s per barrel in late December. As energy stocks fell in tandem, a number of the portfolio’s largest individual detractors came from the sector includingDevon Energy,Canadian Natural Resources,Apache andTechnipFMC.
The Fund’s material underweight exposures in more defensive areas, such as the communication services, consumer staples and utilities sectors also detracted from its relative returns for the year. At the close of the year, we maintained underweight exposure in these sectors, as we believed valuations and fundamentals were unattractive.
The Fund’s use of high-grade bonds as a source of income and to dampen return volatility was a contributor to the Fund’s relative performance, as the bond portion of the Fund’s portfolio posted negative returns, but outperformed the style-specific index for the year. Similarly, the Fund’s allocation to convertible securities also posted negative returns, but outperformed the Russell 1000 Value Index, acting as a relative contributor to returns for the year.
We used currency forward contracts during the year for the purpose of hedging currency exposure ofnon-US-based companies held in the Fund. Derivatives were used solely for the purpose of hedging and not for speculative purposes or leverage. The use of currency forward contracts had a positive impact on the Fund’s performance relative to the Russell 1000 Value Index for the year.
At the end of the year, the Fund’s largest overweight exposures relative to the style-specific benchmark were in the financials and energy sectors, while the largest underweight exposures were in the real estate and utilities sectors.
Thank you for your investment in Invesco V.I. Equity and Income Fund and for sharing our long-term investment horizon.
1 | Source: US Federal Reserve |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Thomas Bastian Chartered Financial Analyst, Portfolio Manager, is lead manager of Invesco V.I. Equity and Income Fund. | ||
He joined Invesco in 2010. Mr. Bastian earned a BA in accounting from St. John’s University and an MBA in finance from the University of Michigan. | ||
Brian Jurkash Portfolio Manager, is lead manager of Invesco V.I. Equity and Income Fund. He joined Invesco in 2000. Mr. Jurkash earned | ||
a BBA degree in finance from Stephen F. Austin State University and an MBA in finance from the University of Houston. | ||
Matthew Titus Chartered Financial Analyst, Portfolio Manager, is lead manager of Invesco V.I. Equity and Income Fund. | ||
He joined Invesco in 2016. Mr. Titus earned a bachelor’s degree in accounting and economics from Luther College in Decorah, Iowa, and an MBA from Ohio State University. |
Chuck Burge Portfolio Manager, is manager of Invesco V.I. Equity and Income Fund. He joined Invesco in 2002. Mr. Burge | ||
earned a BS in economics from Texas A&M University and an MBA in finance and accounting from Rice University. | ||
Sergio Marcheli Portfolio Manager, is manager of Invesco V.I. Equity and Income Fund. He joined Invesco in 2010. Mr. Marcheli | ||
earned a BBA from the University of Houston and an MBA from the University of St. Thomas. |
Invesco V.I. Equity and Income Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: RIMES Technologies Corp. |
2 | Source: Lipper Inc. |
3 | Source: FactSet Research Systems Inc. |
Past performance cannot guarantee comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
10 Years | 8.94 | % | |||
5 Years | 4.27 | ||||
1 Year | -9.50 | ||||
Series II Shares | |||||
Inception (4/30/03) | 7.08 | % | |||
10 Years | 8.75 | ||||
5 Years | 4.00 | ||||
1 Year | -9.73 |
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, prior to June 1, 2010, 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 the12b-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 recentmonth-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Performance figures in the table and chart do not reflect deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 0.56% and 0.81%, 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 0.57% and 0.82%, 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 recentmonth-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recentmonth-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, 2020. See current prospectus for more information. |
Invesco V.I. Equity and Income Fund
Invesco V.I. Equity and Income Fund’s investment objectives are both capital appreciation and current income.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Active trading risk.Active trading of portfolio securities may result in added expenses and a lower return.
Changing fixed income market conditions risk.The current low interest rate environment was created in part by the Federal Reserve Board (FRB) and certain foreign central banks keeping the federal funds and equivalent foreign rates near, at or below zero. Increases in the federal funds and equivalent foreign rates may expose fixed income markets to heightened volatility and reduced liquidity for certain fixed income investments, particularly those with longer maturities. In addition, decreases in fixed income dealer market-making capacity may also potentially lead to heightened volatility and reduced liquidity in the fixed income markets. As a result, the value of the Fund’s investments and share price may decline. Changes in central bank policies could also result in higher than normal shareholder redemptions, which could potentially increase portfolio turnover and the Fund’s transaction costs.
Convertible securities risk.The market values of convertible securities are affected by market interest rates, the risk of actual issuer default on interest or principal payments and the value of the underlying common stock into which the convertible security may be converted. Additionally, a convertible security is subject to the same types of market and issuer risks as apply to the underlying common stock. In addition, certain convertible securities are subject to involuntary conversions and may undergo principal write-downs upon the occurrence of certain triggering events, and, as a result, are subject to an increased risk of loss. Convertible securities may be rated below investment grade.
Debt securities risk.The prices of debt securities held by the Fund will be affected by changes in interest rates, the creditworthiness of the issuer and other factors. An increase in prevailing interest rates typically causes the value of existing debt securities to fall and often has a greater impact on longer-duration debt securities and higher quality debt securities. Falling interest rates will cause the Fund to reinvest the proceeds of debt securities that have been repaid by the issuer at lower interest rates. Falling interest rates may also reduce the Fund’s
distributable income because interest payments on floating rate debt instruments held by the Fund will decline. The Fund could lose money on investments in debt securities if the issuer or borrower fails to meet its obligations to make interest payments and/or to repay principal in a timely manner. Changes in an issuer’s financial strength, the market’s perception of such strength or in the credit rating of the issuer or the security may affect the value of debt securities. The Adviser’s credit analysis may fail to anticipate such changes, which could result in buying a debt security at an inopportune time or failing to sell a debt security in advance of a price decline or other credit event.
Depositary receipts risk.Investing in depositary receipts involves the same risks as direct investments in foreign securities. In addition, the underlying issuers of certain depositary receipts are under no obligation to distribute shareholder communications or pass through any voting rights with respect to the deposited securities to the holders of such receipts. The Fund may therefore receive less timely information or have less control than if it invested directly in the foreign issuer.
Derivatives risk.The value of a derivative instrument depends largely on (and is derived from) the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include other, possibly greater, risks, including counterparty, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by holding a position in the derivative. As a result, an adverse change in the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative or the anticipated value of the underlying asset, which may make the Fund’s returns more volatile and increase the risk of loss. Derivative instruments may also be less liquid than more traditional investments and the
Fund may be unable to sell or close out its derivative positions at a desirable time or price. This risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. Derivatives strategies may not always be successful. For example, derivatives used for hedging or to gain or limit exposure to a particular market segment may not provide the expected benefits, particularly during adverse market conditions.
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or
Invesco V.I. Equity and Income Fund
unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
Preferred securities risk.Preferred securities are subject to issuer-specific and market risks applicable generally to equity securities. Preferred securities also may be subordinated to bonds or other debt instruments, subjecting them to a greater risk ofnon-payment, may be less liquid than many other securities, such as common stocks, and generally offer no voting rights with respect to the issuer.
REIT risk/real estate risk.Investments in real estate related instruments may be affected by economic, legal, cultural, environmental or technological factors that affect property values, rents or occupancies of real estate related to the Fund’s holdings. Shares of real estate related companies, which tend to be small- andmid-cap companies, may be more volatile and less liquid.
Small- andmid-capitalization companies risks.Small- andmid-capitalization companies tend to be more vulnerable to changing market conditions, may have little or no operating history or track record of success, and may have more limited product lines and markets, less experienced management and fewer financial resources than larger companies. These companies’ securities may be more volatile and less liquid than those of more established companies, and their returns may vary, sometimes significantly, from the overall securities market.
Value investing style risk.A value investing style subjects the Fund to the risk that the valuations never improve or that the returns on value equity securities are less than returns on other styles of investing or the overall stock market.
Warrants risk.Warrants may be significantly less valuable or worthless on their expiration date and may also be postponed or terminated early, resulting in a partial or total loss. Warrants may also be illiquid.
Zero coupon orpay-in-kind securities risk.The value, interest rates, and liquidity ofnon-cash paying instruments, such as zero coupon andpay-in-kind securities, are subject to greater fluctuation than other types of securities. The higher yields and interest rates onpay-in-kind securities reflect the payment deferral and increased credit risk associated with such instruments and that such investments may represent a higher credit risk than loans that periodically pay interest.
About indexes used in this report
TheRussell 1000® Value Index is an unmanaged index considered representative oflarge-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.
TheBloomberg Barclays U.S. Government/Credit Index is a broad-based benchmark that includes investment-grade, US dollar-denominated,fixed-rate Treasuries, government-related and corporate securities.
TheLipper VUF Mixed-Asset Target Allocation Growth Funds 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.
Other information
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Industry 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.
Invesco V.I. Equity and Income Fund
Schedule of Investments(a)
December 31, 2018
Shares | Value | |||||||
Common Stocks–61.57% |
| |||||||
Aerospace & Defense–1.28% |
| |||||||
General Dynamics Corp. | 98,365 | $ | 15,463,962 | |||||
Apparel, Accessories & Luxury Goods–0.50% |
| |||||||
Michael Kors Holdings Ltd.(b) | 160,749 | 6,095,602 | ||||||
Asset Management & Custody Banks–1.23% |
| |||||||
Northern Trust Corp. | 62,481 | 5,222,787 | ||||||
State Street Corp. | 152,920 | 9,644,664 | ||||||
14,867,451 | ||||||||
Automobile Manufacturers–1.59% |
| |||||||
General Motors Co. | 575,585 | 19,253,318 | ||||||
Biotechnology–0.52% |
| |||||||
Celgene Corp.(b) | 98,072 | 6,285,434 | ||||||
Broadcasting–0.45% |
| |||||||
CBS Corp.–Class B | 125,416 | 5,483,188 | ||||||
Building Products–1.00% |
| |||||||
Johnson Controls International PLC | 406,613 | 12,056,075 | ||||||
Cable & Satellite–1.78% |
| |||||||
Charter Communications, Inc.–Class A(b) | 46,410 | 13,225,458 | ||||||
Comcast Corp.–Class A | 242,890 | 8,270,404 | ||||||
21,495,862 | ||||||||
Communications Equipment–1.85% |
| |||||||
Cisco Systems, Inc. | 372,149 | 16,125,216 | ||||||
Juniper Networks, Inc. | 233,365 | 6,279,852 | ||||||
22,405,068 | ||||||||
Diversified Banks–8.36% |
| |||||||
Bank of America Corp. | 1,187,592 | 29,262,267 | ||||||
Citigroup Inc. | 609,941 | 31,753,528 | ||||||
JPMorgan Chase & Co. | 247,221 | 24,133,714 | ||||||
Wells Fargo & Co. | 342,921 | 15,801,800 | ||||||
100,951,309 | ||||||||
Diversified Chemicals–0.24% |
| |||||||
DowDuPont Inc. | 53,847 | 2,879,738 | ||||||
Diversified Metals & Mining–0.42% |
| |||||||
BHP Billiton Ltd. (Australia) | 208,118 | 5,017,703 | ||||||
Electric Utilities–0.75% |
| |||||||
Duke Energy Corp. | 60,475 | 5,218,993 | ||||||
FirstEnergy Corp. | 103,282 | 3,878,239 | ||||||
9,097,232 | ||||||||
Fertilizers & Agricultural Chemicals–1.02% |
| |||||||
Mosaic Co. (The) | 236,576 | 6,910,385 | ||||||
Nutrien Ltd. (Canada) | 115,533 | 5,430,051 | ||||||
12,340,436 |
Shares | Value | |||||||
Food Distributors–0.82% |
| |||||||
US Foods Holding Corp.(b) | 313,208 | $ | 9,909,901 | |||||
Health Care Distributors–0.84% |
| |||||||
McKesson Corp. | 91,369 | 10,093,533 | ||||||
Health Care Equipment–1.61% |
| |||||||
Medtronic PLC | 97,755 | 8,891,795 | ||||||
Zimmer Biomet Holdings, Inc. | 101,779 | 10,556,518 | ||||||
19,448,313 | ||||||||
Health Care Services–1.57% |
| |||||||
CVS Health Corp. | 289,601 | 18,974,657 | ||||||
Home Improvement Retail–0.60% |
| |||||||
Kingfisher PLC (United Kingdom) | 2,753,184 | 7,281,606 | ||||||
Hotels, Resorts & Cruise Lines–1.41% |
| |||||||
Carnival Corp. | 346,561 | 17,085,457 | ||||||
Industrial Machinery–0.90% |
| |||||||
Ingersoll-Rand PLC | 119,373 | 10,890,399 | ||||||
Insurance Brokers–1.66% |
| |||||||
Aon PLC | 54,611 | 7,938,255 | ||||||
Willis Towers Watson PLC | 79,582 | 12,085,322 | ||||||
20,023,577 | ||||||||
Integrated Oil & Gas–3.49% |
| |||||||
BP PLC (United Kingdom) | 2,055,022 | �� | 12,966,003 | |||||
Occidental Petroleum Corp. | 215,070 | 13,200,997 | ||||||
Royal Dutch Shell PLC–Class A (United Kingdom) | 544,671 | 15,986,370 | ||||||
42,153,370 | ||||||||
Internet & Direct Marketing Retail–0.79% |
| |||||||
eBay Inc.(b) | 340,062 | 9,545,540 | ||||||
Investment Banking & Brokerage–2.09% |
| |||||||
Goldman Sachs Group, Inc. (The) | 40,561 | 6,775,715 | ||||||
Morgan Stanley | 464,669 | 18,424,126 | ||||||
25,199,841 | ||||||||
IT Consulting & Other Services–0.74% |
| |||||||
Cognizant Technology Solutions Corp.–Class A | 141,599 | 8,988,705 | ||||||
Managed Health Care–0.66% |
| |||||||
Anthem, Inc. | 30,264 | 7,948,234 | ||||||
Multi-Line Insurance–1.61% |
| |||||||
American International Group, Inc. | 492,609 | 19,413,721 | ||||||
Oil & Gas Equipment & Services–1.31% |
| |||||||
Schlumberger Ltd. | 188,674 | 6,807,358 | ||||||
TechnipFMC PLC (United Kingdom) | 462,984 | 9,065,227 | ||||||
15,872,585 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
Shares | Value | |||||||
Oil & Gas Exploration & Production–3.42% |
| |||||||
Anadarko Petroleum Corp. | 221,106 | $ | 9,693,287 | |||||
Apache Corp. | 209,821 | 5,507,801 | ||||||
Canadian Natural Resources Ltd. (Canada) | 280,005 | 6,756,054 | ||||||
Devon Energy Corp. | 493,772 | 11,129,621 | ||||||
Marathon Oil Corp. | 573,605 | 8,225,496 | ||||||
41,312,259 | ||||||||
Other Diversified Financial Services–0.97% |
| |||||||
AXA Equitable Holdings, Inc. | 283,331 | 4,711,795 | ||||||
Voya Financial, Inc. | 174,189 | 6,991,946 | ||||||
11,703,741 | ||||||||
Packaged Foods & Meats–1.37% |
| |||||||
Mondelez International, Inc.–Class A | 412,121 | 16,497,204 | ||||||
Pharmaceuticals–5.68% |
| |||||||
Bristol-Myers Squibb Co. | 176,912 | 9,195,886 | ||||||
Johnson & Johnson | 191,141 | 24,666,746 | ||||||
Merck & Co., Inc. | 169,101 | 12,921,007 | ||||||
Novartis AG (Switzerland) | 150,771 | 12,913,292 | ||||||
Sanofi (France) | 102,929 | 8,895,025 | ||||||
68,591,956 | ||||||||
Railroads–0.77% |
| |||||||
CSX Corp. | 148,705 | 9,239,042 | ||||||
Regional Banks–3.17% |
| |||||||
Citizens Financial Group, Inc. | 489,716 | 14,559,257 | ||||||
Fifth Third Bancorp | 371,276 | 8,736,124 | ||||||
First Horizon National Corp. | 330,712 | 4,352,170 | ||||||
PNC Financial Services Group, Inc. (The) | 91,077 | 10,647,812 | ||||||
38,295,363 | ||||||||
Semiconductors–2.45% |
| |||||||
Intel Corp. | 324,631 | 15,234,933 | ||||||
QUALCOMM Inc. | 251,919 | 14,336,710 | ||||||
29,571,643 | ||||||||
Systems Software–1.37% |
| |||||||
Oracle Corp. | 365,144 | 16,486,252 | ||||||
Tobacco–1.28% |
| |||||||
Philip Morris International Inc. | 232,053 | 15,491,858 | ||||||
Total Common Stocks |
| 743,711,135 | ||||||
Principal Amount | ||||||||
Bonds & Notes–20.26% |
| |||||||
Aerospace & Defense–0.08% | ||||||||
BAE Systems Holdings Inc. (United Kingdom), Sr. Unsec. Gtd. Notes, 2.85%, 12/15/2020(c) | $ | 288,000 | 284,282 | |||||
Precision Castparts Corp., Sr. Unsec. Global Notes, 2.50%, 01/15/2023 | 365,000 | 355,094 |
Principal Amount | Value | |||||||
Aerospace & Defense–(continued) |
| |||||||
United Technologies Corp., Sr. unsec. Global Notes, 4.45%, 11/16/2038 | $ | 327,000 | $ | 318,591 | ||||
957,967 | ||||||||
Agricultural & Farm Machinery–0.10% |
| |||||||
Deere & Co., Sr. Unsec. Notes, 2.60%, 06/08/2022 | 1,275,000 | 1,248,407 | ||||||
Agricultural Products–0.02% |
| |||||||
Ingredion Inc., Sr. Unsec. Notes, 6.63%, 04/15/2037 | 255,000 | 304,585 | ||||||
Air Freight & Logistics–0.13% |
| |||||||
FedEx Corp., | ||||||||
Sr. Unsec. Gtd. Bonds, 4.90%, 01/15/2034 | 440,000 | 451,300 | ||||||
Sr. Unsec. Gtd. Notes, 5.10%, 01/15/2044 | 910,000 | 900,107 | ||||||
United Parcel Service, Inc., Sr. Unsec. Notes, | 258,000 | 223,179 | ||||||
1,574,586 | ||||||||
Airlines–0.17% |
| |||||||
American Airlines Pass Through Trust,Series 2014-1, Class A, Sr. Sec. First Lien Pass Through Ctfs., 3.70%, 04/01/2028 | 349,986 | 340,134 | ||||||
Continental Airlines Pass Through Trust, | 169,858 | 172,231 | ||||||
Series 2012-1, Class A, Sr. Sec. First Lien Pass Through Ctfs., 4.15%, 10/11/2025 | 371,942 | 372,072 | ||||||
United Airlines Pass Through Trust, | 451,991 | 442,926 | ||||||
Series 2018-1, Class AA, Sr. Sec. First Lien Pass Through Ctfs., 3.50%, 09/01/2031 | 543,000 | 534,215 | ||||||
Virgin Australia Pass Through Trust (Australia),Series 2013-1, Class A, Sec. Gtd. First Lien Pass Through Ctfs., 5.00%, 04/23/2025(c) | 167,138 | 169,628 | ||||||
2,031,206 | ||||||||
Application Software–0.89% |
| |||||||
Citrix Systems, Inc., Sr. Unsec. Conv. Notes, 0.50%, 04/15/2019 | 2,171,000 | 3,087,957 | ||||||
Nuance Communications, Inc., | 2,703,000 | 2,354,702 | ||||||
Sr. Unsec. Conv. Global Bonds, 1.25%, 04/01/2025 | 1,713,000 | 1,517,396 | ||||||
RealPage, Inc., Sr. Unsec. Conv. Bonds, 1.50%, 11/15/2022 | 690,000 | 894,972 |
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 | |||||||
Application Software–(continued) |
| |||||||
Workday, Inc., Sr. Unsec. Conv. Notes, 0.25%, 10/01/2022 | $ | 2,389,000 | $ | 2,930,675 | ||||
10,785,702 | ||||||||
Asset Management & Custody Banks–0.32% |
| |||||||
Apollo Management Holdings L.P., Sr. Unsec. Gtd. Notes, 4.00%, 05/30/2024(c) | 2,985,000 | 2,987,779 | ||||||
Brookfield Asset Management Inc. (Canada), Sr. Unsec. Notes, 4.00%, 01/15/2025 | 460,000 | 449,347 | ||||||
Carlyle Holdings Finance LLC, Sr. Unsec. Gtd. Notes, 3.88%, 02/01/2023(c) | 106,000 | 106,622 | ||||||
KKR Group Finance Co. III LLC, Sr. Unsec. Gtd. Bonds, 5.13%, 06/01/2044(c) | 315,000 | 311,312 | ||||||
3,855,060 | ||||||||
Automobile Manufacturers–0.18% |
| |||||||
Ford Motor Credit Co. LLC, Sr. Unsec. Global Notes, | 267,000 | 241,588 | ||||||
3.81%, 01/09/2024 | 445,000 | 411,105 | ||||||
4.13%, 08/04/2025 | 687,000 | 619,979 | ||||||
General Motors Co., Sr. Unsec. Global Notes, 6.60%, 04/01/2036 | 397,000 | 387,786 | ||||||
General Motors Financial Co., Inc., Sr. Unsec. Gtd. Global Notes, 5.25%, 03/01/2026 | 503,000 | 493,045 | ||||||
2,153,503 | ||||||||
Automotive Retail–0.09% |
| |||||||
Advance Auto Parts, Inc., Sr. Unsec. Gtd. Notes, | 660,000 | 676,178 | ||||||
5.75%, 05/01/2020 | 399,000 | 408,737 | ||||||
1,084,915 | ||||||||
Biotechnology–0.79% |
| |||||||
AbbVie Inc., Sr. Unsec. Global Notes, 4.50%, 05/14/2035 | 720,000 | 668,620 | ||||||
BioMarin Pharmaceutical Inc., Sr. Unsec. Sub. Conv. Notes, 1.50%, 10/15/2020 | 2,388,000 | 2,662,620 | ||||||
Celgene Corp., Sr. Unsec. Global Notes, 4.00%, 08/15/2023 | 485,000 | 487,686 | ||||||
4.63%, 05/15/2044 | 1,390,000 | 1,226,875 | ||||||
Gilead Sciences, Inc., Sr. Unsec. Global Notes, | 1,805,000 | 1,790,521 | ||||||
4.40%, 12/01/2021 | 492,000 | 507,911 | ||||||
Neurocrine Biosciences, Inc., Sr. Unsec. Conv. Notes, 2.25%, 05/15/2024 | 1,853,000 | 2,216,618 | ||||||
9,560,851 |
Principal Amount | Value | |||||||
Brewers–0.37% |
| |||||||
Anheuser-Busch Cos. LLC /Anheuser-Busch InBev Worldwide Inc. (Belgium), Sr. Unsec. Gtd. Notes, | $ | 1,005,000 | $ | 938,523 | ||||
4.90%, 02/01/2046(c) | 1,122,000 | 1,044,114 | ||||||
Anheuser-Busch InBev Finance, Inc. (Belgium), Sr. Unsec. Gtd. Global Notes, | 306,000 | 300,919 | ||||||
3.30%, 02/01/2023 | 593,000 | 577,927 | ||||||
Heineken NV (Netherlands), Sr. Unsec. Notes, 3.50%, 01/29/2028(c) | 1,000,000 | 966,735 | ||||||
Molson Coors Brewing Co., Sr. Unsec. Gtd. Global Notes, 1.45%, 07/15/2019 | 341,000 | 337,562 | ||||||
4.20%, 07/15/2046 | 395,000 | 329,844 | ||||||
4,495,624 | ||||||||
Broadcasting–0.65% |
| |||||||
Liberty Media Corp., Liberty Formula One, | 570,000 | 588,479 | ||||||
Sr. Unsec. Conv. Deb., 2.25%, 10/05/2021(d) | 1,538,000 | 731,473 | ||||||
Sr. Unsec. Conv. Notes, 1.38%, 10/15/2023 | 6,063,000 | 6,507,418 | ||||||
7,827,370 | ||||||||
Cable & Satellite–0.90% |
| |||||||
Charter Communications Operating, LLC/Charter Communications Operating Capital Corp., Sr. Sec. Gtd. First Lien Global Notes, 4.46%, 07/23/2022 | 1,065,000 | 1,076,018 | ||||||
Comcast Corp., | 820,000 | 761,460 | ||||||
4.15%, 10/15/2028 | 995,000 | 1,012,163 | ||||||
4.60%, 10/15/2038 | 400,000 | 405,141 | ||||||
4.70%, 10/15/2048 | 480,000 | 489,562 | ||||||
Sr. Unsec. Gtd. Notes, 6.45%, 03/15/2037 | 305,000 | 364,753 | ||||||
DISH Network Corp., Sr. Unsec. Conv. Bonds, 3.38%, 08/15/2026 | 4,954,000 | 4,012,819 | ||||||
GCI Liberty, Inc., Sr. Unsec. Conv. Deb., 1.75%, 10/05/2023(c)(d) | 2,357,000 | 2,306,864 | ||||||
NBCUniversal Media LLC, Sr. Unsec. Gtd. Global Notes, 5.15%, 04/30/2020 | 175,000 | 179,668 | ||||||
5.95%, 04/01/2041 | 215,000 | 247,534 | ||||||
10,855,982 | ||||||||
Commodity Chemicals–0.07% |
| |||||||
Basell Finance Co. B.V. (Netherlands), Sr. Unsec. Gtd. Deb., | 745,000 | 897,742 |
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 | |||||||
Communications Equipment–0.37% |
| |||||||
Finisar Corp., Sr. Unsec. Conv. Bonds, 0.50%, 12/15/2021(d) | $ | 1,114,000 | $ | 1,060,216 | ||||
Viavi Solutions Inc., Sr. Unsec. Conv. Notes, | 1,986,000 | 1,964,686 | ||||||
1.75%, 06/01/2023(c) | 1,424,000 | 1,425,994 | ||||||
4,450,896 | ||||||||
Consumer Finance–0.15% |
| |||||||
American Express Co., Unsec. Sub. Global Notes, 3.63%, 12/05/2024 | 336,000 | 328,872 | ||||||
Capital One Financial Corp., Sr. Unsec. Global Notes, 3.20%, 01/30/2023 | 1,035,000 | 1,008,074 | ||||||
Synchrony Financial, Sr. Unsec. Global Notes, 3.95%, 12/01/2027 | 600,000 | 506,568 | ||||||
1,843,514 | ||||||||
Data Processing & Outsourced Services–0.18% |
| |||||||
Fiserv, Inc., Sr. Unsec. Global Notes, 3.80%, 10/01/2023 | 1,535,000 | 1,546,099 | ||||||
Visa Inc., Sr. Unsec. Global Notes, 4.15%, 12/14/2035 | 670,000 | 694,896 | ||||||
2,240,995 | ||||||||
Diversified Banks–2.64% |
| |||||||
ANZ New Zealand (Int’l) Ltd. (New Zealand), Sr. Unsec. Gtd. Notes, 2.88%, 01/25/2022(c) | 350,000 | 343,389 | ||||||
Australia and New Zealand Banking Group Ltd. (Australia), Sr. Unsec. Medium-Term Global Notes, 2.30%, 06/01/2021 | 713,000 | 696,455 | ||||||
Bank of America Corp., | 255,000 | 245,832 | ||||||
Sr. Unsec. Medium-Term Notes, 3.25%, 10/21/2027 | 565,000 | 523,071 | ||||||
Bank of Montreal (Canada), Sr. Unsec. Medium-Term Notes, 2.10%, 12/12/2019 | 2,580,000 | 2,555,913 | ||||||
BBVA Bancomer S.A. (Mexico), Sr. Unsec. Notes, 4.38%, 04/10/2024(c) | 700,000 | 690,382 | ||||||
Citigroup Inc., | 545,000 | 515,698 | ||||||
Unsec. Sub. Global Notes, 5.30%, 05/06/2044 | 250,000 | 250,317 | ||||||
6.68%, 09/13/2043 | 815,000 | 965,690 | ||||||
Unsec. Sub. Notes, 4.75%, 05/18/2046 | 375,000 | 347,553 | ||||||
Commonwealth Bank of Australia (Australia), Sr. Unsec. Notes, 2.25%, 03/10/2020(c) | 1,085,000 | 1,075,486 | ||||||
Coöperatieve Rabobank U.A. (Netherlands), Jr. Unsec. Sub. Notes, 11.00%(c)(e) | 810,000 | 839,363 |
Principal Amount | Value | |||||||
Diversified Banks–(continued) |
| |||||||
Credit Suisse AG (Switzerland), Sr. Unsec. Conv. Medium-Term Notes, 0.50%, 06/24/2024(c) | $ | 7,880,000 | $ | 6,903,668 | ||||
Unsec. Sub. Notes, 6.50%, 08/08/2023(c) | 686,000 | 717,306 | ||||||
Discover Bank, Sr. Unsec. Notes, 3.35%, 02/06/2023 | 1,500,000 | 1,461,336 | ||||||
JPMorgan Chase & Co., | 415,000 | 391,415 | ||||||
3.51%, 01/23/2029 | 1,145,000 | 1,085,715 | ||||||
3.90%, 01/23/2049 | 1,145,000 | 1,008,198 | ||||||
4.26%, 02/22/2048 | 525,000 | 490,144 | ||||||
4.50%, 01/24/2022 | 80,000 | 82,463 | ||||||
Series V, Jr. Unsec. Sub. Global Notes, 5.00%(e) | 640,000 | 618,400 | ||||||
Mizuho Bank Ltd. (Japan), Sr. Unsec. Gtd. Notes, 2.65%, 09/25/2019(c) | 675,000 | 672,711 | ||||||
Mizuho Financial Group Cayman 3 Ltd. (Japan), Unsec. Gtd. Sub. Notes, 4.60%, 03/27/2024(c) | 200,000 | 203,053 | ||||||
National Australia Bank Ltd. (Australia), | 930,000 | 929,735 | ||||||
Sr. Unsec. Notes, 1.88%, 07/12/2021 | 945,000 | 909,782 | ||||||
Société Générale S.A. (France), | 890,000 | 879,414 | ||||||
Unsec. Sub. Notes, 5.00%, 01/17/2024(c) | 735,000 | 741,821 | ||||||
Standard Chartered PLC (United Kingdom), Sr. Unsec. Notes, 3.05%, 01/15/2021(c) | 680,000 | 670,781 | ||||||
Sumitomo Mitsui Banking Corp. (Japan), Sr. Unsec. Gtd. Medium-Term Global Notes, 2.65%, 07/23/2020 | 715,000 | 707,797 | ||||||
U.S. Bancorp, Series W, Unsec. Sub. Medium-Term Notes, 3.10%, 04/27/2026 | 2,295,000 | 2,176,303 | ||||||
Wells Fargo & Co., | 655,000 | 635,472 | ||||||
Unsec. Sub. Medium-Term Notes, 4.10%, 06/03/2026 | 450,000 | 440,073 | ||||||
4.65%, 11/04/2044 | 1,200,000 | 1,133,624 | ||||||
31,908,360 | ||||||||
Diversified Chemicals–0.02% |
| |||||||
Eastman Chemical Co., Sr. Unsec. Global Notes, 2.70%, 01/15/2020 | 248,000 | 246,207 | ||||||
Diversified Metals & Mining–0.02% |
| |||||||
Rio Tinto Finance USA Ltd. (Australia), Sr. Unsec. Gtd. Global Notes, 7.13%, 07/15/2028 | 200,000 | 249,256 |
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 | |||||||
Drug Retail–0.15% |
| |||||||
CVS Pass Through Trust, Sr. Sec. First Lien Global Pass Through Ctfs., 6.04%, 12/10/2028 | $ | 750,434 | $ | 799,335 | ||||
Walgreens Boots Alliance Inc., Sr. Unsec. Global Notes, 3.30%, 11/18/2021 | 602,000 | 599,612 | ||||||
4.50%, 11/18/2034 | 444,000 | 427,433 | ||||||
1,826,380 | ||||||||
Electric Utilities–0.21% |
| |||||||
Electricite de France S.A. (France), Jr. Unsec. Sub. Notes, 5.63%(c)(e) | 745,000 | 688,194 | ||||||
Sr. Unsec. Notes, 4.60%, 01/27/2020(c) | 150,000 | 152,190 | ||||||
4.88%, 01/22/2044(c) | 930,000 | 843,135 | ||||||
NextEra Energy Capital Holdings, Inc., Sr. Unsec. Gtd. Deb., 3.55%, 05/01/2027 | 569,000 | 544,234 | ||||||
Ohio Power Co., Series M, Sr. Unsec. Notes, 5.38%, 10/01/2021 | 200,000 | 211,584 | ||||||
PPL Electric Utilities Corp., Sr. Sec. First Mortgage Bonds, 6.25%, 05/15/2039 | 50,000 | 62,743 | ||||||
Virginia Electric & Power Co., Sr. Unsec. Notes, 5.00%, 06/30/2019 | 15,000 | 15,117 | ||||||
2,517,197 | ||||||||
Environmental & Facilities Services–0.04% |
| |||||||
Waste Management, Inc., Sr. Unsec. Gtd. Global Notes, 3.90%, 03/01/2035 | 469,000 | 457,003 | ||||||
Financial Exchanges & Data–0.08% |
| |||||||
Moody’s Corp., Sr. Unsec. Global Notes, 4.50%, 09/01/2022 | 935,000 | 962,477 | ||||||
Food Retail–0.01% |
| |||||||
Alimentation Couche-Tard Inc. (Canada), Sr. Unsec. Gtd. Notes, 4.50%, 07/26/2047(c) | 120,000 | 110,433 | ||||||
General Merchandise Stores–0.03% |
| |||||||
Dollar General Corp., Sr. Unsec. Global Notes, 3.25%, 04/15/2023 | 365,000 | 357,198 | ||||||
Health Care Distributors–0.09% |
| |||||||
McKesson Corp., Sr. Unsec. Global Notes, 2.28%, 03/15/2019 | 1,095,000 | 1,092,789 | ||||||
Health Care Equipment–1.31% |
| |||||||
Becton, Dickinson and Co., | 750,000 | 713,385 | ||||||
Sr. Unsec. Notes, 2.68%, 12/15/2019 | 274,000 | 271,462 | ||||||
DexCom, Inc., Sr. Unsec. Conv. Notes, 0.75%, 05/15/2022 | 2,591,000 | 3,501,317 | ||||||
0.75%, 12/01/2023(c) | 2,902,000 | 2,938,435 |
Principal Amount | Value | |||||||
Health Care Equipment–(continued) |
| |||||||
Insulet Corp., Sr. Unsec. Conv. Notes, 1.38%, 11/15/2024(c) | $ | 476,000 | $ | 506,709 | ||||
Medtronic, Inc., Sr. Unsec. Gtd. Global Notes, | 1,076,000 | 1,073,467 | ||||||
4.38%, 03/15/2035 | 358,000 | 367,550 | ||||||
4.63%, 03/15/2044 | 525,000 | 546,668 | ||||||
NuVasive, Inc., Sr. Unsec. Conv. Notes, 2.25%, 03/15/2021 | 1,880,000 | 1,983,315 | ||||||
Wright Medical Group N.V., Sr. Unsec. Conv. Bonds, 2.25%, 11/15/2021 | 986,000 | 1,354,987 | ||||||
Wright Medical Group, Inc., Sr. Unsec. Gtd. Conv. Notes, 1.63%, 06/15/2023(c) | 2,525,000 | 2,583,938 | ||||||
15,841,233 | ||||||||
Health Care Facilities–0.93% |
| |||||||
Convertible Trust–Consumer,Series 2018-1, Sr. Unsec. Medium-Term Notes, 0.25%, 02/05/2024 | 5,897,000 | 5,693,554 | ||||||
Convertible Trust–Healthcare,Series 2018-1, Sr. Unsec. Medium-Term Notes, 0.25%, 01/17/2024 | 5,674,000 | 5,490,162 | ||||||
11,183,716 | ||||||||
Health Care REITs–0.10% |
| |||||||
HCP, Inc., Sr. Unsec. Global Notes, 3.88%, 08/15/2024 | 505,000 | 497,584 | ||||||
4.20%, 03/01/2024 | 480,000 | 481,689 | ||||||
Ventas Realty L.P., Sr. Unsec. Gtd. Notes, 5.70%, 09/30/2043 | 215,000 | 235,020 | ||||||
1,214,293 | ||||||||
Health Care Services–0.29% |
| |||||||
CVS Health Corp., | 375,000 | 364,113 | ||||||
Sr. Unsec. Global Notes, 4.10%, 03/25/2025 | 1,359,000 | 1,348,907 | ||||||
Express Scripts Holding Co., Sr. Unsec. Gtd. Global Notes, 2.25%, 06/15/2019 | 575,000 | 572,618 | ||||||
Cigna Corp., Sr. Sec. Gtd. Notes, 4.80%, 08/15/2038(c) | 326,000 | 324,280 | ||||||
Laboratory Corp. of America Holdings, Sr. Unsec. Notes, 3.20%, 02/01/2022 | 602,000 | 597,851 | ||||||
4.70%, 02/01/2045 | 264,000 | 246,981 | ||||||
3,454,750 | ||||||||
Home Improvement Retail–0.05% |
| |||||||
Home Depot, Inc. (The), Sr. Unsec. Global Notes, 2.00%, 04/01/2021 | 631,000 | 618,713 | ||||||
Homebuilding–0.07% |
| |||||||
MDC Holdings, Inc., Sr. Unsec. Gtd. Notes, 6.00%, 01/15/2043 | 1,050,000 | 824,250 |
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 | |||||||
Hotel & Resort REITs–0.04% |
| |||||||
Hospitality Properties Trust, Sr. Unsec. Notes, 4.50%, 06/15/2023 | $ | 270,000 | $ | 272,528 | ||||
5.00%, 08/15/2022 | 200,000 | 204,426 | ||||||
476,954 | ||||||||
Housewares & Specialties–0.04% |
| |||||||
Tupperware Brands Corp., Sr. Unsec. Gtd. Global Notes, 4.75%, 06/01/2021 | 475,000 | 486,867 | ||||||
Insurance Brokers–0.02% |
| |||||||
Willis North America, Inc., Sr. Unsec. Gtd. Global Notes, 3.60%, 05/15/2024 | 250,000 | 244,367 | ||||||
Integrated Oil & Gas–0.13% |
| |||||||
Husky Energy Inc. (Canada), Sr. Unsec. Global Notes, 3.95%, 04/15/2022 | 300,000 | 301,761 | ||||||
Occidental Petroleum Corp., Sr. Unsec. Global Notes, 3.40%, 04/15/2026 | 365,000 | 357,634 | ||||||
Petróleos Mexicanos (Mexico), Sr. Unsec. Gtd. Global Notes, 4.88%, 01/24/2022 | 570,000 | 556,320 | ||||||
Suncor Energy Inc. (Canada), Sr. Unsec. Notes, 3.60%, 12/01/2024 | 334,000 | 327,091 | ||||||
1,542,806 | ||||||||
Integrated Telecommunication Services–0.56% |
| |||||||
AT&T Inc., Sr. Unsec. Global Notes, 3.00%, 06/30/2022 | 520,000 | 507,521 | ||||||
3.40%, 05/15/2025 | 289,000 | 272,047 | ||||||
4.30%, 02/15/2030 | 348,000 | 329,792 | ||||||
4.50%, 05/15/2035 | 463,000 | 417,256 | ||||||
4.80%, 06/15/2044 | 935,000 | 841,708 | ||||||
5.15%, 03/15/2042 | 90,000 | 84,444 | ||||||
5.15%, 11/15/2046 | 140,000 | 130,729 | ||||||
5.35%, 09/01/2040 | 101,000 | 98,664 | ||||||
Orange S.A. (France), Sr. Unsec. Global Notes, 1.63%, 11/03/2019 | 1,455,000 | 1,437,111 | ||||||
Telefónica Emisiones, S.A.U. (Spain), Sr. Unsec. Gtd. Global Notes, 4.67%, 03/06/2038 | 750,000 | 681,249 | ||||||
5.21%, 03/08/2047 | 700,000 | 643,842 | ||||||
7.05%, 06/20/2036 | 360,000 | 411,679 | ||||||
Verizon Communications Inc., Sr. Unsec. Global Notes, 4.13%, 08/15/2046 | 83,000 | 73,617 | ||||||
4.40%, 11/01/2034 | 325,000 | 314,424 | ||||||
4.81%, 03/15/2039 | 503,000 | 496,417 | ||||||
6,740,500 | ||||||||
Internet & Direct Marketing Retail–0.57% |
| |||||||
Amazon.com, Inc., Sr. Unsec. Global Notes, 2.60%, 12/05/2019 | 1,660,000 | 1,656,040 |
Principal Amount | Value | |||||||
Internet & Direct Marketing Retail–(continued) |
| |||||||
Ctrip.com International, Ltd. (China), Sr. Unsec. Conv. Bonds, 1.25%, 09/15/2019(d) | $ | 2,992,000 | $ | 2,900,433 | ||||
Liberty Expedia Holdings, Inc., Sr. Unsec. Conv. Deb., 1.00%, 07/05/2022(c)(d) | 1,574,000 | 1,508,287 | ||||||
QVC, Inc., Sr. Sec. Gtd. First Lien Global Notes, 5.45%, 08/15/2034 | 880,000 | 771,294 | ||||||
6,836,054 | ||||||||
Investment Banking & Brokerage–0.56% |
| |||||||
Goldman Sachs Group, Inc. (The), Sr. Unsec. Global Notes, 5.25%, 07/27/2021 | 400,000 | 415,370 | ||||||
Unsec. Sub. Notes, 4.25%, 10/21/2025 | 552,000 | 529,310 | ||||||
GS Finance Corp., Series 0001, Sr. Unsec. Conv. Medium-Term Notes, 0.25%, 07/08/2024 | 5,920,000 | 5,158,925 | ||||||
Morgan Stanley, Sr. Unsec. Medium-Term Global Notes, 4.00%, 07/23/2025 | 680,000 | 671,728 | ||||||
6,775,333 | ||||||||
IT Consulting & Other Services–0.04% |
| |||||||
DXC Technology Co., Sr. Unsec. Global Notes, 4.45%, 09/18/2022 | 490,000 | 500,398 | ||||||
Life & Health Insurance–0.35% |
| |||||||
Athene Global Funding, Sec. Notes, 4.00%, 01/25/2022(c) | 1,220,000 | 1,232,968 | ||||||
Jackson National Life Global Funding, Sr. Sec. Notes, 2.10%, 10/25/2021(c) | 525,000 | 506,802 | ||||||
3.25%, 01/30/2024(c) | 480,000 | 470,944 | ||||||
Nationwide Financial Services Inc., Sr. Unsec. Notes, 5.30%, 11/18/2044(c) | 445,000 | 472,136 | ||||||
Prudential Financial, Inc., Sr. Unsec. Global Notes, | 155,000 | 138,951 | ||||||
3.94%, 12/07/2049 | 496,000 | 445,974 | ||||||
Reliance Standard Life Global Funding II, Sr. Sec. First Lien Notes, 3.05%, 01/20/2021(c) | 465,000 | 460,872 | ||||||
Teachers Insurance and Annuity Association of America, Unsec. Sub. Notes, 4.27%, 05/15/2047(c) | 498,000 | 478,480 | ||||||
4,207,127 | ||||||||
Movies & Entertainment–0.18% |
| |||||||
Live Nation Entertainment, Inc., Sr. Unsec. Conv. Notes, 2.50%, 03/15/2023(c) | 2,147,000 | 2,191,520 | ||||||
Multi-Line Insurance–0.17% |
| |||||||
American Financial Group, Inc., Sr. Unsec. Notes, 4.50%, 06/15/2047 | 520,000 | 469,014 |
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 | |||||||
Multi-Line Insurance–(continued) |
| |||||||
American International Group, Inc., Sr. Unsec. Global Notes, 2.30%, 07/16/2019 | $ | 385,000 | $ | 383,443 | ||||
4.38%, 01/15/2055 | 720,000 | 601,045 | ||||||
Metropolitan Life Global Funding I, Sec. Notes, 2.05%, 06/12/2020(c) | 590,000 | 580,627 | ||||||
2,034,129 | ||||||||
Multi-Utilities–0.09% |
| |||||||
NiSource Inc., Sr. Unsec. Global Notes, 4.38%, 05/15/2047 | 616,000 | 576,115 | ||||||
Sempra Energy, Sr. Unsec. Global Notes, 3.80%, 02/01/2038 | 605,000 | 521,657 | ||||||
1,097,772 | ||||||||
Office REITs–0.06% |
| |||||||
Government Properties Income Trust, Sr. Unsec. Global Notes, 4.00%, 07/15/2022 | 730,000 | 718,975 | ||||||
Oil & Gas Equipment & Services–0.37% |
| |||||||
Ensco Jersey Finance Ltd., Sr. Unsec. Gtd. Conv. Bonds, 3.00%, 01/31/2024 | 2,100,000 | 1,393,904 | ||||||
Helix Energy Solutions Group, Inc., Sr. Unsec. Conv. Notes, 4.25%, 05/01/2022 | 1,105,000 | 1,025,226 | ||||||
Nabors Industries Inc., Sr. Unsec. Gtd. Conv. Bonds, 0.75%, 01/15/2024 | 1,150,000 | 711,948 | ||||||
Oil States International, Inc., Sr. Unsec. Conv. Notes, 1.50%, 02/15/2023(c) | 1,595,000 | 1,315,269 | ||||||
4,446,347 | ||||||||
Oil & Gas Exploration & Production–0.19% |
| |||||||
Anadarko Petroleum Corp., Sr. Unsec. Notes, 6.60%, 03/15/2046 | 443,000 | 491,334 | ||||||
Chesapeake Energy Corp., Sr. Unsec. Gtd. Conv. Bonds, 5.50%, 09/15/2026 | 1,042,000 | 841,271 | ||||||
ConocoPhillips Co., Sr. Unsec. Gtd. Global Notes, 4.15%, 11/15/2034 | 237,000 | 226,306 | ||||||
Noble Energy, Inc., Sr. Unsec. Global Notes, 5.25%, 11/15/2043 | 830,000 | 740,009 | ||||||
2,298,920 | ||||||||
Oil & Gas Storage & Transportation–0.81% |
| |||||||
Enable Midstream Partners, LP, Sr. Unsec. Global Notes, 2.40%, 05/15/2019 | 440,000 | 437,547 | ||||||
Energy Transfer Partners, L.P., Sr. Unsec. Gtd. Notes, 4.20%, 09/15/2023 | 1,892,000 | 1,866,490 | ||||||
4.90%, 03/15/2035 | 357,000 | 320,915 |
Principal Amount | Value | |||||||
Oil & Gas Storage & Transportation–(continued) |
| |||||||
Enterprise Products Operating LLC, Sr. Unsec. Gtd. Global Bonds, 6.45%, 09/01/2040 | $ | 25,000 | $ | 29,464 | ||||
Sr. Unsec. Gtd. Global Notes, 4.25%, 02/15/2048 | 754,000 | 671,917 | ||||||
5.25%, 01/31/2020 | 155,000 | 157,924 | ||||||
Sr. Unsec. Gtd. Notes, 2.55%, 10/15/2019 | 370,000 | 368,114 | ||||||
Series N, Sr. Unsec. Gtd. Notes, 6.50%, 01/31/2019 | 245,000 | 245,543 | ||||||
Kinder Morgan Inc., Sr. Unsec. Gtd. Notes, 5.30%, 12/01/2034 | 422,000 | 415,437 | ||||||
MPLX LP, | 1,820,000 | 1,839,890 | ||||||
Sr. Unsec. Global Notes, 4.50%, 04/15/2038 | 877,000 | 769,114 | ||||||
Plains All American Pipeline L.P./ PAA Finance Corp., Sr. Unsec. Global Notes, 3.65%, 06/01/2022 | 355,000 | 348,774 | ||||||
Spectra Energy Partners, L.P., Sr. Unsec. Global Notes, 4.50%, 03/15/2045 | 536,000 | 487,084 | ||||||
Sunoco Logistics Partners Operations L.P., Sr. Unsec. Gtd. Notes, | 645,000 | 572,056 | ||||||
5.50%, 02/15/2020 | 535,000 | 545,420 | ||||||
Texas Eastern Transmission L.P., Sr. Unsec. Notes, 7.00%, 07/15/2032 | 185,000 | 223,995 | ||||||
Western Gas Partners, LP, Sr. Unsec. Notes, 5.45%, 04/01/2044 | 600,000 | 522,624 | ||||||
9,822,308 | ||||||||
Other Diversified Financial Services–0.24% |
| |||||||
ERAC USA Finance LLC, Sr. Unsec. Gtd. Notes, 2.35%, 10/15/2019(c) | 935,000 | 928,792 | ||||||
MassMutual Global Funding II, Sec. Notes, 2.00%, 04/15/2021(c) | 945,000 | 920,381 | ||||||
NXP Funding LLC (Netherlands), Sr. Unsec. Gtd. Notes, 5.35%, 03/01/2026(c) | 720,000 | 733,140 | ||||||
SMBC Aviation Capital Finance DAC (Ireland), Sr. Unsec. Gtd. Notes, 2.65%, 07/15/2021(c) | 315,000 | 306,690 | ||||||
2,889,003 | ||||||||
Packaged Foods & Meats–0.07% |
| |||||||
General Mills, Inc., Sr. Unsec. Global Notes, 2.20%, 10/21/2019 | 850,000 | 843,713 | ||||||
Mead Johnson Nutrition Co. (United Kingdom), Sr. Unsec. Gtd. Global Notes, 4.13%, 11/15/2025 | 64,000 | 65,744 | ||||||
909,457 | ||||||||
Paper Packaging–0.12% |
| |||||||
International Paper Co., Sr. Unsec. Global Notes, 6.00%, 11/15/2041 | 245,000 | 259,184 |
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 | |||||||
Paper Packaging–(continued) |
| |||||||
Packaging Corp. of America, Sr. Unsec. Global Notes, 4.50%, 11/01/2023 | $ | 1,139,000 | $ | 1,168,682 | ||||
1,427,866 | ||||||||
Pharmaceuticals–0.79% |
| |||||||
Allergan Funding SCS, Sr. Unsec. Gtd. Global Notes, 4.85%, 06/15/2044 | 950,000 | 901,296 | ||||||
Bayer US Finance II LLC (Germany), Sr. Unsec. Gtd. Notes, 2.13%, 07/15/2019(c) | 305,000 | 302,648 | ||||||
4.38%, 12/15/2028(c) | 985,000 | 942,882 | ||||||
Bayer US Finance LLC (Germany), Sr. Unsec. Gtd. Notes, 2.38%, 10/08/2019(c) | 2,270,000 | 2,252,304 | ||||||
3.00%, 10/08/2021(c) | 590,000 | 577,236 | ||||||
GlaxoSmithKline Capital Inc. (United Kingdom), Sr. Unsec. Gtd. Global Bonds, 6.38%, 05/15/2038 | 70,000 | 88,207 | ||||||
Jazz Investments I Ltd., Sr. Unsec. Gtd. Conv. Bonds, 1.88%, 08/15/2021 | 1,455,000 | 1,414,665 | ||||||
Medicines Co. (The), Sr. Unsec. Conv. Bonds, 2.75%, 07/15/2023 | 938,000 | 711,609 | ||||||
Mylan N.V., Sr. Unsec. Gtd. Global Notes, 3.15%, 06/15/2021 | 431,000 | 422,306 | ||||||
Pacira Pharmaceuticals, Inc., Sr. Unsec. Conv. Notes, 2.38%, 04/01/2022 | 792,000 | 787,545 | ||||||
Supernus Pharmaceuticals, Inc., Sr. Unsec. Conv. Notes, 0.63%, 04/01/2023(c) | 765,000 | 722,925 | ||||||
Zoetis Inc., Sr. Unsec. Global Notes, 4.70%, 02/01/2043 | 365,000 | 371,878 | ||||||
9,495,501 | ||||||||
Property & Casualty Insurance–0.26% |
| |||||||
Allstate Corp. (The), Sr. Unsec. Bonds, 3.28%, 12/15/2026 | 320,000 | 314,332 | ||||||
CNA Financial Corp., Sr. Unsec. Global Bonds, 5.88%, 08/15/2020 | 325,000 | 337,225 | ||||||
Liberty Mutual Group Inc., Sr. Unsec. Gtd. Bonds, 4.85%, 08/01/2044(c) | 975,000 | 951,397 | ||||||
Markel Corp., Sr. Unsec. Notes, 5.00%, 03/30/2043 | 385,000 | 385,819 | ||||||
Travelers Cos., Inc. (The), Sr. Unsec. Global Notes, 4.60%, 08/01/2043 | 665,000 | 691,947 | ||||||
WR Berkley Corp., Sr. Unsec. Global Notes, 4.63%, 03/15/2022 | 420,000 | 431,995 | ||||||
3,112,715 | ||||||||
Railroads–0.22% |
| |||||||
Burlington Northern Santa Fe, LLC, Sr. Unsec. Deb., 5.15%, 09/01/2043 | 991,000 | 1,113,425 | ||||||
CSX Corp., Sr. Unsec. Notes, 5.50%, 04/15/2041 | 380,000 | 423,180 |
Principal Amount | Value | |||||||
Railroads–(continued) |
| |||||||
Union Pacific Corp., | $ | 101,000 | $ | 101,565 | ||||
Sr. Unsec. Notes, 4.15%, 01/15/2045 | 440,000 | 413,922 | ||||||
4.85%, 06/15/2044 | 570,000 | 598,807 | ||||||
2,650,899 | ||||||||
Regional Banks–0.07% |
| |||||||
Citizens Financial Group, Inc., Sr. Unsec. Global Notes, 2.38%, 07/28/2021 | 455,000 | 443,523 | ||||||
SunTrust Banks, Inc., Unsec. Sub. Global Notes, 3.30%, 05/15/2026 | 385,000 | 365,377 | ||||||
808,900 | ||||||||
Reinsurance–0.03% |
| |||||||
Reinsurance Group of America, Inc., Sr. Unsec. Medium-Term Notes, 4.70%, 09/15/2023 | 386,000 | 403,183 | ||||||
Renewable Electricity–0.05% |
| |||||||
Oglethorpe Power Corp., Sr. Sec. First Mortgage Bonds, 4.55%, 06/01/2044 | 581,000 | 550,900 | ||||||
Semiconductors–0.88% |
| |||||||
Broadcom Corp./Broadcom Cayman Finance Ltd., Sr. Unsec. Gtd. Global Notes, 3.63%, 01/15/2024 | 670,000 | 634,562 | ||||||
Cree, Inc., Sr. Unsec. Conv. Notes, 0.88%, 09/01/2023(c) | 3,529,000 | 3,423,366 | ||||||
Microchip Technology Inc., Sr. Unsec. Sub. Conv. Notes, 1.63%, 02/15/2027 | 2,180,000 | 2,136,221 | ||||||
Micron Technology, Inc., Series G, Sr. Unsec. Conv. Global Bonds, 3.00%, 11/15/2028(d) | 1,566,000 | 1,739,857 | ||||||
ON Semiconductor Corp., Sr. Unsec. Gtd. Conv. Bonds, 1.00%, 12/01/2020 | 1,702,000 | 1,880,710 | ||||||
Silicon Laboratories Inc., Sr. Unsec. Conv. Bonds, 1.38%, 03/01/2022 | 619,000 | 655,431 | ||||||
Texas Instruments Inc., Sr. Unsec. Notes, 2.63%, 05/15/2024 | 230,000 | 222,412 | ||||||
10,692,559 | ||||||||
Specialized Finance–0.34% |
| |||||||
AerCap Ireland Capital DAC/AerCap Global Aviation Trust (Ireland), Sr. Unsec. Gtd. Global Notes, 3.95%, 02/01/2022 | 385,000 | 378,352 | ||||||
Air Lease Corp., Sr. Unsec. Global Notes, | 649,000 | 610,041 | ||||||
4.25%, 09/15/2024 | 430,000 | 420,811 | ||||||
Aircastle Ltd., Sr. Unsec. Notes, 4.40%, 09/25/2023 | 835,000 | 822,056 |
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 | |||||||
Specialized Finance–(continued) |
| |||||||
Aviation Capital Group LLC, Sr. Unsec. Notes, 2.88%, 01/20/2022(c) | $ | 1,115,000 | $ | 1,079,627 | ||||
4.88%, 10/01/2025(c) | 735,000 | 735,468 | ||||||
4,046,355 | ||||||||
Specialized REITs–0.33% |
| |||||||
Crown Castle International Corp., Sr. Unsec. Global Bonds, 3.80%, 02/15/2028 | 1,917,000 | 1,802,491 | ||||||
Sr. Unsec. Global Notes, 4.75%, 05/15/2047 | 50,000 | 46,467 | ||||||
EPR Properties, Sr. Unsec. Gtd. Global Notes, 4.75%, 12/15/2026 | 1,710,000 | 1,695,077 | ||||||
Life Storage LP, Sr. Unsec. Gtd. Global Notes, 3.50%, 07/01/2026 | 444,000 | 417,114 | ||||||
3,961,149 | ||||||||
Specialty Chemicals–0.01% |
| |||||||
Sherwin-Williams Co. (The), Sr. Unsec. Global Notes, 4.50%, 06/01/2047 | 170,000 | 154,094 | ||||||
Systems Software–0.30% |
| |||||||
FireEye, Inc., | 1,722,000 | 1,655,286 | ||||||
Series B, Sr. Unsec. Conv. Bonds, 1.63%, 06/01/2022(d) | 1,745,000 | 1,594,052 | ||||||
Microsoft Corp., Sr. Unsec. Global Notes, 3.50%, 02/12/2035 | 403,000 | 385,739 | ||||||
3,635,077 | ||||||||
Technology Distributors–0.06% |
| |||||||
Avnet, Inc., Sr. Unsec. Global Notes, 4.63%, 04/15/2026 | 705,000 | 690,185 | ||||||
Technology Hardware, Storage & Peripherals–0.46% |
| |||||||
Apple Inc., Sr. Unsec. Global Notes, 2.15%, 02/09/2022 | 716,000 | 698,378 | ||||||
3.35%, 02/09/2027 | 335,000 | 328,081 | ||||||
Dell International LLC/ EMC Corp., Sr. Sec. Gtd. First Lien Notes, | 645,000 | 656,962 | ||||||
8.35%, 07/15/2046(c) | 14,000 | 15,217 | ||||||
SanDisk Corp., Sr. Unsec. Gtd. Conv. Bonds, 0.50%, 10/15/2020 | 2,520,000 | 2,121,790 | ||||||
Western Digital Corp., Sr. Unsec. Gtd. Conv. Notes, 1.50%, 02/01/2024(c) | 2,107,000 | 1,712,782 | ||||||
5,533,210 | ||||||||
Tobacco–0.13% |
| |||||||
Philip Morris International Inc., Sr. Unsec. Global Notes, 3.60%, 11/15/2023 | 405,000 | 406,172 | ||||||
4.88%, 11/15/2043 | 1,210,000 | 1,203,755 | ||||||
1,609,927 |
Principal Amount | Value | |||||||
Wireless Telecommunication Services–0.22% |
| |||||||
América Móvil, S.A.B. de C.V. (Mexico), Sr. Unsec. Global Notes, 4.38%, 07/16/2042 | $ | 600,000 | $ | 578,481 | ||||
Rogers Communications Inc. (Canada), Sr. Unsec. Gtd. Global Notes, 4.30%, 02/15/2048 | 1,515,000 | 1,449,225 | ||||||
4.50%, 03/15/2043 | 585,000 | 580,306 | ||||||
2,608,012 | ||||||||
Total Bonds & Notes | 244,632,529 | |||||||
U.S. Treasury Securities–12.84% |
| |||||||
U.S. Treasury Bills–0.00% | ||||||||
0.98%, 01/24/2019(f)(g) | 40,000 | 39,945 | ||||||
U.S. Treasury Notes–11.30% |
| |||||||
1.25%, 01/31/2019 | 11,775,000 | 11,764,976 | ||||||
3.63%, 08/15/2019 | 1,525,000 | 1,534,744 | ||||||
3.38%, 11/15/2019 | 300,000 | 301,830 | ||||||
3.63%, 02/15/2020 | 46,000 | 46,504 | ||||||
2.63%, 11/15/2020 | 600,000 | 601,148 | ||||||
2.50%, 12/31/2020 | 71,210,000 | 71,200,552 | ||||||
2.63%, 12/15/2021 | 16,096,000 | 16,169,432 | ||||||
2.63%, 12/31/2023 | 15,466,500 | 15,547,880 | ||||||
2.63%, 12/31/2025 | 2,535,000 | 2,542,503 | ||||||
3.13%, 11/15/2028 | 16,119,400 | 16,734,039 | ||||||
136,443,608 | ||||||||
U.S. Treasury Bonds–1.54% |
| |||||||
4.50%, 02/15/2036 | 4,000,000 | 4,936,247 | ||||||
4.50%, 08/15/2039 | 40,000 | 49,936 | ||||||
4.38%, 05/15/2040 | 80,000 | 98,390 | ||||||
3.00%, 08/15/2048 | 13,556,100 | 13,519,328 | ||||||
18,603,901 | ||||||||
Total U.S. Treasury Securities |
| 155,087,454 | ||||||
Shares | ||||||||
Preferred Stocks–0.54% |
| |||||||
Asset Management & Custody Banks–0.19% |
| |||||||
AMG Capital Trust II, $2.58 Conv. Pfd. | 47,000 | 2,267,750 | ||||||
Diversified Banks–0.02% |
| |||||||
Wells Fargo & Co., Series Q, 5.85% Pfd. | 12,000 | 294,840 | ||||||
Oil & Gas Storage & Transportation–0.33% |
| |||||||
El Paso Energy Capital Trust I, $2.38 Conv. Pfd. | 95,499 | 3,987,083 | ||||||
Total Preferred Stocks |
| 6,549,673 |
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–0.09% |
| |||||||
Federal Home Loan Mortgage Corp. (FHLMC)–0.09% |
| |||||||
Unsec. Global Notes, 6.75%, 03/15/2031 | $ | 750,000 | $ | 1,020,887 | ||||
U.S. Government Sponsored Agency |
| |||||||
Federal Home Loan Mortgage Corp. (FHLMC)–0.00% |
| |||||||
Pass Through Ctfs., 5.50%, 02/01/2037 | 17 | 18 | ||||||
Federal National Mortgage Association (FNMA)–0.00% |
| |||||||
Pass Through Ctfs., |
| |||||||
5.50%, 03/01/2021 | 35 | 36 | ||||||
9.50%, 04/01/2030 | 1,421 | 1,583 | ||||||
1,619 | ||||||||
Total U.S. Government Sponsored Agency Mortgage-Backed Securities |
| 1,637 |
Shares | Value | |||||||
Money Market Funds–4.46% |
| |||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30%(h) | 18,865,936 | $ | 18,865,936 | |||||
Invesco Liquid Assets Portfolio–Institutional Class, 2.48%(h) | 13,476,522 | 13,477,870 | ||||||
Invesco Treasury Portfolio–Institutional Class, 2.30%(h) | 21,561,069 | 21,561,069 | ||||||
Total Money Market Funds |
| 53,904,875 | ||||||
TOTAL INVESTMENTS IN SECURITIES–99.76% |
| 1,204,908,190 | ||||||
OTHER ASSETS LESS LIABILITIES–0.24% | 2,926,899 | |||||||
NET ASSETS–100.00% | $ | 1,207,835,089 |
Investment Abbreviations:
Conv. | – Convertible | |
Ctfs. | – Certificates | |
DAC | – Designated Activity Co. | |
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 December 31, 2018 was $58,804,005, which represented 4.87% 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) | Security traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. |
(g) | All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 1K. |
(h) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
Open Futures Contracts | ||||||||||||||||||||
Short Futures Contracts | Number of Contracts | Expiration Month | Notional Value | Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
U.S. Treasury 5 Year Notes | 18 | March-2019 | $ | (2,064,375 | ) | $ | (35,199 | ) | $ | (35,199 | ) | |||||||||
U.S. Treasury 10 Year Notes | 17 | March-2019 | (2,074,266 | ) | (51,306 | ) | (51,306 | ) | ||||||||||||
Total Futures Contracts — Interest Rate Risk | $ | (86,505 | ) | $ | (86,505 | ) |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
Open Forward Foreign Currency Contracts | ||||||||||||||||||||||
Settlement
| Counterparty | Contract to | Unrealized Appreciation (Depreciation) | |||||||||||||||||||
Deliver | Receive | |||||||||||||||||||||
02/01/2019 | Bank of New York Mellon (The) | AUD | 3,018,851 | USD | 2,170,765 | $ | 43,176 | |||||||||||||||
02/01/2019 | Bank of New York Mellon (The) | CAD | 3,465,052 | USD | 2,580,372 | 40,310 | ||||||||||||||||
02/01/2019 | State Street Bank and Trust Co. | AUD | 3,018,793 | USD | 2,171,191 | 43,643 | ||||||||||||||||
02/01/2019 | State Street Bank and Trust Co. | CAD | 3,465,071 | USD | 2,580,021 | 39,945 | ||||||||||||||||
Subtotal — Appreciation | 167,074 | |||||||||||||||||||||
02/01/2019 | Bank of New York Mellon (The) | CHF | 4,786,579 | USD | 4,849,870 | (32,732 | ) | |||||||||||||||
02/01/2019 | Bank of New York Mellon (The) | EUR | 2,941,582 | USD | 3,371,759 | (6,710 | ) | |||||||||||||||
02/01/2019 | Bank of New York Mellon (The) | GBP | 10,737,237 | USD | 13,618,681 | (86,649 | ) | |||||||||||||||
02/01/2019 | State Street Bank and Trust Co. | CHF | 4,786,626 | USD | 4,848,689 | (33,960 | ) | |||||||||||||||
02/01/2019 | State Street Bank and Trust Co. | EUR | 2,941,582 | USD | 3,372,215 | (6,254 | ) | |||||||||||||||
02/01/2019 | State Street Bank and Trust Co. | GBP | 10,737,221 | USD | 13,621,453 | (83,858 | ) | |||||||||||||||
02/01/2019 | State Street Bank and Trust Co. | USD | 675,618 | AUD | 946,037 | (8,881 | ) | |||||||||||||||
Subtotal — Depreciation | (259,044 | ) | ||||||||||||||||||||
Total Forward Foreign Currency Contracts — Currency Risk |
| $ | (91,970 | ) |
Abbreviations:
AUD | – Australian Dollar | |
CHF | – Swiss Franc | |
GBP | – British Pound Sterling | |
CAD | – Canadian Dollar | |
EUR | – Euro | |
USD | – U.S. Dollar |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $1,064,289,663) | $ | 1,151,003,315 | ||
Investments in affiliated money market funds, at value (Cost $53,904,798) | 53,904,875 | |||
Other investments: | ||||
Unrealized appreciation on forward foreign currency contracts outstanding | 167,074 | |||
Foreign currencies, at value (Cost $434,460) | 436,385 | |||
Receivable for: | ||||
Fund shares sold | 346,809 | |||
Dividends and interest | 3,981,124 | |||
Investment for trustee deferred compensation and retirement plans | 138,856 | |||
Total assets | 1,209,978,438 | |||
Liabilities: | ||||
Other investments: | ||||
Unrealized depreciation on forward foreign currency contracts outstanding | 259,044 | |||
Variation margin payable — futures contracts | 11,141 | |||
Payable for: | ||||
Investments purchased | 142,257 | |||
Amount due to custodian | 11,341 | |||
Fund shares reacquired | 317,108 | |||
Accrued fees to affiliates | 1,185,629 | |||
Accrued trustees’ and officers’ fees and benefits | 7,554 | |||
Accrued other operating expenses | 54,079 | |||
Trustee deferred compensation and retirement plans | 155,196 | |||
Total liabilities | 2,143,349 | |||
Net assets applicable to shares outstanding | $ | 1,207,835,089 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 1,014,076,655 | ||
Distributable earnings | 193,758,434 | |||
$ | 1,207,835,089 | |||
Net Assets: | ||||
Series I | $ | 165,924,169 | ||
Series II | $ | 1,041,910,920 | ||
Shares outstanding, no par value, |
| |||
Series I | 10,295,033 | |||
Series II | 64,969,696 | |||
Series I: | ||||
Net asset value per share | $ | 16.12 | ||
Series II: | ||||
Net asset value per share | $ | 16.04 |
Investment income: | ||||
Dividends (net of foreign withholding taxes of $346,619) | $ | 23,200,079 | ||
Dividends from affiliated money market funds | 1,143,177 | |||
Interest | 11,907,445 | |||
Total investment income | 36,250,701 | |||
Expenses: | ||||
Advisory fees | 5,547,264 | |||
Administrative services fees | 2,373,626 | |||
Custodian fees | 47,898 | |||
Distribution fees — Series II | 3,236,174 | |||
Transfer agent fees | 34,764 | |||
Trustees’ and officers’ fees and benefits | 41,084 | |||
Reports to shareholders | 15,043 | |||
Professional services fees | 68,329 | |||
Other | 55,089 | |||
Total expenses | 11,419,271 | |||
Less: Fees waived | (79,205 | ) | ||
Net expenses | 11,340,066 | |||
Net investment income | 24,910,635 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 89,026,541 | |||
Foreign currencies | (220,151 | ) | ||
Forward foreign currency contracts | 3,876,016 | |||
Futures contracts | 151,550 | |||
92,833,956 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (252,834,081 | ) | ||
Foreign currencies | (9,084 | ) | ||
Forward foreign currency contracts | 1,268,168 | |||
Futures contracts | (115,386 | ) | ||
(251,690,383 | ) | |||
Net realized and unrealized gain (loss) | (158,856,427 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (133,945,792 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income | $ | 24,910,635 | $ | 25,839,989 | ||||
Net realized gain | 92,833,956 | 71,047,538 | ||||||
Change in net unrealized appreciation (depreciation) | (251,690,383 | ) | 59,017,947 | |||||
Net increase (decrease) in net assets resulting from operations | (133,945,792 | ) | 155,905,474 | |||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (12,212,096 | ) | (6,065,465 | ) | ||||
Series II | (83,405,521 | ) | (44,046,352 | ) | ||||
Total distributions from distributable earnings | (95,617,617 | ) | (50,111,817 | ) | ||||
Share transactions–net: | ||||||||
Series I | 10,954,748 | 14,958,314 | ||||||
Series II | (143,814,137 | ) | (22,591,494 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (132,859,389 | ) | (7,633,180 | ) | ||||
Net increase (decrease) in net assets | (362,422,798 | ) | 98,160,477 | |||||
Net assets: | ||||||||
Beginning of year | 1,570,257,887 | 1,472,097,410 | ||||||
End of year | $ | 1,207,835,089 | $ | 1,570,257,887 |
(1) | For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income and distributions from net realized gains. The Securities and Exchange Commission eliminated the requirement to disclose the distribution components separately, except for tax return of capital. For the year ended December 31, 2017, distributions from net investment income were $2,908,928 and $19,584,973 and distributions from net realized gains were $3,156,537 and $24,461,379 for Series I and Series II shares, respectively. |
Notes to Financial Statements
December 31, 2018
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. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 theover-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 (“NAV”) 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 theend-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 investment 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. Bond premiums and discounts are amortized and/or accreted over the lives of the respective securities.Pay-in-kind interest income andnon-cash dividend income received in the form of securities in-lieu of cash are recorded at the fair value of the securities received. 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. |
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 the Statement of Changes in Net Assets, or the net investment income per share and the 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. Equity and Income 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 the 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 the dailymark-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 anagreed-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 |
Invesco V.I. Equity and Income Fund
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. | 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 accrues daily and pays monthly 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 year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.38%.
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2019, 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 (the “expense limits”). 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, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $79,205.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $347,112 for accounting and fund administrative services and was reimbursed $2,026,514 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution fees.
For the year ended December 31, 2018, the Fund incurred $11,093 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 December 31, 2018. 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 | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | $ | 692,950,445 | $ | 50,760,690 | $ | — | $ | 743,711,135 | ||||||||
Bonds & Notes | — | 244,632,529 | — | 244,632,529 | ||||||||||||
U.S. Treasury Securities | — | 155,087,454 | — | 155,087,454 | ||||||||||||
Preferred Stocks | 4,281,923 | 2,267,750 | — | 6,549,673 | ||||||||||||
U.S. Government Sponsored Agency Securities | — | 1,020,887 | — | 1,020,887 | ||||||||||||
U.S. Government Sponsored Agency Mortgage-Backed Securities | — | 1,637 | — | 1,637 | ||||||||||||
Money Market Funds | 53,904,875 | — | — | 53,904,875 | ||||||||||||
Total Investments in Securities | 751,137,243 | 453,770,947 | — | 1,204,908,190 | ||||||||||||
Other Investments — Assets* | ||||||||||||||||
Forward Foreign Currency Contracts | — | 167,074 | — | 167,074 | ||||||||||||
Other Investments — Liabilities* | ||||||||||||||||
Forward Foreign Currency Contracts | — | (259,044 | ) | — | (259,044 | ) | ||||||||||
Futures Contracts | (86,505 | ) | — | — | (86,505 | ) | ||||||||||
(86,505 | ) | (259,044 | ) | — | (345,549 | ) | ||||||||||
Total Other Investments | (86,505 | ) | (91,970 | ) | — | (178,475 | ) | |||||||||
Total Investments | $ | 751,050,738 | $ | 453,678,977 | $ | — | $ | 1,204,729,715 |
* | Unrealized appreciation (depreciation). |
NOTE 4—Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (“ISDA Master Agreement”) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
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 December 31, 2018:
Value | ||||||||||||
Derivative Assets | Currency Risk | Interest Rate Risk | Total | |||||||||
Unrealized appreciation on forward foreign currency contracts outstanding | $ | 167,074 | $ | — | $ | 167,074 | ||||||
Derivatives not subject to master netting agreements | — | — | — | |||||||||
Total Derivative Assets subject to master netting agreements | $ | 167,074 | $ | — | $ | 167,074 |
Invesco V.I. Equity and Income Fund
Value | ||||||||||||
Derivative Liabilities | Currency Risk | Interest Rate Risk | Total | |||||||||
Unrealized depreciation on futures contracts — Exchange-Traded(a) | $ | — | $ | (86,505 | ) | $ | (86,505 | ) | ||||
Unrealized depreciation on forward foreign currency contracts outstanding | (259,044 | ) | — | (259,044 | ) | |||||||
Total Derivative Liabilities | (259,044 | ) | (86,505 | ) | (345,549 | ) | ||||||
Derivatives not subject to master netting agreements | — | 86,505 | 86,505 | |||||||||
Total Derivative Liabilities subject to master netting agreements | $ | (259,044 | ) | $ | — | $ | (259,044 | ) |
(a) | The daily variation margin payable at period-end is recorded in the Statement of Assets and Liabilities. |
Offsetting Assets and Liabilities
The table below reflects the Fund’s exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of December 31, 2018.
Financial Derivative Assets | Financial Derivative Liabilities | Collateral (Received)/Pledged | ||||||||||||||||||||||
Counterparty | Forward Foreign Currency Contracts | Forward Foreign Currency Contracts | Net Value of Derivatives | Non-Cash | Cash | Net Amount | ||||||||||||||||||
Bank of New York Mellon (The) | $ | 83,486 | $ | (126,091 | ) | $ | (42,605 | ) | $ | — | $ | — | $ | (42,605 | ) | |||||||||
State Street Bank and Trust Co. | 83,588 | (132,953 | ) | (49,365 | ) | — | — | (49,365 | ) | |||||||||||||||
Total | $ | 167,074 | $ | (259,044 | ) | $ | (91,970 | ) | $ | — | $ | — | $ | (91,970 | ) |
Effect of Derivative Investments for the year ended December 31, 2018
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 | ||||||||||||
Currency Risk | Interest Rate Risk | Total | ||||||||||
Realized Gain: | ||||||||||||
Forward foreign currency contracts | $ | 3,876,016 | $ | — | $ | 3,876,016 | ||||||
Futures contracts | — | 151,550 | 151,550 | |||||||||
Change in Net Unrealized Appreciation (Depreciation): | ||||||||||||
Forward foreign currency contracts | 1,268,168 | — | 1,268,168 | |||||||||
Futures contracts | — | (115,386 | ) | (115,386 | ) | |||||||
Total | $ | 5,144,184 | $ | 36,164 | $ | 5,180,348 |
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 | $ | 87,308,507 | $ | 4,333,415 |
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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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. Equity and Income Fund
NOTE 7—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 30,004,918 | $ | 22,493,901 | ||||
Long-term capital gain | 65,612,699 | 27,617,916 | ||||||
Total distributions | $ | 95,617,617 | $ | 50,111,817 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 28,781,295 | ||
Undistributedlong-term gain | 86,070,837 | |||
Net unrealized appreciation — investments | 79,053,039 | |||
Net unrealized appreciation (depreciation) — foreign currencies | (1,204 | ) | ||
Temporary book/tax differences | (145,533 | ) | ||
Shares of beneficial interest | 1,014,076,655 | |||
Total net assets | $ | 1,207,835,089 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation (depreciation) difference is attributable primarily to wash sales, the tax treatment of equity securities, bond premiums and contingent payment debt instruments.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 does not have a capital loss carryforward as of December 31, 2018.
NOTE 8—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $404,739,846 and $521,671,315, respectively. During the same period, purchases and sales of U.S. Treasury obligations were $1,684,038,217 and $1,705,798,385, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 158,571,427 | ||
Aggregate unrealized (depreciation) of investments | (79,518,388 | ) | ||
Net unrealized appreciation of investments | $ | 79,053,039 |
Cost of investments for tax purposes is $1,125,676,676.
NOTE 9—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of contingent payment debt instruments and bond premiums, on December 31, 2018, undistributed net investment income was increased by $5,670,419 and undistributed net realized gain (loss) was decreased by $5,670,419. This reclassification had no effect on the net assets or the distributable earnings of the Fund.
Invesco V.I. Equity and Income Fund
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 986,810 | $ | 18,720,753 | 1,444,387 | $ | 26,450,705 | ||||||||||
Series II | 3,896,513 | 72,253,278 | 3,955,635 | 72,128,100 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 665,147 | 12,212,096 | 331,991 | 6,065,465 | ||||||||||||
Series II | 4,562,665 | 83,405,521 | 2,420,129 | 44,046,353 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (1,063,169 | ) | (19,978,101 | ) | (955,203 | ) | (17,557,856 | ) | ||||||||
Series II | (16,614,655 | ) | (299,472,936 | ) | (7,581,250 | ) | (138,765,947 | ) | ||||||||
Net increase (decrease) in share activity | (7,566,689 | ) | $ | (132,859,389 | ) | (384,311 | ) | $ | (7,633,180 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 75% 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 | 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 19.04 | $ | 0.35 | $ | (2.00 | ) | $ | (1.65 | ) | $ | (0.43 | ) | $ | (0.84 | ) | $ | (1.27 | ) | $ | 16.12 | (9.50 | )% | $ | 165,924 | 0.54 | %(e) | 0.55 | %(e) | 1.91 | %(e) | 150 | % | |||||||||||||||||||||||
Year ended 12/31/17 | 17.76 | 0.35 | (d) | 1.58 | 1.93 | (0.31 | ) | (0.34 | ) | (0.65 | ) | 19.04 | 11.03 | 184,768 | 0.55 | 0.56 | 1.93 | (d) | 119 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 16.23 | 0.29 | 2.10 | 2.39 | (0.32 | ) | (0.54 | ) | (0.86 | ) | 17.76 | 15.12 | 157,774 | 0.60 | 0.61 | 1.78 | 101 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 18.93 | 0.28 | (0.78 | ) | (0.50 | ) | (0.49 | ) | (1.71 | ) | (2.20 | ) | 16.23 | (2.29 | ) | 96,287 | 0.64 | 0.65 | 1.55 | 87 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 18.58 | 0.37 | (f) | 1.28 | 1.65 | (0.35 | ) | (0.95 | ) | (1.30 | ) | 18.93 | 9.03 | 72,391 | 0.66 | 0.67 | 1.92 | (f) | 85 | |||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 18.95 | 0.31 | (2.00 | ) | (1.69 | ) | (0.38 | ) | (0.84 | ) | (1.22 | ) | 16.04 | (9.73 | ) | 1,041,911 | 0.79 | (e) | 0.80 | (e) | 1.66 | (e) | 150 | |||||||||||||||||||||||||||||||||
Year ended 12/31/17 | 17.68 | 0.31 | (d) | 1.57 | 1.88 | (0.27 | ) | (0.34 | ) | (0.61 | ) | 18.95 | 10.78 | 1,385,490 | 0.80 | 0.81 | 1.68 | (d) | 119 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 16.16 | 0.25 | 2.09 | 2.34 | (0.28 | ) | (0.54 | ) | (0.82 | ) | 17.68 | 14.84 | 1,314,323 | 0.85 | 0.86 | 1.53 | 101 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 18.86 | 0.23 | (0.78 | ) | (0.55 | ) | (0.44 | ) | (1.71 | ) | (2.15 | ) | 16.16 | (2.58 | ) | 1,129,261 | 0.89 | 0.90 | 1.30 | 87 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 18.52 | 0.32 | (f) | 1.28 | 1.60 | (0.31 | ) | (0.95 | ) | (1.26 | ) | 18.86 | 8.77 | 1,290,920 | 0.91 | 0.92 | 1.67 | (f) | 85 |
(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 includes significant dividends received during the year ended December 31, 2017. Net investment income per share and the ratio of net investment income to average net assets excluding the significant dividends are $0.30 and 1.64% and $0.26 and 1.39% for Series I and Series II shares, respectively. |
(e) | Ratios are based on average daily net assets (000’s omitted) of $183,320 and $1,294,470 for Series I and Series II shares, respectively. |
(f) | Net investment income per share and the ratio of net investment income to average net assets includes significant dividends received during the year ended December 31, 2014. 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% and $0.22 and 1.16% for Series I and Series II shares, respectively. |
Invesco V.I. Equity and Income Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Equity and Income Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Equity and Income Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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 (07/01/18) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 915.10 | $ | 2.65 | $ | 1,022.43 | $ | 2.80 | 0.55 | % | ||||||||||||
Series II | 1,000.00 | 913.80 | 3.86 | 1,021.17 | 4.08 | 0.80 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Equity and Income Fund
Tax Information
Form1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Long-Term Capital Gain Distributions | $ | 65,612,699 | ||
Corporate Dividends Received Deduction* | 70.50 | % | ||
U.S. Treasury Obligations* | 12.09 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. Equity and Income Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Equity and Income Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. Equity and Income Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. Equity and Income Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Equity and Income Fund
| ||||
Annual Report to Shareholders
| December 31, 2018 | |||
| ||||
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 FormN-Q (or any successor Form). The Fund’s FormN-Q (or any successor Form) filings are available on the SEC website, sec.gov. The SEC file numbers for the Fund are811-07452 and033-57340. The Fund’s most recent portfolio holdings, as filed on FormN-Q (or any successor Form), 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 recent12-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.
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NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||
Invesco Distributors, Inc. VIGCE-AR-1 02152019 1152 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. Global Core Equity Fund (the Fund) underperformed the MSCI World Index, the Fund’s broad market/style-specific benchmark.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -15.32 | % | |||
Series II Shares | -15.54 | ||||
MSCI World Index▼(Broad Market/Style-Specific Index) | -8.71 | ||||
Lipper VUF GlobalMulti-Cap Value Funds Classification Average∎(Peer Group) | -12.03 | ||||
Source(s):▼RIMES Technologies Corp.;∎ Lipper Inc. |
Market conditions and your Fund
Calendar year 2018 proved to be an increasingly volatile time for global equities. After strong positive returns in January, global equities sold off sharply in February as rising inflation spurred concern that central banks would raise interest rates at a faster pace than previously expected. Through the rest of the first quarter, equity markets struggled to regain momentum, hampered by global trade tensions and weakness in technology stocks. Somewhat counterintuitively, emerging markets generally held up better than developed markets in this volatile environment.
Significant market and currency volatility continued during the second quarter of 2018. While most domestic equity indexes delivered positive performance for the second quarter, most major international indexes had negative results. Many international stocks struggled as investors worried that heightened global trade tensions would derail economic growth. Other concerns such as geopolitical uncertainty and the potential impact of higher interest rates also weakened investor sentiment. In this environment,
developed markets held up better than emerging markets. After a relatively quiet summer, market volatility markedly rose again in October. Global equity markets (particularly the US) declined sharply in the fourth quarter amid rising interest rates and concerns that higher inflation could result in a more restrictive monetary policy. Investors also had concerns over the Brexit negotiations, ongoingUS-China trade tensions, declining oil prices and fears of slowing economic growth, particularly in the eurozone.
Given signs of a strong economy, the US Federal Reserve (the Fed) raised interest rates four times during the year. Following December’s meeting, the Fed raised interest rates by 25 basis points and lowered guidance from three to two rate hikes in 2019, signaling a slightly more dovish stance than expected.1 In contrast, the European Central Bank held rates steady, indicating it would do so at least through the summer of 2019; however, it announced that its bond buying program would be discontinued at year end. Central banks in several other countries maintained extraordinarily accommodative monetary policies, as well.
During the year, stock selection in the
energy sector benefited the Fund’s performance relative to the broad market/ style-specific benchmark. The largest detractors from relative performance included stock selection in the health care, industrials, communication services and information technology (IT) sectors, as well as underweight exposure to IT and health care.
From a geographic perspective, stock selection in Australia and Hong Kong was beneficial to the Fund’s performance versus the broad market/style-specific benchmark for the year. Conversely, stock selection in Japan, the Nether-lands, Switzerland, the UK and, most notably, the US, detracted from the Fund’s relative performance.
The Fund’s top contributor relative to its broad market/style-specific benchmark wasHCA Healthcare, which reported good results and a favorable outlook for the year. The stock responded well as the market had been skeptical that it could meet, much less beat, management’s initial guidance for the year. Investors also appeared to be more confident in the company’s outlook for 2019.
Another key contributor to the Fund’s performance relative to its broad market/ style-specific benchmark for the year was Brazilian energy giantPetróleo Brasileiro, which saw solid earnings estimate revision activity during the year. However, we sold our position in the holding before the close of the year.
Nike was a leading contributor to the Fund’s relative performance for the year, as the company reported material upside in sales and gross profit margin. The company benefited from growing online sales and quality of earnings.
Verizon Communications also aided the Fund’s relative performance for the year, as competitive intensity in the wireless industry moderated throughout the
Portfolio Composition | |||||
By country | % of total net assets |
United States | 49.3 | % | |||
Japan | 14.9 | ||||
United Kingdom | 8.5 | ||||
Italy | 5.0 | ||||
Germany | 4.3 | ||||
Denmark | 2.4 | ||||
Netherlands | 2.4 | ||||
Switzerland | 2.4 | ||||
Hong Kong | 2.1 | ||||
Countries each less than 2% of portfolio | 8.7 |
Top 10 Equity Holdings* | ||||||||||
% of total net assets |
1. Royal Dutch ShellPLC-Class A-ADR | 3.3 | % | |||
2. Chevron Corp. | 3.3 | ||||
3. Alphabet Inc.-Class C | 3.0 | ||||
4. Enel S.p.A. | 2.8 | ||||
5. American Express Co. | 2.7 | ||||
6. Siemens AG | 2.6 | ||||
7. SoftBank Group Corp. | 2.6 | ||||
8. First Republic Bank | 2.5 | ||||
9. Verizon Communications Inc. | 2.4 | ||||
10. AIA Group Ltd. | 2.1 |
Total Net Assets | $ | 64.5 million | |||
Total Number of Holdings* | 71 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings. Data presented here are as of December 31, 2018.
Invesco V.I. Global Core Equity Fund
year, improving investor sentiment. Verizon also benefited because investors see it as a defensive safe haven asset with a less economically sensitive business model.
Shares of industrial manufacturerColfax, the Fund’s largest individual detractor versus the broad market/style-specific benchmark during the year, declined mainly due to higher costs that affected profits.
Concho Resources was another detractor from the Fund’s performance relative to the broad market/style-specific benchmark during the year. The company sold off along with the energy sector as a whole, as oil prices fell during the year. In our view, company-specific issues were not the catalyst for the stock’s downturn.
During the year, several Japanese holdings were key detractors from the Fund’s performance versus the broad market/style-specific benchmark.Komatsu, a manufacturer of construction, mining, forestry and military equipment, was hampered by negative business news. In addition,Suruga Bank, a consumer-focused Japanese regional bank, experienced a recent slowdown in growth and some specific credit issues, which we viewed as temporary.
At the close of the year, the Fund’s largest overweight positions relative to the MSCI World Index were in the energy, financials, communication services and industrials sectors. The Fund also had a slight overweight position in the materials sector. The largest underweight positions were in the consumer staples, IT, consumer discretionary and health care sectors.
Please note that the Fund’s strategy is principally implemented through equity investments, but may also use derivative instruments, including forward foreign currency contracts and options. The Fund can use forward foreign currency contracts and options to hedge against adverse movements in the foreign currencies in which portfolio securities are denominated.
Derivatives can be a cost-effective way to gain exposure to asset classes. However, derivatives may amplify traditional investment risks through the creation of leverage and may be less liquid than traditional securities. During the year, the use of forward foreign currency contracts detracted from the Fund’s performance on an absolute basis.
As always, we believe the team’s focus on mitigating risk and providing a high conviction investment strategy focused onbottom-up company research has the potential to reward investors during these uncertain times. In short, we seek to take advantage of the market’s volatile behavior and short-term focus. We believe our conservative approach should position the Fund to navigate the evolving economic backdrop.
We thank you for your continued investment in Invesco V.I. Global Core Equity Fund.
1 Source: US Federal Reserve
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Erik Esselink Portfolio Manager, is manager of Invesco V.I. Global Core Equity Fund. He joined Invesco in 2007. Mr. Esselink | ||
earned a bachelor of science degree from the Rotterdam School of Economics, where he studied commercial economics. |
Jeffrey Everett Chartered Financial Analyst, Portfolio Manager andCo-Chief Investment Officer of Invesco’s Global Core | ||
Equity Team, is manager of Invesco V.I. Global Core Equity Fund. He joined Invesco in 2016. Mr. Everett earned a bachelor’s degree in finance from Pennsylvania State University. |
Marty Steinik Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Global Core Equity. He joined | ||
Invesco in 2016. Mr. Steinik earned a BS degree from the University of Miami and an MBA from London Business School. He serves as Executive in Residence at the Smith School of Business at the University of Maryland. |
Assisted by Invesco’s Global Core Equity Team
Invesco V.I. Global Core Equity Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: RIMES Technologies Corp. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (1/2/97) | 4.41 | % | |||
10 Years | 5.84 | ||||
5 Years | 1.99 | ||||
1 Year | -15.32 | ||||
Series II Shares | |||||
10 Years | 5.57 | % | |||
5 Years | 1.73 | ||||
1 Year | -15.54 |
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, prior to June 1, 2010, 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 higher12b-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 recentmonth-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Performance figures in the table and chart do not reflect deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 1.04% 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. 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 recentmonth-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recentmonth-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
Invesco V.I. Global Core Equity Fund’s investment objective is long-term capital appreciation by investing primarily in equity securities of issuers throughout the world, including US issuers.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Depositary receipts risk.Investing in depositary receipts involves the same risks as direct investments in foreign securities. In addition, the underlying issuers of certain depositary receipts are under no obligation to distribute shareholder communications or pass through any voting rights with respect to the deposited securities to the holders of such receipts. The Fund may therefore receive less timely information or have less control than if it invested directly in the foreign issuer.
Derivatives risk.The value of a derivative instrument depends largely on (and is derived from) the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include other, possibly greater, risks, including counterparty, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by holding a position in the derivative. As a result, an adverse change in the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative or the anticipated value of the underlying asset, which may make the Fund’s returns more volatile and increase the risk of loss. Derivative instruments may also be less liquid than more traditional investments and the Fund may be unable to sell or close out its derivative positions at a desirable time or price. This risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. Derivatives strategies may not always be successful. For example, derivatives used for hedging or to gain or limit exposure to a particular market segment
may not provide the expected benefits, particularly during adverse market conditions.
Emerging markets securities risk. Emerging markets (also referred to as developing markets) are generally subject to greater market volatility, political, social and economic instability, uncertain trading markets and more governmental limitations on foreign investment than more developed markets. In addition, companies operating in emerging markets may be subject to lower trading volume and greater price fluctuations than companies in more developed markets. Securities law and the enforcement of systems of taxation in many emerging market countries may change quickly and unpredictably. The Fund’s investments in ChinaA-shares are subject to trading restrictions, quota limitations and clearing and settlement risks. In addition, investments in emerging markets securities may also be subject to additional transaction costs, delays in settlement procedures, and lack of timely information.
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
Geographic focus risk.The Fund may from time to time invest a substantial amount of its assets in securities of issuers located in a single country or a limited number of countries. Adverse economic, political or social conditions in those
countries may therefore have a significant negative impact on the Fund’s investment performance.
Investing in the European Union risk.Investments in certain countries in the European Union are susceptible to high economic risks associated with high levels of debt, such as investments in sovereign debt of Greece, Italy and Spain. Efforts of the member states to further unify their economic and monetary policies may increase the potential for the downward movement of one member state’s market to cause a similar effect on other member states’ markets. Separately, the European Union faces issues involving its membership, structure, procedures and policies. The exit of one or more member states from the European Union, such as the United Kingdom (UK) which has announced its intention to exit, would place its currency and banking system in jeopardy. The exit by the UK or other member states will likely result in increased volatility, illiquidity and potentially lower economic growth in the affected markets, which will adversely affect the Fund’s investments.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
Invesco V.I. Global Core Equity Fund
Preferred securities risk.Preferred securities are subject to issuer-specific and market risks applicable generally to equity securities. Preferred securities also may be subordinated to bonds or other debt instruments, subjecting them to a greater risk ofnon-payment, may be less liquid than many other securities, such as common stocks, and generally offer no voting rights with respect to the issuer.
Small- andmid-capitalization companies risks.Small- andmid-capitalization companies tend to be more vulnerable to changing market conditions, may have little or no operating history or track record of success, and may have more limited product lines and markets, less experienced management and fewer financial resources than larger companies. These companies’ securities may be more volatile and less liquid than those of more established companies, and their returns may vary, sometimes significantly, from the overall securities market.
About indexes used in this report
TheMSCI 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 fornon-resident investors.
TheLipper VUF GlobalMulti-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.
Other information
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Industry 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.
Invesco V.I. Global Core Equity Fund
Schedule of Investments
December 31, 2018
Shares | Value | |||||||
Common Stocks & Other Equity Interests–99.99% |
| |||||||
Australia–1.07% |
| |||||||
Rio Tinto PLC | 14,477 | $ | 690,276 | |||||
Brazil–0.81% |
| |||||||
PagSeguro Digital Ltd.–Class A(a)(b) | 27,892 | 522,417 | ||||||
China–1.22% |
| |||||||
Baidu, Inc.–ADR(b) | 4,944 | 784,118 | ||||||
Denmark–2.41% |
| |||||||
A.P. Møller — Maersk A/S–Class B | 530 | 668,873 | ||||||
Novo Nordisk A/S–Class B | 19,262 | 885,430 | ||||||
1,554,303 | ||||||||
Germany–4.31% |
| |||||||
Infineon Technologies AG | 18,910 | 376,232 | ||||||
KION Group AG | 13,845 | 703,203 | ||||||
Siemens AG | 15,251 | 1,701,601 | ||||||
2,781,036 | ||||||||
Hong Kong–2.07% |
| |||||||
AIA Group Ltd. | 162,200 | 1,334,299 | ||||||
Ireland–0.86% |
| |||||||
James Hardie Industries PLC | 52,239 | 556,333 | ||||||
Italy–5.04% |
| |||||||
Banca Mediolanum S.p.A. | 111,740 | 651,653 | ||||||
Enel S.p.A. | 315,386 | 1,819,484 | ||||||
Prysmian S.p.A. | 40,217 | 779,802 | ||||||
3,250,939 | ||||||||
Japan–14.93% |
| |||||||
Asahi Group Holdings, Ltd. | 34,000 | 1,328,022 | ||||||
Daito Trust Construction Co., Ltd. | 7,800 | 1,065,359 | ||||||
Hitachi, Ltd. | 31,000 | 824,036 | ||||||
KDDI Corp. | 48,200 | 1,148,610 | ||||||
Komatsu Ltd. | 46,200 | 984,138 | ||||||
Nissan Chemical Corp. | 9,300 | 484,120 | ||||||
Seven & i Holdings Co., Ltd. | 18,300 | 796,826 | ||||||
Shimano Inc. | 7,900 | 1,123,096 | ||||||
SoftBank Group Corp. | 25,300 | 1,667,643 | ||||||
Suruga Bank Ltd. | 55,400 | 203,241 | ||||||
9,625,091 | ||||||||
Luxembourg–0.58% |
| |||||||
ArcelorMittal | 18,211 | 375,750 | ||||||
Netherlands–2.36% |
| |||||||
Heineken N.V. | 8,768 | 772,788 | ||||||
ING Groep N.V. | 69,659 | 746,524 | ||||||
1,519,312 |
Shares | Value | |||||||
Singapore–1.13% |
| |||||||
DBS Group Holdings Ltd. | 42,300 | $ | 730,838 | |||||
South Korea–0.54% |
| |||||||
Samsung Electronics Co., Ltd. | 10,079 | 348,740 | ||||||
Sweden–1.61% |
| |||||||
Svenska Handelsbanken AB–Class A | 93,468 | 1,035,410 | ||||||
Switzerland–2.36% |
| |||||||
Glencore PLC | 181,081 | 667,892 | ||||||
UBS Group AG | 68,173 | 851,001 | ||||||
1,518,893 | ||||||||
Taiwan–0.90% |
| |||||||
Taiwan Semiconductor Manufacturing Co., Ltd. | 80,000 | 580,742 | ||||||
United Kingdom–8.48% |
| |||||||
Imperial Brands PLC | 27,109 | 819,776 | ||||||
Just Eat PLC(b) | 98,630 | 737,688 | ||||||
Royal Dutch Shell PLC–Class A–ADR | 36,853 | 2,147,424 | ||||||
St. James’s Place PLC | 94,112 | 1,127,599 | ||||||
Vodafone Group PLC–ADR | 32,971 | 635,681 | ||||||
5,468,168 | ||||||||
United States–49.31% |
| |||||||
Activision Blizzard, Inc. | 7,005 | 326,223 | ||||||
Allergan PLC | 6,251 | 835,509 | ||||||
Alphabet Inc.–Class C(b) | 1,888 | 1,955,232 | ||||||
American Express Co. | 18,468 | 1,760,370 | ||||||
Aptiv PLC | 8,321 | 512,324 | ||||||
Biogen Inc.(b) | 3,783 | 1,138,380 | ||||||
BioMarin Pharmaceutical Inc.(b) | 7,875 | 670,556 | ||||||
Booking Holdings Inc.(b) | 587 | 1,011,061 | ||||||
Carnival Corp. | 17,909 | 882,914 | ||||||
Celgene Corp.(b) | 9,141 | 585,847 | ||||||
Chevron Corp. | 19,277 | 2,097,145 | ||||||
Cognizant Technology Solutions Corp.–Class A | 18,106 | 1,149,369 | ||||||
Colfax Corp.(b) | 31,576 | 659,938 | ||||||
Comcast Corp.–Class A | 32,404 | 1,103,356 | ||||||
Concho Resources Inc.(b) | 10,438 | 1,072,922 | ||||||
Delta Air Lines, Inc. | 24,789 | 1,236,971 | ||||||
Elanco Animal Health Inc.(b) | 11,044 | 348,217 | ||||||
EPAM Systems, Inc.(b) | 6,212 | 720,654 | ||||||
Facebook, Inc.–Class A(b) | 4,938 | 647,322 | ||||||
FedEx Corp. | 5,076 | 818,911 | ||||||
First Republic Bank | 18,545 | 1,611,560 | ||||||
HCA Healthcare, Inc. | 6,949 | 864,803 | ||||||
Marsh & McLennan Cos., Inc. | 8,882 | 708,339 | ||||||
Mastercard Inc.–Class A | 2,781 | 524,636 | ||||||
Moody’s Corp. | 2,816 | 394,353 | ||||||
NIKE, Inc.–Class B | 12,465 | 924,155 | ||||||
Oracle Corp. | 14,459 | 652,824 |
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) |
| |||||||
PepsiCo, Inc. | 10,522 | $ | 1,162,471 | |||||
Progressive Corp. (The) | 8,077 | 487,285 | ||||||
U.S. Bancorp | 22,054 | 1,007,868 | ||||||
United Technologies Corp. | 11,822 | 1,258,807 | ||||||
Verizon Communications Inc. | 27,179 | 1,528,003 | ||||||
Wynn Resorts Ltd. | 5,758 | 569,524 | ||||||
Zimmer Biomet Holdings, Inc. | 5,446 | 564,859 | ||||||
31,792,708 | ||||||||
Total Common Stocks & Other Equity Interests |
| 64,469,373 | ||||||
Investments Purchased with Cash Collateral from Securities on Loan |
| |||||||
Money Market Funds–0.61% |
| |||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30% (Cost $390,139)(c)(d) | 390,139 | 390,139 | ||||||
TOTAL INVESTMENTS IN SECURITIES–100.60% |
| 64,859,512 | ||||||
OTHER ASSETS LESS LIABILITIES–(0.60)% |
| (389,881 | ) | |||||
NET ASSETS–100.00% |
| $ | 64,469,631 |
Investment Abbreviations:
ADR | – American Depositary Receipt |
Notes to Schedule of Investments:
(a) | All or a portion of this security was out on loan at December 31, 2018. |
(b) | Non-income producing security. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
(d) | 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. |
Open Forward Foreign Currency Contracts — Currency Risk | ||||||||||||||||||||||
Settlement | Contract to | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||
Counterparty | Deliver | Receive | ||||||||||||||||||||
02/20/2019 | JPMorgan Chase Bank, N.A. | JPY | 202,000,000 | USD | 1,801,890 | $ | (47,510 | ) |
Abbreviations:
JPY | – Japanese Yen | |
USD | – U.S. Dollar |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $65,854,273) | $ | 64,469,373 | ||
Investments in affiliated money market funds, at value and cost | 390,139 | |||
Foreign currencies, at value (Cost $64,558) | 64,118 | |||
Receivable for: | ||||
Investments sold | 156,040 | |||
Fund shares sold | 44,635 | |||
Dividends | 106,234 | |||
Investment for trustee deferred compensation and retirement plans | 36,455 | |||
Total assets | 65,266,994 | |||
Liabilities: | ||||
Other investments: | ||||
Unrealized depreciation on forward foreign currency contracts outstanding | 47,510 | |||
Payable for: | ||||
Amount due to custodian | 242,829 | |||
Fund shares reacquired | 11,330 | |||
Collateral upon return of securities loaned | 390,139 | |||
Accrued fees to affiliates | 31,984 | |||
Accrued trustees’ and officers’ fees and benefits | 4,128 | |||
Accrued other operating expenses | 30,430 | |||
Trustee deferred compensation and retirement plans | 39,013 | |||
Total liabilities | 797,363 | |||
Net assets applicable to shares outstanding | $ | 64,469,631 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 60,460,786 | ||
Distributable earnings | 4,008,845 | |||
$ | 64,469,631 | |||
Net Assets: | ||||
Series I | $ | 54,854,037 | ||
Series II | $ | 9,615,594 | ||
Shares outstanding, no par value, |
| |||
Series I | 6,103,828 | |||
Series II | 1,069,791 | |||
Series I: | ||||
Net asset value per share | $ | 8.99 | ||
Series II: | ||||
Net asset value per share | $ | 8.99 |
* | At December 31, 2018, securities with an aggregate value of $391,813 were on loan to brokers. |
Investment income: | ||||
Dividends (net of foreign withholding taxes of $127,325) | $ | 1,742,545 | ||
Dividends from affiliated money market funds (includes securities lending income of $4,287) | 23,455 | |||
Total investment income | 1,766,000 | |||
Expenses: | ||||
Advisory fees | 535,099 | |||
Administrative services fees | 169,716 | |||
Custodian fees | 16,334 | |||
Distribution fees — Series II | 29,509 | |||
Transfer agent fees | 9,504 | |||
Trustees’ and officers’ fees and benefits | 21,344 | |||
Reports to shareholders | 11,678 | |||
Professional services fees | 45,292 | |||
Other | 6,547 | |||
Total expenses | 845,023 | |||
Less: Fees waived | (1,298 | ) | ||
Net expenses | 843,725 | |||
Net investment income | 922,275 | |||
Realized and unrealized gain (loss): | ||||
Net realized gain (loss) from: | ||||
Investment securities | 4,696,790 | |||
Foreign currencies | (17,965 | ) | ||
Forward foreign currency contracts | 70,987 | |||
4,749,812 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (17,441,917 | ) | ||
Foreign currencies | (3,453 | ) | ||
Forward foreign currency contracts | (102,664 | ) | ||
(17,548,034 | ) | |||
Net realized and unrealized gain (loss) | (12,798,222 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (11,875,947 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income | $ | 922,275 | $ | 732,311 | ||||
Net realized gain | 4,749,812 | 4,600,551 | ||||||
Change in net unrealized appreciation (depreciation) | (17,548,034 | ) | 11,232,447 | |||||
Net increase (decrease) in net assets resulting from operations | (11,875,947 | ) | 16,565,309 | |||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (726,931 | ) | (788,459 | ) | ||||
Series II | (93,313 | ) | (112,894 | ) | ||||
Total distributions from distributable earnings | (820,244 | ) | (901,353 | ) | ||||
Share transactions–net: | ||||||||
Series I | (8,045,844 | ) | (1,609,008 | ) | ||||
Series II | (1,547,564 | ) | (1,728,127 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (9,593,408 | ) | (3,337,135 | ) | ||||
Net increase (decrease) in net assets | (22,289,599 | ) | 12,326,821 | |||||
Net assets: | ||||||||
Beginning of year | 86,759,230 | 74,432,409 | ||||||
End of year | $ | 64,469,631 | $ | 86,759,230 |
(1) | The Securities and Exchange Commission eliminated the requirement to disclose distribution components separately, except for tax return of capital. For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income. |
Notes to Financial Statements
December 31, 2018
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. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 islong-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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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 theover-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 (“NAV”) 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 theend-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
Invesco V.I. Global Core Equity Fund
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. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 investment 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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. Global 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. | 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 inshort-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. The Fund bears the risk of loss with respect to the investment of collateral. 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. When loaning securities, the Fund retains certain benefits of owning the securities, including the economic equivalent of dividends or interest generated by the security. 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. The securities loaned are subject to termination at the option of the borrower or the Fund. Upon termination, the borrower will return to the Fund the securities loaned and the Fund will return the collateral. 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 and the securities may lose value during the delay which could result in potential losses to the Fund. Some of these losses may be indemnified by the lending agent. 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, are included inDividends from affiliated money market fundson 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 the 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 the dailymark-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 anagreed-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
Invesco V.I. Global Core Equity Fund
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 accrues daily and pays monthly 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 year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.67%.
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2019, 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 (the “expense limits”). 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, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
The Adviser has contractually agreed, through at least June 30, 2020, 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 (excluding investments of cash collateral from securities lending) cash in such affiliated money market funds.
For the year ended December 31, 2018, the Adviser waived advisory fees of $1,298.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $50,000 for accounting and fund administrative services and was reimbursed $119,716 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
Invesco V.I. Global Core Equity 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 December 31, 2018. 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 | |||||||||||||
Investments in Securities | ||||||||||||||||
Australia | $ | — | $ | 690,276 | $ | — | $ | 690,276 | ||||||||
Brazil | 522,417 | — | — | 522,417 | ||||||||||||
China | 784,118 | — | — | 784,118 | ||||||||||||
Denmark | — | 1,554,303 | — | 1,554,303 | ||||||||||||
Germany | 2,781,036 | — | — | 2,781,036 | ||||||||||||
Hong Kong | — | 1,334,299 | — | 1,334,299 | ||||||||||||
Ireland | 556,333 | — | — | 556,333 | ||||||||||||
Italy | 651,653 | 2,599,286 | — | 3,250,939 | ||||||||||||
Japan | — | 9,625,091 | — | 9,625,091 | ||||||||||||
Luxembourg | — | 375,750 | — | 375,750 | ||||||||||||
Netherlands | — | 1,519,312 | — | 1,519,312 | ||||||||||||
Singapore | — | 730,838 | — | 730,838 | ||||||||||||
South Korea | — | 348,740 | — | 348,740 | ||||||||||||
Sweden | — | 1,035,410 | — | 1,035,410 | ||||||||||||
Switzerland | — | 1,518,893 | — | 1,518,893 | ||||||||||||
Taiwan | — | 580,742 | — | 580,742 | ||||||||||||
United Kingdom | 3,520,793 | 1,947,375 | — | 5,468,168 | ||||||||||||
United States | 31,792,708 | — | — | 31,792,708 | ||||||||||||
Money Market Funds | 390,139 | — | — | 390,139 | ||||||||||||
Total Investments in Securities | 40,999,197 | 23,860,315 | — | 64,859,512 | ||||||||||||
Other Investments — Liabilities* | ||||||||||||||||
Forward Foreign Currency Contracts | — | (47,510 | ) | — | (47,510 | ) | ||||||||||
Total Investments | $ | 40,999,197 | $ | 23,812,805 | $ | — | $ | 64,812,002 |
* | Uunrealized appreciation (depreciation). |
NOTE 4—Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (“ISDA Master Agreement”) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
Invesco V.I. Global Core Equity Fund
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 December 31, 2018:
Value | ||||
Derivative Liabilities | Currency Risk | |||
Unrealized depreciation on forward foreign currency contracts outstanding | $ | (47,510 | ) | |
Derivatives not subject to master netting agreements | — | |||
Total Derivative Liabilities subject to master netting agreements | $ | (47,510 | ) |
Offsetting Assets and Liabilities
The table below reflects the Fund’s exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of December 31, 2018.
Financial Derivative Liabilities | Collateral (Received)/Pledged | |||||||||||||||||||
Counterparty | Forward Foreign Currency Contracts | Net Value of Derivatives | Non-Cash | Cash | Net Amount | |||||||||||||||
JPMorgan Chase Bank, N.A. | $ | (47,510 | ) | $ | (47,510 | ) | $ | — | $ | — | $ | (47,510 | ) |
Effect of Derivative Investments for the year ended December 31, 2018
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 | ||||
Currency Risk | ||||
Realized Gain: | ||||
Forward foreign currency contracts | $ | 70,987 | ||
Change in Net Unrealized Appreciation (Depreciation): | ||||
Forward foreign currency contracts | (102,664 | ) | ||
Total | $ | (31,677 | ) |
The table below summarizes the average notional value of forward foreign currency contracts outstanding during the period.
Forward Foreign Currency Contracts | ||||
Average notional value | $ | 4,774,062 |
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 year ended December 31, 2018, the Fund engaged in securities purchases of $243,901.
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, andTrustees’ and Officers’ Fees and Benefitsalso 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 Core Equity 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 captionAmount 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—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 820,244 | $ | 901,353 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 1,634,441 | ||
Undistributedlong-term gain | 3,842,640 | |||
Net unrealized appreciation (depreciation) — investments | (1,432,400 | ) | ||
Net unrealized appreciation (depreciation) — foreign currencies | (126 | ) | ||
Temporary book/tax differences | (35,710 | ) | ||
Shares of beneficial interest | 60,460,786 | |||
Total net assets | $ | 64,469,631 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation (depreciation) difference is attributable primarily to wash sales and forward foreign currency contracts.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 does not have a capital loss carryforward as of December 31, 2018.
NOTE 9—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $20,569,280 and $29,953,762, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 6,752,822 | ||
Aggregate unrealized (depreciation) of investments | (8,185,222 | ) | ||
Net unrealized appreciation (depreciation) of investments | $ | (1,432,400 | ) |
Cost of investments for tax purposes is $66,244,402.
NOTE 10—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of passive foreign investment companies and foreign currency transactions, on December 31, 2018, undistributed net investment income was increased by $100,375 and undistributed net realized gain was decreased by $100,375. This reclassification had no effect on the net assets or the distributable earnings of the Fund.
Invesco V.I. Global Core Equity Fund
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 503,897 | $ | 5,374,444 | 830,159 | $ | 8,058,908 | ||||||||||
Series II | 8,185 | 83,331 | 6,745 | 66,624 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 68,065 | 726,931 | 77,528 | 788,459 | ||||||||||||
Series II | 8,717 | 93,182 | 11,087 | 112,756 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (1,339,378 | ) | (14,147,219 | ) | (1,075,643 | ) | (10,456,375 | ) | ||||||||
Series II | (162,966 | ) | (1,724,077 | ) | (195,837 | ) | (1,907,507 | ) | ||||||||
Net increase (decrease) in share activity | (913,480 | ) | $ | (9,593,408 | ) | (345,961 | ) | $ | (3,337,135 | ) |
(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 12—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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 10.73 | $ | 0.13 | $ | (1.76 | ) | $ | (1.63 | ) | $ | (0.11 | ) | $ | — | $ | (0.11 | ) | $ | 8.99 | (15.32 | )% | $ | 54,854 | 1.02 | %(d) | 1.02 | %(d) | 1.19 | %(d) | 26 | % | ||||||||||||||||||||||||
Year ended 12/31/17 | 8.83 | 0.09 | 1.93 | 2.02 | (0.12 | ) | — | (0.12 | ) | 10.73 | 22.90 | 73,716 | 1.04 | 1.04 | 0.95 | 69 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 8.35 | 0.10 | 0.47 | 0.57 | (0.09 | ) | — | (0.09 | ) | 8.83 | 6.81 | 62,130 | 1.05 | 1.05 | 1.14 | 47 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 8.94 | 0.09 | (0.23 | ) | (0.14 | ) | (0.13 | ) | (0.32 | ) | (0.45 | ) | 8.35 | (1.42 | ) | 65,167 | 1.06 | 1.06 | 0.98 | 75 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 9.06 | 0.12 | (0.05 | ) | 0.07 | (0.19 | ) | — | (0.19 | ) | 8.94 | 0.69 | 73,816 | 1.06 | 1.06 | 1.26 | 123 | |||||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 10.73 | 0.10 | (1.75 | ) | (1.65 | ) | (0.09 | ) | — | (0.09 | ) | 8.99 | (15.54 | ) | 9,616 | 1.27 | (d) | 1.27 | (d) | 0.94 | (d) | 26 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/17 | 8.83 | 0.07 | 1.92 | 1.99 | (0.09 | ) | — | (0.09 | ) | 10.73 | 22.60 | 13,043 | 1.29 | 1.29 | 0.70 | 69 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 8.35 | 0.07 | 0.47 | 0.54 | (0.06 | ) | — | (0.06 | ) | 8.83 | 6.50 | 12,302 | 1.30 | 1.30 | 0.89 | 47 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 8.93 | 0.07 | (0.23 | ) | (0.16 | ) | (0.10 | ) | (0.32 | ) | (0.42 | ) | 8.35 | (1.65 | ) | 13,286 | 1.31 | 1.31 | 0.73 | 75 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 9.04 | 0.10 | (0.05 | ) | 0.05 | (0.16 | ) | — | (0.16 | ) | 8.93 | 0.48 | 16,010 | 1.31 | 1.31 | 1.01 | 123 |
(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 based on average daily net assets (000’s omitted) of $68,062 and $11,803 for Series I and Series II shares, respectively. |
Invesco V.I. Global Core Equity Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Global Core Equity Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Global Core Equity Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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 (07/01/18) | ACTUAL | HYPOTHETICAL (5% annual return before | Annualized | ||||||||||||||||||||
Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 871.20 | $ | 4.81 | $ | 1,020.06 | $ | 5.19 | 1.02 | % | ||||||||||||
Series II | 1,000.00 | 870.50 | 5.99 | 1,018.80 | 6.46 | 1.27 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Global Core Equity Fund
Tax Information
Form1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Corporate Dividends Received Deduction* | 40.94 | % | ||
U.S. Treasury Obligations* | 0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. Global Core Equity Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Global Core Equity Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. Global Core Equity Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. Global Core Equity Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Global Core Equity Fund
| ||||
Annual Report to Shareholders
| December 31, 2018 | |||
| ||||
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 FormN-Q (or any successor Form). The Fund’s FormN-Q (or any successor Form) filings are available on the SEC website, sec.gov. The SEC file numbers for the Fund are811-07452 and033-57340. The Fund’s most recent portfolio holdings, as filed on FormN-Q (or any successor Form), 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 recent12-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.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||
Invesco Distributors, Inc. VIGRE-AR-1 02152019 1154 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. Global Real Estate Fund (the Fund) outperformed the Fund’s style-specific benchmark, the Custom Invesco Global Real Estate Index.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -6.15 | % | |||
Series II Shares | -6.33 | ||||
MSCI World Index▼(Broad Market Index) | -8.71 | ||||
Custom Invesco Global Real Estate Index∎(Style-Specific Index) | -6.37 | ||||
Lipper VUF Real Estate Funds Classification Average◆(Peer Group) | -5.84 | ||||
Source(s):▼RIMES Technologies Corp.;∎Invesco, RIMES Technologies Corp.;◆Lipper Inc. |
|
Market conditions and your Fund
2018 appears to have marked the transition into the latter phase of the current global economic cycle. Overall, global growth was good in recent quarters, although there was a clear divergence between regions of the world. Tax breaks and corporate earnings boosted US growth during the year. In contrast, economic moderation was seen in China, Japan and Europe. Inflation rose moderately but remained within normal ranges in most countries. Key global economies showed record low unemployment rates and growing consumption. However, as the year progressed, an increasing number of threats to the growth outlook became evident and economic growth forecasts for 2019 were moderated. These potential threats from policy mistakes, slowing growth and geopolitics were numerous and raised concerns, which were reflected during the last quarter of the year as equity markets fell, bond values rose and credit availability receded.
Overall performance from global listed real estate in 2018 was negative for the
first time since 2011. Earnings and net asset value (NAV) growth was almost universally positive. However, many countries saw real estate investment trusts (REITs) stock valuations reflect material discounts to NAV. This reflected a view of maturity of cycle and rising uncertainty for growth prospects. In some cases, this was warranted. In others, it appeared to offer opportunity. With the market trading below NAV, secondary market equity issuance and initial public offering activity were limited during the year. In contrast, mergers and acquisitions activity increased, which we believe may remain prevalent into 2019. Institutional allocations to real assets were undiminished, private real estate investment markets were generally still well bid, and the spread between real estate yields and risk-free rates remained wider than the long-term average. Without meaningful economic deterioration or a major systemic event, demand for quality cash flow and support for real estate values appeared to exist.
During the year, key detractors from the Fund’s performance relative to the
style-specific benchmark came from security selection in the US and Japan. Key relative contributors to the Fund’s performance included security selection in the United Kingdom, along with security selection in Hong Kong and China. Ancillary cash also contributed to the Fund’s relative return during the year.
Top contributors to the Fund’s performance during the year includedLinkREITand AvalonBay Communities. Link REIT is a retail and quality income-focused company that is listed in Hong Kong. AvalonBay Communities owns a high-quality portfolio of multifamily assets, typically located in markets along the east and west coast of the US.
Top detractors from the Fund’s performance during the year includedWeyer-haeuser, one of the world’s largest owners of timberlands and data centerEquinix.
During the year, we initiated new positions in holdings in Asia. These holdings included Japanese REITsORIXand Japan Prime, which were added due to improved relative value. Other new holdings includedWorkspace Groupand Empire State Realty Trust.
At the end of the year, the Fund held an underweight allocation to North America versus the style-specific benchmark, driven primarily by underweight exposure to Canada. The underweight exposure to Canada was a reflection of decelerating growth conditions, particularly in western Canada, and poor relative valuation in listed real estate markets. In the US, the Fund was focused on property types with higher current income and more defensive-oriented lease structures and cash flow streams, which we believe should be more attractive in a moderating economic environment.
Relative to the style-specific index, the Fund held a small underweight allocation to the Asia Pacific region at the end of
Portfolio Composition | |||||
By country | % of total net assets |
United States | 47.3% | ||||
Japan | 10.3 | ||||
Hong Kong | 7.4 | ||||
China | 5.9 | ||||
Germany | 5.6 | ||||
Australia | 4.1 | ||||
United Kingdom | 3.8 | ||||
Singapore | 2.3 | ||||
France | 2.2 | ||||
Countries each less than 2% of portfolio | 10.0 | ||||
Money Market Funds | |||||
Plus Other Assets Less Liabilities | 1.1 |
Top 10 Equity Holdings* | |||
% of total net assets |
1. Simon Property Group, Inc. | 3.1% | |
2. Prologis, Inc. | 3.1 | |
3. AvalonBay Communities, Inc. | 2.3 | |
4. Public Storage | 2.2 | |
5. Link REIT | 2.0 | |
6. Boston Properties, Inc. | 2.0 | |
7. CK Asset Holdings Ltd. | 1.8 | |
8. Vonovia S.E. | 1.8 | |
9. Equity Residential | 1.7 | |
10. Mid-America Apartment Communities, Inc. | 1.7 |
Total Net Assets | $151.6 million | |
Total Number of Holdings* | 190 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
Data presented here are as of December 31, 2018.
Invesco V.I. Global Real Estate Fund
the year, with a focus on stocks with company-specific catalysts and local relative value opportunity. Across the region, the Fund held underweight allocations to Australia, Japan and Hong Kong. The Fund held a modest overweight allocation to Singapore.
The Fund ended the year with a small underweight exposure to Europe, relative to the style-specific index. Key active exposures reflected a material underweight allocation to retail-focused REITs and overweight allocation to the secular growth prospects of industrial and residential real estate. The Fund held an underweight allocation to the UK and France, with a material country overweight exposure in Continental Europe focused on Germany and smaller country overweight exposure to Sweden, Spain and Ireland, where fundamental growth prospects were above average. Focus within Europe remained on companies with above-average earnings and NAV growth prospects as well as healthy balance sheets.
Relative to the style-specific index, the Fund ended the year with a neutral position to emerging markets (EM). Key active positioning within EM reflected underweight exposure to Mexico and Thailand relative to the style-specific benchmark. An overweight exposure to Indonesia, relative to the style-specific benchmark, was moderated following a period of significant outperformance in the region.
At the close of the year, the listed real estate sector appeared to be in a relatively healthy position, with balance sheet strength, limited over-supply risk and high occupancy levels. With economic, political and market uncertainty elevated, we believe real estate’s offer of relatively stable cash flow and growing dividends, alongside its discounted valuation characteristics, appears to be a fair relative investment opportunity.
We thank you for your continued investment in Invesco V.I. Global Real Estate Fund.
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Joe Rodriguez, Jr. Portfolio Manager, isco-lead manager of Invesco V.I. Global Real Estate Fund. He is Head of Global Securities | ||
with Invesco Real Estate, where he oversees all phases of the unit, including securities research and administration. Mr. Rodriguez joined Invesco in 1990. He earned a BBA in economics and finance and an MBA in finance from Baylor University. |
James Cowen Portfolio Manager, isco-lead manager of Invesco V.I. Global Real Estate Fund. He joined Invesco in 2001. Mr. Cowen earned a | ||
Master of Town and Country Planning degree from the University of Manchester and a Master of Philosophy degree in land economy from Cambridge University. |
Paul Curbo Chartered Financial Analyst, Portfolio Manager, isco-lead manager of Invesco V.I. Global Real Estate Fund. He joined Invesco in | ||
1998. Mr. Curbo earned a BBA in finance from The University of Texas at Austin. |
Ping-Ying Wang Chartered Financial Analyst, Portfolio Manager, isco-lead manager of Invesco V.I. Global Real Estate Fund. She joined Invesco in | ||
1998. Ms. Wang earned a BS in international finance from the People’s University of China and a PhD in finance from The University of Texas at Dallas. |
Mark Blackburn Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Global Real Estate Fund. He joined | ||
Invesco in 1998. Mr. Blackburn earned a BS in accounting from Louisiana State University and an MBA from Southern Methodist University. He is also a Certified Public Accountant. |
Grant Jackson Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Global Real Estate Fund. He joined | ||
Invesco in 2005. Mr. Jackson earned his BS degree in mechanical engineering from The University of Texas at Austin and his MBA from Southern Methodist University’s Cox School of Business. |
Darin Turner Portfolio Manager, is manager of Invesco V.I. Global Real Estate Fund. He joined Invesco in 2005. Mr. Turner | ||
earned a BBA in finance from Baylor University, an MS in real estate from The University of Texas at Arlington and an MBA specializing in investments from Southern Methodist University. |
Invesco V.I. Global Real Estate Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: Lipper Inc. |
2 | Source(s): Invesco, RIMES Technologies Corp. |
3 | Source: RIMES Technologies Corp. |
Past performance cannot guarantee
comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (3/31/98) | 7.28 | % | |||
10 Years | 8.80 | ||||
5 Years | 4.10 | ||||
1 Year | -6.15 | ||||
Series II Shares | |||||
Inception (4/30/04) | 6.96 | % | |||
10 Years | 8.53 | ||||
5 Years | 3.85 | ||||
1 Year | -6.33 |
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 recentmonth-end variable product performance. Performance figures reflect Fund expenses,
reinvested distributions and changes in net asset value. Performance figures in the table and chart do not reflect deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 1.02% and 1.27%, 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 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 recentmonth-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recentmonth-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
Invesco V.I. Global Real Estate Fund’s investment objective is total return through growth of capital and current income.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Convertible securities risk.The market values of convertible securities are affected by market interest rates, the risk of actual issuer default on interest or principal payments and the value of the underlying common stock into which the convertible security may be converted. Additionally, a convertible security is subject to the same types of market and issuer risks as apply to the underlying common stock. In addition, certain convertible securities are subject to involuntary conversions and may undergo principal write-downs upon the occurrence of certain triggering events, and, as a result, are subject to an increased risk of loss. Convertible securities may be rated below investment grade.
Debt securities risk.The prices of debt securities held by the Fund will be affected by changes in interest rates, the creditworthiness of the issuer and other factors. An increase in prevailing interest rates typically causes the value of existing debt securities to fall and often has a greater impact on longer-duration debt securities and higher quality debt securities. Falling interest rates will cause the Fund to reinvest the proceeds of debt securities that have been repaid by the issuer at lower interest rates. Falling interest rates may also reduce the Fund’s distributable income because interest payments on floating rate debt instruments held by the Fund will decline. The Fund could lose money on investments in debt securities if the issuer or borrower fails to meet its obligations to make interest payments and/or to repay principal in a timely manner. Changes in an issuer’s financial strength, the market’s perception of such strength or in the credit rating of the issuer or the security may affect the value of debt securities. The Adviser’s credit analysis may fail to anticipate such changes, which could result in buying a debt security at an inopportune time or failing to sell a debt security in advance of a price decline or other credit event.
Derivatives risk.The value of a derivative instrument depends largely on (and is derived from) the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include
other, possibly greater, risks, including counterparty, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by holding a position in the derivative. As a result, an adverse change in the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative or the anticipated value of the underlying asset, which may make the Fund’s returns more volatile and increase the risk of loss. Derivative instruments may also be less liquid than more traditional investments and the Fund may be unable to sell or close out its derivative positions at a desirable time or price. This risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. Derivatives strategies may not always be successful. For example, derivatives used for hedging or to gain or limit exposure to a particular market segment may not provide the expected benefits, particularly during adverse market conditions.
Emerging markets securities risk. Emerging markets (also referred to as developing markets) are generally subject to greater market volatility, political, social and economic instability, uncertain trading markets and more governmental limitations on foreign investment than more developed markets. In addition, companies operating in emerging markets may be subject to lower trading volume and greater price fluctuations than companies in more developed markets. Securities law and the enforcement of systems of taxation in many emerging market countries may change quickly and unpredictably. The Fund’s investments in ChinaA-shares are subject to trading restrictions, quota limitations and clearing and settlement risks. In addition, investments in emerging markets securities may also be subject to additional transaction
costs, delays in settlement procedures, and lack of timely information.
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
Geographic focus risk.The Fund may from time to time invest a substantial amount of its assets in securities of issuers located in a single country or a limited number of countries. Adverse economic, political or social conditions in those countries may therefore have a significant negative impact on the Fund’s investment performance.
High yield debt securities (junk bond) risk.Investments in high yield debt securities (“junk bonds”) and other lower-rated securities will subject the Fund to substantial risk of loss. These securities are considered to be speculative with respect to the issuer’s ability to pay interest and principal when due, are more susceptible to default or decline in market value and are less liquid than investment grade debt securities. Prices of high yield debt securities tend to be very volatile.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund
Invesco V.I. Global Real Estate Fund
and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When perform well, there can be no assurance that specific investments held by the Fund will rise in value.
Mortgage- and asset-backed securities risk.Mortgage- and asset-backed securities, including collateralized debt obligations and collateralized mortgage obligations, are subject to prepayment or call risk, which is the risk that a borrower’s payments may be received earlier or later than expected due to changes in prepayment rates on underlying loans. This could result in the Fund reinvesting these early payments at lower interest rates, thereby reducing the Fund’s income. Mortgage- and asset-backed securities also are subject to extension risk, which is the risk that an unexpected rise in interest rates could reduce the rate of prepayments, causing the price of the mortgage- and asset-backed securities and the Fund’s share price to fall. An unexpectedly high rate of defaults on the mortgages held by a mortgage pool may adversely affect the value of mortgage-backed securities and could result in losses to the Fund. The Fund may invest in mortgage pools that include subprime mortgages, which are loans made to borrowers with weakened credit histories or with lower capacity to make timely payments on their mortgages. Privately issued mortgage-related securities are not subject to the same underwriting requirements as those with government or government-sponsored entity guarantees and, therefore, mortgage loans underlying privately issued mortgage-related securities may have less favorable collateral, credit risk or other underwriting characteristics, and wider variances in interest rate, term, size, purpose and borrower characteristics.
Preferred securities risk.Preferred securities are subject to issuer-specific and market risks applicable generally to equity securities. Preferred securities also may be subordinated to bonds or other debt instruments, subjecting them to a greater risk ofnon-payment, may be less liquid than many other securities, such as
common stocks, and generally offer no voting rights with respect to the issuer.
REIT risk/real estate risk.The Fund concentrates its investments in the securities of real estate and real estate related companies. Investments in real estate related instruments may be affected by economic, legal, cultural, environmental or technological factors that affect property values, rents or occupancies of real estate related to the Fund’s holdings. Shares of real estate related companies, which tend to be small- andmid-cap companies, may be more volatile and less liquid than larger companies. If a real estate related company defaults on certain types of debt obligations, the Fund may own real estate directly, which involves additional risks such as environmental liabilities; difficulty in valuing and selling the real estate; and economic or regulatory changes.
Short position risk.Because the Fund’s potential loss on a short position arises from increases in the value of the asset sold short, the Fund will incur a loss on a short position, which is theoretically unlimited, if the price of the asset sold short increases from the short sale price. The counterparty to a short position or other market factors may prevent the Fund from closing out a short position at a desirable time or price and may reduce or eliminate any gain or result in a loss. In a rising market, the Fund’s short positions will cause the Fund to underperform the overall market and its peers that do not engage in shorting. If the Fund holds both long and short positions, and both positions decline simultaneously, the short positions will not provide any buffer (hedge) from declines in value of the Fund’s long positions. Certain types of short positions involve leverage, which may exaggerate any losses, potentially more than the actual cost of the investment, and will increase the volatility of the Fund’s returns.
Small- andmid-capitalization companies risks.Small- andmid-capitalization companies tend to be more vulnerable to changing market conditions, may have little or no operating history or track record of success, and may have more limited product lines and markets, less experienced management and fewer financial resources than larger companies. These companies’ securities may be more volatile and less liquid than those of more established companies, and their returns may vary, sometimes significantly, from the overall securities market.
About indexes used in this report
TheMSCI World IndexSMis an unmanaged index considered representative of stocks
of developed countries. The index is computed using the net return, which withholds applicable taxes fornon-resident investors.
TheCustom Invesco 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) thereafter.
TheLipper VUF Real Estate Funds Classification Average represents an average of all variable insurance underlying funds in the Lipper Real Estate Funds classification.
TheFTSE EPRA/NAREIT Developed Index is considered representative of global real estate companies and REITs. The net version of the index is computed using the net return, which withholds taxes fornon-resident investors.
TheFTSE EPRA/NAREIT Global Index is designed to track the performance of listed real estate companies and REITS in developed and emerging markets and 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.
Other information
CPA® and Certified Public Accountant® are trademarks owned by the American Institute of Certified Public Accountants.
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Invesco V.I. Global Real Estate Fund
Schedule of Investments
December 31, 2018
Shares | Value | |||||||
Real Estate Investments Trust, Common Stocks & Other Equity Interests–98.89% |
| |||||||
Australia–4.12% |
| |||||||
Dexus | 117,905 | $ | 881,952 | |||||
Goodman Group | 243,256 | 1,821,316 | ||||||
GPT Group (The) | 165,272 | 621,626 | ||||||
Mirvac Group | 544,998 | 859,867 | ||||||
Scentre Group | 749,054 | 2,057,625 | ||||||
6,242,386 | ||||||||
Brazil–0.58% |
| |||||||
BR Malls Participacoes S.A. | 102,925 | 347,089 | ||||||
BR Properties S.A. | 54,800 | 115,941 | ||||||
Cyrela Brazil Realty S.A. Empreendimentos e Participacoes | 28,800 | 114,955 | ||||||
LOG Commercial Properties e Participacoes S.A.(a) | 2,807 | 13,049 | ||||||
MRV Engenharia e Participacoes S.A. | 38,900 | 124,054 | ||||||
Multiplan Empreendimentos Imobiliarios S.A. | 25,300 | 159,337 | ||||||
874,425 | ||||||||
Canada–1.78% |
| |||||||
Allied Properties REIT | 23,172 | 752,258 | ||||||
Canadian Apartment Properties REIT | 9,106 | 295,485 | ||||||
Chartwell Retirement Residences | 39,010 | 390,614 | ||||||
H&R REIT | 25,481 | 385,425 | ||||||
Killam Apartment REIT | 24,271 | 283,387 | ||||||
RioCan REIT | 33,896 | 590,921 | ||||||
2,698,090 | ||||||||
Chile–0.08% |
| |||||||
Parque Arauco S.A. | 57,927 | 128,633 | ||||||
China–5.89% |
| |||||||
Agile Group Holdings Ltd. | 140,000 | 162,886 | ||||||
CapitaLand Retail China Trust | 82,100 | 81,738 | ||||||
China Aoyuan Property Group Ltd. | 133,000 | 83,611 | ||||||
China Evergrande Group | 295,000 | 876,533 | ||||||
China Jinmao Holdings Group Ltd. | 902,000 | 402,517 | ||||||
China Overseas Land & Investment Ltd. | 458,000 | 1,576,320 | ||||||
China Resources Land Ltd. | 266,444 | 1,017,300 | ||||||
China SCE Group Holdings Ltd. | 173,000 | 62,637 | ||||||
China Vanke Co., Ltd. –Class H | 161,600 | 544,031 | ||||||
CIFI Holdings (Group) Co. Ltd. | 542,000 | 285,232 | ||||||
Country Garden Holdings Co. Ltd. | 665,000 | 801,058 | ||||||
Guangzhou R&F Properties Co. Ltd. | 105,600 | 158,166 | ||||||
Jiayuan International Group Ltd. | 110,000 | 203,410 | ||||||
KWG Group Holdings Ltd. | 290,000 | 253,954 | ||||||
Logan Property Holdings Co. Ltd. | 222,000 | 276,239 | ||||||
Longfor Group Holdings Ltd. | 149,500 | 446,753 | ||||||
Shimao Property Holdings Ltd. | 201,000 | 531,688 | ||||||
Sino-Ocean Group Holding Ltd. | 290,000 | 126,741 | ||||||
SOHO China Ltd.(a) | 225,500 | 80,345 |
Shares | Value | |||||||
China–(continued) |
| |||||||
Sunac China Holdings Ltd. | 221,000 | $ | 710,711 | |||||
Times China Holdings Ltd. | 164,000 | 180,934 | ||||||
Yanlord Land Group Ltd. | 75,900 | 67,573 | ||||||
8,930,377 | ||||||||
France–2.19% |
| |||||||
ICADE | 9,241 | 702,502 | ||||||
Klepierre S.A. | 17,307 | 532,850 | ||||||
Unibail-Rodamco-Westfield(a) | 204 | 31,647 | ||||||
Unibail-Rodamco-Westfield | 13,300 | 2,054,433 | ||||||
3,321,432 | ||||||||
Germany–5.60% |
| |||||||
Aroundtown S.A. | 157,503 | 1,307,171 | ||||||
Deutsche Wohnen S.E. | 45,337 | 2,077,794 | ||||||
Grand City Properties S.A. | 60,758 | 1,317,633 | ||||||
LEG Immobilien AG | 9,979 | 1,041,815 | ||||||
Vonovia S.E. | 60,683 | 2,752,595 | ||||||
8,497,008 | ||||||||
Hong Kong–7.38% |
| |||||||
CK Asset Holdings Ltd. | 384,300 | 2,794,538 | ||||||
Hang Lung Properties Ltd. | 210,000 | 400,128 | ||||||
K Wah International Holdings Ltd. | 125,000 | 59,060 | ||||||
Kerry Properties Ltd | 60,000 | 203,849 | ||||||
Link REIT | 295,500 | 2,975,865 | ||||||
Mapletree North Asia Commercial Trust | 170,200 | 142,144 | ||||||
New World Development Co. Ltd. | 1,340,000 | 1,760,295 | ||||||
Sino Land Co. Ltd. | 274,000 | 466,303 | ||||||
Sun Hung Kai Properties Ltd. | 109,000 | 1,545,510 | ||||||
Swire Properties Ltd. | 140,200 | 489,916 | ||||||
Wharf Real Estate Investment Co. Ltd. | 45,000 | 267,492 | ||||||
Yuexiu REIT | 148,000 | 94,772 | ||||||
11,199,872 | ||||||||
India–0.27% |
| |||||||
Ascendas India Trust | 156,000 | 123,614 | ||||||
DLF Ltd. | 40,670 | 102,961 | ||||||
Oberoi Realty Ltd. | 28,664 | 181,000 | ||||||
407,575 | ||||||||
Indonesia–0.26% |
| |||||||
PT Bumi Serpong Damai Tbk(a) | 1,182,700 | 103,519 | ||||||
PT Ciputra Development Tbk | 1,747,438 | 122,734 | ||||||
PT Pakuwon Jati Tbk | 2,320,400 | 100,045 | ||||||
PT Summarecon Agung Tbk | 1,351,700 | 75,669 | ||||||
401,967 | ||||||||
Ireland–0.30% |
| |||||||
Green REIT PLC | 296,275 | 457,522 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Real Estate Fund
Shares | Value | |||||||
Japan–10.34% |
| |||||||
Activia Properties, Inc. | 13 | $ | 52,673 | |||||
Advance Residence Investment Corp. | 297 | 820,643 | ||||||
Daiwa Office Investment Corp. | 89 | 561,097 | ||||||
Fukuoka REIT Corp. | 204 | 309,536 | ||||||
GLP J-REIT | 573 | 584,998 | ||||||
Hulic Co., Ltd. | 39,759 | 355,785 | ||||||
Invincible Investment Corp. | 440 | 181,625 | ||||||
Japan Hotel REIT Investment Corp. | 959 | 685,969 | ||||||
Japan Prime Realty Investment Corp. | 62 | 235,440 | ||||||
Japan Real Estate Investment Corp. | 187 | 1,050,137 | ||||||
Japan Rental Housing Investments Inc. | 482 | 361,044 | ||||||
Japan Retail Fund Investment Corp. | 388 | 777,027 | ||||||
Kenedix Office Investment Corp. | 64 | 408,740 | ||||||
Mitsubishi Estate Co., Ltd. | 117,620 | 1,843,218 | ||||||
Mitsui Fudosan Co., Ltd. | 97,658 | 2,163,846 | ||||||
Mitsui Fudosan Logistics Park Inc. | 93 | 262,736 | ||||||
Nippon Building Fund Inc. | 140 | 881,688 | ||||||
Nippon Prologis REIT Inc. | 182 | 384,202 | ||||||
Nomura Real Estate Master Fund, Inc. | 313 | 411,910 | ||||||
ORIX JREIT Inc. | 458 | 762,184 | ||||||
Sumitomo Realty & Development Co., Ltd. | 43,289 | 1,581,075 | ||||||
Tokyo Tatemono Co., Ltd. | 38,982 | 401,719 | ||||||
United Urban Investment Corp. | 389 | 603,184 | ||||||
15,680,476 | ||||||||
Malaysia–0.39% |
| |||||||
IOI Properties Group Bhd. | 329,200 | 122,678 | ||||||
KLCCP Stapled Group | 129,800 | 240,597 | ||||||
Mah Sing Group Bhd. | 291,200 | 64,368 | ||||||
Sime Darby Property Bhd. | 696,400 | 167,675 | ||||||
595,318 | ||||||||
Malta–0.00% |
| |||||||
BGP Holdings PLC | 1,355,927 | 0 | ||||||
Mexico–0.40% |
| |||||||
Fibra Uno Administracion S.A. de C.V. | 320,000 | 355,795 | ||||||
Macquarie Mexico Real Estate Management S.A. de C.V. | 208,000 | 186,813 | ||||||
PLA Administradora Industrial, S. de R.L. de C.V. | 58,700 | 69,836 | ||||||
612,444 | ||||||||
Netherlands–0.15% |
| |||||||
InterXion Holding N.V.(a) | 4,316 | 233,755 | ||||||
Philippines–0.82% |
| |||||||
Ayala Land, Inc. | 665,000 | 514,620 | ||||||
Robinsons Land Corp. | 243,300 | 93,230 | ||||||
SM Prime Holdings Inc. | 935,700 | 637,027 | ||||||
1,244,877 | ||||||||
Singapore–2.32% |
| |||||||
Ascendas REIT | 273,000 | 513,309 |
Shares | Value | |||||||
Singapore–(continued) |
| |||||||
CapitaLand Commercial Trust | 411,300 | $ | 527,006 | |||||
CapitaLand Ltd. | 243,600 | 554,025 | ||||||
City Developments Ltd. | 156,200 | 926,957 | ||||||
Mapletree Commercial Trust | 342,000 | 413,711 | ||||||
Mapletree Logistics Trust | 636,400 | 587,611 | ||||||
3,522,619 | ||||||||
South Africa–0.95% |
| |||||||
Growthpoint Properties Ltd. | 342,849 | 553,206 | ||||||
Hyprop Investments Ltd. | 50,946 | 288,591 | ||||||
Redefine Properties Ltd. | 514,984 | 346,127 | ||||||
SA Corporate Real Estate Ltd. | 1,069,015 | 249,654 | ||||||
1,437,578 | ||||||||
Spain–0.88% |
| |||||||
Inmobiliaria Colonial SOCIMI, S.A. | 51,061 | 474,606 | ||||||
Merlin Properties SOCIMI, S.A. | 69,534 | 859,225 | ||||||
1,333,831 | ||||||||
Sweden–1.65% |
| |||||||
Fabege AB | 64,788 | 862,511 | ||||||
Hufvudstaden AB–Class A | 57,081 | 883,326 | ||||||
Wihlborgs Fastigheter AB | 65,219 | 755,678 | ||||||
2,501,515 | ||||||||
Switzerland–0.69% |
| |||||||
Swiss Prime Site AG | 12,939 | 1,048,309 | ||||||
Thailand–0.59% |
| |||||||
AP Thailand PCL | 583,700 | 107,561 | ||||||
Central Pattana PCL | 229,700 | 526,524 | ||||||
Origin Property PCL | 72,800 | 14,789 | ||||||
Supalai PCL | 115,500 | 64,623 | ||||||
Supalai PCL–NVDR | 71,700 | 40,117 | ||||||
WHA Corp. PCL–NVDR | 1,052,300 | 138,142 | ||||||
891,756 | ||||||||
Turkey–0.05% |
| |||||||
Emlak Konut Gayrimenkul Yatirim Ortakligi A.S. | 262,312 | 73,855 | ||||||
United Arab Emirates–0.12% |
| |||||||
Emaar Malls PJSC | 364,141 | 177,132 | ||||||
United Kingdom–3.81% |
| |||||||
Assura PLC | 523,349 | 352,208 | ||||||
Big Yellow Group PLC | 41,497 | 461,130 | ||||||
Derwent London PLC | 18,253 | 662,489 | ||||||
Grainger PLC | 157,375 | 420,838 | ||||||
Great Portland Estates PLC | 7,254 | 60,789 | ||||||
Land Securities Group PLC | 97,154 | 996,108 | ||||||
SEGRO PLC | 146,957 | 1,102,515 | ||||||
Tritax Big Box REIT PLC | 443,691 | 741,490 | ||||||
UNITE Group PLC (The) | 51,399 | 527,326 | ||||||
Workspace Group PLC | 45,437 | 458,382 | ||||||
5,783,275 |
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–47.28% |
| |||||||
Agree Realty Corp. | 11,241 | $ | 664,568 | |||||
Alexandria Real Estate Equities, Inc. | 12,251 | 1,411,805 | ||||||
American Assets Trust, Inc. | 6,230 | 250,259 | ||||||
American Campus Communities, Inc. | 32,660 | 1,351,797 | ||||||
American Homes 4 Rent–Class A | 21,419 | 425,167 | ||||||
AvalonBay Communities, Inc. | 19,984 | 3,478,215 | ||||||
Boston Properties, Inc. | 26,288 | 2,958,714 | ||||||
Corporate Office Properties Trust | 21,675 | 455,825 | ||||||
CyrusOne Inc. | 15,571 | 823,394 | ||||||
Digital Realty Trust, Inc. | 12,761 | 1,359,685 | ||||||
Duke Realty Corp. | 32,449 | 840,429 | ||||||
EastGroup Properties, Inc. | 5,260 | 482,500 | ||||||
Empire State Realty Trust, Inc.–Class A | 41,198 | 586,248 | ||||||
Equinix, Inc. | 3,844 | 1,355,241 | ||||||
Equity LifeStyle Properties, Inc. | 8,814 | 856,104 | ||||||
Equity Residential | 38,755 | 2,558,218 | ||||||
Essex Property Trust, Inc. | 6,622 | 1,623,781 | ||||||
Extra Space Storage Inc. | 18,546 | 1,678,042 | ||||||
Federal Realty Investment Trust | 10,809 | 1,275,894 | ||||||
HCP, Inc. | 51,043 | 1,425,631 | ||||||
Healthcare Realty Trust, Inc. | 74,949 | 2,131,550 | ||||||
Highwoods Properties, Inc. | 9,333 | 361,094 | ||||||
Hilton Worldwide Holdings Inc. | 16,822 | 1,207,820 | ||||||
Hudson Pacific Properties, Inc. | 56,248 | 1,634,567 | ||||||
Invitation Homes Inc. | 87,962 | 1,766,277 | ||||||
Kilroy Realty Corp. | 22,234 | 1,398,074 | ||||||
Liberty Property Trust | 25,626 | 1,073,217 | ||||||
Macerich Co. (The) | 20,218 | 875,035 | ||||||
Mid-America Apartment Communities, Inc. | 26,617 | 2,547,247 | ||||||
National Health Investors, Inc. | 12,521 | 945,836 | ||||||
National Retail Properties Inc. | 35,051 | 1,700,324 | ||||||
Park Hotels & Resorts Inc. | 52,178 | 1,355,584 | ||||||
Pebblebrook Hotel Trust | 13,889 | 393,198 | ||||||
PotlatchDeltic Corp. | 10,961 | 346,806 | ||||||
Prologis, Inc. | 79,622 | 4,675,404 |
Shares | Value | |||||||
United States–(continued) |
| |||||||
Public Storage | 16,467 | $ | 3,333,085 | |||||
QTS Realty Trust Inc.–Class A | 7,486 | 277,356 | ||||||
Realty Income Corp. | 34,014 | 2,144,243 | ||||||
Regency Centers Corp. | 10,513 | 616,903 | ||||||
Retail Opportunity Investments Corp. | 111,384 | 1,768,778 | ||||||
SBA Communications Corp.–Class A(a) | 5,558 | 899,785 | ||||||
Simon Property Group, Inc. | 28,213 | 4,739,502 | ||||||
STAG Industrial, Inc. | 33,010 | 821,289 | ||||||
Sun Communities, Inc. | 13,428 | 1,365,762 | ||||||
Sunstone Hotel Investors, Inc. | 72,009 | 936,837 | ||||||
Terreno Realty Corp. | 9,479 | 333,376 | ||||||
Ventas, Inc. | 22,926 | 1,343,234 | ||||||
VICI Properties Inc. | 73,349 | 1,377,494 | ||||||
Washington REIT | 50,851 | 1,169,573 | ||||||
Weingarten Realty Investors | 10,796 | 267,849 | ||||||
Welltower Inc. | 22,177 | 1,539,306 | ||||||
Weyerhaeuser Co. | 22,348 | 488,527 | ||||||
71,696,449 | ||||||||
Total Real Estate Investments Trust, Common Stocks & Other Equity Interests (Cost $151,336,295) |
| 149,992,476 | ||||||
Money Market Funds–0.28% |
| |||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30%(d) | 147,502 | 147,502 | ||||||
Invesco Liquid Assets Portfolio–Institutional Class, 2.48%(d) | 105,346 | 105,356 | ||||||
Invesco Treasury Portfolio–Institutional Class, 2.30%(d) | 168,573 | 168,573 | ||||||
Total Money Market Funds |
| 421,431 | ||||||
TOTAL INVESTMENTS IN SECURITIES–99.17% |
| 150,413,907 | ||||||
OTHER ASSETS LESS LIABILITIES–0.79% |
| 1,200,915 | ||||||
NET ASSETS–100.00% |
| $ | 151,614,822 |
Investment Abbreviations:
NVDR | – Non-Voting Depositary Receipt | |
REIT | – Real Estate Investment Trust |
Notes to Schedule of Investments:
(a) | Non-income producing security. |
(b) | 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 December 31, 2018 represented less than 1% of the Fund’s Net Assets. |
(c) | Security valued using significant unobservable inputs (Level 3). See Note 3. |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $151,336,295) | $ | 149,992,476 | ||
Investments in affiliated money market funds, at value and cost | 421,431 | |||
Foreign currencies, at value (Cost $162,513) | 158,830 | |||
Receivable for: | ||||
Investments sold | 1,074,423 | |||
Fund shares sold | 11,573 | |||
Dividends | 641,907 | |||
Investment for trustee deferred compensation and retirement plans | 62,804 | |||
Other assets | 22,383 | |||
Total assets | 152,385,827 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 74,301 | |||
Amount due to custodian | 77,480 | |||
Fund shares reacquired | 239,591 | |||
Accrued foreign taxes | 85,565 | |||
Accrued fees to affiliates | 124,132 | |||
Accrued trustees’ and officers’ fees and benefits | 4,613 | |||
Accrued other operating expenses | 93,534 | |||
Trustee deferred compensation and retirement plans | 71,789 | |||
Total liabilities | 771,005 | |||
Net assets applicable to shares outstanding | $ | 151,614,822 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 149,312,080 | ||
Distributable earnings | 2,302,742 | |||
$ | 151,614,822 | |||
Net Assets: | ||||
Series I | $ | 124,815,983 | ||
Series II | $ | 26,798,839 | ||
Shares outstanding, no par value, |
| |||
Series I | 8,040,172 | |||
Series II | 1,783,269 | |||
Series I: | ||||
Net asset value per share | $ | 15.52 | ||
Series II: | ||||
Net asset value per share | $ | 15.03 |
Investment income: | ||||
Dividends (net of foreign withholding taxes of $561,357) | $ | 11,819,685 | ||
Dividends from affiliated money market funds | 56,150 | |||
Total investment income | 11,875,835 | |||
Expenses: | ||||
Advisory fees | 2,616,219 | |||
Administrative services fees | 610,663 | |||
Custodian fees | 165,734 | |||
Distribution fees — Series II | 514,948 | |||
Transfer agent fees | 35,584 | |||
Trustees’ and officers’ fees and benefits | 25,426 | |||
Reports to shareholders | 10,157 | |||
Professional services fees | 50,646 | |||
Other | 25,030 | |||
Total expenses | 4,054,407 | |||
Less: Fees waived | (3,306 | ) | ||
Net expenses | 4,051,101 | |||
Net investment income | 7,824,734 | |||
Realized and unrealized gain (loss) from: | ||||
Net realize gain (loss) from: | ||||
Investment securities (net of foreign taxes of $94,321) | 32,454,389 | |||
Foreign currencies | (197,056 | ) | ||
32,257,333 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities (net of foreign taxes of $103,177) | (62,290,882 | ) | ||
Foreign currencies | (27,288 | ) | ||
(62,318,170 | ) | |||
Net realized and unrealized gain (loss) | (30,060,837 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (22,236,103 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income | $ | 7,824,734 | $ | 9,862,959 | ||||
Net realized gain | 32,257,333 | 7,559,135 | ||||||
Change in net unrealized appreciation (depreciation) | (62,318,170 | ) | 29,881,018 | |||||
Net increase (decrease) in net assets resulting from operations | (22,236,103 | ) | 47,303,112 | |||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (6,963,469 | ) | (7,460,961 | ) | ||||
Series II | (12,230,519 | ) | (11,814,973 | ) | ||||
Total distributions from distributable earnings | (19,193,988 | ) | (19,275,934 | ) | ||||
Sharetransactions-net: | ||||||||
Series I | (17,886,490 | ) | (502,416 | ) | ||||
Series II | (207,381,121 | ) | 26,512,911 | |||||
Net increase (decrease) in net assets resulting from share transactions | (225,267,611 | ) | 26,010,495 | |||||
Net increase (decrease) in net assets | (266,697,702 | ) | 54,037,673 | |||||
Net assets: | ||||||||
Beginning of year | 418,312,524 | 364,274,851 | ||||||
End of year | $ | 151,614,822 | $ | 418,312,524 |
(1) | For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income and distributions from net realized gains. The Securities and Exchange Commission eliminated the requirement to disclose the distribution components separately, except for tax return of capital. For the year ended December 31, 2017, distributions from net investment income were $4,949,175 and $7,647,921 and distributions from net realized gains were $2,511,786 and $4,167,052 for Series I and Series II, respectively. |
Notes to Financial Statements
December 31, 2018
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. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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 theover-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 (“NAV”) 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 theend-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. Global Real Estate 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. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 investment 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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 andshort-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 of the cost of the related investment. 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. |
Invesco V.I. Global Real Estate Fund
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 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 the date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated inforeign 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 theStatement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains orlosses 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 the dailymark-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 anagreed-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 accrues daily and pays monthly 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 year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.75%.
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2019, 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 (the “expense limits”). 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, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $3,306.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $85,538 for accounting and fund administrative services and was reimbursed $525,125 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution 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 December 31, 2018. 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 | |||||||||||||
Investments in Securities | ||||||||||||||||
Australia | $ | 6,242,386 | $ | — | $ | — | $ | 6,242,386 | ||||||||
Brazil | 715,088 | 159,337 | — | 874,425 | ||||||||||||
Canada | 2,698,090 | — | — | 2,698,090 | ||||||||||||
Chile | 128,633 | — | — | 128,633 | ||||||||||||
China | 730,508 | 8,199,869 | — | 8,930,377 | ||||||||||||
France | 31,647 | 3,289,785 | — | 3,321,432 | ||||||||||||
Germany | 5,872,204 | 2,624,804 | — | 8,497,008 | ||||||||||||
Hong Kong | 400,128 | 10,799,744 | — | 11,199,872 | ||||||||||||
India | 304,614 | 102,961 | — | 407,575 | ||||||||||||
Indonesia | 298,448 | 103,519 | — | 401,967 | ||||||||||||
Ireland | — | 457,522 | — | 457,522 | ||||||||||||
Japan | 4,141,059 | 11,539,417 | — | 15,680,476 | ||||||||||||
Malaysia | 530,950 | 64,368 | — | 595,318 | ||||||||||||
Malta | — | — | 0 | 0 | ||||||||||||
Mexico | 612,444 | — | — | 612,444 | ||||||||||||
Netherlands | 233,755 | — | — | 233,755 | ||||||||||||
Philippines | 730,257 | 514,620 | — | 1,244,877 | ||||||||||||
Singapore | — | 3,522,619 | — | 3,522,619 | ||||||||||||
South Africa | 884,372 | 553,206 | — | 1,437,578 | ||||||||||||
Spain | 859,225 | 474,606 | — | 1,333,831 | ||||||||||||
Sweden | — | 2,501,515 | — | 2,501,515 | ||||||||||||
Switzerland | — | 1,048,309 | — | 1,048,309 | ||||||||||||
Thailand | 713,497 | 178,259 | — | 891,756 | ||||||||||||
Turkey | — | 73,855 | — | 73,855 | ||||||||||||
United Arab Emirates | — | 177,132 | — | 177,132 | ||||||||||||
United Kingdom | 2,871,669 | 2,911,606 | — | 5,783,275 | ||||||||||||
United States | 71,696,449 | — | — | 71,696,449 | ||||||||||||
Money Market Funds | 421,431 | — | — | 421,431 | ||||||||||||
Total Investments | $ | 101,116,854 | $ | 49,297,053 | $ | — | $ | 150,413,907 |
Invesco V.I. Global Real Estate Fund
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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 14,684,055 | $ | 12,597,096 | ||||
Long-term capital gain | 4,509,933 | 6,678,838 | ||||||
Total distributions | $ | 19,193,988 | $ | 19,275,934 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 8,007,532 | ||
Net unrealized appreciation (depreciation) — investments | (5,523,052 | ) | ||
Net unrealized appreciation (depreciation) — foreign currencies | (60 | ) | ||
Temporary book/tax differences | (66,910 | ) | ||
Capital loss carryforward | (114,768 | ) | ||
Shares of beneficial interest | 149,312,080 | |||
Total net assets | $ | 151,614,822 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation (depreciation) difference is attributable primarily to wash sales and the tax treatment of passive foreign investment companies.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 has a capital loss carryforward as of December 31, 2018 as follows.
Capital Loss Carryforward* | ||||||||||||
Expiration | Short Term | Long Term | Total | |||||||||
Not subject to expiration | $ | 114,768 | $ | — | $ | 114,768 |
* | 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. |
On October 19, 2018, 13,189,956 of Series II shares valued at $200,883,028, were redeemed by a significant shareholder and settled through a redemption-in-kind transactions, of which $4,319,621 consisted of cash, which resulted in a realized gain of $31,693,570 to the Fund for book purposes. From a federal income tax perspective, the realized gains are not recognized.
NOTE 7—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $192,450,998 and $232,007,600, respectively. Cost of
Invesco V.I. Global Real Estate Fund
investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 11,231,588 | ||
Aggregate unrealized (depreciation) of investments | (16,754,640 | ) | ||
Net unrealized appreciation (depreciation) of investments | $ | (5,523,052 | ) |
Cost of investments for tax purposes is $155,936,959.
NOTE 8—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of redemption in kind and passive foreign investment companies, on December 31, 2018, undistributed net investment income was increased by $8,851,081, undistributed net realized gain was decreased by $30,140,549 and shares of beneficial interest was increased by $21,289,468. This reclassification had no effect on the net assets [or the distributable earnings] of the Fund.
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 1,662,498 | $ | 28,085,608 | 1,590,286 | $ | 26,867,883 | ||||||||||
Series II | 1,936,421 | 31,871,041 | 2,922,326 | 48,002,807 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 418,729 | 6,963,469 | 441,738 | 7,460,961 | ||||||||||||
Series II | 759,188 | 12,230,519 | 720,865 | 11,814,973 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (3,142,606 | ) | (52,935,567 | ) | (2,054,075 | ) | (34,831,260 | ) | ||||||||
Series II | (16,340,645 | ) | (251,482,681 | ) | (2,037,490 | ) | (33,304,869 | ) | ||||||||
Net increase (decrease) in share activity | (14,706,415 | ) | $ | (225,267,611 | ) | 1,583,650 | $ | 26,010,495 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 51% 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 17.38 | $ | 0.40 | $ | (1.41 | ) | $ | (1.01 | ) | $ | (0.65 | ) | $ | (0.20 | ) | $ | (0.85 | ) | $ | 15.52 | (6.10 | )% | $ | 124,816 | 1.01 | %(d) | 1.01 | %(d) | 2.38 | %(d) | 57 | % | |||||||||||||||||||||||
Year ended 12/31/17 | 16.15 | 0.45 | (e) | 1.62 | 2.07 | (0.56 | ) | (0.28 | ) | (0.84 | ) | 17.38 | 12.98 | 158,229 | 1.02 | 1.02 | 2.63 | (e) | 50 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 16.36 | 0.30 | 0.08 | 0.38 | (0.27 | ) | (0.32 | ) | (0.59 | ) | 16.15 | 2.04 | 147,382 | 1.05 | 1.05 | 1.81 | 66 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 17.24 | 0.31 | (0.59 | ) | (0.28 | ) | (0.60 | ) | — | (0.60 | ) | 16.36 | (1.48 | ) | 208,796 | 1.11 | 1.11 | 1.79 | 72 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 15.29 | 0.33 | 1.89 | 2.22 | (0.27 | ) | — | (0.27 | ) | 17.24 | 14.62 | 209,829 | 1.10 | 1.10 | 1.99 | 44 | ||||||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 16.86 | 0.34 | (1.35 | ) | (1.01 | ) | (0.62 | ) | (0.20 | ) | (0.82 | ) | 15.03 | (6.33 | ) | 26,799 | 1.26 | (d) | 1.26 | (d) | 2.13 | (d) | 57 | |||||||||||||||||||||||||||||||||
Year ended 12/31/17 | 15.69 | 0.39 | (e) | 1.58 | 1.97 | (0.52 | ) | (0.28 | ) | (0.80 | ) | 16.86 | 12.73 | 260,083 | 1.27 | 1.27 | 2.38 | (e) | 50 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 15.91 | 0.25 | 0.08 | 0.33 | (0.23 | ) | (0.32 | ) | (0.55 | ) | 15.69 | 1.82 | 216,893 | 1.30 | 1.30 | 1.56 | 66 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 16.79 | 0.26 | (0.58 | ) | (0.32 | ) | (0.56 | ) | — | (0.56 | ) | 15.91 | (1.74 | ) | 208,000 | 1.36 | 1.36 | 1.54 | 72 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 14.90 | 0.28 | 1.84 | 2.12 | (0.23 | ) | — | (0.23 | ) | 16.79 | 14.34 | 200,299 | 1.35 | 1.35 | 1.74 | 44 |
(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 based on average daily net assets (000’s omitted) of $144,186 and $205,979 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 $0.38 and 2.18%, $0.32 and 1.93% for Series I and Series II shares, respectively. |
Invesco V.I. Global Real Estate Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Global Real Estate Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Global Real Estate Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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 | ACTUAL | HYPOTHETICAL (5% annual return before | Annualized | ||||||||||||||||||||
Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 939.00 | $ | 4.94 | $ | 1,020.11 | $ | 5.14 | 1.01 | % | ||||||||||||
Series II | 1,000.00 | 937.80 | 6.15 | 1,018.85 | 6.41 | 1.26 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Global Real Estate Fund
Tax Information
Form1099-DIV, Form 1042-S and other year–end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Long-Term Capital Gain Distributions | $ | 4,509,933 | ||
Corporate Dividends Received Deduction* | 0.00 | % | ||
U.S. Treasury Obligations* | 0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. Global Real Estate Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Global Real Estate Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. Global Real Estate Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. Global Real Estate Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Global Real Estate Fund
| ||||
Annual Report to Shareholders
| December 31, 2018 | |||
| ||||
Invesco V.I. Government 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 FormN-Q (or any successor Form). The Fund’s FormN-Q (or any successor Form) filings are available on the SEC website, sec.gov. The SEC file numbers for the Fund are811-07452 and033-57340. The Fund’s most recent portfolio holdings, as filed on FormN-Q (or any successor Form), 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 recent12-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.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Invesco Distributors, Inc. VIGMKT-AR-1 02152019 1153 |
Management’s Discussion
Fund information
This annual report for Invesco V.I. Government Money Market Fund (the Fund) covers the year ended December 31, 2018.
As of December 31, 2018, the Fund’s net assets totaled $997.2 million. As of the same date, the Fund’s weighted average maturity was 33 days and the Fund’s weighted average life was 93 days.
Weighted average maturity (WAM) is an average of the maturities of all securities held in the portfolio, weighted by each security’s percentage of net assets. The days to maturity for WAM is the lower of the stated maturity date or next interest rate reset date. WAM reflects how a portfolio would react to interest rate changes.
Weighted average life (WAL) is an average of all the maturities of all securities held in the portfolio, weighted by each security’s percentage of net assets. The days to maturity for WAL is the lower of the stated maturity date or next demand feature date. WAL reflects how a portfolio would react to deteriorating credit (widening spreads) or tightening liquidity conditions.
Market conditions affecting money market funds
The largest development affecting money market funds and the money market fund industry in 2018 was the US Federal Reserve’s (the Fed) four interest rate hikes.
Money market investors benefited from the Fed’s decision to increase the fed funds rate by a total of 1.00% in 2018.1 Four 0.25% hikes in March, June, September, and December raised the fed funds rate to a target level of 2.25% to 2.50%.1 Since 2006, there have now been nine separate 0.25% rate hikes.1 The Fed’s “dot plot,” a key function of the Federal Open Market Committee’s (FOMC) Summary of Economic Projections, shows that the FOMC expects the fed funds target rate to be at a median target of 2.9% by the end of 2019.1 This projection would represent an increase of 0.40% from current levels. The ongoing positive health of the US economy, with low unemployment and moderate economic growth, provided the basis for the Fed’s decisions. Relatively benign inflation levels may allow the Fed to be less aggressive with its rate hikes in the near future. For example, following the December Fed meeting, Chairman Jerome Powell lowered guidance from three to two rate hikes in 2019, signaling a slightly more dovish stance than expected.
At the close of the year, the US continued to be an outlier in terms of base rate borrowing costs as most major central banks continued to maintain interest rates at, near or below zero to fuel inflation and spur economic growth. Many major central banks, including the European Central Bank, the Bank of Japan and the Reserve Bank of Australia, kept their base borrowing rates unchanged during 2018. The Bank of England and the Bank of Canada were the only other major central banks to increase their key rates in 2018.
For over 35 years, Invesco Global Liquidity has been a core business for Invesco. We believe in a disciplined investment process, high credit quality solutions, distinguished client engagement and consistent performance.
1 | Source: US Federal Reserve |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Team managed by Invesco Advisers, Inc.
You could lose money by investing in the Fund. Although the Fund seeks to preserve your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Portfolio Composition by Maturity |
| ||||
In days, as of 12/31/18 | % of total net assets | ||||
1 - 7 | 46.7% | ||||
8 - 30 | 3.2 | ||||
31 - 60 | 12.0 | ||||
61 - 90 | 8.9 | ||||
91 - 180 | 17.2 | ||||
181+ | 12.0 |
The number of days to maturity of each holding is determined in accordance with the provisions of Rule2a-7 of the Investment Company Act of 1940.
Invesco V.I. Government Money Market Fund
Invesco V.I. Government Money Market Fund’s investment objective is to provide current income consistent with preservation of capital and liquidity.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Debt securities risk.The prices of debt securities held by the Fund will be affected by changes in interest rates, the credit-worthiness of the issuer and other factors. An increase in prevailing interest rates typically causes the value of existing debt securities to fall and often has a greater impact on longer-duration debt securities and higher quality debt securities. Falling interest rates will cause the Fund to reinvest the proceeds of debt securities that have been repaid by the issuer at lower interest rates. Falling interest rates may also reduce the Fund’s distributable income because interest payments on floating rate debt instruments held by the Fund will decline. The Fund could lose money on investments in debt securities if the issuer or borrower fails to meet its obligations to make interest payments and/or to repay principal in a timely manner. Changes in an issuer’s financial strength, the market’s perception of such strength or in the credit rating of the issuer or the security may affect the value of debt securities. The Adviser’s credit analysis may fail to anticipate such changes, which could result in buying a debt security at an inopportune time or failing to sell a debt security in advance of a price decline or other credit event.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in
the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
Money market fund risk.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. The share price of money market funds can fall below the $1.00 share price. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not rely on or expect that the sponsor will enter into support agreements or take other actions to provide financial support to the Fund or maintain the Fund’s $1.00 share price at any time. The credit quality of the Fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an adverse impact on the Fund’s share price. The Fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility. While the Board of Trustees may implement procedures to impose a fee upon the sale of your shares or temporarily suspend your ability to sell shares in the future if the Fund’s liquidity falls below required minimums because of market conditions or other factors, the Board has not elected to do so at this time. Should the Board elect to do so, such change would only become effective after shareholders were provided with specific advance notice of the change in the Fund’s policy and provided with the opportunity to redeem their shares in accordance with Rule2a-7 before the policy change became effective.
Repurchase agreement risk.If the seller of a repurchase agreement defaults or otherwise does not fulfill its obligations, the Fund may incur delays and losses arising from selling the underlying securities, enforcing its rights, or declining collateral value.
US government obligations risk.Obligations of US government agencies and authorities receive varying levels of support and may not be backed by the full faith and credit of the US government, which could affect the Fund’s ability to recover should they default. No assurance can be given that the US government will provide
financial support to its agencies and authorities if it is not obligated by law to do so.
Yield risk.The Fund’s yield will vary as the short-term securities in its portfolio mature or are sold and the proceeds are reinvested in other securities. When interest rates are very low, the Fund’s expenses could absorb all or a portion of the Fund’s income and yield. Additionally, inflation may outpace and diminish investment returns over time.
Invesco V.I. Government Money Market Fund
Schedule of Investments
December 31, 2018
Interest Rate | Maturity Date | Principal Amount (000) | Value | |||||||||||||
U.S. Treasury Securities–45.42% |
| |||||||||||||||
U.S. Treasury Bills–36.39%(a) |
| |||||||||||||||
U.S. Treasury Bills | 2.28 | % | 01/17/2019 | $ | 25,000 | $ | 24,974,778 | |||||||||
U.S. Treasury Bills | 2.32 | % | 01/31/2019 | 10,000 | 9,980,792 | |||||||||||
U.S. Treasury Bills | 2.33 | % | 02/07/2019 | 25,000 | 24,940,389 | |||||||||||
U.S. Treasury Bills | 2.35 | % | 02/14/2019 | 25,000 | 24,928,500 | |||||||||||
U.S. Treasury Bills | 2.38 | % | 02/19/2019 | 50,000 | 49,838,450 | |||||||||||
U.S. Treasury Bills | 2.27 | % | 03/07/2019 | 10,000 | 9,959,556 | |||||||||||
U.S. Treasury Bills | 2.29 | %-2.39% | 03/14/2019 | 25,000 | 24,883,450 | |||||||||||
U.S. Treasury Bills | 2.32 | % | 03/21/2019 | 10,000 | 9,949,747 | |||||||||||
U.S. Treasury Bills | 2.36 | % | 03/28/2019 | 40,000 | 39,777,117 | |||||||||||
U.S. Treasury Bills | 2.36 | %-2.49% | 04/04/2019 | 70,000 | 69,567,810 | |||||||||||
U.S. Treasury Bills | 2.51 | % | 06/13/2019 | 15,000 | 14,831,567 | |||||||||||
U.S. Treasury Bills | 2.52 | % | 06/20/2019 | 30,000 | 29,647,958 | |||||||||||
U.S. Treasury Bills | 2.51 | % | 06/27/2019 | 30,000 | 29,634,200 | |||||||||||
362,914,314 | ||||||||||||||||
U.S. Treasury Notes–9.03% |
| |||||||||||||||
U.S. Treasury Floating Rate Notes | 2.50 | % | 04/30/2019 | 11,000 | 11,000,388 | |||||||||||
U.S. Treasury Floating Rate Notes | 2.48 | % | 10/31/2019 | 8,000 | 8,000,850 | |||||||||||
U.S. Treasury Floating Rate Notes (3 mo. U.S. Treasury Bill Money Market Yield Rate)(b) | 2.43 | % | 01/31/2020 | 10,000 | 9,996,268 | |||||||||||
U.S. Treasury Floating Rate Notes | 2.46 | % | 04/30/2020 | 3,000 | 3,000,187 | |||||||||||
U.S. Treasury Floating Rate Notes | 2.47 | % | 07/31/2020 | 13,000 | 12,999,457 | |||||||||||
U.S. Treasury Floating Rate Notes | 2.47 | % | 10/31/2020 | 45,000 | 44,998,035 | |||||||||||
89,995,185 | ||||||||||||||||
Total U.S. Treasury Securities (Cost $452,909,499) | 452,909,499 | |||||||||||||||
U.S. Government Sponsored Agency Securities–12.92% |
| |||||||||||||||
Federal Farm Credit Bank (FFCB)–2.01% | ||||||||||||||||
Unsec. Bonds (1 mo. USD LIBOR – 0.10%)(b) | 2.29 | % | 10/08/2019 | 10,000 | 9,997,113 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR – 0.06%)(b) | 2.29 | % | 12/04/2019 | 5,000 | 4,999,880 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR – 0.07%)(b) | 2.39 | % | 12/18/2019 | 5,000 | 4,999,537 | |||||||||||
19,996,530 | ||||||||||||||||
Federal Home Loan Bank (FHLB)–8.32% |
| |||||||||||||||
Unsec. Bonds (1 mo. USD LIBOR – 0.09%)(b) | 2.35 | % | 01/14/2019 | 9,000 | 9,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR – 0.08%)(b) | 2.32 | % | 02/11/2019 | 8,000 | 8,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR – 0.08%)(b) | 2.30 | % | 03/06/2019 | 8,000 | 8,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR – 0.08%)(b) | 2.39 | % | 03/20/2019 | 2,000 | 2,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR – 0.11%)(b) | 2.39 | % | 04/22/2019 | 3,000 | 3,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR – 0.09%)(b) | 2.37 | % | 05/17/2019 | 20,000 | 20,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR – 0.07%)(b) | 2.40 | % | 07/19/2019 | 7,000 | 7,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR – 0.09%)(b) | 2.35 | % | 08/14/2019 | 10,000 | 10,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR – 0.06%)(b) | 2.34 | % | 10/11/2019 | 2,000 | 2,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR – 0.09%)(b) | 2.38 | % | 12/20/2019 | 9,000 | 9,000,000 | |||||||||||
Unsec. Global Bonds (1 mo. USD LIBOR – 0.09%)(b) | 2.36 | % | 06/14/2019 | 5,000 | 5,000,000 | |||||||||||
83,000,000 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Government Money Market Fund
Interest Rate | Maturity Date | Principal Amount (000) | Value | |||||||||||||
Overseas Private Investment Corp. (OPIC)–2.59% |
| |||||||||||||||
Sr. Unsec. Gtd. VRD COP Bonds (3 mo. U.S. Treasury Bill Rate)(c) | 2.43 | % | 06/15/2025 | $ | 3,000 | $ | 3,000,000 | |||||||||
Sr. Unsec. Gtd. VRD COP Bonds (3 mo. U.S. Treasury Bill Rate)(c) | 2.43 | % | 02/15/2028 | 10,000 | 10,000,000 | |||||||||||
Unsec. Gtd. VRD COP Bonds (3 mo. U.S. Treasury Bill Rate)(c) | 2.43 | % | 09/15/2020 | 5,000 | 5,000,000 | |||||||||||
Unsec. Gtd. VRD COP Bonds (3 mo. U.S. Treasury Bill Rate)(c) | 2.43 | % | 07/15/2025 | 350 | 349,500 | |||||||||||
Unsec. Gtd. VRD COP Bonds (3 mo. U.S. Treasury Bill Rate)(c) | 2.47 | % | 07/07/2040 | 7,500 | 7,500,000 | |||||||||||
25,849,500 | ||||||||||||||||
Total U.S. Government Sponsored Agency Securities (Cost $128,846,030) | 128,846,030 | |||||||||||||||
TOTAL INVESTMENTS IN SECURITIES (excluding Repurchase Agreements)–58.34% (Cost $581,755,529) |
| 581,755,529 | ||||||||||||||
Repurchase Amount | ||||||||||||||||
Repurchase Agreements–47.98%(d) |
| |||||||||||||||
Bank of Nova Scotia, joint agreement dated 12/31/2018, aggregate maturing value of $450,075,000 (collateralized by domestic agency mortgage-backed securities valued at $459,000,000; 2.50%-5.00%; 04/01/2026-12/01/2048) | 3.00 | % | 01/02/2019 | 50,008,333 | 50,000,000 | |||||||||||
BNP Paribas Securities Corp., joint agreement dated 12/31/2018, aggregate maturing value of $500,082,778 (collateralized by U.S. Treasury obligations valued at $508,976,209; 0.63%, 07/15/2021) | 2.98 | % | 01/02/2019 | 30,004,967 | 30,000,000 | |||||||||||
Fixed Income Clearing Corp.–Bank of New York Mellon (The), agreement dated 12/31/2018, maturing value of $70,011,472 (collateralized by U.S. Treasury obligations valued at $71,400,074; 1.25%-3.38%; 03/31/2019-05/15/2027) | 2.95 | % | 01/02/2019 | 70,011,472 | 70,000,000 | |||||||||||
ING Financial Markets, LLC, term agreement dated 12/04/2018, maturing value of $10,045,283 (collateralized by domestic mortgage-backed securities and U.S. Treasury obligations valued at $10,200,039; 0%-6.50%; 01/31/2019-08/01/2048) | 2.47 | % | 02/08/2019 | 10,045,283 | 10,000,000 | |||||||||||
J.P. Morgan Securities LLC joint agreement dated 12/31/2018, aggregate maturing value $250,041,667 (collateralized by domestic agency mortgage-backed securities valued at $255,000,000; 0%-6.50%, 10/01/2024-12/01/2048) | 3.00 | % | 01/02/2019 | 50,008,333 | 50,000,000 | |||||||||||
Metropolitan Life Insurance Co., joint term agreement dated 12/27/2018, aggregate maturing value of $200,112,060 (collateralized by U.S. Treasury obligations valued at $205,971,480; 0%-4.50%; 01/10/2019-02/15/2043)(e) | 2.65 | % | 01/03/2019 | 15,012,982 | 15,005,250 | |||||||||||
Mitsubishi UFJ Trust & Banking Corp., joint term agreement dated 12/27/2018, aggregate maturing value of $2,334,889,997 (collateralized by U.S. Treasury obligations valued at $2,400,276,616; 1.63%-2.25%; 08/31/2022-11/30/2024)(e) | 2.65 | % | 01/03/2019 | 28,852,359 | 28,837,500 | |||||||||||
Nomura Securities International, Inc., joint agreement dated 12/31/2018, aggregate maturing value of $1,000,166,667 (collateralized by U.S. Treasury obligations, U.S. government sponsored agency obligations and domestic agency mortgage-backed securities valued at $1,020,000,012; 0%-7.50%; 03/15/2019-08/15/2048) | 3.00 | % | 01/02/2019 | 74,647,419 | 74,634,980 | |||||||||||
RBC Capital Markets LLC, joint term agreement dated 12/31/2018, aggregate maturing value of $1,000,000,000 (collateralized by domestic agency mortgage-backed securities valued at $1,020,000,000; 0%-6.50%, 03/01/2019-03/25/2058)(b)(e) | 2.42 | % | 03/04/2019 | 45,000,000 | 45,000,000 | |||||||||||
Royal Bank of Canada, joint agreement dated 12/31/2018, aggregate maturing value of $500,083,333 (collateralized by domestic agency mortgage-backed securities valued at $510,000,000; 2.41%-6.50%; 11/01/2023-05/15/2059) | 3.00 | % | 01/02/2019 | 50,008,333 | 50,000,000 | |||||||||||
Societe Generale, joint open agreement dated 06/25/2018 (collateralized by U.S. Treasury obligations, U.S. government sponsored agency obligations and domestic agency mortgage-backed securities valued at $510,000,000; 0%-7.00%, 01/22/2019-04/20/2065)(f) | 2.42 | % | — | — | 5,000,000 | |||||||||||
Wells Fargo Securities, LLC, joint agreement dated 12/31/2018, aggregate maturing value of $760,126,667 (collateralized by U.S. government sponsored agency obligations and domestic agency mortgage-backed securities valued at $775,200,000;0%-6.50%, 06/06/2019-12/01/2048) | 3.00 | % | 01/02/2019 | 50,008,333 | 50,000,000 | |||||||||||
Total Repurchase Agreements (Cost $478,477,730) | 478,477,730 | |||||||||||||||
TOTAL INVESTMENTS IN SECURITIES(g)–106.32% (Cost $1,060,233,259) | 1,060,233,259 | |||||||||||||||
OTHER ASSETS LESS LIABILITIES–(6.32)% |
| (62,993,303 | ) | |||||||||||||
NET ASSETS–100.00% |
| $ | 997,239,956 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Government Money Market Fund
Investment Abbreviations:
COP | – Certificates of Participation | |
Gtd. | – Guaranteed | |
LIBOR | – London Interbank Offered Rate | |
Sr. | – Senior | |
Unsec. | – Unsecured | |
USD | – U.S. Dollar | |
VRD | – Variable Rate Demand |
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) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on December 31, 2018. |
(c) | Demand security payable upon demand by the Fund at specified time intervals no greater than thirteen months. Interest rate is redetermined periodically by the issuer or agent based on current market conditions. Rate shown is the rate in effect on December 31, 2018. |
(d) | Principal amount equals value at period end. See Note 1I. |
(e) | The Fund may demand payment of the term repurchase agreement upon one to seven business days’ notice depending on the timing of the demand. |
(f) | Either party may terminate the agreement upon demand. Interest rates, principal amount and collateral are redetermined daily. |
(g) | Also represents cost for federal income tax purposes. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Government Money Market Fund
Statement of Assets and Liabilities
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments, excluding repurchase agreements, at value and cost | $ | 581,755,529 | ||
Repurchase agreements, at value and cost | 478,477,730 | |||
Receivable for: | ||||
Fund shares sold | 346,759 | |||
Interest | 646,375 | |||
Investment for trustee deferred compensation and retirement plans | 42,226 | |||
Total assets | 1,061,268,619 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 49,688,451 | |||
Dividends | 28,166 | |||
Fund shares reacquired | 13,838,337 | |||
Accrued fees to affiliates | 389,783 | |||
Accrued trustees’ and officers’ fees and benefits | 6,073 | |||
Accrued other operating expenses | 26,278 | |||
Trustee deferred compensation and retirement plans | 51,575 | |||
Total liabilities | 64,028,663 | |||
Net assets applicable to shares outstanding | $ | 997,239,956 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 997,256,097 | ||
Distributable earnings | (16,141 | ) | ||
$ | 997,239,956 | |||
Net Assets: | ||||
Series I | $ | 900,900,625 | ||
Series II | $ | 96,339,331 | ||
Shares outstanding, no par value, |
| |||
Series I | 900,903,586 | |||
Series II | 96,339,649 | |||
Series I: | ||||
Net asset value per share | $ | 1.00 | ||
Series II: | ||||
Net asset value per share | $ | 1.00 |
Investment income: | ||||
Interest | $ | 15,134,894 | ||
Expenses: | ||||
Advisory fees | 1,187,537 | |||
Administrative services fees | 1,594,008 | |||
Custodian fees | 2,784 | |||
Distribution fees — Series II | 218,240 | |||
Transfer agent fees | 7,502 | |||
Trustees’ and officers’ fees and benefits | 30,726 | |||
Reports to shareholders | 4,757 | |||
Professional services fees | 27,555 | |||
Other | 5,334 | |||
Net expenses | 3,078,443 | |||
Net investment income | 12,056,451 | |||
Net realized gain (loss) from investment securities | (1,401 | ) | ||
Net increase in net assets resulting from operations | $ | 12,055,050 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Government Money Market Fund
Statement of Changes in Net Assets
For the years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income | $ | 12,056,451 | $ | 3,798,339 | ||||
Net realized gain (loss) | (1,401 | ) | (17,357 | ) | ||||
Net increase in net assets resulting from operations | 12,055,050 | 3,780,982 | ||||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (10,928,099 | ) | (3,515,426 | ) | ||||
Series II | (1,128,352 | ) | (282,913 | ) | ||||
Total distributions from distributable earnings | (12,056,451 | ) | (3,798,339 | ) | ||||
Share transactions–net: | ||||||||
Series l | 244,533,792 | 19,851,083 | ||||||
Series ll | 10,798,163 | (11,818,876 | ) | |||||
Net increase in net assets resulting from share transactions | 255,331,955 | 8,032,207 | ||||||
Net increase in net assets | 255,330,554 | 8,014,850 | ||||||
Net assets: | ||||||||
Beginning of year | 741,909,402 | 733,894,552 | ||||||
End of year | $ | 997,239,956 | $ | 741,909,402 |
(1) | The Securities and Exchange Commission eliminated the requirement to disclose distribution components separately, except for tax return of capital. For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income. |
Notes to Financial Statements
December 31, 2018
NOTE 1—Significant Accounting Policies
Invesco V.I. Government 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. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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) is recorded on the accrual basis from settlement date. Bond premiums and discounts are amortized and/or accreted over the lives of the respective securities.Pay-in-kind interest income andnon-cash dividend income received in the form of securities in-lieu of cash are recorded at the fair value of the securities received. 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.
Invesco V.I. Government Money Market Fund
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 (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 the Statement of Changes in Net Assets, or the net investment income per share and the 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’spro-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. 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. |
J. | Other Risks— Investments in obligations issued by agencies and instrumentalities of the U.S. Government 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. |
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 0.15% of the Fund’s average daily net assets.
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the
Invesco V.I. Government Money Market Fund
fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2019, 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 (the “expense limits”). 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, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
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.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $424,596, for accounting and fund administrative services and was reimbursed $1,169,412 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution 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 December 31, 2018, 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, andTrustees’ and Officers’ Fees and Benefitsalso 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. Government 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 captionAmount 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—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 12,056,451 | $ | 3,798,339 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 51,062 | ||
Temporary book/tax differences | (48,445 | ) | ||
Capital loss carryforward | (18,758 | ) | ||
Shares of beneficial interest | 997,256,097 | |||
Total net assets | $ | 997,239,956 |
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund has a capital loss carryforward as of December 31, 2018, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
Not subject to expiration | $ | 18,758 | $ | — | $ | 18,758 |
* | 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. Government Money Market Fund
NOTE 7—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 1,959,818,121 | $ | 1,959,818,121 | 1,456,355,567 | $ | 1,456,355,567 | ||||||||||
Series II | 73,566,458 | 73,566,458 | 45,247,987 | 45,247,987 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 10,672,129 | 10,672,129 | 3,422,005 | 3,422,005 | ||||||||||||
Series II | 1,128,365 | 1,128,365 | 282,913 | 282,913 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (1,725,956,458 | ) | (1,725,956,458 | ) | (1,439,926,489 | ) | (1,439,926,489 | ) | ||||||||
Series II | (63,896,660 | ) | (63,896,660 | ) | (57,349,776 | ) | (57,349,776 | ) | ||||||||
Net increase in share activity | 255,331,955 | $ | 255,331,955 | 8,032,207 | $ | 8,032,207 |
(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. |
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 gains (losses) on securities | 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 | ||||||||||||||||||||||||||||||||||
Series I | ||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 1.00 | $ | 0.02 | $ | (0.00 | ) | $ | 0.02 | $ | (0.02 | ) | $ | 1.00 | 1.55 | % | $ | 900,901 | 0.36 | %(c) | 0.36 | %(c) | 1.55 | %(c) | ||||||||||||||||||||
Year ended 12/31/17 | 1.00 | 0.01 | (0.00 | ) | 0.01 | (0.01 | ) | 1.00 | 0.56 | 656,368 | 0.40 | 0.40 | 0.56 | |||||||||||||||||||||||||||||||
Year ended 12/31/16 | 1.00 | 0.00 | 0.00 | 0.00 | (0.00 | ) | 1.00 | 0.10 | 636,532 | 0.35 | 0.38 | 0.10 | ||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 1.00 | 0.00 | 0.00 | 0.00 | (0.00 | ) | 1.00 | 0.01 | 737,858 | 0.21 | 0.51 | 0.01 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 1.00 | 0.01 | (0.00 | ) | 0.01 | (0.01 | ) | 1.00 | 1.30 | 96,339 | 0.61 | (c) | 0.61 | (c) | 1.30 | (c) | ||||||||||||||||||||||||||||
Year ended 12/31/17 | 1.00 | 0.00 | (0.00 | ) | 0.00 | (0.00 | ) | 1.00 | 0.31 | 85,541 | 0.65 | 0.65 | 0.31 | |||||||||||||||||||||||||||||||
Year ended 12/31/16 | 1.00 | 0.00 | 0.00 | 0.00 | (0.00 | ) | 1.00 | 0.03 | 97,362 | 0.43 | 0.63 | 0.02 | ||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 1.00 | 0.00 | 0.00 | 0.00 | (0.00 | ) | 1.00 | 0.01 | 23,940 | 0.21 | 0.76 | 0.01 | ||||||||||||||||||||||||||||||||
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 |
(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 based on average daily net assets (000’s omitted) of $704,395 and $87,296 for Series I and Series II shares, respectively. |
Invesco V.I. Government Money Market Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Government Money Market Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Government Money Market Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
Invesco V.I. Government 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 July 1, 2018 through December 31, 2018.
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 (07/01/18) | ACTUAL | HYPOTHETICAL (5% annual return before | Annualized Ratio | ||||||||||||||||||||
Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,009.10 | $ | 1.82 | $ | 1,023.39 | $ | 1.84 | 0.36 | % | ||||||||||||
Series II | 1,000.00 | 1,000.00 | 3.09 | 1,022.13 | 3.11 | 0.61 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Government Money Market Fund
Tax Information
Form1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Corporate Dividends Received Deduction* | 0.00 | % | ||
U.S. Treasury Obligations* | 31.24 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. Government Money Market Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President,Co-Chief Executive Officer,Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company);Co-Chairman,Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Government Money Market Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance(non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch(non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. Government Money Market Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. Government Money Market Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer — Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’ssub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 | Investment Adviser Invesco Advisers, Inc. | Distributor Invesco Distributors, Inc. | Auditors PricewaterhouseCoopers LLP Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP | Counsel to the Independent Trustees Goodwin Procter LLP | Transfer Agent Invesco Investment Services, Inc. | Custodian Bank of New York Mellon 2 Hanson Place Brooklyn, NY 11217-1431 |
Invesco V.I. Government Money Market Fund
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Annual Report to Shareholders
| December 31, 2018 | |||
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Invesco V.I. Government Securities Fund
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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 FormN-Q (or any successor Form). The Fund’s FormN-Q (or any successor Form) filings are available on the SEC website, sec.gov. The SEC file numbers for the Fund are811-07452 and033-57340. The Fund’s most recent portfolio holdings, as filed on FormN-Q (or any successor Form), 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 recent12-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.
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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.
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NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Invesco Distributors, Inc. | VIGOV-AR-1 | 02152019 1153 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. Government Securities Fund (the Fund) underperformed the Fund’s style-specific index, the Bloomberg Barclays U.S. Government Index.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | 0.56 | % | |||
Series II Shares | 0.29 | ||||
Bloomberg Barclays U.S. Aggregate Bond Index▼(Broad Market Index) | 0.01 | ||||
Bloomberg Barclays U.S. Government Index▼(Style-Specific Index) | 0.88 | ||||
Lipper VUF General U.S. Government Funds Index∎(Peer Group Index) | 0.60 | ||||
Source(s):▼FactSet Research Systems Inc.;∎Lipper Inc. |
Market conditions and your Fund
Calendar year 2018 proved to be an increasingly volatile time for the US bond market. The year began with a surge in both interest rates and volatility, which was driven in part by fears of a material pickup in inflation in addition to a significant increase in Treasury supply. Interest rates continued to climb as the year progressed against a backdrop of vibrant US economic growth, low unemployment, strong consumer confidence, equity markets near record highs and inflation expectations maintaining at a moderate pace. However, by October volatility returned fueled by a deceleration in global gross domestic product growth, ongoing trade disputes, rising geopolitical uncertainties and volatile equity market returns. Despite market uncertainties, US growth remained strong, but macroeconomic indicators pointed to a slowdown in 2019.
Given signs of a strong economy, the US Federal Reserve (the Fed) raised interest rates four times during the year: in March, June, September and December
2018. Following December’s Federal Reserve meeting, Chairman Jerome Powell raised interest rates for the fourth time in 2018 by 25 basis points to a targeted range of 2.25% to 2.50%, and lowered guidance from three to two rate hikes in 2019, signaling a slightly more dovish stance than expected.1 In contrast, the European Central Bank and central banks in several other countries maintained extraordinarily accommodative monetary policies.
The yield curve flattened during 2018 as thetwo-year US Treasury yield rose 59 basis points, while the30-year US Treasury yield rose 26 basis points.2 (A basis point is 0.01%.) The10-year US Treasury yield ended the year at 2.69%, 29 basis points higher than where it began the year.2
Given this market backdrop, the Fund’s total return for the year was positive, but the Fund underperformed its style-specific benchmark, the Bloomberg Barclays U.S. Government Index.
Most of the Fund’s performance relative to the style-specific benchmark in 2018 was driven by the Fund’sout-of-index
exposure to structured securities. These securities included agency pass-through mortgage-backed securities, high-quality residential mortgage -backed securities and commercial mortgage-backed securities. The Fund’s duration underweight relative to its style-specific benchmark also proved to be beneficial to the Fund’s return as interest rates rose during the year.Out-of-index exposure to agency collateralized mortgage obligations was the largest detractor from the Fund’s performance for the year. The Fund’s use of derivatives during the year included interest rate futures to manage yield curve exposure and swaptions to hedge interest rate volatility.
The Fund utilizes duration and yield curve positioning for risk management and for generating returns. Duration measures a portfolio’s price sensitivity to interest rate changes, with a shorter duration tending to be less sensitive to these changes. Yield curve positioning refers to actively emphasizing points (maturities) along the yield curve with favorable risk-return expectations. During the year, duration was managed with cash, bonds and futures positions. Buying and selling interest rate futures contracts was an important tool we used to manage interest rate risk. The Fund also used swaptions to hedge interest rate volatility during the year.
Please note that our strategy is implemented using derivative instruments, including futures, swaps and options. Therefore, a portion of the performance of the Fund, both positive and negative, can be attributed to these instruments. Derivatives can be a cost-effective way to gain or hedge exposure to certain risks and asset classes. However, derivatives may amplify traditional investment risks through the creation of leverage and may
Portfolio Composition |
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By security type | % of total net investments |
U.S. Treasury Securities | 47.8% | ||||
U.S. Government Sponsored Agency Mortgage-Backed Securities | 40.0 | ||||
Non-U.S. Government Sponsored Agency Securities | 12.1 | ||||
U.S. Government Sponsored Agency Securities | 1.7 | ||||
Put Options Purchased | 0.0 | ||||
Money Market Funds Plus Other Assets Less Liabilities | -1.6 |
Top Five Debt Issuers* | |||||
% of total net assets |
1. U.S. Treasury | 40.9% | ||||
2. Federal National Mortgage Association | 10.4 | ||||
3. Federal Home Loan Mortgage Corp. | 8.3 | ||||
4. Fannie Mae REMICs | 6.9 | ||||
5. Freddie Mac REMICs | 5.9 |
Total Net Assets | $ | 471.2 million | |||
Total Number of Holdings* | 600 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
Data presented here are as of December 31, 2018.
Invesco V.I. Government Securities Fund
be less liquid than traditional securities.
We wish to remind you that the Fund is subject to interest rate risk, meaning when interest rates rise, the value of fixed income securities tends to fall. This risk may be greater in the current market environment because interest rates are near historic lows. The degree to which the value of fixed income securities may decline due to rising interest rates may vary depending on the speed and magnitude of the increase in interest rates as well as individual security characteristics, such as price, maturity, duration and coupon, and market forces such as supply and demand for similar securities. We are monitoring interest rates, and the market, economic and geopolitical factors that may impact the direction, speed and magnitude of changes to interest rates across the maturity spectrum, including the potential impact of monetary policy changes by the Fed and certain foreign central banks. If interest rates rise, markets may experience increased volatility, which may affect the value and/or liquidity of certain of the Fund’s investments.
We welcome new investors who joined the Fund during the year and thank you for your investment in Invesco V.I. Government Securities Fund.
1 | Source: US Federal Reserve |
2 | Source: US Department of the Treasury |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Clint Dudley Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Government Securities Fund. He | ||
joined Invesco in 1998. Mr. Dudley earned a BBA and an MBA from Baylor University. |
Brian Schneider Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Government Securities Fund. He | ||
joined Invesco in 1987. Mr. Schneider earned a BA in economics and an MBA from Bellarmine University (formerly Bellarmine College). |
Robert Waldner Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Government Securities Fund. He | ||
joined Invesco in 2013. Mr. Waldner earned a BSE degree in civil engineering from Princeton University. |
Invesco V.I. Government Securities Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (5/5/93) | 4.08 | % | |||
10 Years | 2.10 | ||||
5 Years | 1.64 | ||||
1 Year | 0.56 | ||||
Series II Shares | |||||
Inception (9/19/01) | 3.07 | % | |||
10 Years | 1.84 | ||||
5 Years | 1.38 | ||||
1 Year | 0.29 |
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 recentmonth-end variable product performance. Performance figures reflect Fund expenses, reinvested
distributions and changes in net asset value. Performance figures in the table and chart do not reflect deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 0.70% and 0.95%, 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 recentmonth-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recentmonth-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
Invesco V.I. Government Securities Fund’s investment objective is total return, comprised of current income and capital appreciation.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Changing fixed income market conditions risk.The current low interest rate environment was created in part by the Federal Reserve Board (FRB) and certain foreign central banks keeping the federal funds and equivalent foreign rates near, at or below zero. Increases in the federal funds and equivalent foreign rates may expose fixed income markets to heightened volatility and reduced liquidity for certain fixed income investments, particularly those with longer maturities. In addition, decreases in fixed income dealer market-making capacity may also potentially lead to heightened volatility and reduced liquidity in the fixed income markets. As a result, the value of the Fund’s investments and share price may decline. Changes in central bank policies could also result in higher than normal shareholder redemptions, which could potentially increase portfolio turnover and the Fund’s transaction costs.
Collateralized loan obligations risk.
CLOs are subject to the risks of substantial losses due to actual defaults by underlying borrowers, which will be greater during periods of economic or financial stress. CLOs may also lose value due to collateral defaults and disappearance of subordinate tranches, market anticipation of defaults, and investor aversion to CLO securities as a class. The risks of CLOs will be greater if the Fund invests in CLOs that hold loans of uncreditworthy borrowers or if the Fund holds subordinate tranches of the CLO that absorbs losses from the defaults before senior tranches. In addition, CLOs are subject to interest rate risk and credit risk.
Debt securities risk.The prices of debt securities held by the Fund will be affected by changes in interest rates, the creditworthiness of the issuer and other factors. An increase in prevailing interest rates typically causes the value of existing debt securities to fall and often has a greater impact on longer-duration debt securities and higher quality debt securities. Falling interest rates will cause the Fund to reinvest the proceeds of debt securities that have been repaid by the issuer at lower interest rates. Falling interest rates may also reduce the Fund’s distributable income because interest payments on floating rate debt instruments held by
the Fund will decline. The Fund could lose money on investments in debt securities if the issuer or borrower fails to meet its obligations to make interest payments and/or to repay principal in a timely manner. Changes in an issuer’s financial strength, the market’s perception of such strength or in the credit rating of the issuer or the security may affect the value of debt securities. The Adviser’s credit analysis may fail to anticipate such changes, which could result in buying a debt security at an inopportune time or failing to sell a debt security in advance of a price decline or other credit event.
Derivatives risk.The value of a derivative instrument depends largely on (and is derived from) the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include other, possibly greater, risks, including counterparty, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by holding a position in the derivative. As a result, an adverse change in the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative or the anticipated value of the underlying asset, which may make the Fund’s returns more volatile and increase the risk of loss. Derivative instruments may also be less liquid than more traditional investments and the Fund may be unable to sell or close out its derivative positions at a desirable time or price. This risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. Derivatives strategies may not always be successful. For example, derivatives used for hedging or to gain or limit exposure to a particular market segment
may not provide the expected benefits, particularly during adverse market conditions.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
Mortgage- and asset-backed securities risk.Mortgage- and asset-backed securities, including collateralized debt obligations and collateralized mortgage obligations, are subject to prepayment or call risk, which is the risk that a borrower’s payments may be received earlier or later than expected due to changes in prepayment rates on underlying loans. This could result in the Fund reinvesting these early payments at lower interest rates, thereby reducing the Fund’s income. Mortgage- and asset-backed securities also are subject to extension risk, which is the risk that an unexpected rise in interest rates could reduce the rate of prepayments, causing the price of the mortgage- and asset-backed securities and the Fund’s share price to fall. An unexpectedly high rate of defaults on the mortgages held by a mortgage pool may adversely affect the value of mortgage-backed securities and could result in losses to the Fund. The Fund may invest in mortgage pools that include subprime mortgages, which are loans made to
Invesco V.I. Government Securities Fund
borrowers with weakened credit histories or with lower capacity to make timely payments on their mortgages. Privately issued mortgage-related securities are not subject to the same underwriting requirements as those with government or government-sponsored entity guarantees and, therefore, mortgage loans underlying privately issued mortgage-related securities may have less favorable collateral, credit risk or other underwriting characteristics, and wider variances in interest rate, term, size, purpose and borrower characteristics.
TBA transactions risk.TBA transactions involve the risk of loss if the securities received are less favorable than what was anticipated by the Fund when entering into the TBA transaction, or if the counterparty fails to deliver the securities. When the Fund enters into a short sale of a TBA mortgage it does not own, the Fund may have to purchase deliverable mortgages to settle the short sale at a higher price than anticipated, thereby causing a loss. As there is no limit on how much the price of mortgage securities can increase, the Fund’s exposure is unlimited. The Fund may not always be able to purchase mortgage securities to close out the short position at a particular time or at an acceptable price. In addition, taking short positions results in a form of leverage, which could increase the volatility of the Fund’s share price.
US government obligations risk.Obligations of US government agencies and authorities receive varying levels of support and may not be backed by the full faith and credit of the US government, which could affect the Fund’s ability to recover should they default. No assurance can be given that the US government will provide financial support to its agencies and authorities if it is not obligated by law to do so.
When-issued, delayed delivery and forward commitment risks.When-issued and delayed delivery transactions subject the Fund to market risk because the value or yield of a security at delivery may be more or less than the purchase price or yield generally available when delivery occurs, and counterparty risk because the Fund relies on the buyer or seller, as the case may be, to consummate the transaction. These transactions also have a leveraging effect on the Fund because
the Fund commits to purchase securities that it does not have to pay for until a later date, which increases the Fund’s overall investment exposure and, as a result, its volatility.
Zero coupon orpay-in-kind securities risk.The value, interest rates, and liquidity ofnon-cash paying instruments, such as zero coupon andpay-in-kind securities, are subject to greater fluctuation than other types of securities. The higher yields and interest rates onpay-in-kind securities reflect the payment deferral and increased credit risk associated with such instruments and that such investments may represent a higher credit risk than loans that periodically pay interest.
About indexes used in this report
TheBloomberg Barclays U.S. Aggregate Bond Index is an unmanaged index considered representative of the US investment grade, fixed-rate bond market.
TheBloomberg 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.
TheLipper 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.
Other information
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Invesco V.I. Government Securities Fund
Schedule of Investments
December 31, 2018
Principal Amount | Value | |||||||
U.S. Treasury Securities–47.76% |
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U.S. Treasury Bills–0.28% |
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0.71%-1.56%, 01/24/2019(a)(b) | $ | 1,335,000 | $ | 1,333,024 | ||||
U.S. Treasury Notes–34.73% |
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0.75%, 07/15/2019 | 8,100,000 | 8,022,905 | ||||||
1.63%, 07/31/2019 | 2,700,000 | 2,685,704 | ||||||
1.75%, 09/30/2019 | 2,500,000 | 2,483,971 | ||||||
3.38%, 11/15/2019 | 625,000 | 628,813 | ||||||
1.75%, 11/30/2019 | 3,000,000 | 2,976,712 | ||||||
1.50%, 04/15/2020 | 2,000,000 | 1,973,527 | ||||||
2.50%, 05/31/2020 | 2,000,000 | 1,998,350 | ||||||
2.00%, 09/30/2020 | 2,500,000 | 2,478,117 | ||||||
2.75%, 09/30/2020 | 11,500,000 | 11,543,523 | ||||||
1.75%, 12/31/2020 | 2,500,000 | 2,464,370 | ||||||
2.50%, 12/31/2020 | 5,900,000 | 5,899,217 | ||||||
2.00%, 01/15/2021 | 9,250,000 | 9,156,860 | ||||||
1.38%, 01/31/2021 | 3,000,000 | 2,931,255 | ||||||
2.63%, 05/15/2021 | 2,000,000 | 2,006,539 | ||||||
3.13%, 05/15/2021 | 2,100,000 | 2,131,473 | ||||||
2.13%, 08/15/2021 | 2,700,000 | 2,675,780 | ||||||
2.00%, 10/31/2021 | 2,500,000 | 2,468,265 | ||||||
2.00%, 11/15/2021 | 3,300,000 | 3,258,141 | ||||||
2.00%, 12/31/2021 | 3,000,000 | 2,959,576 | ||||||
1.75%, 05/15/2022 | 4,000,000 | 3,907,222 | ||||||
2.13%, 06/30/2022 | 3,000,000 | 2,965,076 | ||||||
2.00%, 07/31/2022 | 2,000,000 | 1,967,552 | ||||||
1.63%, 08/31/2022 | 5,000,000 | 4,851,243 | ||||||
1.63%, 11/15/2022 | 2,000,000 | 1,936,826 | ||||||
2.00%, 11/30/2022 | 2,700,000 | 2,651,575 | ||||||
2.13%, 12/31/2022 | 12,000,000 | 11,834,340 | ||||||
2.38%, 01/31/2023 | 2,000,000 | 1,991,288 | ||||||
1.63%, 04/30/2023 | 4,000,000 | 3,858,254 | ||||||
1.63%, 05/31/2023 | 1,400,000 | 1,349,145 | ||||||
2.75%, 05/31/2023 | 13,500,000 | 13,649,547 | ||||||
1.63%, 10/31/2023 | 625,000 | 600,007 | ||||||
2.13%, 11/30/2023 | 5,500,000 | 5,401,702 | ||||||
2.13%, 03/31/2024 | 4,000,000 | 3,921,984 | ||||||
2.13%, 07/31/2024 | 3,000,000 | 2,935,622 | ||||||
2.25%, 11/15/2024 | 5,000,000 | 4,915,830 | ||||||
2.88%, 05/31/2025 | 4,000,000 | 4,070,964 | ||||||
2.88%, 11/30/2025 | 2,500,000 | 2,546,482 | ||||||
1.50%, 08/15/2026 | 8,750,000 | 8,077,586 | ||||||
2.38%, 05/15/2027 | 1,000,000 | 980,091 | ||||||
2.25%, 11/15/2027 | 4,000,000 | 3,868,037 | ||||||
2.88%, 05/15/2028 | 2,000,000 | 2,032,594 | ||||||
3.13%, 11/15/2028 | 2,500,000 | 2,595,326 | ||||||
163,651,391 |
Principal Amount | Value | |||||||
U.S. Treasury Bonds–12.75% |
| |||||||
8.75%, 05/15/2020 | $ | 1,200,000 | $ | 1,299,146 | ||||
7.88%, 02/15/2021 | 1,100,000 | 1,221,475 | ||||||
5.38%, 02/15/2031 | 3,800,000 | 4,831,784 | ||||||
3.38%, 05/15/2044 | 6,000,000 | 6,403,623 | ||||||
3.00%, 05/15/2045 | 7,000,000 | 7,001,455 | ||||||
2.88%, 08/15/2045 | 750,000 | 732,057 | ||||||
3.00%, 11/15/2045 | 3,000,000 | 3,000,204 | ||||||
2.50%, 05/15/2046 | 6,000,000 | 5,423,109 | ||||||
2.25%, 08/15/2046 | 6,550,000 | 5,610,631 | ||||||
3.00%, 05/15/2047 | 7,300,000 | 7,283,823 | ||||||
2.75%, 08/15/2047 | 10,000,000 | 9,490,862 | ||||||
2.75%, 11/15/2047 | 5,500,000 | 5,215,407 | ||||||
3.13%, 05/15/2048 | 2,500,000 | 2,552,587 | ||||||
60,066,163 | ||||||||
Total U.S. Treasury Securities |
| 225,050,578 | ||||||
U.S. Government Sponsored Agency Mortgage-Backed Securities–40.00% |
| |||||||
Collateralized Mortgage Obligations–16.25% |
| |||||||
Fannie Mae ACES, 2.89% (1 mo. USD LIBOR + 0.59%), 09/25/2023(c) | 1,794,659 | 1,799,122 | ||||||
Fannie Mae REMICs, | ||||||||
5.00%, 08/25/2019 | 13,812 | 13,815 | ||||||
3.00%, 10/25/2025 | 177,679 | 177,338 | ||||||
2.50%, 03/25/2026 | 214,474 | 214,029 | ||||||
7.00%, 09/18/2027 | 217,118 | 236,380 | ||||||
1.50%, 01/25/2028 | 3,800,676 | 3,655,934 | ||||||
6.50%, 03/25/2032 | 640,080 | 710,231 | ||||||
5.75%, 10/25/2035 | 256,258 | 275,510 | ||||||
4.25%, 02/25/2037 | 441,051 | 446,039 | ||||||
2.81% (1 mo. USD LIBOR + 0.30%), 05/25/2036(c) | 2,223,041 | 2,224,119 | ||||||
2.96% (1 mo. USD LIBOR + 0.45%), 03/25/2037(c) | 998,030 | 1,003,747 | ||||||
2.91% (1 mo. USD LIBOR + 0.40%), 06/25/2038(c) | 1,905,915 | 1,909,597 | ||||||
6.59%, 06/25/2039(d) | 2,772,012 | 3,110,228 | ||||||
4.00%, 02/25/2040 to 07/25/2040 | 1,958,410 | 2,029,858 | ||||||
3.01% (1 mo. USD LIBOR + 0.50%), 03/25/2040 to 05/25/2041(c) | 2,631,023 | 2,639,110 | ||||||
3.06% (1 mo. USD LIBOR + 0.55%), 02/25/2041(c) | 2,202,053 | 2,209,411 | ||||||
3.03% (1 mo. USD LIBOR + 0.52%), 11/25/2041(c) | 1,108,741 | 1,115,773 | ||||||
2.62% (1 mo. USD LIBOR + 0.32%), 08/25/2044(c) | 2,123,364 | 2,117,963 | ||||||
2.78% (1 mo. USD LIBOR + 0.48%), 02/25/2056(c) | 4,139,817 | 4,144,686 | ||||||
2.72% (1 mo. USD LIBOR + 0.42%), 12/25/2056(c) | 4,202,447 | 4,197,676 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Government Securities Fund
Principal Amount | Value | |||||||
Collateralized Mortgage Obligations–(continued) |
| |||||||
Freddie Mac REMICs, | ||||||||
3.00%, 04/15/2026 | $ | 259,861 | $ | 258,720 | ||||
2.96% (1 mo. USD LIBOR + 0.50%), 12/15/2035 to 03/15/2040(c) | 3,811,918 | 3,835,532 | ||||||
2.76% (1 mo. USD LIBOR + 0.30%), 03/15/2036 to 09/15/2044(c) | 9,912,720 | 9,888,523 | ||||||
2.70% (1 mo. USD LIBOR + 0.35%), 11/15/2036(c) | 3,028,362 | 3,025,160 | ||||||
2.83% (1 mo. USD LIBOR + 0.37%), 03/15/2037(c) | 1,124,329 | 1,127,578 | ||||||
2.86% (1 mo. USD LIBOR + 0.40%), 05/15/2037 to 06/15/2037(c) | 2,304,289 | 2,312,885 | ||||||
3.32% (1 mo. USD LIBOR + 0.86%), 11/15/2039(c) | 582,523 | 595,372 | ||||||
2.91% (1 mo. USD LIBOR + 0.45%), 03/15/2040 to 02/15/2042(c) | 6,561,778 | 6,580,038 | ||||||
Freddie Mac STRIPS, 2.70% (1 mo. USD LIBOR + 0.35%), 10/15/2037(c) | 2,398,497 | 2,404,881 | ||||||
Freddie Mac Whole Loan Securities Trust, 3.50%, 05/25/2047 | 1,866,598 | 1,863,250 | ||||||
Ginnie Mae REMICs, | ||||||||
6.00%, 01/16/2025 | 224,583 | 234,293 | ||||||
5.72%, 08/20/2034(d) | 1,004,677 | 1,094,214 | ||||||
5.88%, 01/20/2039(d) | 3,480,032 | 3,802,749 | ||||||
3.26% (1 mo. USD LIBOR + 0.80%), 09/16/2039(c) | 1,091,281 | 1,112,306 | ||||||
4.49%, 07/20/2041(d) | 778,051 | 808,085 | ||||||
3.44%, 09/20/2041(d) | 2,774,808 | 2,872,847 | ||||||
2.72% (1 mo. USD LIBOR + 0.25%), 01/20/2042(c) | 520,518 | 520,410 | ||||||
76,567,409 | ||||||||
Federal Home Loan Mortgage Corp. (FHLMC)–8.34% |
| |||||||
Pass Through Ctfs., | ||||||||
6.50%, 05/01/2019 to 12/01/2035 | 2,008,380 | 2,234,331 | ||||||
6.00%, 07/01/2019 to 07/01/2038 | 219,416 | 233,077 | ||||||
4.50%, 09/01/2020 to 08/01/2041 | 6,950,350 | 7,277,862 | ||||||
10.00%, 03/01/2021 | 966 | 969 | ||||||
9.00%, 06/01/2021 to 06/01/2022 | 19,060 | 19,254 | ||||||
7.00%, 12/01/2021 to 11/01/2035 | 2,500,099 | 2,779,610 | ||||||
8.00%, 12/01/2021 to 02/01/2035 | 634,212 | 668,028 | ||||||
7.50%, 09/01/2022 to 06/01/2035 | 799,921 | 879,722 | ||||||
8.50%, 11/17/2022 to 08/01/2031 | 341,945 | 372,237 | ||||||
5.50%, 12/01/2022 | 55,424 | 55,784 | ||||||
3.50%, 08/01/2026 | 534,528 | 541,906 | ||||||
3.00%, 05/01/2027 to 02/01/2032 | 5,706,730 | 5,699,785 | ||||||
7.05%, 05/20/2027 | 93,467 | 99,354 | ||||||
6.03%, 10/20/2030 | 682,088 | 745,326 | ||||||
5.00%, 01/01/2037 to 01/01/2040 | 1,016,240 | 1,080,384 | ||||||
Pass Through Ctfs., ARM, | ||||||||
4.71% (1 yr. USD LIBOR + 1.88%), 09/01/2035(c) | 3,060,864 | 3,219,630 | ||||||
4.43% (1 yr. USD LIBOR + 1.87%), 07/01/2036(c) | 2,670,166 | 2,802,893 |
Principal Amount | Value | |||||||
Federal Home Loan Mortgage Corp. (FHLMC)–(continued) |
| |||||||
4.31% (1 yr. USD LIBOR + 1.55%), 10/01/2036(c) | $ | 1,389,144 | $ | 1,447,436 | ||||
4.74% (1 yr. USD LIBOR + 1.91%), 10/01/2036(c) | 109,579 | 115,617 | ||||||
4.78% (1 yr. USD LIBOR + 1.98%), 11/01/2037(c) | 774,883 | 814,651 | ||||||
4.35% (1 yr. USD LIBOR + 2.01%), 01/01/2038(c) | 52,685 | 55,332 | ||||||
4.38% (1 yr. USD LIBOR + 1.84%), 07/01/2038(c) | 754,473 | 792,956 | ||||||
4.23% (1 yr. USD LIBOR + 1.78%), 06/01/2043(c) | 1,225,288 | 1,274,911 | ||||||
2.89% (1 yr. USD LIBOR + 1.64%), 01/01/2048(c) | 6,109,489 | 6,115,156 | ||||||
39,326,211 | ||||||||
Federal National Mortgage Association (FNMA)–12.45% |
| |||||||
Pass Through Ctfs., | ||||||||
6.50%, 02/01/2019 to 11/01/2037 | 1,964,495 | 2,118,988 | ||||||
4.50%, 04/01/2019 to 10/01/2048 | 9,526,493 | 9,934,361 | ||||||
5.00%, 03/01/2020 to 12/01/2033 | 223,402 | 230,257 | ||||||
7.00%, 08/01/2020 to 06/01/2036 | 2,299,309 | 2,428,733 | ||||||
8.00%, 02/01/2021 to 10/01/2037 | 2,320,493 | 2,656,156 | ||||||
8.50%, 02/01/2021 to 08/01/2037 | 712,845 | 786,423 | ||||||
5.50%, 03/01/2021 to 05/01/2035 | 1,152,457 | 1,233,763 | ||||||
6.00%, 08/01/2021 to 10/01/2038 | 1,327,715 | 1,437,389 | ||||||
7.50%, 11/01/2022 to 08/01/2037 | 3,624,356 | 4,024,527 | ||||||
6.75%, 07/01/2024 | 206,610 | 221,832 | ||||||
6.95%, 10/01/2025 | 15,207 | 15,331 | ||||||
3.50%, 03/01/2027 to 08/01/2027 | 7,208,727 | 7,311,289 | ||||||
3.00%, 05/01/2027 to 07/01/2032 | 10,531,441 | 10,534,216 | ||||||
4.00%, 12/01/2048 | 9,189,763 | 9,424,039 | ||||||
Pass Through Ctfs., ARM, | ||||||||
4.83% (1 yr. U.S. Treasury Yield Curve Rate + 2.36%), 10/01/2034(c) | 1,718,751 | 1,818,525 | ||||||
4.30% (1 yr. U.S. Treasury Yield Curve Rate + 2.21%), 05/01/2035(c) | 225,668 | 237,997 | ||||||
4.11% (1 yr. USD LIBOR + 1.72%), 03/01/2038(c) | 54,998 | 57,688 | ||||||
4.47% (1 yr. USD LIBOR + 1.76%), 02/01/2042(c) | 532,110 | 546,055 | ||||||
2.17% (1 yr. USD LIBOR + 1.52%), 08/01/2043(c) | 1,895,516 | 1,871,179 | ||||||
2.28% (1 yr. U.S. Treasury Yield Curve Rate + 1.88%), 05/01/2044(c) | 1,739,566 | 1,758,158 | ||||||
58,646,906 | ||||||||
Government National Mortgage Association (GNMA)–2.96% |
| |||||||
Pass Through Ctfs., | ||||||||
7.00%, 07/15/2019 to 12/15/2036 | 724,298 | 781,022 | ||||||
6.50%, 07/15/2020 to 09/15/2034 | 2,752,814 | 2,959,407 | ||||||
6.00%, 09/15/2020 to 08/15/2033 | 429,245 | 458,362 | ||||||
7.50%, 09/15/2022 to 10/15/2035 | 1,798,938 | 1,989,932 | ||||||
8.00%, 01/15/2023 to 01/15/2037 | 985,554 | 1,108,094 | ||||||
5.00%, 02/15/2025 | 148,807 | 154,801 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Government Securities Fund
Principal Amount | Value | |||||||
Government National Mortgage Association (GNMA)–(continued) |
| |||||||
8.50%, 02/15/2025 to 01/15/2037 | $ | 136,063 | $ | 140,860 | ||||
6.95%, 08/20/2025 to 08/20/2027 | 158,097 | 158,182 | ||||||
6.38%, 10/20/2027 to 02/20/2028 | 209,455 | 214,585 | ||||||
6.10%, 12/20/2033 | 3,489,693 | 3,844,619 | ||||||
3.50%, 10/20/2042 | 2,161,015 | 2,154,372 | ||||||
13,964,236 | ||||||||
Total U.S. Government Sponsored Agency Mortgage-Backed Securities (Cost $188,295,172) |
| 188,504,762 | ||||||
Non-U.S. Government Sponsored Agency |
| |||||||
Collateralized Mortgage Obligations–9.78% |
| |||||||
Banc of America Commercial Mortgage Trust,Series 2015-UBS7, Class XA, IO, Variable Rate Pass Through Ctfs., 0.85%, 09/15/2048(d) | 16,212,315 | 713,946 | ||||||
Bear Stearns Adjustable Rate Mortgage Trust,Series 2004-10, Class 12A1, Variable Rate Pass Through Ctfs., 4.14%, 01/25/2035(d) | 495,966 | 502,875 | ||||||
Chase Mortgage Trust, | ||||||||
Series 2016-1, Class M3, Variable Rate Pass Through Ctfs., 3.75%, 04/25/2045(d)(e) | 2,285,816 | 2,271,942 | ||||||
Series 2016-2, Class M3, Variable | 2,687,524 | 2,653,884 | ||||||
Commercial Mortgage Trust, | ||||||||
Series 2015-CR23, Class CMB, Variable Rate Pass Through Ctfs., 3.68%, 05/10/2048(d)(e) | 4,740,000 | 4,748,639 | ||||||
Series 2015-CR24, Class B, Variable Rate Pass Through Ctfs., 4.38%, 08/10/2048(d) | 6,200,000 | 6,356,002 | ||||||
Galton Funding Mortgage Trust,Series 2018-2, Class A41, | 4,484,365 | 4,561,369 | ||||||
JP Morgan Mortgage Trust,Series 2018-8, Class A15, Variable Rate Pass Through Ctfs., 4.00%, 01/25/2049(d)(e) | 3,372,700 | 3,408,747 | ||||||
New Residential Mortgage Loan Trust,Series 2018-4A, Class A1S, Floating Rate Pass Through Ctfs., 3.26% (1 mo. USD LIBOR + 0.75%), 01/25/2048(c)(e) | 4,558,443 | 4,545,850 | ||||||
Starwood Mortgage Residential Trust,Series 2018-IMC2, Class A3, Rate Pass Through Ctfs., 4.38%, 10/25/2048(e) | 4,604,839 | 4,653,089 |
Principal Amount | Value | |||||||
Collateralized Mortgage Obligations–(continued) |
| |||||||
Towd Point Mortgage Trust,Series 2015-1, Class AES, Variable Rate Pass Through Ctfs., 3.00%, 10/25/2053(d)(e) | $ | 1,721,387 | $ | 1,712,636 | ||||
Verus Securitization Trust,Series 2018-3, Class A2, Pass Through Ctfs., 4.18%, 10/25/2058(e) | 4,074,850 | 4,058,866 | ||||||
Wells Fargo Commercial Mortgage Trust,Series 2015-C28, Class B, Variable Rate Pass Through Ctfs., 4.13%, 05/15/2048(d) | 5,900,000 | 5,906,122 | ||||||
46,093,967 | ||||||||
Bonds & Notes–2.31% |
| |||||||
Israel Government Agency for International Development (AID) Bond, Unsec. Gtd. Global Bonds, 5.13%, 11/01/2024 | 3,800,000 | 4,293,794 | ||||||
Private Export Funding Corp., | ||||||||
Series BB, Sec. Gtd. Notes, 4.30%, 12/15/2021 | 1,540,000 | 1,609,566 | ||||||
Series HH, Sr. Sec. Gtd. Notes, 1.45%, 08/15/2019 | 5,000,000 | 4,959,405 | ||||||
10,862,765 | ||||||||
TotalNon-U.S. Government Sponsored Agency Securities (Cost $56,517,268) |
| 56,956,732 | ||||||
U.S. Government Sponsored Agency Securities–1.75% |
| |||||||
Federal Home Loan Bank (FHLB)–1.34% |
| |||||||
Unsec. Bonds, 3.38%, 06/12/2020 | 6,220,000 | 6,293,999 | ||||||
Tennessee Valley Authority (TVA)–0.41% |
| |||||||
Sr. Unsec. Global Notes, 1.88%, 08/15/2022 | 2,000,000 | 1,947,660 | ||||||
Total U.S. Government Sponsored Agency Securities |
| 8,241,659 | ||||||
Shares | ||||||||
Money Market Funds–1.23% |
| |||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30% | 5,779,554 | 5,779,554 | ||||||
Options Purchased–0.00% | ||||||||
(Cost $160,800)(g) |
| 12,016 | ||||||
TOTAL INVESTMENTS IN SECURITIES–102.83% |
| 484,545,301 | ||||||
OTHER ASSETS LESS LIABILITIES–(2.83)% |
| (13,343,503 | ) | |||||
NET ASSETS–100.00% |
| $ | 471,201,798 |
Investment Abbreviations:
ACES | – Automatically Convertible Extendable Security | |
ARM | – Adjustable Rate Mortgage | |
Ctfs. | – Certificates | |
Gtd. | – Guaranteed | |
IO | – Interest Only | |
LIBOR | – London Interbank Offered Rate |
REMICs | – Real Estate Mortgage Investment Conduits | |
Sec. | – Secured | |
Sr. | – Senior | |
STRIPS | – Separately Traded Registered Interest and Principal Security | |
Unsec. | – Unsecured | |
USD | – U.S. Dollar |
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) | 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 and swap agreements. See Note 1J, 1M and Note 4. |
(c) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on December 31, 2018. |
(d) | Interest rate is redetermined periodically based on the cash flows generated by the pool of assets backing the security, less any applicable fees. The rate shown is the rate in effect on December 31, 2018. |
(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 December 31, 2018 was $32,615,022, which represented 6.92% of the Fund’s Net Assets. |
(f) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
(g) | The table below details options purchased: See Note 1L and Note 4: |
Open Over-The-Counter Interest Rate Swaptions Purchased | ||||||||||||||||||||||||||||||||
Description | Type of Contract | Counterparty | Exercise Rate | Pay/ Receive Exercise Rate | Floating Rate Index | Payment Frequency | Expiration Date | Notional Value | Value | |||||||||||||||||||||||
10 Year Interest Rate Swap | Put | BNP Paribas Securities Corp. | 3.25% | Pay | 3 month USD LIBOR | Quarterly | 03/12/2019 | $ | 20,000,000 | $ | 12,016 | |||||||||||||||||||||
Total Options Purchased — Interest Rate Risk (Cost $160,800) |
| $ | 12,016 |
Open Futures Contracts | ||||||||||||||||||||
Number of Contracts | Expiration Month | Notional Value | Value | Unrealized Appreciation (Depreciation)(a) | ||||||||||||||||
Long Futures Contracts | ||||||||||||||||||||
U.S. Treasury 5 Year Notes | 52 | March-2019 | $ | 5,963,750 | $ | 12,501 | $ | 12,501 | ||||||||||||
U.S. Treasury 10 Year Notes | 64 | March-2019 | 7,809,000 | 111,316 | 111,316 | |||||||||||||||
U.S. Treasury Ultra Bonds | 85 | March-2019 | 13,655,781 | 407,090 | 407,090 | |||||||||||||||
Subtotal — Long Future Contracts | 530,907 | 530,907 | ||||||||||||||||||
Short Futures Contracts | ||||||||||||||||||||
U.S. Treasury 2 Year Notes | 99 | March-2019 | (21,018,938 | ) | (87,071 | ) | (87,071 | ) | ||||||||||||
U.S. Treasury 10 Year Ultra Bonds | 34 | March-2019 | (4,422,656 | ) | (140,726 | ) | (140,726 | ) | ||||||||||||
Subtotal — Short Future Contracts | (227,797 | ) | (227,797 | ) | ||||||||||||||||
Total Futures Contracts — Interest Rate Risk | $ | 303,110 | $ | 303,110 |
Open Centrally Cleared Interest Rate Swap Agreements | ||||||||||||||||||||||||||||||||||
Pay/Receive Floating Rate | Floating Rate Index | Payment Frequency | (Pay)/ Receive Fixed Rate | Payment Frequency | Maturity Date | Notional Value | Upfront Payments Paid (Received) | Value | Unrealized Appreciation (Depreciation)(a) | |||||||||||||||||||||||||
Pay | 3 month USD LIBOR | Quarterly | 2.93 | % | Semi-Annually | 03/14/2019 | $ | (6,221,000 | ) | $ | — | $ | (115,279 | ) | $ | (115,279 | ) | |||||||||||||||||
Pay | 3 month USD LIBOR | Quarterly | 3.21 | Semi-Annually | 03/14/2019 | 10,151,000 | — | 440,944 | 440,944 | |||||||||||||||||||||||||
Total Centrally Cleared Interest Rate Swap Agreements — Interest Rate Risk |
| $ | — | $ | 325,665 | $ | 325,665 |
(a) | The daily variation margin receivable at period-end is recorded in the Statement of Assets and Liabilities. |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $480,988,237) | $ | 478,765,747 | ||
Investments in affiliated money market funds, at value and cost | 5,779,554 | |||
Other investments: |
| |||
Variation margin receivable — futures contracts | 47,464 | |||
Variation margin receivable — centrally cleared swap agreements | 16,325 | |||
Receivable for: |
| |||
Investments sold | 6,005,804 | |||
Fund shares sold | 17,692 | |||
Dividends | 2,053,144 | |||
Investment for trustee deferred compensation and retirement plans | 212,430 | |||
Other assets | 381 | |||
Total assets | 492,898,541 | |||
Liabilities: | ||||
Payable for: |
| |||
Investments purchased | 20,017,121 | |||
Amount due to custodian | 347,168 | |||
Fund shares reacquired | 746,467 | |||
Accrued fees to affiliates | 301,966 | |||
Accrued trustees’ and officers’ fees and benefits | 5,186 | |||
Accrued other operating expenses | 46,197 | |||
Trustee deferred compensation and retirement plans | 232,638 | |||
Total liabilities | 21,696,743 | |||
Net assets applicable to shares outstanding | $ | 471,201,798 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 482,331,737 | ||
Distributable earnings | (11,129,939 | ) | ||
$ | 471,201,798 | |||
Net Assets: | ||||
Series I | $ | 279,476,344 | ||
Series II | $ | 191,725,454 | ||
Shares outstanding, no par value, |
| |||
Series I | 24,901,978 | |||
Series II | 17,241,864 | |||
Series I: |
| |||
Net asset value per share | $ | 11.22 | ||
Series II: |
| |||
Net asset value per share | $ | 11.12 |
Investment income: |
| |||
Interest | $ | 14,527,041 | ||
Dividends from affiliated money market funds | 100,453 | |||
Total investment income | 14,627,494 | |||
Expenses: |
| |||
Advisory fees | 2,365,820 | |||
Administrative services fees | 866,030 | |||
Custodian fees | 18,935 | |||
Distribution fees — Series II | 494,942 | |||
Transfer agent fees | 25,465 | |||
Trustees’ and officers’ fees and benefits | 26,967 | |||
Reports to shareholders | 5,644 | |||
Professional services fees | 41,195 | |||
Other | 66,493 | |||
Total expenses | 3,911,491 | |||
Less: Fees waived | (5,944 | ) | ||
Net expenses | 3,905,547 | |||
Net investment income | 10,721,947 | |||
Realized and unrealized gain (loss): |
| |||
Net realized gain (loss) from: |
| |||
Investment securities | (2,840,375 | ) | ||
Futures contracts | (939,408 | ) | ||
Option contracts written | 28,426 | |||
Swap agreements | (517,239 | ) | ||
(4,268,596 | ) | |||
Change in net unrealized appreciation (depreciation) of: |
| |||
Investment securities | (5,536,074 | ) | ||
Futures contracts | 179,108 | |||
Swap agreements | 396,317 | |||
(4,960,649 | ) | |||
Net realized and unrealized gain (loss) | (9,229,245 | ) | ||
Net increase in net assets resulting from operations | $ | 1,492,702 |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: |
| |||||||
Net investment income | $ | 10,721,947 | $ | 10,356,098 | ||||
Net realized gain (loss) | (4,268,596 | ) | (86,759 | ) | ||||
Change in net unrealized appreciation (depreciation) | (4,960,649 | ) | (387,548 | ) | ||||
Net increase in net assets resulting from operations | 1,492,702 | 9,881,791 | ||||||
Distributions to shareholders from distributable earnings(1): |
| |||||||
Series I | (6,550,635 | ) | (7,221,984 | ) | ||||
Series II | (3,832,997 | ) | (3,882,382 | ) | ||||
Total distributions from distributable earnings | (10,383,632 | ) | (11,104,366 | ) | ||||
Share transactions–net: |
| |||||||
Series I | (33,348,279 | ) | (34,554,472 | ) | ||||
Series II | (11,943,167 | ) | 2,536,879 | |||||
Net increase (decrease) in net assets resulting from share transactions | (45,291,446 | ) | (32,017,593 | ) | ||||
Net increase (decrease) in net assets | (54,182,376 | ) | (33,240,168 | ) | ||||
Net assets: |
| |||||||
Beginning of year | 525,384,174 | 558,624,342 | ||||||
End of year | $ | 471,201,798 | $ | 525,384,174 |
(1) | The Securities and Exchange Commission eliminated the requirement to disclose distribution components separately, except for tax return of capital. For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income. |
Notes to Financial Statements
December 31, 2018
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 anopen-end series management investment company. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 theover-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 (“NAV”) 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. Government Securities Fund
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at theend-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 investment 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. Bond premiums and discounts are amortized and/or accreted over the lives of the respective securities.Pay-in-kind interest income andnon-cash dividend income received in the form of securities in-lieu of cash are recorded at the fair value of the securities received. 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. |
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 the Statement of Changes in Net Assets, or the net investment income per share and the 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. Government Securities 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. | 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 shown asTreasury Inflation-Protected Securities inflation adjustmentsin the Statement of Operations, even though investors do not receive their principal until maturity. |
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 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. |
K. | Call Options Purchased and Written — The Fund may write covered call options and/or buy call options. A covered call option gives the purchaser of such option the right to buy, and the writer the obligation to sell, the underlying security or foreign currency at the stated exercise price during the option period. Options written by the Fund normally will have expiration dates between three and nine months from the date written. The exercise price of a call option may be below, equal to, or above the current market value of the underlying security at the time the option is written. |
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.
When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability in the Statement of Assets and Liabilities. The amount of the liability is subsequently “marked-to-market” to reflect the current market value of the option written. If a written covered call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written covered call option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. Realized and unrealized gains and losses on call options written are included in the Statement of Operations as Net realized gain (loss) from and Change in net unrealized appreciation (depreciation) of Option contracts written. A risk in writing a covered call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised.
When the Fund buys a call option, an amount equal to the premium paid by the Fund is recorded as an investment on the Statement of Assets and Liabilities. The amount of the investment is subsequently “marked-to-market” to reflect the current value of the option purchased. Realized and unrealized gains and losses on call options purchased are included in the Statement of Operations as Net realized gain (loss) from and Change in net unrealized appreciation (depreciation) of 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.
L. | 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. |
Invesco V.I. Government Securities Fund
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 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 put options purchased are included in the Statement of Operations as Net realized gain (loss) from and Change in net unrealized appreciation (depreciation) of 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.
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. A swap agreement may be negotiated bilaterally and tradedover-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.
A total return swap is an agreement in which one party makes payments based on a set rate, either fixed or variable, while the other party makes payments based on the return of an underlying asset, which includes both the income generated and capital gains, if any. The unrealized appreciation (depreciation) on total return swaps includes dividends on the underlying securities and financing rate payable from the Counterparty. 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.
Invesco V.I. Government Securities Fund
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 cash or liquid securities having a value at least equal to the amount of the potential obligation of a Fund under any swap transaction. Cash held as collateral is recorded as deposits with brokers on the Statement of Assets and Liabilities. 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.
N. | 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 theto 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 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 roll 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. Dollar roll transactions covered in this manner are not treated as senior securities for purposes of a Fund’s fundamental investment limitation on borrowings.
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. | Leverage Risk — Leverage exists when the 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. | 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 accrues daily and pays monthly 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 year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.48%.
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2019, 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 (the “expense limits”). 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, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $5,944.
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 fees paid to insurance
Invesco V.I. Government Securities Fund
companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $119,530 for accounting and fund administrative services and was reimbursed $746,499 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution 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 December 31, 2018. 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 | |||||||||||||
Investments in Securities | ||||||||||||||||
U.S. Treasury Securities | $ | — | $ | 225,050,578 | $ | — | $ | 225,050,578 | ||||||||
U.S. Government Sponsored Agency Mortgage-Backed Securities | — | 188,504,762 | — | 188,504,762 | ||||||||||||
Non-U.S. Government Sponsored Agency Securities | — | 56,956,732 | — | 56,956,732 | ||||||||||||
U.S. Government Sponsored Agency Securities | — | 8,241,659 | — | 8,241,659 | ||||||||||||
Money Market Funds | 5,779,554 | — | — | 5,779,554 | ||||||||||||
Options Purchased | — | 12,016 | — | 12,016 | ||||||||||||
Total Investments in Securities | 5,779,554 | 478,765,747 | — | 484,545,301 | ||||||||||||
Other Investments — Assets* | ||||||||||||||||
Futures Contracts | 530,907 | — | — | 530,907 | ||||||||||||
Swap Agreements | — | 440,944 | — | 440,944 | ||||||||||||
530,907 | 440,944 | — | 971,851 | |||||||||||||
Other Investments — Liabilities* | ||||||||||||||||
Futures Contracts | (227,797 | ) | — | — | (227,797 | ) | ||||||||||
Swap Agreements | — | (115,279 | ) | — | (115,279 | ) | ||||||||||
(227,797 | ) | (115,279 | ) | — | (343,076 | ) | ||||||||||
Total Other Investments | 303,110 | 325,665 | — | 628,775 | ||||||||||||
Total Investments | $ | 6,082,664 | $ | 479,091,412 | $ | — | $ | 485,174,076 |
* | Unrealized appreciation (depreciation). |
Invesco V.I. Government Securities Fund
NOTE 4—Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (“ISDA Master Agreement”) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
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 December 31, 2018:
Value | ||||
Derivative Assets | Interest Rate Risk | |||
Unrealized appreciation on futures contracts — Exchange-Traded(a) | $ | 530,907 | ||
Unrealized appreciation on swap agreements — Centrally Cleared(a) | 440,944 | |||
Options purchased, at value — OTC(b) | 12,016 | |||
Total Derivative Assets | 983,867 | |||
Derivatives not subject to master netting agreements | (971,851 | ) | ||
Total Derivative Assets subject to master netting agreements | $ | 12,016 |
Value | ||||
Derivative Liabilities | Interest Rate Risk | |||
Unrealized depreciation on futures contracts — Exchange-Traded(a) | $ | (227,797 | ) | |
Unrealized depreciation on swap agreements — Centrally Cleared(a) | (115,279 | ) | ||
Total Derivative Liabilities | (343,076 | ) | ||
Derivatives not subject to master netting agreements | 343,076 | |||
Total Derivative Liabilities subject to master netting agreements | $ | — |
(a) | The daily variation margin receivable at period-end is recorded in the Statement of Assets and Liabilities. |
(b) | Options purchased, at value as reported in the Schedule of Investments. |
Offsetting Assets and Liabilities
The table below reflects the Fund’s exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of December 31, 2018
Financial Derivative Assets | Collateral (Received)/Pledged | |||||||||||||||||||
Counterparty | Options Purchased | Net Value of Derivatives | Non-Cash | Cash | Net Amount | |||||||||||||||
BNP Paribas Securities Corp. | $ | 12,016 | $ | 12,016 | $ | — | $ | — | $ | 12,016 |
Effect of Derivative Investments for the year ended December 31, 2018
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 | ||||
Interest Rate Risk | ||||
Realized Gain (Loss): | ||||
Futures contracts | $ | (939,408 | ) | |
Options purchased(a) | 279,551 | |||
Options written | 28,426 | |||
Swap agreements | (517,239 | ) | ||
Change in Net Unrealized Appreciation (Depreciation): | ||||
Futures contracts | 179,108 | |||
Options purchased(a) | (187,825 | ) | ||
Swap agreements | 396,317 | |||
Total | $ | (761,070 | ) |
(a) | Options purchased are included in the net realized gain (loss) from investment securities and the change in net unrealized appreciation (depreciation) of investment securities. |
Invesco V.I. Government Securities Fund
The table below summarizes the twelve month average notional value of futures contracts, the nine months average notional value of swaptions purchased, the two months average notional value of swaptions written and nine month average notional value of swap agreements outstanding during the period.
Futures Contracts | Swaptions Purchased | Swaptions Written | Swap Agreements | |||||||||||||
Average notional value | $ | 49,634,932 | $ | 28,221,111 | $ | 43,500,000 | $ | 10,679,111 |
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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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. The Fund may not purchase additional securities when any borrowings from banks exceed 5% of the Fund’s total assets.
NOTE 7—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 10,383,632 | $ | 11,104,366 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 10,598,549 | ||
Net unrealized appreciation (depreciation) — investments | (2,125,573 | ) | ||
Temporary book/tax differences | (219,552 | ) | ||
Capital loss carryforward | (19,383,363 | ) | ||
Shares of beneficial interest | 482,331,737 | |||
Total net assets | $ | 471,201,798 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation (depreciation) difference is attributable primarily to futures contracts and swap agreements.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 has a capital loss carryforward as of December 31, 2018, as follows:
Capital Loss Carryforward | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
Not subject to expiration | $ | 9,307,474 | $ | 10,075,889 | $ | 19,383,363 |
Invesco V.I. Government Securities Fund
NOTE 8—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $42,942,847 and $98,574,724, respectively. During the same period, purchases and sales of U.S. Treasury obligations were $77,192,420 and $52,143,976, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 4,978,979 | ||
Aggregate unrealized (depreciation) of investments | (7,104,552 | ) | ||
Net unrealized appreciation (depreciation) of investments | $ | (2,125,573 | ) |
Cost of investments for tax purposes is $487,299,649.
NOTE 9—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of swap agreements, on December 31, 2018, undistributed net investment income was decreased by $56 and undistributed net realized gain (loss) was increased by $56. This reclassification had no effect on the net assets or the distributable earnings of the Fund.
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 3,593,416 | $ | 40,500,688 | 4,245,551 | $ | 49,001,619 | ||||||||||
Series II | 1,057,433 | 11,758,788 | 1,931,968 | 22,005,900 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 594,971 | 6,550,635 | 632,952 | 7,221,984 | ||||||||||||
Series II | 351,007 | 3,832,997 | 343,270 | 3,882,382 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (7,180,556 | ) | (80,399,602 | ) | (7,906,368 | ) | (90,778,075 | ) | ||||||||
Series II | (2,482,818 | ) | (27,534,952 | ) | (2,048,051 | ) | (23,351,403 | ) | ||||||||
Net increase (decrease) in share activity | (4,066,547 | ) | $ | (45,291,446 | ) | (2,800,678 | ) | $ | (32,017,593 | ) |
(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. |
Invesco V.I. Government Securities 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 | 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 | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 11.41 | $ | 0.25 | $ | (0.19 | ) | $ | 0.06 | $ | (0.25 | ) | $ | 11.22 | 0.56 | % | $ | 279,476 | 0.69 | %(d) | 0.69 | %(d) | 2.25 | %(d) | 25 | % | ||||||||||||||||||||||
Year ended 12/31/17 | 11.44 | 0.22 | (0.01 | ) | 0.21 | (0.24 | ) | 11.41 | 1.87 | 318,298 | 0.70 | 0.70 | 1.97 | 35 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 11.52 | 0.23 | (0.07 | ) | 0.16 | (0.24 | ) | 11.44 | 1.32 | 353,614 | 0.73 | 0.73 | 1.93 | 31 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 11.74 | 0.17 | (0.13 | ) | 0.04 | (0.26 | ) | 11.52 | 0.34 | 393,090 | 0.77 | 0.77 | 1.44 | 59 | ||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 11.31 | 0.22 | (0.19 | ) | 0.03 | (0.22 | ) | 11.12 | 0.29 | 191,725 | 0.94 | (d) | 0.94 | (d) | 2.00 | (d) | 25 | |||||||||||||||||||||||||||||||
Year ended 12/31/17 | 11.33 | 0.19 | (0.00 | ) | 0.19 | (0.21 | ) | 11.31 | 1.72 | 207,086 | 0.95 | 0.95 | 1.72 | 35 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 11.42 | 0.20 | (0.08 | ) | 0.12 | (0.21 | ) | 11.33 | 1.00 | 205,010 | 0.98 | 0.98 | 1.68 | 31 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 11.64 | 0.14 | (0.13 | ) | 0.01 | (0.23 | ) | 11.42 | 0.06 | 195,392 | 1.02 | 1.02 | 1.19 | 59 | ||||||||||||||||||||||||||||||||||
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 |
(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 based on average daily net assets (000’s omitted) of $299,983 and $197,977 for Series I and Series II shares, respectively. |
Invesco V.I. Government Securities Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Government Securities Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Government Securities Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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 (07/01/18) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,012.70 | $ | 3.50 | $ | 1,021.73 | $ | 3.52 | 0.69 | % | ||||||||||||
Series II | 1,000.00 | 1,011.90 | 4.77 | 1,020.47 | 4.79 | 0.94 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Government Securities Fund
Tax Information
Form1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Corporate Dividends Received Deduction* | 0.00 | % | ||
U.S. Treasury Obligations* | 33.22 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. Government Securities Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Government Securities Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. Government Securities Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. Government Securities Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Government Securities Fund
| ||||
Annual Report to Shareholders
| December 31, 2018 | |||
| ||||
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 FormN-Q (or any successor Form). The Fund’s FormN-Q (or any successor Form) filings are available on the SEC website, sec.gov. The SEC file numbers for the Fund are811-07452 and033-57340. The Fund’s most recent portfolio holdings, as filed on FormN-Q (or any successor Form), 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 recent12-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.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||
Invesco Distributors, Inc. VK-VIGRI-AR-1 02152019 1212 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. Growth and Income Fund (the Fund) underperformed the Russell 1000 Value Index, the Fund’s style-specific benchmark.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -13.38 | % | |||
Series II Shares | -13.59 | ||||
S&P 500 Index▼(Broad Market Index) | -4.38 | ||||
Russell 1000 Value Index∎(Style-Specific Index) | -8.27 | ||||
Lipper VUFLarge-Cap Value Funds Index¨ (Peer Group Index) | -9.47 | ||||
Source(s):▼FactSet Research Systems Inc.;∎RIMES Technologies Corp.;◆Lipper Inc.
|
Market conditions and your Fund
Calendar year 2018 proved to be an increasingly volatile time for US equities. In January 2018, US equity markets steadily moved higher, as investors remained enthused about the passage of the Tax Cuts and Jobs Act signed into law in late December 2017. However, in February 2018, volatility returned to the US stock and bond markets. Worries about how rising interest rates might affect economic growth, concerns about a potential trade war and heightened geopolitical tensions, caused the US stock markets to pull back and volatility to increase.
US equity markets generally recovered in the second quarter of 2018 as strong US retail sales and low unemployment buoyed markets. Throughout the summer, US equities moved higher as corporate profits surged. Several US equity indexes reached new highs despite potential headwinds including trade tensions, tariff announcements and contagion concerns over a Turkish currency crisis. After a relatively quiet summer, market volatility noticeably rose in October, as US equity markets suffered a sharpsell-off throughyear-end, amid rising interest rates and
concerns that higher inflation could mean a more restrictive monetary policy. In this environment, there was a flight to safety, as investors fled to defensive areas of the equities markets, like health care and utilities, and US Treasuries.
Given signs of a strong economy, the US Federal Reserve raised interest rates four times during the year: in March, June, September and December 2018. Following December’s Federal Reserve meeting, Chairman Jerome Powell raised interest rates for the fourth time in 2018 by 25 basis points to a targeted range of 2.25% to 2.50%, and lowered guidance from three to two rate hikes in 2019, signaling a slightly more dovish stance than expected.1 In contrast, the European Central Bank and central banks in several other countries maintained extraordinarily accommodative monetary policies.
During the year, nine of the 11 sectors within the Russell 1000 Value Index posted negative returns. The industrials and energy sectors were the weakest-performing sectors, posting double-digit losses, while health care and utilities were the only sectors with positive returns.
Stock selection in the industrials sector
was a large contributor to the Fund’s performance relative to its style-specific benchmark for the year.CSX Corporation, a rail-based transportation services firm, was one of the top contributors within the sector. The company reported strong earnings and revenues in July 2018 as it benefited from improved profit margins and a lower tax rate. Lack of exposure to General Electric was also a large contributor to the Fund’s relative performance, as the stock performed poorly for the year.
Stock selection in the materials sector also contributed to the Fund’s performance relative to its style-specific benchmark for the year. Notably,The Mosaic Company, a potash and phosphate supplier, was a contributor. An upbeat earnings outlook, healthy prospects from the Vale Fertilizantes (not a Fund holding) buyout, along with strong demand and pricing fundamentals for crop nutrients contributed to the company’s strong performance.
Stock selection in information technology (IT) also boosted the Fund’s performance versus the style-specific benchmark for the year. Within IT,QUALCOMMandOracle were key contributors. During the third quarter, QUALCOMM reported better-than-expected earnings and announced a share repurchase plan totaling $30 billion after the company terminated its plan to purchase NXP Semiconductors (not a Fund holding).
During the year, a large driver of the Fund’s underperformance relative to the style-specific benchmark was stock selection within the financials sector – notably within banks and capital markets. Financials were negatively impacted by the flattening yield curve and subsequent concerns over a recession due to a slowing economy. Within the sector,Citigroup, Morgan Stanley and State
Portfolio Composition | |||||
By sector | % of total net assets | ||||
Financials | 29.1% | ||||
Health Care | 16.7 | ||||
Energy | 12.9 | ||||
Information Technology | 10.3 | ||||
Consumer Discretionary | 7.7 | ||||
Industrials | 6.2 | ||||
Consumer Staples | 5.3 | ||||
Communication Services | 3.2 | ||||
Materials | 2.6 | ||||
Utilities | 1.2 | ||||
Money Market Funds | |||||
Plus Other Assets Less Liabilities | 4.8 |
Top 10 Equity Holdings* | |||||
% of total net assets |
| ||||
1. Citigroup Inc. | 3.9 | % | |||
2. Bank of America Corp. | 3.6 | ||||
3. Johnson & Johnson | 3.0 | ||||
4. JPMorgan Chase & Co. | 3.0 | ||||
5. American International Group, Inc. | 2.7 | ||||
6. General Motors Co. | 2.4 | ||||
7. CVS Health Corp. | 2.4 | ||||
8. Carnival Corp. | 2.3 | ||||
9. Intel Corp. | 2.3 | ||||
10. Morgan Stanley | 2.2 |
Total Net Assets | $1.3 billion | |||
Total Number of Holdings* | 65 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
Data presented here are as of December 31, 2018.
Invesco V.I. Growth and Income Fund
Street were key detractors. At the close of the year, we still believed that large banks and capital markets were attractively valued, had strong balance sheets and the potential for future growth as they continued to return high levels of capital to shareholders in the form of stock buybacks and dividends.
Stock selection in and an overweight allocation to the energy sector also dampened the Fund’s performance relative to its style-specific benchmark for the year. Oil prices declined sharply during the fourth quarter, falling from roughly $75 per barrel in early October to the mid $40s per barrel in late December.2 In our view, oil prices fell as a result of increased production from Saudi Arabia and President Trump providing waivers on Iran sanctions, which allowed select countries to import oil and increased US production. As energy stocks fell in tandem during the year, a number of the Fund’s largest individual detractors came from the sector includingDevon Energy,Canadian Natural Resources,Apache andTechnipFMC.
The Fund’s material underweight exposure, relative to the style-specific benchmark, in more defensive areas, such as the communication services, consumer staples and utilities sectors also detracted from its relative returns for the year. At the close of the year, we maintained underweight exposure in these sectors, as we believed valuations and fundamentals were unattractive.
We used currency forward contracts during the year for the purpose of hedging currency exposure ofnon-US-based companies held in the Fund. Derivatives were used solely for the purpose of hedging and not for speculative purposes or leverage. The use of currency forward contracts had a positive impact on the Fund’s performance relative to the Russell 1000 Value Index for the year.
At the end of the year, the Fund’s largest overweight exposures relative to the style-specific benchmark were in the financials and energy sectors, while the largest underweight exposures were in the real estate and utilities sectors.
Thank you for your investment in Invesco V.I. Growth and Income Fund and for sharing our long-term investment horizon.
1 | Source: US Federal Reserve |
2 | Source: Bloomberg |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Thomas Bastian Chartered Financial Analyst, Portfolio Manager, is lead manager of Invesco V.I. Growth and Income | ||
Fund. He joined Invesco in 2010. Mr. Bastian earned a BA in accounting from St. John’s University and an MBA in finance from the University of Michigan. |
Brian Jurkash Portfolio Manager, is lead manager of Invesco V.I. Growth and Income Fund. He joined Invesco in 2000. | ||
Mr. Jurkash earned a BBA degree in finance from Stephen F. Austin State University and an MBA in finance from the University of Houston. |
Matthew Titus Chartered Financial Analyst, Portfolio Manager, is lead manager of Invesco V.I. Growth and Income | ||
Fund. He joined Invesco in 2016. Mr. Titus earned a bachelor’s degree in accounting and economics from Luther College in Decorah, Iowa, and an MBA from Ohio State University. |
Sergio Marcheli Portfolio Manager, is manager of Invesco V.I. Growth and Income Fund. He joined Invesco in 2010. Mr. Marcheli | ||
earned a BBA from the University of Houston and an MBA from the University of St. Thomas. |
Invesco V.I. Growth and Income Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: FactSet Research Systems Inc. |
2 | Source: RIMES Technologies Corp. |
3 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (12/23/96) | 8.14 | % | |||
10 Years | 10.32 | ||||
5 Years | 4.85 | ||||
1 Year | -13.38 | ||||
Series II Shares | |||||
Inception (9/18/00) | 5.84 | % | |||
10 Years | 10.05 | ||||
5 Years | 4.58 | ||||
1 Year | -13.59 |
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, prior to June 1, 2010, 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 recentmonth-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Performance figures in the table and chart do not reflect deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 0.76% and 1.01%, 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 recentmonth-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recentmonth-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. Growth and Income Fund
Invesco V.I. Growth and Income Fund’s investment objective is to seek long-term growth of capital and income.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Convertible securities risk.The market values of convertible securities are affected by market interest rates, the risk of actual issuer default on interest or principal payments and the value of the underlying common stock into which the convertible security may be converted. Additionally, a convertible security is subject to the same types of market and issuer risks as apply to the underlying common stock. In addition, certain convertible securities are subject to involuntary conversions and may undergo principal write-downs upon the occurrence of certain triggering events, and, as a result, are subject to an increased risk of loss. Convertible securities may be rated below investment grade.
Depositary receipts risk.Investing in depositary receipts involves the same risks as direct investments in foreign securities. In addition, the underlying issuers of certain depositary receipts are under no obligation to distribute shareholder communications or pass through any voting rights with respect to the deposited securities to the holders of such receipts. The Fund may therefore receive less timely information or have less control than if it invested directly in the foreign issuer.
Derivatives risk.The value of a derivative instrument depends largely on (and is derived from) the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include other, possibly greater, risks, including counterparty, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by holding a position in the derivative. As a result, an adverse change in the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative or the anticipated value of the underlying asset, which may make the Fund’s returns more volatile
and increase the risk of loss. Derivative instruments may also be less liquid than more traditional investments and the Fund may be unable to sell or close out its derivative positions at a desirable time or price. This risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. Derivatives strategies may not always be successful. For example, derivatives used for hedging or to gain or limit exposure to a particular market segment may not provide the expected benefits, particularly during adverse market conditions.
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
REIT risk/real estate risk.Investments in real estate related instruments may be affected by economic, legal, cultural, environmental or technological factors that affect property values, rents or occupancies of real estate related to the Fund’s holdings. Shares of real estate related companies, which tend to be small- andmid-cap companies, may be more volatile and less liquid.
Sector focus risk.The Fund may from time to time invest a significant amount of its assets (i.e. over 25%) in one market sector or group of related industries. In this event, the Fund’s performance will depend to a greater extent on the overall condition of the sector or group of industries and there is increased risk that the Fund will lose significant value if conditions adversely affect that sector or group of industries.
Small- andmid-capitalization companies risks.Small- andmid-capitalization companies tend to be more vulnerable to changing market conditions, may have little or no operating history or track record of success, and may have more limited product lines and markets, less experienced management and fewer financial resources than larger companies. These companies’ securities may be more volatile and less liquid than those of more established companies, and their returns may vary, sometimes significantly, from the overall securities market.
Value investing style risk.A value investing style subjects the Fund to the risk that the valuations never improve or that the returns on value equity securities are less than returns on other styles of investing or the overall stock market.
Invesco V.I. Growth and Income Fund
About indexes used in this report
TheS&P 500® Index is an unmanaged index considered representative of the US stock market.
TheRussell 1000® Value Index is an unmanaged index considered representative oflarge-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.
TheLipper VUFLarge-Cap Value Funds Index is an unmanaged index considered representative oflarge-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.
Other information
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Industry 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.
Invesco V.I. Growth and Income Fund
Schedule of Investments(a)
December 31, 2018
Shares | Value | |||||||
Common Stocks–95.16% |
| |||||||
Aerospace & Defense–1.99% |
| |||||||
General Dynamics Corp. | 158,295 | $ | 24,885,557 | |||||
Apparel, Accessories & Luxury Goods–0.77% |
| |||||||
Capri Holdings Ltd.(b) | 254,034 | 9,632,969 | ||||||
Asset Management & Custody Banks–1.99% |
| |||||||
Northern Trust Corp. | 94,816 | 7,925,669 | ||||||
State Street Corp. | 268,665 | 16,944,702 | ||||||
24,870,371 | ||||||||
Automobile Manufacturers–2.42% |
| |||||||
General Motors Co. | 906,263 | 30,314,497 | ||||||
Biotechnology–0.81% |
| |||||||
Celgene Corp.(b) | 158,624 | 10,166,212 | ||||||
Broadcasting–0.69% |
| |||||||
CBS Corp.–Class B | 197,124 | 8,618,261 | ||||||
Building Products–1.70% |
| |||||||
Johnson Controls International PLC | 716,942 | 21,257,330 | ||||||
Cable & Satellite–2.48% |
| |||||||
Charter Communications, Inc.–Class A(b) | 64,601 | 18,409,347 | ||||||
Comcast Corp.–Class A | 372,260 | 12,675,453 | ||||||
31,084,800 | ||||||||
Communications Equipment–2.88% |
| |||||||
Cisco Systems, Inc. | 588,893 | 25,516,734 | ||||||
Juniper Networks, Inc. | 392,198 | 10,554,048 | ||||||
36,070,782 | ||||||||
Diversified Banks–12.46% |
| |||||||
Bank of America Corp. | 1,802,192 | 44,406,011 | ||||||
Citigroup Inc. | 941,016 | 48,989,293 | ||||||
JPMorgan Chase & Co. | 381,992 | 37,290,059 | ||||||
Wells Fargo & Co. | 547,779 | 25,241,656 | ||||||
155,927,019 | ||||||||
Diversified Chemicals–0.36% |
| |||||||
DowDuPont Inc. | 83,419 | 4,461,248 | ||||||
Diversified Metals & Mining–0.63% |
| |||||||
BHP Group Ltd. (Australia) | 324,457 | 7,822,624 | ||||||
Electric Utilities–1.20% |
| |||||||
Duke Energy Corp. | 103,343 | 8,918,501 | ||||||
FirstEnergy Corp. | 161,508 | 6,064,625 | ||||||
14,983,126 | ||||||||
Fertilizers & Agricultural Chemicals–1.60% |
| |||||||
Mosaic Co. (The) | 388,019 | 11,334,035 | ||||||
Nutrien Ltd. (Canada) | 185,307 | 8,709,429 | ||||||
20,043,464 |
Shares | Value | |||||||
Food Distributors–1.35% |
| |||||||
US Foods Holding Corp.(b) | 532,695 | $ | 16,854,470 | |||||
Health Care Distributors–1.23% |
| |||||||
McKesson Corp. | 139,325 | 15,391,233 | ||||||
Health Care Equipment–2.49% |
| |||||||
Medtronic PLC | 158,087 | 14,379,594 | ||||||
Zimmer Biomet Holdings, Inc. | 161,579 | 16,758,974 | ||||||
31,138,568 | ||||||||
Health Care Services–2.39% |
| |||||||
CVS Health Corp. | 455,823 | 29,865,523 | ||||||
Home Improvement Retail–0.89% |
| |||||||
Kingfisher PLC (United Kingdom) | 4,204,766 | 11,120,742 | ||||||
Hotels, Resorts & Cruise Lines–2.33% |
| |||||||
Carnival Corp. | 591,834 | 29,177,416 | ||||||
Industrial Machinery–1.37% |
| |||||||
Ingersoll-Rand PLC | 188,239 | 17,173,044 | ||||||
Insurance Brokers–2.73% |
| |||||||
Aon PLC | 84,615 | 12,299,636 | ||||||
Willis Towers Watson PLC | 144,022 | 21,871,181 | ||||||
34,170,817 | ||||||||
Integrated Oil & Gas–5.53% |
| |||||||
BP PLC (United Kingdom) | 3,156,445 | 19,915,347 | ||||||
Occidental Petroleum Corp. | 376,658 | 23,119,268 | ||||||
Royal Dutch Shell PLC–Class A (United Kingdom) | 893,764 | 26,232,427 | ||||||
69,267,042 | ||||||||
Internet & Direct Marketing Retail–1.26% |
| |||||||
eBay Inc.(b) | 563,941 | 15,829,824 | ||||||
Investment Banking & Brokerage–3.08% |
| |||||||
Goldman Sachs Group, Inc. (The) | 62,878 | 10,503,770 | ||||||
Morgan Stanley | 706,810 | 28,025,017 | ||||||
38,528,787 | ||||||||
IT Consulting & Other Services–1.19% |
| |||||||
Cognizant Technology Solutions Corp.–Class A | 235,476 | 14,948,017 | ||||||
Managed Health Care–0.98% |
| |||||||
Anthem, Inc. | 46,753 | 12,278,741 | ||||||
Multi-Line Insurance–2.74% |
| |||||||
American International Group, Inc. | 870,251 | 34,296,592 | ||||||
Oil & Gas Equipment & Services–1.95% |
| |||||||
Schlumberger Ltd. | 289,702 | 10,452,448 | ||||||
TechnipFMC PLC (United Kingdom) | 712,077 | 13,942,468 | ||||||
24,394,916 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Growth and Income Fund
Shares | Value | |||||||
Oil & Gas Exploration & Production–5.38% |
| |||||||
Anadarko Petroleum Corp. | 338,550 | $ | 14,842,032 | |||||
Apache Corp. | 336,228 | 8,825,985 | ||||||
Canadian Natural Resources Ltd. (Canada) | 500,052 | 12,065,421 | ||||||
Devon Energy Corp. | 761,307 | 17,159,860 | ||||||
Marathon Oil Corp. | 1,011,089 | 14,499,016 | ||||||
67,392,314 | ||||||||
Other Diversified Financial Services–1.42% |
| |||||||
AXA Equitable Holdings, Inc. | 430,553 | 7,160,096 | ||||||
Voya Financial, Inc. | 265,683 | 10,664,516 | ||||||
17,824,612 | ||||||||
Packaged Foods & Meats–1.99% |
| |||||||
Mondelez International, Inc.–Class A | 621,547 | 24,880,527 | ||||||
Pharmaceuticals–8.86% |
| |||||||
Bristol-Myers Squibb Co. | 268,725 | 13,968,325 | ||||||
Johnson & Johnson | 290,632 | 37,506,060 | ||||||
Merck & Co., Inc. | 268,440 | 20,511,500 | ||||||
Novartis AG (Switzerland) | 286,125 | 24,506,143 | ||||||
Sanofi (France) | 166,410 | 14,380,992 | ||||||
110,873,020 | ||||||||
Railroads–1.11% |
| |||||||
CSX Corp. | 223,747 | 13,901,401 | ||||||
Regional Banks–4.70% |
| |||||||
Citizens Financial Group, Inc. | 765,576 | 22,760,575 | ||||||
Fifth Third Bancorp | 562,916 | 13,245,413 | ||||||
First Horizon National Corp. | 507,115 | 6,673,633 | ||||||
PNC Financial Services Group, Inc. (The) | 138,090 | 16,144,102 | ||||||
58,823,723 |
Shares | Value | |||||||
Semiconductors–4.17% |
| |||||||
Intel Corp. | 620,618 | $ | 29,125,603 | |||||
QUALCOMM Inc. | 404,689 | 23,030,851 | ||||||
52,156,454 | ||||||||
Systems Software–2.05% |
| |||||||
Oracle Corp. | 569,109 | 25,695,271 | ||||||
Tobacco–1.99% |
| |||||||
Philip Morris International Inc. | 373,174 | 24,913,095 | ||||||
Total Common Stocks |
| 1,191,034,409 | ||||||
Money Market Funds–2.60% |
| |||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30%(c) | 11,376,269 | 11,376,269 | ||||||
Invesco Liquid Assets Portfolio–Institutional Class, 2.48%(c) | 8,124,168 | 8,124,980 | ||||||
Invesco Treasury Portfolio–Institutional Class, 2.30%(c) | 13,001,450 | 13,001,450 | ||||||
Total Money Market Funds |
| 32,502,699 | ||||||
TOTAL INVESTMENTS IN SECURITIES–97.76% |
| 1,223,537,108 | ||||||
OTHER ASSETS LESS LIABILITIES–2.24% |
| 28,028,746 | ||||||
NET ASSETS–100.00% |
| $ | 1,251,565,854 |
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. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Growth and Income Fund
Open Forward Foreign Currency Contracts | ||||||||||||||||||||||
Settlement | Counterparty | Contract to | Unrealized Appreciation (Depreciation) | |||||||||||||||||||
Deliver | Receive | |||||||||||||||||||||
02/01/2019 | Bank of New York Mellon (The) | AUD | 4,714,851 | USD | 3,390,308 | $ | 67,433 | |||||||||||||||
02/01/2019 | Bank of New York Mellon (The) | CAD | 6,197,778 | USD | 4,615,391 | 72,100 | ||||||||||||||||
02/01/2019 | State Street Bank and Trust Co. | AUD | 4,714,761 | USD | 3,390,974 | 68,162 | ||||||||||||||||
02/01/2019 | State Street Bank and Trust Co. | CAD | 6,197,814 | USD | 4,614,765 | 71,447 | ||||||||||||||||
02/01/2019 | State Street Bank and Trust Co. | USD | 40,827 | GBP | 32,184 | 254 | ||||||||||||||||
Subtotal — Appreciation | 279,396 | |||||||||||||||||||||
02/01/2019 | Bank of New York Mellon (The) | CHF | 9,083,709 | USD | 9,203,819 | (62,116 | ) | |||||||||||||||
02/01/2019 | Bank of New York Mellon (The) | EUR | 4,755,790 | USD | 5,451,277 | (10,849 | ) | |||||||||||||||
02/01/2019 | Bank of New York Mellon (The) | GBP | 16,974,154 | USD | 21,529,338 | (136,981 | ) | |||||||||||||||
02/01/2019 | State Street Bank and Trust Co. | CHF | 9,083,798 | USD | 9,201,578 | (64,448 | ) | |||||||||||||||
02/01/2019 | State Street Bank and Trust Co. | EUR | 4,755,790 | USD | 5,452,014 | (10,112 | ) | |||||||||||||||
02/01/2019 | State Street Bank and Trust Co. | GBP | 16,974,130 | USD | 21,533,721 | (132,567 | ) | |||||||||||||||
02/01/2019 | State Street Bank and Trust Co. | USD | 1,065,357 | AUD | 1,491,771 | (14,005 | ) | |||||||||||||||
02/01/2019 | State Street Bank and Trust Co. | USD | 14,386 | CAD | 19,305 | (234 | ) | |||||||||||||||
Subtotal — Depreciation |
| (431,312 | ) | |||||||||||||||||||
Total Forward Foreign Currency Contracts — Currency Risk |
| $ | (151,916 | ) |
Abbreviations:
AUD | – Australian Dollar | |
CAD | – Canadian Dollar | |
CHF | – Swiss Franc | |
EUR | – Euro | |
GBP | – British Pound Sterling | |
USD | – U.S. Dollar |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $1,169,320,405) | $ | 1,191,034,409 | ||
Investments in affiliated money market funds, at value (Cost $32,503,333) | 32,502,699 | |||
Other investments: | ||||
Unrealized appreciation on forward foreign currency contracts outstanding | 279,396 | |||
Cash | 300,595 | |||
Foreign currencies, at value (Cost $690,585) | 693,580 | |||
Receivable for: | ||||
Fund shares sold | 26,686,233 | |||
Dividends | 2,690,702 | |||
Investment for trustee deferred compensation and retirement plans | 189,431 | |||
Total assets | 1,254,377,045 | |||
Liabilities: | ||||
Other investments: | ||||
Unrealized depreciation on forward foreign currency contracts outstanding | 431,312 | |||
Payable for: | ||||
Investments purchased | 224,849 | |||
Fund shares reacquired | 526,825 | |||
Accrued fees to affiliates | 1,356,465 | |||
Accrued trustees’ and officers’ fees and benefits | 8,113 | |||
Accrued other operating expenses | 48,510 | |||
Trustee deferred compensation and retirement plans | 215,117 | |||
Total liabilities | 2,811,191 | |||
Net assets applicable to shares outstanding | $ | 1,251,565,854 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 1,043,235,513 | ||
Distributable earnings | 208,330,341 | |||
$ | 1,251,565,854 | |||
Net Assets: | ||||
Series I | $ | 166,305,674 | ||
Series II | $ | 1,085,260,180 | ||
Shares outstanding, no par value, |
| |||
Series I | 9,497,126 | |||
Series II | 62,090,110 | |||
Series I: | ||||
Net asset value per share | $ | 17.51 | ||
Series II: | ||||
Net asset value per share | $ | 17.48 |
Investment income: | ||||
Dividends (net of foreign withholding taxes of $682,634) | $ | 41,939,357 | ||
Dividends from affiliated money market funds | 853,254 | |||
Total investment income | 42,792,611 | |||
Expenses: | ||||
Advisory fees | 10,183,763 | |||
Administrative services fees | 3,096,869 | |||
Custodian fees | 48,453 | |||
Distribution fees — Series II | 4,054,543 | |||
Transfer agent fees | 23,288 | |||
Trustees’ and officers’ fees and benefits | 46,187 | |||
Reports to shareholders | 7,833 | |||
Professional services fees | 51,570 | |||
Other | 20,258 | |||
Total expenses | 17,532,764 | |||
Less: Fees waived | (57,671 | ) | ||
Net expenses | 17,475,093 | |||
Net investment income | 25,317,518 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities (includes net gains from securities sold to affiliates of $130,328) | 161,006,484 | |||
Foreign currencies | (489,184 | ) | ||
Forward foreign currency contracts | 7,099,465 | |||
167,616,765 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (400,331,474 | ) | ||
Foreign currencies | (20,099 | ) | ||
Forward foreign currency contracts | 2,612,089 | |||
(397,739,484 | ) | |||
Net realized and unrealized gain (loss) | (230,122,719 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (204,805,201 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income | $ | 25,317,518 | $ | 33,140,004 | ||||
Net realized gain | 167,616,765 | 170,194,828 | ||||||
Change in net unrealized appreciation (depreciation) | (397,739,484 | ) | 57,350,489 | |||||
Net increase (decrease) in net assets resulting from operations | (204,805,201 | ) | 260,685,321 | |||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (20,657,576 | ) | (10,115,304 | ) | ||||
Series II | (184,183,100 | ) | (98,273,704 | ) | ||||
Total distributions from distributable earnings | (204,840,676 | ) | (108,389,008 | ) | ||||
Share transactions–net: | ||||||||
Series I | 25,029,084 | 5,625,071 | ||||||
Series II | (374,156,431 | ) | (153,738,313 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (349,127,347 | ) | (148,113,242 | ) | ||||
Net increase (decrease) in net assets | (758,773,224 | ) | 4,183,071 | |||||
Net assets: | ||||||||
Beginning of year | 2,010,339,078 | 2,006,156,007 | ||||||
End of year | $ | 1,251,565,854 | $ | 2,010,339,078 |
(1) | For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income and distributions from net realized gains. The Securities and Exchange Commission eliminated the requirement to disclose the distribution components separately. For the year ended December 31, 2017, distributions from net investment income were $2,699,090 and $23,299,802 and distributions from net realized gains were $7,416,214 and $74,973,902 for Series I and Series II, respectively. |
Notes to Financial Statements
December 31, 2018
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. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 seeklong-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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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 theover-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 (“NAV”) 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 theend-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. Growth and Income 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. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 investment 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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 the 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 the dailymark-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 anagreed-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 accrues daily and pays monthly 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 year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.56%.
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
Invesco V.I. Growth and Income Fund
The Adviser has contractually agreed, through at least April 30, 2020, 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 (the “expense limits”). 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, 2020. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $57,671.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $389,798 for accounting and fund administrative services and was reimbursed $2,707,071 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution fees.
For the year ended December 31, 2018, the Fund incurred $26,323 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. |
Invesco V.I. Growth and Income Fund
The following is a summary of the tiered valuation input levels, as of December 31, 2018. 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 | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | $ | 1,105,999,500 | $ | 85,034,909 | $ | — | $ | 1,191,034,409 | ||||||||
Money Market Funds | 32,502,699 | — | — | 32,502,699 | ||||||||||||
Total Investments in Securities | 1,138,502,199 | 85,034,909 | — | 1,223,537,108 | ||||||||||||
Other Investments — Assets* | ||||||||||||||||
Forward Foreign Currency Contracts | — | 279,396 | — | 279,396 | ||||||||||||
Other Investments — Liabilities* | ||||||||||||||||
Forward Foreign Currency Contracts | — | (431,312 | ) | — | (431,312 | ) | ||||||||||
Total Other Investments | — | (151,916 | ) | — | (151,916 | ) | ||||||||||
Total Investments | $ | 1,138,502,199 | $ | 84,882,993 | $ | — | $ | 1,223,385,192 |
* | Unrealized appreciation (depreciation). |
NOTE 4—Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (“ISDA Master Agreement”) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
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 December 31, 2018:
Value | ||||
Derivative Assets | Currency Risk | |||
Unrealized appreciation on forward foreign currency contracts outstanding | $ | 279,396 | ||
Derivatives not subject to master netting agreements | — | |||
Total Derivative Assets subject to master netting agreements | $ | 279,396 |
Value | ||||
Derivative Liabilities | Currency Risk | |||
Unrealized depreciation on forward foreign currency contracts outstanding | $ | (431,312 | ) | |
Derivatives not subject to master netting agreements | — | |||
Total Derivative Liabilities subject to master netting agreements | $ | (431,312 | ) |
Offsetting Assets and Liabilities
The table below reflects the Fund’s exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of December 31, 2018.
Financial Derivative Assets | Financial Derivative Liabilities | Collateral (Received)/Pledged | ||||||||||||||||||||||
Counterparty | Forward Foreign Currency Contracts | Forward Foreign Currency Contracts | Net Value of Derivatives | Non-Cash | Cash | Net Amount | ||||||||||||||||||
Bank of New York Mellon (The) | $ | 139,533 | $ | (209,946 | ) | $ | (70,413 | ) | $ | — | $ | — | $ | (70,413 | ) | |||||||||
State Street Bank and Trust Co. | 139,863 | (221,366 | ) | (81,503 | ) | — | — | (81,503 | ) | |||||||||||||||
Total | $ | 279,396 | $ | (431,312 | ) | $ | (151,916 | ) | $ | — | $ | — | $ | (151,916 | ) |
Invesco V.I. Growth and Income Fund
Effect of Derivative Investments for the year ended December 31, 2018
The table below summarizes the gains on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain on Statement of Operations | ||||
Currency Risk | ||||
Realized Gain: | ||||
Forward foreign currency contracts | $ | 7,099,465 | ||
Change in Net Unrealized Appreciation: | ||||
Forward foreign currency contracts | 2,612,089 | |||
Total | $ | 9,711,554 |
The table below summarizes the average notional value of forward foreign currency contracts outstanding during the period.
Forward Foreign Currency Contracts | ||||
Average notional value | $ | 167,396,462 |
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 year ended December 31, 2018, the Fund engaged in securities purchases of $156,746 and securities sales of $648,861, which resulted in net realized gains of $130,328.
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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 38,083,181 | $ | 33,469,069 | ||||
Long-term capital gain | 166,757,495 | 74,919,939 | ||||||
Total distributions | $ | 204,840,676 | $ | 108,389,008 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 24,894,436 | ||
Undistributedlong-term gain | 164,139,762 | |||
Net unrealized appreciation — investments | 19,503,265 | |||
Net unrealized appreciation (depreciation) — foreign currencies | (3,071 | ) | ||
Temporary book/tax differences | (204,051 | ) | ||
Shares of beneficial interest | 1,043,235,513 | |||
Total net assets | $ | 1,251,565,854 |
Invesco V.I. Growth and Income Fund
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to forward foreign currency contracts and wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 does not have a capital loss carryforward as of December 31, 2018.
NOTE 9—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $548,323,530 and $1,064,072,038, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 155,397,280 | ||
Aggregate unrealized (depreciation) of investments | (135,894,015 | ) | ||
Net unrealized appreciation of investments | $ | 19,503,265 |
Cost of investments for tax purposes is $1,203,881,927.
NOTE 10—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of foreign currency transactions, on December 31, 2018, undistributed net investment income was decreased by $406,578 and undistributed net realized gain was increased by $406,578. This reclassification had no effect on the net assets or the distributable earnings of the Fund.
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 1,599,024 | $ | 33,449,701 | 1,248,121 | $ | 26,984,341 | ||||||||||
Series II | 4,823,927 | 100,263,745 | 1,126,956 | 24,398,016 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 978,568 | 20,657,576 | 472,016 | 10,115,304 | ||||||||||||
Series II | 8,737,339 | 184,183,100 | 4,592,229 | 98,273,704 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (1,330,437 | ) | (29,078,193 | ) | (1,454,161 | ) | (31,474,574 | ) | ||||||||
Series II | (31,937,812 | ) | (658,603,276 | ) | (12,689,269 | ) | (276,410,033 | ) | ||||||||
Net increase (decrease) in share activity | (17,129,391 | ) | $ | (349,127,347 | ) | (6,704,108 | ) | $ | (148,113,242 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 72% 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. Growth and Income Fund
NOTE 12—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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 22.70 | $ | 0.36 | $ | (2.95 | ) | $ | (2.59 | ) | $ | (0.47 | ) | $ | (2.13 | ) | $ | (2.60 | ) | $ | 17.51 | (13.38 | )% | $ | 166,306 | 0.75 | %(d) | 0.75 | %(d) | 1.63 | %(d) | 32 | % | |||||||||||||||||||||||
Year ended 12/31/17 | 21.05 | 0.41 | (e) | 2.52 | 2.93 | (0.34 | ) | (0.94 | ) | (1.28 | ) | 22.70 | 14.32 | 187,254 | 0.76 | 0.76 | 1.90 | (e) | 17 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 19.60 | 0.33 | 3.29 | 3.62 | (0.23 | ) | (1.94 | ) | (2.17 | ) | 21.05 | 19.69 | 168,082 | 0.77 | 0.79 | 1.69 | 28 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 25.15 | 0.33 | (1.30 | ) | (0.97 | ) | (0.74 | ) | (3.84 | ) | (4.58 | ) | 19.60 | (3.06 | ) | 149,066 | 0.78 | 0.84 | 1.41 | 22 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 26.29 | 0.59 | (f) | 2.02 | 2.61 | (0.50 | ) | (3.25 | ) | (3.75 | ) | 25.15 | 10.28 | 161,866 | 0.78 | 0.83 | 2.22 | (f) | 31 | |||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 22.66 | 0.30 | (2.95 | ) | (2.65 | ) | (0.40 | ) | (2.13 | ) | (2.53 | ) | 17.48 | (13.59 | ) | 1,085,260 | 1.00 | (d) | 1.00 | (d) | 1.38 | (d) | 32 | |||||||||||||||||||||||||||||||||
Year ended 12/31/17 | 21.02 | 0.36 | (e) | 2.51 | 2.87 | (0.29 | ) | (0.94 | ) | (1.23 | ) | 22.66 | 14.04 | 1,823,085 | 1.01 | 1.01 | 1.65 | (e) | 17 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 19.58 | 0.28 | 3.28 | 3.56 | (0.18 | ) | (1.94 | ) | (2.12 | ) | 21.02 | 19.37 | 1,838,074 | 1.02 | 1.04 | 1.44 | 28 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 25.09 | 0.27 | (1.29 | ) | (1.02 | ) | (0.65 | ) | (3.84 | ) | (4.49 | ) | 19.58 | (3.26 | ) | 1,435,111 | 1.03 | 1.09 | 1.16 | 22 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 26.23 | 0.52 | (f) | 2.01 | 2.53 | (0.42 | ) | (3.25 | ) | (3.67 | ) | 25.09 | 9.96 | 1,828,854 | 1.03 | 1.08 | 1.97 | (f) | 31 |
(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 based on average daily net assets (000’s omitted) of $184,322 and $1,621,817 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 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 $0.30 and 1.42%, and $0.25 and 1.17%, for Series I and Series II, respectively. |
(f) | 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 $0.35 and 1.29%, and $0.28 and 1.04%, for Series I and Series II, respectively. |
Invesco V.I. Growth and Income Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Growth and Income Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Growth and Income Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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 (07/01/18) | ACTUAL | HYPOTHETICAL (5% annual return before | Annualized | ||||||||||||||||||||
Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 878.60 | $ | 3.55 | $ | 1,021.42 | $ | 3.82 | 0.75 | % | ||||||||||||
Series II | 1,000.00 | 877.70 | 4.73 | 1,020.16 | 5.09 | 1.00 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Growth and Income Fund
Tax Information
Form1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Long-Term Capital Gain Distributions | $ | 166,757,495 | ||
Corporate Dividends Received Deduction* | 100.00 | % | ||
U.S. Treasury Obligations* | 0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. Growth and Income Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Growth and Income Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. Growth and Income Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. Growth and Income Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Growth and Income Fund
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Annual Report to Shareholders
| December 31, 2018
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Invesco V.I. Health Care Fund
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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 (or any successor Form). The Fund’s Form N-Q (or any successor Form) filings are available on the SEC website, 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 (or any successor Form), 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.
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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.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Invesco Distributors, Inc. | I-VIGHC-AR-1 | 02152019 1146 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. Health Care Fund (the Fund) underperformed the MSCI World Health Care Index, the Fund’s style-specific benchmark.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | 0.90 | % | |||
Series II Shares | 0.62 | ||||
MSCI World Index▼ (Broad Market Index) | -8.71 | ||||
MSCI World Health Care Index▼(Style-Specific Index) | 2.51 | ||||
Lipper VUF Health/Biotechnology Funds Classification Average∎(Peer Group) | 1.45 | ||||
Source(s):▼RIMES Technologies Corp.;∎Lipper Inc. |
Market conditions and your Fund
Calendar year 2018 proved to be an increasingly volatile time for US equities. In January 2018, US equity markets steadily moved higher, as investors remained enthused about the passage of the Tax Cuts and Jobs Act signed into law in late December 2017. However, in February 2018, volatility returned to the US stock and bond markets. Worries about how rising interest rates might affect economic growth, concerns about a potential trade war and heightened geopolitical tensions caused the US stock markets to pull back and volatility to increase.
US equity markets generally recovered in the second quarter of 2018 as strong US retail sales and low unemployment buoyed markets. Throughout the summer, US equities moved higher as corporate profits surged. Several US equity indexes reached new highs despite potential headwinds including trade tensions, tariff announcements and contagion concerns over a Turkish currency crisis. After a relatively quiet summer, market volatility noticeably rose in October, as US equity markets suffered a
sharp sell-off through year-end, amid rising interest rates and concerns that higher inflation could mean a more restrictive monetary policy. In this environment, there was a flight to safety, as investors fled to defensive areas of the equities markets, like health care and utilities, and US Treasuries.
Given signs of a strong economy, the US Federal Reserve raised interest rates four times during the year: in March, June, September and December 2018. Following December’s Federal Reserve meeting, Chairman Jerome Powell raised interest rates for the fourth time in 2018 by 25 basis points to a targeted range of 2.25% to 2.50%, and lowered guidance from three to two rate hikes in 2019, signaling a slightly more dovish stance than expected.1 In contrast, the European Central Bank and central banks in several other countries maintained extraordinarily accommodative monetary policies.
Health care equipment companyDentsply Sirona was the main driver of the Fund’s underperformance relative to the style-specific benchmark during the year, as dental industry trends failed to improve despite a better economy. The
company’s management did not execute on plan and its new distribution partner’s impact on the business was minimal. We sold our position in Dentsply Sirona before the close of the year.
Stock selection in the pharmaceuticals industry also detracted from the Fund’s performance versus the style-specific benchmark for the year. The Fund held an underweight position inPfizer, which rallied during the year as macroeconomic concerns, resulting from the global trade wars and the decline of FAANG (Facebook, Apple, Amazon, Netflix and Alphabet’s Google) stocks (not Fund holdings), weighed on the market and investors sought safe haven assets. However, performance in this sector was somewhat offset by the positive contribution from the Fund’s underweight positioning.
During the year, the Fund’s overweight exposure to the managed health care industry contributed to its performance relative to the style-specific benchmark. In particular, health insurance company,Humana and health financial services company,HealthEquity benefited from tax reform, rising interest rates and a stabilizing market environment.
The Fund’s stock selection in the health care technology industry also aided the Fund’s performance versus the style-specific benchmark for the year. Specifically,HMS Holdings increased guidance on increased momentum in its business, as well as margin improvement.
The Fund’s cash position, while less than 3% on average during the year, also added to the Fund’s relative and absolute performance in the volatile equity market environment.
During the year, we took profits from holdings in the biotechnology industry, in particular in small- and mid-cap stocks, and increased the Fund’s weightings to the pharmaceuticals and medical devices
Portfolio Composition | |||
By country | % of total net assets |
United States | 76.9% | |
Switzerland | 6.4 | |
United Kingdom | 3.9 | |
France | 3.0 | |
Denmark | 2.3 | |
Countries each less than 2.0% of portfolio | 5.4 | |
Money Market Funds Plus Other Assets Less Liabilities | 2.1 |
Top 10 Equity Holdings* | |||
% of total net assets | |||
1. UnitedHealth Group Inc. | 4.9% | ||
2. Novartis AG-ADR | 4.7 | ||
3. Johnson & Johnson | 4.3 | ||
4. Medtronic PLC | 4.2 | ||
5. Thermo Fisher Scientific, Inc. | 4.2 | ||
6. AstraZeneca PLC | 3.6 | ||
7. Merck & Co., Inc. | 3.4 | ||
8. Eli Lilly and Co. | 2.9 | ||
9. Sanofi-ADR | 2.7 | ||
10. Zimmer Biomet Holdings, Inc. | 2.7 |
Total Net Assets | $189.7 million | |
Total Number of Holdings* | 69 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
Data presented here are as of December 31, 2018.
Invesco V.I. Health Care Fund
industries. At the close of the year, the Fund’s largest overweight exposures relative to its style-specific benchmark were in biotechnology and managed health care holdings where, in our opinion, valuations were attractive, growth was robust and pipelines were strong.
We continue to believe research and development productivity within health care remains robust, as information technology increasingly intersects with new medical technologies and a receptive regulatory environment to shepherd new treatments to market. Therefore, we continue to emphasize and search for new investment opportunities in the biotechnology and pharmaceuticals industries, and in areas like life sciences tools and services, and medical devices.
As always, thank you for your continued investment in Invesco V.I. Health Care Fund.
1 | Source: US Federal Reserve |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Henry Wu Portfolio Manager, is manager of Invesco V.I. Health Care Fund. He joined Invesco in 2014. Mr. Wu earned a BS | ||
degree, with honors, in biological sciences and an MS degree in engineering-economic systems and operations research from Stanford University. He also earned an MBA from Harvard University. |
Invesco V.I. Health Care Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: Lipper Inc. |
2 | Source: RIMES Technologies Corp. |
Past performance cannot guarantee
comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (5/21/97) | 8.12 | % | |||
10 Years | 11.74 | ||||
5 Years | 5.02 | ||||
1 Year | 0.90 | ||||
Series II Shares | |||||
Inception (4/30/04) | 7.16 | % | |||
10 Years | 11.45 | ||||
5 Years | 4.75 | ||||
1 Year | 0.62 |
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. Performance figures in the table and chart do not reflect deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 1.01% and 1.26%, 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. 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.
Invesco V.I. Health Care Fund
Invesco V.I. Health Care Fund’s investment objective is long-term growth of capital.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Convertible securities risk.The market values of convertible securities are affected by market interest rates, the risk of actual issuer default on interest or principal payments and the value of the underlying common stock into which the convertible security may be converted. Additionally, a convertible security is subject to the same types of market and issuer risks as apply to the underlying common stock. In addition, certain convertible securities are subject to involuntary conversions and may undergo principal write-downs upon the occurrence of certain triggering events, and, as a result, are subject to an increased risk of loss. Convertible securities may be rated below investment grade.
Depositary receipts risk.Investing in depositary receipts involves the same risks as direct investments in foreign securities. In addition, the underlying issuers of certain depositary receipts are under no obligation to distribute shareholder communications or pass through any voting rights with respect to the deposited securities to the holders of such receipts. The Fund may therefore receive less timely information or have less control than if it invested directly in the foreign issuer.
Derivatives risk.The value of a derivative instrument depends largely on (and is derived from) the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include other, possibly greater, risks, including counterparty, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by holding a position in the derivative. As a result, an adverse change in the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative or the anticipated value of the underlying asset, which may make the Fund’s returns more volatile
and increase the risk of loss. Derivative instruments may also be less liquid than more traditional investments and the Fund may be unable to sell or close out its derivative positions at a desirable time or price. This risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. Derivatives strategies may not always be successful. For example, derivatives used for hedging or to gain or limit exposure to a particular market segment may not provide the expected benefits, particularly during adverse market conditions.
Emerging markets securities risk.Emerging markets (also referred to as developing markets) are generally subject to greater market volatility, political, social and economic instability, uncertain trading markets and more governmental limitations on foreign investment than more developed markets. In addition, companies operating in emerging markets may be subject to lower trading volume and greater price fluctuations than companies in more developed markets. Securities law and the enforcement of systems of taxation in many emerging market countries may change quickly and unpredictably. In addition, investments in emerging markets securities may also be subject to additional transaction costs, delays in settlement procedures, and lack of timely information.
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated
in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
Health care sector risk.The Fund will concentrate its investments in the securities of domestic and foreign issuers in the health care sector. The health care sector is subject to significant government regulations, increases or decreases in the cost of medical products and services, and competitive forces that could negatively impact a health care company’s profitability. The health care sector may also be affected by government health care programs.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
Preferred securities risk.Preferred securities are subject to issuer-specific and market risks applicable generally to equity securities. Preferred securities also may be subordinated to bonds or other debt instruments, subjecting them to a greater risk of non-payment, may be less liquid than many other securities, such as common stocks, and generally offer no voting rights with respect to the issuer.
Invesco V.I. Health Care Fund
Small- and mid-capitalization companies risks.Small- and mid-capitalization companies tend to be more vulnerable to changing market conditions, may have little or no operating history or track record of success, and may have more limited product lines and markets, less experienced management and fewer financial resources than larger companies. These companies’ securities may be more volatile and less liquid than those of more established companies, and their returns may vary, sometimes significantly, from the overall securities market.
About indexes used in this report
TheMSCI 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.
TheMSCI 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.
TheLipper VUF Health/Biotechnology Funds Classification Average represents an average of all 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.
Other information
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Industry 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.
Invesco V.I. Health Care Fund
Schedule of Investments(a)
December 31, 2018
Shares | Value | |||||||
Common Stocks & Other Equity Interests–97.87% |
| |||||||
Biotechnology–19.47% |
| |||||||
ACADIA Pharmaceuticals Inc.(b) | 51,746 | $ | 836,733 | |||||
Alexion Pharmaceuticals, Inc.(b) | 34,221 | 3,331,757 | ||||||
Amarin Corp. PLC–ADR (Ireland)(b) | 60,664 | 825,637 | ||||||
Amicus Therapeutics, Inc.(b) | 65,550 | 627,969 | ||||||
Array BioPharma Inc.(b) | 118,453 | 1,687,955 | ||||||
Ascendis Pharma A/S–ADR (Denmark)(b) | 15,659 | 981,036 | ||||||
Avrobio, Inc.(b) | 15,465 | 257,492 | ||||||
BioCryst Pharmaceuticals, Inc.(b) | 96,821 | 781,346 | ||||||
Biogen Inc.(b) | 16,108 | 4,847,219 | ||||||
Biohaven Pharmaceutical Holding Co. Ltd.(b) | 13,110 | 484,808 | ||||||
BioMarin Pharmaceutical Inc.(b) | 42,447 | 3,614,362 | ||||||
bluebird bio, Inc.(b) | 8,802 | 873,158 | ||||||
Celgene Corp.(b) | 34,219 | 2,193,096 | ||||||
DBV Technologies S.A.–ADR (France)(b) | 86,045 | 552,409 | ||||||
Exact Sciences Corp.(b) | 34,628 | 2,185,027 | ||||||
Heron Therapeutics, Inc.(b) | 31,133 | 807,590 | ||||||
Incyte Corp.(b) | 33,236 | 2,113,477 | ||||||
KalVista Pharmaceuticals, Inc.(b) | 22,496 | 444,296 | ||||||
Loxo Oncology, Inc.(b) | 6,159 | 862,691 | ||||||
Neurocrine Biosciences, Inc.(b) | 15,163 | 1,082,790 | ||||||
REGENXBIO Inc.(b) | 14,958 | 627,488 | ||||||
Rocket Pharmaceuticals, Inc.(b) | 64,393 | 954,304 | ||||||
Rubius Therapeutics, Inc.(b) | 40,991 | 659,135 | ||||||
Sarepta Therapeutics, Inc.(b) | 11,570 | 1,262,634 | ||||||
Vertex Pharmaceuticals Inc.(b) | 24,333 | 4,032,222 | ||||||
36,926,631 | ||||||||
Drug Retail–0.41% |
| |||||||
Raia Drogasil S.A. (Brazil) | 52,760 | 777,974 | ||||||
Health Care Equipment–17.34% |
| |||||||
Abbott Laboratories | 67,261 | 4,864,988 | ||||||
Baxter International Inc. | 32,641 | 2,148,431 | ||||||
Boston Scientific Corp.(b) | 126,187 | 4,459,449 | ||||||
Edwards Lifesciences Corp.(b) | 14,668 | 2,246,697 | ||||||
Koninklijke Philips N.V. (Netherlands) | 82,593 | 2,910,830 | ||||||
Medtronic PLC | 88,144 | 8,017,578 | ||||||
Wright Medical Group N.V.(b) | 117,095 | 3,187,326 | ||||||
Zimmer Biomet Holdings, Inc. | 48,736 | 5,054,898 | ||||||
32,890,197 | ||||||||
Health Care Facilities–1.63% |
| |||||||
HCA Healthcare, Inc. | 24,932 | 3,102,787 | ||||||
Health Care Services–3.11% |
| |||||||
Cigna Corp. | 16,951 | 3,219,334 | ||||||
CVS Health Corp. | 40,803 | 2,673,413 | ||||||
5,892,747 |
Shares | Value | |||||||
Health Care Supplies–0.75% |
| |||||||
Align Technology, Inc.(b) | 6,791 | $ | 1,422,239 | |||||
Health Care Technology–1.05% |
| |||||||
HMS Holdings Corp.(b) | 32,082 | 902,467 | ||||||
Inspire Medical Systems, Inc.(b) | 25,931 | 1,095,585 | ||||||
1,998,052 | ||||||||
Life Sciences Tools & Services–7.63% |
| |||||||
Agilent Technologies, Inc. | 16,723 | 1,128,133 | ||||||
Bio-Rad Laboratories, Inc.–Class A(b) | 7,477 | 1,736,309 | ||||||
Eurofins Scientific S.E. (Luxembourg) | 3,931 | 1,459,812 | ||||||
Illumina, Inc.(b) | 7,505 | 2,250,975 | ||||||
Thermo Fisher Scientific, Inc. | 35,303 | 7,900,458 | ||||||
14,475,687 | ||||||||
Managed Health Care–13.06% |
| |||||||
Anthem, Inc. | 16,753 | 4,399,840 | ||||||
Centene Corp.(b) | 30,795 | 3,550,663 | ||||||
Hapvida Participacoes e Investimentos S.A. (Brazil)(c) | 155,200 | 1,249,369 | ||||||
HealthEquity, Inc.(b) | 11,488 | 685,259 | ||||||
Humana Inc. | 15,133 | 4,335,302 | ||||||
Notre Dame Intermedica Participacoes S.A. (Brazil)(b) | 155,383 | 1,172,415 | ||||||
UnitedHealth Group Inc. | 37,625 | 9,373,140 | ||||||
24,765,988 | ||||||||
Pharmaceuticals–33.42% |
| |||||||
Allergan PLC | 11,065 | 1,478,948 | ||||||
AstraZeneca PLC–ADR (United Kingdom) | 181,177 | 6,881,103 | ||||||
Bristol-Myers Squibb Co. | 80,743 | 4,197,021 | ||||||
Elanco Animal Health Inc.(b) | 29,865 | 941,644 | ||||||
Eli Lilly and Co. | 47,039 | 5,443,353 | ||||||
Indivior PLC (United Kingdom)(b) | 309,813 | 440,815 | ||||||
Jazz Pharmaceuticals PLC(b) | 9,871 | 1,223,609 | ||||||
Johnson & Johnson | 63,341 | 8,174,156 | ||||||
Merck & Co., Inc. | 85,051 | 6,498,747 | ||||||
Nippon Shinyaku Co., Ltd. (Japan) | 30,100 | 1,896,207 | ||||||
Novartis AG–ADR (Switzerland) | 104,312 | 8,951,013 | ||||||
Novo Nordisk A/S–Class B (Denmark) | 72,684 | 3,341,117 | ||||||
Odonate Therapeutics, Inc.(b) | 42,502 | 598,428 | ||||||
Pfizer Inc. | 92,726 | 4,047,490 | ||||||
Roche Holding AG (Switzerland) | 13,062 | 3,229,896 | ||||||
Sanofi–ADR (France) | 118,483 | 5,143,347 | ||||||
Zogenix, Inc.(b) | 24,755 | 902,567 | ||||||
63,389,461 | ||||||||
Total Common Stocks & Other Equity Interests |
| 185,641,763 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Health Care Fund
Shares | Value | |||||||
Money Market Funds–2.25% |
| |||||||
Invesco Government & Agency Portfolio– Institutional Class, 2.30%(d) | 1,497,229 | $ | 1,497,229 | |||||
Invesco Liquid Assets Portfolio–Institutional Class, 2.48%(d) | 1,068,751 | 1,068,858 | ||||||
Invesco Treasury Portfolio–Institutional Class, 2.30%(d) | 1,711,118 | 1,711,118 | ||||||
Total Money Market Funds |
| 4,277,205 | ||||||
TOTAL INVESTMENTS IN SECURITIES–100.12% |
| 189,918,968 | ||||||
OTHER ASSETS LESS LIABILITIES–(0.12)% |
| (235,940 | ) | |||||
NET ASSETS–100.00% |
| $ | 189,683,028 |
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 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 value of this security at December 31, 2018 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. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Health Care Fund
Statement of Assets and Liabilities
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $162,509,502) | $ | 185,641,763 | ||
Investments in affiliated money market funds, at value (Cost $4,277,310) | 4,277,205 | |||
Foreign currencies, at value (Cost $7,112) | 7,337 | |||
Receivable for: | ||||
Fund shares sold | 40,275 | |||
Dividends | 326,404 | |||
Investment for trustee deferred compensation and retirement plans | 67,634 | |||
Total assets | 190,360,618 | |||
Liabilities: | ||||
Payable for: | ||||
Amount due to custodian | 285,546 | |||
Fund shares reacquired | 129,093 | |||
Accrued fees to affiliates | 123,724 | |||
Accrued trustees’ and officers’ fees and benefits | 4,436 | |||
Accrued other operating expenses | 58,124 | |||
Trustee deferred compensation and retirement plans | 76,667 | |||
Total liabilities | 677,590 | |||
Net assets applicable to shares outstanding | $ | 189,683,028 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 161,887,193 | ||
Distributable earnings | 27,795,835 | |||
$ | 189,683,028 | |||
Net Assets: | ||||
Series I | $ | 129,376,908 | ||
Series II | $ | 60,306,120 | ||
Shares outstanding, no par value, |
| |||
Series I | 5,527,016 | |||
Series II | 2,723,389 | |||
Series I: | ||||
Net asset value per share | $ | 23.41 | ||
Series II: | ||||
Net asset value per share | $ | 22.14 |
Investment income: | ||||
Dividends (net of foreign withholding taxes of $118,990) | $ | 2,165,150 | ||
Dividends from affiliated money market funds | 100,620 | |||
Total investment income | 2,265,770 | |||
Expenses: | ||||
Advisory fees | 1,541,974 | |||
Administrative services fees | 358,246 | |||
Custodian fees | 16,534 | |||
Distribution fees — Series II | 161,375 | |||
Transfer agent fees | 40,570 | |||
Trustees’ and officers’ fees and benefits | 23,007 | |||
Reports to shareholders | 10,367 | |||
Professional services fees | 60,903 | |||
Other | 6,724 | |||
Total expenses | 2,219,700 | |||
Less: Fees waived | (6,505 | ) | ||
Net expenses | 2,213,195 | |||
Net investment income | 52,575 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from: | ||||
Investment securities | 6,014,057 | |||
Foreign currencies | 9,872 | |||
6,023,929 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (4,173,067 | ) | ||
Foreign currencies | 2,397 | |||
(4,170,670 | ) | |||
Net realized and unrealized gain | 1,853,259 | |||
Net increase in net assets resulting from operations | $ | 1,905,834 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Health Care Fund
Statement of Changes in Net Assets
For the years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 52,575 | $ | (332,593 | ) | |||
Net realized gain | 6,023,929 | 25,713,301 | ||||||
Change in net unrealized appreciation (depreciation) | (4,170,670 | ) | 6,965,617 | |||||
Net increase in net assets resulting from operations | 1,905,834 | 32,346,325 | ||||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (18,007,655 | ) | (8,071,335 | ) | ||||
Series II | (8,604,944 | ) | (3,762,716 | ) | ||||
Total distributions from distributable earnings | (26,612,599 | ) | (11,834,051 | ) | ||||
Share transactions–net: | ||||||||
Series I | 1,916,919 | (15,342,320 | ) | |||||
Series II | 1,194,044 | (8,488,857 | ) | |||||
Net increase (decrease) in net assets resulting from share transactions | 3,110,963 | (23,831,177 | ) | |||||
Net increase (decrease) in net assets | (21,595,802 | ) | (3,318,903 | ) | ||||
Net assets: | ||||||||
Beginning of year | 211,278,830 | 214,597,733 | ||||||
End of year | $ | 189,683,028 | $ | 211,278,830 |
(1) | For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income and distributions from net realized gains. The Securities and Exchange Commission eliminated the requirement to disclose the distribution components separately. For the year ended December 31, 2017, distributions from net investment income were $542,045 and $59,680 and distributions from net realized gains were $7,529,290 and $3,703,036 for Series I and Series II shares, respectively. |
Notes to Financial Statements
December 31, 2018
NOTE 1—Significant Accounting Policies
Invesco V.I. Health Care Fund (the “Fund”) , formerly Invesco V.I. Global Health Care 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. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 islong-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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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 theover-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 (“NAV”) 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 theend-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
Invesco V.I. Health Care Fund
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. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 investment 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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’staxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) thatis 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. Health Care 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 the 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 foreigncurrencies, (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 the dailymark-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 anagreed-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. |
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 accrues daily and pays monthly 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. Health Care Fund
For the year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.75%.
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2019, 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 (the “expense limits”). 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, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $6,505.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $50,000 for accounting and fund administrative services and was reimbursed $308,246 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution fees.
For the year ended December 31, 2018, the Fund incurred $1,810 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. |
Invesco V.I. Health Care Fund
The following is a summary of the tiered valuation input levels, as of December 31, 2018. 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 | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks & Other Equity Interests | $ | 171,190,671 | $ | 14,451,092 | $ | — | $ | 185,641,763 | ||||||||
Money Market Funds | 4,277,205 | — | — | 4,277,205 | ||||||||||||
Total Investments | $ | 175,467,876 | $ | 14,451,092 | $ | — | $ | 189,918,968 |
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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 281,491 | $ | 601,725 | ||||
Long-term capital gain | 26,331,108 | 11,232,326 | ||||||
Total distributions | $ | 26,612,599 | $ | 11,834,051 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 1,763,802 | ||
Undistributedlong-term gain | 2,973,722 | |||
Net unrealized appreciation — investments | 23,131,550 | |||
Net unrealized appreciation (depreciation) — foreign currencies | (1,555 | ) | ||
Temporary book/tax differences | (71,684 | ) | ||
Shares of beneficial interest | 161,887,193 | |||
Total net assets | $ | 189,683,028 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 does not have a capital loss carryforward as of December 31, 2018.
Invesco V.I. Health Care Fund
NOTE 7—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $70,422,008 and $86,981,583 respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 36,428,717 | ||
Aggregate unrealized (depreciation) of investments | (13,297,167 | ) | ||
Net unrealized appreciation of investments | $ | 23,131,550 |
Cost of investments for tax purposes is $166,787,418.
NOTE 8—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of foreign currency transactions, on December 31, 2018, undistributed net investment income was increased by $9,871 and undistributed net realized gain was decreased by $9,871. This reclassification had no effect on the net assets or the distributable earnings of the Fund.
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
| |||||||||||||||
Series I | 682,421 | $ | 18,324,767 | 570,966 | $ | 15,191,152 | ||||||||||
Series II | 204,677 | 5,112,391 | 122,136 | 3,109,327 | ||||||||||||
Issued as reinvestment of dividends: |
| |||||||||||||||
Series I | 689,156 | 18,007,655 | 300,385 | 8,071,335 | ||||||||||||
Series II | 347,815 | 8,604,944 | 146,580 | 3,762,716 | ||||||||||||
Reacquired: |
| |||||||||||||||
Series I | (1,292,416 | ) | (34,415,503 | ) | (1,453,869 | ) | (38,604,807 | ) | ||||||||
Series II | (492,468 | ) | (12,523,291 | ) | (604,171 | ) | (15,360,900 | ) | ||||||||
Net increase (decrease) in share activity | 139,185 | $ | (3,110,963 | ) | (917,973 | ) | $ | (23,831,177 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 52% 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. Health Care 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, | 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 26.44 | $ | 0.03 | (d) | $ | 0.59 | $ | 0.62 | $ | — | $ | (3.65 | ) | $ | (3.65 | ) | $ | 23.41 | 0.90 | % | $ | 129,377 | 1.00 | %(e) | 1.00 | %(e) | 0.10 | %(d)(e) | 35 | % | |||||||||||||||||||||||||
Year ended 12/31/17 | 24.11 | (0.02 | ) | 3.86 | 3.84 | (0.10 | ) | (1.41 | ) | (1.51 | ) | 26.44 | 15.83 | 144,038 | 1.01 | 1.01 | (0.08 | ) | 37 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 31.75 | 0.09 | (3.36 | ) | (3.27 | ) | — | (4.37 | ) | (4.37 | ) | 24.11 | (11.46 | ) | 145,408 | 1.04 | 1.04 | 0.31 | 23 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 33.78 | 0.00 | 1.08 | 1.08 | — | (3.11 | ) | (3.11 | ) | 31.75 | 3.16 | 209,511 | 1.06 | 1.07 | 0.01 | 42 | ||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 25.25 | (0.04 | )(d) | 0.58 | 0.54 | — | (3.65 | ) | (3.65 | ) | 22.14 | 0.62 | 60,306 | 1.25 | (e) | 1.25 | (e) | (0.15 | )(d)(e) | 35 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 | 23.07 | (0.08 | ) | 3.69 | 3.61 | (0.02 | ) | (1.41 | ) | (1.43 | ) | 25.25 | 15.55 | 67,240 | 1.26 | 1.26 | (0.33 | ) | 37 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 30.65 | 0.02 | (3.23 | ) | (3.21 | ) | — | (4.37 | ) | (4.37 | ) | 23.07 | (11.69 | ) | 69,190 | 1.29 | 1.29 | 0.06 | 23 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 32.80 | (0.08 | ) | 1.04 | 0.96 | — | (3.11 | ) | (3.11 | ) | 30.65 | 2.89 | 103,464 | 1.31 | 1.32 | (0.24 | ) | 42 | ||||||||||||||||||||||||||||||||||||||
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 |
(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 year ended December 31, 2018. Net investment income per share and the ratio of net investment income to average net assets excluding the significant dividends are $0.00 and (0.03)%, $(0.07) and (0.28)%, for Series I and Series II shares, respectively. |
(e) | Ratios are based on average daily net assets (000’s omitted) of $141,046 and $64,550 for Series I and Series II shares, respectively. |
Invesco V.I. Health Care Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Health Care Fund (formerly Invesco V.I. Global Health Care Fund):
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Health Care Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and transfer agent. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
Invesco V.I. 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 July 1, 2018 through December 31, 2018.
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 (07/01/18) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Ratio | ||||||||||||||||||||
Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 976.50 | $ | 4.98 | $ | 1,020.16 | $ | 5.09 | 1.00 | % | ||||||||||||
Series II | 1,000.00 | 975.30 | 6.22 | 1,018.90 | 6.36 | 1.25 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Health Care Fund
Tax Information
Form1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Long-Term Capital Gain Distributions | $ | 26,331,108 | ||
Corporate Dividends Received Deduction* | 99.80 | % | ||
U.S. Treasury Obligations* | 0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. Health Care Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Health Care Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. Health Care Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. Health Care Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Health Care Fund
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Annual Report to Shareholders
| December 31, 2018 | |||
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Invesco V.I. High Yield Fund
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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 FormN-Q (or any successor Form). The Fund’s FormN-Q (or any successor Form) filings are available on the SEC website, sec.gov. The SEC file numbers for the Fund are811-07452 and033-57340. The Fund’s most recent portfolio holdings, as filed on FormN-Q (or any successor Form), 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 recent12-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.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||
Invesco Distributors, Inc. VIHYI-AR-1 02152019 1154 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. High Yield Fund (the Fund) underperformed the Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Cap Index, the Fund’s style-specific index.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -3.35 | % | |||
Series II Shares | -3.60 | ||||
Bloomberg Barclays U.S. Aggregate Bond Index▼(Broad Market Index) | 0.01 | ||||
Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Cap Index▼ (Style- Specific Index) | -2.08 | ||||
Lipper VUF High Yield Bond Funds Classification Average∎(Peer Group) | -2.63 | ||||
Source(s):▼FactSet Research Systems Inc.;∎Lipper Inc.
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Market conditions and your Fund
In 2018, the high yield market came under pressure from a variety of factors including trade tensions, slowing global economic growth, an increase in equity market volatility and declining oil prices. Despite these pressures, credit fundamentals remained solid and defaults continued to stay below the long-term average.
The US Federal Reserve (the Fed) raised interest rates four times during the year to a range of 2.25% to 2.50% and has now done so nine times since the global financial crisis ended.1 At its December 2018 meeting, the Fed noted solid job gains, low unemployment and strong growth in household spending in an environment where inflation has stayed near 2.00%.1
The high yield market posted roughly flat returns through November, but in December the market sold off significantly
as credit spreads widened 100 basis points. (A basis point is 0.01%.)2 Concerns about slower global economic growth, market volatility and global trade tensions increased toward the end of the year. This spilled over to the high yield market and led to a negative total return in December and the year as a whole in the high yield market.
Despite the increase in market turmoil during the year, thepar-weighted high yield default rate increased only modestly in 2018 and ended the year at 1.81% compared to 1.28% at the end of 2017.3 New issuance fell dramatically in 2018 with no new deals in December – the first month with no issuance since November 2008.3 For the year, total issuance was $187 billion compared to $328 billion in 2017, a 43% decline and the lowest amount since 2009.3 In 2018, high yield mutual funds funds had outflows in 10 out of 12 months of the year for a total of
Portfolio Composition† | |||||
By credit quality | % of total investments | ||||
B | 42.0% | ||||
BB | 40.8 | ||||
BBB | 3.0 | ||||
CCC | 9.7 | ||||
Non-Rated | 4.5 |
† | 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 & Poor’s rating methodology, please visit standardandpoors.com and select “Understanding Ratings” under Rating Resources on the homepage. |
Top Five Debt Issuers* | |||
% of total net assets |
1. Sprint Corp | 2.5% | |
2. HCA, Inc. | 1.8 | |
3. DISH DBS Corp. | 1.7 | |
4. CCO Holdings LLC/CCO Holdings Capital Corp. | 1.6 | |
5. CSC Holdings LLC | 1.6 |
Total Net Assets | $141.9 million | |
Total Number of Holdings* | 299 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
* | Excluding US Treasury bills and money market fund holdings. |
Data presented here are as of December 31, 2018.
$45 billion at year end, compared to $20 billion in outflows in 2017.3
The Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Cap Index, which measures the performance of the US high yield bond market and is the Fund’s style-specific index, returned-2.08% for the year ended December 31, 2018. Likewise, the Fund generated a negative return for the year.
During the year, the Fund benefited from its positioning in the energy and consumer cyclicals sectors. The energy sector was notably volatile, especially in the fourth quarter when oil prices fell more than 30%.2 While the Fund had an overweight allocation to the independent energy sector relative to the style-specific index, security selection was a significant contributor to the Fund’s relative performance. In particular, the Fund avoided the distressed part of the independent energy sector and issuers with idiosyncratic problems. The underweight allocation to consumer cyclicals was also beneficial, along with security selection in the automotive industry. Specifically, avoidance of problem credits – those with weaker fundamentals or those that have underperformed – in the automotive industry benefited relative Fund performance for the year.
The largest detractors from the Fund’s performance during the year were positions in the metals and mining and technology industries. In metals and mining,First Quantum negatively impacted the Fund’s performance due to poor sentiment in emerging markets and the industry in general. The Fund’s underweight allocation to the technology industry versus the style-specific index, along with security selection in the industry, was also a drag on the Fund’s performance.
During the year, we used currency forward contracts for the purpose of hedging currency exposure ofnon-US-dollar-denominated bonds held in the portfolio. We also used credit default swaps to efficiently manage the portfolio and to take advantage of relative value opportunities. The use of currency, interest rate and credit derivatives had an immaterial impact on the Fund’s performance during the year.
Invesco V.I. High Yield Fund
At the close of the year, we saw wider credit spreads that we believe could provide a favorable foundation for future returns. New issue supply is expected to remain constrained, providing technical support to the market. At the close of the year, we witnessed many companies that had already refinanced near-term maturities and the bank loan market continued to draw supply away from high yield. In our view, the main risk for the market continues to be slowing global growth. We believe a growth deceleration in the US that settles into the 2% area could still be sufficient to preserve the favorable fundamental backdrop the market has been experiencing. An added benefit of slower growth is that management teams tend to become more balance sheet focused, which is positive for creditors. Macroeconomic concerns also include the risk of a policy error on behalf of the Fed and growth-related challenges faced by China. At the sector level, we expect challenging conditions in retail and fixed wireline telecom to continue. At the close of the year, we saw cyclical industries being reviewed for risks and opportunities as volatility late in the year created a target-rich environment for security selection.
We wish to remind you that the Fund is subject to interest rate risk, meaning when interest rates rise, the value of fixed income securities tends to fall. This risk may be greater in the current market environment because interest rates are near historic lows. The degree to which the value of fixed income securities may decline due to rising interest rates may vary depending on the speed and magnitude of the increase in interest rates, as well as individual security characteristics such as price, maturity, duration and coupon and market forces such as supply and demand for similar securities. We are monitoring interest rates, and the market, economic and geopolitical factors that may impact the direction, speed and magnitude of changes to interest rates across the maturity spectrum, including the potential impact of monetary policy changes by the Fed and certain foreign central banks. If interest rates rise, markets may experience increased volatility, which may affect the value and/or liquidity of certain of the Fund’s investments.
Thank you for investing in Invesco V.I. High Yield Fund and for sharing our long-term investment horizon.
1 | Source: US Federal Reserve |
2 | Source: Bloomberg L.P. |
3 | Source: JP Morgan |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Andrew Geryol Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. High Yield Fund. He joined Invesco | ||
in 2011. Mr. Geryol earned a BS in business administration from Miami University. |
Jennifer Hartviksen Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. High Yield Fund. She is the Head | ||
of Canada Fixed Income. Ms. Hartviksen joined Invesco in 2013. She earned a BA in economics from the University of Toronto. |
Joseph Portera Portfolio Manager, is manager of Invesco V.I. High Yield Fund. He joined Invesco in 2012. Mr. Portera earned BA | ||
and MA degrees in Soviet studies and an MA in international political economy and development from Fordham University. |
Scott Roberts Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. High Yield Fund. He joined | ||
Invesco in 2000. Mr. Roberts earned a BBA in finance from the University of Houston. |
Invesco V.I. High Yield Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (5/1/98) | 3.96 | % | |||
10 Years | 9.47 | ||||
5 Years | 2.39 | ||||
1 Year | -3.35 | ||||
Series II Shares | |||||
Inception (3/26/02) | 6.22 | % | |||
10 Years | 9.21 | ||||
5 Years | 2.16 | ||||
1 Year | -3.60 |
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 recentmonth-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Performance figures in the table and chart do not reflect deduction of taxes a shareholder would
pay on Fund distributions or the redemption of Fund shares. 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 1.01% and 1.26%, 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 1.02% and 1.27%, 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 recentmonth-end performance data at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recentmonth-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, 2020. See current prospectus for more information. |
Invesco V.I. High Yield Fund
Invesco V.I. High Yield Fund’s investment objective is total return, comprised of current income and capital appreciation.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Changing fixed income market conditions risk.The current low interest rate environment was created in part by the Federal Reserve Board (FRB) and certain foreign central banks keeping the federal funds and equivalent foreign rates near, at or below zero. Increases in the federal funds and equivalent foreign rates may expose fixed income markets to heightened volatility and reduced liquidity for certain fixed income investments, particularly those with longer maturities. In addition, decreases in fixed income dealer market-making capacity may also potentially lead to heightened volatility and reduced liquidity in the fixed income markets. As a result, the value of the Fund’s investments and share price may decline. Changes in central bank policies could also result in higher than normal shareholder redemptions, which could potentially increase portfolio turnover and the Fund’s transaction costs.
Collateralized loan obligations risk. CLOs are subject to the risks of substantial losses due to actual defaults by underlying borrowers, which will be greater during periods of economic or financial stress. CLOs may also lose value due to collateral defaults and disappearance of subordinate tranches, market anticipation of defaults, and investor aversion to CLO securities as a class. The risks of CLOs will be greater if the Fund invests in CLOs that hold loans of uncreditworthy borrowers or if the Fund holds subordinate tranches of the CLO that absorbs losses from the defaults before senior tranches. In addition, CLOs are subject to interest rate risk and credit risk.
Convertible securities risk.The market values of convertible securities are affected by market interest rates, the risk of actual issuer default on interest or principal payments and the value of the underlying common stock into which the convertible security may be converted. Additionally, a convertible security is subject to the same types of market and issuer risks as apply to the underlying common stock. In addition, certain convertible securities are subject to involuntary conversions and may undergo principal write-downs upon the occurrence of certain triggering events, and, as a result, are subject to an increased risk of loss. Convertible securities
may be rated below investment grade.
Debt securities risk.The prices of debt securities held by the Fund will be affected by changes in interest rates, the creditworthiness of the issuer and other factors. An increase in prevailing interest rates typically causes the value of existing debt securities to fall and often has a greater impact on longer-duration debt securities and higher quality debt securities. Falling interest rates will cause the Fund to reinvest the proceeds of debt securities that have been repaid by the issuer at lower interest rates. Falling interest rates may also reduce the Fund’s distributable income because interest payments on floating rate debt instruments held by the Fund will decline. The Fund could lose money on investments in debt securities if the issuer or borrower fails to meet its obligations to make interest payments and/or to repay principal in a timely manner. Changes in an issuer’s financial strength, the market’s perception of such strength or in the credit rating of the issuer or the security may affect the value of debt securities. The Adviser’s credit analysis may fail to anticipate such changes, which could result in buying a debt security at an inopportune time or failing to sell a debt security in advance of a price decline or other credit event.
Derivatives risk.The value of a derivative instrument depends largely on (and is derived from) the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include other, possibly greater, risks, including counterparty, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by holding a position in the derivative. As a result, an adverse change in the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative or the anticipated value of the underlying asset, which may make the Fund’s returns more volatile and increase the risk of loss. Derivative instruments
may also be less liquid than more traditional investments and the Fund may be unable to sell or close out its derivative positions at a desirable time or price. This risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. Derivatives strategies may not always be successful. For example, derivatives used for hedging or to gain or limit exposure to a particular market segment may not provide the expected benefits, particularly during adverse market conditions.
Emerging markets securities risk. Emerging markets (also referred to as developing markets) are generally subject to greater market volatility, political, social and economic instability, uncertain trading markets and more governmental limitations on foreign investment than more developed markets. In addition, companies operating in emerging markets may be subject to lower trading volume and greater price fluctuations than companies in more developed markets. Securities law and the enforcement of systems of taxation in many emerging market countries may change quickly and unpredictably. In addition, investments in emerging markets securities may also be subject to additional transaction costs, delays in settlement procedures, and lack of timely information.
Foreign credit exposure risk.US dollar-denominated securities carrying foreign credit exposure may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest.
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities
Invesco V.I. High Yield Fund
risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
High yield debt securities (junk bond) risk.Investments in high yield debt securities (“junk bonds”) and other lower-rated securities will subject the Fund to substantial risk of loss. These securities are considered to be speculative with respect to the issuer’s ability to pay interest and principal when due, are more susceptible to default or decline in market value and are less liquid than investment grade debt securities. Prices of high yield debt securities tend to be very volatile.
Liquidity risk.The Fund may be unable to sell illiquid investments at the time or price it desires and, as a result, could lose its entire investment in such investments. Liquid securities can become illiquid during periods of market stress. If a significant amount of the Fund’s securities become illiquid, the Fund may not be able to timely pay redemption proceeds and may need to sell securities at significantly reduced prices.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
Mortgage- and asset-backed securities risk.Mortgage- and asset-backed securities, including collateralized debt
obligations and collateralized mortgage obligations, are subject to prepayment or call risk, which is the risk that a borrower’s payments may be received earlier or later than expected due to changes in prepayment rates on underlying loans. This could result in the Fund reinvesting these early payments at lower interest rates, thereby reducing the Fund’s income. Mortgage- and asset-backed securities also are subject to extension risk, which is the risk that an unexpected rise in interest rates could reduce the rate of prepayments, causing the price of the mortgage- and asset-backed securities and the Fund’s share price to fall. An unexpectedly high rate of defaults on the mortgages held by a mortgage pool may adversely affect the value of mortgage-backed securities and could result in losses to the Fund. The Fund may invest in mortgage pools that include subprime mortgages, which are loans made to borrowers with weakened credit histories or with lower capacity to make timely payments on their mortgages. Privately issued mortgage-related securities are not subject to the same underwriting requirements as those with government or government-sponsored entity guarantees and, therefore, mortgage loans underlying privately issued mortgage-related securities may have less favorable collateral, credit risk or other underwriting characteristics, and wider variances in interest rate, term, size, purpose and borrower characteristics.
Municipal securities risk.The risk of a municipal obligation generally depends on the financial and credit status of the issuer. Constitutional amendments, legislative enactments, executive orders, administrative regulations, voter initiatives, and the issuer’s regional economic conditions may affect the municipal security’s value, interest payments, repayment of principal and the Fund’s ability to sell the security. Failure of a municipal security issuer to comply with applicable tax requirements may make income paid thereon taxable, resulting in a decline in the security’s value. In addition, there could be changes in applicable tax laws or tax treatments that reduce or eliminate the current federal income tax exemption on municipal securities or otherwise adversely affect the current federal or state tax status of municipal securities.
Preferred securities risk.Preferred securities are subject to issuer-specific and market risks applicable generally to equity securities. Preferred securities also may be subordinated to bonds or other debt instruments, subjecting them to a greater risk ofnon-payment, may be less liquid than many other securities, such as
common stocks, and generally offer no voting rights with respect to the issuer.
Zero coupon orpay-in-kind securities risk.The value, interest rates, and liquidity ofnon-cash paying instruments, such as zero coupon andpay-in-kind securities, are subject to greater fluctuation than other types of securities. The higher yields and interest rates onpay-in-kind securities reflect the payment deferral and increased credit risk associated with such instruments and that such investments may represent a higher credit risk than loans that periodically pay interest.
About indexes used in this report
TheBloomberg Barclays U.S. AggregateBond Index is an unmanaged index considered representative of the US investment grade,fixed-rate bond market.
TheBloomberg Barclays U.S. Corporate High Yield 2% Issuer Cap Index is an unmanaged index considered representative of the US high-yield,fixed-rate corporate bond market. Index weights for each issuer are capped at 2%.
TheLipper VUF High Yield Bond Funds Classification Average represents an average of all variable insurance underlying funds in the Lipper High 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.
Other information
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Invesco V.I. High Yield Fund
Schedule of Investments(a)
December 31, 2018
Principal Amount | Value | |||||||
U.S. Dollar Denominated Bonds & Notes–94.46% |
| |||||||
Aerospace & Defense–2.56% |
| |||||||
BBA U.S. Holdings, Inc., Sr. Unsec. Notes, 5.38%, 05/01/2026(b) | $ | 215,000 | $ | 204,248 | ||||
Bombardier Inc. (Canada), Sr. Unsec. Notes, | ||||||||
5.75%, 03/15/2022(b) | 215,000 | 201,563 | ||||||
6.13%, 01/15/2023(b) | 428,000 | 402,320 | ||||||
7.50%, 03/15/2025(b) | 832,000 | 787,280 | ||||||
8.75%, 12/01/2021(b) | 170,000 | 175,738 | ||||||
TransDigm Inc., Sr. Unsec. Gtd. Sub. Global Notes, | ||||||||
6.50%, 07/15/2024 | 157,000 | 153,271 | ||||||
6.50%, 05/15/2025 | 630,000 | 604,012 | ||||||
TransDigm UK Holdings PLC, Sr. Unsec. Sub. Gtd. Notes, 6.88%, 05/15/2026(b) | 400,000 | 382,000 | ||||||
Triumph Group, Inc., Sr. Unsec. Gtd. Global Notes, 7.75%, 08/15/2025 | 819,000 | 724,815 | ||||||
3,635,247 | ||||||||
Agricultural & Farm Machinery–0.63% |
| |||||||
Titan International, Inc., Sr. Sec. Gtd. First Lien Global Notes, 6.50%, 11/30/2023 | 989,000 | 890,100 | ||||||
Agricultural Products–0.28% |
| |||||||
Kernel Holding S.A. (Ukraine), REGS, Sr. Unsec. Gtd. Euro Notes, 8.75%, 01/31/2022(b) | 418,000 | 401,944 | ||||||
Airlines–0.30% |
| |||||||
Air Canada (Canada), Sr. Unsec. Gtd. Notes, 7.75%, 04/15/2021(b) | 400,000 | 424,900 | ||||||
Alternative Carriers–0.41% |
| |||||||
Level 3 Financing, Inc., Sr. Unsec. Gtd. Global Notes, | ||||||||
5.25%, 03/15/2026 | 253,000 | 232,128 | ||||||
5.38%, 05/01/2025 | 365,000 | 343,100 | ||||||
575,228 | ||||||||
Aluminum–0.73% |
| |||||||
Novelis Corp., Sr. Unsec. Gtd. Notes, | ||||||||
5.88%, 09/30/2026(b) | 58,000 | 51,475 | ||||||
6.25%, 08/15/2024(b) | 1,046,000 | 985,855 | ||||||
1,037,330 | ||||||||
Apparel Retail–1.11% |
| |||||||
Hot Topic, Inc., Sr. Sec. Gtd. First Lien Notes, 9.25%, 06/15/2021(b) | 687,000 | 676,695 | ||||||
L Brands, Inc., Sr. Unsec. Gtd. Global Notes, | ||||||||
5.63%, 02/15/2022 | 473,000 | 473,000 | ||||||
6.75%, 07/01/2036 | 101,000 | 82,820 | ||||||
6.88%, 11/01/2035 | 404,000 | 339,441 | ||||||
1,571,956 |
Principal Amount | Value | |||||||
Auto Parts & Equipment–0.71% |
| |||||||
Dana Financing Luxembourg S.a.r.l., Sr. Unsec. Gtd. Notes, 5.75%, 04/15/2025(b) | $ | 270,000 | $ | 253,125 | ||||
Dana Inc., Sr. Unsec. Notes, 5.50%, 12/15/2024 | 498,000 | 465,630 | ||||||
Flexi-Van Leasing, Inc., Sec. Second Lien Notes, 10.00%, 02/15/2023(b) | 346,000 | 281,990 | ||||||
1,000,745 | ||||||||
Automobile Manufacturers–0.62% |
| |||||||
J.B. Poindexter & Co., Inc., Sr. Unsec. Bonds, 7.13%, 04/15/2026(b) | 936,000 | 879,840 | ||||||
Motors Liquidation Co., Sr. Unsec. Deb., 0.00%, 07/15/2033(c)(d) | 1,060,000 | 0 | ||||||
879,840 | ||||||||
Automotive Retail–1.08% |
| |||||||
Lithia Motors, Inc., Sr. Unsec. Gtd. Notes, 5.25%, 08/01/2025(b) | 248,000 | 229,090 | ||||||
Murphy Oil USA, Inc., Sr. Unsec. Gtd. Global Notes, 5.63%, 05/01/2027 | 472,000 | 455,480 | ||||||
Penske Automotive Group Inc., Sr. Unsec. Sub. Gtd. Notes, 5.50%, 05/15/2026 | 902,000 | 842,242 | ||||||
1,526,812 | ||||||||
Broadcasting–2.53% |
| |||||||
Clear Channel Worldwide Holdings Inc., | ||||||||
Series B, Sr. Unsec. Gtd. Global Notes, 6.50%, 11/15/2022 | 694,000 | 697,470 | ||||||
Sr. Unsec. Gtd. Sub. Global Notes, 7.63%, 03/15/2020 | 747,000 | 731,126 | ||||||
Netflix, Inc., | ||||||||
Sr. Unsec. Global Notes, 5.75%, 03/01/2024 | 355,000 | 361,213 | ||||||
Sr. Unsec. Notes, 5.88%, 11/15/2028(b) | 467,000 | 456,226 | ||||||
Nexstar Broadcasting, Inc., Sr. Unsec. Gtd. Notes, 5.63%, 08/01/2024(b) | 540,000 | 506,250 | ||||||
Sirius XM Radio Inc., Sr. Unsec. Gtd. Notes, | ||||||||
5.38%, 04/15/2025(b) | 4,000 | 3,805 | ||||||
5.38%, 07/15/2026(b) | 220,000 | 206,525 | ||||||
6.00%, 07/15/2024(b) | 168,000 | 169,050 | ||||||
TV Azteca, S.A.B. de C.V. (Mexico), REGS, Sr. Unsec. Gtd. Euro Notes, 8.25%, 08/09/2024(b) | 470,000 | 453,555 | ||||||
3,585,220 | ||||||||
Building Products–0.95% |
| |||||||
BMC East, LLC, Sr. Sec. Gtd. First Lien Notes, 5.50%, 10/01/2024(b) | 649,000 | 607,626 | ||||||
SRS Distribution Inc., Sr. Unsec. Gtd. Notes, 8.25%, 07/01/2026(b) | 315,000 | 289,800 | ||||||
Standard Industries Inc., Sr. Unsec. Notes, 5.00%, 02/15/2027(b) | 515,000 | 451,913 | ||||||
1,349,339 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
Principal Amount | Value | |||||||
Cable & Satellite–10.20% |
| |||||||
Altice France S.A. (France), | ||||||||
Sr. Sec. Gtd. First Lien Bonds, 6.25%, 05/15/2024(b) | $ | 556,000 | $ | 520,555 | ||||
Sr. Sec. Gtd. First Lien Notes, 7.38%, 05/01/2026(b) | 764,000 | 702,880 | ||||||
AMC Networks Inc., Sr. Unsec. Gtd. Global Notes, | ||||||||
4.75%, 08/01/2025 | 127,000 | 115,570 | ||||||
5.00%, 04/01/2024 | 500,000 | 475,000 | ||||||
CCO Holdings LLC/CCO Holdings Capital Corp., |
| |||||||
Sr. Unsec. Global Notes, 5.75%, 09/01/2023 | 620,000 | 618,450 | ||||||
5.75%, 01/15/2024 | 40,000 | 39,900 | ||||||
Sr. Unsec. Notes, 5.75%, 02/15/2026(b) | 1,670,000 | 1,640,775 | ||||||
CSC Holdings LLC, | ||||||||
Sr. Sec. Gtd. First Lien Notes, 5.50%, 05/15/2026(b) | 440,000 | 415,800 | ||||||
Sr. Unsec. Gtd. Notes, 6.63%, 10/15/2025(b) | 200,000 | 203,000 | ||||||
Sr. Unsec. Notes, | ||||||||
10.13%, 01/15/2023(b) | 1,005,000 | 1,083,651 | ||||||
10.88%, 10/15/2025(b) | 445,000 | 500,812 | ||||||
DISH DBS Corp., Sr. Unsec. Gtd. Global Notes, | ||||||||
5.88%, 11/15/2024 | 1,446,000 | 1,169,452 | ||||||
7.75%, 07/01/2026 | 163,000 | 135,290 | ||||||
7.88%, 09/01/2019 | 1,111,000 | 1,136,331 | ||||||
Gray Escrow, Inc., Sr. Unsec. Notes, 7.00%, 05/15/2027(b) | 264,000 | 258,039 | ||||||
Hughes Satellite Systems Corp., Sr. Unsec. Gtd. Global Notes, 7.63%, 06/15/2021 | 942,000 | 979,680 | ||||||
Intelsat Jackson Holdings S.A. (Luxembourg), | ||||||||
Sr. Unsec. Gtd. Global Bonds, 5.50%, 08/01/2023 | 1,563,000 | 1,367,625 | ||||||
Sr. Unsec. Gtd. Notes, 8.50%, 10/15/2024(b) | 501,000 | 488,475 | ||||||
Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH (Germany), Sr. Sec. Gtd. First Lien Bonds, 5.00%, 01/15/2025(b) | 885,000 | 869,070 | ||||||
UPCB Finance IV Ltd. (Netherlands), Sr. Sec. First Lien Notes, 5.38%, 01/15/2025(b) | 450,000 | 421,929 | ||||||
Virgin Media Finance PLC (United Kingdom), Sr. Unsec. Gtd. Notes, 6.00%, 10/15/2024(b) | 450,000 | 433,913 | ||||||
Virgin Media Secured Finance PLC (United Kingdom), Sr. Sec. Gtd. First Lien Notes, 5.50%, 08/15/2026(b) | 300,000 | 278,205 | ||||||
VTR Finance B.V. (Chile), Sr. Sec. First Lien Notes, 6.88%, 01/15/2024(b) | 440,000 | 441,650 | ||||||
Ziggo Bond Finance B.V. (Netherlands), Sr. Unsec. Notes, 5.88%, 01/15/2025(b) | 200,000 | 181,500 | ||||||
14,477,552 |
Principal Amount | Value | |||||||
Casinos & Gaming–2.01% |
| |||||||
Boyd Gaming Corp., Sr. Unsec. Gtd. Global Notes, | ||||||||
6.00%, 08/15/2026 | $ | 226,000 | $ | 212,157 | ||||
6.88%, 05/15/2023 | 125,000 | 126,719 | ||||||
Codere Finance 2 (Luxembourg) S.A. (Spain), Sr. Sec. Gtd. First Lien Notes, 7.63%, 11/01/2021(b) | 448,000 | 383,224 | ||||||
MGM Resorts International, Sr. Unsec. Gtd. Notes, | ||||||||
6.00%, 03/15/2023 | 530,000 | 533,975 | ||||||
7.75%, 03/15/2022 | 169,000 | 180,196 | ||||||
Scientific Games International Inc., Sr. Unsec. Gtd. Global Notes, 10.00%, 12/01/2022 | 1,045,000 | 1,061,971 | ||||||
Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., Sr. Unsec. Gtd. Notes, 5.50%, 03/01/2025(b) | 385,000 | 359,975 | ||||||
2,858,217 | ||||||||
Commodity Chemicals–0.49% |
| |||||||
Koppers Inc., Sr. Unsec. Gtd. Notes, 6.00%, 02/15/2025(b) | 460,000 | 407,100 | ||||||
Nufarm Australia Ltd./Nufarm Americas Inc. (Australia), Sr. Unsec. Gtd. Notes, 5.75%, 04/30/2026(b) | 306,000 | 280,449 | ||||||
687,549 | ||||||||
Construction Machinery & Heavy Trucks–0.84% |
| |||||||
Meritor Inc., Sr. Unsec. Gtd. Notes, 6.25%, 02/15/2024 | 592,000 | 568,320 | ||||||
Terex Corp., Sr. Unsec. Gtd. Notes, 5.63%, 02/01/2025(b) | 675,000 | 629,437 | ||||||
1,197,757 | ||||||||
Consumer Finance–1.58% |
| |||||||
Ally Financial Inc., Sr. Unsec. Global Notes, 5.13%, 09/30/2024 | 1,041,000 | 1,035,795 | ||||||
Discover Financial Services, Inc., Series C, Jr. Unsec. Sub. Global Notes, 5.50%(e) | 385,000 | 320,351 | ||||||
Navient Corp., Sr. Unsec. Medium-Term Notes, | ||||||||
7.25%, 01/25/2022 | 345,000 | 334,219 | ||||||
8.00%, 03/25/2020 | 535,000 | 544,951 | ||||||
2,235,316 | ||||||||
Copper–1.30% |
| |||||||
First Quantum Minerals Ltd. (Zambia), | ||||||||
Sr. Unsec. Gtd. Notes, 7.00%, 02/15/2021(b) | 280,000 | 269,325 | ||||||
7.50%, 04/01/2025(b) | 1,440,000 | 1,193,400 | ||||||
Taseko Mines Ltd. (Canada), Sr. Sec. Gtd. First Lien Notes, 8.75%, 06/15/2022(b) | 430,000 | 388,075 | ||||||
1,850,800 | ||||||||
Diversified Banks–2.84% |
| |||||||
Barclays Bank PLC (United Kingdom), Unsec. Sub. Global Notes, 7.63%, 11/21/2022 | 200,000 | 207,625 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
Principal Amount | Value | |||||||
Diversified Banks–(continued) |
| |||||||
Barclays PLC (United Kingdom), Jr. Unsec. Sub. Global Bonds, 7.75%(e) | $ | 300,000 | $ | 289,326 | ||||
REGS, Jr. Unsec. Sub. Euro Bonds, 7.88%(b)(e) | 263,000 | 263,986 | ||||||
Credit Agricole S.A. (France), REGS, Jr. Unsec. Sub. Euro Notes, 8.13%(b)(e) | 307,000 | 316,594 | ||||||
Dresdner Funding Trust I (Germany), REGS, Jr. Unsec. Sub. Euro Notes, 8.15%, 06/30/2031(b) | 465,000 | 563,766 | ||||||
ING Groep N.V. (Netherlands), Jr. Unsec. Sub. Global Notes, 6.50%(e) | 274,000 | 253,861 | ||||||
REGS, Jr. Unsec. Sub. Euro Bonds, 6.88%(b)(e) | 280,000 | 279,300 | ||||||
Lloyds Banking Group PLC (United Kingdom), Jr. Unsec. Sub. Global Bonds, 7.50%(e) | 276,000 | 266,975 | ||||||
Royal Bank of Scotland Group PLC (The) (United Kingdom), | ||||||||
Jr. Unsec. Sub. Bonds, 7.50%(e) | 750,000 | 744,375 | ||||||
Jr. Unsec. Sub. Notes, 8.63%(e) | 263,000 | 272,862 | ||||||
Société Générale S.A. (France), REGS, Jr. Unsec. Sub. Euro Notes, 7.38%(b)(e) | 308,000 | 300,685 | ||||||
Standard Chartered PLC (United Kingdom), REGS, Jr. Unsec. Sub. Euro Bonds, 7.50%(b)(e) | 263,000 | 264,315 | ||||||
4,023,670 | ||||||||
Diversified Capital Markets–0.20% |
| |||||||
Credit Suisse Group AG (Switzerland), REGS, Jr. Unsec. Sub. Euro Bonds, 7.13%(b)(e) | 279,000 | 275,861 | ||||||
Diversified Chemicals–0.33% |
| |||||||
Chemours Co. (The), Sr. Unsec. Gtd. Global Notes, 7.00%, 05/15/2025 | 220,000 | 222,750 | ||||||
Trinseo Materials Operating S.C.A./Trinseo Materials Finance, Inc., Sr. Unsec. Gtd. Notes, 5.38%, 09/01/2025(b) | 285,000 | 250,515 | ||||||
473,265 | ||||||||
Diversified Metals & Mining–1.51% |
| |||||||
Freeport-McMoRan Inc., Sr. Unsec. Gtd. Global Notes, 5.40%, 11/14/2034 | 1,118,000 | 886,015 | ||||||
HudBay Minerals, Inc. (Canada), Sr. Unsec. Gtd. Notes, 7.63%, 01/15/2025(b) | 396,000 | 389,070 | ||||||
Teck Resources Ltd. (Canada), Sr. Unsec. Notes, 6.13%, 10/01/2035 | 528,000 | 506,880 | ||||||
Vedanta Resources PLC (India), Sr. Unsec. Notes, 6.38%, 07/30/2022(b) | 407,000 | 365,384 | ||||||
2,147,349 | ||||||||
Electrical Components & Equipment–0.41% |
| |||||||
EnerSys, Sr. Unsec. Gtd. Notes, 5.00%, 04/30/2023(b) | 598,000 | 586,040 | ||||||
Electronic Equipment & Instruments–0.29% |
| |||||||
Itron, Inc., Sr. Unsec. Gtd. Notes, 5.00%, 01/15/2026(b) | 452,000 | 414,710 |
Principal Amount | Value | |||||||
Environmental & Facilities Services–1.94% |
| |||||||
Advanced Disposal Services, Inc., Sr. Unsec. Gtd. Notes, 5.63%, 11/15/2024(b) | $ | 408,000 | $ | 400,860 | ||||
Core & Main LP, Sr. Unsec. Notes, 6.13%, 08/15/2025(b) | 861,000 | 768,442 | ||||||
Hulk Finance Corp. (Canada), Sr. Unsec. Notes, 7.00%, 06/01/2026(b) | 1,337,000 | 1,169,875 | ||||||
Waste Pro USA, Inc., Sr. Unsec. Notes, 5.50%, 02/15/2026(b) | 444,000 | 410,700 | ||||||
2,749,877 | ||||||||
Fertilizers & Agricultural Chemicals–0.34% |
| |||||||
OCI N.V. (Netherlands), Sr. Sec. Gtd. Notes, 6.63%, 04/15/2023(b) | 481,000 | 474,988 | ||||||
Food Distributors–0.45% |
| |||||||
US Foods, Inc., Sr. Unsec. Gtd. Notes, 5.88%, 06/15/2024(b) | 653,000 | 637,491 | ||||||
Food Retail–1.50% |
| |||||||
1011778 BC ULC/ New Red Finance, Inc. (Canada), Sec. Gtd. Second Lien Notes, 5.00%, 10/15/2025(b) | 1,508,000 | 1,391,130 | ||||||
Albertsons Cos. LLC/ Safeway Inc./New Albertson’s L.P./Albertson’s LLC, Sr. Unsec. Gtd. Global Notes, 6.63%, 06/15/2024 | 783,000 | 730,147 | ||||||
2,121,277 | ||||||||
Gas Utilities–1.66% |
| |||||||
AmeriGas Partners, L.P./AmeriGas Finance Corp., Sr. Unsec. Global Notes, 5.88%, 08/20/2026 | 842,000 | 772,535 | ||||||
Ferrellgas L.P./Ferrellgas Finance Corp., | ||||||||
Sr. Unsec. Global Notes, 6.50%, 05/01/2021 | 487,000 | 401,775 | ||||||
Sr. Unsec. Gtd. Global Notes, 6.75%, 06/15/2023 | 117,000 | 94,770 | ||||||
Suburban Propane Partners, L.P./Suburban Energy Finance Corp., Sr. Unsec. Global Notes, 5.50%, 06/01/2024 | 1,155,000 | 1,079,925 | ||||||
2,349,005 | ||||||||
Health Care Equipment–0.79% |
| |||||||
Eagle Holding Co. II, LLC, Sr. Unsec. PIK Notes, 8.38% PIK Rate, 7.63% Cash Rate, 05/15/2022(b)(f) | 526,000 | 503,645 | ||||||
Hill-Rom Holdings, Inc., Sr. Unsec. Gtd. Notes, 5.00%, 02/15/2025(b) | 645,000 | 615,975 | ||||||
1,119,620 | ||||||||
Health Care Facilities–3.07% |
| |||||||
Acadia Healthcare Co., Inc., Sr. Unsec. Gtd. Global Notes, 6.50%, 03/01/2024 | 385,000 | 373,450 |
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 Facilities–(continued) |
| |||||||
Community Health Systems, Inc., | ||||||||
Sec. Gtd. Second Lien Notes, 8.13%, 06/30/2024(b) | $ | 15,000 | $ | 11,025 | ||||
Sr. Sec. Gtd. First Lien Global Notes, 5.13%, 08/01/2021 | 425,000 | 396,313 | ||||||
Sr. Sec. Gtd. First Lien Notes, 6.25%, 03/31/2023 | 502,000 | 458,100 | ||||||
Encompass Health Corp., Sr. Unsec. Gtd. Global Notes, 5.75%, 09/15/2025 | 640,000 | 627,200 | ||||||
HCA, Inc., | ||||||||
Sr. Sec. Gtd. First Lien Notes, 5.25%, 04/15/2025 | 894,000 | 891,765 | ||||||
Sr. Unsec. Gtd. Global Notes, 7.50%, 02/15/2022 | 334,000 | 355,710 | ||||||
Sr. Unsec. Gtd. Notes, 5.38%, 02/01/2025 | 640,000 | 625,600 | ||||||
5.38%, 09/01/2026 | 220,000 | 214,500 | ||||||
5.88%, 02/15/2026 | 410,000 | 408,975 | ||||||
4,362,638 | ||||||||
Health Care REITs–0.51% |
| |||||||
MPT Operating Partnership L.P./MPT Finance Corp., Sr. Unsec. Gtd. Global Notes, 5.00%, 10/15/2027 | 795,000 | 728,916 | ||||||
Health Care Services–3.03% |
| |||||||
DaVita Inc., Sr. Unsec. Gtd. Global Notes, 5.00%, 05/01/2025 | 372,000 | 338,985 | ||||||
Heartland Dental, LLC, Sr. Unsec. Notes, 8.50%, 05/01/2026(b) | 723,000 | 652,508 | ||||||
MEDNAX, Inc., Sr. Unsec. Gtd. Notes, 6.25%, 01/15/2027(b) | 759,000 | 734,332 | ||||||
MPH Acquisition Holdings LLC, Sr. Unsec. Gtd. Notes, 7.13%, 06/01/2024(b) | 269,000 | 251,515 | ||||||
Surgery Center Holdings, Inc., Sr. Unsec. Gtd. Notes, | ||||||||
6.75%, 07/01/2025(b) | 233,000 | 199,215 | ||||||
8.88%, 04/15/2021(b) | 490,000 | 491,225 | ||||||
Team Health Holdings, Inc., Sr. Unsec. Gtd. Notes, 6.38%, 02/01/2025(b) | 460,000 | 377,775 | ||||||
Tenet Healthcare Corp., Sr. Unsec. Global Notes, 6.75%, 06/15/2023 | 1,335,000 | 1,258,237 | ||||||
4,303,792 | ||||||||
Home Improvement Retail–0.57% |
| |||||||
Hillman Group Inc. (The), Sr. Unsec. Gtd. Notes, 6.38%, 07/15/2022(b) | 980,000 | 803,600 | ||||||
Homebuilding–2.64% |
| |||||||
Ashton Woods USA LLC/Ashton Woods Finance Co., Sr. Unsec. Notes, 6.88%, 02/15/2021(b) | 446,000 | 430,390 | ||||||
Beazer Homes USA, Inc., Sr. Unsec. Gtd. Global Notes, | ||||||||
6.75%, 03/15/2025 | 402,000 | 347,228 | ||||||
8.75%, 03/15/2022 | 934,000 | 936,335 |
Principal Amount | Value | |||||||
Homebuilding–(continued) |
| |||||||
KB Home, Sr. Unsec. Gtd. Notes, | ||||||||
7.50%, 09/15/2022 | $ | 236,000 | $ | 243,670 | ||||
8.00%, 03/15/2020 | 211,000 | 218,385 | ||||||
Lennar Corp., Sr. Unsec. Gtd. Global Notes, | ||||||||
5.25%, 06/01/2026 | 377,000 | 356,736 | ||||||
5.38%, 10/01/2022 | 304,000 | 304,380 | ||||||
8.38%, 01/15/2021 | 112,000 | 119,560 | ||||||
Meritage Homes Corp., Sr. Unsec. Gtd. Global Notes, 6.00%, 06/01/2025 | 200,000 | 189,500 | ||||||
Taylor Morrison Communities Inc./ Taylor Morrison Holdings II, Inc., Sr. Unsec. Gtd. Notes, 5.88%, 04/15/2023(b) | 498,000 | 483,060 | ||||||
William Lyon Homes, Inc., Sr. Unsec. Gtd. Global Notes, 6.00%, 09/01/2023 | 124,000 | 112,220 | ||||||
3,741,464 | ||||||||
Household Products–1.32% |
| |||||||
Reynolds Group Issuer Inc./LLC, Sr. Unsec. Gtd. Notes, 7.00%, 07/15/2024(b) | 1,261,000 | 1,203,467 | ||||||
Spectrum Brands, Inc., Sr. Unsec. Gtd. Global Notes, 5.75%, 07/15/2025 | 705,000 | 673,063 | ||||||
1,876,530 | ||||||||
Independent Power Producers & Energy Traders–1.11% |
| |||||||
AES Corp. (The), Sr. Unsec. Notes, 5.50%, 04/15/2025 | 340,000 | 339,150 | ||||||
Calpine Corp., Sr. Unsec. Global Notes, 5.50%, 02/01/2024 | 334,000 | 306,862 | ||||||
NRG Energy, Inc., Sr. Unsec. Gtd. Global Notes, | ||||||||
6.25%, 05/01/2024 | 245,000 | 249,594 | ||||||
6.63%, 01/15/2027 | 175,000 | 176,969 | ||||||
7.25%, 05/15/2026 | 200,000 | 209,000 | ||||||
Vistra Energy Corp., Sr. Unsec. Gtd. Global Notes, 7.38%, 11/01/2022 | 285,000 | 294,975 | ||||||
1,576,550 | ||||||||
Industrial Machinery–1.37% |
| |||||||
Cleaver-Brooks, Inc., Sr. Sec. Notes, 7.88%, 03/01/2023(b) | 659,000 | 637,582 | ||||||
EnPro Industries, Inc., Sr. Unsec. Notes, 5.75%, 10/15/2026(b) | 345,000 | 333,787 | ||||||
Mueller Industries, Inc., Unsec. Sub. Deb., 6.00%, 03/01/2027 | 650,000 | 607,750 | ||||||
Mueller Water Products Inc., Sr. Unsec. Gtd. Notes, 5.50%, 06/15/2026(b) | 153,000 | 148,793 | ||||||
Stevens Holding Co., Inc., Sr. Unsec. Gtd. Notes, 6.13%, 10/01/2026(b) | 213,000 | 210,870 | ||||||
1,938,782 | ||||||||
Integrated Oil & Gas–0.69% |
| |||||||
California Resources Corp., Sec. Gtd. Second Lien Notes, 8.00%, 12/15/2022(b) | 559,000 | 380,120 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
Principal Amount | Value | |||||||
Integrated Oil & Gas–(continued) |
| |||||||
Petrobras Global Finance B.V. (Brazil), Sr. Unsec. Gtd. Global Notes, 5.75%, 02/01/2029 | $ | 645,000 | $ | 598,237 | ||||
978,357 | ||||||||
Integrated Telecommunication Services–2.43% |
| |||||||
CenturyLink, Inc., | ||||||||
Series S, Sr. Unsec. Notes, 6.45%, 06/15/2021 | 635,000 | 635,793 | ||||||
Series Y, Sr. Unsec. Global Notes, 7.50%, 04/01/2024 | 696,000 | 673,380 | ||||||
Cincinnati Bell Inc., | ||||||||
Sr. Unsec. Gtd. Notes, 7.00%, 07/15/2024(b) | 629,000 | 522,070 | ||||||
Sr. Unsec. Notes, 8.00%, 10/15/2025(b) | 94,000 | 78,020 | ||||||
Frontier Communications Corp., Sr. Unsec. Global Notes, | ||||||||
10.50%, 09/15/2022 | 1,272,000 | 890,400 | ||||||
11.00%, 09/15/2025 | 264,000 | 165,647 | ||||||
Telecom Italia Capital S.A. (Italy), Sr. Unsec. Gtd. Global Notes, | ||||||||
6.38%, 11/15/2033 | 95,000 | 86,225 | ||||||
7.20%, 07/18/2036 | 417,000 | 400,320 | ||||||
3,451,855 | ||||||||
Internet Software & Services–0.40% |
| |||||||
Equinix, Inc., Sr. Unsec. Notes, 5.88%, 01/15/2026 | 556,000 | 561,560 | ||||||
Leisure Products–0.19% |
| |||||||
Mattel, Inc., Sr. Unsec. Gtd. Notes, 6.75%, 12/31/2025(b) | 303,000 | 271,091 | ||||||
Life Sciences Tools & Services–0.10% |
| |||||||
Charles River Laboratories International, Inc., Sr. Unsec. Gtd. Notes, 5.50%, 04/01/2026(b) | 149,000 | 147,138 | ||||||
Managed Health Care–0.93% |
| |||||||
Centene Corp., Sr. Unsec. Notes, 5.38%, 06/01/2026(b) | 356,000 | 347,100 | ||||||
Molina Healthcare, Inc., Sr. Unsec. Gtd. Notes, 4.88%, 06/15/2025(b) | 340,000 | 311,525 | ||||||
WellCare Health Plans Inc., Sr. Unsec. Notes, | ||||||||
5.25%, 04/01/2025 | 367,000 | 354,614 | ||||||
5.38%, 08/15/2026(b) | 310,000 | 299,925 | ||||||
1,313,164 | ||||||||
Metal & Glass Containers–0.95% |
| |||||||
Ardagh Packaging Finance PLC/Ardagh Holdings USA Inc. (Ireland), | ||||||||
Sr. Unsec. Gtd. Notes, 6.00%, 02/15/2025(b) | 500,000 | 462,810 | ||||||
7.25%, 05/15/2024(b) | 310,000 | 310,388 | ||||||
Flex Acquisition Co., Inc., Sr. Unsec. Notes, 7.88%, 07/15/2026(b) | 507,000 | 457,567 |
Principal Amount | Value | |||||||
Metal & Glass Containers–(continued) |
| |||||||
OI European Group B.V., Sr. Unsec. Gtd. Notes, 4.00%, 03/15/2023(b) | $ | 130,000 | $ | 121,875 | ||||
1,352,640 | ||||||||
Movies & Entertainment–0.78% |
| |||||||
AMC Entertainment Holdings, Inc., Sr. Unsec. Gtd. Sub. Global Notes, 5.75%, 06/15/2025 | 735,000 | 649,556 | ||||||
Lions Gate Capital Holdings LLC, Sr. Unsec. Gtd. Notes, 5.88%, 11/01/2024(b) | 466,000 | 462,505 | ||||||
1,112,061 | ||||||||
Oil & Gas Drilling–1.77% |
| |||||||
Diamond Offshore Drilling, Inc., Sr. Unsec. Global Notes, 4.88%, 11/01/2043 | 240,000 | 135,600 | ||||||
Ensco PLC, Sr. Unsec. Global Notes, | ||||||||
4.50%, 10/01/2024 | 24,000 | 15,720 | ||||||
7.75%, 02/01/2026 | 827,000 | 616,115 | ||||||
Noble Holding International Ltd., Sr. Unsec. Gtd. Global Notes, 7.75%, 01/15/2024 | 953,000 | 725,471 | ||||||
Precision Drilling Corp. (Canada), Sr. Unsec. Gtd. Global Notes, | ||||||||
5.25%, 11/15/2024 | 514,000 | 429,190 | ||||||
7.75%, 12/15/2023 | 94,000 | 87,068 | ||||||
Transocean Inc., Sr. Unsec. Gtd. Global Notes, 7.50%, 04/15/2031 | 662,000 | 504,775 | ||||||
2,513,939 | ||||||||
Oil & Gas Equipment & Services–0.98% |
| |||||||
Archrock Partners, L.P./Archrock Partners Finance Corp., Sr. Unsec. Gtd. Global Notes, 6.00%, 10/01/2022 | 490,000 | 463,050 | ||||||
SESI, L.L.C., Sr. Unsec. Gtd. Global Notes, 7.13%, 12/15/2021 | 521,000 | 445,455 | ||||||
Sunoco LP/ Sunoco Finance Corp., Sr. Unsec. Gtd. Global Notes, 4.88%, 01/15/2023 | 496,000 | 484,840 | ||||||
1,393,345 | ||||||||
Oil & Gas Exploration & Production–6.35% |
| |||||||
Ascent Resources Utica Holdings, LLC /ARU Finance Corp., Sr. Unsec. Notes, 10.00%, 04/01/2022(b) | 533,000 | 547,817 | ||||||
Callon Petroleum Co., Sr. Unsec. Gtd. Global Notes, 6.13%, 10/01/2024 | 782,000 | 731,170 | ||||||
Denbury Resources Inc., Sr. Unsec. Gtd. Sub. Notes, 5.50%, 05/01/2022 | 323,000 | 216,410 | ||||||
EP Energy LLC/Everest Acquisition Finance Inc., Sr. Sec. Gtd. First Lien Notes, 8.00%, 11/29/2024(b) | 420,000 | 315,000 | ||||||
Gulfport Energy Corp., Sr. Unsec. Gtd. Global Notes, 6.00%, 10/15/2024 | 497,000 | 442,330 | ||||||
Jagged Peak Energy LLC, Sr. Unsec. Gtd. Notes, 5.88%, 05/01/2026(b) | 762,000 | 712,470 | ||||||
Oasis Petroleum Inc., Sr. Unsec. Gtd. Global Notes, 6.88%, 01/15/2023 | 619,000 | 573,349 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
Principal Amount | Value | |||||||
Oil & Gas Exploration & Production–(continued) |
| |||||||
Parsley Energy LLC/Finance Corp., Sr. Unsec. Gtd. Notes, | ||||||||
6.25%, 06/01/2024(b) | $ | 470,000 | $ | 457,075 | ||||
5.63%, 10/15/2027(b) | 315,000 | 287,831 | ||||||
QEP Resources, Inc., Sr. Unsec. Global Notes, 5.25%, 05/01/2023 | 375,000 | 333,750 | ||||||
Range Resources Corp., Sr. Unsec. Gtd. Global Notes, | ||||||||
4.88%, 05/15/2025 | 641,000 | 528,825 | ||||||
5.88%, 07/01/2022 | 446,000 | 414,780 | ||||||
SM Energy Co., Sr. Unsec. Global Notes, | ||||||||
6.13%, 11/15/2022 | 139,000 | 132,050 | ||||||
6.63%, 01/15/2027 | 96,000 | 85,920 | ||||||
6.75%, 09/15/2026 | 185,000 | 166,500 | ||||||
Southwestern Energy Co., Sr. Unsec. Gtd. Global Notes, | ||||||||
7.50%, 04/01/2026 | 341,000 | 323,950 | ||||||
7.75%, 10/01/2027 | 425,000 | 405,875 | ||||||
Tullow Oil PLC (Ghana), Sr. Unsec. Gtd. Notes, 7.00%, 03/01/2025(b) | 321,000 | 299,333 | ||||||
Whiting Petroleum Corp., Sr. Unsec. Gtd. Global Notes, 6.25%, 04/01/2023 | 583,000 | 533,445 | ||||||
WildHorse Resource Development Corp., Sr. Unsec. Gtd. Global Notes, 6.88%, 02/01/2025 | 931,000 | 884,450 | ||||||
WPX Energy Inc., Sr. Unsec. Notes, 5.25%, 09/15/2024 | 680,000 | 618,800 | ||||||
9,011,130 | ||||||||
Oil & Gas Refining & Marketing–0.25% |
| |||||||
Parkland Fuel Corp. (Canada), Sr. Unsec. Notes, 6.00%, 04/01/2026(b) | 376,000 | 354,380 | ||||||
Oil & Gas Storage & Transportation–1.31% |
| |||||||
Energy Transfer Partners, L.P., Series A, Jr. Unsec. Sub. Global Notes, 6.25%(e) | 307,000 | 257,496 | ||||||
Plains All American Pipeline, L.P., Series B, Jr. Unsec. Sub. Notes, 6.13%(e) | 456,000 | 384,180 | ||||||
SemGroup Corp., Sr. Unsec. Gtd. Global Notes, 6.38%, 03/15/2025 | 535,000 | 496,213 | ||||||
Targa Resources Partners L.P./Targa Resources Partners Finance Corp., Sr. Unsec. Gtd. Notes, 5.88%, | 743,000 | 726,282 | ||||||
1,864,171 | ||||||||
Other Diversified Financial Services–1.41% |
| |||||||
Lincoln Finance Ltd. (Netherlands), Sr. Sec. Gtd. First Lien Notes, 7.38%, | 492,000 | 499,995 | ||||||
LPL Holdings Inc., Sr. Unsec. Gtd. Notes, 5.75%, 09/15/2025(b) | 509,000 | 478,460 | ||||||
Telenet Finance Luxembourg Notes S.a r.l. (Belgium), Sr. Sec. First Lien Notes, 5.50%, 03/01/2028(b) | 400,000 | 364,000 | ||||||
Tempo Acquisition, LLC/Finance Corp., Sr. Unsec. Notes, 6.75%, 06/01/2025(b) | 532,000 | 494,760 |
Principal Amount | Value | |||||||
Other Diversified Financial Services–(continued) |
| |||||||
VFH Parent LLC/Orchestra Co-Issuer Inc., Sec. Gtd. Second Lien Notes, 6.75%, 06/15/2022(b) | $ | 171,000 | $ | 166,373 | ||||
2,003,588 | ||||||||
Packaged Foods & Meats–1.07% |
| |||||||
B&G Foods, Inc., Sr. Unsec. Gtd. Notes, 5.25%, 04/01/2025 | 389,000 | 363,229 | ||||||
JBS Investments GmbH, Sr. Unsec. Gtd. Notes, 7.25%, 04/03/2024(b) | 525,000 | 531,174 | ||||||
JBS USA Lux S.A./JBS USA Finance Inc., Sr. Unsec. Gtd. Notes, 5.75%, 06/15/2025(b) | 180,000 | 172,575 | ||||||
TreeHouse Foods, Inc., Sr. Unsec. Gtd. Notes, 6.00%, 02/15/2024(b) | 448,000 | 445,200 | ||||||
1,512,178 | ||||||||
Paper Packaging–0.36% |
| |||||||
Plastipak Holdings Inc., Sr. Unsec. Notes, 6.25%, 10/15/2025(b) | 580,000 | 516,200 | ||||||
Paper Products–1.37% |
| |||||||
Mercer International Inc. (Canada), Sr. Unsec. Global Notes, | ||||||||
5.50%, 01/15/2026 | 162,000 | 145,800 | ||||||
6.50%, 02/01/2024 | 442,000 | 434,265 | ||||||
7.75%, 12/01/2022 | 57,000 | 58,853 | ||||||
Rayonier A.M. Products Inc., Sr. Unsec. Gtd. Notes, 5.50%, 06/01/2024(b) | 948,000 | 838,980 | ||||||
Schweitzer-Mauduit International, Inc., Sr. Unsec. Gtd. Notes, 6.88%, 10/01/2026(b) | 495,000 | 466,537 | ||||||
1,944,435 | ||||||||
Pharmaceuticals–2.09% |
| |||||||
Bausch Health Cos. Inc., | ||||||||
Sr. Sec. Gtd. First Lien Notes, 5.50%, 11/01/2025(b) | 348,000 | 325,815 | ||||||
Sr. Unsec. Gtd. Notes, 5.88%, 05/15/2023(b) | 200,000 | 185,750 | ||||||
6.13%, 04/15/2025(b) | 410,000 | 358,750 | ||||||
9.00%, 12/15/2025(b) | 649,000 | 648,189 | ||||||
9.25%, 04/01/2026(b) | 372,000 | 372,930 | ||||||
Endo DAC/Endo Finance LLC/Endo Finco Inc., Sr. Unsec. Gtd. Notes, 6.00%, 07/15/2023(b) | 240,000 | 184,200 | ||||||
HLF Financing S.a.r.l., LLC/ Herbalife International, Inc., Sr. Unsec. Gtd. Notes, 7.25%, 08/15/2026(b) | 424,000 | 418,170 | ||||||
Teva Pharmaceutical Finance IV, B.V. (Israel), Sr. Unsec. Gtd. Global Notes, 3.65%, 11/10/2021 | 500,000 | 474,025 | ||||||
2,967,829 | ||||||||
Publishing–0.76% |
| |||||||
Meredith Corp., Sr. Unsec. Gtd. Notes, 6.88%, 02/01/2026(b) | 1,105,000 | 1,082,900 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
Principal Amount | Value | |||||||
Restaurants–0.57% |
| |||||||
IRB Holding Corp., Sr. Unsec. Gtd. Notes, 6.75%, 02/15/2026(b) | $ | 665,000 | $ | 583,537 | ||||
KFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC, Sr. Unsec. Gtd. Notes, 4.75%, 06/01/2027(b) | 241,000 | 224,733 | ||||||
808,270 | ||||||||
Security & Alarm Services–1.16% |
| |||||||
Brink’s Co. (The), Sr. Unsec. Gtd. Notes, 4.63%, 10/15/2027(b) | 345,000 | 315,754 | ||||||
Prime Security Services Borrower, LLC/Prime Finance, Inc., Sec. Gtd. Second Lien Notes, 9.25%, | 1,288,000 | 1,331,470 | ||||||
1,647,224 | ||||||||
Specialized Consumer Services–0.78% |
| |||||||
ServiceMaster Co., LLC (The), Sr. Unsec. Notes, 7.45%, 08/15/2027 | 1,086,000 | 1,113,150 | ||||||
Specialized Finance–0.53% |
| |||||||
AerCap Global Aviation Trust (Ireland), Jr. Unsec. Gtd. Sub. Notes, 6.50%, 06/15/2045(b) | 434,000 | 423,150 | ||||||
CIT Group Inc., Unsec. Sub. Global Notes, 6.13%, 03/09/2028 | 94,000 | 93,765 | ||||||
MSCI Inc., Sr. Unsec. Gtd. Notes, | ||||||||
5.25%, 11/15/2024(b) | 95,000 | 95,000 | ||||||
5.75%, 08/15/2025(b) | 140,000 | 141,750 | ||||||
753,665 | ||||||||
Specialized REITs–0.41% |
| |||||||
Iron Mountain Inc., Sr. Unsec. Gtd. Sub. Global Notes, 5.75%, 08/15/2024 | 377,000 | 359,093 | ||||||
Iron Mountain US Holdings, Inc., Sr. Unsec. Gtd. Notes, 5.38%, 06/01/2026(b) | 248,000 | 226,920 | ||||||
586,013 | ||||||||
Specialty Chemicals–0.90% |
| |||||||
GCP Applied Technologies, Inc., Sr. Unsec. Gtd. Notes, 5.50%, 04/15/2026(b) | 567,000 | 554,242 | ||||||
Platform Specialty Products Corp., Sr. Unsec. Gtd. Notes, 5.88%, 12/01/2025(b) | 578,000 | 543,320 | ||||||
Valvoline Inc., Sr. Unsec. Gtd. Global Notes, 5.50%, 07/15/2024 | 188,000 | 184,240 | ||||||
1,281,802 | ||||||||
Steel–1.69% |
| |||||||
Cleveland-Cliffs Inc., Sr. Unsec. Gtd. Global Notes, 5.75%, 03/01/2025 | 934,000 | 842,935 | ||||||
SunCoke Energy Partners, L.P./ SunCoke Energy Partners Finance Corp., Sr. Unsec. Gtd. Notes, 7.50%, 06/15/2025(b) | 741,000 | 703,950 | ||||||
United States Steel Corp., Sr. Unsec. Global Notes, 6.88%, 08/15/2025 | 931,000 | 856,520 | ||||||
2,403,405 |
Principal Amount | Value | |||||||
Technology Hardware, Storage & Peripherals–1.18% |
| |||||||
CommScope Technologies LLC, Sr. Unsec. Gtd. Notes, 6.00%, 06/15/2025(b) | $ | 502,000 | $ | 459,330 | ||||
Dell International LLC/EMC Corp., Sr. Unsec. Gtd. Notes, 7.13%, 06/15/2024(b) | 1,197,000 | 1,218,869 | ||||||
1,678,199 | ||||||||
Textiles–0.54% |
| |||||||
Eagle Intermediate Global Holding B.V./Ruyi US Finance LLC (China), Sr. Sec. Gtd. First Lien Bonds, 7.50%, 05/01/2025(b) | 814,000 | 764,550 | ||||||
Trading Companies & Distributors–1.56% |
| |||||||
H&E Equipment Services, Inc., Sr. Unsec. Gtd. Global Notes, 5.63%, 09/01/2025 | 1,004,000 | 924,935 | ||||||
Herc Rentals Inc., Sec. Gtd. Second Lien Notes, 7.75%, 06/01/2024(b) | 566,000 | 592,885 | ||||||
United Rentals North America Inc., |
| |||||||
Sr. Unsec. Gtd. Global Notes, 6.50%, 12/15/2026 | 188,000 | 185,650 | ||||||
5.50%, 07/15/2025 | 41,000 | 38,745 | ||||||
Sr. Unsec. Gtd. Notes, 5.88%, 09/15/2026 | 500,000 | 473,125 | ||||||
2,215,340 | ||||||||
Trucking–0.95% |
| |||||||
Avis Budget Car Rental LLC/Avis Budget Finance Inc., Sr. Unsec. Gtd. Notes, 6.38%, 04/01/2024(b) | 150,000 | 144,000 | ||||||
Hertz Corp. (The), Sec. Gtd. Second Lien Notes, 7.63%, 06/01/2022(b) | 193,000 | 182,385 | ||||||
Kenan Advantage Group Inc. (The), Sr. Unsec. Notes, 7.88%, 07/31/2023(b) | 1,068,000 | 1,027,950 | ||||||
1,354,335 | ||||||||
Wireless Telecommunication Services–5.79% |
| |||||||
Altice Financing S.A. (Luxembourg), | ||||||||
Sr. Sec. Gtd. First Lien Bonds, 7.50%, 05/15/2026(b) | 430,000 | 393,450 | ||||||
Sr. Sec. Gtd. First Lien Notes, 6.63%, 02/15/2023(b) | 600,000 | 577,500 | ||||||
Altice Luxembourg S.A. (Luxembourg), Sr. Unsec. Gtd. Notes, 7.75%, 05/15/2022(b) | 950,000 | 868,063 | ||||||
Digicel Group Ltd. (Jamaica), Sr. Unsec. Notes, 8.25%, 09/30/2020(b) | 399,000 | 271,320 | ||||||
Oztel Holdings SPC Ltd. (Oman), Sr. Sec. Gtd. Notes, 5.63%, 10/24/2023(b) | 477,000 | 456,465 | ||||||
Sprint Capital Corp., Sr. Unsec. Gtd. Global Notes, 8.75%, 03/15/2032 | 196,000 | 207,270 | ||||||
Sprint Corp., Sr. Unsec. Gtd. Global Notes, | ||||||||
7.25%, 09/15/2021 | 1,416,000 | 1,452,816 | ||||||
7.63%, 02/15/2025 | 275,000 | 275,688 | ||||||
7.88%, 09/15/2023 | 1,814,000 | 1,866,152 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
Principal Amount | Value | |||||||
Wireless Telecommunication Services–(continued) |
| |||||||
T-Mobile USA, Inc., | ||||||||
Sr. Unsec. Gtd. Global Bonds, 6.50%, 01/15/2026 | $ | 1,171,000 | $ | 1,197,347 | ||||
Sr. Unsec. Gtd. Global Notes, 6.38%, 03/01/2025 | 647,000 | 656,679 | ||||||
8,222,750 | ||||||||
Total U.S. Dollar Denominated Bonds & Notes |
| 134,071,941 | ||||||
Non-U.S. Dollar Denominated Bonds & Notes–1.45%(g) |
| |||||||
Beverage & Tobacco–0.15% |
| |||||||
Sunshine Mid B.V. (Netherlands), Sr. Sec. Gtd. First Lien Notes, 6.50%, 05/15/2026(b) | EUR | 200,000 | 212,204 | |||||
Cable & Satellite–0.15% |
| |||||||
Tele Columbus AG (Germany), Sr. Sec. First Lien Notes, 3.88%, 05/02/2025(b) | EUR | 200,000 | 208,727 | |||||
Diversified Banks–0.54% |
| |||||||
ABN AMRO Bank N.V. (Netherlands), REGS, Jr. Unsec. Sub. Euro Bonds, 4.75%(b)(e) | EUR | 300,000 | 300,571 | |||||
CaixaBank, S.A. (Spain), REGS, Jr. Unsec. Sub. Euro Bonds, 6.75%(b)(e) | EUR | 200,000 | 232,205 | |||||
Erste Group Bank AG (Austria), REGS, Jr. Unsec. Sub. Euro Bonds, 6.50%(b)(e) | EUR | 200,000 | 234,420 | |||||
767,196 | ||||||||
Diversified Chemicals–0.15% |
| |||||||
Chemours Co. (The), Sr. Unsec. Gtd. Euro Bonds, 4.00%, 05/15/2026 | EUR | 200,000 | 217,664 | |||||
Other Diversified Financial Services–0.27% |
| |||||||
Iceland Bondco PLC (United Kingdom), Sr. Sec. Gtd. First Lien Notes, 4.63%, 03/15/2025(b) | GBP | 350,000 | 380,699 | |||||
Specialized Consumer Services–0.12% |
| |||||||
Intertrust Group B.V. (Netherlands), Sr. Unsec. Notes, 3.38%, 11/15/2025(b) | EUR | 150,000 | 169,767 | |||||
Textiles–0.07% |
| |||||||
Eagle Intermediate Global Holding B.V./Ruyi US Finance LLC (China), Sr. Sec. Gtd. First Lien Bonds, 5.38%, 05/01/2023(b) | EUR | 100,000 | 105,799 | |||||
TotalNon-U.S. Dollar Denominated Bonds & Notes |
| 2,062,056 | ||||||
U.S. Treasury Bills–0.78% | ||||||||
0.98-1.12%, 01/24/2019 (Cost 1,113,479)(h) (i) | $ | 1,115,000 | 1,113,480 | |||||
Variable Rate Senior Loan Interests–0.71%(j) |
| |||||||
Data Processing & Outsourced Services–0.71% |
| |||||||
First Data Corp., Term Loan, 4.80% (3 mo. USD LIBOR + 2.00%), 07/08/2022 | 1,037,697 | 999,593 |
Shares | Value | |||||||
Preferred Stocks–0.65% |
| |||||||
Diversified Banks–0.57% | ||||||||
Wells Fargo & Co. Class A, Series L, $75.00 Conv. Pfd. | 640 | $ | 807,661 | |||||
Specialized Finance–0.08% |
| |||||||
CIT Group Inc. Series A, 5.80% Pfd. | 120,000 | 108,900 | ||||||
Total Preferred Stocks |
| 916,561 | ||||||
Common Stocks & Other Equity Interests–0.00% |
| |||||||
Automobile Manufacturers–0.00% |
| |||||||
Motors Liquidation Co. GUC Trust(k) | 1 | 9 | ||||||
Broadcasting–0.00% |
| |||||||
Adelphia RecoveryTrust–Series ACC-1(l) | 318,570 | 32 | ||||||
Adelphia Recovery Trust–Series Arahova(l) | 109,170 | 11 | ||||||
43 | ||||||||
Diversified Support Services–0.00% |
| |||||||
ACC Claims Holdings, LLC(c)(k) | 269,616 | 2,157 | ||||||
Total Common Stocks & Other Equity Interests |
| 2,209 | ||||||
Money Market Funds–0.73% |
| |||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30%(m) | 363,560 | 363,560 | ||||||
Invesco Liquid Assets Portfolio–Institutional Class, 2.48%(m) | 259,593 | 259,619 | ||||||
Invesco Treasury Portfolio–Institutional Class, 2.30%(m) | 415,498 | 415,498 | ||||||
Total Money Market Funds |
| 1,038,677 | ||||||
Options Purchased–0.01% |
| |||||||
(Cost $48,790)(n) | 17,110 | |||||||
TOTAL INVESTMENTS IN SECURITIES–98.79% |
| 140,221,627 | ||||||
OTHER ASSETS LESS LIABILITIES–1.21% |
| 1,717,444 | ||||||
NET ASSETS–100.00% |
| $ | 141,939,071 |
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 | |
DAC | – Designated Activity Co. | |
Deb. | – Debentures | |
EUR | – Euro | |
GBP | – British Pound | |
Gtd. | – Guaranteed | |
GUC | – General Unsecured Creditors | |
Jr. | – Junior | |
LIBOR | – London Interbank Offered Rate | |
Pfd. | – Preferred | |
PIK | – Pay-in-Kind | |
REGS | – Regulation S | |
REIT | – Real Estate Investment Trust | |
Sec. | – Secured | |
Sr. | – Senior | |
Sub. | – Subordinated | |
Unsec. | – Unsecured | |
USD | – U.S. Dollar |
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 December 31, 2018 was $69,814,793, which represented 49.19% of the Fund’s Net Assets. |
(c) | Security valued using significant unobservable inputs (Level 3). See Note 3. |
(d) | Defaulted security. Currently, the issuer is partially or fully in default with respect to interest payments. The value of this security at December 31, 2018 represents less than 1% of the Fund’s Net Assets. |
(e) | Perpetual bond with no specified maturity date. |
(f) | All or a portion of this security is Pay-in-Kind. Pay-in-Kind securities pay interest income in the form of securities. |
(g) | Foreign denominated security. Principal amount is denominated in the currency indicated. |
(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 designated as collateral to cover margin requirements for swap agreements. See Note 1O and Note 4. |
(j) | Variable rate senior loan interests are, at present, not readily marketable, not registered under the Securities Act of 1933, as amended (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. |
(k) | Non-income producing security. |
(l) | Acquired as part of the Adelphia Communications bankruptcy reorganization. |
(m) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
(n) | The table below details options purchased: See Note 1M and Note 4. |
Open Over-The-Counter Credit Default Swaptions Purchased — Credit Risk | ||||||||||||||||||||
Description | Type of Contract | Counterparty | Exercise Rate | Reference Entity | (Pay)/Receive Fixed Rate | Payment Frequency | Expiration Date | Implied Credit Spread(o) | Notional Value | Value | ||||||||||
5 Year Credit Default Swap | Call | Morgan Stanley Capital Services LLC | 104.00% | Markit CDX North America High Yield Index, Series 31, Version 1 | 5.00% | Quarterly | 02/20/2019 | 4.50% | $8,200,000 | $17,110 |
Open Over-The-Counter Credit Default Swaptions Written — Credit Risk | ||||||||||||||||||||||||||||||
Description | Type of Contract | Counterparty | Exercise Rate | Reference Entity | (Pay)/ Receive | Payment Frequency | Expiration Date | Implied Credit | Premiums Received | Notional Value | Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||||
5 Year Credit Default Swap | Put | Morgan Stanley Capital Services LLC | 98.50% | Markit CDX North America High Yield Index, Series 31, Version 1 | (5.00)% | Quarterly | 02/20/2019 | 4.50% | $(44,690) | $(8,200,000) | $(49,857) | $(5,167) |
Open Forward Foreign Currency Contracts | ||||||||||||||||||||||
Settlement | Counterparty | Contract to | Unrealized Appreciation (Depreciation) | |||||||||||||||||||
Deliver | Receive | |||||||||||||||||||||
02/28/2019 | Canadian Imperial Bank of Commerce | GBP | 232,394 | USD | 297,806 | $ | 784 | |||||||||||||||
02/28/2019 | Goldman Sachs International | EUR | 1,681,478 | USD | 1,921,585 | (13,989 | ) | |||||||||||||||
Total Open Forward Foreign Currency Contracts — Currency Risk | $ | (13,205 | ) |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
Currency Abbreviations:
EUR | – Euro | |
GBP | – British Pound Sterling | |
USD | – U.S. Dollar |
Open Centrally Cleared Credit Default Swap Agreements — Credit Risk | ||||||||||||||||||||||||||||||||||
Reference Entity | Buy/Sell Protection | (Pay)/Receive Fixed Rate | Payment Frequency | Maturity Date | Implied Credit Spread(o) | Notional Value | Upfront Payments Paid | Value | Unrealized Appreciation (Depreciation)(p) | |||||||||||||||||||||||||
Markit CDX North America High Yield Index, Series 31, Version 1 | Sell | 5.00 | % | Quarterly | 12/20/2023 | 4.51% | USD 8,500,000 | $ | 407,792 | $ | 169,430 | $ | (238,362 | ) |
(o) | Implied credit spreads represent the current level, as of December 31, 2018 at which protection could be bought or sold given the terms of the existing credit default swap agreement and serve as an indicator of the current status of the payment/performance risk of the credit default swap agreement. An implied credit spread that has widened or increased since entry into the initial agreement 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. |
(p) | The daily variation margin receivable (payable) at period end is recorded in the Statement of Assets and Liabilities. |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $155,853,318) | $ | 139,182,950 | ||
Investments in affiliated money market funds, at value and cost | 1,038,677 | |||
Other investments: | ||||
Variation margin receivable — centrally cleared swap agreements | 9,721 | |||
Unrealized appreciation on forward foreign currency contracts outstanding | 784 | |||
Foreign currencies, at value (Cost $459,064) | 462,126 | |||
Receivable for: | ||||
Investments sold | 407,301 | |||
Fund shares sold | 128,676 | |||
Dividends and interest | 2,498,384 | |||
Investment for trustee deferred compensation and retirement plans | 68,615 | |||
Other assets | 13,516 | |||
Total assets | 143,810,750 | |||
Liabilities: | ||||
Other investments: | ||||
Options written, at value (premiums received $44,690) | 49,857 | |||
Unrealized depreciation on forward foreign currency contracts outstanding | 13,989 | |||
Payable for: | ||||
Investments purchased | 1,015,646 | |||
Amount due to custodian | 314,648 | |||
Fund shares reacquired | 219,455 | |||
Accrued fees to affiliates | 116,176 | |||
Accrued trustees’ and officers’ fees and benefits | 4,365 | |||
Accrued other operating expenses | 63,944 | |||
Trustee deferred compensation and retirement plans | 73,599 | |||
Total liabilities | 1,871,679 | |||
Net assets applicable to shares outstanding | $ | 141,939,071 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 162,187,980 | ||
Distributable earnings | (20,248,909 | ) | ||
$ | 141,939,071 | |||
Net Assets: | ||||
Series I | $ | 55,702,879 | ||
Series II | $ | 86,236,192 | ||
Shares outstanding, no par value, |
| |||
Series I | 11,010,147 | |||
Series II | 17,195,056 | |||
Series I: | ||||
Net asset value per share | $ | 5.06 | ||
Series II: | ||||
Net asset value per share | $ | 5.02 |
Investment income: | ||||
Interest | $ | 10,093,987 | ||
Dividends (net of foreign withholding taxes of $147) | 358,554 | |||
Dividends from affiliated money market funds | 92,102 | |||
Total investment income | 10,544,643 | |||
Expenses: | ||||
Advisory fees | 1,096,482 | |||
Administrative services fees | 312,452 | |||
Custodian fees | 18,204 | |||
Distribution fees — Series II | 230,040 | |||
Transfer agent fees | 29,621 | |||
Trustees’ and officers’ fees and benefits | 22,699 | |||
Reports to shareholders | 11,791 | |||
Professional services fees | 515,676 | |||
Other | 37,076 | |||
Total expenses | 2,274,041 | |||
Less: Fees waived | (5,004 | ) | ||
Net expenses | 2,269,037 | |||
Net investment income | 8,275,606 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | (1,029,224 | ) | ||
Foreign currencies | 13,290 | |||
Forward foreign currency contracts | 127,564 | |||
Option contracts written | (75,934 | ) | ||
Swap agreements | 140,252 | |||
(824,052 | ) | |||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (13,177,294 | ) | ||
Foreign currencies | (7,195 | ) | ||
Forward foreign currency contracts | 1,959 | |||
Option contracts written | (5,167 | ) | ||
Swap agreements | (404,611 | ) | ||
(13,592,308 | ) | |||
Net realized and unrealized gain (loss) | (14,416,360 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (6,140,754 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income | $ | 8,275,606 | $ | 8,625,415 | ||||
Net realized gain (loss) | (824,052 | ) | 1,465,141 | |||||
Change in net unrealized appreciation (depreciation) | (13,592,308 | ) | 766,828 | |||||
Net increase (decrease) in net assets resulting from operations | (6,140,754 | ) | 10,857,384 | |||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (4,211,171 | ) | (4,535,246 | ) | ||||
Series II | (4,569,006 | ) | (3,468,057 | ) | ||||
Total distributions from distributable earnings | (8,780,177 | ) | (8,003,303 | ) | ||||
Sharetransactions-net: | ||||||||
Series I | (17,542,621 | ) | (15,580,462 | ) | ||||
Series II | 2,229,098 | 7,275,758 | ||||||
Net increase (decrease) in net assets resulting from share transactions | (15,313,523 | ) | (8,304,704 | ) | ||||
Net increase (decrease) in net assets | (30,234,454 | ) | (5,450,623 | ) | ||||
Net assets: | ||||||||
Beginning of year | 172,173,525 | 177,624,148 | ||||||
End of year | $ | 141,939,071 | $ | 172,173,525 |
(1) | The Securities and Exchange Commission eliminated the requirement to disclose distribution components separately, except for tax return of capital. For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income. |
Notes to Financial Statements
December 31, 2018
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. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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.
Variable rate senior loan interests are fair valued using quotes provided by an independent pricing service. 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 theover-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.
Invesco V.I. High Yield Fund
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 (“NAV”) 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 theend-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 includeend-of-day net present values, spreads, ratings, industry, company performance and returns of referenced assets. Centrally cleared swap agreements are valued at the daily settlement price determined by the relevant exchange or clearinghouse.
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 investment 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. Bond premiums and discounts are amortized and/or accreted over the lives of the respective securities.Pay-in-kind interest income andnon-cash dividend income received in the form of securities in-lieu of cash are recorded at the fair value of the securities received. 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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 thisdetermination 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. |
Invesco V.I. High Yield Fund
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 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 the 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 foreigncurrency 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 the dailymark-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 anagreed-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. High Yield Fund
M. | Call Options Purchased and Written— The Fund may write covered call options and/or buy call options. A covered call option gives the purchaser of such option the right to buy, and the writer the obligation to sell, the underlying security or foreign currency at the stated exercise price during the option period. Options written by the Fund normally will have expiration dates between three and nine months from the date written. The exercise price of a call option may be below, equal to, or above the current market value of the underlying security at the time the option is written. |
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.
When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability in the Statement of Assets and Liabilities. The amount of the liability is subsequently “marked-to-market” to reflect the current market value of the option written. If a written covered call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written covered call option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. Realized and unrealized gains and losses on call options written are included in the Statement of Operations as Net realized gain (loss) from and Change in net unrealized appreciation (depreciation) of Option contracts written. A risk in writing a covered call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised.
When the Fund buys a call option, an amount equal to the premium paid by the Fund is recorded as an investment on the Statement of Assets and Liabilities. The amount of the investment is subsequently “marked-to-market” to reflect the current value of the option purchased. Realized and unrealized gains and losses on call options purchased are included in the Statement of Operations as Net realized gain (loss) from and Change in net unrealized appreciation (depreciation) of 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. | Put Options Purchased and Written— The Fund may purchase and write 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 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 underlying portfolio securities. The Fund may write put options to earn additional income in the form of option premiums if it expects the price of the underlying instrument to remain stable or rise during the option period so that the option will not be exercised. The risk in this strategy is that the price of the underlying securities may decline by an amount greater than the premium received. Put options written are reported as a liability in the Statement of Assets and Liabilities. Realized and unrealized gains and losses on put options purchased and put options written are included in the Statement of Operations as Net realized gain (loss) from and Change in net unrealized appreciation (depreciation) of Investment securities and Option contracts written, respectively. 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.
O. | 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 tradedover-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.
Invesco V.I. High Yield Fund
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 cash or liquid securities having a value at least equal to the amount of the potential obligation of a Fund under any swap transaction. Cash held as collateral is recorded as deposits with brokers on the Statement of Assets and Liabilities. 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 December 31, 2018 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.
P. | Leverage Risk— Leverage exists when the 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. ornon-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”. |
R. | 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. High Yield 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 accrues daily and pays monthly 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 year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.625%.
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2019, 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 (the “expense limits”). 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, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $5,004.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $50,000 for accounting and fund administrative services and was reimbursed $262,452 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution 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. |
Invesco V.I. High Yield Fund
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 December 31, 2018. 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 | |||||||||||||
Investments in Securities | ||||||||||||||||
U.S. Dollar Denominated Bonds & Notes | $ | — | $ | 134,071,941 | $ | 0 | $ | 134,071,941 | ||||||||
Non-U.S. Dollar Denominated Bonds & Notes | — | 2,062,056 | — | 2,062,056 | ||||||||||||
U.S. Treasury Bills | — | 1,113,480 | — | 1,113,480 | ||||||||||||
Variable Rate Senior Loan Interests | — | 999,593 | — | 999,593 | ||||||||||||
Preferred Stocks | 807,661 | 108,900 | — | 916,561 | ||||||||||||
Common Stocks & Other Equity Interests | 9 | 43 | 2,157 | 2,209 | ||||||||||||
Money Market Funds | 1,038,677 | — | — | 1,038,677 | ||||||||||||
Options Purchased | — | 17,110 | — | 17,110 | ||||||||||||
Total Investments in Securities | 1,846,347 | 138,373,123 | 2,157 | 140,221,627 | ||||||||||||
Other Investments — Assets* | ||||||||||||||||
Forward Foreign Currency Contracts | — | 784 | — | 784 | ||||||||||||
Other Investments — Liabilities* | ||||||||||||||||
Forward Foreign Currency Contracts | — | (13,989 | ) | — | (13,989 | ) | ||||||||||
Options Written | — | (49,857 | ) | — | (49,857 | ) | ||||||||||
Swap Agreements | — | (238,362 | ) | — | (238,362 | ) | ||||||||||
— | (302,208 | ) | — | (302,208 | ) | |||||||||||
Total Other Investments | — | (301,424 | ) | — | (301,424 | ) | ||||||||||
Total Investments | $ | 1,846,347 | $ | 138,071,699 | $ | 2,157 | $ | 139,920,203 |
* | Forward foreign currency contracts and swap agreements are valued at unrealized appreciation (depreciation). Options written are shown at value. |
NOTE 4—Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (“ISDA Master Agreement”) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
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 December 31, 2018:
Value | ||||||||||||
Derivative Assets | Credit Risk | Currency Risk | Total | |||||||||
Options purchased, at value — OTC(a) | $ | 17,110 | $ | — | $ | 17,110 | ||||||
Unrealized appreciation on forward foreign currency contracts outstanding | — | 784 | 784 | |||||||||
Total Derivative Assets | 17,110 | 784 | 17,894 | |||||||||
Derivatives not subject to master netting agreements | — | — | — | |||||||||
Total Derivative Assets subject to master netting agreements | $ | 17,110 | $ | 784 | $ | 17,894 |
Invesco V.I. High Yield Fund
Value | ||||||||||||
Derivative Liabilities | Credit Risk | Currency Risk | Total | |||||||||
Unrealized depreciation on swap agreements — Centrally Cleared(b) | $ | (238,362 | ) | $ | — | $ | (238,362 | ) | ||||
Options written, at value — OTC | (49,857 | ) | — | (49,857 | ) | |||||||
Unrealized depreciation on forward foreign currency contracts outstanding | — | (13,989 | ) | (13,989 | ) | |||||||
Total Derivative Liabilities | (288,219 | ) | (13,989 | ) | (302,208 | ) | ||||||
Derivatives not subject to master netting agreements | 238,362 | — | 238,362 | |||||||||
Total Derivative Liabilities subject to master netting agreements | $ | (49,857 | ) | $ | (13,989 | ) | $ | (63,846 | ) |
(a) | Options purchased, at value as reported in the Schedule of Investments. |
(b) | The daily variation margin receivable at period-end is recorded in the Statement of Assets and Liabilities. |
Offsetting Assets and Liabilities
The table below reflects the Fund’s exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of December 31, 2018.
Financial Derivative Assets | Financial Derivative Liabilities | Collateral (Received)/Pledged | ||||||||||||||||||||||||||||||||||||||
Counterparty | Forward Foreign Currency Contracts | Options Purchased | Total Assets | Forward Foreign Currency Contracts | Options Written | Total Liabilities | Net Value of Derivatives | Non-Cash | Cash | Net Amount | ||||||||||||||||||||||||||||||
Canadian Imperial Bank of Commerce | $ | 784 | $ | — | $ | 784 | $ | — | $ | — | $ | — | $ | 784 | $ | — | $ | — | $ | 784 | ||||||||||||||||||||
Goldman Sachs International | — | — | — | (13,989 | ) | — | (13,989 | ) | (13,989 | ) | — | — | (13,989 | ) | ||||||||||||||||||||||||||
Morgan Stanley Capital Services LLC | — | 17,110 | 17,110 | — | (49,857 | ) | (49,857 | ) | (32,747 | ) | — | — | (32,747 | ) | ||||||||||||||||||||||||||
Total | $ | 784 | $ | 17,110 | $ | 17,894 | $ | (13,989 | ) | $ | (49,857 | ) | $ | (63,846 | ) | $ | (45,952 | ) | $ | — | $ | — | $ | (45,952 | ) |
Effect of Derivative Investments for the year ended December 31, 2018
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 | ||||||||||||||||
Credit Risk | Currency Risk | Interest Rate Risk | Total | |||||||||||||
Realized Gain (Loss): | ||||||||||||||||
Forward foreign currency contracts | $ | — | $ | 127,564 | $ | — | $ | 127,564 | ||||||||
Options purchased(a) | — | — | (31,822 | ) | (31,822 | ) | ||||||||||
Options written | (37,250 | ) | — | (38,684 | ) | (75,934 | ) | |||||||||
Swap agreements | 140,252 | — | — | 140,252 | ||||||||||||
Change in Net Unrealized Appreciation (Depreciation): | ||||||||||||||||
Forward foreign currency contracts | — | 1,959 | — | 1,959 | ||||||||||||
Options purchased(a) | (31,680 | ) | — | — | (31,680 | ) | ||||||||||
Options written | (5,167 | ) | — | — | (5,167 | ) | ||||||||||
Swap agreements | (404,611 | ) | — | — | (404,611 | ) | ||||||||||
Total | $ | (338,456 | ) | $ | 129,523 | $ | (70,506 | ) | $ | (279,439 | ) |
(a) | Options purchased are included in the net realized gain (loss) from investment securities and the change in net unrealized appreciation (depreciation) of investment securities. |
The table below summarizes the twelve month average notional value of forward foreign currency contracts, three month average notional value of options purchased and options written and eleven month average notional value of swap agreements outstanding during the period.
Forward Foreign Currency Contracts | Options Purchased | Options Written | Swap Agreements | |||||||||||||
Average notional value | $ | 1,949,648 | $ | 12,600,000 | $ | 15,933,333 | $ | 15,448,814 |
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, andTrustees’ and Officers’ Fees and Benefitsalso 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. High Yield 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 captionAmount 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. The Fund may not purchase additional securities when any borrowings from banks exceed 5% of the Fund’s total assets.
NOTE 7—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 8,780,177 | $ | 8,003,303 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 8,674,466 | ||
Net unrealized appreciation (depreciation) — investments | (17,037,525 | ) | ||
Net unrealized appreciation — foreign currencies | 3,111 | |||
Temporary book/tax differences | (67,354 | ) | ||
Capital loss carryforward | (11,821,607 | ) | ||
Shares of beneficial interest | 162,187,980 | |||
Total net assets | $ | 141,939,071 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation (depreciation) difference is attributable primarily to wash sales and forward foreign currency contracts.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 has a capital loss carryforward as of December 31, 2018 as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
Not subject to expiration | $ | 6,475,665 | $ | 5,345,942 | $ | 11,821,607 |
* | 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 Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $110,687,977 and $124,009,686, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 337,734 | ||
Aggregate unrealized (depreciation) of investments | (17,375,259 | ) | ||
Net unrealized appreciation (depreciation) of investments | $ | (17,037,525 | ) |
Cost of investments for tax purposes is $157,365,520.
NOTE 9—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of foreign currency transactions and swap agreements income, on December 31, 2018, undistributed net investment income was increased by $499,792 and undistributed net realized gain (loss) was decreased by $499,792. This reclassification had no effect on the net assets or the distributable earnings of the Fund.
Invesco V.I. High Yield Fund
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 14,839,601 | $ | 80,754,950 | 11,501,884 | $ | 63,906,862 | ||||||||||
Series II | 3,110,907 | 16,714,977 | 2,531,262 | 13,924,938 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 793,064 | 4,211,171 | 829,113 | 4,535,246 | ||||||||||||
Series II | 866,984 | 4,569,006 | 637,511 | 3,468,057 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (19,216,611 | ) | (102,508,742 | ) | (15,263,276 | ) | (84,022,570 | ) | ||||||||
Series II | (3,585,217 | ) | (19,054,885 | ) | (1,841,220 | ) | (10,117,237 | ) | ||||||||
Net increase (decrease) in share activity | (3,191,272 | ) | $ | (15,313,523 | ) | (1,604,726 | ) | $ | (8,304,704 | ) |
(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. |
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 | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 5.51 | $ | 0.26 | $ | (0.43 | ) | $ | (0.17 | ) | $ | (0.28 | ) | $ | 5.06 | (3.35 | )% | $ | 55,703 | 1.17 | %(d) | 1.17 | %(d) | 4.84 | %(d) | 66 | % | |||||||||||||||||||||
Year ended 12/31/17 | 5.40 | 0.26 | 0.08 | 0.34 | (0.23 | ) | 5.51 | 6.30 | 80,372 | 0.99 | 1.00 | 4.73 | 73 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 5.06 | 0.28 | 0.28 | 0.56 | (0.22 | ) | 5.40 | 11.21 | 94,653 | 0.96 | 0.96 | 5.25 | 99 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 5.53 | 0.29 | (0.46 | ) | (0.17 | ) | (0.30 | ) | 5.06 | (3.17 | ) | 73,594 | 1.03 | 1.03 | 5.23 | 99 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 5.46 | 0.25 | (0.42 | ) | (0.17 | ) | (0.27 | ) | 5.02 | (3.43 | ) | 86,236 | 1.42 | (d) | 1.42 | (d) | 4.59 | (d) | 66 | |||||||||||||||||||||||||||||
Year ended 12/31/17 | 5.36 | 0.25 | 0.07 | 0.32 | (0.22 | ) | 5.46 | 5.93 | 91,802 | 1.24 | 1.25 | 4.48 | 73 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 5.03 | 0.26 | 0.28 | 0.54 | (0.21 | ) | 5.36 | 10.83 | 82,971 | 1.21 | 1.21 | 5.00 | 99 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 5.50 | 0.27 | (0.45 | ) | (0.18 | ) | (0.29 | ) | 5.03 | (3.37 | ) | 70,840 | 1.28 | 1.28 | 4.98 | 99 | ||||||||||||||||||||||||||||||||
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 |
(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 based on average daily net assets (000’s omitted) of $83,421 and $92,016 for Series I and Series II shares, respectively. |
Invesco V.I. High Yield Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. High Yield Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. High Yield Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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 Value | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Ratio | ||||||||||||||||||||
Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 973.50 | $ | 4.68 | $ | 1,020.47 | $ | 4.79 | 0.94 | % | ||||||||||||
Series II | 1,000.00 | 972.90 | 5.92 | 1,019.21 | 6.06 | 1.19 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. High Yield Fund
Tax Information
Form1099-DIV, Form 1042-S and other year–end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Corporate Dividends Received Deduction* | 1.33 | % | ||
U.S. Treasury Obligations* | 0.04 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. High Yield Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. High Yield Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. High Yield Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. High Yield Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. High Yield Fund
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Annual Report to Shareholders
| December 31, 2018 | |||
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Invesco V.I. International Growth Fund
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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 FormN-Q (or any successor Form). The Fund’s FormN-Q (or any successor Form) filings are available on the SEC website, sec.gov. The SEC file numbers for the Fund are811-07452 and033-57340. The Fund’s most recent portfolio holdings, as filed on FormN-Q (or any successor Form), 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 recent12-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.
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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.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Invesco Distributors, Inc. | VIIGR-AR-1 | 02152019 1202 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. International Growth Fund (the Fund) underperformed the Custom Invesco International Growth Index, the Fund’s style-specific benchmark.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -14.97 | % | |||
Series II Shares | -15.20 | ||||
MSCI All Country Worldex-U.S. Index▼(Broad Market Index) | -14.20 | ||||
Custom Invesco International Growth Index∎(Style-Specific Index) | -14.43 | ||||
Lipper VUF InternationalLarge-Cap Growth Funds Index¨(Peer Group Index) | -13.90 | ||||
Source(s):▼RIMES Technologies Corp.;∎Invesco, RIMES Technologies Corp.;¨Lipper Inc. |
Market conditions and your Fund
Calendar year 2018 proved to be an increasingly volatile time for global equities. After strong positive returns in January, global equities sold off sharply in February as rising inflation spurred concern that central banks would raise interest rates at a faster pace than previously expected. Through the rest of the first quarter, equity markets struggled to regain momentum, hampered by global trade tensions and weakness in technology stocks. Somewhat counterintuitively, emerging markets generally held up better than developed markets in this volatile environment.
Significant market and currency volatility continued during the second quarter of 2018. While most domestic equity indexes delivered positive performance for the second quarter, most major international indexes had negative results. Many international stocks struggled as investors worried that heightened global trade tensions would derail economic growth. Other concerns such as geopolitical uncertainty and the potential impact of higher interest rates also weakened investor sentiment. In this environment,
developed markets held up better than emerging markets. After a relatively quiet summer, market volatility markedly rose again in October. Global equity markets (particularly the US) declined sharply in the fourth quarter amid rising interest rates and concerns that higher inflation could result in a more restrictive monetary policy. Investors also had concerns over the Brexit negotiations, ongoingUS-China trade tensions, declining oil prices and fears of slowing economic growth, particularly in the eurozone.
Given signs of a strong economy, the US Federal Reserve (the Fed) raised interest rates four times during the year. Following December’s meeting, the Fed raised interest rates by 25 basis points and lowered guidance from three to two rate hikes in 2019, signaling a slightly more dovish stance than expected.1 In contrast, the European Central Bank held rates steady, indicating it would do so at least through the summer of 2019; however, it announced that its bond buying program would be discontinued at year end. Central banks in several other countries maintained extraordinarily accommodative monetary policies, as well.
Regardless of the macroeconomic environment, we remain focused on ourbottom-up investment approach of identifying attractive companies that we believe have sustainable earnings growth, efficient capital allocation and attractive prices.
During the year, Fund holdings in the information technology (IT) and health care sectors outperformed those of the style-specific index and were among the most significant contributors to the Fund’s relative performance. In the IT sector, Canadian IT consulting and outsourcing companyCGI Group andUS-based semiconductor companyBroadcom contributed to relative Fund performance. In the health care sector, Switzerland-based pharmaceutical companyNovartis and Australia-based biotechnology companyCSL were key contributors to the Fund’s performance relative to the style-specific benchmark for the year. The Fund’s modest cash position, in a generally weak market environment, contributed favorably to relative results as well.
During the second part of the year, we saw evidence of change in the market as investors appeared to refocus on valuation and risk. Evidence of this shift included a weak and volatile performance from a number of richly-valued momentum growth stocks that performed well in the first half of the year, including China-based Tencent Holdings (not a Fund holding),Alibaba Group and South Africa-based Naspers (not a Fund holding). An underweight allocation to Alibaba versus the style-specific index, as well as not owning Tencent and Naspers, contributed to the Fund’s relative performance for the year. Alibaba has been on our “wish list” for some time; however, we waited patiently for the stock’s valuation to come down to a more attractive entry point before we were willing to add it to the port-
Portfolio Composition | |||
By sector | % of total net assets |
Financials | 21.5% | |
Consumer Staples | 18.2 | |
Industrials | 16.1 | |
Information Technology | 14.6 | |
Consumer Discretionary | 8.3 | |
Communication Services | 5.4 | |
Health Care | 4.9 | |
Energy | 4.6 | |
Materials | 2.9 | |
Money Market Funds Plus Other Assets Less Liabilities | 3.5 |
Top 10 Equity Holdings* | ||
% of total net assets | ||
1. InvestorAB-Class B | 3.2% | |
2. CGI Group Inc.-Class A | 3.2 | |
3. Broadcom Inc. | 2.9 | |
4. SAP S.E. | 2.3 | |
5. RELX PLC | 2.3 | |
6. Wolters Kluwer N.V. | 2.2 | |
7. Taiwan Semiconductor Manufacturing Co.Ltd.-ADR | 2.2 | |
8. Allianz S.E. | 2.2 | |
9. Fomento Economico Mexicano, S.A.B. deC.V.-ADR | 2.2 | |
10. Hoya Corp. | 2.1 |
Total Net Assets | $1.3 billion | |
Total Number of Holdings* | 66 | |
The Fund’s holdings are subject to change, and | ||
there is no assurance that the Fund will continue to hold any particular security. | ||
*Excluding money market fund holdings.
| ||
Data presented here are as of December 31, 2018. |
Invesco V.I. International Growth Fund
folio. Weakness at the end of the year provided us the opportunity, and we added the holding in October 2018.
The Fund’s holdings in the consumer staples sector, however, underperformed those of the style-specific benchmark and were the most significant detractors from the Fund’s relative performance during the year. In the consumer staples sector, particular weakness was seen in the Fund’s food, beverage and tobacco industry stocks, includingUK-basedBritish American Tobacco and Japan-based
Asahi Group Holdings. Weakness was also seen in the Fund’s holdings in the energy and industrials sectors. Declining energy prices and concerns regarding the trajectory of the economy caused the oil services industry to perform poorly during the year. In the industrials sector, key detractors included Germany-based companiesGEA Groupand Deutsche Post.
South Korea-basedNaver, the leading internet search portal operator in Korea (sometimes referred to as the “Google of Korea”), was among the Fund’s largest individual detractors for the year. Although the company continued to report strong growth, supported in part by a robuste-commerce and payments business, we remained concerned as we believe the company’s investment spend is greater than expected, resulting in pressure on margins and returns. As an example, Naver aggressively invested in video content to avoid potential advertising share loss, however gaining market share in this space could prove to be challenging due to the presence of strong competition.
During the year, we looked for opportunities to improve the growth potential and quality of the Fund’s portfolio by adding companies based on our EQV outlook for each company. We took advantage of market volatility during the year to put some cash to work at more attractive valuation levels. We added several new holdings, includingUK-based global oilfield services and equipment companyTechnipFMC, Italy-based bankFinecoBank and China-based fast-food restaurant operatorYum China Holdings. Deteriorating fundamentals and/or valuations led to the sale of several holdings, includingLloyds Bankingand Fairfax Financial Holdings.
As always, regardless of the macroeconomic environment, we remain focused on abottom-up investment approach of identifying attractive companies that fit ourEQV-focused investment process. We continue to look for companies that exhibit the following characteristics: strong organic growth, high returns on capital, pricing power, strong balance sheets, cash generation, and reasonable valuations. In addition, we continue to favor companies that are able to consistently generate cash during weak economic environments. We believe that this balancedEQV-focused approach may help deliver attractive returns over the long term.
We thank you for your continued investment in Invesco V.I. International Growth Fund.
1 | Source: US Federal Reserve |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Clas Olsson Portfolio Manager and Chief Investment Officer of Invesco’s International and Global Growth Team, is | ||
manager of Invesco V.I. International Growth Fund. He joined Invesco in 1994. Mr. Olsson became a commissioned officer at the Royal Swedish Naval Academy in 1988. He also earned a BBA from The University of Texas at Austin. |
Brent Bates Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. International Growth Fund. He joined | ||
Invesco in 1996. Mr. Bates earned a BBA from Texas A&M University and is a Certified Public Accountant. |
Matthew Dennis Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. International Growth Fund. He joined | ||
Invesco in 2000. Mr. Dennis earned a BA in economics from The University of Texas at Austin and an MS in finance from Texas A&M University. |
Mark Jason Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. International Growth Fund. He joined | ||
Invesco in 2001. Mr. Jason earned a BS in finance and a BS in real estate from California State University, Northridge. |
Richard Nield Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. International Growth Fund. He joined | ||
Invesco in 2000. Mr. Nield earned a Bachelor of Commerce degree in finance and international business from McGill University in Montreal. |
Invesco V.I. International Growth Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: Lipper Inc. |
2 | Source(s): Invesco, RIMES Technologies Corp. |
3 | Source: RIMES Technologies Corp. |
Past performance cannot guarantee
comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (5/5/93) | 6.43 | % | |||
10 Years | 7.16 | ||||
5 Years | 0.40 | ||||
1 Year | -14.97 | ||||
Series II Shares | |||||
Inception (9/19/01) | 6.24 | % | |||
10 Years | 6.89 | ||||
5 Years | 0.15 | ||||
1 Year | -15.20 |
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 recentmonth-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Performance figures in the table and chart do not reflect
deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 0.93% and 1.18%, 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 0.94% and 1.19%, 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. 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 recentmonth-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recentmonth-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, 2020. See current prospectus for more information. |
Invesco V.I. International Growth Fund
Invesco V.I. International Growth Fund’s investment objective is long-term growth of capital.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Depositary receipts risk.Investing in depositary receipts involves the same risks as direct investments in foreign securities. In addition, the underlying issuers of certain depositary receipts are under no obligation to distribute shareholder communications or pass through any voting rights with respect to the deposited securities to the holders of such receipts. The Fund may therefore receive less timely information or have less control than if it invested directly in the foreign issuer.
Derivatives risk.The value of a derivative instrument depends largely on (and is derived from) the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include other, possibly greater, risks, including counterparty, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by holding a position in the derivative. As a result, an adverse change in the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative or the anticipated value of the underlying asset, which may make the Fund’s returns more volatile and increase the risk of loss. Derivative instruments may also be less liquid than more traditional investments and the Fund may be unable to sell or close out its derivative positions at a desirable time or price. This risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. Derivatives strategies may not always be successful. For example, derivatives used for hedging or to gain or limit exposure to a particular market segment may not provide the expected benefits, particularly during adverse market conditions.
Emerging markets securities risk.
Emerging markets (also referred to as developing markets) are generally subject to greater market volatility, political, social and economic instability, uncertain trading markets and more governmental limitations on foreign investment than more developed markets. In addition, companies operating in emerging markets may be subject to lower trading volume and greater price fluctuations than companies in more developed markets. Securities law and the enforcement of systems of taxation in many emerging market countries may change quickly and unpredictably. The Fund’s investments in ChinaA-shares are subject to trading restrictions, quota limitations and clearing and settlement risks. In addition, investments in emerging markets securities may also be subject to additional transaction costs, delays in settlement procedures, and lack of timely information.
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
Geographic focus risk.The Fund may from time to time invest a substantial amount of its assets in securities of issuers located in a single country or a limited number of countries. Adverse economic, political or social conditions in those countries may therefore have a significant negative impact on the Fund’s investment performance.
Growth investing risk.Growth stocks tend to be more expensive relative to the issuing company’s earnings or assets compared with other types of stock. As a result, they tend to be more sensitive to changes in, or investors’ expectations of, the issuing company’s earnings and can be more volatile.
Investing in the European Union risk.Investments in certain countries in the European Union are susceptible to high economic risks associated with high levels of debt, such as investments in sovereign debt of Greece, Italy and Spain. Efforts of the member states to further unify their economic and monetary policies may increase the potential for the downward movement of one member state’s market to cause a similar effect on other member states’ markets. Separately, the European Union faces issues involving its membership, structure, procedures and policies. The exit of one or more member states from the European Union, such as the United Kingdom (UK) which has announced its intention to exit, would place its currency and banking system in jeopardy. The exit by the UK or other member states will likely result in increased volatility, illiquidity and potentially lower economic growth in the affected markets, which will adversely affect the Fund’s investments.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset
Invesco V.I. International Growth Fund
classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
Mid-capitalization companies risk.Mid-capitalization companies tend to be more vulnerable to changing market conditions and may have more limited product lines and markets, less experienced management and fewer financial resources than larger companies. These companies’ securities may be more volatile and less liquid than those of more established companies, and their returns may vary, sometimes significantly, from the overall securities market.
Preferred securities risk.Preferred securities are subject to issuer-specific and market risks applicable generally to equity securities. Preferred securities also may be subordinated to bonds or other debt instruments, subjecting them to a greater risk ofnon-payment, may be less liquid than many other securities, such as common stocks, and generally offer no voting rights with respect to the issuer.
About indexes used in this report
TheMSCI All Country Worldex-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.
TheCustom Invesco International Growth Index is composed of the MSCI EAFE Growth Index through February 28, 2013, and the MSCI All Country Worldex-U.S. Growth Index thereafter.
TheLipper VUF InternationalLarge-Cap Growth Funds Index is an unmanaged index considered representative of internationallarge-cap growth variable insurance underlying funds tracked by Lipper.
TheMSCI EAFE® Growth Index is an unmanaged index considered representative of the growth stocks of Europe, Australasia and the Far East. The index is computed using the net return, which withholds applicable taxes fornon-resident investors.
TheMSCI All Country Worldex-U.S. Growth Index is a market capitalization weighted index that includes growth companies in developed and emerging markets, excluding the US. The index is computed using the net return, which withholds applicable taxes fornon-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.
Other information
CPA® and Certified Public Accountant® are trademarks owned by the American Institute of Certified Public Accountants.
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Industry 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.
Invesco V.I. International Growth Fund
Schedule of Investments
December 31, 2018
Shares | Value | |||||||
Common Stocks & Other Equity Interests–96.43% |
| |||||||
Australia–3.55% |
| |||||||
Amcor Ltd. | 2,117,317 | $ | 19,760,148 | |||||
Brambles Ltd. | 2,318,084 | 16,572,333 | ||||||
CSL Ltd. | 69,497 | 9,063,619 | ||||||
45,396,100 | ||||||||
Brazil–3.53% |
| |||||||
B3 S.A.–Brasil, Bolsa, Balcão | 3,658,134 | 25,304,670 | ||||||
Banco Bradesco S.A.–ADR | 2,004,498 | 19,824,485 | ||||||
45,129,155 | ||||||||
Canada–9.23% |
| |||||||
Canadian National Railway Co. | 259,845 | 19,244,747 | ||||||
CGI Group Inc.–Class A(a) | 664,646 | 40,651,876 | ||||||
Great-West Lifeco Inc. | 322,914 | 6,665,482 | ||||||
Nutrien Ltd. | 359,018 | 16,862,170 | ||||||
PrairieSky Royalty Ltd. | 1,203,731 | 15,580,081 | ||||||
Suncor Energy, Inc. | 676,754 | 18,901,721 | ||||||
117,906,077 | ||||||||
China–7.13% |
| |||||||
Alibaba Group Holding Ltd.–ADR(a) | 100,373 | 13,758,127 | ||||||
Baidu, Inc.–ADR(a) | 95,646 | 15,169,456 | ||||||
Henan Shuanghui Investment & Development Co., Ltd.–Class A | 4,727,478 | 16,243,239 | ||||||
Kweichow Moutai Co., Ltd.–Class A | 257,580 | 22,135,365 | ||||||
New Oriental Education & Technology Group, Inc.–ADR(a) | 56,900 | 3,118,689 | ||||||
Wuliangye Yibin Co., Ltd.–Class A | 1,341,197 | 9,939,278 | ||||||
Yum China Holdings, Inc. | 318,262 | 10,671,325 | ||||||
91,035,479 | ||||||||
Denmark–1.44% |
| |||||||
Carlsberg A/S–Class B | 172,719 | 18,375,320 | ||||||
France–8.20% |
| |||||||
EssilorLuxottica S.A. | 130,234 | 16,444,931 | ||||||
Pernod Ricard S.A. | 109,238 | 17,935,342 | ||||||
Schneider Electric S.E. | 385,643 | 26,245,708 | ||||||
Vinci S.A. | 318,308 | 26,157,860 | ||||||
Vivendi S.A. | 739,058 | 17,957,124 | ||||||
104,740,965 | ||||||||
Germany–7.81% |
| |||||||
Allianz S.E. | 138,948 | 27,882,222 | ||||||
Deutsche Boerse AG | 221,702 | 26,658,874 | ||||||
Deutsche Post AG | 243,530 | 6,671,474 | ||||||
GEA Group AG | 355,340 | 9,160,440 | ||||||
SAP S.E. | 295,434 | 29,425,232 | ||||||
99,798,242 | ||||||||
Hong Kong–0.51% |
| |||||||
CK Hutchison Holdings Ltd. | 681,768 | 6,515,174 |
Shares | Value | |||||||
Italy–3.37% |
| |||||||
FinecoBank Banca Fineco S.p.A. | 1,243,666 | $ | 12,508,035 | |||||
Intesa Sanpaolo S.p.A. | 6,257,630 | 13,868,630 | ||||||
Mediobanca Banca di Credito Finanziario S.p.A | 1,979,043 | 16,724,990 | ||||||
43,101,655 | ||||||||
Japan–8.46% |
| |||||||
Asahi Group Holdings, Ltd. | 495,400 | 19,350,052 | ||||||
FANUC Corp. | 142,800 | 21,468,221 | ||||||
Hoya Corp. | 448,400 | 27,407,233 | ||||||
Japan Tobacco Inc. | 322,400 | 7,648,913 | ||||||
Kao Corp. | 199,000 | 14,671,456 | ||||||
Keyence Corp. | 34,900 | 17,588,922 | ||||||
108,134,797 | ||||||||
Macau–1.81% |
| |||||||
Galaxy Entertainment Group Ltd. | 3,684,000 | 23,123,415 | ||||||
Mexico–2.17% |
| |||||||
Fomento Economico Mexicano, S.A.B. de C.V.–ADR | 322,062 | 27,713,435 | ||||||
Netherlands–3.47% |
| |||||||
ING Groep N.V. | 1,483,042 | 15,893,503 | ||||||
Wolters Kluwer N.V. | 482,157 | 28,472,958 | ||||||
44,366,461 | ||||||||
Singapore–2.06% |
| |||||||
United Overseas Bank Ltd. | 1,469,766 | 26,343,786 | ||||||
South Korea–2.72% |
| |||||||
NAVER Corp.(a) | 167,376 | 18,236,915 | ||||||
Samsung Electronics Co., Ltd. | 476,919 | 16,501,718 | ||||||
34,738,633 | ||||||||
Spain–1.38% |
| |||||||
Amadeus IT Group S.A. | 252,134 | 17,575,608 | ||||||
Sweden–3.23% |
| |||||||
Investor AB–Class B | 969,282 | 41,197,685 | ||||||
Switzerland–6.77% |
| |||||||
Compagnie Financiere Richemont S.A. | 322,267 | 20,711,274 | ||||||
Julius Baer Group Ltd. | 386,964 | 13,827,686 | ||||||
Kuehne + Nagel International AG | 123,190 | 15,880,712 | ||||||
Novartis AG | 310,876 | 26,626,026 | ||||||
UBS Group AG | 754,460 | 9,417,894 | ||||||
86,463,592 | ||||||||
Taiwan–2.20% |
| |||||||
Taiwan Semiconductor Manufacturing Co. Ltd.–ADR | 762,030 | 28,126,527 | ||||||
Thailand–0.51% |
| |||||||
Kasikornbank PCL–NVDR | 1,139,200 | 6,482,216 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. International Growth Fund
Shares | Value | |||||||
Turkey–0.89% |
| |||||||
Akbank T.A.S. | 8,823,615 | $ | 11,407,305 | |||||
United Kingdom–11.49% |
| |||||||
British American Tobacco PLC | 561,246 | 17,884,101 | ||||||
Compass Group PLC | 852,958 | 17,907,581 | ||||||
Informa PLC | 2,246,117 | 18,010,946 | ||||||
Reckitt Benckiser Group PLC | 294,676 | 22,503,229 | ||||||
RELX PLC | 1,399,205 | 28,738,159 | ||||||
Royal Dutch Shell PLC–Class B | 423,872 | 12,613,060 | ||||||
TechnipFMC PLC | 602,499 | 12,146,023 | ||||||
Unilever N.V. | 312,401 | 16,973,199 | ||||||
146,776,298 | ||||||||
United States–4.50% |
| |||||||
Broadcom Inc. | 144,724 | 36,800,419 | ||||||
Philip Morris International Inc. | 309,816 | 20,683,316 | ||||||
57,483,735 | ||||||||
Total Common Stocks & Other Equity Interests |
| 1,231,931,660 |
Shares | Value | |||||||
Money Market Funds–3.61% |
| |||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30%(b) | 16,136,894 | $ | 16,136,894 | |||||
Invesco Liquid Assets Portfolio–Institutional Class, 2.48%(b) | 11,534,780 | 11,535,934 | ||||||
Invesco Treasury Portfolio–Institutional Class, 2.30%(b) | 18,442,164 | 18,442,164 | ||||||
Total Money Market Funds | 46,114,992 | |||||||
TOTAL INVESTMENTS IN SECURITIES–100.04% |
| 1,278,046,652 | ||||||
OTHER ASSETS LESS LIABILITIES–(0.04)% |
| (543,631 | ) | |||||
NET ASSETS–100.00% |
| $ | 1,277,503,021 |
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. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $1,043,712,551) | $ | 1,231,931,660 | ||
Investments in affiliated money market funds, at value (Cost $46,114,764) | 46,114,992 | |||
Foreign currencies, at value (Cost $1,088,059) | 1,057,068 | |||
Receivable for: | ||||
Investments sold | 2,782,018 | |||
Fund shares sold | 417,460 | |||
Dividends | 4,273,890 | |||
Reimbursement due from advisor | 663,572 | |||
Other receivables | 557,136 | |||
Investment for trustee deferred compensation and retirement plans | 229,647 | |||
Total assets | 1,288,027,443 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 7,791,239 | |||
Amount due to custodian | 27,681 | |||
Fund shares reacquired | 1,106,197 | |||
Accrued foreign taxes | 24,371 | |||
Accrued fees to affiliates | 1,131,693 | |||
Accrued trustees’ and officers’ fees and benefits | 7,800 | |||
Accrued other operating expenses | 178,619 | |||
Trustee deferred compensation and retirement plans | 256,822 | |||
Total liabilities | 10,524,422 | |||
Net assets applicable to shares outstanding | $ | 1,277,503,021 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 1,007,092,677 | ||
Distributable earnings | 270,410,344 | |||
$ | 1,277,503,021 | |||
Net Assets: | ||||
Series I | $ | 414,774,287 | ||
Series II | $ | 862,728,734 | ||
Shares outstanding, no par value, |
| |||
Series I | 12,575,757 | |||
Series II | 26,531,725 | |||
Series I: | ||||
Net asset value per share | $ | 32.98 | ||
Series II: | ||||
Net asset value per share | $ | 32.52 |
Investment income: | ||||
Dividends (net of foreign withholding taxes of $4,217,053) | $ | 45,182,254 | ||
Dividends from affiliated money market funds | 1,336,536 | |||
Total investment income | 46,518,790 | |||
Expenses: | ||||
Advisory fees | 12,383,862 | |||
Administrative services fees | 3,001,300 | |||
Custodian fees | 505,033 | |||
Distribution fees — Series II | 3,019,656 | |||
Transfer agent fees | 91,762 | |||
Trustees’ and officers’ fees and benefits | 45,568 | |||
Reports to shareholders | 10,517 | |||
Professional services fees | 99,871 | |||
Other | 33,040 | |||
Total expenses | 19,190,609 | |||
Less: Fees waived | (100,543 | ) | ||
Net expenses | 19,090,066 | |||
Net investment income | 27,428,724 | |||
Realized and unrealized gain (loss): | ||||
Net realized gain (loss) from: | ||||
Investment securities (net of foreign taxes of $434,129 and net gains from a redemption-in-kind of $54,855,983) | 142,939,837 | |||
Foreign currencies | (1,423,189 | ) | ||
141,516,648 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities (net of foreign taxes of $1,418,230) | (430,629,707 | ) | ||
Foreign currencies | (58,680 | ) | ||
(430,688,387 | ) | |||
Net realized and unrealized gain (loss) | (289,171,739 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (261,743,015 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income | $ | 27,428,724 | $ | 22,677,714 | ||||
Net realized gain | 141,516,648 | 63,556,696 | ||||||
Change in net unrealized appreciation (depreciation) | (430,688,387 | ) | 307,045,299 | |||||
Net increase (decrease) in net assets resulting from operations | (261,743,015 | ) | 393,279,709 | |||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (14,207,500 | ) | (8,599,101 | ) | ||||
Series II | (29,812,608 | ) | (17,155,517 | ) | ||||
Total distributions from distributable earnings | (44,020,108 | ) | (25,754,618 | ) | ||||
Share transactions–net: | ||||||||
Series I | (118,679,986 | ) | (25,091,564 | ) | ||||
Series II | (374,671,558 | ) | 25,903,929 | |||||
Net increase (decrease) in net assets resulting from share transactions | (493,351,544 | ) | 812,365 | |||||
Net increase (decrease) in net assets | (799,114,667 | ) | 368,337,456 | |||||
Net assets: | ||||||||
Beginning of year | 2,076,617,688 | 1,708,280,232 | ||||||
End of year | $ | 1,277,503,021 | $ | 2,076,617,688 |
(1) | The Securities and Exchange Commission eliminated the requirement to disclose distribution components separately, except for tax return of capital. For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income. |
Notes to Financial Statements
December 31, 2018
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 anopen-end series management investment company. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 islong-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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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 theover-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 (“NAV”) 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 theend-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. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 investment 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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. International Growth 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 the 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 the dailymark-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 anagreed-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 accrues daily and pays monthly 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 year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.71%.
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2019, 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. International Growth Fund
below) of Series I shares to 2.25% and Series II shares to 2.50% of average daily net assets (the “expense limits”). 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, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $100,543.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $382,664 for accounting and fund administrative services and was reimbursed $2,618,636 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution 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. International Growth Fund
The following is a summary of the tiered valuation input levels, as of December 31, 2018. 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 | |||||||||||||
Investments in Securities | ||||||||||||||||
Australia | $ | 45,396,100 | $ | — | $ | — | $ | 45,396,100 | ||||||||
Brazil | 45,129,155 | — | — | 45,129,155 | ||||||||||||
Canada | 117,906,077 | — | — | 117,906,077 | ||||||||||||
China | 91,035,479 | — | — | 91,035,479 | ||||||||||||
Denmark | — | 18,375,320 | — | 18,375,320 | ||||||||||||
France | 17,935,342 | 86,805,623 | — | 104,740,965 | ||||||||||||
Germany | 99,798,242 | — | — | 99,798,242 | ||||||||||||
Hong Kong | — | 6,515,174 | — | 6,515,174 | ||||||||||||
Italy | 29,233,025 | 13,868,630 | — | 43,101,655 | ||||||||||||
Japan | — | 108,134,797 | — | 108,134,797 | ||||||||||||
Macau | — | 23,123,415 | — | 23,123,415 | ||||||||||||
Mexico | 27,713,435 | — | — | 27,713,435 | ||||||||||||
Netherlands | — | 44,366,461 | — | 44,366,461 | ||||||||||||
Singapore | — | 26,343,786 | — | 26,343,786 | ||||||||||||
South Korea | — | 34,738,633 | — | 34,738,633 | ||||||||||||
Spain | 17,575,608 | — | — | 17,575,608 | ||||||||||||
Sweden | — | 41,197,685 | — | 41,197,685 | ||||||||||||
Switzerland | — | 86,463,592 | — | 86,463,592 | ||||||||||||
Taiwan | 28,126,527 | — | — | 28,126,527 | ||||||||||||
Thailand | — | 6,482,216 | — | 6,482,216 | ||||||||||||
Turkey | — | 11,407,305 | — | 11,407,305 | ||||||||||||
United Kingdom | 34,857,300 | 111,918,998 | — | 146,776,298 | ||||||||||||
United States | 57,483,735 | — | — | 57,483,735 | ||||||||||||
Money Market Funds | 46,114,992 | — | — | 46,114,992 | ||||||||||||
Total Investments | $ | 658,305,017 | $ | 619,741,635 | $ | — | $ | 1,278,046,652 |
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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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. International Growth Fund
NOTE 6—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 32,026,526 | $ | 25,754,618 | ||||
Long-term capital gain | 11,993,582 | — | ||||||
Total distributions | $ | 44,020,108 | $ | 25,754,618 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 19,388,101 | ||
Undistributedlong-term gain | 86,181,067 | |||
Net unrealized appreciation — investments | 165,056,265 | |||
Net unrealized appreciation — foreign currencies | 27,335 | |||
Temporary book/tax differences | (242,424 | ) | ||
Shares of beneficial interest | 1,007,092,677 | |||
Total net assets | $ | 1,277,503,021 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to wash sales and passive foreign investment companies.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 does not have a capital loss carryforward as of December 31, 2018.
On October 22, 2018, 4,936,732 of Series II shares valued at $169,724,861, were redeemed by a significant shareholder and settled through a redemption-in-kind transaction, of which $21,227,131 consisted of cash, which resulted in a realized gain of $54,855,983 to the Fund for book purposes. From a federal income tax perspective, the realized gains are not recognized.
NOTE 7—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $584,470,238 and $846,681,842, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 273,816,513 | ||
Aggregate unrealized (depreciation) of investments | (108,760,248 | ) | ||
Net unrealized appreciation of investments | $ | 165,056,265 |
Cost of investments for tax purposes is $1,112,990,387.
NOTE 8—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of redemption in-kind and foreign currency transactions, on December 31, 2018, undistributed net investment income was increased by $1,319,583, undistributed net realized gain was decreased by $50,618,713 and shares of beneficial interest was increased by $49,299,130. This reclassification had no effect on the net assets of the Fund.
Invesco V.I. International Growth Fund
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 1,795,725 | $ | 68,266,200 | 2,055,141 | $ | 75,392,382 | ||||||||||
Series II | 3,256,967 | 122,515,503 | 5,918,465 | 210,230,623 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 378,411 | 14,076,897 | 220,254 | 8,521,626 | ||||||||||||
Series II | 812,333 | 29,812,608 | 449,451 | 17,155,517 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (5,338,737 | ) | (201,023,083 | ) | (2,968,744 | ) | (109,005,572 | ) | ||||||||
Series II | (14,373,620 | ) | (526,999,669 | ) | (5,526,752 | ) | (201,482,211 | ) | ||||||||
Net increase (decrease) in share activity | (13,468,921 | ) | $ | (493,351,544 | ) | 147,815 | $ | 812,365 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 41% 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 39.89 | $ | 0.66 | $ | (6.51 | ) | $ | (5.85 | ) | $ | (0.79 | ) | $ | (0.27 | ) | $ | (1.06 | ) | $ | 32.98 | (14.97 | )% | $ | 414,774 | 0.92 | %(d) | 0.93 | %(d) | 1.74 | %(d) | 35 | % | |||||||||||||||||||||||
Year ended 12/31/17 | 32.89 | 0.49 | 7.06 | 7.55 | (0.55 | ) | — | (0.55 | ) | 39.89 | 23.00 | 627,894 | 0.92 | 0.93 | 1.34 | 34 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 33.49 | 0.50 | (0.63 | ) | (0.13 | ) | (0.47 | ) | — | (0.47 | ) | 32.89 | (0.45 | ) | 540,460 | 0.95 | 0.96 | 1.51 | 18 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 34.87 | 0.48 | (1.33 | ) | (0.85 | ) | (0.53 | ) | — | (0.53 | ) | 33.49 | (2.34 | ) | 601,760 | 1.00 | 1.01 | 1.35 | 22 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 35.32 | 0.56 | (0.44 | ) | 0.12 | (0.57 | ) | — | (0.57 | ) | 34.87 | 0.33 | 647,530 | 1.01 | 1.02 | 1.58 | 26 | |||||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 39.33 | 0.56 | (6.42 | ) | (5.86 | ) | (0.68 | ) | (0.27 | ) | (0.95 | ) | 32.52 | (15.18 | ) | 862,729 | 1.17 | (d) | 1.18 | (d) | 1.49 | (d) | 35 | |||||||||||||||||||||||||||||||||
Year ended 12/31/17 | 32.44 | 0.40 | 6.96 | 7.36 | (0.47 | ) | — | (0.47 | ) | 39.33 | 22.73 | 1,448,723 | 1.17 | 1.18 | 1.09 | 34 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 33.04 | 0.41 | (0.62 | ) | (0.21 | ) | (0.39 | ) | — | (0.39 | ) | 32.44 | (0.70 | ) | 1,167,820 | 1.20 | 1.21 | 1.26 | 18 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 34.42 | 0.38 | (1.31 | ) | (0.93 | ) | (0.45 | ) | — | (0.45 | ) | 33.04 | (2.61 | ) | 1,169,823 | 1.25 | 1.26 | 1.10 | 22 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 34.88 | 0.47 | (0.43 | ) | 0.04 | (0.50 | ) | — | (0.50 | ) | 34.42 | 0.09 | 1,079,488 | 1.26 | 1.27 | 1.33 | 26 |
(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 based on average daily net assets (000’s omitted) of $543,404 and $1,207,862 for Series I and Series II shares, respectively. |
Invesco V.I. International Growth Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. International Growth Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. International Growth Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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 | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Ratio | ||||||||||||||||||||
Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 902.00 | $ | 4.41 | $ | 1,020.57 | $ | 4.69 | 0.92 | % | ||||||||||||
Series II | 1,000.00 | 900.60 | 5.60 | 1,019.31 | 5.96 | 1.17 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. International Growth Fund
Tax Information
Form1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Long-Term Capital Gain Distributions | $ | 11,993,582 | ||
Corporate Dividends Received Deduction* | 0 | % | ||
U.S. Treasury Obligations* | 0 | % | ||
Foreign Taxes | $ | 0.0861 | per share | |
Foreign Source Income | $ | 1.0128 | per share |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. International Growth Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. International Growth Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. International Growth Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. International Growth Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. International Growth Fund
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Annual Report to Shareholders
| December 31, 2018 | |||
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Invesco V.I. Managed Volatility Fund
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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 FormN-Q (or any successor Form). The Fund’s FormN-Q (or any successor Form) filings are available on the SEC website, sec.gov. The SEC file numbers for the Fund are811-07452 and033-57340. The Fund’s most recent portfolio holdings, as filed on FormN-Q (or any successor Form), 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 recent12-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.
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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.
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NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Invesco Distributors, Inc. | I-VIMGV-AR-1 | 02152019 1147 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. Managed Volatility Fund (the Fund) underperformed the Russell 1000 Value Index.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -11.00% | ||||
Series II Shares | -11.28 | ||||
Russell 1000 Value Index▼(Broad Market Index) | -8.27 | ||||
Bloomberg Barclays U.S. Government/Credit Index∎(Style-Specific Index) | -0.42 | ||||
Lipper VUF Mixed-Asset Target Allocation Growth Funds Index¨(Peer Group Index) | -6.39 | ||||
Source(s):▼RIMES Technologies Corp.;∎FactSet Research Systems Inc.;¨Lipper Inc. |
Market conditions and your Fund
Calendar year 2018 proved to be an increasingly volatile time for US equities. In January 2018, US equity markets steadily moved higher, as investors remained enthused about the passage of the Tax Cuts and Jobs Act signed into law in late December 2017. However, in February 2018, volatility returned to the US stock and bond markets. Worries about how rising interest rates might affect economic growth, concerns about a potential trade war and heightened geopolitical tensions caused the US stock markets to pull back and volatility to increase.
US equity markets generally recovered in the second quarter of 2018 as strong US retail sales and low unemployment buoyed markets. Throughout the summer, US equities moved higher as corporate profits surged. Several US equity indexes reached new highs despite potential headwinds including trade tensions, tariff announcements and contagion concerns over a Turkish currency crisis. After a relatively quiet summer, market volatility noticeably rose in October, as US equity markets suffered a sharpsell-off through
year-end, amid rising interest rates and concerns that higher inflation could mean a more restrictive monetary policy. In this environment, there was a flight to safety, as investors fled to defensive areas of the equities markets, like health care and utilities, and US Treasuries.
Given signs of a strong economy, the US Federal Reserve raised interest rates four times during the year: in March, June, September and December 2018. Following December’s Federal Reserve meeting, Chairman Jerome Powell raised interest rates for the fourth time in 2018 by 25 basis points to a targeted range of
2.25% to 2.50%, and lowered guidance from three to two rate hikes in 2019, signaling a slightly more dovish stance than expected.1 In contrast, the European Central Bank and central banks in several other countries maintained extraordinarily accommodative monetary policies.
During the year, nine of the 11 sectors within the Russell 1000 Value Index posted negative returns. The industrials and energy sectors were the weakest-performing sectors, posting double-digit losses, while health care and utilities were the only sectors with positive returns.
Stock selection in the industrials sector was a large contributor to the Fund’s performance relative to its style-specific benchmark for the year.CSX, a rail-based transportation services firm, was one of the top contributors within the sector. The company reported strong earnings and revenues in July 2018 as it benefited from improved profit margins and a lower tax rate. Having no exposure toGeneral Electric was also a large contributor to the Fund’s relative performance, as the stock performed poorly for the year.
Stock selection in the materials sector also contributed to the Fund’s performance relative to its style-specific benchmark for the year. Notably,The Mosaic Company, a potash and phosphate supplier was a contributor to the Fund’s performance. An upbeat earnings outlook, healthy prospects from the Vale Fertilizantes (not a Fund holding) buyout along with strong demand and pricing fundamentals for crop nutrients contributed to the strong performance.
Stock selection in information technology (IT) also boosted the Fund’s performance versus the style-specific benchmark for the year. Within IT,QUALCOMM andOracle were key contributors. During the third quarter, QUALCOMM reported better-than-expected earnings and announced a share repurchase plan totaling $30 billion after the company terminated its plan to purchase NXP Semiconductors (not a Fund holding).
During the year, a large driver of underperformance relative to the style-specific benchmark was stock selection within the financials sector – notably within banks and capital markets. Financials were negatively impacted by the flattening yield curve and subsequent
Portfolio Composition | |||
By sector | % of total net assets |
Financials | 25.0% | |
Health Care | 16.2 | |
Information Technology | 10.3 | |
US Treasury Securities | 10.0 | |
Energy | 9.6 | |
Consumer Discretionary | 6.3 | |
Communication Services | 5.8 | |
Industrials | 4.3 | |
Consumer Staples | 4.2 | |
Materials | 1.7 | |
Utilities | 1.2 | |
Real Estate | 0.6 | |
Money Market Funds | ||
Plus Other Assets Less Liabilities | 4.8 |
Top 10 Equity Holdings* | |||
% of total net assets |
1. Citigroup Inc. | 2.4% | |
2. Bank of America Corp. | 2.3 | |
3. Johnson & Johnson | 2.0 | |
4. JPMorgan Chase & Co. | 2.0 | |
5. American International Group, Inc. | 1.6 | |
6. General Motors Co. | 1.6 | |
7. CVS Health Corp. | 1.5 | |
8. Morgan Stanley | 1.4 | |
9. Oracle Corp. | 1.3 | |
10. Mondelez International, Inc.-Class A | 1.3 |
Total Net Assets | $35.6 million | |
Total Number of Holdings* | 259 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
Data presented here are as of December 31, 2018.
Invesco V.I. Managed Volatility Fund
concerns over a recession due to a slowing economy. Within the sector,Citigroup,Morgan Stanley andStateStreet were key detractors. At the close of the year, we still believed that large banks and capital markets were attractively valued, had strong balance sheets and have the potential for future growth as they continued to return high levels of capital to shareholders in the form of stock buybacks and dividends.
Stock selection in and overweight allocation to the energy sector also dampened the Fund’s performance relative to its style-specific benchmark for the year. Oil prices declined sharply during the fourth quarter, falling from roughly $75 per barrel in early October to the mid $40s per barrel in late December. As energy stocks fell in tandem, a number of the Fund’s portfolio’s largest individual detractors during the year came from the sector includingDevon Energy,Canadian Natural Resources,Apache andTechnipFMC.
The Fund’s material underweight exposures in more defensive areas, such as the communication services, consumer staples and utilities sectors, also detracted from its relative returns for the year. At the close of the year, we maintained underweight exposure in these sectors, as we believed valuations and fundamentals were unattractive.
The Fund’s use of high grade bonds as a source of income and to dampen return volatility was a relative contributor for the year, as the bond portion of the Fund’s portfolio posted negative returns, but outperformed the style-specific index. Similarly, the Fund’s allocation to convertible securities also posted negative returns, but outperformed the Russell 1000 Value Index, acting as a relative contributor to returns.
We used currency forward contracts during the year for the purpose of hedging currency exposure ofnon-US-based companies held in the Fund. Forward foreign currency contracts were used solely for the purpose of hedging and not for speculative purposes or leverage. The use of currency forward foreign currency contracts had a positive impact on the Fund’s performance relative to the Russell 1000 Value Index for the year.
As part of our mandate, and to potentially reduce portfolio volatility during a market downturn, we sold short S&P 500 futures contracts during the year for the purpose of reducing equity exposure in the Fund. S&P 500 futures contracts were used solely for the purpose of reducing volatility and not for speculative
purposes. The use of S&P 500 futures contracts had a negative impact on the Fund’s performance relative to the Russell 1000 Value Index for the year. However, the Fund was less volatile, as measured by standard deviation, than the Russell 1000 Value Index for the year.
At the end of the year, the Fund’s largest overweight exposures relative to the style-specific benchmark were in the financials and energy sectors, while the largest underweight exposures were in the real estate and utilities sectors.
Thank you for your investment in Invesco V.I. Managed Volatility Fund and for sharing our long-term investment horizon.
1 | Source: US Federal Reserve |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Thomas Bastian Chartered Financial Analyst, Portfolio Manager, is lead manager of Invesco V.I. Managed Volatility | ||
Fund. He joined Invesco in 2010. Mr. Bastian earned a BA in accounting from St. John’s University and an MBA in finance from the University of Michigan. |
Brian Jurkash Portfolio Manager, is lead manager of Invesco V.I. Managed Volatility Fund. He joined Invesco in 2000. Mr. Jurkash | ||
earned. a BBA degree in finance from Stephen F. Austin State University and an MBA in finance from the University of Houston |
Matthew Titus Chartered Financial Analyst, Portfolio Manager, is lead manager of Invesco V.I. Managed Volatility Fund. | ||
He joined Invesco in 2016. Mr. Titus earned a bachelor’s degree in accounting and economics from Luther College in Decorah, Iowa, and an MBA from Ohio State University. |
Jacob Borbidge Chartered Financial Analyst, Portfolio Manager and Head of Research for Invesco’s Global Solutions | ||
Development and Implementation Team, is manager of Invesco V.I. Managed Volatility Fund. He joined Invesco in 2004. Mr. Borbidge earned a BS in mechanical engineering from Lehigh University and an MS in finance from the University of Houston. |
Chuck Burge Portfolio Manager, is manager of Invesco V.I. Managed Volatility Fund. He joined Invesco in 2002. Mr. Burge earned | ||
a BS in economics from Texas A&M University and an MBA in finance and accounting from Rice University. |
Sergio Marcheli Portfolio Manager, is manager of Invesco V.I. Managed Volatility Fund. He joined Invesco in 2010. Mr. Marcheli | ||
earned a BBA from the University of Houston and an MBA from the University of St. Thomas. |
Invesco V.I. Managed Volatility Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: RIMES Technologies Corp. |
2 | Source: Lipper Inc. |
3 | Source: FactSet Research Systems Inc. |
Past performance cannot guarantee
comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (12/30/94) | 6.64 | % | |||
10 Years | 7.68 | ||||
5 Years | 5.13 | ||||
1 Year | -11.00 | ||||
Series II Shares | |||||
Inception (4/30/04) | 7.74 | % | |||
10 Years | 7.40 | ||||
5 Years | 4.85 | ||||
1 Year | -11.28 |
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 recentmonth-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 1.14% and 1.39%, 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 deter-
mined by the variable product issuers, will vary and will lower the total return.
The most recentmonth-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recentmonth-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. Managed Volatility Fund
Invesco V.I. Managed Volatility Fund’s investment objective is both capital appreciation and current income while managing portfolio volatility.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Active trading risk.Active trading of portfolio securities may result in added expenses, a lower return and increased tax liability.
Changing fixed income market conditions risk.The current low interest rate environment was created in part by the Federal Reserve Board (FRB) and certain foreign central banks keeping the federal funds and equivalent foreign rates near, at or below zero. Increases in the federal funds and equivalent foreign rates may expose fixed income markets to heightened volatility and reduced liquidity for certain fixed income investments, particularly those with longer maturities. In addition, decreases in fixed income dealer market-making capacity may also potentially lead to heightened volatility and reduced liquidity in the fixed income markets. As a result, the value of the Fund’s investments and share price may decline. Changes in central bank policies could also result in higher than normal shareholder redemptions, which could potentially increase portfolio turnover and the Fund’s transaction costs.
Convertible securities risk.The market values of convertible securities are affected by market interest rates, the risk of actual issuer default on interest or principal payments and the value of the underlying common stock into which the convertible security may be converted. Additionally, a convertible security is subject to the same types of market and issuer risks as apply to the underlying common stock. In addition, certain convertible securities are subject to involuntary conversions and may undergo principal write-downs upon the occurrence of certain triggering events, and, as a result, are subject to an increased risk of loss. Convertible securities may be rated below investment grade.
Debt securities risk.The prices of debt securities held by the Fund will be affected by changes in interest rates, the creditworthiness of the issuer and other factors. An increase in prevailing interest rates typically causes the value of existing debt securities to fall and often has a greater impact on longer-duration debt securities and higher quality debt securities. Falling interest rates will cause the Fund to reinvest the proceeds of debt securities that have been repaid by the issuer at lower interest rates. Falling interest rates may also reduce the Fund’s distributable
income because interest payments on floating rate debt instruments held by the Fund will decline. The Fund could lose money on investments in debt securities if the issuer or borrower fails to meet its obligations to make interest payments and/or to repay principal in a timely manner. Changes in an issuer’s financial strength, the market’s perception of such strength or in the credit rating of the issuer or the security may affect the value of debt securities. The Adviser’s credit analysis may fail to anticipate such changes, which could result in buying a debt security at an inopportune time or failing to sell a debt security in advance of a price decline or other credit event.
Depositary receipts risk.Investing in depositary receipts involves the same risks as direct investments in foreign securities. In addition, the underlying issuers of certain depositary receipts are under no obligation to distribute shareholder communications or pass through any voting rights with respect to the deposited securities to the holders of such receipts. The Fund may therefore receive less timely information or have less control than if it invested directly in the foreign issuer.
Derivatives risk.The value of a derivative instrument depends largely on (and is derived from) the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include other, possibly greater, risks, including counter-party, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by holding a position in the derivative. As a result, an adverse change in the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative or the anticipated value of the underlying asset, which may make the Fund’s returns more volatile and increase the risk of loss. Derivative instruments may also be less liquid than more traditional investments and the Fund may be unable to sell or close out its derivative positions at a desirable time or price. This
risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. Derivatives strategies may not always be successful. For example, derivatives used for hedging or to gain or limit exposure to a particular market segment may not provide the expected benefits, particularly during adverse market conditions.
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. There is no guarantee that the portfolio manager’s stock selection process will produce lower volatility than the broader markets in which the Fund invests. In addition, the Fund’s investment strategy to seek lower volatility over a full market cycle may cause the Fund to underperform the broader markets in which the Fund invests during market rallies. Such underperformance could be significant during sudden or significant market rallies. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund
Invesco V.I. Managed Volatility Fund
and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
Preferred securities risk.Preferred securities are subject to issuer-specific and market risks applicable generally to equity securities. Preferred securities also may be subordinated to bonds or other debt instruments, subjecting them to a greater risk ofnon-payment, may be less liquid than many other securities, such as common stocks, and generally offer no voting rights with respect to the issuer.
REIT risk/real estate risk.Investments in real estate related instruments may be affected by economic, legal, cultural, environmental or technological factors that affect property values, rents or occupancies of real estate related to the Fund’s holdings. Shares of real estate related companies, which tend to be small- andmid-cap companies, may be more volatile and less liquid.
Sector focus risk.The Fund may from time to time invest a significant amount of its assets (i.e. over 25%) in one market sector or group of related industries. In this event, the Fund’s performance will depend to a greater extent on the overall condition of the sector or group of industries and there is increased risk that the Fund will lose significant value if conditions adversely affect that sector or group of industries.
Short position risk.Because the Fund’s potential loss on a short position arises from increases in the value of the asset sold short, the Fund will incur a loss on a short position, which is theoretically unlimited, if the price of the asset sold short increases from the short sale price. The counterparty to a short position or other market factors may prevent the Fund from closing out a short position at a desirable time or price and may reduce or eliminate any gain or result in a loss. In a rising market, the Fund’s short positions will cause the Fund to underperform the overall market and its peers that do not engage in shorting. If the Fund holds both long and short positions, and both
positions decline simultaneously, the short positions will not provide any buffer (hedge) from declines in value of the Fund’s long positions. Certain types of short positions involve leverage, which may exaggerate any losses, potentially more than the actual cost of the investment, and will increase the volatility of the Fund’s returns.
Small- andmid-capitalization companies risks.Small- andmid-capitalization companies tend to be more vulnerable to changing market conditions, may have little or no operating history or track record of success, and may have more limited product lines and markets, less experienced management and fewer financial resources than larger companies. These companies’ securities may be more volatile and less liquid than those of more established companies, and their returns may vary, sometimes significantly, from the overall securities market.
Value investing style risk.A value investing style subjects the Fund to the risk that the valuations never improve or that the returns on value equity securities are less than returns on other styles of investing or the overall stock market.
Volatility management risk.The Adviser’s strategy for managing portfolio volatility may not produce the desired result and there can be no guarantee that the Fund will stay below a target volatility level (the threshold volatility level). Additionally, maintenance of the threshold volatility level will not ensure that the Fund will deliver competitive returns. The use of derivatives in connection with the Fund’s managed volatility strategy may expose the Fund to losses (some of which may be sudden) that it would not have otherwise been exposed to if it had only invested directly in equity and/or fixed income securities. Efforts to manage the Fund’s volatility could limit the Fund’s gains in rising markets and may expose the Fund to costs to which it would otherwise not have been exposed. The Adviser uses a combination of proprietary and third-party systems and risk models to help it estimate the Fund’s expected volatility, which may perform differently than expected and may negatively affect performance and the ability of the Fund to maintain its volatility at or below its threshold volatility level.
Warrants risk.Warrants may be significantly less valuable or worthless on their expiration date and may also be postponed or terminated early, resulting in a partial or total loss. Warrants may also be illiquid.
Zero coupon orpay-in-kind securities risk.The value, interest rates, and liquidity ofnon-cash paying instruments, such
as zero coupon andpay-in-kind securities, are subject to greater fluctuation than other types of securities. The higher yields and interest rates onpay-in-kind securities reflect the payment deferral and increased credit risk associated with such instruments and that such investments may represent a higher credit risk than loans that periodically pay interest.
About indexes used in this report
TheRussell 1000® Value Index is an unmanaged index considered representative oflarge-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.
TheBloomberg Barclays U.S. Government/Credit Index is a broad-based benchmark that includes investment-grade, US dollar-denominated,fixed-rate Treasuries, government-related and corporate securities.
TheLipper VUF Mixed-Asset Target Allocation Growth Funds 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.
Other information
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Industry 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.
Invesco V.I. Managed Volatility Fund
Schedule of Investments(a)
December 31, 2018
Shares | Value | |||||||
Common Stocks–59.10% |
| |||||||
Aerospace & Defense–1.21% |
| |||||||
General Dynamics Corp. | 2,737 | $ | 430,284 | |||||
Apparel, Accessories & Luxury Goods–0.48% |
| |||||||
Michael Kors Holdings Ltd.(b) | 4,527 | 171,664 | ||||||
Asset Management & Custody Banks–1.14% |
| |||||||
Northern Trust Corp. | 1,776 | 148,456 | ||||||
State Street Corp. | 4,107 | 259,028 | ||||||
407,484 | ||||||||
Automobile Manufacturers–1.55% |
| |||||||
General Motors Co. | 16,551 | 553,631 | ||||||
Biotechnology–0.50% |
| |||||||
Celgene Corp.(b) | 2,791 | 178,875 | ||||||
Broadcasting–0.43% |
| |||||||
CBS Corp.–Class B | 3,541 | 154,812 | ||||||
Building Products–0.97% |
| |||||||
Johnson Controls International PLC | 11,619 | 344,503 | ||||||
Cable & Satellite–1.73% |
| |||||||
Charter Communications, Inc.–Class A(b) | 1,327 | 378,155 | ||||||
Comcast Corp.–Class A | 6,977 | 237,567 | ||||||
615,722 | ||||||||
Communications Equipment–1.70% |
| |||||||
Cisco Systems, Inc. | 9,927 | 430,137 | ||||||
Juniper Networks, Inc. | 6,520 | 175,453 | ||||||
605,590 | ||||||||
Diversified Banks–7.98% |
| |||||||
Bank of America Corp.(c) | 33,783 | 832,413 | ||||||
Citigroup Inc.(c) | 16,665 | 867,580 | ||||||
JPMorgan Chase & Co. | 7,137 | 696,714 | ||||||
Wells Fargo & Co. | 9,673 | 445,732 | ||||||
2,842,439 | ||||||||
Diversified Chemicals–0.23% |
| |||||||
DowDuPont Inc. | 1,556 | 83,215 | ||||||
Diversified Metals & Mining–0.39% |
| |||||||
BHP Billiton Ltd. (Australia) | 5,742 | 138,439 | ||||||
Electric Utilities–0.71% |
| |||||||
Duke Energy Corp. | 1,576 | 136,009 | ||||||
FirstEnergy Corp. | 3,082 | 115,729 | ||||||
251,738 | ||||||||
Fertilizers & Agricultural Chemicals–1.02% |
| |||||||
Mosaic Co. (The) | 7,120 | 207,975 | ||||||
Nutrien Ltd. (Canada) | 3,350 | 157,450 | ||||||
365,425 |
Shares | Value | |||||||
Food Distributors–0.78% |
| |||||||
US Foods Holding Corp.(b) | 8,837 | $ | 279,603 | |||||
Health Care Distributors–0.84% |
| |||||||
McKesson Corp. | 2,710 | 299,374 | ||||||
Health Care Equipment–1.57% |
| |||||||
Medtronic PLC | 2,867 | 260,782 | ||||||
Zimmer Biomet Holdings, Inc. | 2,873 | 297,988 | ||||||
558,770 | ||||||||
Health Care Services–1.52% |
| |||||||
CVS Health Corp. | 8,263 | 541,392 | ||||||
Home Improvement Retail–0.63% |
| |||||||
Kingfisher PLC (United Kingdom) | 84,438 | 223,321 | ||||||
Hotels, Resorts & Cruise Lines–1.29% |
| |||||||
Carnival Corp. | 9,349 | 460,906 | ||||||
Industrial Machinery–0.80% |
| |||||||
Ingersoll-Rand PLC | 3,124 | 285,002 | ||||||
Insurance Brokers–1.57% |
| |||||||
Aon PLC | 1,630 | 236,937 | ||||||
Willis Towers Watson PLC | 2,122 | 322,247 | ||||||
559,184 | ||||||||
Integrated Oil & Gas–3.35% |
| |||||||
BP PLC (United Kingdom) | 57,724 | 364,205 | ||||||
Occidental Petroleum Corp. | 6,207 | 380,986 | ||||||
Royal Dutch Shell PLC–Class A (United Kingdom) | 15,335 | 450,090 | ||||||
1,195,281 | ||||||||
Internet & Direct Marketing Retail–0.73% |
| |||||||
eBay Inc.(b) | 9,254 | 259,760 | ||||||
Investment Banking & Brokerage–1.94% |
| |||||||
Goldman Sachs Group, Inc. (The) | 1,106 | 184,757 | ||||||
Morgan Stanley | 12,780 | 506,727 | ||||||
691,484 | ||||||||
IT Consulting & Other Services–0.74% |
| |||||||
Cognizant Technology Solutions Corp.–Class A | 4,185 | 265,664 | ||||||
Managed Health Care–0.60% |
| |||||||
Anthem, Inc. | 816 | 214,306 | ||||||
Multi-Line Insurance–1.63% |
| |||||||
American International Group, Inc. | 14,704 | 579,485 | ||||||
Oil & Gas Equipment & Services–1.28% |
| |||||||
Schlumberger Ltd. | 5,524 | 199,306 | ||||||
TechnipFMC PLC (United Kingdom) | 13,040 | 255,323 | ||||||
454,629 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
Shares | Value | |||||||
Oil & Gas Exploration & Production–3.28% |
| |||||||
Anadarko Petroleum Corp. | 6,399 | $ | 280,532 | |||||
Apache Corp. | 5,924 | 155,505 | ||||||
Canadian Natural Resources Ltd. (Canada) | 7,841 | 189,190 | ||||||
Devon Energy Corp. | 14,332 | 323,044 | ||||||
Marathon Oil Corp. | 15,315 | 219,617 | ||||||
1,167,888 | ||||||||
Other Diversified Financial Services–0.99% |
| |||||||
AXA Equitable Holdings, Inc. | 8,342 | 138,728 | ||||||
Voya Financial, Inc. | 5,316 | 213,384 | ||||||
352,112 | ||||||||
Packaged Foods & Meats–1.33% |
| |||||||
Mondelez International, Inc.–Class A | 11,803 | 472,474 | ||||||
Pharmaceuticals–5.57% |
| |||||||
Bristol-Myers Squibb Co. | 5,617 | 291,972 | ||||||
Johnson & Johnson | 5,463 | 705,000 | ||||||
Merck & Co., Inc. | 4,492 | 343,234 | ||||||
Novartis AG (Switzerland) | 4,604 | 394,325 | ||||||
Sanofi (France) | 2,881 | 248,973 | ||||||
1,983,504 | ||||||||
Railroads–0.74% |
| |||||||
CSX Corp. | 4,251 | 264,114 | ||||||
Regional Banks–2.99% |
| |||||||
Citizens Financial Group, Inc. | 13,458 | 400,106 | ||||||
Fifth Third Bancorp | 10,373 | 244,077 | ||||||
First Horizon National Corp. | 9,289 | 122,243 | ||||||
PNC Financial Services Group, Inc. (The) | 2,547 | 297,770 | ||||||
1,064,196 | ||||||||
Semiconductors–2.26% |
| |||||||
Intel Corp. | 8,374 | 392,992 | ||||||
QUALCOMM Inc. | 7,222 | 411,004 | ||||||
803,996 | ||||||||
Systems Software–1.33% |
| |||||||
Oracle Corp. | 10,523 | 475,113 | ||||||
Tobacco–1.30% |
| |||||||
Philip Morris International Inc. | 6,953 | 464,182 | ||||||
Total Common Stocks | 21,059,561 | |||||||
Principal Amount | ||||||||
Bonds & Notes–25.84% |
| |||||||
Aerospace & Defense–0.02% | ||||||||
United Technologies Corp., Sr. Unsec. Global Notes, 4.45%, 11/16/2038 | $ | 9,000 | 8,769 | |||||
Air Freight & Logistics–0.01% |
| |||||||
United Parcel Service, Inc., Sr. Unsec. Notes, 3.40%, 11/15/2046 | 4,000 | 3,460 |
Principal Amount | Value | |||||||
Airlines–0.18% |
| |||||||
American Airlines Pass Through Trust,Series 2014-1, Class A, Sr. Sec. First Lien Pass Through Ctfs., 3.70%, 04/01/2028 | $ | 19,444 | $ | 18,896 | ||||
United Airlines Pass Through Trust, | ||||||||
Series 2014-2, Class A, Sr. Sec. First Lien Pass Through Ctfs., 3.75%, 03/03/2028 | 24,880 | 24,381 | ||||||
Series 2018-1, Class AA, Sr. Sec. First Lien Pass Through Ctfs., 3.50%, 09/01/2031 | 17,000 | 16,725 | ||||||
Virgin Australia Pass Through Trust (Australia),Series 2013-1, Class A, Sr. Sec. Gtd. First Lien Pass Through Ctfs., 5.00%, 04/23/2025(d) | 4,810 | 4,882 | ||||||
64,884 | ||||||||
Application Software–1.25% |
| |||||||
Citrix Systems, Inc., Sr. Unsec. Conv. Notes, 0.50%, 04/15/2019 | 117,000 | 166,417 | ||||||
Nuance Communications, Inc., | ||||||||
Sr. Unsec. Conv. Bonds, 1.00%, 12/15/2022(e) | 127,000 | 110,635 | ||||||
Sr. Unsec. Conv. Global Bonds, 1.25%, 04/01/2025 | 49,000 | 43,405 | ||||||
RealPage, Inc., Sr. Unsec. Conv. Bonds, 1.50%, 11/15/2022 | 24,000 | 31,130 | ||||||
Workday, Inc., Sr. Unsec. Conv. Notes, 0.25%, 10/01/2022 | 75,000 | 92,005 | ||||||
443,592 | ||||||||
Asset Management & Custody Banks–0.85% |
| |||||||
Apollo Management Holdings L.P., Sr. Unsec. Gtd. Notes, 4.00%, 05/30/2024(d) | 40,000 | 40,037 | ||||||
Blackstone Holdings Finance Co. LLC, Sr. Unsec. Gtd. Notes, 5.00%, 06/15/2044(d) | 150,000 | 149,757 | ||||||
Brookfield Asset Management Inc. (Canada), Sr. Unsec. Notes, 4.00%, 01/15/2025 | 25,000 | 24,421 | ||||||
Carlyle Holdings Finance LLC, Sr. Unsec. Gtd. Notes, 3.88%, 02/01/2023(d) | 5,000 | 5,029 | ||||||
KKR Group Finance Co. III LLC, Sr. Unsec. Gtd. Bonds, 5.13%, 06/01/2044(d) | 85,000 | 84,005 | ||||||
303,249 | ||||||||
Automobile Manufacturers–0.61% |
| |||||||
Ford Motor Credit Co. LLC, Sr. Unsec. Global Notes, 4.13%, 08/04/2025 | 200,000 | 180,489 | ||||||
General Motors Co., Sr. Unsec. Global Notes, 6.60%, 04/01/2036 | 16,000 | 15,629 | ||||||
General Motors Financial Co., Inc., Sr. Unsec. Gtd. Global Notes, 5.25%, 03/01/2026 | 21,000 | 20,584 | ||||||
216,702 | ||||||||
Biotechnology–1.13% |
| |||||||
AbbVie Inc., Sr. Unsec. Global Notes, 4.50%, 05/14/2035 | 38,000 | 35,288 | ||||||
BioMarin Pharmaceutical Inc., Sr. Unsec. Sub. Conv. Notes, 1.50%, 10/15/2020 | 117,000 | 130,455 | ||||||
Celgene Corp., Sr. Unsec. Global Notes, 4.63%, 05/15/2044 | 100,000 | 88,264 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
Principal Amount | Value | |||||||
Biotechnology–(continued) |
| |||||||
Gilead Sciences, Inc., Sr. Unsec. Global Notes, | ||||||||
2.55%, 09/01/2020 | $ | 50,000 | $ | 49,599 | ||||
4.40%, 12/01/2021 | 25,000 | 25,809 | ||||||
Neurocrine Biosciences, Inc., Sr. Unsec. Conv. Notes, 2.25%, 05/15/2024 | 62,000 | 74,166 | ||||||
403,581 | ||||||||
Brewers–0.52% |
| |||||||
Anheuser-Busch Cos LLC/ Anheuser-Busch InBev Worldwide, Inc. (Belgium), Sr. Unsec. Gtd. Notes, | ||||||||
4.70%, 02/01/2036(d) | 45,000 | 42,023 | ||||||
4.90%, 02/01/2046(d) | 47,000 | 43,737 | ||||||
Anheuser-Busch InBev Finance, Inc. (Belgium), Sr. Unsec. Gtd. Global Notes, | ||||||||
2.65%, 02/01/2021 | 15,000 | 14,751 | ||||||
3.30%, 02/01/2023 | 25,000 | 24,365 | ||||||
Heineken NV (Netherlands), Sr. Unsec. Notes, 3.50%, 01/29/2028(d) | 35,000 | 33,836 | ||||||
Molson Coors Brewing Co., Sr. Unsec. Gtd. Global Notes, | ||||||||
1.45%, 07/15/2019 | 13,000 | 12,869 | ||||||
4.20%, 07/15/2046 | 16,000 | 13,361 | ||||||
184,942 | ||||||||
Broadcasting–1.03% |
| |||||||
Liberty Media Corp., Liberty Formula One, | ||||||||
Sr. Unsec. Conv. Bonds, 1.00%, 01/30/2023 | 20,000 | 20,648 | ||||||
Sr. Unsec. Conv. Deb., 2.25%, 10/05/2021(e) | 55,000 | 26,158 | ||||||
Sr. Unsec. Conv. Notes, 1.38%, 10/15/2023 | 299,000 | 320,917 | ||||||
367,723 | ||||||||
Cable & Satellite–0.91% |
| |||||||
Charter Communications Operating, LLC/Charter Communications Operating Capital Corp., Sr. Sec. Gtd. First Lien Global Notes, 4.46%, 07/23/2022 | 60,000 | 60,621 | ||||||
Comcast Corp, Sr. Unsec. Gtd. Global Notes, | ||||||||
3.90%, 03/01/2038 | 10,000 | 9,286 | ||||||
4.15%, 10/15/2028 | 30,000 | 30,517 | ||||||
4.60%, 10/15/2038 | 10,000 | 10,129 | ||||||
4.70%, 10/15/2048 | 11,000 | 11,219 | ||||||
DISH Network Corp., Sr. Unsec. Conv. Bonds, 3.38%, 08/15/2026 | 147,000 | 119,072 | ||||||
GCI Liberty, Inc., Sr. Unsec. Conv. Deb., 1.75%, 10/05/2023(d)(e) | 85,000 | 83,192 | ||||||
324,036 | ||||||||
Communications Equipment–0.49% |
| |||||||
Finisar Corp., Sr. Unsec. Conv. Bonds, 0.50%, 12/15/2021(e) | 39,000 | 37,117 | ||||||
Viavi Solutions Inc., Sr. Unsec. Conv. Notes, | ||||||||
1.75%, 06/01/2023(d) | 71,000 | 71,100 | ||||||
1.00%, 03/01/2024 | 68,000 | 67,270 | ||||||
175,487 |
Principal Amount | Value | |||||||
Consumer Finance–0.11% |
| |||||||
American Express Co., Unsec. Sub. Global Notes, 3.63%, 12/05/2024 | $ | 18,000 | $ | 17,618 | ||||
Capital One Financial Corp., Sr. Unsec. Global Notes, 3.20%, 01/30/2023 | 15,000 | 14,610 | ||||||
Synchrony Financial, Sr. Unsec. Global Notes, 3.95%, 12/01/2027 | 10,000 | 8,443 | ||||||
40,671 | ||||||||
Data Processing & Outsourced Services–0.13% |
| |||||||
Fiserv, Inc., Sr. Unsec. Global Notes, 3.80%, 10/01/2023 | 15,000 | 15,108 | ||||||
Visa Inc., Sr. Unsec. Global Notes, 4.15%, 12/14/2035 | 30,000 | 31,115 | ||||||
46,223 | ||||||||
Diversified Banks–2.67% |
| |||||||
Bank of America Corp., | ||||||||
Sr. Unsec. Medium-Term Global Notes, 3.50%, 04/19/2026 | 15,000 | 14,461 | ||||||
Sr. Unsec. Medium-Term Notes, 3.25%, 10/21/2027 | 10,000 | 9,258 | ||||||
Bank of Montreal (Canada), Sr. Unsec. Medium-Term Notes, 2.10%, 12/12/2019 | 75,000 | 74,300 | ||||||
Citigroup Inc., | ||||||||
Sr. Unsec. Global Notes, 3.67%, 07/24/2028 | 15,000 | 14,193 | ||||||
Unsec. Sub. Notes, | ||||||||
4.00%, 08/05/2024 | 60,000 | 59,346 | ||||||
4.75%, 05/18/2046 | 15,000 | 13,902 | ||||||
Commonwealth Bank of Australia (Australia), Sr. Unsec. Notes, 2.25%, 03/10/2020(d) | 40,000 | 39,649 | ||||||
Coöperatieve Rabobank U.A. (Netherlands), Jr. Unsec. Sub. Notes, 11.00%(d)(f) | 75,000 | 77,719 | ||||||
Credit Suisse AG (Switzerland), Sr. Unsec. Conv. Medium-Term Notes, 0.50%, 06/24/2024(d) | 260,000 | 227,786 | ||||||
JPMorgan Chase & Co., |
| |||||||
Sr. Unsec. Global Notes, | ||||||||
3.20%, 06/15/2026 | 15,000 | 14,148 | ||||||
3.51%, 01/23/2029 | 15,000 | 14,223 | ||||||
4.26%, 02/22/2048 | 10,000 | 9,336 | ||||||
3.90%, 01/23/2049 | 15,000 | 13,208 | ||||||
Series V, Jr. Unsec. Sub. Global Notes, 5.00%(f) | 150,000 | 144,937 | ||||||
U.S. Bancorp, Series W, Unsec. Sub. Medium-Term Notes, 3.10%, 04/27/2026 | 10,000 | 9,483 | ||||||
Wells Fargo & Co., | ||||||||
Sr. Unsec. Medium-Term Notes, 3.55%, 09/29/2025 | 30,000 | 29,106 | ||||||
Unsec. Sub. Medium-Term Notes, | ||||||||
4.10%, 06/03/2026 | 95,000 | 92,904 | ||||||
4.65%, 11/04/2044 | 100,000 | 94,469 | ||||||
952,428 | ||||||||
Diversified Chemicals–0.04% |
| |||||||
Eastman Chemical Co., Sr. Unsec. Global Notes, 2.70%, 01/15/2020 | 13,000 | 12,906 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
Principal Amount | Value | |||||||
Drug Retail–0.15% |
| |||||||
Walgreens Boots Alliance Inc., Sr. Unsec. Global Notes, | ||||||||
3.30%, 11/18/2021 | $ | 32,000 | $ | 31,873 | ||||
4.50%, 11/18/2034 | 24,000 | 23,105 | ||||||
54,978 | ||||||||
Electric Utilities–0.03% |
| |||||||
NextEra Energy Capital Holdings, Inc., Sr. Unsec. Gtd. Deb., 3.55%, 05/01/2027 | 11,000 | 10,521 | ||||||
Environmental & Facilities Services–0.07% |
| |||||||
Waste Management, Inc., Sr. Unsec. Gtd. Global Notes, 3.90%, 03/01/2035 | 25,000 | 24,360 | ||||||
Food Retail–0.01% |
| |||||||
Alimentation Couche-Tard Inc. (Canada), Sr. Unsec. Gtd. Notes, 4.50%, 07/26/2047(d) | 2,000 | 1,841 | ||||||
General Merchandise Stores–0.06% |
| |||||||
Dollar General Corp., Sr. Unsec. Global Notes, 3.25%, 04/15/2023 | 20,000 | 19,572 | ||||||
Health Care Equipment–2.04% |
| |||||||
Becton, Dickinson and Co., | ||||||||
Sr. Unsec. Global Notes, 4.88%, 05/15/2044 | 170,000 | 161,701 | ||||||
Sr. Unsec. Notes, 2.68%, 12/15/2019 | 15,000 | 14,861 | ||||||
DexCom Inc., Sr. Unsec. Conv. Notes, |
| |||||||
0.75%, 12/01/2023(d) | 86,000 | 87,080 | ||||||
0.75%, 05/15/2022 | 88,000 | 118,918 | ||||||
Insulet Corp., Sr. Unsec. Conv. Notes, 1.38%, 11/15/2024(d) | 13,000 | 13,839 | ||||||
Medtronic, Inc., Sr. Unsec. Gtd. Global Notes, | ||||||||
3.15%, 03/15/2022 | 58,000 | 57,863 | ||||||
4.38%, 03/15/2035 | 20,000 | 20,533 | ||||||
NuVasive, Inc., Sr. Unsec. Conv. Notes, 2.25%, 03/15/2021 | 80,000 | 84,396 | ||||||
Wright Medical Group N.V., Sr. Unsec. Conv. Bonds, 2.25%, 11/15/2021 | 39,000 | 53,595 | ||||||
Wright Medical Group, Inc., Sr. Unsec. Gtd. Conv. Notes, 1.63%, 06/15/2023(d) | 113,000 | 115,638 | ||||||
728,424 | ||||||||
Health Care Facilities–0.89% |
| |||||||
Convertible Trust — Consumer,Series 2018-1, Sr. Unsec. Medium-Term Notes, 0.25%, 01/17/2024 | 160,000 | 154,816 | ||||||
Convertible Trust — Healthcare,Series 2018-1, Sr. Unsec. Medium-Term Notes, 0.25%, 02/05/2024 | 168,000 | 162,204 | ||||||
317,020 | ||||||||
Health Care REITs–0.07% |
| |||||||
HCP, Inc., Sr. Unsec. Global Notes, 3.88%, 08/15/2024 | 25,000 | 24,633 | ||||||
Health Care Services–0.53% |
| |||||||
CVS Health Corp., | ||||||||
Sr. Unsec. Global Bonds, 3.38%, 08/12/2024 | 20,000 | 19,419 | ||||||
Sr. Unsec. Global Notes, 4.10%, 03/25/2025 | 16,000 | 15,881 |
Principal Amount | Value | |||||||
Health Care Services–(continued) |
| |||||||
Express Scripts Holding Co., Sr. Unsec. Gtd. Global Notes, 2.25%, 06/15/2019 | $ | 90,000 | $ | 89,627 | ||||
Cigna Corp., Sr. Sec. Gtd. Notes, 4.80%, 08/15/2038(d) | 9,000 | 8,952 | ||||||
Laboratory Corp. of America Holdings, Sr. Unsec. Notes, | ||||||||
3.20%, 02/01/2022 | 33,000 | 32,773 | ||||||
4.70%, 02/01/2045 | 22,000 | 20,582 | ||||||
187,234 | ||||||||
Home Improvement Retail–0.07% |
| |||||||
Home Depot, Inc. (The), Sr. Unsec. Global Notes, 2.00%, 04/01/2021 | 27,000 | 26,474 | ||||||
Hotel & Resort REITs–0.03% |
| |||||||
Hospitality Properties Trust, Sr. Unsec. Notes, 4.50%, 06/15/2023 | 10,000 | 10,094 | ||||||
Insurance Brokers–0.01% |
| |||||||
Willis North America, Inc., Sr. Unsec. Gtd. Global Notes, 3.60%, 05/15/2024 | 5,000 | 4,887 | ||||||
Integrated Oil & Gas–0.09% |
| |||||||
Occidental Petroleum Corp., Sr. Unsec. Global Notes, 3.40%, 04/15/2026 | 15,000 | 14,697 | ||||||
Suncor Energy Inc. (Canada), Sr. Unsec. Notes, 3.60%, 12/01/2024 | 18,000 | 17,628 | ||||||
32,325 | ||||||||
Integrated Telecommunication Services–1.64% |
| |||||||
AT&T Inc., Sr. Unsec. Global Notes, | ||||||||
3.00%, 06/30/2022 | 28,000 | 27,328 | ||||||
3.40%, 05/15/2025 | 15,000 | 14,120 | ||||||
4.50%, 05/15/2035 | 25,000 | 22,530 | ||||||
5.15%, 03/15/2042 | 150,000 | 140,739 | ||||||
4.80%, 06/15/2044 | 40,000 | 36,009 | ||||||
Orange S.A. (France), Sr. Unsec. Global Notes, 1.63%, 11/03/2019 | 55,000 | 54,324 | ||||||
Telefónica Emisiones, S.A.U. (Spain), Sr. Unsec. Gtd. Global Notes, 7.05%, 06/20/2036 | 150,000 | 171,533 | ||||||
Verizon Communications Inc., Sr. Unsec. Global Notes, 4.40%, 11/01/2034 | 120,000 | 116,095 | ||||||
582,678 | ||||||||
Internet & Direct Marketing Retail–0.74% |
| |||||||
Amazon.com, Inc., Sr. Unsec. Global Notes, | ||||||||
2.60%, 12/05/2019 | 50,000 | 49,881 | ||||||
4.80%, 12/05/2034 | 9,000 | 9,666 | ||||||
Ctrip.com International, Ltd. (China), Sr. Unsec. Conv. Bonds, 1.25%, 09/15/2019(e) | 113,000 | 109,542 | ||||||
Liberty Expedia Holdings, Inc., Sr. Unsec. Conv. Deb., 1.00%, 07/05/2022(d)(e) | 53,000 | 50,787 | ||||||
QVC, Inc., Sr. Sec. Gtd. First Lien Global Notes, 5.45%, 08/15/2034 | 50,000 | 43,823 | ||||||
263,699 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
Principal Amount | Value | |||||||
Investment Banking & Brokerage–1.14% |
| |||||||
Goldman Sachs Group, Inc. (The), Unsec. Sub. Notes, 4.25%, 10/21/2025 | $ | 27,000 | $ | 25,890 | ||||
GS Finance Corp., Series 0001, Sr. Unsec. Conv. Medium-Term Notes, 0.25%, 07/08/2024 | 198,000 | 172,545 | ||||||
Morgan Stanley, Sr. Unsec. Medium-Term Global Notes, | ||||||||
2.38%, 07/23/2019 | 175,000 | 174,266 | ||||||
4.00%, 07/23/2025 | 35,000 | 34,574 | ||||||
407,275 | ||||||||
Life & Health Insurance–0.40% |
| |||||||
Athene Global Funding, Sec. Notes, 4.00%, 01/25/2022(d) | 45,000 | 45,478 | ||||||
Jackson National Life Global Funding, Sr. Sec. Notes, | ||||||||
2.10%, 10/25/2021(d) | 10,000 | 9,653 | ||||||
3.25%, 01/30/2024(d) | 15,000 | 14,717 | ||||||
Nationwide Financial Services Inc., Sr. Unsec. Notes, 5.30%, 11/18/2044(d) | 35,000 | 37,134 | ||||||
Reliance Standard Life Global Funding II, Sr. Sec. First Lien Notes, 3.05%, 01/20/2021(d) | 20,000 | 19,823 | ||||||
Teachers Insurance and Annuity Association of America, Unsec. Sub. Notes, 4.27%, 05/15/2047(d) | 17,000 | 16,334 | ||||||
143,139 | ||||||||
Movies & Entertainment–0.18% |
| |||||||
Live Nation Entertainment, Inc., Sr. Unsec. Conv. Notes, 2.50%, 03/15/2023(d) | 62,000 | 63,286 | ||||||
Multi-Line Insurance–0.20% |
| |||||||
American Financial Group, Inc., Sr. Unsec. Notes, 4.50%, 06/15/2047 | 20,000 | 18,039 | ||||||
American International Group, Inc., Sr. Unsec. Global Notes, | ||||||||
2.30%, 07/16/2019 | 20,000 | 19,919 | ||||||
4.38%, 01/15/2055 | 40,000 | 33,391 | ||||||
71,349 | ||||||||
Multi-Utilities–0.04% |
| |||||||
NiSource Inc., Sr. Unsec. Global Notes, 4.38%, 05/15/2047 | 9,000 | 8,417 | ||||||
Sempra Energy, Sr. Unsec. Global Notes, 3.80%, 02/01/2038 | 8,000 | 6,898 | ||||||
15,315 | ||||||||
Office REITs–0.49% |
| |||||||
Government Properties Income Trust, Sr. Unsec. Global Notes, 4.00%, 07/15/2022 | 25,000 | 24,622 | ||||||
Highwoods Realty L.P., Sr. Unsec. Notes, 3.20%, 06/15/2021 | 150,000 | 148,248 | ||||||
172,870 | ||||||||
Oil & Gas Equipment & Services–0.42% |
| |||||||
Ensco Jersey Finance Ltd., Sr. Unsec. Gtd. Conv. Bonds, 3.00%, 01/31/2024 | 73,000 | 48,455 | ||||||
Helix Energy Solutions Group, Inc., Sr. Unsec. Conv. Notes, 4.25%, 05/01/2022 | 40,000 | 37,112 |
Principal Amount | Value | |||||||
Oil & Gas Equipment & Services–(continued) |
| |||||||
Nabors Industries Inc., Sr. Unsec. Gtd. Conv. Bonds, 0.75%, 01/15/2024 | $ | 40,000 | $ | 24,763 | ||||
Oil States International, Inc., Sr. Unsec. Conv. Notes, 1.50%, 02/15/2023(d) | 46,000 | 37,933 | ||||||
148,263 | ||||||||
Oil & Gas Exploration & Production–0.17% |
| |||||||
Anadarko Petroleum Corp., Sr. Unsec. Notes, 6.60%, 03/15/2046 | 18,000 | 19,964 | ||||||
Chesapeake Energy Corp., Sr. Unsec. Gtd. Conv. Bonds, 5.50%, 09/15/2026 | 37,000 | 29,872 | ||||||
ConocoPhillips Co., Sr. Unsec. Gtd. Global Notes, 4.15%, 11/15/2034 | 13,000 | 12,414 | ||||||
62,250 | ||||||||
Oil & Gas Storage & Transportation–0.97% |
| |||||||
Enable Midstream Partners, LP, Sr. Unsec. Global Notes, 2.40%, 05/15/2019 | 200,000 | 198,885 | ||||||
Energy Transfer Partners, L.P., Sr. Unsec. Gtd. Notes, | ||||||||
4.20%, 09/15/2023 | 2,000 | 1,973 | ||||||
4.90%, 03/15/2035 | 19,000 | 17,080 | ||||||
Enterprise Products Operating LLC, | ||||||||
Sr. Unsec. Gtd. Global Notes, 4.25%, 02/15/2048 | 10,000 | 8,911 | ||||||
Sr. Unsec. Gtd. Notes, 2.55%, 10/15/2019 | 20,000 | 19,898 | ||||||
Kinder Morgan Inc., Sr. Unsec. Gtd. Notes, 5.30%, 12/01/2034 | 23,000 | 22,642 | ||||||
MPLX LP, | ||||||||
Sr. Unsec. Global Bonds, 4.50%, 07/15/2023 | 65,000 | 65,710 | ||||||
Sr. Unsec. Global Notes, 4.50%, 04/15/2038 | 11,000 | 9,647 | ||||||
344,746 | ||||||||
Other Diversified Financial Services–0.20% |
| |||||||
ERAC USA Finance LLC, Sr. Unsec. Gtd. Notes, 2.35%, 10/15/2019(d) | 50,000 | 49,668 | ||||||
NXP Funding LLC (Netherlands), Sr. Unsec. Gtd. Notes, 5.35%, 03/01/2026(d) | 20,000 | 20,365 | ||||||
70,033 | ||||||||
Packaged Foods & Meats–0.13% |
| |||||||
General Mills, Inc., Sr. Unsec. Global Notes, 2.20%, 10/21/2019 | 45,000 | 44,667 | ||||||
Mead Johnson Nutrition Co. (United Kingdom), Sr. Unsec. Gtd. Global Notes, 4.13%, 11/15/2025 | 3,000 | 3,082 | ||||||
47,749 | ||||||||
Pharmaceuticals–1.45% |
| |||||||
Allergan Funding SCS, Sr. Unsec. Gtd. Global Notes, 4.85%, 06/15/2044 | 150,000 | 142,310 | ||||||
Bayer US Finance II LLC (Germany), Sr. Unsec. Gtd. Notes, 2.13%, 07/15/2019(d) | 15,000 | 14,884 | ||||||
Bayer US Finance LLC (Germany), Sr. Unsec. Gtd. Notes, 3.00%, 10/08/2021(d) | 200,000 | 195,673 | ||||||
Jazz Investments I Ltd., Sr. Unsec. Gtd. Conv. Bonds, 1.88%, 08/15/2021 | 76,000 | 73,893 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
Principal Amount | Value | |||||||
Pharmaceuticals–(continued) |
| |||||||
Medicines Co. (The), Sr. Unsec. Conv. Bonds, 2.75%, 07/15/2023 | $ | 37,000 | $ | 28,070 | ||||
Mylan N.V., Sr. Unsec. Gtd. Global Notes, 3.15%, 06/15/2021 | 17,000 | 16,657 | ||||||
Pacira Pharmaceuticals, Inc., Sr. Unsec. Conv. Notes, 2.38%, 04/01/2022 | 26,000 | 25,854 | ||||||
Supernus Pharmaceuticals, Inc., Sr. Unsec. Conv. Notes, 0.63%, 04/01/2023(d) | 22,000 | 20,790 | ||||||
518,131 | ||||||||
Property & Casualty Insurance–0.34% |
| |||||||
Allstate Corp. (The), Sr. Unsec. Bonds, 3.28%, 12/15/2026 | 10,000 | 9,823 | ||||||
Liberty Mutual Group Inc., Sr. Unsec. Gtd. Bonds, 4.85%, 08/01/2044(d) | 115,000 | 112,216 | ||||||
122,039 | ||||||||
Railroads–0.07% |
| |||||||
Union Pacific Corp., Sr. Unsec. Notes, 4.15%, 01/15/2045 | 25,000 | 23,518 | ||||||
Regional Banks–0.04% |
| |||||||
Citizens Financial Group, Inc., Sr. Unsec. Global Notes, 2.38%, 07/28/2021 | 15,000 | 14,622 | ||||||
Renewable Electricity–0.40% |
| |||||||
Oglethorpe Power Corp., Sr. Sec. First Mortgage Bonds, 4.55%, 06/01/2044 | 150,000 | 142,229 | ||||||
Semiconductors–1.17% |
| |||||||
Broadcom Corp./Broadcom Cayman Finance Ltd., Sr. Unsec. Gtd. Global Notes, 3.63%, 01/15/2024 | 30,000 | 28,413 | ||||||
Cree, Inc., Sr. Unsec. Conv. Notes, 0.88%, 09/01/2023(d) | 98,000 | 95,067 | ||||||
Microchip Technology Inc., Sr. Unsec. Sub. Conv. Notes, 1.63%, 02/15/2027 | 74,000 | 72,514 | ||||||
Micron Technology, Inc., Series G, Sr. Unsec. Conv. Global Bonds, 3.00%, 11/15/2028(e) | 98,000 | 108,880 | ||||||
ON Semiconductor Corp., Sr. Unsec. Gtd. Conv. Bonds, 1.00%, 12/01/2020 | 76,000 | 83,980 | ||||||
Silicon Laboratories Inc., Sr. Unsec. Conv. Bonds, 1.38%, 03/01/2022 | 21,000 | 22,236 | ||||||
Texas Instruments Inc., Sr. Unsec. Notes, 2.63%, 05/15/2024 | 5,000 | 4,835 | ||||||
415,925 | ||||||||
Specialized Finance–0.30% |
| |||||||
Air Lease Corp., Sr. Unsec. Global Notes, | ||||||||
3.00%, 09/15/2023 | 24,000 | 22,559 | ||||||
4.25%, 09/15/2024 | 35,000 | 34,252 | ||||||
Aircastle Ltd., Sr. Unsec. Notes, 4.40%, 09/25/2023 | 10,000 | 9,845 | ||||||
Aviation Capital Group LLC, Sr. Unsec. Notes, 4.88%, 10/01/2025(d) | 40,000 | 40,026 | ||||||
106,682 |
Principal Amount | Value | |||||||
Specialized REITs–0.04% |
| |||||||
Crown Castle International Corp., Sr. Unsec. Global Bonds, 3.80%, 02/15/2028 | $ | 15,000 | $ | 14,104 | ||||
Specialty Chemicals–0.01% |
| |||||||
Sherwin-Williams Co. (The), Sr. Unsec. Global Notes, 4.50%, 06/01/2047 | 3,000 | 2,719 | ||||||
Systems Software–0.50% |
| |||||||
FireEye, Inc., | ||||||||
Series A, Sr. Unsec. Conv. Bonds, 1.00%, 06/01/2020(e) | 76,000 | 73,056 | ||||||
Series B, Sr. Unsec. Conv. Bonds, 1.63%, 06/01/2022(e) | 77,000 | 70,339 | ||||||
Microsoft Corp., Sr. Unsec. Global Notes, 3.50%, 02/12/2035 | 37,000 | 35,415 | ||||||
178,810 | ||||||||
Technology Distributors–0.08% |
| |||||||
Avnet, Inc., Sr. Unsec. Global Notes, 4.63%, 04/15/2026 | 30,000 | 29,370 | ||||||
Technology Hardware, Storage & Peripherals–0.68% |
| |||||||
Apple Inc., Sr. Unsec. Global Notes, | ||||||||
2.15%, 02/09/2022 | 39,000 | 38,040 | ||||||
3.35%, 02/09/2027 | 10,000 | 9,794 | ||||||
Dell International LLC/ EMC Corp., Sr. Sec. First Lien Gtd. Notes, 5.45%, 06/15/2023(d) | 26,000 | 26,482 | ||||||
SanDisk Corp., Sr. Unsec. Gtd. Conv. Bonds, 0.50%, 10/15/2020 | 140,000 | 117,877 | ||||||
Western Digital Corp., Sr. Unsec. Gtd. Conv. Notes, 1.50%, 02/01/2024(d) | 61,000 | 49,587 | ||||||
241,780 | ||||||||
Wireless Telecommunication Services–0.04% |
| |||||||
Rogers Communications Inc. (Canada), Sr. Unsec. Gtd. Global Notes, 4.30%, 02/15/2048 | 15,000 | 14,349 | ||||||
Total Bonds & Notes |
| 9,207,946 | ||||||
U.S. Treasury Securities–10.04% |
| |||||||
U.S. Treasury Notes–9.09% | ||||||||
1.25%, 01/31/2019 | 710,000 | 709,395 | ||||||
2.50%, 12/31/2020 | 2,128,000 | 2,127,718 | ||||||
2.63%, 12/15/2021 | 290,000 | 291,323 | ||||||
2.63%, 12/31/2023 | 19,200 | 19,301 | ||||||
2.63%, 12/31/2025 | 19,300 | 19,357 | ||||||
3.13%, 11/15/2028 | 70,100 | 72,773 | ||||||
3,239,867 | ||||||||
U.S. Treasury Bonds–0.95% |
| |||||||
4.50%, 02/15/2036 | 75,000 | 92,555 | ||||||
3.00%, 08/15/2048 | 245,200 | 244,535 | ||||||
337,090 | ||||||||
Total U.S. Treasury Securities |
| 3,576,957 |
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–0.23% |
| |||||||
Asset Management & Custody Banks–0.23% |
| |||||||
AMG Capital Trust II, $2.58 Conv. Pfd. (Cost $106,269) | 1,700 | $ | 82,025 | |||||
Money Market Funds–4.25% |
| |||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30%(g) | 529,865 | 529,865 | ||||||
Invesco Liquid Assets Portfolio–Institutional Class, 2.48%(g) | 378,405 | 378,443 |
Shares | Value | |||||||
Invesco Treasury Portfolio–Institutional Class, 2.30%(g) | 605,561 | $ | 605,561 | |||||
Total Money Market Funds |
| 1,513,869 | ||||||
TOTAL INVESTMENTS IN SECURITIES–99.46% |
| 35,440,358 | ||||||
OTHER ASSETS LESS LIABILITIES–0.54% |
| 193,824 | ||||||
NET ASSETS–100.00% |
| $ | 35,634,182 |
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 the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 1K. |
(d) | 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 December 31, 2018 was $2,050,005, which represented 5.75% of the Fund’s Net Assets. |
(e) | Security has an irrevocable call by the issuer or mandatory put by the holder. Maturity date reflects such call or put. |
(f) | Perpetual bond with no specified maturity date. |
(g) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
Investment Abbreviations:
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 |
Open Futures Contracts — Equity Risk | ||||||||||||||||||||
Short Futures Contracts | Number of Contracts | Expiration Month | Notional Value | Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
E-Mini S&P 500 | 70 | March–2019 | $ | (8,768,200 | ) | $ | (172,631 | ) | $ | (172,631 | ) |
Open Forward Foreign Currency Contracts | ||||||||||||||||||||||
Settlement Date | Counterparty | Contract to | Unrealized Appreciation (Depreciation) | |||||||||||||||||||
Deliver | Receive | |||||||||||||||||||||
02/01/2019 | Bank of New York Mellon (The) | AUD | 83,291 | USD | 54,892 | $ | 1,191 | |||||||||||||||
02/01/2019 | Bank of New York Mellon (The) | CAD | 97,032 | USD | 72,258 | 1,129 | ||||||||||||||||
02/01/2019 | State Street Bank & Trust Co. | AUD | 83,289 | USD | 59,904 | 1,204 | ||||||||||||||||
02/01/2019 | State Street Bank & Trust Co. | CAD | 97,032 | USD | 72,248 | 1,119 | ||||||||||||||||
Subtotal — Appreciation | 4,643 | |||||||||||||||||||||
02/01/2019 | Bank of New York Mellon (The) | CHF | 146,165 | USD | 148,097 | �� | (999 | ) | ||||||||||||||
02/01/2019 | Bank of New York Mellon (The) | EUR | 82,335 | USD | 94,376 | (188 | ) | |||||||||||||||
02/01/2019 | Bank of New York Mellon (The) | GBP | 307,774 | USD | 390,369 | (2,484 | ) | |||||||||||||||
02/01/2019 | State Street Bank & Trust Co. | CHF | 146,166 | USD | 148,061 | (1,037 | ) | |||||||||||||||
02/01/2019 | State Street Bank & Trust Co. | EUR | 82,335 | USD | 94,389 | (175 | ) | |||||||||||||||
02/01/2019 | State Street Bank & Trust Co. | GBP | 307,774 | USD | 390,448 | (2,404 | ) | |||||||||||||||
02/01/2019 | State Street Bank & Trust Co. | USD | 18,641 | AUD | 26,102 | (245 | ) | |||||||||||||||
Subtotal — Depreciation | (7,532 | ) | ||||||||||||||||||||
Total Forward Foreign Currency Contracts — Currency Risk | $ | (2,889 | ) |
Abbreviations:
AUD | – Australian Dollar | |
CAD | – Canadian Dollar | |
CHF | – Swiss Franc |
EUR | – Euro | |
GBP | – British Pound Sterling | |
USD | – U.S. Dollar |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $33,383,708) | $ | 33,926,489 | ||
Investments in affiliated money market funds, at value (Cost $1,513,845) | 1,513,869 | |||
Other Investments: | ||||
Unrealized appreciation on forward foreign currency contracts outstanding | 4,643 | |||
Foreign currencies, at value (Cost $36,766) | 36,860 | |||
Receivable for: | ||||
Fund shares sold | 225,565 | |||
Dividends and interest | 119,666 | |||
Investment for trustee deferred compensation and retirement plans | 60,151 | |||
Total assets | 35,887,243 | |||
Liabilities: | ||||
Other investments: | ||||
Unrealized depreciation on forward foreign currency contracts outstanding | 7,532 | |||
Payable for: | ||||
Variation margin payable — futures contracts | 81,886 | |||
Investments purchased | 3,978 | |||
Amount due to custodian | 7,011 | |||
Fund shares reacquired | 14,720 | |||
Accrued fees to affiliates | 16,239 | |||
Accrued trustees’ and officers’ fees and benefits | 4,047 | |||
Accrued other operating expenses | 53,095 | |||
Trustee deferred compensation and retirement plans | 64,553 | |||
Total liabilities | 253,061 | |||
Net assets applicable to shares outstanding | $ | 35,634,182 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 33,566,370 | ||
Distributable earnings | 2,067,812 | |||
$ | 35,634,182 | |||
Net Assets: | ||||
Series I | $ | 34,419,748 | ||
Series II | $ | 1,214,434 | ||
Shares outstanding, no par value, | ||||
Series I | 3,118,055 | |||
Series II | 111,284 | |||
Series I: | ||||
Net asset value per share | $ | 11.04 | ||
Series II: | ||||
Net asset value per share | $ | 10.91 |
Investment income: | ||||
Dividends (net of foreign withholding taxes of $9,627) | $ | 633,091 | ||
Dividends from affiliated money market funds | 36,318 | |||
Interest | 375,799 | |||
Total investment income | 1,045,208 | |||
Expenses: | ||||
Advisory fees | 253,776 | |||
Administrative services fees | 113,430 | |||
Custodian fees | 19,128 | |||
Distribution fees — Series II | 3,440 | |||
Transfer agent fees | 18,758 | |||
Trustees’ and officers’ fees and benefits | 20,799 | |||
Reports to shareholders | 10,683 | |||
Professional services fees | 61,240 | |||
Other | 25,047 | |||
Total expenses | 526,301 | |||
Less: Fees waived | (2,393 | ) | ||
Net expenses | 523,908 | |||
Net investment income | 521,300 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities (includes net gains from securities sold to affiliates of $3,186) | 1,664,835 | |||
Foreign currencies | (4,539 | ) | ||
Forward foreign currency contracts | 104,536 | |||
Futures contracts | (180,270 | ) | ||
1,584,562 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (6,410,379 | ) | ||
Foreign currencies | (562 | ) | ||
Forward foreign currency contracts | 36,343 | |||
Futures contracts | (172,631 | ) | ||
(6,547,229 | ) | |||
Net realized and unrealized gain (loss) | (4,962,667 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (4,441,367 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income | $ | 521,300 | $ | 702,760 | ||||
Net realized gain | 1,584,562 | 2,639,827 | ||||||
Change in net unrealized appreciation (depreciation) | (6,547,229 | ) | 1,552,948 | |||||
Net increase (decrease) in net assets resulting from operations | (4,441,367 | ) | 4,895,535 | |||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (2,054,218 | ) | (610,486 | ) | ||||
Series II | (66,296 | ) | (16,351 | ) | ||||
Total distributions from distributable earnings | (2,120,514 | ) | (626,837 | ) | ||||
Share transactions–net: | ||||||||
Series I | (3,342,378 | ) | (10,218,192 | ) | ||||
Series II | (11,717 | ) | (145,427 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (3,354,095 | ) | (10,363,619 | ) | ||||
Net increase (decrease) in net assets | (9,915,976 | ) | (6,094,921 | ) | ||||
Net assets: | ||||||||
Beginning of year | 45,550,158 | 51,645,079 | ||||||
End of year | $ | 35,634,182 | $ | 45,550,158 |
(1) | The Securities and Exchange Commission eliminated the requirement to disclose distribution components separately, except for tax return of capital. For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income. |
Notes to Financial Statements
December 31, 2018
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. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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 theover-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 (“NAV”) 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 theend-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. Pricing services generally value debt obligations assuming orderly transactions of institutional
Invesco V.I. Managed Volatility Fund
round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 investment 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) isrecorded on the accrual basis from settlement date. Bond premiums and discounts are amortized and/or accreted over the lives of the respective securities.Pay-in-kind interest income andnon-cash dividend income received in the form of securities in-lieu of cash are recorded at the fair value of the securities received. 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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. Managed Volatility 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 the 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 the dailymark-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 anagreed-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 Counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. |
Invesco V.I. Managed Volatility 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 accrues daily and pays monthly 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 mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2019, 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 (the “expense limits”). 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, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $2,393.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $50,000 for accounting and fund administrative services and was reimbursed $63,430 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution fees.
For the year ended December 31, 2018, the Fund incurred $289 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. |
Invesco V.I. Managed Volatility Fund
The following is a summary of the tiered valuation input levels, as of December 31, 2018. 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 | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | $ | 19,601,968 | $ | 1,457,593 | $ | — | $ | 21,059,561 | ||||||||
Bonds & Notes | — | 9,207,946 | — | 9,207,946 | ||||||||||||
U.S. Treasury Securities | — | 3,576,957 | — | 3,576,957 | ||||||||||||
Preferred Stocks | — | 82,025 | — | 82,025 | ||||||||||||
Money Market Funds | 1,513,869 | — | — | 1,513,869 | ||||||||||||
Total Investments in Securities | 21,115,837 | 14,324,521 | — | 35,440,358 | ||||||||||||
Other Investments — Assets* | ||||||||||||||||
Forward Foreign Currency Contracts | — | 4,643 | — | 4,643 | ||||||||||||
Other Investments — Liabilities* | ||||||||||||||||
Forward Foreign Currency Contracts | — | (7,532 | ) | — | (7,532 | ) | ||||||||||
Futures Contracts | (172,631 | ) | — | — | (172,631 | ) | ||||||||||
(172,631 | ) | (7,532 | ) | — | (180,163 | ) | ||||||||||
Total Other Investments | (172,631 | ) | (2,889 | ) | — | (175,520 | ) | |||||||||
Total Investments | $ | 20,943,206 | $ | 14,321,632 | $ | — | $ | 35,264,838 |
* | Unrealized appreciation (depreciation). |
NOTE 4—Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (“ISDA Master Agreement”) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
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 December 31, 2018:
Value | ||||
Derivative Assets | Currency Risk | |||
Unrealized appreciation on forward foreign currency contracts outstanding | $ | 4,643 | ||
Derivatives not subject to master netting agreements | — | |||
Total Derivative Assets subject to master netting agreements | $ | 4,643 |
Value | ||||||||||||
Derivative Liabilities | Currency Risk | Equity Risk | Total | |||||||||
Unrealized depreciation on futures contracts — Exchange-Traded(a) | $ | — | $ | (172,631 | ) | $ | (172,631 | ) | ||||
Unrealized depreciation on forward foreign currency contracts outstanding | (7,532 | ) | — | (7,532 | ) | |||||||
Total Derivative Liabilities | (7,532 | ) | (172,631 | ) | (180,163 | ) | ||||||
Derivatives not subject to master netting agreements | — | 172,631 | 172,631 | |||||||||
Total Derivative Liabilities subject to master netting agreements | $ | (7,532 | ) | $ | — | $ | (7,532 | ) |
(a) | The daily variation margin receivable (payable) at period-end is recorded in the Statement of Assets and Liabilities. |
Invesco V.I. Managed Volatility Fund
Offsetting Assets and Liabilities
The table below reflects the Fund’s exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of December 31, 2018.
Financial Derivative Assets | Financial Derivative Liabilities | Collateral (Received)/Pledged | ||||||||||||||||||||||
Counterparty | Forward Foreign Currency Contracts | Forward Foreign Currency Contracts | Net Value of Derivatives | Non-Cash | Cash | Net Amount | ||||||||||||||||||
Bank of New York Mellon (The) | $ | 2,320 | $ | (3,672 | ) | $ | (1,352 | ) | $ | — | $ | — | $ | (1,352 | ) | |||||||||
State Street Bank & Trust Co. | 2,323 | (3,860 | ) | (1,537 | ) | — | — | (1,537 | ) | |||||||||||||||
Total | $ | 4,643 | $ | (7,532 | ) | $ | (2,889 | ) | $ | — | $ | — | $ | (2,889 | ) |
Effect of Derivative Investments for the year ended December 31, 2018
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 | ||||||||||||
Currency Risk | Equity Risk | Total | ||||||||||
Realized Gain (Loss): | ||||||||||||
Forward foreign currency contracts | $ | 104,536 | $ | — | $ | 104,536 | ||||||
Futures contracts | — | (180,270 | ) | (180,270 | ) | |||||||
Change in Net Unrealized Appreciation (Depreciation): | ||||||||||||
Forward foreign currency contracts | 36,343 | — | 36,343 | |||||||||
Futures contracts | — | (172,631 | ) | (172,631 | ) | |||||||
Total | $ | 140,879 | $ | (352,901 | ) | $ | (212,022 | ) |
The table below summarizes the twelve month average notional value of forward foreign currency contracts and the four month average notional value of futures contracts outstanding during the period.
Forward Foreign Currency Contracts | Futures Contracts | |||||||
Average notional value | $ | 2,483,276 | $ | 6,705,489 |
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 year ended December 31, 2018, the Fund engaged in securities purchases of $2,349 and securities sales of $9,678, which resulted in net realized gains of $3,186.
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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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. Managed Volatility Fund
NOTE 8—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 700,251 | $ | 626,837 | ||||
Long-term capital gain | 1,420,263 | — | ||||||
Total distributions | $ | 2,120,514 | $ | 626,837 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 505,839 | ||
Undistributedlong-term gain | 1,376,330 | |||
Net unrealized appreciation — investments | 244,891 | |||
Net unrealized appreciation — foreign currencies | 16 | |||
Temporary book/tax differences | (59,264 | ) | ||
Shares of beneficial interest | 33,566,370 | |||
Total net assets | $ | 35,634,182 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to wash sales, tax treatment of futures contracts and adjustments to contingent payment debt instruments.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 does not have a capital loss carryforward as of December 31, 2018.
NOTE 9—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $11,215,494 and $15,173,100, respectively. During the same period, purchases and sales of U.S. Treasury obligations were $33,198,958 and $32,939,742, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 2,897,478 | ||
Aggregate unrealized (depreciation) of investments | (2,652,587 | ) | ||
Net unrealized appreciation of investments | $ | 244,891 |
Cost of investments for tax purposes is $35,019,947.
NOTE 10—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of deemed dividends on convertible debt, contingent payment debt instruments sold and foreign currency transactions, on December 31, 2018, undistributed net investment income was increased by $7,399 and undistributed net realized gain was decreased by $7,399. This reclassification had no effect on the net assets or the distributable earnings of the Fund.
Invesco V.I. Managed Volatility Fund
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 209,264 | $ | 2,541,868 | 283,126 | $ | 3,509,281 | ||||||||||
Series II | 5,870 | 72,638 | 13,842 | 167,061 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 162,517 | 2,054,218 | 48,606 | 610,486 | ||||||||||||
Series II | 5,304 | 66,295 | 1,316 | 16,351 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (630,388 | ) | (7,938,464 | ) | (1,147,686 | ) | (14,337,959 | ) | ||||||||
Series II | (11,831 | ) | (150,650 | ) | (26,720 | ) | (328,839 | ) | ||||||||
Net increase (decrease) in share activity | (259,264 | ) | $ | (3,354,095 | ) | (827,516 | ) | $ | (10,363,619 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 59% 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—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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 13.06 | $ | 0.16 | $ | (1.51 | ) | $ | (1.35 | ) | $ | (0.22 | ) | $ | (0.45 | ) | $ | (0.67 | ) | $ | 11.04 | (11.00 | )% | $ | 34,420 | 1.23 | %(d) | 1.24 | %(d) | 1.24 | %(d) | 111 | % | |||||||||||||||||||||||
Year ended 12/31/17 | 11.97 | 0.18 | (e) | 1.08 | 1.26 | (0.17 | ) | — | (0.17 | ) | 13.06 | 10.56 | 44,104 | 1.13 | 1.13 | 1.42 | (e) | 91 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 11.38 | 0.14 | 1.03 | 1.17 | (0.22 | ) | (0.36 | ) | (0.58 | ) | 11.97 | 10.61 | 50,183 | 1.15 | 1.16 | 1.26 | 92 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 19.02 | 0.18 | (0.74 | ) | (0.56 | ) | (0.27 | ) | (6.81 | ) | (7.08 | ) | 11.38 | (2.15 | ) | 52,360 | 1.08 | 1.10 | 1.07 | 117 | ||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 12.92 | 0.12 | (1.49 | ) | (1.37 | ) | (0.19 | ) | (0.45 | ) | (0.64 | ) | 10.91 | (11.28 | ) | 1,214 | 1.48 | (d) | 1.49 | (d) | 0.99 | (d) | 111 | % | ||||||||||||||||||||||||||||||||
Year ended 12/31/17 | 11.84 | 0.15 | (e) | 1.07 | 1.22 | (0.14 | ) | — | (0.14 | ) | 12.92 | 10.33 | 1,446 | 1.38 | 1.38 | 1.17 | (e) | 91 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 11.26 | 0.11 | 1.02 | 1.13 | (0.19 | ) | (0.36 | ) | (0.55 | ) | 11.84 | 10.31 | 1,462 | 1.40 | 1.41 | 1.01 | 92 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 18.88 | 0.13 | (0.72 | ) | (0.59 | ) | (0.22 | ) | (6.81 | ) | (7.03 | ) | 11.26 | (2.37 | ) | 1,500 | 1.33 | 1.35 | 0.82 | 117 | ||||||||||||||||||||||||||||||||||||
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 |
(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 based on average daily net assets (000’s omitted) of $40,920 and $1,376 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 year ended December 31, 2017. Net investment income per share and the ratio of net investment income to average net assets excluding the significant dividends are $0.14 and 1.11% and $0.11 and 0.86% for Series I and Series II shares, respectively. |
Invesco V.I. Managed Volatility Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Managed Volatility Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Managed Volatility Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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.
ACTUAL | HYPOTHETICAL (5% annual return before | |||||||||||||||||||||||
Class | Beginning Account Value (07/01/18) | Ending Account Value (12/31/18)1 | Expenses Paid During Period2,3 | Ending Account Value (12/31/18) | Expenses Paid During Period2,4 | Annualized Expense Ratio2 | ||||||||||||||||||
Series I | $ | 1,000.00 | $ | 908.10 | $ | 5.87 | $ | 1,019.06 | $ | 6.21 | 1.22 | % | ||||||||||||
Series II | 1,000.00 | 906.10 | 7.06 | 1,017.80 | 7.48 | 1.47 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. Effective January 1, 2019, the Fund’s adviser has contractually agreed to limit administrative services fees reimbursed by the Fund. The annualized ratios restated as if this administrative services fee limitation had been in effect throughout the entire most recent fiscal half year are 1.11% and 1.36%, 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 $5.34 and $6.53 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 $5.65 and $6.92 for Series I and Series II shares, respectively. |
Invesco V.I. Managed Volatility Fund
Tax Information
Form1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Long-Term Capital Gain Distributions | $ | 1,420,263 | ||
Corporate Dividends Received Deduction* | 98.41 | % | ||
U.S. Treasury Obligations* | 7.62 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. Managed Volatility Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Managed Volatility Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. Managed Volatility Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. Managed Volatility Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Managed Volatility Fund
| ||||
Annual Report to Shareholders
| December 31, 2018 | |||
| ||||
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 (or any successor Form). The Fund’s Form N-Q (or any successor Form) filings are available on the SEC website, 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 (or any successor Form), 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.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Invesco Distributors, Inc. | VIMCCE-AR-1 | 02152019 1209 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. Mid Cap
Core Equity Fund (the Fund) underperformed the Russell Midcap Index, the Fund’s style-specific benchmark.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -11.35 | % | |||
Series II Shares | -11.60 | ||||
S&P 500 Index▼ (Broad Market Index) | -4.38 | ||||
Russell Midcap Index∎ (Style-Specific Index) | -9.06 | ||||
Lipper VUF Mid-Cap Core Funds Index¨ (Peer Group Index) | -11.67 | ||||
Source(s):▼FactSet Research Systems Inc.;∎RIMES Technologies Corp.;¨Lipper Inc. |
Market conditions and your Fund
Calendar year 2018 proved to be an increasingly volatile time for US equities. In January 2018, US equity markets steadily moved higher, as investors remained enthused about the passage of the Tax Cuts and Jobs Act signed into law in late December 2017. However, in February 2018, volatility returned to the US stock and bond markets. Worries about how rising interest rates might affect economic growth, concerns about a potential trade war and heightened geopolitical tensions caused the US stock markets to pull back and volatility to increase.
US equity markets generally recovered in the second quarter of 2018 as strong US retail sales and low unemployment buoyed markets. Throughout the summer, US equities moved higher as corporate profits surged. Several US equity indexes reached new highs despite potential headwinds including trade tensions, tariff announcements and contagion concerns over a Turkish currency crisis. After a relatively quiet summer, market volatility noticeably rose in October, as US equity markets suffered a sharp sell-off through year-end, amid
rising interest rates and concerns that higher inflation could mean a more restrictive monetary policy. In this environment, there was a flight to safety, as investors fled to defensive areas of the equities markets, like health care and utilities, and US Treasuries.
Given signs of a strong economy, the US Federal Reserve raised interest rates four times during the year: in March, June, September and December 2018. Following December’s Federal Reserve meeting, Chairman Jerome Powell raised interest rates for the fourth time in 2018 by 25 basis points to a targeted range of 2.25% to 2.50%, and lowered guidance from three to two rate hikes in 2019, signaling a slightly more dovish stance than expected.1 In contrast, the European Central Bank and central banks in several other countries maintained extraordinarily accommodative monetary policies.
During the year, the largest contributor to the Fund’s performance relative to the style-specific benchmark was the Fund’s large weighting to cash. Stock selection in the financials and consumer staples sectors also benefited the Fund’s relative performance. While stock selection in the utilities sector added to the Fund’s
relative performance, underweight exposure to the sector produced negative overall results. The largest detractors from the Fund’s relative performance included stock selection in the information technology (IT), energy, consumer discretionary and industrials sectors.
Discount retailerDollar General was the largest contributor for the year. The company grew in market share and the market responded to its improved business model.
Another key individual contributor to the Fund’s relative performance was IT sector holding,Xilinx. During the year, Xilinx won a major order from Microsoft’s cloud platform for “Field Programmable Gate Arrays.” This order was a significant endorsement of Xilinx’s technology and boosted investor confidence in the company’s future growth, which pushed the shares higher.
CommScope was a key detractor from the Fund’s performance relative to its style-specific benchmark for the year. The company’s stock price fell approximately 58% during the year, as the market did not respond well to an acquisition the company announced during the fourth quarter.
Concho Resources andCore Laboratories also detracted from the Fund’s performance versus the style-specific benchmark. Both companies sold off along with the energy sector as a whole, as oil prices fell during the year. In our view, company-specific issues were not the catalyst for either company’s downturn.
During the year, industrial manufacturerColfax detracted from the Fund’s performance relative to its style-specific benchmark. Shares of the company declined mainly due to higher costs that affected profits.
Finally, the Fund’s conservative positioning and allocation to cash benefited the Fund’s relative and absolute returns
Portfolio Composition | |||
By sector | % of total net assets |
Information Technology | 17.1% | |
Industrials | 14.6 | |
Financials | 10.8 | |
Health Care | 8.2 | |
Consumer Discretionary | 7.6 | |
Materials | 5.2 | |
Consumer Staples | 4.7 | |
Energy | 4.4 | |
Communication Services | 1.7 | |
Utilities | 1.6 | |
Money Market Funds | ||
Plus Other Assets Less Liabilities | 24.1 |
Top 10 Equity Holdings* | |||
% of total net assets | |||
1. Dollar General Corp. | 3.1% | ||
2. Zimmer Biomet Holdings, Inc. | 2.1 | ||
3. Progressive Corp. (The) | 2.0 | ||
4. EPAM Systems, Inc. | 2.0 | ||
5. Agilent Technologies, Inc. | 2.0 | ||
6. Moody’s Corp. | 2.0 | ||
7. Jack Henry & Associates, Inc. | 2.0 | ||
8. Viacom Inc.-Class B | 1.7 | ||
9. Republic Services, Inc. | 1.7 | ||
10. Keysight Technologies, Inc. | 1.7 |
Total Net Assets | $219.9 million | |
Total Number of Holdings* | 67 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
Data presented here are as of December 31, 2018.
Invesco V.I. Mid Cap Core Equity Fund
during the year. We have been quite active in deploying cash during periods of market volatility, and we remain focused on putting these assets back to work.
At the close of the year, the Fund’s largest overweight position relative to the Russell Midcap Index was in the IT sector. The Fund held a slight overweight position to the industrials sector. The largest underweight positions relative to the Russell Midcap Index were in the consumer discretionary, consumer staples, health care, real estate and utilities sectors. The Fund also had a slight underweight position in the communication services sector.
As always, the Fund focuses on companies that provide an attractive return on invested capital, trade at attractive valuations and have high-quality management teams with a long-term perspective. In short, we seek to take advantage of the market’s volatile behavior and short-term focus. We believe our conservative approach should position the Fund to navigate the evolving economic backdrop.
We thank you for your continued investment in Invesco V.I. Mid Cap Core Equity Fund.
1 | Source: US Federal Reserve |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Ronald Sloan Chartered Financial Analyst, Portfolio Manager and Co-Chief Investment Officer of | ||
Invesco’s Global Core Equity Team, is lead manager of Invesco V.I. Mid Cap Core Equity Fund. He joined Invesco in 1998. Mr. Sloan earned a BS in business administration and an MBA from the University of Missouri. |
Assisted by Invesco’s Global Core Equity Team
Invesco V.I. Mid Cap Core Equity Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: RIMES Technologies Corp. |
2 | Source: FactSet Research Systems Inc. |
3 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (9/10/01) | 6.52 | % | |||
10 Years | 8.70 | ||||
5 Years | 2.98 | ||||
1 Year | -11.35 | ||||
Series II Shares | |||||
Inception (9/10/01) | 6.26 | % | |||
10 Years | 8.42 | ||||
5 Years | 2.72 | ||||
1 Year | -11.60 |
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. Performance figures in the table and chart do not reflect deduction of taxes a shareholder would pay on Fund distributions or the
redemption of Fund shares. 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 0.97% and 1.22%, 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. 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, 2020. See current prospectus for more information. |
Invesco V.I. Mid Cap Core Equity Fund
Invesco V.I. Mid Cap Core Equity Fund’s investment objective is long-term growth of capital.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Cash/cash equivalents risk.In rising markets, holding cash or cash equivalents will negatively affect the Fund’s performance relative to its benchmark.
Derivatives risk.The value of a derivative instrument depends largely on (and is derived from) the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include other, possibly greater, risks, including counterparty, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by holding a position in the derivative. As a result, an adverse change in the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative or the anticipated value of the underlying asset, which may make the Fund’s returns more volatile and increase the risk of loss. Derivative instruments may also be less liquid than more traditional investments and the Fund may be unable to sell or close out its derivative positions at a desirable time or price. This risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. Derivatives strategies may not always be successful. For example, derivatives used for hedging or to gain or limit exposure to a particular market segment may not provide the expected benefits, particularly during adverse market conditions.
Emerging markets securities risk.Emerging markets (also referred to as developing markets) are generally subject to greater market volatility, political, social and economic instability, uncertain trading markets and more governmental limitations on foreign investment than more developed markets. In addition, companies operating in emerging markets may be subject to lower trading volume and greater price fluctuations than companies in more developed markets. Securities law and the enforcement of
systems of taxation in many emerging market countries may change quickly and unpredictably. In addition, investments in emerging markets securities may also be subject to additional transaction costs, delays in settlement procedures, and lack of timely information.
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
Mid-capitalization companies risk.Mid-capitalization companies tend to be more vulnerable to changing market conditions
and may have more limited product lines and markets, less experienced management and fewer financial resources than larger companies. These companies’ securities may be more volatile and less liquid than those of more established companies, and their returns may vary, sometimes significantly, from the overall securities market.
About indexes used in this report
TheS&P 500® Index is an unmanaged index considered representative of the US stock market.
TheRussell 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.
TheLipper 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.
Other information
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Industry 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.
Invesco V.I. Mid Cap Core Equity Fund
Schedule of Investments(a)
December 31, 2018
Shares | Value | |||||||
Common Stocks–75.88% |
| |||||||
Apparel, Accessories & Luxury Goods–1.15% |
| |||||||
Samsonite International S.A.(b)(c) | 898,200 | $ | 2,535,683 | |||||
Application Software–1.22% |
| |||||||
Synopsys, Inc.(c) | 31,929 | 2,689,699 | ||||||
Asset Management & Custody Banks–1.53% |
| |||||||
St. James’s Place PLC (United Kingdom) | 280,715 | 3,363,375 | ||||||
Biotechnology–1.32% |
| |||||||
BioMarin Pharmaceutical Inc.(c) | 34,082 | 2,902,082 | ||||||
Building Products–0.60% |
| |||||||
Allegion PLC | 16,639 | 1,326,295 | ||||||
Commodity Chemicals–2.08% |
| |||||||
Orion Engineered Carbons S.A. (Luxembourg) | 42,106 | 1,064,440 | ||||||
Valvoline, Inc. | 181,046 | 3,503,240 | ||||||
4,567,680 | ||||||||
Communications Equipment–2.54% |
| |||||||
CommScope Holding Co., Inc.(c) | 133,212 | 2,183,345 | ||||||
Motorola Solutions, Inc. | 29,606 | 3,405,874 | ||||||
5,589,219 | ||||||||
Data Processing & Outsourced Services–2.43% |
| |||||||
Jack Henry & Associates, Inc. | 33,916 | 4,291,052 | ||||||
PagSeguro Digital Ltd.–Class A (Brazil)(c) | 56,194 | 1,052,514 | ||||||
5,343,566 | ||||||||
Department Stores–1.04% |
| |||||||
Nordstrom, Inc. | 48,908 | 2,279,602 | ||||||
Electronic Components–1.08% |
| |||||||
Amphenol Corp.–Class A | 29,323 | 2,375,749 | ||||||
Electronic Equipment & Instruments–1.71% |
| |||||||
Keysight Technologies, Inc.(c) | 60,666 | 3,766,145 | ||||||
Electronic Manufacturing Services–0.54% |
| |||||||
IPG Photonics Corp.(c) | 10,405 | 1,178,782 | ||||||
Environmental & Facilities Services–2.59% |
| |||||||
Republic Services, Inc. | 52,609 | 3,792,583 | ||||||
Tetra Tech, Inc. | 36,743 | 1,902,185 | ||||||
5,694,768 | ||||||||
Financial Exchanges & Data–1.95% |
| |||||||
Moody’s Corp. | 30,644 | 4,291,386 | ||||||
General Merchandise Stores–3.12% |
| |||||||
Dollar General Corp. | 63,564 | 6,869,997 | ||||||
Health Care Equipment–4.88% |
| |||||||
Hill-Rom Holdings, Inc. | 28,872 | 2,556,616 | ||||||
Wright Medical Group N.V.(c) | 129,837 | 3,534,163 | ||||||
Zimmer Biomet Holdings, Inc. | 44,802 | 4,646,863 | ||||||
10,737,642 |
Shares | Value | |||||||
Homebuilding–1.60% |
| |||||||
D.R. Horton, Inc. | 101,675 | $ | 3,524,055 | |||||
Industrial Machinery–9.35% |
| |||||||
Altra Industrial Motion Corp. | 15,663 | 393,924 | ||||||
Colfax Corp.(c) | 58,736 | 1,227,582 | ||||||
Crane Co. | 16,472 | 1,188,949 | ||||||
Fortive Corp. | 30,515 | 2,064,645 | ||||||
Gates Industrial Corp. PLC(c) | 78,497 | 1,039,300 | ||||||
Ingersoll-Rand PLC | 28,864 | 2,633,263 | ||||||
ITT Inc. | 72,192 | 3,484,708 | ||||||
Lincoln Electric Holdings, Inc. | 14,811 | 1,167,847 | ||||||
Nordson Corp. | 14,868 | 1,774,496 | ||||||
Parker-Hannifin Corp. | 15,264 | 2,276,473 | ||||||
Stanley Black & Decker Inc. | 18,470 | 2,211,598 | ||||||
Timken Co. (The) | 29,137 | 1,087,393 | ||||||
20,550,178 | ||||||||
Internet & Direct Marketing Retail–0.78% |
| |||||||
Just Eat PLC (United Kingdom)(c) | 230,764 | 1,725,965 | ||||||
IT Consulting & Other Services–1.98% |
| |||||||
EPAM Systems, Inc.(c) | 37,509 | 4,351,419 | ||||||
Life & Health Insurance–1.36% |
| |||||||
Torchmark Corp. | 40,159 | 2,993,050 | ||||||
Life Sciences Tools & Services–1.97% |
| |||||||
Agilent Technologies, Inc. | 64,126 | 4,325,940 | ||||||
Marine–0.94% |
| |||||||
Kirby Corp.(c) | 30,760 | 2,071,994 | ||||||
Movies & Entertainment–1.74% |
| |||||||
Viacom Inc.–Class B | 148,633 | 3,819,868 | ||||||
Multi-Utilities–1.65% |
| |||||||
CMS Energy Corp. | 72,944 | 3,621,670 | ||||||
Office Services & Supplies–0.87% |
| |||||||
Societe BIC S.A. (France) | 18,755 | 1,910,663 | ||||||
Oil & Gas Equipment & Services–1.93% |
| |||||||
Apergy Corp.(c) | 27,260 | 738,201 | ||||||
Cactus, Inc.–Class A(c) | 37,804 | 1,036,207 | ||||||
Core Laboratories N.V. | 41,386 | 2,469,089 | ||||||
4,243,497 | ||||||||
Oil & Gas Exploration & Production–2.23% |
| |||||||
Concho Resources Inc.(c) | 33,443 | 3,437,606 | ||||||
Seven Generations Energy Ltd.–Class A (Canada)(c) | 179,239 | 1,462,586 | ||||||
4,900,192 |
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 | |||||||
Packaged Foods & Meats–4.02% |
| |||||||
JM Smucker Co. (The) | 23,797 | $ | 2,224,782 | |||||
Kellogg Co. | 36,944 | 2,106,177 | ||||||
McCormick & Co., Inc. | 22,367 | 3,114,381 | ||||||
Nomad Foods Ltd. (United Kingdom)(c) | 83,215 | 1,391,355 | ||||||
8,836,695 | ||||||||
Paper Packaging–0.89% |
| |||||||
Packaging Corp. of America | 23,466 | 1,958,472 | ||||||
Property & Casualty Insurance–3.25% |
| |||||||
Arch Capital Group Ltd.(c) | 101,721 | 2,717,985 | ||||||
Progressive Corp. (The) | 73,332 | 4,424,120 | ||||||
7,142,105 | ||||||||
Railroads–1.07% |
| |||||||
Genesee & Wyoming Inc.–Class A(c) | 31,914 | 2,362,274 | ||||||
Regional Banks–1.95% |
| |||||||
Comerica Inc. | 28,118 | 1,931,426 | ||||||
First Republic Bank | 27,089 | 2,354,034 | ||||||
4,285,460 | ||||||||
Semiconductor Equipment–2.00% |
| |||||||
KLA-Tencor Corp. | 26,812 | 2,399,406 | ||||||
Teradyne, Inc. | 63,963 | 2,007,159 | ||||||
4,406,565 | ||||||||
Semiconductors–3.63% |
| |||||||
Analog Devices, Inc. | 29,572 | 2,538,165 | ||||||
Microchip Technology Inc. | 30,168 | 2,169,682 | ||||||
Xilinx, Inc. | 38,421 | 3,272,317 | ||||||
7,980,164 |
Shares | Value | |||||||
Specialty Chemicals–1.19% |
| |||||||
International Flavors & Fragrances Inc. | 19,488 | $ | 2,616,654 | |||||
Specialty Stores–0.70% |
| |||||||
Ulta Beauty, Inc.(c) | 6,284 | 1,538,575 | ||||||
Steel–1.00% |
| |||||||
Reliance Steel & Aluminum Co. | 17,511 | 1,246,258 | ||||||
Steel Dynamics, Inc. | 31,514 | 946,680 | ||||||
2,192,938 | ||||||||
Total Common Stocks (Cost $139,348,247) | 166,870,063 | |||||||
Money Market Funds–24.12% |
| |||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30%(d) | 17,704,522 | 17,704,522 | ||||||
Invesco Liquid Assets Portfolio–Institutional Class, 2.48%(d) | 12,642,171 | 12,643,435 | ||||||
Invesco Treasury Portfolio –Institutional Class, 2.30%(d) | 22,686,188 | 22,686,188 | ||||||
Total Money Market Funds |
| 53,034,145 | ||||||
TOTAL INVESTMENTS IN SECURITIES–100.00% |
| 219,904,208 | ||||||
OTHER ASSETS LESS LIABILITIES–0.00% |
| 2,642 | ||||||
NET ASSETS–100.00% |
| $ | 219,906,850 |
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 value of this security at December 31, 2018 represented 1.15% of the Fund’s Net Assets. |
(c) | Non-income producing security. |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $139,348,247) | $ | 166,870,063 | ||
Investments in affiliated money market funds, at value (Cost $53,034,079) | 53,034,145 | |||
Foreign currencies, at value (Cost $601) | 586 | |||
Receivable for: | ||||
Fund shares sold | 131,810 | |||
Dividends | 282,165 | |||
Investment for trustee deferred compensation and retirement plans | 106,146 | |||
Total assets | 220,424,915 | |||
Liabilities: | ||||
Payable for: | ||||
Amount due to custodian | 56,983 | |||
Fund shares reacquired | 165,571 | |||
Accrued fees to affiliates | 137,094 | |||
Accrued trustees’ and officers’ fees and benefits | 4,577 | |||
Accrued other operating expenses | 36,547 | |||
Trustee deferred compensation and retirement plans | 117,293 | |||
Total liabilities | 518,065 | |||
Net assets applicable to shares outstanding | $ | 219,906,850 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 166,716,480 | ||
Distributable earnings | 53,190,370 | |||
$ | 219,906,850 | |||
Net Assets: | ||||
Series I | $ | 148,078,282 | ||
Series II | $ | 71,828,568 | ||
Shares outstanding, no par value, |
| |||
Series I | 13,503,019 | |||
Series II | 6,701,954 | |||
Series I: | ||||
Net asset value per share | $ | 10.97 | ||
Series II: | ||||
Net asset value per share | $ | 10.72 |
Investment income: | ||||
Dividends (net of foreign withholding taxes of $34,355) | $ | 2,753,869 | ||
Dividends from affiliated money market funds | 1,012,522 | |||
Total investment income | 3,766,391 | |||
Expenses: | ||||
Advisory fees | 1,990,015 | |||
Administrative services fees | 479,145 | |||
Custodian fees | 10,283 | |||
Distribution fees — Series II | 244,440 | |||
Transfer agent fees | 30,505 | |||
Trustees’ and officers’ fees and benefits | 24,163 | |||
Reports to shareholders | 8,480 | |||
Professional services fees | 43,184 | |||
Other | 5,598 | |||
Total expenses | 2,835,813 | |||
Less: Fees waived | (68,722 | ) | ||
Net expenses | 2,767,091 | |||
Net investment income | 999,300 | |||
Realized and unrealized gain (loss) from: |
| |||
Net realized gain (loss) from: | ||||
Investment securities | 26,581,112 | |||
Foreign currencies | (896 | ) | ||
26,580,216 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (58,167,666 | ) | ||
Foreign currencies | (125 | ) | ||
(58,167,791 | ) | |||
Net realized and unrealized gain (loss) | (31,587,575 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (30,588,275 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income | $ | 999,300 | $ | 891,482 | ||||
Net realized gain | 26,580,216 | 34,934,135 | ||||||
Change in net unrealized appreciation (depreciation) | (58,167,791 | ) | 9,878,571 | |||||
Net increase (decrease) in net assets resulting from operations | (30,588,275 | ) | 45,704,188 | |||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (25,354,121 | ) | (4,886,138 | ) | ||||
Series II | (12,182,243 | ) | (3,318,004 | ) | ||||
Total distributions from distributable earnings | (37,536,364 | ) | (8,204,142 | ) | ||||
Share transactions–net: | ||||||||
Series I | 350,737 | (25,346,439 | ) | |||||
Series II | (45,715,623 | ) | (4,339,452 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (45,364,886 | ) | (29,685,891 | ) | ||||
Net increase (decrease) in net assets | (113,489,525 | ) | 7,814,155 | |||||
Net assets: | ||||||||
Beginning of year | 333,396,375 | 325,582,220 | ||||||
End of year | $ | 219,906,850 | $ | 333,396,375 |
(1) | For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income and distributions from net realized gains. The Securities and Exchange Commission eliminated the requirement to disclose the distribution components separately. For the year ended December 31, 2017, distributions from net investment income were $1,002,873 and $437,528 and distributions from net realized gains were $3,883,265 and $2,880,476 for Series I and Series II shares, respectively. |
Notes to Financial Statements
December 31, 2018
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. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 islong-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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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 theover-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 (“NAV”) 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 theend-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. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 investment 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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. Mid Cap 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 the 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 the dailymark-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 anagreed-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 accrues daily and pays monthly 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 year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.725%.
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the
Invesco V.I. Mid Cap Core Equity Fund
fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2019, 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 (the “expense limits”). 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, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $68,722.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $68,131 for accounting and fund administrative services and was reimbursed $411,014 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution fees.
For the year ended December 31, 2018, the Fund incurred $262 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 December 31, 2018. 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 | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | $ | 159,060,342 | $ | 7,809,721 | $ | — | $ | 166,870,063 | ||||||||
Money Market Funds | 53,034,145 | — | — | 53,034,145 | ||||||||||||
Total Investments | $ | 212,094,487 | $ | 7,809,721 | $ | — | $ | 219,904,208 |
Invesco V.I. Mid Cap Core Equity Fund
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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 978,585 | $ | 2,926,214 | ||||
Long-term capital gain | 36,557,779 | 5,277,928 | ||||||
Total distributions | $ | 37,536,364 | $ | 8,204,142 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 942,026 | ||
Undistributedlong-term gain | 24,838,124 | |||
Net unrealized appreciation — investments | 27,520,552 | |||
Net unrealized appreciation (depreciation) — foreign currencies | (55 | ) | ||
Temporary book/tax differences | (110,277 | ) | ||
Shares of beneficial interest | 166,716,480 | |||
Total net assets | $ | 219,906,850 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 does not have a capital loss carryforward as of December 31, 2018.
NOTE 7—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $59,355,793 and $112,350,316, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 45,581,853 | ||
Aggregate unrealized (depreciation) of investments | (18,061,301 | ) | ||
Net unrealized appreciation of investments | $ | 27,520,552 |
Cost of investments for tax purposes is $192,383,656.
Invesco V.I. Mid Cap Core Equity Fund
NOTE 8—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of return of capital dividend adjustments, on December 31, 2018, undistributed net investment income was decreased by $49,853, undistributed net realized gain was increased by $896 and shares of beneficial interest was increased by $48,957. This reclassification had no effect on the net assets of the Fund.
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 300,113 | $ | 3,835,156 | 246,444 | $ | 3,379,997 | ||||||||||
Series II | 740,161 | 9,893,417 | 1,068,806 | 14,280,075 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 1,976,159 | 25,354,119 | 355,873 | 4,886,138 | ||||||||||||
Series II | 970,697 | 12,182,244 | 246,692 | 3,318,004 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (2,114,524 | ) | (28,838,538 | ) | (2,449,096 | ) | (33,612,574 | ) | ||||||||
Series II | (5,009,103 | ) | (67,791,284 | ) | (1,632,724 | ) | (21,937,531 | ) | ||||||||
Net increase (decrease) in share activity | (3,136,497 | ) | $ | (45,364,886 | ) | (2,164,005 | ) | $ | (29,685,891 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 74% 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 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 14.41 | $ | 0.06 | $ | (1.39 | ) | $ | (1.33 | ) | $ | (0.07 | ) | $ | (2.04 | ) | $ | (2.11 | ) | $ | 10.97 | (11.35 | )% | $ | 148,078 | 0.91 | %(d) | 0.94 | %(d) | 0.46 | %(d) | 27 | % | |||||||||||||||||||||||
Year ended 12/31/17 | 12.87 | 0.05 | 1.85 | 1.90 | (0.07 | ) | (0.29 | ) | (0.36 | ) | 14.41 | 14.92 | 192,277 | 0.94 | 0.96 | 0.37 | 45 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 12.12 | 0.07 | 1.54 | 1.61 | (0.01 | ) | (0.85 | ) | (0.86 | ) | 12.87 | 13.43 | 195,464 | 0.98 | 1.00 | 0.57 | 29 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 14.06 | 0.02 | (0.58 | ) | (0.56 | ) | (0.05 | ) | (1.33 | ) | (1.38 | ) | 12.12 | (4.03 | ) | 201,685 | 1.01 | 1.03 | 0.17 | 44 | ||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 14.11 | 0.03 | (1.36 | ) | (1.33 | ) | (0.02 | ) | (2.04 | ) | (2.06 | ) | 10.72 | (11.60 | ) | 71,829 | 1.16 | (d) | 1.19 | (d) | 0.21 | (d) | 27 | |||||||||||||||||||||||||||||||||
Year ended 12/31/17 | 12.61 | 0.02 | 1.81 | 1.83 | (0.04 | ) | (0.29 | ) | (0.33 | ) | 14.11 | 14.65 | 141,120 | 1.19 | 1.21 | 0.12 | 45 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 11.91 | 0.04 | 1.51 | 1.55 | — | (0.85 | ) | (0.85 | ) | 12.61 | 13.16 | 130,118 | 1.23 | 1.25 | 0.32 | 29 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 13.84 | (0.01 | ) | (0.57 | ) | (0.58 | ) | (0.02 | ) | (1.33 | ) | (1.35 | ) | 11.91 | (4.28 | ) | 118,276 | 1.26 | 1.28 | (0.08 | ) | 44 | ||||||||||||||||||||||||||||||||||
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 |
(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 based on average daily net assets (000’s omitted) of $176,709 and $97,776 for Series I and Series II shares, respectively. |
Invesco V.I. Mid Cap Core Equity Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Mid Cap Core Equity Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Mid Cap Core Equity Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian and transfer agent. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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 | ACTUAL | HYPOTHETICAL (5% annual return before | Annualized | ||||||||||||||||||||
Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 909.90 | $ | 4.48 | $ | 1,020.52 | $ | 4.74 | 0.93 | % | ||||||||||||
Series II | 1,000.00 | 908.50 | 5.68 | 1,019.26 | 6.01 | 1.18 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Mid Cap Core Equity Fund
Tax Information
Form1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Long-Term Capital Gain Distributions | $ | 36,557,779 | ||
Corporate Dividends Received Deduction* | 100.00 | % | ||
U.S. Treasury Obligations* | 0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. Mid Cap Core Equity Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Mid Cap Core Equity Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. Mid Cap Core Equity Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. Mid Cap Core Equity Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Mid Cap Core Equity Fund
| ||||
Annual Report to Shareholders
| December 31, 2018 | |||
| ||||
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 FormN-Q (or any successor Form). The Fund’s FormN-Q (or any successor Form) filings are available on the SEC website, sec.gov. The SEC file numbers for the Fund are811-07452 and033-57340. The Fund’s most recent portfolio holdings, as filed on FormN-Q (or any successor Form), 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 recent12-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.
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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.
| ||
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Invesco Distributors, Inc. | VK-VIMCG-AR-1 | 02152019 1213 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. Mid Cap Growth Fund (the Fund) underperformed the Russell Midcap Growth Index, the Fund’s style-specific benchmark.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -5.58% | ||||
Series II Shares | -5.87 | ||||
S&P 500 Index▼ (Broad Market Index) | -4.38 | ||||
Russell Midcap Growth Index∎ (Style-Specific Index) | -4.75 | ||||
Lipper VUFMid-Cap Growth Funds Index¨ (Peer Group Index) | -4.64 | ||||
Source(s):▼FactSet Research Systems Inc.;∎RIMES Technologies Corp;¨Lipper Inc. |
Market conditions and your Fund
Calendar year 2018 proved to be an increasingly volatile time for US equities. In January 2018, US equity markets steadily moved higher, as investors remained enthused about the passage of the Tax Cuts and Jobs Act signed into law in late December 2017. However, in February 2018, volatility returned to the US stock and bond markets. Worries about how rising interest rates might affect economic growth, concerns about a potential trade war and heightened geopolitical tensions caused the US stock markets to pull back and volatility to increase.
US equity markets generally recovered in the second quarter of 2018 as strong US retail sales and low unemployment buoyed markets. Throughout the summer, US equities moved higher as corporate profits surged. Several US equity indexes reached new highs despite potential headwinds including trade tensions, tariff announcements and contagion concerns over a Turkish currency crisis. After a relatively quiet summer, market volatility noticeably rose in October, as US equity markets suffered a sharpsell-off
throughyear-end, amid rising interest rates and concerns that higher inflation could mean a more restrictive monetary policy. In this environment, there was a flight to safety, as investors fled to defensive areas of the equities markets, like health care and utilities, and US Treasuries.
Given signs of a strong economy, the US Federal Reserve raised interest rates four times during the year: in March, June, September and December 2018. Following December’s Federal Reserve meeting, Chairman Jerome Powell raised interest rates for the fourth time in 2018 by 25 basis points to a targeted range of
2.25% to 2.50%, and lowered guidance from three to two rate hikes in 2019, signaling a slightly more dovish stance than expected.1 In contrast, the European Central Bank and central banks in several other countries maintained extraordinarily accommodative monetary policies.
During the year, the Fund produced a loss and underperformed its style-specific benchmark. Key detractors to relative performance for the year included stock selection in the information technology (IT), industrials and communication
services sectors. An underweight allocation to consumer staples and an overweight allocation to energy also hurt relative returns. Stock selection and an overweight position in health care, as well as stock selection and an underweight position in materials and consumer discretionary, were primary relative contributors to the Fund’s relative performance. Stock selection in financials was beneficial, as was the Fund’s ancillary cash position during the year.
Parsley Energy was among detractors from absolute and relative performance for the year. In general, the energy sector was among the worst-performing sectors this year given volatility in oil prices. We used weakness in energy stocks to reallocate into companies that we believed had higher conviction and higher quality. We believed Parsley Energy to be a high-quality company with key acreage in the Permian Basin that is positioned to relatively outperform in the global oil market.
Within consumer discretionary, an overweight position inWynn Resorts was a detractor from the Fund’s performance versus the style-specific benchmark for the year. The hotel and casino company faced headwinds as several factors slowed gambling revenue in the Macau region of China, including the World Cup in Russia and a September typhoon that shut down the casinos. We exited our position in the company before the close of the year.
Within the software industry,LogMeIn detracted from the Fund’s performance relative to the style-specific benchmark for the year. The company’s stock sold off after it experienced customer turnover that affected a small percentage of the company’s sales. We believed that the company’s fundamentals remained relatively stable. We exited our position in the company before the close of the year.
Portfolio Composition | |||
By sector | % of total net assets |
Information Technology | 28.7% | |
Health Care | 17.5 | |
Industrials | 16.9 | |
Consumer Discretionary | 16.0 | |
Financials | 8.9 | |
Communication Services | 3.8 | |
Energy | 3.4 | |
Materials | 2.2 | |
Real Estate | 1.4 | |
Consumer Staples | 0.6 | |
Money Market Funds | ||
Plus Other Assets Less Liabilities | 0.6 |
Top 10 Equity Holdings* | |||
% of total net assets |
1. ServiceNow, Inc. | 2.5% | |
2. Burlington Stores, Inc. | 2.1 | |
3. Cheniere Energy, Inc. | 2.1 | |
4. Centene Corp. | 2.0 | |
5. Roper Technologies, Inc. | 2.0 | |
6. CoStar Group Inc. | 2.0 | |
7. E*TRADE Financial Corp. | 2.0 | |
8. TD Ameritrade Holding Corp. | 1.9 | |
9. Boston Scientific Corp. | 1.8 | |
10. DexCom Inc. | 1.8 |
Total Net Assets | $183.3 million | |
Total Number of Holdings* | 85 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
Data presented here are as of December 31, 2018.
Invesco V.I. Mid Cap Growth Fund
Holdings within the health care equipment and supplies and biotechnology industries aided the Fund’s performance for the year. The leading individual contributor to both absolute and relative returns wasDexcom, which is in the early stages of a new product launch that is expected to support long-term revenue growth.Boston Scientific, which manufactures an array of medical devices, reported strong results across their portfolio of products and raised earnings guidance for the year. It also received a “mini-tender” offer by a private investment firm, although the offer was subsequently denied as it was below Boston Scientific’s trading price at the time.
Within biotechnology, the leading individual contributor to the Fund’s performance versus the style-specific benchmark for the year wasSarepta Therapeutics. The company delivered encouraging updates regarding the development of its gene therapy molecule during the year.
While security selection within the IT sector detracted from the Fund’s relative performance,ServiceNow was among the top individual contributors to the Fund’s absolute performance and an overweight position in the holding was beneficial to relative results. ServiceNow provides cloud computing services to businesses in an effort to “make work better for people.” The stock benefited from the firm’s continued growth across both the public and private sectors.
At the end of the year, the Fund’s largest overweight allocations relative to the style-specific benchmark were in the health care, financials, energy and industrials sectors. In contrast, the largest underweight allocations were in the IT, consumer staples, materials and real estate sectors.
Our view is that we are in a slowing, but not declining, global growth environment as the benefits of US tax stimulus and deregulation are being offset by higher interest rates, rising labor costs and trade pressures. In such an environment, true growth will likely remain scarce, and we believe the market will favor companies that can produce growth and compound earnings in spite of the economic cycle. Given this scenario, we seek opportunities in companies that are taking share within their respective industries. Though we anticipate a possible economic slowing, we continue to prudently balance the Fund between dynamic growth opportunities and more durable growth opportunities.
We thank you for your commitment to Invesco V.I. Mid Cap Growth Fund and for sharing our long-term investment horizon.
1 | Source: US Federal Reserve |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Jim Leach Chartered Financial Analyst, Portfolio Manager, is lead manager of Invesco V.I. Mid Cap Growth Fund. | ||
He joined Invesco in 2011. Mr. Leach earned a BS in mechanical engineering from the University of California and an MBA from New York University Stern School of Business. |
Elizabeth Bernstein Portfolio Manager, is manager of Invesco V.I. Mid Cap Growth Fund. She joined Invesco in 2012. Ms. Bernstein | ||
earned a BA degree in history, cum laude, from the University of Pennsylvania and an MBA from the University of Michigan – Ross School of Business with an emphasis in strategy and finance. |
Invesco V.I. Mid Cap Growth Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: RIMES Technologies Corp. |
2 | Source: Lipper Inc. |
3 | Source: FactSet Research Systems Inc. |
Past performance cannot guarantee comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
10 Years | 13.42 | % | |||
5 Years | 4.96 | ||||
1 Year | -5.58 | ||||
Series II Shares | |||||
Inception (9/25/00) | 1.23 | % | |||
10 Years | 13.22 | ||||
5 Years | 4.70 | ||||
1 Year | -5.87 |
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, prior to June 1, 2010, 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 the12b-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 recentmonth-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Performance figures in the table and chart do not reflect deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 1.00% and 1.25%, 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 recentmonth-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recentmonth-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
Invesco V.I. Mid Cap Growth Fund’s investment objective is to seek capital growth.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
Growth investing risk.Growth stocks tend to be more expensive relative to the issuing company’s earnings or assets compared with other types of stock. As a result, they tend to be more sensitive to changes in, or investors’ expectations of, the issuing company’s earnings and can be more volatile.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in
the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
Mid-capitalization companies risk.Mid-capitalization companies tend to be more vulnerable to changing market conditions and may have more limited product lines and markets, less experienced management and fewer financial resources than larger companies. These companies’ securities may be more volatile and less liquid than those of more established companies, and their returns may vary, sometimes significantly, from the overall securities market.
Sector focus risk.The Fund may from time to time invest a significant amount of its assets (i.e. over 25%) in one market sector or group of related industries. In this event, the Fund’s performance will depend to a greater extent on the overall condition of the sector or group of industries and there is increased risk that the Fund will lose significant value if conditions adversely affect that sector or group of industries.
About indexes used in this report
TheS&P 500® Index is an unmanaged index considered representative of the US stock market.
TheRussell Midcap® Growth Index is an unmanaged index considered representative ofmid-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.
TheLipper VUFMid-Cap Growth Funds Index is an unmanaged index considered representative ofmid-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.
Other information
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Industry 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.
Invesco V.I. Mid Cap Growth Fund
Schedule of Investments(a)
December 31, 2018
Shares | Value | |||||||
Common Stocks & Other Equity Interests–99.44% |
| |||||||
Aerospace & Defense–2.87% |
| |||||||
Harris Corp. | 15,574 | $ | 2,097,039 | |||||
TransDigm Group, Inc.(b) | 9,279 | 3,155,417 | ||||||
5,252,456 | ||||||||
Air Freight & Logistics–0.35% |
| |||||||
XPO Logistics, Inc.(b) | 11,357 | 647,803 | ||||||
Apparel Retail–2.12% |
| |||||||
Burlington Stores, Inc.(b) | 23,942 | 3,894,645 | ||||||
Apparel, Accessories & Luxury Goods–0.58% |
| |||||||
PVH Corp. | 11,472 | 1,066,322 | ||||||
Application Software–7.30% |
| |||||||
Autodesk, Inc.(b) | 12,981 | 1,669,486 | ||||||
Guidewire Software Inc.(b) | 36,301 | 2,912,429 | ||||||
New Relic, Inc.(b) | 19,670 | 1,592,680 | ||||||
SS&C Technologies Holdings, Inc. | 71,196 | 3,211,652 | ||||||
Synopsys, Inc.(b) | 17,609 | 1,483,382 | ||||||
Tyler Technologies, Inc.(b) | 13,480 | 2,504,854 | ||||||
13,374,483 | ||||||||
Auto Parts & Equipment–0.88% |
| |||||||
Aptiv PLC | 26,155 | 1,610,363 | ||||||
Biotechnology–4.19% |
| |||||||
BioMarin Pharmaceutical Inc.(b) | 30,062 | 2,559,779 | ||||||
Neurocrine Biosciences, Inc.(b) | 30,514 | 2,179,005 | ||||||
Sage Therapeutics, Inc.(b) | 11,116 | 1,064,802 | ||||||
Sarepta Therapeutics, Inc.(b) | 17,265 | 1,884,129 | ||||||
7,687,715 | ||||||||
Building Products–0.53% |
| |||||||
Trex Co., Inc.(b) | 16,257 | 965,016 | ||||||
Communications Equipment–1.96% |
| |||||||
Arista Networks Inc.(b) | 4,653 | 980,387 | ||||||
F5 Networks, Inc.(b) | 16,123 | 2,612,410 | ||||||
3,592,797 | ||||||||
Data Processing & Outsourced Services–5.72% |
| |||||||
Black Knight, Inc.(b) | 65,942 | 2,971,347 | ||||||
Fidelity National Information Services, Inc. | 24,251 | 2,486,940 | ||||||
FleetCor Technologies Inc.(b) | 10,948 | 2,033,263 | ||||||
Worldpay, Inc.–Class A(b) | 39,259 | 3,000,565 | ||||||
10,492,115 | ||||||||
Department Stores–0.68% |
| |||||||
Kohl’s Corp. | 18,760 | 1,244,538 | ||||||
Diversified Support Services–1.13% |
| |||||||
KAR Auction Services, Inc. | 43,553 | 2,078,349 |
Shares | Value | |||||||
Education Services–2.25% |
| |||||||
Bright Horizons Family Solutions Inc.(b) | 22,946 | $ | 2,557,332 | |||||
Grand Canyon Education, Inc.(b) | 16,242 | 1,561,506 | ||||||
4,118,838 | ||||||||
Electronic Components–1.30% |
| |||||||
Amphenol Corp.–Class A | 29,485 | 2,388,875 | ||||||
Electronic Equipment & Instruments–0.59% |
| |||||||
FLIR Systems, Inc. | 24,992 | 1,088,152 | ||||||
Environmental & Facilities Services–1.21% |
| |||||||
Republic Services, Inc. | 30,895 | 2,227,221 | ||||||
Financial Exchanges & Data–2.38% |
| |||||||
London Stock Exchange Group PLC (United Kingdom) | 44,297 | 2,285,948 | ||||||
Nasdaq, Inc. | 25,403 | 2,072,123 | ||||||
4,358,071 | ||||||||
General Merchandise Stores–1.45% |
| |||||||
Dollar General Corp. | 24,524 | 2,650,554 | ||||||
Health Care Equipment–5.78% |
| |||||||
Boston Scientific Corp.(b) | 94,143 | 3,327,014 | ||||||
DexCom Inc.(b) | 26,835 | 3,214,833 | ||||||
LivaNova PLC(b) | 19,161 | 1,752,657 | ||||||
Penumbra, Inc.(b) | 18,781 | 2,295,038 | ||||||
10,589,542 | ||||||||
Health Care Services–0.75% |
| |||||||
Laboratory Corp. of America Holdings(b) | 10,923 | 1,380,230 | ||||||
Hotels, Resorts & Cruise Lines–2.31% |
| |||||||
Hilton Worldwide Holdings Inc. | 26,759 | 1,921,296 | ||||||
Royal Caribbean Cruises Ltd. | 23,567 | 2,304,617 | ||||||
4,225,913 | ||||||||
Household Products–0.66% |
| |||||||
Church & Dwight Co., Inc. | 18,408 | 1,210,510 | ||||||
Industrial Conglomerates–2.01% |
| |||||||
Roper Technologies, Inc. | 13,796 | 3,676,910 | ||||||
Industrial Machinery–3.02% |
| |||||||
Fortive Corp. | 41,222 | 2,789,081 | ||||||
Ingersoll-Rand PLC | 30,052 | 2,741,644 | ||||||
5,530,725 | ||||||||
Insurance Brokers–0.85% |
| |||||||
Brown & Brown, Inc. | 56,225 | 1,549,561 | ||||||
Interactive Home Entertainment–2.14% |
| |||||||
Electronic Arts Inc.(b) | 13,416 | 1,058,656 | ||||||
Nintendo Co., Ltd. (Japan) | 4,600 | 1,215,370 | ||||||
Take-Two Interactive Software, Inc.(b) | 16,072 | 1,654,452 | ||||||
3,928,478 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Mid Cap Growth Fund
Shares | Value | |||||||
Internet & Direct Marketing Retail–1.05% |
| |||||||
Etsy, Inc.(b) | 40,428 | $ | 1,923,160 | |||||
Internet Services & Infrastructure–1.60% |
| |||||||
GoDaddy, Inc.–Class A(b) | 44,713 | 2,934,067 | ||||||
Investment Banking & Brokerage–3.83% |
| |||||||
E*TRADE Financial Corp. | 82,018 | 3,598,950 | ||||||
TD Ameritrade Holding Corp. | 69,837 | 3,419,219 | ||||||
7,018,169 | ||||||||
IT Consulting & Other Services–1.26% |
| |||||||
Gartner, Inc.(b) | 18,095 | 2,313,265 | ||||||
Leisure Facilities–0.71% |
| |||||||
Vail Resorts, Inc. | 6,182 | 1,303,289 | ||||||
Life Sciences Tools & Services–2.00% |
| |||||||
Mettler-Toledo International Inc.(b) | 4,696 | 2,655,964 | ||||||
Syneos Health, Inc.(b) | 25,758 | 1,013,577 | ||||||
3,669,541 | ||||||||
Managed Health Care–3.34% |
| |||||||
Centene Corp.(b) | 32,091 | 3,700,092 | ||||||
Humana Inc. | 8,458 | 2,423,048 | ||||||
6,123,140 | ||||||||
Movies & Entertainment–1.65% |
| |||||||
Live Nation Entertainment, Inc.(b) | 61,353 | 3,021,635 | ||||||
Multi-Line Insurance–1.02% |
| |||||||
Assurant, Inc. | 20,927 | 1,871,711 | ||||||
Oil & Gas Exploration & Production–1.28% |
| |||||||
Diamondback Energy Inc. | 12,702 | 1,177,476 | ||||||
Parsley Energy, Inc.–Class A(b) | 73,389 | 1,172,756 | ||||||
2,350,232 | ||||||||
Oil & Gas Storage & Transportation–2.09% |
| |||||||
Cheniere Energy, Inc.(b) | 64,725 | 3,831,073 | ||||||
Pharmaceuticals–1.40% |
| |||||||
Zoetis Inc. | 29,932 | 2,560,383 | ||||||
Regional Banks–0.87% |
| |||||||
SVB Financial Group(b) | 8,373 | 1,590,200 | ||||||
Research & Consulting Services–4.28% |
| |||||||
CoStar Group Inc.(b) | 10,679 | 3,602,454 | ||||||
Equifax Inc. | 22,804 | 2,123,736 | ||||||
IHS Markit Ltd.(b) | 44,141 | 2,117,444 | ||||||
7,843,634 | ||||||||
Restaurants–1.70% |
| |||||||
Domino’s Pizza, Inc. | 12,547 | 3,111,531 | ||||||
Semiconductor Equipment–1.36% |
| |||||||
Entegris, Inc. | 39,229 | 1,094,293 | ||||||
KLA-Tencor Corp. | 15,541 | 1,390,764 | ||||||
2,485,057 |
Shares | Value | |||||||
Semiconductors–3.46% |
| |||||||
Advanced Micro Devices, Inc.(b) | 64,093 | $ | 1,183,157 | |||||
Analog Devices, Inc. | 19,666 | 1,687,933 | ||||||
Microchip Technology Inc. | 30,309 | 2,179,823 | ||||||
Universal Display Corp.(c) | 13,806 | 1,291,827 | ||||||
6,342,740 | ||||||||
Specialized Consumer Services–1.37% |
| |||||||
ServiceMaster Global Holdings, Inc.(b) | 68,184 | 2,505,080 | ||||||
Specialized REITs–1.36% |
| |||||||
SBA Communications Corp.–Class A(b) | 15,416 | 2,495,696 | ||||||
Specialty Chemicals–2.21% |
| |||||||
Celanese Corp. | 18,398 | 1,655,268 | ||||||
Sherwin-Williams Co. (The) | 6,081 | 2,392,630 | ||||||
4,047,898 | ||||||||
Specialty Stores–0.95% |
| |||||||
Ulta Beauty, Inc.(b) | 7,105 | 1,739,588 | ||||||
Systems Software–3.13% |
| |||||||
ServiceNow, Inc.(b) | 25,363 | 4,515,882 | ||||||
Varonis Systems, Inc.(b) | 23,204 | 1,227,492 | ||||||
5,743,374 | ||||||||
Technology Hardware, Storage & Peripherals–1.04% |
| |||||||
NetApp, Inc. | 31,989 | 1,908,784 | ||||||
Trading Companies & Distributors–1.47% |
| |||||||
Fastenal Co. | 25,915 | 1,355,095 | ||||||
United Rentals, Inc.(b) | 13,111 | 1,344,271 | ||||||
2,699,366 | ||||||||
Total Common Stocks & Other Equity Interests |
| 182,262,795 | ||||||
Money Market Funds–0.71% |
| |||||||
Invesco Government & Agency Portfolio– | 458,415 | 458,415 | ||||||
Invesco Liquid Assets Portfolio–Institutional Class, 2.48%(d) | 326,411 | 326,444 | ||||||
Invesco Treasury Portfolio–Institutional Class, 2.30%(d) | 523,902 | 523,902 | ||||||
Total Money Market Funds |
| 1,308,761 | ||||||
TOTAL INVESTMENTS IN SECURITIES (excluding investments purchased with cash collateral from securities on loan)–100.15% |
| 183,571,556 | ||||||
Investments Purchased with Cash |
| |||||||
Money Market Funds–0.53% |
| |||||||
Invesco Government & Agency Portfolio– | 969,230 | 969,230 | ||||||
TOTAL INVESTMENTS IN SECURITIES–100.68% |
| 184,540,786 | ||||||
OTHER ASSETS LESS LIABILITIES–(0.68)% |
| (1,244,660 | ) | |||||
NET ASSETS–100.00% |
| $ | 183,296,126 |
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 December 31, 2018. |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
(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. |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $160,240,604)* | $ | 182,262,795 | ||
Investments in affiliated money market funds, at value and cost | 2,277,991 | |||
Foreign currencies, at value (Cost $5,556) | 5,743 | |||
Receivable for: | ||||
Fund shares sold | 148,093 | |||
Dividends | 67,168 | |||
Investment for trustee deferred compensation and retirement plans | 104,462 | |||
Other assets | 6,648 | |||
Total assets | 184,872,900 | |||
Liabilities: | ||||
Payable for: | ||||
Amount due to custodian | 49,371 | |||
Fund shares reacquired | 251,977 | |||
Collateral upon return of securities loaned | 969,230 | |||
Accrued fees to affiliates | 146,501 | |||
Accrued trustees’ and officers’ fees and benefits | 4,506 | |||
Accrued other operating expenses | 41,502 | |||
Trustee deferred compensation and retirement plans | 113,687 | |||
Total liabilities | 1,576,774 | |||
Net assets applicable to shares outstanding | $ | 183,296,126 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 131,764,843 | ||
Distributable earnings | 51,531,283 | |||
$ | 183,296,126 | |||
Net Assets: | ||||
Series I | $ | 91,501,432 | ||
Series II | $ | 91,794,694 | ||
Shares outstanding, no par value, |
| |||
Series I | 19,167,078 | |||
Series II | 19,636,750 | |||
Series I: | ||||
Net asset value per share | $ | 4.77 | ||
Series II: | ||||
Net asset value per share | $ | 4.67 |
* | At December 31, 2018, securities with an aggregate value of $963,771 were on loan to brokers. |
Investment income: | ||||
Dividends (net of foreign withholding taxes of $2,455) | $ | 1,407,775 | ||
Dividends from affiliated money market funds (includes securities lending income of $105) | 38,624 | |||
Total investment income | 1,446,399 | |||
Expenses: | ||||
Advisory fees | 1,712,480 | |||
Administrative services fees | 398,222 | |||
Custodian fees | 12,887 | |||
Distribution fees — Series II | 295,931 | |||
Transfer agent fees | 56,988 | |||
Trustees’ and officers’ fees and benefits | 19,025 | |||
Reports to shareholders | 10,691 | |||
Professional services fees | 56,282 | |||
Other | 7,586 | |||
Total expenses | 2,570,092 | |||
Less: Fees waived | (2,394 | ) | ||
Net expenses | 2,567,698 | |||
Net investment income (loss) | (1,121,299 | ) | ||
Realized and unrealized gain (loss): | ||||
Net realized gain from: | ||||
Investment securities (includes net gain from securities sold to affiliates of $7,516) | 32,028,887 | |||
Foreign currencies | 271 | |||
32,029,158 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (40,227,843 | ) | ||
Foreign currencies | 131 | |||
(40,227,712 | ) | |||
Net realized and unrealized gain (loss) | (8,198,554 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (9,319,853 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income (loss) | $ | (1,121,299 | ) | $ | (1,076,145 | ) | ||
Net realized gain | 32,029,158 | 24,180,705 | ||||||
Change in net unrealized appreciation (depreciation) | (40,227,712 | ) | 22,465,950 | |||||
Net increase (decrease) in net assets resulting from operations | (9,319,853 | ) | 45,570,510 | |||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (11,710,806 | ) | (6,675,715 | ) | ||||
Series II | (12,842,411 | ) | (7,683,442 | ) | ||||
Total distributions from distributable earnings | (24,553,217 | ) | (14,359,157 | ) | ||||
Share transactions–net: | ||||||||
Series I | (1,294,488 | ) | (2,907,769 | ) | ||||
Series II | (13,180,099 | ) | (8,386,056 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (14,474,587 | ) | (11,293,825 | ) | ||||
Net increase (decrease) in net assets | (48,347,657 | ) | 19,917,528 | |||||
Net assets: | ||||||||
Beginning of year | 231,643,783 | 211,726,255 | ||||||
End of year | $ | 183,296,126 | $ | 231,643,783 |
(1) | The Securities and Exchange Commission eliminated the requirement to disclose distribution components separately, except for tax return of capital. For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net realized gains. |
Notes to Financial Statements
December 31, 2018
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. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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 theover-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 (“NAV”) 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 theend-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. Mid Cap Growth Fund
trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 investment 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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 Growth 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. | 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 inshort-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. The Fund bears the risk of loss with respect to the investment of collateral. 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. When loaning securities, the Fund retains certain benefits of owning the securities, including the economic equivalent of dividends or interest generated by the security. 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. The securities loaned are subject to termination at the option of the borrower or the Fund. Upon termination, the borrower will return to the Fund the securities loaned and the Fund will return the collateral. 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 and the securities may lose value during the delay which could result in potential losses to the Fund. Some of these losses may be indemnified by the lending agent. 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, are included inDividends from affiliated money market fundson 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 the 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 the dailymark-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 anagreed-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. Mid Cap Growth 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 accrues daily and pays monthly 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 year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.75%.
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2019, 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 (the “expense limits”). 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, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $2,394.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $57,517 for accounting and fund administrative services and was reimbursed $340,705 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution fees.
For the year ended December 31, 2018, the Fund incurred $1,511 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. Mid Cap Growth 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 December 31, 2018. 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 | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks & Other Equity Interests | $ | 178,761,477 | $ | 3,501,318 | $ | — | $ | 182,262,795 | ||||||||
Money Market Funds | 2,277,991 | — | — | 2,277,991 | ||||||||||||
Total Investments | $ | 181,039,468 | $ | 3,501,318 | $ | — | $ | 184,540,786 |
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 year ended December 31, 2018, the Fund engaged in securities sales of $207,797, which resulted in net realized gains of $7,516.
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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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. Mid Cap Growth Fund
NOTE 7—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Long-term capital gain | $ | 24,553,217 | $ | 14,359,157 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributedlong-term gain | $ | 30,888,306 | ||
Net unrealized appreciation — investments | 20,748,362 | |||
Net unrealized appreciation — foreign currencies | 187 | |||
Temporary book/tax differences | (105,572 | ) | ||
Shares of beneficial interest | 131,764,843 | |||
Total net assets | $ | 183,296,126 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 does not have a capital loss carryforward as of December 31, 2018.
NOTE 8—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $128,429,882 and $169,491,780, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 34,753,967 | ||
Aggregate unrealized (depreciation) of investments | (14,005,605 | ) | ||
Net unrealized appreciation of investments | $ | 20,748,362 |
Cost of investments for tax purposes is $163,792,424.
NOTE 9—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of net operating losses, on December 31, 2018, undistributed net investment income (loss) was increased by $1,155,274, undistributed net realized gain was increased by $2,138 and shares of beneficial interest was decreased by $1,157,412. This reclassification had no effect on the net assets of the Fund.
Invesco V.I. Mid Cap Growth Fund
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 1,634,000 | $ | 9,588,108 | 2,110,516 | $ | 11,337,794 | ||||||||||
Series II | 1,697,932 | 9,678,387 | 1,772,258 | 9,394,698 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 2,026,091 | 11,710,806 | 1,252,479 | 6,675,715 | ||||||||||||
Series II | 2,264,976 | 12,842,411 | 1,463,513 | 7,683,442 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (3,918,877 | ) | (22,593,402 | ) | (3,864,213 | ) | (20,921,278 | ) | ||||||||
Series II | (6,472,581 | ) | (35,700,897 | ) | (4,767,695 | ) | (25,464,196 | ) | ||||||||
Net increase (decrease) in share activity | (2,768,459 | ) | $ | (14,474,587 | ) | (2,033,142 | ) | $ | (11,293,825 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 54% 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 (loss)(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Distributions from net realized gains | 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 | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 5.62 | $ | (0.02 | ) | $ | (0.18 | ) | $ | (0.20 | ) | $ | (0.65 | ) | $ | 4.77 | (5.58 | )% | $ | 91,501 | 1.00 | %(d) | 1.00 | %(d) | (0.37 | )%(d) | 57 | % | ||||||||||||||||||||
Year ended 12/31/17 | 4.89 | (0.02 | ) | 1.10 | 1.08 | (0.35 | ) | 5.62 | 22.49 | 109,197 | 1.00 | 1.00 | (0.34 | ) | 46 | |||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 5.38 | (0.02 | ) | 0.07 | 0.05 | (0.54 | ) | 4.89 | 0.76 | 97,444 | 1.03 | 1.03 | (0.39 | ) | 60 | |||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 5.78 | (0.02 | ) | 0.08 | 0.06 | (0.46 | ) | 5.38 | 1.21 | 103,632 | 1.07 | 1.07 | (0.33 | ) | 62 | |||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 5.53 | (0.03 | ) | (0.18 | ) | (0.21 | ) | (0.65 | ) | 4.67 | (5.87 | ) | 91,795 | 1.25 | (d) | 1.25 | (d) | (0.62 | )(d) | 57 | ||||||||||||||||||||||||||||
Year ended 12/31/17 | 4.83 | (0.03 | ) | 1.08 | 1.05 | (0.35 | ) | 5.53 | 22.14 | 122,447 | 1.25 | 1.25 | (0.59 | ) | 46 | |||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 5.33 | (0.03 | ) | 0.07 | 0.04 | (0.54 | ) | 4.83 | 0.57 | 114,282 | 1.28 | 1.28 | (0.64 | ) | 60 | |||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 5.74 | (0.03 | ) | 0.08 | 0.05 | (0.46 | ) | 5.33 | 1.04 | 158,684 | 1.32 | 1.32 | (0.58 | ) | 62 | |||||||||||||||||||||||||||||||||
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 |
(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 based on average daily net assets (000’s omitted) of $109,958 and $118,373 for Series I and Series II shares, respectively. |
Invesco V.I. Mid Cap Growth Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Mid Cap Growth Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Mid Cap Growth Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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 (07/01/18) | ACTUAL | HYPOTHETICAL (5% annual return before | Annualized | ||||||||||||||||||||
Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 874.20 | $ | 4.68 | $ | 1,020.21 | $ | 5.04 | 0.99 | % | ||||||||||||
Series II | 1,000.00 | 873.40 | 5.86 | 1,018.95 | 6.31 | 1.24 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Mid Cap Growth Fund
Tax Information
Form1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Long-Term Capital Gain Distributions | $ | 24,553,217 | ||
Corporate Dividends Received Deduction* | 0.00 | % | ||
U.S. Treasury Obligations* | 0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. Mid Cap Growth Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Mid Cap Growth Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. Mid Cap Growth Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. Mid Cap Growth Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Mid Cap Growth Fund
| ||||
Annual Report to Shareholders | December 31, 2018 | |||
| ||||
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) onForm N-Q (or any successor Form). The Fund’s Form N-Q (or any successor Form) filings are available on the SEC website, sec.gov. The SEC file numbers for the Fund are811-07452 and 033-57340. The Fund’s most recent portfolio holdings, as filed onForm N-Q (or any successor Form), 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.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Invesco Distributors, Inc. MS-VISPI-AR-1 02152019 1150 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. S&P 500 Index Fund (the Fund) underperformed the Fund’s broad market/style-specific index, the S&P 500 Index.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -4.80 | % | |||
Series II Shares | -5.07 | ||||
S&P 500 Index▼ (Broad Market/Style-Specific Index) | -4.38 | ||||
Lipper VUF S&P 500 Funds Index∎ (Peer Group Index) | -4.63 | ||||
Source(s):▼FactSet Research Systems Inc.;∎Lipper Inc. |
Market conditions and your Fund
Calendar year 2018 proved to be an increasingly volatile time for US equities. In January 2018, US equity markets steadily moved higher, as investors remained enthused about the passage of the Tax Cuts and Jobs Act signed into law in late December 2017. However, in February 2018, volatility returned to the US stock and bond markets. Worries about how rising interest rates might affect economic growth, concerns about a potential trade war and heightened geopolitical tensions caused the US stock markets to pull back and volatility to increase.
US equity markets generally recovered in the second quarter of 2018 as strong US retail sales and low unemployment buoyed markets. Throughout the summer, US equities moved higher as corporate profits surged. Several US equity indexes reached new highs despite potential headwinds including trade tensions, tariff announcements and contagion concerns over a Turkish currency crisis. After a relatively quiet summer, market volatility noticeably rose in October, as US equity markets suffered a sharp sell-off through year-end, amid rising
interest rates and concerns that higher inflation could mean a more restrictive monetary policy. In this environment, there was a flight to safety, as investors fled to defensive areas of the equities markets, like health care and utilities, and US Treasuries.
Given signs of a strong economy, the US Federal Reserve raised interest rates four times during the year: in March, June, September and December 2018. Following December’s Federal Reserve meeting, Chairman Jerome Powell raised interest rates for the fourth time in 2018 by 25 basis points to a targeted range of 2.25% to 2.50%, and lowered guidance from three to two rate hikes in 2019, signaling a slightly more dovish stance than expected.1 In contrast, the European Central Bank and central banks in several other countries maintained extraordinarily accommodative monetary policies.
Invesco V.I. S&P 500 Index Fund invests in stocks in approximately the same proportion as they are represented in the S&P 500 Index. During the year, the sectors that contributed the most to overall Fund performance were the health care, information technology (IT), consumer discretionary and utilities. Three of the
four sectors also delivered positive absolute performance for the year. The financials, industrials and energy sectors delivered negative returns and detracted from the Fund’s performance.
Four of the five top contributors for the year were from either the IT or health care sectors. The largest contributor to overall Fund performance wasMicrosoft. Microsoft benefited from a strong IT sector and continued demand for its core products.Mastercard was also a strong performer in the sector.Amazon.com was also a top contributor. Within the health care sector,Merck andPfizer were key contributors.
As noted earlier, the financials, industrials and energy sectors detracted from absolute Fund performance during the year. Within the industrials sector,General Electric struggled and its share price declined over 50% during the year. Several energy holdings were key detractors including,Exxon Mobil. Volatile oil prices hampered these companies’ ability to deliver positive returns.
Social media giantFacebook was the largest individual detractor from Fund performance. The company struggled with negative press that adversely affected its stock price.
Please note, the Fund’s strategy is principally implemented through equity investments, but the Fund may also use S&P 500 futures contracts, which are derivative instruments used to gain exposure to the equity market. During the year, the Fund invested in S&P 500 futures contracts, which generated a negative return and detracted from absolute Fund performance. Derivatives can be a cost-effective way to gain exposure to asset classes. However, derivatives may amplify traditional investment risks through the creation of leverage and may be less liquid than traditional securities.
Portfolio Composition | |||||
By sector | % of total net assets |
Information Technology | 19.7% | ||||
Health Care | 15.2 | ||||
Financials | 13.1 | ||||
Communication Services | 9.9 | ||||
Consumer Discretionary | 9.7 | ||||
Industrials | 9.0 | ||||
Consumer Staples | 7.2 | ||||
Energy | 5.2 | ||||
Utilities | 3.3 | ||||
Real Estate | 2.9 | ||||
Materials | 2.7 | ||||
Money Market Funds | |||||
Plus Other Assets Less Liabilities | 2.1 |
Top 10 Equity Holdings* |
% of total net assets |
1. Microsoft Corp. | 3.7% | ||||
2. Apple Inc. | 3.3 | ||||
3. Alphabet Inc. | 2.9 | ||||
4. Amazon.com, Inc. | 2.9 | ||||
5. Berkshire Hathaway Inc.-Class B | 1.8 | ||||
6. Johnson & Johnson | 1.6 | ||||
7. JPMorgan Chase & Co. | 1.5 | ||||
8. Facebook, Inc. | 1.5 | ||||
9. Exxon Mobil Corp. | 1.3 | ||||
10. Pfizer Inc. | 1.2 |
Total Net Assets | $ | 78.9 million | |||
Total Number of Holdings* | 506 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
Data presented here are as of December 31, 2018.
Invesco V.I. S&P 500 Index Fund
We welcome new investors who joined the Fund during the year and thank you for your investment in Invesco V.I. S&P 500 Index Fund.
1 | Source: US Federal Reserve |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Anthony Munchak Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. S&P 500 Index Fund. He joined | ||
Invesco in 2000. Mr. Munchak earned a BS and an MS in finance from Boston College and an MBA from Bentley College. |
Glen Murphy Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. S&P 500 Index Fund. He | ||
joined Invesco in 1995. Mr. Murphy earned a BA from the University of Massachusetts at Amherst and an MS in finance from Boston College. |
Francis Orlando Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. S&P 500 Index Fund. He | ||
joined Invesco in 1987. Mr. Orlando earned a BA in business administration from Merrimack College and an MBA from Boston University. |
Daniel Tsai Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. S&P 500 Index Fund. He joined | ||
Invesco in 2000. Mr. Tsai earned a BS in mechanical engineering from National Taiwan University, an MS in mechanical engineering from the University of Michigan and an MS in computer science from Wayne State University. |
Anne Unflat Portfolio Manager, is manager of Invesco V.I. S&P 500 Index Fund. She joined Invesco in 1988. Ms. Unflat | ||
earned a BA in economics from Queens College and an MBA in finance from St. John’s University. |
Invesco V.I. S&P 500 Index Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (5/18/98) | 5.69% | ||||
10 Years | 12.75 | ||||
5 Years | 8.05 | ||||
1 Year | -4.80 | ||||
Series II Shares | |||||
Inception (6/5/00) | 4.35% | ||||
10 Years | 12.48 | ||||
5 Years | 7.77 | ||||
1 Year | -5.07 |
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, prior to June 1, 2010, 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. Performance figures in the table and chart do not reflect deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 0.48% and 0.73%, 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
Invesco V.I. S&P 500 Index 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.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Depositary receipts risk.Investing in depositary receipts involves the same risks as direct investments in foreign securities. In addition, the underlying issuers of certain depositary receipts are under no obligation to distribute shareholder communications or pass through any voting rights with respect to the deposited securities to the holders of such receipts. The Fund may therefore receive less timely information or have less control than if it invested directly in the foreign issuer.
Derivatives risk.The value of a derivative instrument depends largely on (and is derived from) the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include other, possibly greater, risks, including counterparty, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by holding a position in the derivative. As a result, an adverse change in the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative or the anticipated value of the underlying asset, which may make the Fund’s returns more volatile and increase the risk of loss. Derivative instruments may also be less liquid than more traditional investments and the Fund may be unable to sell or close out its derivative positions at a desirable time or price. This risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. Derivatives strategies may not always be successful. For example, derivatives used for hedging or to gain or limit exposure to a particular market segment may not provide the expected benefits, particularly during adverse market conditions.
Emerging markets securities risk. Emerging markets (also referred to as developing markets) are generally subject to greater market volatility, political, social and economic instability, uncertain trading markets and more governmental limitations on foreign investment than more developed markets. In addition, companies operating in emerging markets may be subject to lower trading volume and greater price fluctuations than companies in more developed markets. Securities law and the enforcement of systems of taxation in many emerging market countries may change quickly and unpredictably. In addition, investments in emerging markets securities may also be subject to additional transaction costs, delays in settlement procedures, and lack of timely information.
Foreign securities risk. The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
Indexing risk. The Fund is operated as a passively managed index fund and, therefore, the adverse performance of a particular security necessarily will not result in the elimination of the security from the Fund’s portfolio. Ordinarily, the Adviser will not sell the Fund’s portfolio securities except to reflect additions or deletions of the securities that comprise the Index, or as may be necessary to raise cash to pay Fund shareholders who sell Fund shares. As such, the Fund will be negatively affected by declines in the securities represented by the Index. Also, there is no guarantee that the Adviser will be able to
correlate the Fund’s performance with that of the Index.
Market risk. The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
About indexes used in this report
TheS&P 500® Index is an unmanaged index considered representative of the US stock market.
TheLipper VUF S&P 500 Funds Indexis 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.
Other information
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Industry 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.
Invesco V.I. S&P 500 Index Fund
Schedule of Investments(a)
December 31, 2018
Shares | Value | |||||||
Common Stocks & Other Equity Interests–97.96% |
| |||||||
Advertising–0.11% |
| |||||||
Interpublic Group of Cos., Inc. (The) | 1,400 | $ | 28,882 | |||||
Omnicom Group Inc. | 819 | 59,984 | ||||||
88,866 | ||||||||
Aerospace & Defense–2.44% |
| |||||||
Arconic Inc. | 1,537 | 25,914 | ||||||
Boeing Co. (The) | 1,939 | 625,327 | ||||||
General Dynamics Corp. | 1,022 | 160,669 | ||||||
Harris Corp. | 430 | 57,899 | ||||||
Huntington Ingalls Industries, Inc. | 160 | 30,450 | ||||||
L3 Technologies, Inc. | 284 | 49,319 | ||||||
Lockheed Martin Corp. | 908 | 237,751 | ||||||
Northrop Grumman Corp. | 635 | 155,511 | ||||||
Raytheon Co. | 1,042 | 159,791 | ||||||
Textron Inc. | 906 | 41,667 | ||||||
TransDigm Group, Inc.(b) | 179 | 60,871 | ||||||
United Technologies Corp. | 2,980 | 317,310 | ||||||
1,922,479 | ||||||||
Agricultural & Farm Machinery–0.22% |
| |||||||
Deere & Co. | 1,177 | 175,573 | ||||||
Agricultural Products–0.11% |
| |||||||
Archer-Daniels-Midland Co. | 2,059 | 84,357 | ||||||
Air Freight & Logistics–0.61% |
| |||||||
C.H. Robinson Worldwide, Inc. | 505 | 42,466 | ||||||
Expeditors International of Washington, Inc. | 633 | 43,101 | ||||||
FedEx Corp. | 892 | 143,906 | ||||||
United Parcel Service, Inc.–Class B | 2,553 | 248,994 | ||||||
478,467 | ||||||||
Airlines–0.44% |
| |||||||
Alaska Air Group Inc. | 458 | 27,869 | ||||||
American Airlines Group Inc. | 1,513 | 48,583 | ||||||
Delta Air Lines, Inc. | 2,297 | 114,620 | ||||||
Southwest Airlines Co. | 1,859 | 86,407 | ||||||
United Continental Holdings Inc.(b) | 836 | 69,998 | ||||||
347,477 | ||||||||
Alternative Carriers–0.07% |
| |||||||
CenturyLink Inc. | 3,467 | 52,525 | ||||||
Apparel Retail–0.48% |
| |||||||
Foot Locker, Inc. | 428 | 22,770 | ||||||
Gap, Inc. (The) | 801 | 20,634 | ||||||
L Brands, Inc. | 833 | 21,383 | ||||||
Ross Stores, Inc. | 1,375 | 114,400 | ||||||
TJX Cos., Inc. (The) | 4,545 | 203,343 | ||||||
382,530 |
Shares | Value | |||||||
Apparel, Accessories & Luxury Goods–0.29% |
| |||||||
Hanesbrands, Inc. | 1,329 | $ | 16,652 | |||||
Michael Kors Holdings Ltd.(b) | 543 | 20,590 | ||||||
PVH Corp. | 284 | 26,398 | ||||||
Ralph Lauren Corp. | 204 | 21,106 | ||||||
Tapestry, Inc. | 1,045 | 35,269 | ||||||
Under Armour, Inc.–Class A(b)(c) | 669 | 11,821 | ||||||
Under Armour, Inc.–Class C(b) | 722 | 11,675 | ||||||
VF Corp. | 1,188 | 84,752 | ||||||
228,263 | ||||||||
Application Software–1.60% |
| |||||||
Adobe Inc.(b) | 1,793 | 405,648 | ||||||
ANSYS, Inc.(b) | 304 | 43,454 | ||||||
Autodesk, Inc.(b) | 804 | 103,403 | ||||||
Cadence Design Systems, Inc.(b) | 1,041 | 45,263 | ||||||
Citrix Systems, Inc. | 466 | 47,746 | ||||||
Intuit Inc. | 952 | 187,401 | ||||||
salesforce.com, inc.(b) | 2,809 | 384,749 | ||||||
Synopsys, Inc.(b) | 550 | 46,332 | ||||||
1,263,996 | ||||||||
Asset Management & Custody Banks–0.89% |
| |||||||
Affiliated Managers Group, Inc. | 196 | 19,098 | ||||||
Ameriprise Financial, Inc. | 511 | 53,333 | ||||||
Bank of New York Mellon Corp. (The) | 3,341 | 157,261 | ||||||
BlackRock, Inc. | 447 | 175,590 | ||||||
Franklin Resources, Inc. | 1,116 | 33,101 | ||||||
Invesco Ltd.(d) | 1,519 | 25,428 | ||||||
Northern Trust Corp. | 815 | 68,126 | ||||||
State Street Corp. | 1,385 | 87,352 | ||||||
T. Rowe Price Group Inc. | 887 | 81,888 | ||||||
701,177 | ||||||||
Auto Parts & Equipment–0.11% |
| |||||||
Aptiv PLC | 961 | 59,169 | ||||||
BorgWarner, Inc. | 762 | 26,472 | ||||||
85,641 | ||||||||
Automobile Manufacturers–0.34% |
| |||||||
Ford Motor Co. | 14,333 | 109,647 | ||||||
General Motors Co. | 4,822 | 161,296 | ||||||
270,943 | ||||||||
Automotive Retail–0.33% |
| |||||||
Advance Auto Parts, Inc. | 268 | 42,199 | ||||||
AutoZone, Inc(b) | 92 | 77,127 | ||||||
CarMax, Inc.(b) | 646 | 40,524 | ||||||
O’Reilly Automotive, Inc.(b) | 296 | 101,922 | ||||||
261,772 |
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–2.58% |
| |||||||
AbbVie Inc. | 5,531 | $ | 509,903 | |||||
Alexion Pharmaceuticals, Inc.(b) | 819 | 79,738 | ||||||
Amgen Inc. | 2,340 | 455,528 | ||||||
Biogen Inc.(b) | 739 | 222,380 | ||||||
Celgene Corp.(b) | 2,567 | 164,519 | ||||||
Gilead Sciences, Inc. | 4,752 | 297,237 | ||||||
Incyte Corp.(b) | 638 | 40,570 | ||||||
Regeneron Pharmaceuticals, Inc.(b) | 284 | 106,074 | ||||||
Vertex Pharmaceuticals Inc.(b) | 938 | 155,436 | ||||||
2,031,385 | ||||||||
Brewers–0.05% |
| |||||||
Molson Coors Brewing Co.–Class B | 687 | 38,582 | ||||||
Broadcasting–0.13% |
| |||||||
CBS Corp.–Class B | 1,240 | 54,213 | ||||||
Discovery, Inc.–Class A(b)(c) | 580 | 14,349 | ||||||
Discovery, Inc.–Class C(b) | 1,313 | 30,304 | ||||||
98,866 | ||||||||
Building Products–0.26% |
| |||||||
A.O. Smith Corp. | 542 | 23,143 | ||||||
Allegion PLC | 344 | 27,420 | ||||||
Fortune Brands Home & Security, Inc. | 519 | 19,717 | ||||||
Johnson Controls International PLC | 3,394 | 100,632 | ||||||
Masco Corp. | 1,127 | 32,954 | ||||||
203,866 | ||||||||
Cable & Satellite–0.98% |
| |||||||
Charter Communications, Inc.–Class A(b) | 647 | 184,376 | ||||||
Comcast Corp.–Class A | 16,688 | 568,226 | ||||||
DISH Network Corp.–Class A(b) | 831 | 20,750 | ||||||
773,352 | ||||||||
Casinos & Gaming–0.10% |
| |||||||
MGM Resorts International | 1,851 | 44,905 | ||||||
Wynn Resorts Ltd. | 362 | 35,806 | ||||||
80,711 | ||||||||
Commodity Chemicals–0.12% |
| |||||||
LyondellBasell Industries N.V.–Class A | 1,155 | 96,050 | ||||||
Communications Equipment–1.13% |
| |||||||
Arista Networks Inc.(b) | 188 | 39,612 | ||||||
Cisco Systems, Inc. | 16,516 | 715,638 | ||||||
F5 Networks, Inc.(b) | 221 | 35,809 | ||||||
Juniper Networks, Inc. | 1,283 | 34,525 | ||||||
Motorola Solutions, Inc. | 600 | 69,024 | ||||||
894,608 | ||||||||
Computer & Electronics Retail–0.06% |
| |||||||
Best Buy Co., Inc. | 859 | 45,493 | ||||||
Construction & Engineering–0.07% |
| |||||||
Fluor Corp. | 509 | 16,390 | ||||||
Jacobs Engineering Group Inc. | 437 | 25,547 |
Shares | Value | |||||||
Construction & Engineering–(continued) |
| |||||||
Quanta Services, Inc. | 542 | $ | 16,314 | |||||
58,251 | ||||||||
Construction Machinery & Heavy Trucks–0.54% |
| |||||||
Caterpillar Inc. | 2,171 | 275,869 | ||||||
Cummins Inc. | 548 | 73,234 | ||||||
PACCAR Inc. | 1,277 | 72,968 | ||||||
422,071 | ||||||||
Construction Materials–0.11% |
| |||||||
Martin Marietta Materials, Inc. | 233 | 40,046 | ||||||
Vulcan Materials Co. | 479 | 47,325 | ||||||
87,371 | ||||||||
Consumer Electronics–0.04% |
| |||||||
Garmin Ltd. | 441 | 27,924 | ||||||
Consumer Finance–0.64% |
| |||||||
American Express Co. | 2,578 | 245,735 | ||||||
Capital One Financial Corp. | 1,747 | 132,056 | ||||||
Discover Financial Services | 1,233 | 72,722 | ||||||
Synchrony Financial | 2,428 | 56,961 | ||||||
507,474 | ||||||||
Copper–0.07% |
| |||||||
Freeport-McMoRan Inc. | 5,293 | 54,571 | ||||||
Data Processing & Outsourced Services–3.38% |
| |||||||
Alliance Data Systems Corp. | 174 | 26,114 | ||||||
Automatic Data Processing, Inc. | 1,608 | 210,841 | ||||||
Broadridge Financial Solutions, Inc. | 427 | 41,099 | ||||||
Fidelity National Information Services, Inc. | 1,202 | 123,265 | ||||||
Fiserv, Inc.(b) | 1,462 | 107,442 | ||||||
FleetCor Technologies Inc.(b) | 324 | 60,173 | ||||||
Global Payments Inc. | 578 | 59,609 | ||||||
Jack Henry & Associates, Inc. | 282 | 35,679 | ||||||
Mastercard Inc.–Class A | 3,337 | 629,525 | ||||||
Paychex, Inc. | 1,173 | 76,421 | ||||||
PayPal Holdings, Inc.(b) | 4,323 | 363,521 | ||||||
Total System Services, Inc. | 612 | 49,749 | ||||||
Visa Inc.–Class A | 6,455 | 851,673 | ||||||
Western Union Co. (The) | 1,601 | 27,313 | ||||||
2,662,424 | ||||||||
Department Stores–0.12% |
| |||||||
Kohl’s Corp. | 608 | 40,335 | ||||||
Macy’s, Inc. | 1,132 | 33,711 | ||||||
Nordstrom, Inc. | 425 | 19,809 | ||||||
93,855 | ||||||||
Distillers & Vintners–0.16% |
| |||||||
Brown-Forman Corp.–Class B | 615 | 29,262 | ||||||
Constellation Brands, Inc.–Class A | 609 | 97,939 | ||||||
127,201 |
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 | |||||||
Distributors–0.10% |
| |||||||
Genuine Parts Co. | 532 | $ | 51,083 | |||||
LKQ Corp.(b) | 1,144 | 27,147 | ||||||
78,230 | ||||||||
Diversified Banks–4.39% |
| |||||||
Bank of America Corp. | 33,530 | 826,179 | ||||||
Citigroup Inc. | 8,971 | 467,030 | ||||||
JPMorgan Chase & Co. | 12,215 | 1,192,429 | ||||||
U.S. Bancorp | 5,593 | 255,600 | ||||||
Wells Fargo & Co. | 15,564 | 717,189 | ||||||
3,458,427 | ||||||||
Diversified Chemicals–0.62% |
| |||||||
DowDuPont Inc. | 8,433 | 450,997 | ||||||
Eastman Chemical Co. | 515 | 37,651 | ||||||
488,648 | ||||||||
Diversified Support Services–0.11% |
| |||||||
Cintas Corp. | 318 | 53,421 | ||||||
Copart, Inc.(b) | 756 | 36,122 | ||||||
89,543 | ||||||||
Drug Retail–0.26% |
| |||||||
Walgreens Boots Alliance, Inc. | 2,952 | 201,710 | ||||||
Electric Utilities–2.03% |
| |||||||
Alliant Energy Corp. | 866 | 36,588 | ||||||
American Electric Power Co., Inc. | 1,811 | 135,354 | ||||||
Duke Energy Corp. | 2,618 | 225,933 | ||||||
Edison International | 1,183 | 67,159 | ||||||
Entergy Corp. | 665 | 57,237 | ||||||
Evergy, Inc. | 967 | 54,897 | ||||||
Eversource Energy | 1,163 | 75,642 | ||||||
Exelon Corp. | 3,552 | 160,195 | ||||||
FirstEnergy Corp. | 1,775 | 66,651 | ||||||
NextEra Energy, Inc. | 1,755 | 305,054 | ||||||
PG&E Corp.(b) | 1,875 | 44,531 | ||||||
Pinnacle West Capital Corp. | 405 | 34,506 | ||||||
PPL Corp. | 2,645 | 74,933 | ||||||
Southern Co. (The) | 3,779 | 165,974 | ||||||
Xcel Energy, Inc. | 1,888 | 93,022 | ||||||
1,597,676 | ||||||||
Electrical Components & Equipment–0.47% |
| |||||||
AMETEK Inc. | 852 | 57,680 | ||||||
Eaton Corp. PLC | 1,588 | 109,032 | ||||||
Emerson Electric Co. | 2,288 | 136,708 | ||||||
Rockwell Automation, Inc. | 443 | 66,663 | ||||||
370,083 | ||||||||
Electronic Components–0.23% |
| |||||||
Amphenol Corp.–Class A | 1,106 | 89,608 | ||||||
Corning Inc. | 2,958 | 89,361 | ||||||
178,969 |
Shares | Value | |||||||
Electronic Equipment & Instruments–0.08% |
| |||||||
FLIR Systems, Inc. | 506 | $ | 22,031 | |||||
Keysight Technologies, Inc.(b) | 684 | 42,463 | ||||||
64,494 | ||||||||
Electronic Manufacturing Services–0.14% |
| |||||||
IPG Photonics Corp.(b) | 131 | 14,841 | ||||||
TE Connectivity Ltd. | 1,259 | 95,218 | ||||||
110,059 | ||||||||
Environmental & Facilities Services–0.26% |
| |||||||
Republic Services, Inc. | 795 | 57,311 | ||||||
Rollins, Inc. | 537 | 19,386 | ||||||
Waste Management, Inc. | 1,444 | 128,502 | ||||||
205,199 | ||||||||
Fertilizers & Agricultural Chemicals–0.14% |
| |||||||
CF Industries Holdings, Inc. | 862 | 37,506 | ||||||
FMC Corp. | 496 | 36,684 | ||||||
Mosaic Co. (The) | 1,296 | 37,856 | ||||||
112,046 | ||||||||
Financial Exchanges & Data–0.97% |
| |||||||
Cboe Global Markets, Inc. | 415 | 40,600 | ||||||
CME Group Inc.–Class A | 1,313 | 247,002 | ||||||
Intercontinental Exchange, Inc. | 2,092 | 157,590 | ||||||
Moody’s Corp. | 611 | 85,564 | ||||||
MSCI Inc. | 322 | 47,473 | ||||||
Nasdaq, Inc. | 420 | 34,259 | ||||||
S&P Global Inc. | 918 | 156,005 | ||||||
768,493 | ||||||||
Food Distributors–0.14% |
| |||||||
Sysco Corp. | 1,756 | 110,031 | ||||||
Food Retail–0.10% |
| |||||||
Kroger Co. (The) | 2,909 | 79,998 | ||||||
Footwear–0.44% |
| |||||||
NIKE, Inc.–Class B | 4,677 | 346,753 | ||||||
General Merchandise Stores–0.39% |
| |||||||
Dollar General Corp. | 969 | 104,730 | ||||||
Dollar Tree, Inc.(b) | 873 | 78,849 | ||||||
Target Corp. | 1,922 | 127,025 | ||||||
310,604 | ||||||||
Gold–0.09% |
| |||||||
Newmont Mining Corp. | 1,937 | 67,117 | ||||||
Health Care Distributors–0.27% |
| |||||||
AmerisourceBergen Corp. | 575 | 42,780 | ||||||
Cardinal Health, Inc. | 1,093 | 48,748 | ||||||
Henry Schein, Inc.(b) | 568 | 44,599 | ||||||
McKesson Corp. | 717 | 79,207 | ||||||
215,334 |
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–3.16% |
| |||||||
Abbott Laboratories | 6,452 | $ | 466,673 | |||||
ABIOMED, Inc.(b) | 163 | 52,982 | ||||||
Baxter International Inc. | 1,815 | 119,463 | ||||||
Becton Dickinson and Co. | 984 | 221,715 | ||||||
Boston Scientific Corp.(b) | 5,083 | 179,633 | ||||||
Danaher Corp. | 2,265 | 233,567 | ||||||
Edwards Lifesciences Corp.(b) | 765 | 117,175 | ||||||
Hologic, Inc.(b) | 991 | 40,730 | ||||||
IDEXX Laboratories, Inc.(b) | 314 | 58,410 | ||||||
Intuitive Surgical, Inc.(b) | 419 | 200,667 | ||||||
Medtronic PLC | 4,933 | 448,706 | ||||||
ResMed Inc. | 517 | 58,871 | ||||||
Stryker Corp. | 1,140 | 178,695 | ||||||
Varian Medical Systems, Inc.(b) | 340 | 38,525 | ||||||
Zimmer Biomet Holdings, Inc. | 748 | 77,583 | ||||||
2,493,395 | ||||||||
Health Care Facilities–0.20% |
| |||||||
HCA Healthcare, Inc. | 985 | 122,583 | ||||||
Universal Health Services, Inc.–Class B | 314 | 36,600 | ||||||
159,183 | ||||||||
Health Care REITs–0.28% |
| |||||||
HCP, Inc. | 1,754 | 48,989 | ||||||
Ventas, Inc. | 1,308 | 76,636 | ||||||
Welltower Inc. | 1,379 | 95,716 | ||||||
221,341 | ||||||||
Health Care Services–0.87% |
| |||||||
Cigna Corp. | 1,398 | 265,451 | ||||||
CVS Health Corp. | 4,750 | 311,220 | ||||||
DaVita Inc.(b) | 463 | 23,826 | ||||||
Laboratory Corp. of America Holdings(b) | 370 | 46,753 | ||||||
Quest Diagnostics Inc. | 501 | 41,719 | ||||||
688,969 | ||||||||
Health Care Supplies–0.17% |
| |||||||
Align Technology, Inc.(b) | 266 | 55,708 | ||||||
Cooper Cos., Inc. (The) | 177 | 45,047 | ||||||
DENTSPLY SIRONA Inc. | 825 | 30,698 | ||||||
131,453 | ||||||||
Health Care Technology–0.08% |
| |||||||
Cerner Corp.(b) | 1,201 | 62,980 | ||||||
Home Furnishings–0.06% |
| |||||||
Leggett & Platt, Inc. | 476 | 17,060 | ||||||
Mohawk Industries, Inc.(b) | 235 | 27,485 | ||||||
44,545 | ||||||||
Home Improvement Retail–1.25% |
| |||||||
Home Depot, Inc. (The) | 4,148 | 712,710 | ||||||
Lowe’s Cos., Inc. | 2,948 | 272,277 | ||||||
984,987 |
Shares | Value | |||||||
Homebuilding–0.14% |
| |||||||
D.R. Horton, Inc. | 1,247 | $ | 43,221 | |||||
Lennar Corp.–Class A | 1,065 | 41,695 | ||||||
PulteGroup Inc. | 948 | 24,638 | ||||||
109,554 | ||||||||
Hotel & Resort REITs–0.06% |
| |||||||
Host Hotels & Resorts Inc. | 2,716 | 45,276 | ||||||
Hotels, Resorts & Cruise Lines–0.45% |
| |||||||
Carnival Corp. | 1,474 | 72,668 | ||||||
Hilton Worldwide Holdings Inc. | 1,088 | 78,118 | ||||||
Marriott International Inc.–Class A | 1,039 | 112,794 | ||||||
Norwegian Cruise Line Holdings Ltd.(b) | 807 | 34,209 | ||||||
Royal Caribbean Cruises Ltd. | 625 | 61,119 | ||||||
358,908 | ||||||||
Household Appliances–0.03% |
| |||||||
Whirlpool Corp. | 241 | 25,756 | ||||||
Household Products–1.66% |
| |||||||
Church & Dwight Co., Inc. | 904 | 59,447 | ||||||
Clorox Co. (The) | 469 | 72,291 | ||||||
Colgate-Palmolive Co. | 3,186 | 189,631 | ||||||
Kimberly-Clark Corp. | 1,268 | 144,476 | ||||||
Procter & Gamble Co. (The) | 9,151 | 841,160 | ||||||
1,307,005 | ||||||||
Housewares & Specialties–0.04% |
| |||||||
Newell Brands, Inc. | 1,588 | 29,521 | ||||||
Human Resource & Employment Services–0.03% |
| |||||||
Robert Half International, Inc. | 456 | 26,083 | ||||||
Hypermarkets & Super Centers–1.03% |
| |||||||
Costco Wholesale Corp. | 1,609 | 327,770 | ||||||
Walmart Inc. | 5,229 | 487,081 | ||||||
814,851 | ||||||||
Independent Power Producers & Energy Traders–0.10% |
| |||||||
AES Corp. (The) | 2,442 | 35,311 | ||||||
NRG Energy, Inc. | 1,064 | 42,135 | ||||||
77,446 | ||||||||
Industrial Conglomerates–1.41% |
| |||||||
3M Co. | 2,142 | 408,137 | ||||||
General Electric Co.(e) | 31,954 | 241,892 | ||||||
Honeywell International Inc. | 2,713 | 358,441 | ||||||
Roper Technologies, Inc. | 377 | 100,478 | ||||||
1,108,948 | ||||||||
Industrial Gases–0.56% |
| |||||||
Air Products & Chemicals, Inc. | 805 | 128,840 | ||||||
Linde PLC (United Kingdom) | 2,024 | 315,825 | ||||||
444,665 |
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–0.75% |
| |||||||
Dover Corp. | 539 | $ | 38,242 | |||||
Flowserve Corp. | 474 | 18,021 | ||||||
Fortive Corp. | 1,078 | 72,938 | ||||||
Illinois Tool Works Inc. | 1,126 | 142,653 | ||||||
Ingersoll-Rand PLC | 900 | 82,107 | ||||||
Parker-Hannifin Corp. | 482 | 71,886 | ||||||
Pentair PLC (United Kingdom) | 599 | 22,630 | ||||||
Snap-on Inc. | 204 | 29,639 | ||||||
Stanley Black & Decker Inc. | 559 | 66,935 | ||||||
Xylem, Inc. | 652 | 43,501 | ||||||
588,552 | ||||||||
Industrial REITs–0.22% |
| |||||||
Duke Realty Corp. | 1,319 | 34,162 | ||||||
Prologis, Inc. | 2,312 | 135,761 | ||||||
169,923 | ||||||||
Insurance Brokers–0.50% |
| |||||||
Aon PLC | 887 | 128,934 | ||||||
Arthur J. Gallagher & Co. | 674 | 49,674 | ||||||
Marsh & McLennan Cos., Inc. | 1,843 | 146,979 | ||||||
Willis Towers Watson PLC | 478 | 72,589 | ||||||
398,176 | ||||||||
Integrated Oil & Gas–2.53% |
| |||||||
Chevron Corp. | 7,019 | 763,597 | ||||||
Exxon Mobil Corp. | 15,554 | 1,060,627 | ||||||
Occidental Petroleum Corp. | 2,782 | 170,759 | ||||||
1,994,983 | ||||||||
Integrated Telecommunication Services–2.05% |
| |||||||
AT&T Inc. | 26,737 | 763,074 | ||||||
Verizon Communications Inc. | 15,179 | 853,363 | ||||||
1,616,437 | ||||||||
Interactive Home Entertainment–0.33% |
| |||||||
Activision Blizzard, Inc. | 2,802 | 130,489 | ||||||
Electronic Arts Inc.(b) | 1,114 | 87,906 | ||||||
Take-Two Interactive Software, Inc.(b) | 414 | 42,617 | ||||||
261,012 | ||||||||
Interactive Media & Services–4.52% |
| |||||||
Alphabet Inc.–Class A(b) | 1,097 | 1,146,321 | ||||||
Alphabet Inc.–Class C(b) | 1,129 | 1,169,204 | ||||||
Facebook, Inc.–Class A(b) | 8,825 | 1,156,869 | ||||||
TripAdvisor, Inc.(b) | 373 | 20,120 | ||||||
Twitter, Inc.(b) | 2,629 | 75,557 | ||||||
3,568,071 | ||||||||
Internet & Direct Marketing Retail–3.42% |
| |||||||
Amazon.com, Inc.(b) | 1,507 | 2,263,469 | ||||||
Booking Holdings Inc.(b) | 170 | 292,811 | ||||||
eBay Inc.(b) | 3,298 | 92,575 | ||||||
Expedia Group, Inc. | 438 | 49,341 | ||||||
2,698,196 |
Shares | Value | |||||||
Internet Services & Infrastructure–0.12% |
| |||||||
Akamai Technologies, Inc.(b) | 597 | $ | 36,465 | |||||
VeriSign, Inc.(b) | 390 | 57,833 | ||||||
94,298 | ||||||||
Investment Banking & Brokerage–0.84% |
| |||||||
Charles Schwab Corp. (The) | 4,414 | 183,313 | ||||||
E*TRADE Financial Corp. | 933 | 40,940 | ||||||
Goldman Sachs Group, Inc. (The) | 1,270 | 212,154 | ||||||
Morgan Stanley | 4,802 | 190,399 | ||||||
Raymond James Financial, Inc. | 470 | 34,973 | ||||||
661,779 | ||||||||
IT Consulting & Other Services–1.19% |
| |||||||
Accenture PLC–Class A | 2,336 | 329,399 | ||||||
Cognizant Technology Solutions Corp.–Class A | 2,128 | 135,086 | ||||||
DXC Technology Co. | 1,034 | 54,978 | ||||||
Gartner, Inc.(b) | 336 | 42,954 | ||||||
International Business Machines Corp. | 3,334 | 378,976 | ||||||
941,393 | ||||||||
Leisure Products–0.06% |
| |||||||
Hasbro, Inc. | 426 | 34,612 | ||||||
Mattel, Inc.(b)(c) | 1,227 | 12,258 | ||||||
46,870 | ||||||||
Life & Health Insurance–0.70% |
| |||||||
Aflac, Inc. | 2,812 | 128,115 | ||||||
Brighthouse Financial, Inc.(b) | 442 | 13,472 | ||||||
Lincoln National Corp. | 793 | 40,689 | ||||||
MetLife, Inc. | 3,634 | 149,212 | ||||||
Principal Financial Group, Inc. | 966 | 42,668 | ||||||
Prudential Financial, Inc. | 1,525 | 124,364 | ||||||
Torchmark Corp. | 382 | 28,470 | ||||||
Unum Group | 798 | 23,445 | ||||||
550,435 | ||||||||
Life Sciences Tools & Services–0.98% |
| |||||||
Agilent Technologies, Inc. | 1,161 | 78,321 | ||||||
Illumina, Inc.(b) | 539 | 161,662 | ||||||
IQVIA Holdings Inc.(b) | 587 | 68,192 | ||||||
Mettler-Toledo International Inc.(b) | 91 | 51,468 | ||||||
PerkinElmer, Inc. | 411 | 32,284 | ||||||
Thermo Fisher Scientific, Inc. | 1,478 | 330,761 | ||||||
Waters Corp.(b) | 281 | 53,011 | ||||||
775,699 | ||||||||
Managed Health Care–1.78% |
| |||||||
Anthem, Inc. | 949 | 249,236 | ||||||
Centene Corp.(b) | 753 | 86,821 | ||||||
Humana Inc. | 502 | 143,813 | ||||||
UnitedHealth Group Inc. | 3,534 | 880,390 | ||||||
WellCare Health Plans, Inc.(b) | 182 | 42,968 | ||||||
1,403,228 |
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 | |||||||
Metal & Glass Containers–0.07% |
| |||||||
Ball Corp. | 1,245 | $ | 57,245 | |||||
Motorcycle Manufacturers–0.03% |
| |||||||
Harley-Davidson, Inc. | 603 | 20,574 | ||||||
Movies & Entertainment–1.69% |
| |||||||
Netflix, Inc.(b) | 1,602 | 428,791 | ||||||
Twenty-First Century Fox, Inc.–Class A | 3,882 | 186,802 | ||||||
Twenty-First Century Fox, Inc.–Class B | 1,779 | 85,001 | ||||||
Viacom Inc.–Class B | 1,304 | 33,513 | ||||||
Walt Disney Co. (The) | 5,468 | 599,566 | ||||||
1,333,673 | ||||||||
Multi-Line Insurance–0.32% |
| |||||||
American International Group, Inc. | 3,261 | 128,516 | ||||||
Assurant, Inc. | 195 | 17,441 | ||||||
Hartford Financial Services Group, Inc. (The) | 1,300 | 57,785 | ||||||
Loews Corp. | 1,015 | 46,203 | ||||||
249,945 | ||||||||
Multi-Sector Holdings–1.87% |
| |||||||
Berkshire Hathway Inc.–Class B(b) | 7,146 | 1,459,070 | ||||||
Jefferies Financial Group Inc. | 1,036 | 17,985 | ||||||
1,477,055 | ||||||||
Multi-Utilities–1.06% |
| |||||||
Ameren Corp. | 896 | 58,446 | ||||||
CenterPoint Energy, Inc. | 1,841 | 51,971 | ||||||
CMS Energy Corp. | 1,025 | 50,891 | ||||||
Consolidated Edison, Inc. | 1,143 | 87,394 | ||||||
Dominion Energy, Inc. | 2,411 | 172,290 | ||||||
DTE Energy Co. | 667 | 73,570 | ||||||
NiSource Inc. | 1,346 | 34,121 | ||||||
Public Service Enterprise Group Inc. | 1,856 | 96,605 | ||||||
SCANA Corp. | 523 | 24,989 | ||||||
Sempra Energy | 998 | 107,974 | ||||||
WEC Energy Group, Inc. | 1,158 | 80,203 | ||||||
838,454 | ||||||||
Office REITs–0.22% |
| |||||||
Alexandria Real Estate Equities, Inc. | 394 | 45,404 | ||||||
Boston Properties, Inc. | 567 | 63,816 | ||||||
SL Green Realty Corp. | 320 | 25,306 | ||||||
Vornado Realty Trust | 627 | 38,893 | ||||||
173,419 | ||||||||
Oil & Gas Drilling–0.02% |
| |||||||
Helmerich & Payne, Inc. | 405 | 19,416 | ||||||
Oil & Gas Equipment & Services–0.48% |
| |||||||
Baker Hughes, a GE Co. | 1,885 | 40,528 | ||||||
Halliburton Co. | 3,214 | 85,428 | ||||||
National Oilwell Varco Inc. | 1,387 | 35,646 | ||||||
Schlumberger Ltd. | 5,087 | 183,539 | ||||||
TechnipFMC PLC (United Kingdom) | 1,559 | 30,525 | ||||||
375,666 |
Shares | Value | |||||||
Oil & Gas Exploration & Production–1.26% |
| |||||||
Anadarko Petroleum Corp. | 1,852 | $ | 81,192 | |||||
Apache Corp. | 1,387 | 36,409 | ||||||
Cabot Oil & Gas Corp. | 1,584 | 35,402 | ||||||
Cimarex Energy Co. | 352 | 21,701 | ||||||
Concho Resources Inc.(b) | 731 | 75,140 | ||||||
ConocoPhillips | 4,228 | 263,616 | ||||||
Devon Energy Corp. | 1,719 | 38,746 | ||||||
Diamondback Energy Inc. | 566 | 52,468 | ||||||
EOG Resources, Inc. | 2,130 | 185,757 | ||||||
Hess Corp. | 919 | 37,220 | ||||||
Marathon Oil Corp. | 3,019 | 43,292 | ||||||
Newfield Exploration Co.(b) | 745 | 10,922 | ||||||
Noble Energy, Inc. | 1,790 | 33,580 | ||||||
Pioneer Natural Resources Co. | 625 | 82,200 | ||||||
997,645 | ||||||||
Oil & Gas Refining & Marketing–0.55% |
| |||||||
HollyFrontier Corp. | 591 | 30,212 | ||||||
Marathon Petroleum Corp. | 2,537 | 149,708 | ||||||
Phillips 66 | 1,559 | 134,308 | ||||||
Valero Energy Corp. | 1,565 | 117,328 | ||||||
431,556 | ||||||||
Oil & Gas Storage & Transportation–0.36% |
| |||||||
Kinder Morgan, Inc. | 6,983 | 107,399 | ||||||
ONEOK, Inc. | 1,510 | 81,464 | ||||||
Williams Cos., Inc. (The) | 4,417 | 97,395 | ||||||
286,258 | ||||||||
Packaged Foods & Meats–1.02% |
| |||||||
Campbell Soup Co.(c) | 717 | 23,654 | ||||||
Conagra Brands, Inc. | 1,783 | 38,085 | ||||||
General Mills, Inc. | 2,176 | 84,733 | ||||||
Hershey Co. (The) | 514 | 55,091 | ||||||
Hormel Foods Corp. | 998 | 42,595 | ||||||
JM Smucker Co. (The) | 419 | 39,172 | ||||||
Kellogg Co. | 923 | 52,620 | ||||||
Kraft Heinz Co. (The) | 2,271 | 97,744 | ||||||
Lamb Weston Holdings, Inc. | 533 | 39,208 | ||||||
McCormick & Co., Inc. | 447 | 62,240 | ||||||
Mondelez International, Inc.–Class A | 5,349 | 214,120 | ||||||
Tyson Foods, Inc.–Class A | 1,080 | 57,672 | ||||||
806,934 | ||||||||
Paper Packaging–0.22% |
| |||||||
Avery Dennison Corp. | 318 | 28,566 | ||||||
International Paper Co. | 1,503 | 60,661 | ||||||
Packaging Corp. of America | 348 | 29,044 | ||||||
Sealed Air Corp. | 595 | 20,730 | ||||||
WestRock Co. | 931 | 35,154 | ||||||
174,155 |
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 | |||||||
Personal Products–0.15% |
| |||||||
Coty Inc.–Class A(b) | 1,694 | $ | 11,113 | |||||
Estee Lauder Cos. Inc. (The)–Class A | 813 | 105,771 | ||||||
116,884 | ||||||||
Pharmaceuticals–5.13% |
| |||||||
Allergan PLC | 1,164 | 155,580 | ||||||
Bristol-Myers Squibb Co. | 5,995 | 311,620 | ||||||
Eli Lilly and Co. | 3,463 | 400,738 | ||||||
Johnson & Johnson | 9,852 | 1,271,401 | ||||||
Merck & Co., Inc. | 9,553 | 729,945 | ||||||
Mylan N.V.(b) | 1,872 | 51,293 | ||||||
Nektar Therapeutics(b) | 629 | 20,675 | ||||||
Perrigo Co. PLC | 466 | 18,057 | ||||||
Pfizer Inc. | 21,235 | 926,908 | ||||||
Zoetis Inc. | 1,757 | 150,294 | ||||||
4,036,511 | ||||||||
Property & Casualty Insurance–0.77% |
| |||||||
Allstate Corp. (The) | 1,264 | 104,444 | ||||||
Chubb Ltd. | 1,691 | 218,443 | ||||||
Cincinnati Financial Corp. | 551 | 42,659 | ||||||
Progressive Corp. (The) | 2,129 | 128,443 | ||||||
Travelers Cos., Inc. (The) | 972 | 116,397 | ||||||
610,386 | ||||||||
Publishing–0.03% |
| |||||||
News Corp.–Class A | 1,400 | 15,890 | ||||||
News Corp.–Class B | 442 | 5,105 | ||||||
20,995 | ||||||||
Railroads–0.94% |
| |||||||
CSX Corp. | 2,946 | 183,035 | ||||||
Kansas City Southern | 378 | 36,080 | ||||||
Norfolk Southern Corp. | 999 | 149,391 | ||||||
Union Pacific Corp. | 2,700 | 373,221 | ||||||
741,727 | ||||||||
Real Estate Services–0.06% |
| |||||||
CBRE Group, Inc.–Class A(b) | 1,153 | 46,166 | ||||||
Regional Banks–1.16% |
| |||||||
BB&T Corp. | 2,832 | 122,682 | ||||||
Citizens Financial Group, Inc. | 1,718 | 51,076 | ||||||
Comerica Inc. | 593 | 40,733 | ||||||
Fifth Third Bancorp | 2,433 | 57,249 | ||||||
First Republic Bank | 601 | 52,227 | ||||||
Huntington Bancshares Inc. | 3,883 | 46,285 | ||||||
KeyCorp | 3,817 | 56,415 | ||||||
M&T Bank Corp. | 515 | 73,712 | ||||||
People’s United Financial, Inc. | 1,385 | 19,986 | ||||||
PNC Financial Services Group, Inc. (The) | 1,696 | 198,279 | ||||||
Regions Financial Corp. | 3,797 | 50,804 | ||||||
SunTrust Banks, Inc. | 1,650 | 83,226 | ||||||
SVB Financial Group(b) | 194 | 36,844 |
Shares | Value | |||||||
Regional Banks–(continued) |
| |||||||
Zions Bancorp., N.A. | 709 | $ | 28,885 | |||||
918,403 | ||||||||
Reinsurance–0.04% |
| |||||||
Everest Re Group, Ltd. | 147 | 32,011 | ||||||
Research & Consulting Services–0.25% |
| |||||||
Equifax Inc. | 436 | 40,605 | ||||||
IHS Markit Ltd.(b) | 1,316 | 63,128 | ||||||
Nielsen Holdings PLC | 1,300 | 30,329 | ||||||
Verisk Analytics, Inc.–Class A(b) | 601 | 65,533 | ||||||
199,595 | ||||||||
Residential REITs–0.43% |
| |||||||
Apartment Investment & Management Co.–Class A | 570 | 25,012 | ||||||
AvalonBay Communities, Inc. | 507 | 88,243 | ||||||
Equity Residential | 1,352 | 89,245 | ||||||
Essex Property Trust, Inc. | 242 | 59,341 | ||||||
Mid-America Apartment Communities, Inc. | 419 | 40,098 | ||||||
UDR, Inc. | 1,011 | 40,056 | ||||||
341,995 | ||||||||
Restaurants–1.25% |
| |||||||
Chipotle Mexican Grill, Inc.(b) | 89 | 38,429 | ||||||
Darden Restaurants, Inc. | 456 | 45,536 | ||||||
McDonald’s Corp. | 2,833 | 503,056 | ||||||
Starbucks Corp. | 4,556 | 293,407 | ||||||
Yum! Brands, Inc. | 1,146 | 105,340 | ||||||
985,768 | ||||||||
Retail REITs–0.47% |
| |||||||
Federal Realty Investment Trust | 272 | 32,107 | ||||||
Kimco Realty Corp. | 1,562 | 22,883 | ||||||
Macerich Co. (The) | 393 | 17,009 | ||||||
Realty Income Corp. | 1,083 | 68,272 | ||||||
Regency Centers Corp. | 618 | 36,264 | ||||||
Simon Property Group, Inc. | 1,135 | 190,669 | ||||||
367,204 | ||||||||
Semiconductor Equipment–0.31% |
| |||||||
Applied Materials, Inc. | 3,590 | 117,536 | ||||||
KLA-Tencor Corp. | 565 | 50,562 | ||||||
Lam Research Corp. | 575 | 78,298 | ||||||
246,396 | ||||||||
Semiconductors–3.34% |
| |||||||
Advanced Micro Devices, Inc.(b) | 3,235 | 59,718 | ||||||
Analog Devices, Inc. | 1,356 | 116,386 | ||||||
Broadcom Inc. | 1,517 | 385,743 | ||||||
Intel Corp. | 16,766 | 786,828 | ||||||
Maxim Integrated Products, Inc. | 1,012 | 51,460 | ||||||
Microchip Technology Inc. | 868 | 62,427 | ||||||
Micron Technology, Inc.(b) | 4,114 | 130,537 | ||||||
NVIDIA Corp. | 2,240 | 299,040 |
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 | |||||||
Semiconductors–(continued) |
| |||||||
Qorvo, Inc.(b) | 466 | $ | 28,300 | |||||
QUALCOMM Inc. | 4,452 | 253,363 | ||||||
Skyworks Solutions, Inc. | 660 | 44,233 | ||||||
Texas Instruments Inc. | 3,528 | 333,396 | ||||||
Xilinx, Inc. | 929 | 79,123 | ||||||
2,630,554 | ||||||||
Soft Drinks–1.66% |
| |||||||
Coca-Cola Co. (The) | 14,082 | 666,783 | ||||||
Monster Beverage Corp.(b) | 1,452 | 71,467 | ||||||
PepsiCo, Inc. | 5,185 | 572,839 | ||||||
1,311,089 | ||||||||
Specialized Consumer Services–0.02% |
| |||||||
H&R Block, Inc. | 750 | 19,028 | ||||||
Specialized REITs–1.17% |
| |||||||
American Tower Corp.–Class A | 1,618 | 255,951 | ||||||
Crown Castle International Corp. | 1,523 | 165,444 | ||||||
Digital Realty Trust, Inc. | 757 | 80,658 | ||||||
Equinix, Inc. | 295 | 104,005 | ||||||
Extra Space Storage Inc. | 465 | 42,073 | ||||||
Iron Mountain Inc. | 1,050 | 34,031 | ||||||
Public Storage | 550 | 111,326 | ||||||
SBA Communications Corp.–Class A(b) | 417 | 67,508 | ||||||
Weyerhaeuser Co. | 2,750 | 60,115 | ||||||
921,111 | ||||||||
Specialty Chemicals–0.60% |
| |||||||
Albemarle Corp. | 395 | 30,443 | ||||||
Celanese Corp. | 491 | 44,175 | ||||||
Ecolab Inc. | 928 | 136,741 | ||||||
International Flavors & Fragrances Inc. | 371 | 49,814 | ||||||
PPG Industries, Inc. | 883 | 90,269 | ||||||
Sherwin-Williams Co. (The) | 302 | 118,825 | ||||||
470,267 | ||||||||
Specialty Stores–0.15% |
| |||||||
Tiffany & Co. | 397 | 31,962 | ||||||
Tractor Supply Co. | 442 | 36,881 | ||||||
Ulta Beauty, Inc.(b) | 206 | 50,437 | ||||||
119,280 | ||||||||
Steel–0.08% |
| |||||||
Nucor Corp. | 1,155 | 59,841 | ||||||
Systems Software–4.44% |
| |||||||
Fortinet, Inc.(b) | 525 | 36,976 | ||||||
Microsoft Corp. | 28,394 | 2,883,978 | ||||||
Oracle Corp. | 9,360 | 422,604 | ||||||
Red Hat, Inc.(b) | 644 | 113,112 | ||||||
Symantec Corp. | 2,315 | 43,742 | ||||||
3,500,412 |
Shares | Value | |||||||
Technology Hardware, Storage & Peripherals–3.73% |
| |||||||
Apple Inc. | 16,561 | $ | 2,612,332 | |||||
Hewlett Packard Enterprise Co. | 5,227 | 69,049 | ||||||
HP Inc. | 5,780 | 118,259 | ||||||
NetApp, Inc. | 924 | 55,135 | ||||||
Seagate Technology PLC | 942 | 36,352 | ||||||
Western Digital Corp. | 1,063 | 39,299 | ||||||
Xerox Corp. | 761 | 15,037 | ||||||
2,945,463 | ||||||||
Tires & Rubber–0.02% |
| |||||||
Goodyear Tire & Rubber Co. (The) | 886 | 18,083 | ||||||
Tobacco–0.92% |
| |||||||
Altria Group, Inc. | 6,902 | 340,890 | ||||||
Philip Morris International Inc. | 5,710 | 381,199 | ||||||
722,089 | ||||||||
Trading Companies & Distributors–0.17% |
| |||||||
Fastenal Co. | 1,044 | 54,591 | ||||||
United Rentals, Inc.(b) | 302 | 30,964 | ||||||
W.W. Grainger, Inc. | 167 | 47,154 | ||||||
132,709 | ||||||||
Trucking–0.04% |
| |||||||
J.B. Hunt Transport Services, Inc. | 318 | 29,587 | ||||||
Water Utilities–0.08% |
| |||||||
American Water Works Co., Inc. | 658 | 59,727 | ||||||
Total Common Stocks & Other Equity Interests |
| 77,250,729 | ||||||
Money Market Funds–2.05% |
| |||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30%(f) | 552,539 | 552,539 | ||||||
Invesco Liquid Assets Portfolio–Institutional Class, 2.48%(f) | 394,472 | 394,512 | ||||||
Invesco Treasury Portfolio–Institutional Class, 2.30%(f) | 668,660 | 668,660 | ||||||
Total Money Market Funds |
| 1,615,711 | ||||||
TOTAL INVESTMENTS IN SECURITIES (excluding investments purchased with cash collateral from securities on loan)–100.01% |
| 78,866,440 | ||||||
Investments Purchased with Cash |
| |||||||
Money Market Funds–0.06% | ||||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30% (Cost $47,824)(f)(g) | 47,824 | 47,824 | ||||||
TOTAL INVESTMENTS IN SECURITIES–100.07% |
| 78,914,264 | ||||||
OTHER ASSETS LESS LIABILITIES–(0.07)% |
| (53,779 | ) | |||||
NET ASSETS–100.00% |
| $ | 78,860,485 |
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) | All or a portion of this security was out on loan at December 31, 2018. |
(d) | The Fund’s Adviser is a subsidiary of Invesco Ltd. and therefore, Invesco Ltd. is considered to be affiliated with the Fund. The value of this security as of December 31, 2018 represented less than 1% of the Fund’s Net Assets. See Note 5. |
(e) | All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 1J. |
(f) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
(g) | 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. |
Open Futures Contracts — Equity Risk | ||||||||||||||||||||
Long Futures Contracts | Number of Contracts | Expiration Month | Notional Value | Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
E-Mini S&P 500 Index | 13 | March–2019 | $ | 1,628,380 | $ | (65,026 | ) | $ | (65,026 | ) |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $26,841,050) | $ | 77,250,729 | ||
Investments in affiliates, at value (Cost $1,663,583) | 1,663,535 | |||
Other investments: | ||||
Variation margin — futures contracts | 12,482 | |||
Receivable for: | ||||
Investments sold | 23,351 | |||
Fund shares sold | 82,646 | |||
Dividends | 93,508 | |||
Investment for trustee deferred compensation and retirement plans | 32,770 | |||
Total assets | 79,159,021 | |||
Liabilities: | ||||
Other investments: | ||||
Investments purchased | 52,227 | |||
Amount due to custodian | 40,547 | |||
Fund shares reacquired | 7,031 | |||
Collateral upon return of securities loaned | 47,824 | |||
Accrued fees to affiliates | 63,490 | |||
Accrued trustees’ and officers’ fees and benefits | 4,143 | |||
Accrued other operating expenses | 44,188 | |||
Trustee deferred compensation and retirement plans | 39,086 | |||
Total liabilities | 298,536 | |||
Net assets applicable to shares outstanding | $ | 78,860,485 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 21,312,896 | ||
Distributable earnings | 57,547,589 | |||
$ | 78,860,485 | |||
Net Assets: | ||||
Series I | $ | 33,758,069 | ||
Series II | $ | 45,102,416 | ||
Shares outstanding, no par value, |
| |||
Series I | 2,093,534 | |||
Series II | 2,814,245 | |||
Series I: | ||||
Net asset value per share | $ | 16.12 | ||
Series II: | ||||
Net asset value per share | $ | 16.03 |
* | At December 31, 2018, securities with an aggregate value of $46,521 were on loan to brokers. |
Investment income: | ||||
Dividends | $ | 1,677,407 | ||
Dividends from affiliates (includes securities lending income of $569) | 27,820 | |||
Total investment income | 1,705,227 | |||
Expenses: | ||||
Advisory fees | 106,852 | |||
Administrative services fees | 183,488 | |||
Custodian fees | 16,651 | |||
Distribution fees — Series II | 130,083 | |||
Transfer agent fees | 4,458 | |||
Trustees’ and officers’ fees and benefits | 21,355 | |||
Licensing fees | 17,809 | |||
Reports to shareholders | 10,781 | |||
Professional services fees | 51,867 | |||
Other | 38,099 | |||
Total expenses | 581,443 | |||
Less: Fees waived | (1,431 | ) | ||
Net expenses | 580,012 | |||
Net investment income | 1,125,215 | |||
Realized and unrealized gain (loss): | ||||
Net realized gain (loss) from: | ||||
Investment securities | 9,031,290 | |||
Foreign currencies | 18 | |||
Futures contracts | (200,248 | ) | ||
8,831,060 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
investment securities | (13,817,579 | ) | ||
Futures contracts | (70,913 | ) | ||
(13,888,492 | ) | |||
Net realized and unrealized gain (loss) | (5,057,432 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (3,932,217 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income | $ | 1,125,215 | $ | 1,186,720 | ||||
Net realized gain | 8,831,060 | 6,771,653 | ||||||
Change in net unrealized appreciation (depreciation) | (13,888,492 | ) | 9,368,744 | |||||
Net increase (decrease) in net assets resulting from operations | (3,932,217 | ) | 17,327,117 | |||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (3,325,539 | ) | (3,270,524 | ) | ||||
Series II | (4,552,548 | ) | (4,740,894 | ) | ||||
Total distributions from distributable earnings | (7,878,087 | ) | (8,011,418 | ) | ||||
Share transactions–net: | ||||||||
Series I | 268,373 | (189,787 | ) | |||||
Series II | (3,137,670 | ) | (2,610,593 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (2,869,297 | ) | (2,800,380 | ) | ||||
Net increase (decrease) in net assets | (14,679,601 | ) | 6,515,319 | |||||
Net assets: | ||||||||
Beginning of year | 93,540,086 | 87,024,767 | ||||||
End of year | $ | 78,860,485 | $ | 93,540,086 |
(1) | For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income and distributions from net realized gains. The Securities and Exchange Commission eliminated the requirement to disclose the distribution components separately. For the year ended December 31, 2017, distributions from net investment income were $599,367 and $759,177 and distributions from net realized gains were $2,671,157 and $3,981,717 for Series I and Series II, respectively. |
Notes to Financial Statements
December 31, 2018
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. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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 theover-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 (“NAV”) 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 theend-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. S&P 500 Index 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. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 investment 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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. S&P 500 Index 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. | 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 inshort-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. The Fund bears the risk of loss with respect to the investment of collateral. 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. When loaning securities, the Fund retains certain benefits of owning the securities, including the economic equivalent of dividends or interest generated by the security. 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. The securities loaned are subject to termination at the option of the borrower or the Fund. Upon termination, the borrower will return to the Fund the securities loaned and the Fund will return the collateral. 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 and the securities may lose value during the delay which could result in potential losses to the Fund. Some of these losses may be indemnified by the lending agent. 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, are included inDividends from affiliated money market fundson 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. | 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. |
K. | 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 accrues daily and pays monthly 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 year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.12%.
Invesco V.I. S&P 500 Index Fund
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2019, 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 (the “expense limits”). 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, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $1,431.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $50,000 for accounting and fund administrative services and was reimbursed $133,488 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution 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 December 31, 2018. 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. S&P 500 Index Fund
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks & Other Equity Interests | $ | 77,250,729 | $ | — | $ | — | $ | 77,250,729 | ||||||||
Money Market Funds | 1,663,535 | — | — | 1,663,535 | ||||||||||||
Total Investments in Securities | 78,914,264 | — | — | 78,914,264 | ||||||||||||
Other Investments — Liabilities* | ||||||||||||||||
Futures Contracts | (65,026 | ) | — | — | (65,026 | ) | ||||||||||
Total Investments | $ | 78,849,238 | $ | — | $ | — | $ | 78,849,238 |
* | Unrealized appreciation (depreciation). |
NOTE 4—Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (“ISDA Master Agreement”) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
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 December 31, 2018:
Value | ||||
Derivative Liabilities | Equity Risk | |||
Unrealized depreciation on futures contracts — Exchange-Traded(a) | $ | (65,026 | ) | |
Derivatives not subject to master netting agreements | 65,026 | |||
Total Derivative Liabilities subject to master netting agreements | — |
(a) | Only current day’s variation margin receivable at period-end is recorded in the Statement of Assets and Liabilities. |
Effect of Derivative Investments for the year ended December 31, 2018
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 | ||||
Equity Risk | ||||
Realized Gain (loss): | ||||
Futures contracts | $ | (200,248 | ) | |
Change in Net Unrealized Appreciation (Depreciation): | ||||
Futures contracts | (70,913 | ) | ||
Total | $ | (271,161 | ) |
The table below summarizes the average notional value of futures contracts during the period.
Futures Contracts | ||||
Average notional value | $ | 1,593,923 |
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 year ended December 31, 2018.
Value 12/31/17 | Purchases at Cost | Proceeds from Sales | Change in Unrealized Appreciation (Depreciation) | Realized Gain | Value 12/31/18 | Dividend Income | ||||||||||||||||||||||
Invesco, Ltd. | $ | 60,766 | $ | – | $ | (4,664 | ) | $ | (31,631 | ) | $ | 957 | $ | 25,428 | $ | 1,838 |
Invesco V.I. S&P 500 Index Fund
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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 1,343,960 | $ | 1,438,937 | ||||
Long-term capital gain | 6,534,127 | 6,572,481 | ||||||
Total distributions | $ | 7,878,087 | $ | 8,011,418 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 1,124,629 | ||
Undistributedlong-term gain | 8,223,389 | |||
Net unrealized appreciation — investments | 48,235,751 | |||
Temporary book/tax differences | (36,180 | ) | ||
Shares of beneficial interest | 21,312,896 | |||
Total net assets | $ | 78,860,485 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 does not have a capital loss carryforward as of December 31, 2018.
NOTE 9—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $2,981,873 and $13,229,977, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 49,895,075 | ||
Aggregate unrealized (depreciation) of investments | (1,659,324 | ) | ||
Net unrealized appreciation of investments | $ | 48,235,751 |
Cost of investments for tax purposes is $30,613,487.
Invesco V.I. S&P 500 Index Fund
NOTE 10—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of foreign currencies, on December 31, 2018, undistributed net investment income was increased by $18, undistributed net realized gain was decreased by $18. This reclassification had no effect on the net assets or the distributable earnings of the Fund.
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 197,507 | $ | 3,659,064 | 84,246 | $ | 1,475,450 | ||||||||||
Series II | 126,250 | 2,450,887 | 155,899 | 2,840,138 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 177,118 | 3,324,539 | 189,428 | 3,269,530 | ||||||||||||
Series II | 243,843 | 4,552,548 | 275,954 | 4,740,894 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (355,679 | ) | (6,715,230 | ) | (273,913 | ) | (4,934,767 | ) | ||||||||
Series II | (544,977 | ) | (10,141,105 | ) | (570,729 | ) | (10,191,625 | ) | ||||||||
Net increase (decrease) in share activity | (155,938 | ) | $ | (2,869,297 | ) | (139,115 | ) | $ | (2,800,380 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 89% 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—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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 18.53 | $ | 0.26 | $ | (0.91 | ) | $ | (0.65 | ) | $ | (0.30 | ) | $ | (1.46 | ) | $ | (1.76 | ) | $ | 16.12 | (4.86 | )% | $ | 33,758 | 0.51 | %(d) | 0.51 | %(d) | 1.41 | %(d) | 3 | % | |||||||||||||||||||||||
Year ended 12/31/17 | 16.78 | 0.26 | 3.18 | 3.44 | (0.31 | ) | (1.38 | ) | (1.69 | ) | 18.53 | 21.26 | 38,450 | 0.48 | 0.48 | 1.46 | 3 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 16.58 | 0.30 | 1.55 | 1.85 | (0.31 | ) | (1.34 | ) | (1.65 | ) | 16.78 | 11.45 | 34,812 | 0.41 | 0.41 | 1.81 | 4 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 18.52 | 0.30 | (0.24 | ) | 0.06 | (0.33 | ) | (1.67 | ) | (2.00 | ) | 16.58 | 1.03 | 35,586 | 0.41 | 0.41 | 1.66 | 7 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 16.66 | 0.28 | 1.92 | 2.20 | (0.34 | ) | — | (0.34 | ) | 18.52 | 13.32 | 37,685 | 0.41 | 0.41 | 1.62 | 3 | ||||||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 18.43 | 0.22 | (0.91 | ) | (0.69 | ) | (0.25 | ) | (1.46 | ) | (1.71 | ) | 16.03 | (5.07 | ) | 45,102 | 0.76 | (d) | 0.76 | (d) | 1.16 | (d) | 3 | |||||||||||||||||||||||||||||||||
Year ended 12/31/17 | 16.69 | 0.22 | 3.17 | 3.39 | (0.27 | ) | (1.38 | ) | (1.65 | ) | 18.43 | 21.00 | 55,090 | 0.73 | 0.73 | 1.21 | 3 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 16.49 | 0.26 | 1.54 | 1.80 | (0.26 | ) | (1.34 | ) | (1.60 | ) | 16.69 | 11.20 | 52,212 | 0.66 | 0.66 | 1.56 | 4 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 18.43 | 0.25 | (0.24 | ) | 0.01 | (0.28 | ) | (1.67 | ) | (1.95 | ) | 16.49 | 0.72 | 58,268 | 0.66 | 0.66 | 1.41 | 7 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 16.58 | 0.24 | 1.90 | 2.14 | (0.29 | ) | — | (0.29 | ) | 18.43 | 13.02 | 63,667 | 0.66 | 0.66 | 1.37 | 3 |
(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 based on average daily net assets (000’s omitted) of $37,010 and $52,033 for Series I and Series II shares, respectively. |
Invesco V.I. S&P 500 Index Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) and Shareholders of Invesco V.I. S&P 500 Index Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. S&P 500 Index Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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 | ACTUAL | HYPOTHETICAL (5% annual return before | ||||||||||||||||||||||
Beginning Account Value (07/01/18) | Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | Annualized Ratio | |||||||||||||||||||
Series I | $ | 1,000.00 | $ | 929.40 | $ | 2.53 | $ | 1,022.58 | $ | 2.65 | 0.52 | % | ||||||||||||
Series II | 1,000.00 | 928.20 | 3.74 | 1,021.32 | 3.92 | 0.77 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. S&P 500 Index Fund
Tax Information
Form1099-DIV, Form 1042-S and other year–end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Long-Term Capital Gain Distributions | $ | 6,534,127 | ||
Corporate Dividends Received Deduction* | 100.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. S&P 500 Index Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. S&P 500 Index Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. S&P 500 Index Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. S&P 500 Index Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. S&P 500 Index Fund
| ||||
Annual Report to Shareholders
| December 31, 2018 | |||
| ||||
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 FormN-Q (or any successor Form). The Fund’s FormN-Q (or any successor Form) filings are available on the SEC website, sec.gov. The SEC file numbers for the Fund are811-07452 and033-57340. The Fund’s most recent portfolio holdings, as filed on FormN-Q (or any successor Form), 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 recent12-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.
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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.
| ||
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Invesco Distributors, Inc. | VISCE-AR-1 | 02152019 1209 |
Management’s Discussion of Fund Performance
Performance summary |
For the year ended December 31, 2018, Series I shares of Invesco V.I. Small Cap Equity Fund (the Fund) underperformed the Russell 2000 Index, the Fund’s style-specific index.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -15.08% | |
Series II Shares | -15.27 | |
S&P 500 Index▼(Broad Market Index) | -4.38 | |
Russell 2000 Index⬛(Style-Specific Index) | -11.01 | |
Lipper VUFSmall-Cap Core Funds Index¨(Peer Group Index) | -11.83 | |
Source(s):▼FactSet Research Systems Inc.;⬛RIMES Technologies Corp.;¨Lipper Inc.
|
Market conditions and your Fund
Calendar year 2018 proved to be an increasingly volatile time for US equities. In January 2018, US equity markets steadily moved higher, as investors remained enthused about the passage of the Tax Cuts and Jobs Act signed into law in late December 2017. However, in February 2018, volatility returned to the US stock and bond markets. Worries about how rising interest rates might affect economic growth, concerns about a potential trade war and heightened geopolitical tensions caused the US stock markets to pull back and volatility to increase.
US equity markets generally recovered in the second quarter of 2018 as strong US retail sales and low unemployment buoyed markets. Throughout the summer, US equities moved higher as corporate profits surged. Several US equity indexes reached new highs despite potential head-winds including trade tensions, tariff announcements and contagion concerns over a Turkish currency crisis. After a relatively quiet summer, market volatility noticeably rose in October, as US equity markets suffered a sharpsell-off through
year-end, amid rising interest rates and concerns that higher inflation could mean a more restrictive monetary policy. In this environment, there was a flight to safety, as investors fled to defensive areas of the equities markets, like health care and utilities, and US Treasuries.
Given signs of a strong economy, the US Federal Reserve raised interest rates four times during the year: in March, June, September and December 2018. Following December’s Federal Reserve meeting, Chairman Jerome Powell raised interest rates for the fourth time in 2018 to a targeted range of 2.25% to 2.50%, and lowered guidance from three to two rate hikes in 2019, signaling a slightly more dovish stance than expected.1 In contrast, the European Central Bank and central banks in several other countries maintained extraordinarily accommodative monetary policies.
Within this environment, stock selection helped the Fund outperform its style-specific index in the communication services, health care, real estate and industrials sectors. The Fund’s ancillary cash position also helped to mitigate
losses in a down year. In contrast, these contributions were offset by the underperformance of holdings in the consumer discretionary, financials, information technology (IT) and energy sectors. Relatively small exposure in the defensive utilities sector also detracted from relative performance for the year given the choppy market.
California-based IT companyCoherent was the leading detractor from the Fund’s performance on both a relative and absolute basis for the year. The laser system manufacturer experienced weakness during the reporting period as a result of Apple’s (not a Fund holding) organic light-emitting diode (OLED) adoption concerns, which has driven a pause in the market in the near term. Growth in Coherent’s laser business, which cuts the OLED panels, has been impacted by this pause in the market. In addition,US-China trade tensions have also put pressure on Coherent’s stock price as China has been adopting laser technology in many industrial applications, including automobile manufacturing.
Visteon, a global automotive supplier, was another detractor from both absolute and relative Fund performance for the year. Headwinds included decelerating auto sales in China due to a softer economy, European production delays related to the implementation of the Worldwide Harmonize Light Vehicle Test Procedure (testing for CO2 emissions and fuel efficiency) and potential pressures from higher raw material costs, emerging markets weakness and tariff risks.
Energy sector holdingsForum Energy Technologies,Core Laboratories andMatador Resources were among the leading detractors from Fund results during the year. Lower oil prices have led to reduced activity levels for exploration and
Portfolio Composition |
| ||||
By sector | % of total net assets |
Financials | 19.4% | ||||
Information Technology | 17.6 | ||||
Industrials | 17.5 | ||||
Health Care | 13.8 | ||||
Consumer Discretionary | 12.5 | ||||
Real Estate | 4.2 | ||||
Materials | 3.7 | ||||
Energy | 3.6 | ||||
Communication Services | 3.3 | ||||
Utilities | 1.1 | ||||
Consumer Staples | 1.0 | ||||
Money Market Funds Plus Other Assets Less Liabilities | 2.3 |
Top 10 Equity Holdings* |
| ||||
% of total net assets |
1. SPX Corp. | 1.9% | ||||
2. Iridium Communications Inc. | 1.9 | ||||
3. Hanover Insurance Group Inc. (The) | 1.6 | ||||
4. STERIS PLC | 1.6 | ||||
5. Webster Financial Corp. | 1.6 | ||||
6. Jack Henry & Associates, Inc. | 1.5 | ||||
7. Array BioPharma Inc. | 1.5 | ||||
8. Argo Group International Holdings, Ltd. | 1.5 | ||||
9.Take-Two Interactive Software, Inc. | 1.5 | ||||
10 Neurocrine Biosciences, Inc. | 1.5 |
Total Net Assets | $ | 225.7 million | ||||||||
Total Number of Holdings* |
| 94 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
Data presented here are as of December 31, 2018.
Invesco V.I. Small Cap Equity Fund
production companies. This depressed spending environment is weighing on the oilfield services group.
Iridium Communications, one of the Fund’s top ten holdings, was a leading contributor to annual results from the communication services sector. The satellite communications company provides 100% global coverage, even in the middle of the desert, or to phones on remote oil rigs. Iridium planned to launch its 9th and final satellite for the Iridium Next platform, which is a recurring20-year capital expenditure cycle, in late 2018. The final launch has been subsequently pushed back until the first quarter of 2019. With the final satellite’s launch, the company’s network will speed up and open up new markets and is expected to generate substantial free cash flow.
IT sector constituentZebra Technologies reported strong quarterly results across the board in 2018, which continued a string of better than expected performance. Forward guidance also exceeded expectations. Its strong results were powered by robust organic growth, which has accelerated since we originally bought the stock. New products and strength in mobile computing drove the impressive execution. We exited our Zebra position in the fourth quarter primarily due to valuations.
STERIS, a strong contributor to absolute performance in the health care sector, is primarily a consumables/recurring revenue business with meaningful exposure to hospital capital expenditure trends. One such trend is orders for capital equipment, which were very strong in the third quarter and drove an increase in organic growth guidance and supports our view of broad-based hospital capital expenditure strength in 2018. STERIS is in the process of introducing a new centralized outsourced sterilization model to health care systems in the US and has invested a decent amount in this new market, which has modestly constrained margin expansion.
Kansas-basedEuronet Worldwide was an overall contributor during the year. Euronet offers a currency conversion service on its ATMs and earns a currency spread on the transaction. In late 2017, a European Union Commission issued a proposal recommending a cap on these currency conversion charges. Euronet’s stock underperformed during the first half of 2018 on concerns that the company would be forced to lower the spread it earns on these transactions. In August of 2018, the European Parliament issued a draft proposal that recommended no caps on currency conversion charges on
European ATMs and further recommended that the EU Commission change its recommendation. The stock recovered on the news as it seems increasingly likely that currency conversion charges will be permitted in their existing form.
All changes to the Fund’s positioning are based on ourbottom-up stock selection process. Our portfolio construction process acts as a risk control and ensures the portfolio is aligned withsmall-cap market sector exposure within modest over- and underweights. Our long-term investment horizon leads to a relatively low turnover.
Our view is that we are in a slowing, but not declining, growth environment as the benefits of US tax stimulus and deregulations are being offset by higher interest rates, rising labor costs and trade pressures. In such an environment, true growth will likely remain scarce, and we believe the market will favor companies that can produce growth and compound earnings in spite of the economic cycle. We believe that change is the fuel for growth, thus we are seeking to identify “share takers,” companies that can gain market share from technology-enabled advantages in their business models and from disruptive shifts in consumer behavior. Though we anticipate a possible economic slowing, we continue to prudently balance the portfolio between dynamic growth opportunities and more durable growth opportunities.
Thank you for your commitment to Invesco V.I. Small Cap Equity Fund and for sharing our long-term investment horizon.
1 | Source: US Federal Reserve |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Juan Hartsfield Chartered Financial Analyst, Portfolio Manager, is lead manager of Invesco V.I. Small Cap Equity Fund. | ||
He joined Invesco in 2004. Mr. Hartsfield earned a BS in petroleum engineering from The University of Texas at Austin and an MBA from the University of Michigan. |
Davis Paddock Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Small Cap Equity Fund. He joined | ||
Invesco in 2001. Mr. Paddock earned a BA and an MBA from The University of Texas at Austin. |
Invesco V.I. Small Cap Equity Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: FactSet Research Systems Inc. |
2 | Source: RIMES Technologies Corp. |
3 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (8/29/03) | 7.21 | % | |||
10 Years | 9.79 | ||||
5 Years | 0.98 | ||||
1 Year | -15.08 | ||||
Series II Shares | |||||
Inception (8/29/03) | 6.96 | % | |||
10 Years | 9.51 | ||||
5 Years | 0.73 | ||||
1 Year | -15.27 |
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 recentmonth-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in
net asset value. Performance figures in the table and chart do not reflect deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 0.97% and 1.22%, 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 recentmonth-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recentmonth-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
Invesco V.I. Small Cap Equity Fund’s investment objective is long-term growth of capital.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
Small- andmid-capitalization companies risks.Small- andmid-capitalization companies tend to be more vulnerable to changing market conditions, may have little or no operating history or track record of success, and may have more limited product lines and markets, less experienced management and fewer financial resources than larger companies. These companies’ securities may be more volatile and less liquid than those of more established companies, and their returns may vary, sometimes significantly, from the overall securities market.
About indexes used in this report
TheS&P 500® Index is an unmanaged index considered representative of the US stock market.
TheRussell 2000® Index is an unmanaged index considered representative ofsmall-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.
TheLipper VUFSmall-Cap Core Funds Index is an unmanaged index considered representative ofsmall-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.
Other information
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Industry 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.
Invesco V.I. Small Cap Equity Fund
Schedule of Investments(a)
December 31, 2018
Shares | Value | |||||||
Common Stocks & Other Equity Interests–97.62% |
| |||||||
Aerospace & Defense–2.91% |
| |||||||
BWX Technologies, Inc. | 43,529 | $ | 1,664,114 | |||||
Cubic Corp. | 46,578 | 2,503,102 | ||||||
Curtiss-Wright Corp. | 23,597 | 2,409,725 | ||||||
6,576,941 | ||||||||
Air Freight & Logistics–1.09% |
| |||||||
Forward Air Corp. | 44,735 | 2,453,715 | ||||||
Alternative Carriers–1.85% |
| |||||||
Iridium Communications Inc.(b) | 226,677 | 4,182,191 | ||||||
Apparel Retail–1.93% |
| |||||||
American Eagle Outfitters, Inc. | 124,620 | 2,408,904 | ||||||
Children’s Place Inc. (The) | 21,719 | 1,956,665 | ||||||
4,365,569 | ||||||||
Application Software–3.92% |
| |||||||
Avalara, Inc.(b)(c) | 72,444 | 2,256,631 | ||||||
Blackbaud, Inc. | 38,724 | 2,435,739 | ||||||
Cornerstone OnDemand, Inc.(b) | 54,369 | 2,741,829 | ||||||
Instructure Inc.(b) | 12,714 | 476,902 | ||||||
SVMK Inc.(b)(c) | 75,701 | 928,851 | ||||||
8,839,952 | ||||||||
Auto Parts & Equipment–0.81% |
| |||||||
Visteon Corp.(b) | 30,241 | 1,822,928 | ||||||
Biotechnology–3.87% |
| |||||||
Array BioPharma Inc.(b) | 239,459 | 3,412,291 | ||||||
Neurocrine Biosciences, Inc.(b) | 46,666 | 3,332,419 | ||||||
Retrophin, Inc.(b) | 87,970 | 1,990,761 | ||||||
8,735,471 | ||||||||
Building Products–1.24% |
| |||||||
Trex Co., Inc.(b) | 47,193 | 2,801,377 | ||||||
Casinos & Gaming–1.66% |
| |||||||
Boyd Gaming Corp. | 87,284 | 1,813,762 | ||||||
Penn National Gaming, Inc.(b) | 102,522 | 1,930,489 | ||||||
3,744,251 | ||||||||
Communications Equipment–1.99% |
| |||||||
Ciena Corp.(b) | 69,785 | 2,366,409 | ||||||
Lumentum Holdings Inc.(b) | 50,664 | 2,128,395 | ||||||
4,494,804 | ||||||||
Construction & Engineering–1.54% |
| |||||||
Dycom Industries, Inc.(b) | 29,151 | 1,575,320 | ||||||
Primoris Services Corp. | 98,926 | 1,892,454 | ||||||
3,467,774 | ||||||||
Consumer Finance–0.90% |
| |||||||
SLM Corp.(b) | 244,672 | 2,033,224 |
Shares | Value | |||||||
Data Processing & Outsourced Services–2.90% |
| |||||||
Euronet Worldwide, Inc.(b) | 30,197 | $ | 3,091,569 | |||||
Jack Henry & Associates, Inc. | 27,374 | 3,463,358 | ||||||
6,554,927 | ||||||||
Diversified Support Services–1.04% |
| |||||||
Mobile Mini, Inc. | 73,747 | 2,341,467 | ||||||
Education Services–1.33% |
| |||||||
Strategic Education, Inc. | 26,539 | 3,010,053 | ||||||
Electrical Components & Equipment–1.33% |
| |||||||
EnerSys | 38,764 | 3,008,474 | ||||||
Electronic Components–0.66% |
| |||||||
Belden Inc. | 35,961 | 1,502,091 | ||||||
Electronic Equipment & Instruments–3.14% |
| |||||||
Coherent, Inc.(b) | 13,503 | 1,427,402 | ||||||
FLIR Systems, Inc. | 57,231 | 2,491,838 | ||||||
National Instruments Corp. | 69,828 | 3,168,795 | ||||||
7,088,035 | ||||||||
Environmental & Facilities Services–2.28% |
| |||||||
ABM Industries Inc. | 68,934 | 2,213,471 | ||||||
Waste Connections, Inc. | 39,567 | 2,937,850 | ||||||
5,151,321 | ||||||||
Food Retail–0.98% |
| |||||||
Sprouts Farmers Market, Inc.(b) | 93,912 | 2,207,871 | ||||||
Footwear–1.38% |
| |||||||
Wolverine World Wide, Inc. | 97,438 | 3,107,298 | ||||||
General Merchandise Stores–0.65% |
| |||||||
Big Lots, Inc. | 50,850 | 1,470,582 | ||||||
Health Care Equipment–4.14% |
| |||||||
Hill-Rom Holdings, Inc. | 35,613 | 3,153,531 | ||||||
STERIS PLC | 33,558 | 3,585,672 | ||||||
Wright Medical Group N.V.(b) | 95,593 | 2,602,042 | ||||||
9,341,245 | ||||||||
Health Care Facilities–0.55% |
| |||||||
Acadia Healthcare Co., Inc.(b) | 48,644 | 1,250,637 | ||||||
Health Care REITs–0.93% |
| |||||||
Healthcare Trust of America, Inc.–Class A | 83,305 | 2,108,450 | ||||||
Health Care Supplies–2.03% |
| |||||||
ICU Medical, Inc.(b) | 10,574 | 2,428,108 | ||||||
Lantheus Holdings, Inc.(b) | 138,010 | 2,159,856 | ||||||
4,587,964 | ||||||||
Industrial Machinery–3.23% |
| |||||||
Albany International Corp.–Class A | 48,252 | 3,012,372 |
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) |
| |||||||
SPX Corp.(b) | 153,206 | $ | 4,291,300 | |||||
7,303,672 | ||||||||
Interactive Home Entertainment–1.48% |
| |||||||
Take-Two Interactive Software, Inc.(b) | 32,391 | 3,334,330 | ||||||
Investment Banking & Brokerage–3.51% |
| |||||||
E*TRADE Financial Corp. | 70,057 | 3,074,101 | ||||||
Lazard Ltd.–Class A | 66,083 | 2,439,124 | ||||||
Piper Jaffray Cos. | 36,519 | 2,404,411 | ||||||
7,917,636 | ||||||||
Life & Health Insurance–0.76% |
| |||||||
CNO Financial Group, Inc. | 115,839 | 1,723,684 | ||||||
Life Sciences Tools & Services–0.83% |
| |||||||
Cambrex Corp.(b) | 49,947 | 1,885,999 | ||||||
Managed Health Care–1.23% |
| |||||||
HealthEquity, Inc.(b) | 46,405 | 2,768,058 | ||||||
Multi-Line Insurance–2.27% |
| |||||||
American Financial Group, Inc. | 28,065 | 2,540,724 | ||||||
Horace Mann Educators Corp. | 69,184 | 2,590,941 | ||||||
5,131,665 | ||||||||
Office REITs–0.93% |
| |||||||
Highwoods Properties, Inc. | 54,221 | 2,097,811 | ||||||
Oil & Gas Equipment & Services–1.79% |
| |||||||
Apergy Corp.(b) | 69,985 | 1,895,194 | ||||||
Core Laboratories N.V. | 26,281 | 1,567,925 | ||||||
Forum Energy Technologies, Inc.(b) | 140,148 | 578,811 | ||||||
4,041,930 | ||||||||
Oil & Gas Exploration & Production–1.80% |
| |||||||
Matador Resources Co.(b) | 94,191 | 1,462,786 | ||||||
Newfield Exploration Co.(b) | 72,586 | 1,064,111 | ||||||
Parsley Energy, Inc.–Class A(b) | 95,534 | 1,526,633 | ||||||
4,053,530 | ||||||||
Paper Packaging–0.89% |
| |||||||
Graphic Packaging Holding Co. | 187,988 | 2,000,192 | ||||||
Pharmaceuticals–1.12% |
| |||||||
Phibro Animal Health Corp.–Class A | 78,577 | 2,527,036 | ||||||
Property & Casualty Insurance–4.13% |
| |||||||
Argo Group International Holdings, Ltd. | 49,699 | 3,342,258 | ||||||
Hanover Insurance Group Inc. (The) | 31,268 | 3,651,164 | ||||||
Selective Insurance Group, Inc. | 38,105 | 2,322,119 | ||||||
9,315,541 | ||||||||
Real Estate Operating Companies–0.89% |
| |||||||
Kennedy-Wilson Holdings, Inc. | 110,376 | 2,005,532 | ||||||
Regional Banks–7.81% |
| |||||||
Columbia Banking System, Inc. | 72,014 | 2,613,388 | ||||||
Great Western Bancorp, Inc. | 69,472 | 2,171,000 |
Shares | Value | |||||||
Regional Banks–(continued) |
| |||||||
IBERIABANK Corp. | 42,289 | $ | 2,718,337 | |||||
Synovus Financial Corp. | 56,024 | 1,792,208 | ||||||
UMB Financial Corp. | 38,801 | 2,365,697 | ||||||
Webster Financial Corp. | 71,611 | 3,529,706 | ||||||
Western Alliance Bancorp(b) | 61,695 | 2,436,335 | ||||||
17,626,671 | ||||||||
Restaurants–1.88% |
| |||||||
Papa John’s International, Inc. | 38,025 | 1,513,775 | ||||||
Wendy’s Co. (The) | 174,778 | 2,728,285 | ||||||
4,242,060 | ||||||||
Semiconductor Equipment–2.20% |
| |||||||
Brooks Automation, Inc. | 94,885 | 2,484,089 | ||||||
Teradyne, Inc. | 78,966 | 2,477,953 | ||||||
4,962,042 | ||||||||
Semiconductors–0.57% |
| |||||||
Power Integrations, Inc. | 21,270 | 1,297,045 | ||||||
Specialized Consumer Services–1.08% |
| |||||||
ServiceMaster Global Holdings, Inc.(b) | 66,143 | 2,430,094 | ||||||
Specialized REITs–1.43% |
| |||||||
CubeSmart | 112,385 | 3,224,326 | ||||||
Specialty Chemicals–2.79% |
| |||||||
Minerals Technologies Inc. | 41,822 | 2,147,141 | ||||||
PolyOne Corp. | 76,486 | 2,187,500 | ||||||
Sensient Technologies Corp. | 34,986 | 1,953,968 | ||||||
6,288,609 | ||||||||
Specialty Stores–0.75% |
| |||||||
Michaels Cos., Inc. (The)(b) | 125,278 | 1,696,264 | ||||||
Systems Software–1.27% |
| |||||||
CommVault Systems, Inc.(b) | 48,468 | 2,863,974 | ||||||
Technology Distributors–1.00% |
| |||||||
Tech Data Corp.(b) | 27,580 | 2,256,320 | ||||||
Tires & Rubber–1.03% |
| |||||||
Cooper Tire & Rubber Co. | 71,625 | 2,315,636 | ||||||
Trading Companies & Distributors–0.79% |
| |||||||
Univar Inc.(b) | 100,927 | 1,790,445 | ||||||
Trucking–2.03% |
| |||||||
Knight-Swift Transportation Holdings Inc. | 75,220 | 1,885,765 | ||||||
Old Dominion Freight Line, Inc. | 21,838 | 2,696,775 | ||||||
4,582,540 | ||||||||
Water Utilities–1.08% |
| |||||||
California Water Service Group | 50,981 | 2,429,754 | ||||||
Total Common Stocks & Other Equity Interests |
| 220,361,008 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Small Cap Equity Fund
Shares | Value | |||||||
Money Market Funds–4.38% |
| |||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30%(d) | 3,456,688 | $ | 3,456,688 | |||||
Invesco Liquid Assets Portfolio–Institutional Class, 2.48%(d) | 2,468,916 | 2,469,163 | ||||||
Invesco Treasury Portfolio–Institutional Class, 2.30%(d) | 3,950,501 | 3,950,501 | ||||||
Total Money Market Funds |
| 9,876,352 | ||||||
TOTAL INVESTMENTS IN SECURITIES (excluding investments purchased with cash collateral from securities on loan)–102.00% (Cost $223,222,156) |
| 230,237,360 |
Shares | Value | |||||||
Investments Purchased with Cash |
| |||||||
Money Market Fund–0.26% |
| |||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30% (Cost $601,505)(d)(e) | 601,505 | $ | 601,505 | |||||
TOTAL INVESTMENTS IN SECURITIES–102.26% |
| 230,838,865 | ||||||
OTHER ASSETS LESS LIABILITIES–(2.26)% |
| (5,110,046 | ) | |||||
NET ASSETS–100.00% |
| $ | 225,728,819 |
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 December 31, 2018. |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
(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. |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $213,345,810)* | $ | 220,361,008 | ||
Investments in affiliated money market funds, at value (Cost $10,477,851) | 10,477,857 | |||
Cash | 47,121 | |||
Receivable for: | ||||
Investments sold | 324,435 | |||
Fund shares sold | 489,667 | |||
Dividends | 196,314 | |||
Investment for trustee deferred compensation and retirement plans | 69,356 | |||
Total assets | 231,965,758 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 5,232,527 | |||
Fund shares reacquired | 105,978 | |||
Collateral upon return of securities loaned | 601,505 | |||
Accrued fees to affiliates | 179,756 | |||
Accrued trustees’ and officers’ fees and benefits | 4,676 | |||
Accrued other operating expenses | 34,243 | |||
Trustee deferred compensation and retirement plans | 78,254 | |||
Total liabilities | 6,236,939 | |||
Net assets applicable to shares outstanding | $ | 225,728,819 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 187,966,835 | ||
Distributable earnings | 37,761,984 | |||
$ | 225,728,819 | |||
Net Assets: | ||||
Series I | $ | 106,064,323 | ||
Series II | $ | 119,664,496 | ||
Shares outstanding, no par value, |
| |||
Series I | 6,656,390 | |||
Series II | 7,940,521 | |||
Series I: | ||||
Net asset value per share | $ | 15.93 | ||
Series II: | ||||
Net asset value per share | $ | 15.07 |
* | At December 31, 2018, securities with an aggregate value of $588,786 were on loan to brokers. |
Investment income: | ||||
Dividends (net of foreign withholding taxes of $9,964) | $ | 2,972,303 | ||
Dividends from affiliated money market funds (includes securities lending income of $6,539) | 125,684 | |||
Total investment income | 3,097,987 | |||
Expenses: | ||||
Advisory fees | 2,163,296 | |||
Administrative services fees | 508,609 | |||
Custodian fees | 9,469 | |||
Distribution fees — Series II | 381,570 | |||
Transfer agent fees | 28,878 | |||
Trustees’ and officers’ fees and benefits | 24,474 | |||
Reports to shareholders | 8,441 | |||
Professional services fees | 48,918 | |||
Other | 7,636 | |||
Total expenses | 3,181,291 | |||
Less: Fees waived | (6,698 | ) | ||
Net expenses | 3,174,593 | |||
Net investment income (loss) | (76,606 | ) | ||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from investment securities (includes net gains from securities sold to affiliates of $749,515) | 31,854,197 | |||
Change in net unrealized appreciation (depreciation) of investment securities | (70,466,254 | ) | ||
Net realized and unrealized gain (loss) | (38,612,057 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (38,688,663 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income (loss) | $ | (76,606 | ) | $ | (449,792 | ) | ||
Net realized gain | 31,854,197 | 19,070,078 | ||||||
Change in net unrealized appreciation (depreciation) | (70,466,254 | ) | 20,825,514 | |||||
Net increase (decrease) in net assets resulting from��operations | (38,688,663 | ) | 39,445,800 | |||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (8,819,904 | ) | (6,502,386 | ) | ||||
Series II | (10,565,170 | ) | (7,130,030 | ) | ||||
Total distributions from distributable earnings | (19,385,074 | ) | (13,632,416 | ) | ||||
Share transactions–net: | ||||||||
Series I | (16,916,326 | ) | (25,705,703 | ) | ||||
Series II | (6,035,415 | ) | (3,963,272 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (22,951,741 | ) | (29,668,975 | ) | ||||
Net increase (decrease) in net assets | (81,025,478 | ) | (3,855,591 | ) | ||||
Net assets: | ||||||||
Beginning of year | 306,754,297 | 310,609,888 | ||||||
End of year | $ | 225,728,819 | $ | 306,754,297 |
(1) | The Securities and Exchange Commission eliminated the requirement to disclose distribution components separately, except for tax return of capital. For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net realized gains. |
Notes to Financial Statements
December 31, 2018
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. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 islong-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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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 theover-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 (“NAV”) 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 theend-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
Invesco V.I. Small Cap Equity Fund
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. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 investment 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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. Small Cap 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. | 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 inshort-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. The Fund bears the risk of loss with respect to the investment of collateral. 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. When loaning securities, the Fund retains certain benefits of owning the securities, including the economic equivalent of dividends or interest generated by the security. 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. The securities loaned are subject to termination at the option of the borrower or the Fund. Upon termination, the borrower will return to the Fund the securities loaned and the Fund will return the collateral. 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 and the securities may lose value during the delay which could result in potential losses to the Fund. Some of these losses may be indemnified by the lending agent. 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, are included inDividends from affiliated money market fundson 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 accrues daily and pays monthly 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 year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.74%.
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2019, 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 (the “expense limits”). 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. Small Cap Equity 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, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $6,698.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $71,977 for accounting and fund administrative services and was reimbursed $436,632 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution fees.
For the year ended December 31, 2018, the Fund incurred $5,263 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 December 31, 2018, 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 year ended December 31, 2018, the Fund engaged in securities purchases of $163,745 and securities sales of $3,432,590, which resulted in net realized gains of $749,515.
Invesco V.I. Small Cap 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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 4,111,298 | $ | — | ||||
Long-term capital gain | 15,273,776 | 13,632,416 | ||||||
Total distributions | $ | 19,385,074 | $ | 13,632,416 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 236,981 | ||
Undistributedlong-term gain | 30,616,186 | |||
Net unrealized appreciation — investments | 6,981,667 | |||
Temporary book/tax differences | (72,850 | ) | ||
Shares of beneficial interest | 187,966,835 | |||
Total net assets | $ | 225,728,819 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation (depreciation) difference is attributable primarily to wash sales and partnerships.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 does not have a capital loss carryforward as of December 31, 2018.
Invesco V.I. Small Cap Equity Fund
NOTE 8—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $61,703,553 and $105,854,745, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 37,640,257 | ||
Aggregate unrealized (depreciation) of investments | (30,658,590 | ) | ||
Net unrealized appreciation of investments | $ | 6,981,667 |
Cost of investments for tax purposes is $223,857,198.
NOTE 9—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of net operating losses and partnerships, on December 31, 2018, undistributed net investment income (loss) was increased by $102,346 and undistributed net realized gain was decreased by $102,346. This reclassification had no effect on the net assets or the distributable earnings of the Fund.
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 705,274 | $ | 13,617,305 | 746,673 | $ | 14,287,755 | ||||||||||
Series II | 610,379 | 11,139,397 | 553,660 | 10,143,965 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 433,837 | 8,819,904 | 346,979 | 6,502,386 | ||||||||||||
Series II | 549,125 | 10,565,170 | 399,666 | 7,130,030 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (1,946,379 | ) | (39,353,535 | ) | (2,427,148 | ) | (46,495,844 | ) | ||||||||
Series II | (1,480,032 | ) | (27,739,982 | ) | (1,162,843 | ) | (21,237,267 | ) | ||||||||
Net increase (decrease) in share activity | (1,127,796 | ) | $ | (22,951,741 | ) | (1,543,013 | ) | $ | (29,668,975 | ) |
(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 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 (loss)(a) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Distributions from net realized gains | 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 | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 20.02 | $ | 0.02 | $ | (2.74 | ) | $ | (2.72 | ) | $ | (1.37 | ) | $ | 15.93 | (15.08 | )% | $ | 106,064 | 0.96 | %(d) | 0.96 | %(d) | 0.10 | %(d) | 22 | % | |||||||||||||||||||||
Year ended 12/31/17 | 18.38 | (0.01 | ) | 2.53 | 2.52 | (0.88 | ) | 20.02 | 14.06 | 149,405 | 0.97 | 0.97 | (0.02 | ) | 20 | |||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 17.64 | 0.01 | 2.06 | 2.07 | (1.33 | ) | 18.38 | 12.06 | 161,727 | 1.01 | 1.01 | 0.04 | 37 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 23.64 | 0.00 | (1.27 | ) | (1.27 | ) | (4.73 | ) | 17.64 | (5.52 | ) | 166,407 | 1.04 | 1.04 | 0.02 | 31 | ||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 25.44 | (0.04 | ) | 0.47 | 0.43 | (2.23 | ) | 23.64 | 2.36 | 203,963 | 1.05 | 1.05 | (0.17 | ) | 45 | |||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 19.05 | (0.03 | ) | (2.58 | ) | (2.61 | ) | (1.37 | ) | 15.07 | (15.27 | ) | 119,664 | 1.21 | (d) | 1.21 | (d) | (0.15 | ) (d) | 22 | ||||||||||||||||||||||||||||
Year ended 12/31/17 | 17.58 | (0.05 | ) | 2.40 | 2.35 | (0.88 | ) | 19.05 | 13.73 | 157,349 | 1.22 | 1.22 | (0.27 | ) | 20 | |||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 16.96 | (0.03 | ) | 1.98 | 1.95 | (1.33 | ) | 17.58 | 11.84 | 148,883 | 1.26 | 1.26 | (0.21 | ) | 37 | |||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 22.97 | (0.05 | ) | (1.23 | ) | (1.28 | ) | (4.73 | ) | 16.96 | (5.74 | ) | 128,614 | 1.29 | 1.29 | (0.23 | ) | 31 | ||||||||||||||||||||||||||||||
Year ended 12/31/14 | 24.85 | (0.10 | ) | 0.45 | 0.35 | (2.23 | ) | 22.97 | 2.08 | 145,505 | 1.30 | 1.30 | (0.42 | ) | 45 |
(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 based on average daily net assets (000’s omitted) of $138,577 and $152,628 for Series I and Series II shares, respectively. |
Invesco V.I. Small Cap Equity Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Small Cap Equity Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Small Cap Equity Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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 (07/01/18) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Ratio | ||||||||||||||||||||
Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | |||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 811.10 | $ | 4.38 | $ | 1,020.37 | $ | 4.89 | 0.96 | % | ||||||||||||
Series II | 1,000.00 | 810.30 | 5.52 | 1,019.11 | 6.16 | 1.21 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Small Cap Equity Fund
Tax Information
Form1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Long-Term Capital Gain Distributions | $ | 15,273,776 | ||
Corporate Dividends Received Deduction* | 53.56 | % | ||
U.S. Treasury Obligations* | 0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. Small Cap Equity Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Small Cap Equity Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. Small Cap Equity Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. Small Cap Equity Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Small Cap Equity Fund
| ||||
Annual Report to Shareholders
| December 31, 2018 | |||
| ||||
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 FormN-Q (or any successor Form). The Fund’s FormN-Q (or any successor Form) filings are available on the SEC website, sec.gov. The SEC file numbers for the Fund are811-07452 and033-57340. The Fund’s most recent portfolio holdings, as filed on FormN-Q (or any successor Form), 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 recent12-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.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||
Invesco Distributors, Inc. I-VITEC-AR-1 02152019 1148 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. Technology Fund (the Fund) outperformed the NASDAQ Composite Index, the Fund’s broad market/style-specific benchmark.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -0.45 | % | |||
Series II Shares | -0.71 | ||||
NASDAQ Composite Index▼(Broad Market/ Style-Specific Index) | -2.84 | ||||
Lipper VUF Science & Technology Funds Classification Average⬛(Peer Group) | -3.07 | ||||
Source(s):▼FactSet Research Systems Inc.;⬛Lipper Inc. |
Market conditions and your Fund
Calendar year 2018 proved to be an increasingly volatile time for US equities. In January 2018, US equity markets steadily moved higher, as investors remained enthused about the passage of the Tax Cuts and Jobs Act signed into law in late December 2017. However, in February 2018, volatility returned to the US stock and bond markets. Worries about how rising interest rates might affect economic growth, concerns about a potential trade war and heightened geopolitical tensions caused the US stock markets to pull back and volatility to increase.
US equity markets generally recovered in the second quarter of 2018 as strong US retail sales and low unemployment buoyed markets. Throughout the summer, US equities moved higher as corporate profits surged. Several US equity indexes reached new highs despite potential headwinds including trade tensions, tariff announcements and contagion concerns over a Turkish currency crisis. After a relatively quiet summer, market volatility noticeably rose in October, as US equity markets suffered a sharpsell-off throughyear-end, amid rising interest rates and concerns that higher inflation could mean a more restrictive monetary policy. In this environment, there was a
flight to safety, as investors fled to defensive areas of the equities markets, like health care and utilities, and US Treasuries.
Given signs of a strong economy, the US Federal Reserve raised interest rates four times during the year: in March, June, September and December 2018. Following December’s Federal Reserve meeting, Chairman Jerome Powell raised interest rates for the fourth time in 2018 by 25 basis points to a targeted range of 2.25% to 2.50%, and lowered guidance from three to two rate hikes in 2019, signaling a slightly more dovish stance than expected.1 In contrast, the European Central Bank and central banks in several other countries maintained extraordinarily accommodative monetary policies.
In this market environment, the Fund outperformed its broad market/style-specific benchmark, the NASDAQ Composite Index despite producing a negative return. Relative outperformance was driven by stock selection in and an overweight allocation to the information technology (IT) services industry. Additional contributors to the Fund’s relative return resulted from an overweight allocation in the life sciences tools and services industry, as well as Fund holdings in the health care equipment and supplies, electronic equipment, instrument and components
and software and services industries. Finally, not having exposure to the banking industry also contributed to relative results. In contrast, stock selection in entertainment, the biotechnology and interactive media and services industries were the leading detractors from relative performance. An underweight position in the communications equipment industry and having limited exposure to the tobacco industry were also relative detractors during the year.
From an individual securities perspective,Amazon.com was a leading contributor to the Fund’s absolute and relative performance for the year. The retail ande-commerce giant reported strong revenue growth across all segments and strong profit margins in its retail and Amazon Web Services (AWS) segments. AWS provideson-demand cloud computing services enabling retailers to increase operational efficiency in order to have a global reach and gain scale quickly.
Another contributor to relative and absolute returns for the year wasIntegrated Device Technology. This year, the California-based semiconductor company announced it would be acquired by Renesas Electronics (not a Fund holding). This helped drive stock performance during the year, and we subsequently decided to exit our position in the fourth quarter. Rising trade tensions potentially created a risk to the deal’s closure and we don’t expect another bidder. Removing our position in the stock helped us to reduce exposure to the semiconductors industry. We exited our position in the holding before the close of the year.
Within the software industryMicrosoft,salesforce.com andPalo Alto Networks were contributors to absolute performance, although Microsoft was a relative detractor. salesforce.com provides customer relationship management (CRM) software that is delivered via internet browsers and on mobile devices to help
Portfolio Composition |
| ||||
By sector
|
| % of total net assets
|
|
Information Technology | 31.7 | % | |||
Communication Services | 29.2 | ||||
Health Care | 19.7 | ||||
Consumer Discretionary | 18.5 | ||||
Money Market Funds | |||||
Plus Other Assets Less Liabilities | 0.9 |
Top 10 Equity Holdings* | |||||
% of total net assets |
1. Amazon.com, Inc. | 9.20 | % | |||
2. Microsoft Corp. | 5.6 | ||||
3. Alphabet Inc.-Class A | 4.7 | ||||
4. Illumina, Inc. | 4.3 | ||||
5. Alibaba Group Holding Ltd.-ADR | 4.3 | ||||
6. Sony Corp. | 4.1 | ||||
7. Facebook, Inc.-Class A | 3.9 | ||||
8. Apple Inc. | 3.8 | ||||
9. UnitedHealth Group Inc. | 3.7 | ||||
10. Visa Inc.-Class A | 3.6 |
Total Net Assets | $119.2 million | ||||
Total Number of Holdings* | 44 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
Data presented here are as of December 31, 2018.
Invesco V.I. Technology Fund
companies increase sales and promote customer satisfaction. Quarterly revenue results were strong during 2018, with double-digit growth over the previous year. Further, the company continued to increase future guidance on these strong results. Palo Alto Networks is a cybersecurity company that provides advanced firewall protection and helps businesses protect against cyber-attacks. Unlike its competitors, Palo Alto Network’s services run on the same hardware and threats are evaluated with its unique “single pass” technology. We believed this would help Palo Alto Networks continue to gain market share as security breaches increase worldwide. The Fund’s underweight position in Microsoft hurt its relative performance as enterprise cloud services demand remained strong and Microsoft continued to drive fast growth while expanding margins. With otherlarge-cap cloud providers trading at much higher rates, Microsoft benefited from a shift to more defensive ways to remain exposed to the cloud theme. Cloud demand should remain strong even in a slower growth macroeconomic environment, and we remain constructive on the sustainability of their competitive advantages in cloud and productivity.
Internet and direct marketing retail industry constituentAlibaba Group Holding was the leading detractor on an absolute and relative basis. Alibaba’s quarterly reports were mixed throughout the year and it has come under pressure due to the ongoing trade dialogue between the US and China. Furthermore, late in the year, the Chinesee-commerce giant lowered its fiscal year outlook on a weaker Chinese macroeconomic environment and its decision to delay the launch of new advertising products.
On an absolute basis,Facebook was among the leading detractors within the interactive media and services industry for the year. The social media company faced a few tough periods in 2018, with the first being a majorsell-off in March following the announcement that Cambridge Analytica (not a Fund holding) harvested personal data from users for targeted political ads. In July, Facebook’s management released guidance indicating slower-than-expected revenue growth in the second half of 2018 driven by the transition from the application’s News Feed to a Stories based format, along
with higher-than-expected expense growth related to safety, security and privacy controls.
Entertainment industry constituents
Nintendo andActivision Blizzard were key detractors from Fund returns on an absolute and relative basis for the year. Nintendo’s stock fell in the second quarter following slowing Switch console sales that resulted from a lack of momentum in Nintendo Labo, a series ofdo-it-yourself kits that work with the Switch console. Activision Blizzard experienced weak third-quarter results and reduced its outlook given lower-than-expected performance of the expansion pack for its key “Destiny” title and a lack of a major game release for 2019. In general, global video game stocks saw weakness in the fourth quarter as a result of China’s regulatory headwinds combined with a market rotation out of growth and toward defensive areas.
At the end of the year, the Fund’s largest overweight allocations relative to the NASDAQ Composite Index were in the entertainment, life sciences tools and services, internet and catalog retail and health care equipment and supplies industries. Conversely, the Fund’s largest underweight allocations were in the biotechnology, semiconductors, semiconductor equipment and the computer and peripherals industries.
Our view is that we are in a slowing, but not declining, growth environment as the benefits of US tax stimulus and deregulations are offset by higher interest rates, rising labor costs and trade pressures. In such an environment, true growth will likely remain scarce, and we believe the market will favor companies that can produce growth and compound earnings in spite of the economic cycle. We believe that change is the fuel for growth, thus we are seeking to identify “share-takers,” companies that can gain market share from technology-enabled advantages in their business models and from disruptive shifts in consumer behavior. Though we anticipate a possible economic slowing, we continue to prudently balance the Fund’s portfolio between dynamic growth opportunities and more durable growth opportunities.
We thank you for your commitment to Invesco V.I. Technology Fund.
1 | Source: US Federal Reserve |
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Erik Voss Chartered Financial Analyst, Portfolio Manager, is lead manager of Invesco V.I. Technology Fund. He | ||
joined Invesco in 2010. Mr. Voss earned a BS in mathematics and an MS in finance from the University of Wisconsin. |
Janet Luby Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Technology Fund. She joined | ||
Invesco in 2011. Ms. Luby earned a BBA in finance from Texas A&M University. She is also a Certified Public Accountant. |
Invesco V.I. Technology Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (5/20/97) | 5.79 | % | |||
10 Years | 14.86 | ||||
5 Years | 9.63 | ||||
1 Year | -0.45 | ||||
Series II Shares | |||||
Inception (4/30/04) | 7.54 | % | |||
10 Years | 14.59 | ||||
5 Years | 9.36 | ||||
1 Year | -0.71 |
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 recentmonth-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. 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 recentmonth-end performance at the Fund level, excluding variable product charges, is available at 800 451 4246. As mentioned above, for the most recentmonth-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
Invesco V.I. Technology Fund’s investment objective is long-term growth of capital.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Depositary receipts risk.Investing in depositary receipts involves the same risks as direct investments in foreign securities. In addition, the underlying issuers of certain depositary receipts are under no obligation to distribute shareholder communications or pass through any voting rights with respect to the deposited securities to the holders of such receipts. The Fund may therefore receive less timely information or have less control than if it invested directly in the foreign issuer.
Derivatives risk.The value of a derivative instrument depends largely on (and is derived from) the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include other, possibly greater, risks, including counterparty, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by holding a position in the derivative. As a result, an adverse change in the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative or the anticipated value of the underlying asset, which may make the Fund’s returns more volatile and increase the risk of loss. Derivative instruments may also be less liquid than more traditional investments and the Fund may be unable to sell or close out its derivative positions at a desirable time or price. This risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. Derivatives strategies may not always be successful. For example, derivatives used for hedging or to gain or limit exposure to a particular market segment may not provide the expected benefits, particularly during adverse market conditions.
Emerging markets securities risk. Emerging markets (also referred to as developing markets) are generally subject to greater market volatility, political, social and economic instability, uncertain trading markets and more governmental limitations on foreign investment than more developed markets. In addition, companies operating in emerging markets may be subject to lower trading volume and greater price fluctuations than companies in more developed markets. Securities law and the enforcement of systems of taxation in many emerging market countries may change quickly and unpredictably. In addition, investments in emerging markets securities may also be subject to additional transaction costs, delays in settlement procedures, and lack of timely information.
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
Growth investing risk.Growth stocks tend to be more expensive relative to the issuing company’s earnings or assets compared with other types of stock. As a result, they tend to be more sensitive to changes in, or investors’ expectations of, the issuing company’s earnings and can be more volatile.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience
losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
Mid-capitalization companies risk.Mid-capitalization companies tend to be more vulnerable to changing market conditions and may have more limited product lines and markets, less experienced management and fewer financial resources than larger companies. These companies’ securities may be more volatile and less liquid than those of more established companies, and their returns may vary, sometimes significantly, from the overall securities market.
Technology sector risk.The Fund will concentrate its investments in the securities of issuers engaged primarily in technology-related industries. Technology companies are subject to intense competition, rapid obsolescence of their products, issues with obtaining financing or regulatory approvals, product incompatibility, changing consumer preferences, high required corporate capital expenditure for research and development or infrastructure and development of new products, each of which make the prices of securities issued by these companies more volatile.
Invesco V.I. Technology Fund
About indexes used in this report
TheNASDAQ Composite Index is a broad-based, market index of the common stocks and similar securities listed on the Nasdaq stock market.
TheLipper 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.
Other information
CPA® and Certified Public Accountant® are trademarks owned by the American Institute of Certified Public Accountants.
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Industry 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.
Invesco V.I. Technology Fund
Schedule of Investments(a)
December 31, 2018
Shares | Value | |||||||
Common Stocks & Other Equity Interests–99.13% |
| |||||||
Alternative Carriers–1.24% |
| |||||||
Intelsat S.A.(b) | 68,886 | $ | 1,473,472 | |||||
Application Software–5.56% |
| |||||||
Adobe Inc.(b) | 12,440 | 2,814,425 | ||||||
salesforce.com, inc.(b) | 23,299 | 3,191,264 | ||||||
Splunk Inc.(b) | 5,902 | 618,825 | ||||||
6,624,514 | ||||||||
Biotechnology–1.84% |
| |||||||
Alexion Pharmaceuticals, Inc.(b) | 11,112 | 1,081,864 | ||||||
Celgene Corp.(b) | 17,310 | 1,109,398 | ||||||
2,191,262 | ||||||||
Cable & Satellite–1.41% |
| |||||||
Charter Communications, Inc.–Class A(b) | 5,895 | 1,679,898 | ||||||
Consumer Electronics–4.05% |
| |||||||
Sony Corp. (Japan) | 100,300 | 4,830,137 | ||||||
Data Processing & Outsourced Services–8.12% |
| |||||||
Mastercard Inc.–Class A | 15,297 | 2,885,779 | ||||||
PayPal Holdings, Inc.(b) | 29,407 | 2,472,835 | ||||||
Visa Inc.–Class A | 32,716 | 4,316,549 | ||||||
9,675,163 | ||||||||
Electronic Equipment & Instruments–1.18% |
| |||||||
Keysight Technologies, Inc.(b) | 22,643 | 1,405,677 | ||||||
Health Care Equipment–6.93% |
| |||||||
Abbott Laboratories | 17,791 | 1,286,823 | ||||||
Boston Scientific Corp.(b) | 51,681 | 1,826,407 | ||||||
Intuitive Surgical, Inc.(b) | 5,258 | 2,518,161 | ||||||
Stryker Corp. | 8,317 | 1,303,690 | ||||||
Teleflex Inc. | 5,128 | 1,325,485 | ||||||
8,260,566 | ||||||||
Interactive Home Entertainment–13.30% |
| |||||||
Activision Blizzard, Inc. | 54,015 | 2,515,479 | ||||||
Electronic Arts Inc.(b) | 13,597 | 1,072,939 | ||||||
Nintendo Co., Ltd. (Japan) | 12,900 | 3,408,319 | ||||||
Sea Ltd.–ADR (Thailand)(b) | 165,370 | 1,871,988 | ||||||
Take-Two Interactive Software, Inc.(b) | 39,829 | 4,099,997 | ||||||
UbiSoft Entertainment S.A. (France)(b) | 35,986 | 2,886,976 | ||||||
15,855,698 | ||||||||
Interactive Media & Services–11.91% |
| |||||||
Alphabet Inc.–Class A(b) | 5,341 | 5,581,131 | ||||||
Alphabet Inc.–Class C(b) | 2,230 | 2,309,410 | ||||||
Facebook, Inc.–Class A(b) | 35,229 | 4,618,170 | ||||||
Match Group, Inc.(c) | 39,325 | 1,681,930 | ||||||
14,190,641 |
Shares | Value | |||||||
Internet & Direct Marketing Retail–14.46% |
| |||||||
Alibaba Group Holding Ltd.–ADR (China)(b) | 37,355 | $ | 5,120,250 | |||||
Amazon.com, Inc.(b) | 7,272 | 10,922,326 | ||||||
Booking Holdings Inc.(b) | 689 | 1,186,747 | ||||||
17,229,323 | ||||||||
Life Sciences Tools & Services–7.29% |
| |||||||
Illumina, Inc.(b) | 17,203 | 5,159,696 | ||||||
IQVIA Holdings Inc.(b) | 17,220 | 2,000,447 | ||||||
Thermo Fisher Scientific, Inc. | 6,835 | 1,529,605 | ||||||
8,689,748 | ||||||||
Managed Health Care–3.66% |
| |||||||
UnitedHealth Group Inc. | 17,500 | 4,359,600 | ||||||
Movies & Entertainment–1.39% |
| |||||||
Netflix, Inc.(b) | 6,178 | 1,653,603 | ||||||
Semiconductor Equipment–1.36% |
| |||||||
Applied Materials, Inc. | 30,530 | 999,552 | ||||||
ASML Holding N.V.–New York Shares (Netherlands) | 4,028 | 626,838 | ||||||
1,626,390 | ||||||||
Semiconductors–3.28% |
| |||||||
Broadcom Inc. | 8,439 | 2,145,869 | ||||||
NVIDIA Corp. | 8,571 | 1,144,229 | ||||||
Semtech Corp.(b) | 13,559 | 621,951 | ||||||
3,912,049 | ||||||||
Systems Software–8.32% |
| |||||||
Microsoft Corp. | 65,676 | 6,670,711 | ||||||
Palo Alto Networks, Inc.(b) | 8,448 | 1,591,181 | ||||||
ServiceNow, Inc.(b) | 9,311 | 1,657,824 | ||||||
9,919,716 | ||||||||
Technology Hardware, Storage & Peripherals–3.83% |
| |||||||
Apple Inc. | 28,948 | 4,566,258 | ||||||
Total Common Stocks & Other Equity Interests |
| 118,143,715 | ||||||
Money Market Funds–1.01% |
| |||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30%(d) | 420,980 | 420,980 | ||||||
Invesco Liquid Assets Portfolio–Institutional Class, 2.48%(d) | 300,381 | 300,411 | ||||||
Invesco Treasury Portfolio–Institutional Class, 2.30%(d) | 481,119 | 481,119 | ||||||
Total Money Market Funds |
| 1,202,510 | ||||||
TOTAL INVESTMENTS IN SECURITIES (excluding investments purchased with cash collateral from securities on loan)–100.14% (Cost $75,168,004) |
| 119,346,225 |
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–0.81% | ||||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30% (Cost $966,038)(d)(e) | 966,038 | $ | 966,038 | |||||
TOTAL INVESTMENTS IN SECURITIES–100.95% |
| 120,312,263 | ||||||
OTHER ASSETS LESS LIABILITIES–(0.95)% |
| (1,129,597 | ) | |||||
NET ASSETS–100.00% |
| $ | 119,182,666 |
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 December 31, 2018. |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
(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. |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $73,965,472) | $ | 118,143,715 | ||
Investments in affiliated money market funds, Value (Cost $2,168,570) | 2,168,548 | |||
Foreign currencies, at value (Cost $150) | 155 | |||
Receivable for: | ||||
Fund shares sold | 73,356 | |||
Dividends | 9,037 | |||
Investment for trustee deferred compensation and retirement plans | 58,828 | |||
Total assets | 120,453,639 | |||
Liabilities: | ||||
Payable for: | ||||
Amount due to custodian | 75,371 | |||
Fund shares reacquired | 56,626 | |||
Collateral upon return of securities loaned | 966,038 | |||
Accrued fees to affiliates | 58,578 | |||
Accrued trustees’ and officers’ fees and benefits | 4,294 | |||
Accrued other operating expenses | 44,647 | |||
Trustee deferred compensation and retirement plans | 65,419 | |||
Total liabilities | 1,270,973 | |||
Net assets applicable to shares outstanding | $ | 119,182,666 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 64,981,803 | ||
Distributable earnings | 54,200,863 | |||
$ | 119,182,666 | |||
Net Assets: | ||||
Series I | $ | 109,595,968 | ||
Series II | $ | 9,586,698 | ||
Shares outstanding, no par value, |
| |||
Series I | 5,000,549 | |||
Series II | 461,100 | |||
Series I: | ||||
Net asset value per share | $ | 21.92 | ||
Series II: | ||||
Net asset value per share | $ | 20.79 |
* | At December 31, 2018, securities with an aggregate value of $960,871 were on loan to brokers. |
Investment income: | ||||
Dividends (net of foreign withholding taxes of $14,814) | $ | 721,816 | ||
Dividends from affiliated money market funds (includes securities lending income of $695) | 42,218 | |||
Total investment income | 764,034 | |||
Expenses: | ||||
Advisory fees | 1,023,053 | |||
Administrative services fees | 253,950 | |||
Custodian fees | 16,214 | |||
Distribution fees — Series II | 27,583 | |||
Transfer agent fees | 29,350 | |||
Trustees’ and officers’ fees and benefits | 22,048 | |||
Reports to shareholders | 10,038 | |||
Professional services fees | 46,961 | |||
Other | 4,312 | |||
Total expenses | 1,433,509 | |||
Less: Fees waived | (2,389 | ) | ||
Net expenses | 1,431,120 | |||
Net investment income (loss) | (667,086 | ) | ||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 10,617,750 | |||
Foreign currencies | (2,950 | ) | ||
10,614,800 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (10,726,388 | ) | ||
Foreign currencies | 3 | |||
(10,726,385 | ) | |||
Net realized and unrealized gain (loss) | (111,585 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (778,671 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income (loss) | $ | (667,086 | ) | $ | (496,234 | ) | ||
Net realized gain | 10,614,800 | 6,458,329 | ||||||
Change in net unrealized appreciation (depreciation) | (10,726,385 | ) | 26,955,776 | |||||
Net increase (decrease) in net assets resulting from operations | (778,671 | ) | 32,917,871 | |||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (5,582,826 | ) | (5,644,440 | ) | ||||
Series II | (539,546 | ) | (458,282 | ) | ||||
Total distributions from distributable earnings | (6,122,372 | ) | (6,102,722 | ) | ||||
Share transactions–net: | ||||||||
Series I | 2,448,136 | 814,302 | ||||||
Series II | 844,764 | 729,904 | ||||||
Net increase in net assets resulting from share transactions | 3,292,900 | 1,544,206 | ||||||
Net increase (decrease) in net assets | (3,608,143 | ) | 28,359,355 | |||||
Net assets: | ||||||||
Beginning of year | 122,790,809 | 94,431,454 | ||||||
End of year | $ | 119,182,666 | $ | 122,790,809 |
(1) | The Securities and Exchange Commission eliminated the requirement to disclose distribution components separately, except for tax return of capital. For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net realized gains. |
Notes to Financial Statements
December 31, 2018
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. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 islong-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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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 theover-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 (“NAV”) 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 theend-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. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 investment 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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. Technology 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. | 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 inshort-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. The Fund bears the risk of loss with respect to the investment of collateral. 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. When loaning securities, the Fund retains certain benefits of owning the securities, including the economic equivalent of dividends or interest generated by the security. 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. The securities loaned are subject to termination at the option of the borrower or the Fund. Upon termination, the borrower will return to the Fund the securities loaned and the Fund will return the collateral. 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 and the securities may lose value during the delay which could result in potential losses to the Fund. Some of these losses may be indemnified by the lending agent. 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, are included inDividends from affiliated money market fundson 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 the 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 the dailymark-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 anagreed-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. Technology Fund
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.
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 accrues daily and pays monthly 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 year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.75%.
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2019, 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 (the “expense limits”). 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, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $2,389.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $50,000 for accounting and fund administrative services and was reimbursed $203,950 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution fees.
For the year ended December 31, 2018, the Fund incurred $719 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 December 31, 2018. 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 | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks & Equity Securities | $ | 107,018,283 | $ | 11,125,432 | $ | — | $ | 118,143,715 | ||||||||
Money Market Funds | 2,168,548 | — | — | 2,168,548 | ||||||||||||
Total Investments | $ | 109,186,831 | $ | 11,125,432 | $ | — | $ | 120,312,263 |
NOTE 4—Trustees’ and Officers’ Fees and Benefits
Trustees’ and Officers’ Fees and Benefitsinclude 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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 1,229,123 | $ | — | ||||
Long-term capital gain | 4,893,249 | 6,102,722 | ||||||
Total distributions | $ | 6,122,372 | $ | 6,102,722 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributedlong-term gain | $ | 10,503,065 | ||
Net unrealized appreciation — investments | 43,758,358 | |||
Net unrealized appreciation — foreign currencies | 3 | |||
Temporary book/tax differences | (60,563 | ) | ||
Shares of beneficial interest | 64,981,803 | |||
Total net assets | $ | 119,182,666 |
Invesco V.I. Technology Fund
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 does not have a capital loss carryforward as of December 31, 2018.
NOTE 7—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $63,807,114 and $67,433,477, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 46,004,269 | ||
Aggregate unrealized (depreciation) of investments | (2,245,911 | ) | ||
Net unrealized appreciation of investments | $ | 43,758,358 |
Cost of investments for tax purposes is $76,553,905.
NOTE 8—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of net operating losses, on December 31, 2018, undistributed net investment income was increased by $669,695, undistributed net realized gain was increased by $2,950 and shares of beneficial interest was decreased by $672,645. This reclassification had no effect on the net assets of the Fund.
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 1,041,909 | $ | 26,582,108 | 997,886 | $ | 21,692,361 | ||||||||||
Series II | 86,082 | 2,113,927 | 66,105 | 1,382,819 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 209,251 | 5,582,826 | 253,797 | 5,644,440 | ||||||||||||
Series II | 21,301 | 539,546 | 21,607 | 458,282 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (1,185,392 | ) | (29,716,798 | ) | (1,214,728 | ) | (26,522,499 | ) | ||||||||
Series II | (77,423 | ) | (1,808,709 | ) | (53,315 | ) | (1,111,197 | ) | ||||||||
Net increase in share activity | 95,728 | $ | 3,292,900 | 71,352 | $ | 1,544,206 |
(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. Technology 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 | Distributions from net realized gains | 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 | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 22.97 | $ | (0.12 | ) | $ | 0.22 | $ | 0.10 | $ | (1.15 | ) | $ | 21.92 | (0.45 | )% | $ | 109,596 | 1.03 | %(d) | 1.03 | %(d) | (0.47 | )%(d) | 48 | % | ||||||||||||||||||||||
Year ended 12/31/17 | 17.89 | (0.09 | ) | 6.34 | 6.25 | (1.17 | ) | 22.97 | 35.13 | 113,352 | 1.06 | 1.06 | (0.41 | ) | 43 | |||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 18.83 | (0.06 | ) | (0.06 | ) | (0.12 | ) | (0.82 | ) | 17.89 | (0.76 | ) | 87,632 | 1.10 | 1.10 | (0.33 | ) | 52 | ||||||||||||||||||||||||||||||
Year ended 12/31/15 | 19.75 | (0.11 | ) | 1.29 | 1.18 | (2.10 | ) | 18.83 | 6.82 | 107,257 | 1.15 | 1.15 | (0.53 | ) | 61 | |||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 19.42 | (0.13 | ) | 2.20 | 2.07 | (1.74 | ) | 19.75 | 11.05 | 104,556 | 1.16 | 1.16 | (0.65 | ) | 77 | |||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 21.89 | (0.17 | ) | 0.22 | 0.05 | (1.15 | ) | 20.79 | (0.71 | ) | 9,587 | 1.28 | (d) | 1.28 | (d) | (0.72 | )(d) | 48 | ||||||||||||||||||||||||||||||
Year ended 12/31/17 | 17.14 | (0.14 | ) | 6.06 | 5.92 | (1.17 | ) | 21.89 | 34.74 | 9,439 | 1.31 | 1.31 | (0.66 | ) | 43 | |||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 18.12 | (0.10 | ) | (0.06 | ) | (0.16 | ) | (0.82 | ) | 17.14 | (1.01 | ) | 6,799 | 1.35 | 1.35 | (0.58 | ) | 52 | ||||||||||||||||||||||||||||||
Year ended 12/31/15 | 19.13 | (0.15 | ) | 1.24 | 1.09 | (2.10 | ) | 18.12 | 6.56 | 8,043 | 1.40 | 1.40 | (0.78 | ) | 61 | |||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 18.90 | (0.17 | ) | 2.14 | 1.97 | (1.74 | ) | 19.13 | 10.82 | 4,775 | 1.41 | 1.41 | (0.90 | ) | 77 |
(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 based on average daily net assets (000’s omitted) of $125,374 and $11,033 for Series I and Series II shares, respectively. |
Invesco V.I. Technology Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Technology Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Technology Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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.
Beginning Account Value (07/01/18) | ACTUAL | HYPOTHETICAL (5% annual return before | Annualized Ratio | |||||||||||||||||||||
Class | Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | ||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 880.10 | $ | 4.88 | $ | 1,020.01 | $ | 5.24 | 1.03 | % | ||||||||||||
Series II | 1,000.00 | 878.90 | 6.06 | 1,018.75 | 6.51 | 1.28 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Technology Fund
Tax Information
Form1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Long-Term Capital Gain Distributions | $ | 4,893,249 | ||
Corporate Dividends Received Deduction* | 43.96 | % | ||
U.S. Treasury Obligations* | 0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund's fiscal year. |
Invesco V.I. Technology Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Technology Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. Technology Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. Technology Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Technology Fund
| ||||
Annual Report to Shareholders
| December 31, 2018 | |||
| ||||
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 (or any successor Form). The Fund’s Form N-Q (or any successor Form) filings are available on the SEC website, 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 (or any successor Form), 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.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||
Invesco Distributors, Inc. VK-VIVOPP-AR-1 02152019 1214 |
Management’s Discussion of Fund Performance
Performance summary
For the year ended December 31, 2018, Series I shares of Invesco V.I. Value Opportunities Fund (the Fund) underperformed the S&P 1500 Value Index, the Fund’s style-specific benchmark.
Your Fund’s long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/17 to 12/31/18, excluding variable product issuer charges.
If variable product issuer charges were included, returns would be lower.
Series I Shares | -19.18 | % | |||
Series II Shares | -19.35 | ||||
S&P 500 Index▼ (Broad Market Index) | -4.38 | ||||
S&P 1500 Value Index▼ (Style-Specific Index) | �� | -9.29 | |||
Lipper VUF Multi-Cap Value Funds Index∎ (Peer Group Index) | -11.33 | ||||
Source(s):▼FactSet Research Systems Inc.;∎Lipper Inc. |
Market conditions and your Fund
Calendar year 2018 proved to be an increasingly volatile time for US equities. In January 2018, US equity markets steadily moved higher, as investors remained enthused about the passage of the Tax Cuts and Jobs Act signed into law in late December 2017. However, in February 2018, volatility returned to the US stock and bond markets. Worries about how rising interest rates might affect economic growth, concerns about a potential trade war and heightened geopolitical tensions caused the US stock markets to pull back and volatility to increase.
US equity markets generally recovered in the second quarter of 2018 as strong US retail sales and low unemployment buoyed markets. Throughout the summer, US equities moved higher as corporate profits surged. Several US equity indexes reached new highs despite potential headwinds including trade tensions, tariff announcements and contagion concerns over a Turkish currency crisis. After a relatively quiet summer, market volatility noticeably rose in October, as US equity
markets suffered a sharp sell-off through year-end, amid rising interest rates and concerns that higher inflation could mean a more restrictive monetary policy. In this environment, there was a flight to safety, as investors fled to defensive areas of the equities markets, like health care and utilities, and US Treasuries.
Given signs of a strong economy, the US Federal Reserve raised interest rates four times during the year: in March, June, September and December 2018. Following December’s Federal Reserve meeting, Chairman Jerome Powell raised interest rates for the fourth time in 2018 by 25 basis points to a targeted range of 2.25% to 2.50%, and lowered guidance from three to two rate hikes in 2019, signaling a slightly more dovish stance than expected.1 In contrast, the European Central Bank and central banks in several other countries maintained extraordinarily accommodative monetary policies.
During the year, we continued implementing our intrinsic value strategy, seeking to create wealth by maintaining a long-term investment horizon and investing in companies selling at a significant
discount to our estimate of their intrinsic value. We believe intrinsic value represents the fair economic worth of a business. Since our application of this strategy is highly disciplined and relatively unique, it is important to understand the benefits and limitations of our process. First, the investment strategy is intended to preserve capital while growing it at above-market rates over the long term. Second, the investments generally have little in common with popular stock market indexes and most of our peers. And third, the Fund’s short-term relative performance will naturally be different from stock market indexes and peers and have little information value since we typically structure the portfolio significantly differently than these benchmarks.
During the year, drivers of Fund performance were mainly stock-specific. Property and casualty insurance providerAm-Trust Financial Services was the largest contributor to the Fund’s performance during the year. The company’s stock rose after a private equity group offered to buy the firm. Mental health care facility operatorAcadia Healthcare was also a large contributor to the Fund’s returns as management announced they were exploring strategic alternatives for the company toward the end of the year. Business services companyDun & Bradstreet performed well during the year as the company received a purchase offer by a private equity firm. These positions were sold before the close of the year based on valuations.
Electronic components companyBelden was the largest detractor from the Fund’s performance during the year. Shares of the company fell after management reported disappointing financial results for the third quarter and provided
Portfolio Composition |
By sector | % of total net assets |
Financials | 25.1% | ||||
Health Care | 19.9 | ||||
Industrials | 17.1 | ||||
Materials | 8.4 | ||||
Information Technology | 8.2 | ||||
Energy | 7.1 | ||||
Consumer Discretionary | 6.4 | ||||
Real Estate | 2.3 | ||||
Consumer Staples | 1.9 | ||||
Communication Services | 0.8 | ||||
Money Market Funds Plus Other Assets Less Liabilities | 2.8 |
Top 10 Equity Holdings* |
% of total net assets |
1. McKesson Corp. | 4.0% | |
2. Anthem, Inc. | 3.8 | |
3. AECOM | 3.7 | |
4. Crown Holdings, Inc. | 3.5 | |
5. Oracle Corp. | 3.4 | |
6. SLM Corp. | 3.3 | |
7. Cardinal Health, Inc. | 3.3 | |
8. Sealed Air Corp. | 3.2 | |
9. MGIC Investment Corp. | 3.2 | |
10. Mylan N.V. | 3.1 |
Total Net Assets | $81.3 million | |
Total Number of Holdings* | 45 |
The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
Data presented here are as of December 31, 2018.
Invesco V.I. Value Opportunities Fund
guidance that challenges would likely continue in the near term. Shares of asset management companyAffiliated Managers Group also declined during the year on news that its net asset inflows in 2018 were below expectations. Asset managers, in general, underperformed for the year. Medical waste management companyStericycle was among the largest detractors from the Fund’s performance as well. Shares of the company fell after reporting weaker-than-expected results in the third quarter and pushing out the timeline of several planned asset sales.
For some time, we have found very limited investment opportunities in the yield-oriented sectors of utilities, consumer staples and real estate investment trusts, given their unattractive valuations. Our underweight exposure to these sectors hurt the Fund’s performance relative to the S&P 1500 Value Index as these defensive sectors performed well during the year due to rising investor fears.
At the close of the year, given our focus on intrinsic value and long-term investment horizon, the Fund was positioned toward more economically-sensitive stocks than its peers. We believe the single most important indicator of how the Fund is positioned for potential future success is not our recent investment results or popular statistical measures, but rather the difference between current market prices and the Fund’s estimated intrinsic value – the aggregate business value of the portfolio based on our estimate of intrinsic value for each individual holding.
At the end of the year, the difference between the market price and the estimated intrinsic value of the Fund was very attractive, according to our estimation. While there is no assurance that market value will ever reflect our estimate of the Fund’s intrinsic value, we believe the gap between price and estimated intrinsic value may provide above-average capital appreciation.
We will continue to work hard to protect and grow the Fund’s estimated intrinsic value. We thank you for your investment and for sharing our long-term investment perspective.
1 Source: US Federal Reserve
The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
See important Fund and, if applicable, index disclosures later in this report.
Jonathan Edwards Chartered Financial Analyst, Portfolio Manager, is lead manager of Invesco V.I. Value Opportunities |
Fund. He joined Invesco in 2001. Mr. Edwards earned a BS in economics from Texas A&M University and an MBA from The University of Texas at Austin.
Jonathan Mueller Chartered Financial Analyst, Portfolio Manager, is manager of Invesco V.I. Value Opportunities Fund. He |
joined Invesco in 2001. Mr. Mueller earned a BBA in accounting from Texas Christian University and an MBA in finance from The University of Texas at Austin. He is also a Certified Public Accountant.
Invesco V.I. Value Opportunities Fund
Your Fund’s Long-Term Performance
Results of a $10,000 Investment – Oldest Share Class(es)
Fund and index data from 12/31/08
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Average Annual Total Returns | |||||
As of 12/31/18 | |||||
Series I Shares | |||||
Inception (9/10/01) | 3.48% | ||||
10 Years | 10.03 | ||||
5 Years | 1.42 | ||||
1 Year | -19.18 | ||||
Series II Shares | |||||
Inception (9/10/01) | 3.23% | ||||
10 Years | 9.75 | ||||
5 Years | 1.17 | ||||
1 Year | -19.35 | ||||
Performance includes litigation proceeds. Had these proceeds not been received, total returns would have been lower. |
|
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. Performance figures in the table and chart do not reflect deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 0.98% and 1.23%, 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.
Invesco V.I. Value Opportunities Fund
Invesco V.I. Value Opportunities Fund’s investment objective is long-term growth of capital.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2018, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Principal risks of investing in the Fund
Convertible securities risk.The market values of convertible securities are affected by market interest rates, the risk of actual issuer default on interest or principal payments and the value of the underlying common stock into which the convertible security may be converted. Additionally, a convertible security is subject to the same types of market and issuer risks as apply to the underlying common stock. In addition, certain convertible securities are subject to involuntary conversions and may undergo principal write-downs upon the occurrence of certain triggering events, and, as a result, are subject to an increased risk of loss. Convertible securities may be rated below investment grade.
Depositary receipts risk.Investing in depositary receipts involves the same risks as direct investments in foreign securities. In addition, the underlying issuers of certain depositary receipts are under no obligation to distribute shareholder communications or pass through any voting rights with respect to the deposited securities to the holders of such receipts. The Fund may therefore receive less timely information or have less control than if it invested directly in the foreign issuer.
Derivatives risk.The value of a derivative instrument depends largely on (and is derived from) the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include other, possibly greater, risks, including counterparty, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by holding a position in the derivative. As a result, an adverse change in the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative or the anticipated value of the underlying asset, which may
make the Fund’s returns more volatile and increase the risk of loss. Derivative instruments may also be less liquid than more traditional investments and the Fund may be unable to sell or close out its derivative positions at a desirable time or price. This risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. Derivatives strategies may not always be successful. For example, derivatives used for hedging or to gain or limit exposure to a particular market segment may not provide the expected benefits, particularly during adverse market conditions.
Emerging markets securities risk. Emerging markets (also referred to as developing markets) are generally subject to greater market volatility, political, social and economic instability, uncertain trading markets and more governmental limitations on foreign investment than more developed markets. In addition, companies operating in emerging markets may be subject to lower trading volume and greater price fluctuations than companies in more developed markets. Securities law and the enforcement of systems of taxation in many emerging market countries may change quickly and unpredictably. In addition, investments in emerging markets securities may also be subject to additional transaction costs, delays in settlement procedures, and lack of timely information.
Foreign securities risk.The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which
may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
Initial public offerings (IPO) risk.The prices of IPO securities often fluctuate more than prices of securities of companies with longer trading histories and sometimes experience significant price drops shortly after their initial issuance. In addition, companies offering securities in IPOs may have less experienced management or limited operating histories.
Management risk.The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
Market risk.The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
Preferred securities risk.Preferred securities are subject to issuer-specific and market risks applicable generally to equity securities. Preferred securities also may be subordinated to bonds or other debt instruments, subjecting them to a greater risk of non-payment, may be less liquid than many other securities, such as common stocks, and generally offer no voting rights with respect to the issuer.
REIT risk/real estate risk.Investments in real estate related instruments may be
Invesco V.I. Value Opportunities Fund
affected by economic, legal, cultural, environmental or technological factors that affect property values, rents or occupancies of real estate related to the Fund’s holdings. Shares of real estate related companies, which tend to be small- and mid-cap companies, may be more volatile and less liquid.
Sector focus risk.The Fund may from time to time invest a significant amount of its assets (i.e. over 25%) in one market sector or group of related industries. In this event, the Fund’s performance will depend to a greater extent on the overall condition of the sector or group of industries and there is increased risk that the Fund will lose significant value if conditions adversely affect that sector or group of industries.
Small- and mid-capitalization companies risks.Small- and mid-capitalization companies tend to be more vulnerable to changing market conditions, may have little or no operating history or track record of success, and may have more limited product lines and markets, less experienced management and fewer financial resources than larger companies. These companies’ securities may be more volatile and less liquid than those of more established companies, and their returns may vary, sometimes significantly, from the overall securities market.
Unseasoned issuer risk.Investments in unseasoned companies or companies with special circumstances often involve much greater risks than are inherent in other types of investments and securities of such companies may be more likely to experience fluctuations in price. In addition, investments made in anticipation of future events may, if the events are delayed or never achieved, cause stock prices to fall.
Value investing style risk.A value investing style subjects the Fund to the risk that the valuations never improve or that the returns on value equity securities are less than returns on other styles of investing or the overall stock market.
About indexes used in this report
TheS&P 500® Index is an unmanaged index considered representative of the US stock market.
TheS&P 1500® Value Index tracks the performance of US large-, mid- and small-cap value stocks.
TheLipper VUF Multi-Cap Value Funds Index is an unmanaged index considered representative of multicap 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.
Other information
CPA® and Certified Public Accountant® are trademarks owned by the American Institute of Certified Public Accountants.
The returns shown in management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. Additionally, the returns and net asset values shown throughout this report are at the Fund level only and do not include variable product issuer charges. If such charges were included, the total returns would be lower.
Industry 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.
Invesco V.I. Value Opportunities Fund
Schedule of Investments(a)
December 31, 2018
Shares | Value | |||||||
Common Stocks–97.23% |
| |||||||
Advertising–0.81% |
| |||||||
Interpublic Group of Cos., Inc. (The) | 17,900 | $ | 369,277 | |||||
Omnicom Group Inc. | 3,915 | 286,735 | ||||||
656,012 | ||||||||
Agricultural & Farm Machinery–1.16% |
| |||||||
AGCO Corp. | 16,889 | 940,211 | ||||||
Asset Management & Custody Banks–2.51% |
| |||||||
Affiliated Managers Group, Inc. | 20,940 | 2,040,393 | ||||||
Auto Parts & Equipment–4.06% |
| |||||||
Dana Inc. | 93,327 | 1,272,047 | ||||||
Delphi Technologies PLC | 141,765 | 2,030,075 | ||||||
3,302,122 | ||||||||
Building Products–5.14% |
| |||||||
Masco Corp. | 76,308 | 2,231,246 | ||||||
Owens Corning | 44,300 | 1,948,314 | ||||||
4,179,560 | ||||||||
Construction & Engineering–5.18% |
| |||||||
AECOM(b) | 112,004 | 2,968,106 | ||||||
Fluor Corp. | 38,500 | 1,239,700 | ||||||
4,207,806 | ||||||||
Consumer Finance–3.34% |
| |||||||
SLM Corp.(b) | 327,000 | 2,717,370 | ||||||
Diversified Banks–5.77% |
| |||||||
Bank of America Corp. | 100,774 | 2,483,071 | ||||||
Citigroup Inc. | 38,472 | 2,002,852 | ||||||
JPMorgan Chase & Co. | 2,119 | 206,857 | ||||||
4,692,780 | ||||||||
Electronic Components–2.98% |
| |||||||
Belden Inc. | 58,056 | 2,424,999 | ||||||
Electronic Manufacturing Services–1.81% |
| |||||||
Flex Ltd.(b) | 193,565 | 1,473,030 | ||||||
Environmental & Facilities Services–2.66% |
| |||||||
Stericycle, Inc.(b) | 59,046 | 2,166,398 | ||||||
Health Care Distributors–7.33% |
| |||||||
Cardinal Health, Inc. | 60,800 | 2,711,680 | ||||||
McKesson Corp. | 29,400 | 3,247,818 | ||||||
5,959,498 | ||||||||
Health Care Facilities–2.07% |
| |||||||
Brookdale Senior Living Inc.(b) | 251,151 | 1,682,712 | ||||||
Health Care Services–1.73% |
| |||||||
Cigna Corp. | 7,400 | 1,405,408 |
Shares | Value | |||||||
Homebuilding–1.12% |
| |||||||
D.R. Horton, Inc. | 26,200 | $ | 908,092 | |||||
Hotels, Resorts & Cruise Lines–1.19% |
| |||||||
Norwegian Cruise Line Holdings Ltd.(b) | 22,800 | 966,492 | ||||||
Household Products–1.93% |
| |||||||
Spectrum Brands Holdings, Inc. | 37,161 | 1,570,052 | ||||||
Industrial Conglomerates–2.97% |
| |||||||
Carlisle Cos. Inc. | 24,000 | 2,412,480 | ||||||
Investment Banking & Brokerage–4.03% |
| |||||||
E*TRADE Financial Corp. | 5,400 | 236,952 | ||||||
LPL Financial Holdings, Inc. | 41,393 | 2,528,284 | ||||||
TD Ameritrade Holding Corp. | 10,500 | 514,080 | ||||||
3,279,316 | ||||||||
Life & Health Insurance–2.74% |
| |||||||
MetLife, Inc. | 54,217 | 2,226,150 | ||||||
Managed Health Care–3.84% |
| |||||||
Anthem, Inc. | 11,900 | 3,125,297 | ||||||
Metal & Glass Containers–3.46% |
| |||||||
Crown Holdings, Inc.(b) | 67,600 | 2,810,132 | ||||||
Oil & Gas Exploration & Production–7.15% |
| |||||||
Apache Corp. | 28,200 | 740,250 | ||||||
Diamondback Energy Inc. | 8,700 | 806,490 | ||||||
Noble Energy, Inc. | 66,800 | 1,253,168 | ||||||
Parsley Energy, Inc.–Class A(b) | 100,600 | 1,607,588 | ||||||
Pioneer Natural Resources Co. | 10,700 | 1,407,264 | ||||||
5,814,760 | ||||||||
Other Diversified Financial Services–1.63% |
| |||||||
AXA Equitable Holdings, Inc. | 79,900 | 1,328,737 | ||||||
Paper Packaging–3.20% |
| |||||||
Sealed Air Corp. | 74,700 | 2,602,548 | ||||||
Pharmaceuticals–4.90% |
| |||||||
Mylan N.V.(b) | 93,200 | 2,553,680 | ||||||
Novartis AG (Switzerland) | 16,652 | 1,426,217 | ||||||
3,979,897 | ||||||||
Real Estate Services–2.27% |
| |||||||
Realogy Holdings Corp. | 125,913 | 1,848,403 | ||||||
Steel–1.76% |
| |||||||
Allegheny Technologies, Inc.(b) | 65,905 | 1,434,752 | ||||||
Systems Software–3.43% |
| |||||||
Oracle Corp. | 61,695 | 2,785,529 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Value Opportunities Fund
Shares | Value | |||||||
Thrifts & Mortgage Finance–5.06% |
| |||||||
MGIC Investment Corp.(b) | 248,221 | $ | 2,596,392 | |||||
Radian Group Inc. | 92,876 | 1,519,451 | ||||||
4,115,843 | ||||||||
Total Common Stocks |
| 79,056,779 | ||||||
Money Market Funds–3.00% |
| |||||||
Invesco Government & Agency Portfolio–Institutional Class, 2.30%(c) | 1,007,613 | 1,007,613 | ||||||
Invesco Liquid Assets Portfolio–Institutional Class, 2.48%(c) | 719,452 | 719,524 | ||||||
Invesco Treasury Portfolio–Institutional Class, 2.30%(c) | 707,288 | 707,288 | ||||||
Total Money Market Funds |
| 2,434,425 | ||||||
TOTAL INVESTMENTS IN SECURITIES–100.23% |
| 81,491,204 | ||||||
OTHER ASSETS LESS LIABILITIES–(0.23)% |
| (184,247 | ) | |||||
NET ASSETS–100.00% |
| 81,306,957 |
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. The rate shown is the 7-day SEC standardized yield as of December 31, 2018. |
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
December 31, 2018
Statement of Operations
For the year ended December 31, 2018
Assets: | ||||
Investments in securities, at value (Cost $87,721,327) | $ | 79,056,779 | ||
Investments in affiliated money market funds, at value and cost (Cost $2,434,440) | 2,434,425 | |||
Receivable for: | ||||
Fund shares sold | 314,904 | |||
Dividends | 94,518 | |||
Investment for trustee deferred compensation and retirement plans | 99,508 | |||
Other assets | 3,271 | |||
Total assets | 82,003,405 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 339,489 | |||
Amount due to custodian | 6,904 | |||
Fund shares reacquired | 138,430 | |||
Accrued fees to affiliates | 53,140 | |||
Accrued trustees’ and officers’ fees and benefits | 3,870 | |||
Accrued other operating expenses | 45,631 | |||
Trustee deferred compensation and retirement plans | 108,984 | |||
Total liabilities | 696,448 | |||
Net assets applicable to shares outstanding | $ | 81,306,957 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 72,940,772 | ||
Distributable earnings | 8,366,185 | |||
$ | 81,306,957 | |||
Net Assets: | ||||
Series I | $ | 59,997,590 | ||
Series II | $ | 21,309,367 | ||
Shares outstanding, no par value, | ||||
Series I | 10,917,178 | |||
Series II | 3,884,553 | |||
Series I: | ||||
Net asset value per share | $ | 5.50 | ||
Series II: | ||||
Net asset value per share | $ | 5.49 |
Investment income: | ||||
Dividends (net of foreign withholding taxes of $8,242) | $ | 1,277,275 | ||
Dividends from affiliated money market funds | 37,685 | |||
Total investment income | 1,314,960 | |||
Expenses: | ||||
Advisory fees | 744,676 | |||
Administrative services fees | 210,823 | |||
Custodian fees | 9,870 | |||
Distribution fees — Series II | 71,996 | |||
Transfer agent fees | 27,372 | |||
Trustees’ and officers’ fees and benefits | 21,449 | |||
Reports to shareholders | 10,498 | |||
Professional services fees | 54,012 | |||
Other | 4,178 | |||
Total expenses | 1,154,874 | |||
Less: Fees waived | (2,306 | ) | ||
Net expenses | 1,152,568 | |||
Net investment income | 162,392 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 18,204,823 | |||
Foreign currencies | (463 | ) | ||
18,204,360 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (37,762,479 | ) | ||
Foreign currencies | (615 | ) | ||
(37,763,094 | ) | |||
Net realized and unrealized gain (loss) | (19,558,734 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (19,396,342 | ) |
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 years ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Operations: | ||||||||
Net investment income | $ | 162,392 | $ | 281,297 | ||||
Net realized gain | 18,204,360 | 11,542,936 | ||||||
Change in net unrealized appreciation (depreciation) | (37,763,094 | ) | 8,200,593 | |||||
Net increase (decrease) in net assets resulting from operations | (19,396,342 | ) | 20,024,826 | |||||
Distributions to shareholders from distributable earnings(1): | ||||||||
Series I | (8,093,985 | ) | (326,616 | ) | ||||
Series II | (2,790,803 | ) | (5,339 | ) | ||||
Total distributions from distributable earnings | (10,884,788 | ) | (331,955 | ) | ||||
Share transactions–net: | ||||||||
Series I | (4,794,903 | ) | (11,866,628 | ) | ||||
Series II | (6,176,982 | ) | (25,426,253 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (10,971,885 | ) | (37,292,881 | ) | ||||
Net increase (decrease) in net assets | (41,253,015 | ) | (17,600,010 | ) | ||||
Net assets: | ||||||||
Beginning of year | 122,559,972 | 140,159,982 | ||||||
End of year | $ | 81,306,957 | $ | 122,559,972 |
(1) | The Securities and Exchange Commission eliminated the requirement to disclose distribution components separately, except for tax return of capital. For the year ended December 31, 2017, distributions to shareholders from distributable earnings consisted of distributions from net investment income. |
Notes to Financial Statements
December 31, 2018
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 anopen-end series management investment company. Information presented in these financial statements pertains only to the Fund. Matters affecting the Fund or each class will be voted on exclusively by the shareholders of the Fund or each 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 islong-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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946,Financial Services — Investment Companies.
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 theover-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 (“NAV”) 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 theend-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. Value Opportunities Fund
trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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 investment 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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. Value Opportunities 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 the 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 the dailymark-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 anagreed-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 accrues daily and pays monthly 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 year ended December 31, 2018, the effective advisory fees incurred by the Fund was 0.695%.
Invesco V.I. Value Opportunities Fund
Under the terms of a mastersub-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. and separatesub-advisory agreements with Invesco Capital Management LLC, formerly Invesco PowerShares Capital Management LLC, and Invesco Asset Management (India) Private Limited (collectively, the “AffiliatedSub-Advisers”) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such AffiliatedSub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such AffiliatedSub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2019, 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 (the “expense limits”). 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, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2020, 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 year ended December 31, 2018, the Adviser waived advisory fees of $2,306.
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 fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2018, Invesco was paid $50,000 for accounting and fund administrative services and was reimbursed $160,823 for fees paid to 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 year ended December 31, 2018, expenses incurred under the agreement are shown in the Statement of Operations asTransfer 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. The fees are accrued daily and paid monthly. 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 year ended December 31, 2018, expenses incurred under the Plan are detailed in the Statement of Operations asDistribution fees.
For the year ended December 31, 2018, the Fund incurred $1,496 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. |
Invesco V.I. Value Opportunities Fund
The following is a summary of the tiered valuation input levels, as of December 31, 2018. 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 | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks | $ | 77,630,562 | $ | 1,426,217 | $ | — | $ | 79,056,779 | ||||||||
Money Market Funds | 2,434,425 | — | — | 2,434,425 | ||||||||||||
Total Investments | $ | 80,064,987 | $ | 1,426,217 | $ | — | $ | 81,491,204 |
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, andTrustees’ and Officers’ Fees and Benefitsalso 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 captionAmount 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—Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2018 and 2017:
2018 | 2017 | |||||||
Ordinary income | $ | 1,027,667 | $ | 331,955 | ||||
Long-term capital gain | 9,857,121 | — | ||||||
Total distributions | $ | 10,884,788 | $ | 331,955 |
Tax Components of Net Assets at Period-End:
2018 | ||||
Undistributed ordinary income | $ | 2,445,968 | ||
Undistributedlong-term gain | 15,456,438 | |||
Net unrealized appreciation (depreciation) — investments | (9,434,041 | ) | ||
Net unrealized appreciation — foreign currencies | 183 | |||
Temporary book/tax differences | (102,363 | ) | ||
Shares of beneficial interest | 72,940,772 | |||
Total net assets | $ | 81,306,957 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation (depreciation) difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
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 eithershort-term orlong-term capital losses instead of asshort-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 does not have a capital loss carryforward as of December 31, 2018.
Invesco V.I. Value Opportunities Fund
NOTE 7—Investment Transactions
The aggregate amount of investment securities (other thanshort-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2018 was $ 46,882,323 and $ 68,716,149, respectively. Cost of investments, including any derivatives, 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 Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments | $ | 9,123,463 | ||
Aggregate unrealized (depreciation) of investments | (18,557,504 | ) | ||
Net unrealized appreciation (depreciation) of investments | $ | (9,434,041 | ) |
Cost of investments for tax purposes is $90,925,245.
NOTE 8—Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of foreign currency transactions, on December 31, 2018, undistributed net investment income was decreased by $464 and undistributed net realized gain was increased by $464. This reclassification had no effect on the net assets or the distributable earnings of the Fund.
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2018(a) | 2017 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Series I | 246,902 | $ | 1,647,873 | 691,703 | $ | 4,815,992 | ||||||||||
Series II | 230,991 | 1,598,135 | 249,911 | 1,718,280 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Series I | 1,156,284 | 8,093,985 | 46,527 | 326,616 | ||||||||||||
Series II | 399,257 | 2,790,803 | 762 | 5,339 | ||||||||||||
Reacquired: | ||||||||||||||||
Series I | (1,997,013 | ) | (14,536,761 | ) | (2,465,512 | ) | (17,009,236 | ) | ||||||||
Series II | (1,418,342 | ) | (10,565,920 | ) | (4,012,341 | ) | (27,149,872 | ) | ||||||||
Net increase (decrease) in share activity | (1,381,921 | ) | $ | (10,971,885 | ) | (5,488,950 | ) | $ | (37,292,881 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 74% 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. Value Opportunities 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | $ | 7.58 | $ | 0.01 | $ | (1.30 | ) | $ | (1.29 | ) | $ | (0.02 | ) | $ | (0.77 | ) | $ | (0.79 | ) | $ | 5.50 | (19.18 | )% | $ | 59,998 | 1.01 | %(d) | 1.01 | %(d) | 0.22 | %(d) | 45 | % | |||||||||||||||||||||||
Year ended 12/31/17 | 6.48 | 0.02 | 1.11 | (e) | 1.13 | (0.03 | ) | — | (0.03 | ) | 7.58 | 17.44 | (e) | 87,232 | 0.98 | 0.98 | 0.30 | 28 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 7.82 | 0.03 | 1.10 | 1.13 | (0.03 | ) | (2.44 | ) | (2.47 | ) | 6.48 | 18.34 | 85,722 | 1.01 | 1.02 | 0.43 | 36 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 9.84 | 0.05 | (1.09 | ) | (1.04 | ) | (0.26 | ) | (0.72 | ) | (0.98 | ) | 7.82 | (10.40 | ) | 83,889 | 1.04 | 1.04 | 0.51 | 82 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 9.36 | 0.18 | (f) | 0.44 | 0.62 | (0.14 | ) | — | (0.14 | ) | 9.84 | 6.62 | 110,865 | 1.03 | 1.04 | 1.87 | (f) | 15 | ||||||||||||||||||||||||||||||||||||||
Series II | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/18 | 7.56 | (0.00 | ) | (1.30 | ) | (1.30 | ) | — | (0.77 | ) | (0.77 | ) | 5.49 | (19.35 | ) | 21,309 | 1.26 | (d) | 1.26 | (d) | (0.03 | )(d) | 45 | |||||||||||||||||||||||||||||||||
Year ended 12/31/17 | 6.45 | 0.00 | 1.11 | (e) | 1.11 | 0.00 | — | 0.00 | 7.56 | 17.23 | (e) | 35,328 | 1.23 | 1.23 | 0.05 | 28 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 | 7.79 | 0.01 | 1.10 | 1.11 | (0.01 | ) | (2.44 | ) | (2.45 | ) | 6.45 | 17.92 | 54,438 | 1.26 | 1.27 | 0.18 | 36 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 | 9.79 | 0.02 | (1.08 | ) | (1.06 | ) | (0.22 | ) | (0.72 | ) | (0.94 | ) | 7.79 | (10.65 | ) | 54,887 | 1.29 | 1.29 | 0.26 | 82 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 | 9.31 | 0.15 | (f) | 0.44 | 0.59 | (0.11 | ) | — | (0.11 | ) | 9.79 | 6.39 | 80,217 | 1.28 | 1.29 | 1.62 | (f) | 15 |
(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 based on average daily net assets (000’s omitted) of $78,349 and $28,798 for Series I and Series II shares, respectively. |
(e) | Includes litigation proceeds received during the period. Had these litigation proceeds not been received, Net gains (losses) on securities (both realized and unrealized) per share would have been $1.09 and $1.09 for Series I and Series II shares, respectively. Total returns would have been lower. |
(f) | Net Investment income per share and the ratio of net investment income to average net assets include significant dividends received during the year ended December 31, 2014. 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. |
Invesco V.I. Value Opportunities Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Value Opportunities Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Value Opportunities Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2019
We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.
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 July 1, 2018 through December 31, 2018.
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.
ACTUAL | HYPOTHETICAL (5% annual return before | |||||||||||||||||||||||
Class | Beginning Account Value (07/01/18) | Ending Account Value (12/31/18)1 | Expenses Paid During Period2 | Ending Account Value (12/31/18) | Expenses Paid During Period2 | Annualized Expense Ratio | ||||||||||||||||||
Series I | $ | 1,000.00 | $ | 834.70 | $ | 4.76 | $ | 1,020.01 | $ | 5.24 | 1.03 | % | ||||||||||||
Series II | 1,000.00 | 833.00 | 5.91 | 1,018.75 | 6.51 | 1.28 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2018 through December 31, 2018, 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 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Value Opportunities Fund
Tax Information
Form1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2018:
Federal and State Income Tax | ||||
Long-Term Capital Gain Distributions | $ | 9,857,121 | ||
Corporate Dividends Received Deduction* | 99.89 | % | ||
U.S. Treasury Obligations* | 0 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year. |
Invesco V.I. Value Opportunities Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 — 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) | 158 | None | ||||
Philip A. Taylor2 — 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management)
Formerly: Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Co-Chairman, Co-President andCo-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. | 158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Value Opportunities Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Independent Trustees | ||||||||
Bruce L. Crockett — 1944 Trustee and Chair | 1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council | 158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch — 1945 Trustee | 2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents’ Organization | 158 | Board member of the Illinois Manufacturers’ Association | ||||
Jack M. Fields — 1952 Trustee | 1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives | 158 | None | ||||
Cynthia Hostetler — 1962 Trustee | 2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Director, Aberdeen Investment Funds (4 portfolios); Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP | 158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Genesse Wyoming, Inc. (railroads); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor); Investment Company Institute (professional organization); Independent Directors Council (professional organization) | ||||
Eli Jones — 1961 Trustee | 2016 | Professor and Dean, Mays Business School — Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank | 158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis — 1950 Trustee | 1998 | Retired
Co-Owner & Partner of Quantalytics Research, LLC, (a FinTech Investment Research Platform for the Self-Directed Investor) | 158 | None | ||||
Teresa M. Ressel — 1962 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury | 158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern — 1957 Trustee | 2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Children’s Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP | 158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. — 1944 Trustee | 2005 | Retired
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche | 158 | None | ||||
Robert C. Troccoli — 1949 Trustee | 2016 | Adjunct Professor, University of Denver — Daniels College of Business
Formerly: Senior Partner, KPMG LLP | 158 | None | ||||
Christopher L. Wilson — 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Director, TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments | 158 | ISO New England, Inc.(non-profit organization managing regional electricity market) |
Invesco V.I. Value Opportunities Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers | ||||||||
Sheri Morris — 1964 President, Principal Executive Officer and Treasurer | 1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust | N/A | N/A | ||||
Russell C. Burk — 1958 Senior Vice President and Senior Officer | 2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
Jeffrey H. Kupor — 1968 Senior Vice President, Chief Legal Officer and Secretary | 2018 | Head of Legal of the Americas; Senior Vice President and Secretary, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Secretary, W.L. Ross & Co., LLC; Secretary and Vice President, Jemstep, Inc.
Formerly: Head of Legal, Worldwide Institutional; Secretary and General Counsel, INVESCO Private Capital Investments, Inc.; Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Assistant Secretary, INVESCO Asset Management (Bermuda) Ltd.; Secretary and General Counsel, Invesco Private Capital, Inc.; Assistant Secretary and General Counsel, INVESCO Realty, Inc.; Secretary and General Counsel, Invesco Senior Secured Management, Inc.; and Secretary, Sovereign G./P. Holdings Inc. | N/A | N/A | ||||
John M. Zerr — 1962 Senior Vice President | 2006 | Chief Operating Officer of the Americas; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director and Vice President, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, The Invesco Funds; Managing Director, Invesco Capital Management LLC; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Senior Vice President, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Manager, Invesco Indexing LLC
Formerly: Director and Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.); Chief Legal Officer and Secretary, The Invesco Funds; Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.); Chief Legal Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Secretary, Invesco Indexing LLC; Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser) | N/A | N/A |
Invesco V.I. Value Opportunities Fund
Trustees and Officers—(continued)
Name, Year of Birth and Position(s) Held with the Trust | Trustee and/ or Officer Since | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee | Other Directorship(s) Held by Trustee During | ||||
Other Officers—(continued) | ||||||||
Gregory G. McGreevey — 1962 Senior Vice President | 2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Senior Vice President, Invesco Management Group, Inc. and Invesco Advisers, Inc.; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Kelli Gallegos — 1970 Vice President, Principal Financial Officer and Assistant Treasurer | 2008 | Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Principal Financial and Accounting Officer – Pooled Investments, Invesco Capital Management LLC
Formerly: Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Assistant Treasurer, Invesco Capital Management LLC; Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Tracy Sullivan — 1962 Vice President, Chief Tax Officer and Assistant Treasurer | 2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco Capital Management LLC, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds | N/A | N/A | ||||
Crissie M. Wisdom — 1969 Anti-Money Laundering Compliance Officer | 2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., The Invesco Funds, and Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. and Invesco Management Group, Inc. | N/A | N/A | ||||
Robert R. Leveille — 1969 Chief Compliance Officer | 2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds | N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 | Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5021 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 | Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 | Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 | Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Value Opportunities Fund
ITEM 2. | CODE OF ETHICS. |
On May 2, 2018, the Board of Trustees of the Invesco Funds amended 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. |
The Board of Trustees has determined that the Registrant has at least one audit committee financial expert serving on its Audit Committee. The Audit Committee financial experts are David C. Arch, Bruce L. Crockett, Cynthia Hostetler, Teresa M. Ressel, Raymond Stickel, Jr. and Robert C. Troccoli. David C. Arch, Bruce L. Crockett, Cynthia Hostetler, Teresa M. Ressel, Raymond Stickel, Jr. and Robert Troccoli are “independent” within the meaning of that term as used in FormN-CSR.
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
PricewaterhouseCoopers LLP (“PwC”) informed the Trust that it has identified an issue related to its independence under Rule2-01(c)(1)(ii)(A) of RegulationS-X (referred to as the Loan Rule). The Loan Rule prohibits accounting firms, such as PricewaterhouseCoopers LLP, from being deemed independent if they have certain financial relationships with their audit clients or certain affiliates of those clients. The Trust is required under various securities laws to have its financial statements audited by an independent accounting firm.
The Loan Rule specifically provides that an accounting firm would not be independent if it or certain affiliates and covered persons receives a loan from a lender that is a record or beneficial owner of more than ten percent of an audit client’s equity securities (referred to as a “more than ten percent owner”). For purposes of the Loan Rule, audit clients include the Funds as well as all registered investment companies advised by the Adviser and its affiliates, including other subsidiaries of the Adviser’s parent company, Invesco Ltd. (collectively, the Invesco Fund Complex). PricewaterhouseCoopers LLP informed the Trust it and certain affiliates and covered persons have relationships with lenders who hold, as record owner, more than ten percent of the shares of certain funds within the Invesco Fund Complex.
On June 20, 2016, the SEC Staff issued a“no-action” letter to another mutual fund complex (see Fidelity Management & Research Company et al.,No-Action Letter) related to the audit independence issue described above. In that letter, the SEC confirmed that it would not recommend enforcement action against a fund that relied on audit services performed by an audit firm that was not in compliance with the Loan Rule in certain specified circumstances. On May 2, 2018, the SEC proposed amendments to the Loan Rule that, if adopted as proposed, would address many of the issues that led to issuance of theno-action letter. In connection with prior independence determinations, PricewaterhouseCoopers LLP communicated, as contemplated by theno-action letter, that it believes that it remains objective and impartial and that a reasonable investor possessing all the facts would conclude that PricewaterhouseCoopers LLP is able to exhibit the requisite objectivity and impartiality to report on the Funds’ financial statements as the independent registered public accounting firm. PricewaterhouseCoopers LLP also represented that it has complied with PCAOB Rule 3526(b)(1) and (2), which are conditions to the Funds relying on the no action letter, and affirmed that it is an independent accountant within the meaning of PCAOB Rule 3520. Therefore, the Adviser, the Funds and PricewaterhouseCoopers LLP concluded that PricewaterhouseCoopers LLP could continue as the Funds’ independent registered public accounting firm. The Invesco Fund Complex relied upon theno-action letter in reaching this conclusion.
If in the future the independence of PricewaterhouseCoopers LLP is called into question under the Loan Rule by circumstances that are not addressed in the SEC’sno-action letter, the Funds will need to take other action in order for the Funds’ filings with the SEC containing financial statements to be deemed compliant with applicable securities laws. Such additional actions could result in additional costs, impair the ability of the Funds to issue new shares or have other material adverse effects on the Funds. The SECno-action relief was initially set to expire 18 months from issuance but has been extended by the SEC without an expiration date, except that theno-action letter will be withdrawn upon the effectiveness of any amendments to the Loan Rule designed to address the concerns expressed in the letter.
PwC advised the Registrant’s Audit Committee that PwC had identified two matters for consideration under the SEC’s auditor independence rules. PwC stated that a PwC manager and a PwC Senior Manager each held financial interests in investment companies within the Invesco Fund complex that were inconsistent with the requirements of Rule2-01(c)(1) of RegulationS-X.
PwC advised the Audit Committee that it believes its objectivity and impartiality had not been adversely affected by these matters as they related to the audit of the Registrant. In reaching this conclusion, PwC noted, among other things, that during the time of its audit, the engagement team was not aware of the investments, neither individual was in the chain of command of the audit or the audit partners of Invesco or the affiliate of the Registrant, the services each individual provided were not relied upon by the audit engagement team with respect to the audit of the affiliate of the Registrant and the investments were not material to the net worth of either individual or their immediate family members.
(a) to (d)
Fees Billed by PwC Related to the Registrant
PwC billed the Registrant aggregate fees for services rendered to the Registrant for the last two fiscal years as follows:
Fees Billed for Services Rendered to the Registrant for fiscal year end 2018 | Fees Billed for Services Rendered to the Registrant for fiscal year end 2017 | |||||||
Audit Fees | $ | 719,500 | $ | 592,375 | ||||
Audit-Related Fees | $ | 0 | $ | 0 | ||||
Tax Fees(1) | $ | 155,473 | $ | 149,984 | ||||
All Other Fees | $ | 0 | $ | 0 | ||||
|
|
|
| |||||
Total Fees | $ | 874,973 | $ | 742,359 |
(g) PwC billed the Registrant aggregatenon-audit fees of $155,473 for the fiscal year ended 2018, and $149,984 for the fiscal year ended 2017, fornon-audit services rendered to the Registrant.
(1) | Tax Fees for the fiscal year end December 31, 2018 includes fees billed for reviewing tax returns and/or services related to tax compliance. Tax Fees for fiscal year end December 31, 2017 included fees billed for reviewing tax returns and/or services related to tax compliance. |
Fees Billed by PwC Related to Invesco and Invesco Affiliates
PwC billed Invesco Advisers, Inc. (“Invesco”), the Registrant’s adviser, and any entity controlling, controlled by or under common control with Invesco that provides ongoing services to the Registrant (“Invesco Affiliates”) aggregate fees forpre-approvednon-audit services rendered to Invesco and Invesco Affiliates for the last two fiscal years as follows:
Fees Billed for Non-Audit Services Rendered to Invesco and Invesco Affiliates for fiscal year end 2018 That Were Required to bePre-Approved by the Registrant’s Audit Committee | Fees Billed for Non-Audit Services Rendered to Invesco and Invesco Affiliates for fiscal year end 2017 That Were Required to bePre-Approved by the Registrant’s Audit Committee | |||||||
Audit-Related Fees(1) | $ | 690,000 | $ | 662,000 | ||||
Tax Fees | $ | 0 | $ | 0 | ||||
All Other Fees(2) | $ | 0 | $ | 1,006,000 | ||||
|
|
|
| |||||
Total Fees | $ | 690,000 | $ | 1,668,000 |
(1) | Audit-Related Fees for the year end 2018 include fees billed related to reviewing controls at a service organization. Audit-Related Fees for the year end 2017 included fees billed related to reviewing controls at a service organization. |
(2) | All Other Fees for the year end 2017 included fees billed related to the assessments for certain of the company’s risk management tools, current state analysis against regulatory requirements and identification of structural and organizational alternatives, informed by industry practices, for certain of the company’s administrative activities and functions. |
(e)(2) There were no amounts that werepre-approved by the Audit Committee pursuant to the de minimus exception under Rule2-01 of RegulationS-X.
(f) Not applicable.
(g) Including the fees for services not required to bepre-approved by the registrant’s audit committee, PwC billed Invesco and Invesco Affiliates aggregatenon-audit fees of $4,240,000 for the fiscal year ended December 31, 2018, and $4,496,000 for the fiscal year ended December 31, 2017, fornon-audit services rendered to Invesco and Invesco Affiliates.
PwC provided audit services to the Investment Company complex of approximately $25 million.
(h) The Audit Committee also has considered whether the provision ofnon-audit services that were rendered to Invesco and Invesco Affiliates that were not required to bepre-approved pursuant to SEC regulations, if any, is compatible with maintaining PwC’s independence.
(e)(1)
PRE-APPROVAL OF AUDIT ANDNON-AUDIT SERVICES
POLICIES AND PROCEDURES
As adopted by the Audit Committees
of the Invesco Funds (the “Funds”)
Last Amended May 4, 2016
I. | Statement of Principles |
The Audit Committees (the “Audit Committee”) of the Boards of Trustees of the Funds (the “Board”) have adopted these policies and procedures (the “Procedures”) with respect to thepre-approval of audit andnon-audit services to be provided by the Funds’ independent auditor (the “Auditor”) to the Funds, and to the Funds’ investment adviser(s) and any entity controlling, controlled by, or under common control with the investment adviser(s) that provides ongoing services to the Funds (collectively, “Service Affiliates”).
Under Section 202 of the Sarbanes-Oxley Act of 2002, all audit andnon-audit services provided to the Funds by the Auditor must be preapproved by the Audit Committee. Rule2-01 of RegulationS-X requires that the Audit Committee alsopre-approve a Service Affiliate’s engagement of the Auditor fornon-audit services if the engagement relates directly to the operations and financial reporting of the Funds (a “Service Affiliate’s Covered Engagement”).
These Procedures set forth the procedures and the conditions pursuant to which the Audit Committee maypre-approve audit andnon-audit services for the Funds and a Service Affiliate’s Covered Engagement pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”) and other organizations and regulatory bodies applicable to the Funds (“Applicable Rules”).1 They address both generalpre-approvals without consideration of specificcase-by-case services (“general pre-approvals”) and pre-approvals on acase-by-case basis (“specific pre-approvals”). Any services requiringpre-approval that are not within the scope of generalpre-approvals hereunder are subject to specificpre-approval. These Procedures also address the delegation by the Audit Committee ofpre-approval authority to the Audit Committee Chair or Vice Chair.
II. | Pre-Approval of Fund Audit Services |
The annual Fund audit services engagement, including terms and fees, is subject to specificpre-approval by the Audit Committee. Audit services include the annual financial statement audit and other procedures required to be performed by an independent auditor to be able to form an opinion on the Funds’ financial statements. The Audit Committee will receive, review and consider sufficient information concerning a proposed Fund audit engagement to make a reasonable evaluation of the Auditor’s qualifications and independence. The Audit Committee will oversee the Fund audit services engagement as necessary, including approving any changes in terms, audit scope, conditions and fees.
In addition to approving the Fund audit services engagement at least annually and specifically approving any changes, the Audit Committee may generally or specificallypre-approve engagements for other audit services, which are those services that only an independent auditor reasonably can provide. Other audit services may include services associated with SEC registration statements, periodic reports and other documents filed with the SEC.
1 | Applicable Rules include, for example, New York Stock Exchange (“NYSE”) rules applicable toclosed-end funds managed by Invesco and listed on NYSE. |
III. | General and SpecificPre-Approval ofNon-Audit Fund Services |
The Audit Committee will consider, at least annually, the list of GeneralPre-ApprovedNon-Audit Services which list may be terminated or modified at any time by the Audit Committee. To inform the Audit Committee’s review and approval of GeneralPre-ApprovedNon-Audit Services, the Funds’ Treasurer (or his or her designee) and Auditor shall provide such information regarding independence or other matters as the Audit Committee may request.
Any services or fee ranges that are not within the scope of GeneralPre-ApprovedNon-Audit Services have not received generalpre-approval and require specificpre-approval. Each request for specificpre-approval by the Audit Committee for services to be provided by the Auditor to the Funds must be submitted to the Audit Committee by the Funds’ Treasurer (or his or her designee)and must include detailed information about the services to be provided, the fees or fee ranges to be charged, and other relevant information sufficient to allow the Audit Committee to consider whether topre-approve such engagement, including evaluating whether the provision of such services will impair the independence of the Auditor and is otherwise consistent with Applicable Rules.
IV. | Non-Audit Service Types |
The Audit Committee may provide either general or specificpre-approval of audit-related, tax or other services, each as described in more detail below.
a. | Audit-Related Services |
“Audit-related services” are assurance and related services that are reasonably related to the performance of the audit or review of the Fund’s financial statements or that are traditionally performed by an independent auditor. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters not classified as “Audit services”; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; services related to mergers, acquisitions or dispositions; compliance with ratings agency requirements and interfund lending activities; and assistance with internal control reporting requirements.
b. | Tax Services |
“Tax services” include, but are not limited to, the review and signing of the Funds’ federal tax returns, the review of required distributions by the Funds and consultations regarding tax matters such as the tax treatment of new investments or the impact of new regulations. The Audit Committee will not approve proposed services of the Auditor which the Audit Committee believes are to be provided in connection with a service or transaction initially recommended by the Auditor, the sole business purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee will consult with the Funds’ Treasurer (or his or her designee) and may consult with outside counsel or advisers as necessary to ensure the consistency of tax services rendered by the Auditor with the foregoing policy. The Auditor shall not represent any Fund or any Service Affiliate before a tax court, district court or federal court of claims.
Each request to provide tax services under either the general or specificpre-approval of the Audit Committee will include a description from the Auditor in writing of (i) the scope of the service, the fee structure for the engagement, and any side letter or other amendment to the engagement letter, or any other agreement (whether oral, written, or otherwise) between the Auditor and the Funds, relating to the service; and (ii) any compensation arrangement or other agreement, such as a referral agreement, a referral fee orfee-sharing arrangement, between the Auditor (or an affiliate of the Auditor) and any person (other than the Funds or Service Affiliates receiving the services) with respect to the promoting, marketing, or recommending of a transaction covered by the service. The Auditor will also discuss with the Audit Committee the potential effects of the services on the independence of the Auditor, and document the substance of its discussion with the Audit Committee.
c. | Other Services |
The Audit Committee maypre-approve other non-audit services so long as the Audit Committee believes that the service will not impair the independence of the Auditor.Appendix I includes a list of services that the Auditor is prohibited from performing by the SEC rules.Appendix I also includes a list of services that would impair the Auditor’s independence unless the Audit Committee reasonably concludes that the results of the services will not be subject to audit procedures during an audit of the Funds’ financial statements.
V. | Pre-Approval of Service Affiliate’s Covered Engagements |
Rule2-01 of RegulationS-X requires that the Audit Committeepre-approve a Service Affiliate’s engagement of the Auditor fornon-audit services if the engagement relates directly to the operations and financial reporting of the Funds, defined above as a “Service Affiliate’s Covered Engagement”.
The Audit Committee may provide either general or specificpre-approval of any Service Affiliate’s Covered Engagement, including for audit-related, tax or other services, as described above, if the Audit Committee believes that the provision of the services to a Service Affiliate will not impair the independence of the Auditor with respect to the Funds. Any Service Affiliate’s Covered Engagements that are not within the scope of GeneralPre-ApprovedNon-Audit Services have not received generalpre-approval and require specificpre-approval.
Each request for specificpre-approval by the Audit Committee of a Service Affiliate’s Covered Engagement must be submitted to the Audit Committee by the Funds’ Treasurer (or his or her designee)and must include detailed information about the services to be provided, the fees or fee ranges to be charged, a description of the current status of thepre-approval process involving other audit committees in the Invesco investment company complex (as defined in Rule2-201 of RegulationS-X) with respect to the proposed engagement, and other relevant information sufficient to allow the Audit Committee to consider whether the provision of such services will impair the independence of the Auditor from the Funds. Additionally, the Funds’ Treasurer (or his or her designee) and the Auditor will provide the Audit Committee with a statement that the proposed engagement requirespre-approval by the Audit Committee, the proposed engagement, in their view, will not impair the independence of the Auditor and is consistent with Applicable Rules, and the description of the proposed engagement provided to the Audit Committee is consistent with that presented to or approved by the Invesco audit committee.
Information about all Service Affiliate engagements of the Auditor fornon-audit services, whether or not subject topre-approval by the Audit Committee, shall be provided to the Audit Committee at least quarterly, to allow the Audit Committee to consider whether the provision of such services is compatible with maintaining the Auditor’s independence from the Funds. The Funds’ Treasurer and Auditor shall provide the Audit Committee with sufficiently detailed information about the scope of services provided and the fees for such services, to ensure that the Audit Committee can adequately consider whether the provision of such services is compatible with maintaining the Auditor’s independence from the Funds.
VI. | Pre-Approved Fee Levels or Established Amounts |
Pre-approved fee levels or ranges for audit andnon-audit services to be provided by the Auditor to the Funds, and for a Service Affiliate’s Covered Engagement, under generalpre-approval or specificpre-approval will be set periodically by the Audit Committee. Any proposed fees exceeding 110% of the maximumpre-approved fee levels or ranges for such services or engagements will be promptly presented to the Audit Committee and will require specificpre-approval by the Audit Committee before payment of any additional fees is made.
VII. | Delegation |
The Audit Committee may from time to time delegate specificpre-approval authority to its Chair and/or Vice Chair, so that the Chair or, in his or her absence, Vice Chair may grant specificpre-approval for audit andnon-audit services by the Auditor to the Funds and/or a Service Affiliate’s Covered Engagement between Audit Committee meetings. Any such delegation shall be reflected in resolutions adopted by the Audit Committee and may include such limitations as to dollar amount(s) and/or scope of service(s) as the Audit Committee may choose to impose. Any such delegation shall not preclude the Chair or Vice Chair from declining, on a case by case basis, to exercise his or her delegated authority and instead convening the Audit Committee to consider andpre-approve any proposed services or engagements.
Notwithstanding the foregoing, anynon-audit services to be provided to the Funds for which the fees are estimated to exceed $500,000 and any Service Affiliate’s Covered Engagement for which the fees are estimated to exceed $500,000 must bepre-approved by the Audit Committee and may not be delegated to the Chair or Vice Chair.
VIII. | Compliance with Procedures |
Notwithstanding anything herein to the contrary, failure topre-approve any services or engagements that are not required to bepre-approved pursuant to the de minimis exception provided for in Rule2-01(c)(7)(i)(C) of RegulationS-X shall not constitute a violation of these Procedures. The Audit Committee has designated the Funds’ Treasurer to ensure services and engagements arepre-approved in compliance with these Procedures. The Funds’ Treasurer will immediately report to the Chair of the Audit Committee, or the Vice Chair in his or her absence, any breach of these Procedures that comes to the attention of the Funds’ Treasurer or any services or engagements that are not required to bepre-approved pursuant to the de minimis exception provided for in Rule2-01(c)(7)(i)(C) of RegulationS-X.
On at least an annual basis, the Auditor will provide the Audit Committee with a summary of allnon-audit services provided to any entity in the investment company complex (as defined in section2-01(f)(14) of RegulationS-X, including the Funds and Service Affiliates) that were notpre-approved, including the nature of services provided and the associated fees.
IX. | Amendments to Procedures |
All material amendments to these Procedures must be approved in advance by the Audit Committee.Non-material amendments to these Procedures may be made by the Legal and Compliance Departments and will be reported to the Audit Committee at the next regularly scheduled meeting of the Audit Committee.
Appendix I
Non-Audit Services That May Impair the Auditor’s Independence
The Auditor is not independent if, at any point during the audit and professional engagement, the Auditor provides the followingnon-audit services:
• | Management functions; |
• | Human resources; |
• | Broker-dealer, investment adviser, or investment banking services ; |
• | Legal services; |
• | Expert services unrelated to the audit; |
• | Any service or product provided for a contingent fee or a commission; |
• | Services related to marketing, planning, or opining in favor of the tax treatment of confidential transactions or aggressive tax position transactions, a significant purpose of which is tax avoidance; |
• | Tax services for persons in financial reporting oversight roles at the Fund; and |
• | Any other service that the Public Company Oversight Board determines by regulation is impermissible. |
An Auditor is not independent if, at any point during the audit and professional engagement, the Auditor provides the followingnon-audit services unless it is reasonable to conclude that the results of the services will not be subject to audit procedures during an audit of the Funds’ financial statements:
• | Bookkeeping or other services related to the accounting records or financial statements of the audit client; |
• | Financial information systems design and implementation; |
• | Appraisal or valuation services, fairness opinions, orcontribution-in-kind reports; |
• | Actuarial services; and |
• | Internal audit outsourcing services. |
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 FORCLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
ITEM 8. | PORTFOLIO MANAGERS OFCLOSED-END MANAGEMENT COMPANIES. |
Not applicable.
ITEM 9. | PURCHASES OF EQUITY SECURITIES BYCLOSED-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 February 13, 2019, an evaluation was performed under the supervision and with the participation of the officers of the Registrant, including the PEO and PFO, to assess the effectiveness of the Registrant’s disclosure controls and procedures, as that term is defined in Rule30a-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 February 13, 2019, the Registrant’s disclosure controls and procedures were reasonably designed to ensure: (1) that information required to be disclosed by the Registrant on FormN-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 Rule30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
ITEM 12. | DISCLOSURE OF SECURITIES LENDING ACTIVITIES FORCLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
ITEM 13. | EXHIBITS. |
13(a) (1) | Code of Ethics. | |
13(a) (2) | Certifications of principal executive officer and principal financial officer as required by Rule30a-2(a) under the Investment Company Act of 1940. | |
13(a) (3) | Not applicable. | |
13(a) (4) | Not applicable. | |
13(b) | Certifications of principal executive officer and principal financial officer as required by Rule30a-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/ Sheri Morris | |
Sheri Morris | ||
Principal Executive Officer | ||
Date: | February 27, 2019 |
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/ Sheri Morris | |
Sheri Morris | ||
Principal Executive Officer | ||
Date: | February 27, 2019 | |
By: | /s/ Kelli Gallegos | |
Kelli Gallegos | ||
Principal Financial Officer | ||
Date: | February 27, 2019 |
EXHIBIT INDEX
13(a) (1) | Code of Ethics. | |
13(a) (2) | Certifications of principal executive officer and principal financial officer as required by Rule30a-2(a) under the Investment Company Act of 1940. | |
13(a) (3) | Not applicable. | |
13(a) (4) | Not applicable. |